I am preparing to establish a U.S. branch; what legal aspects should I be careful about?

Hello. This is an international trade attorney at Daeryun Law LLC.

Establishing a U.S. branch is an act of newly setting the company's legal and tax status within the United States, so legal review at the early stage is very important.

In particular, the cosmetics industry has a special legal environment, including U.S. FDA regulations, labeling standards, and ingredient regulations, so advance risk management is essential.

In the United States, legal liability, tax structure, and the possibility of attracting investment vary significantly depending on the form of the branch.

Therefore, you must comprehensively review the size of the company, future investment plans, and the relationship with the Korean headquarters to select the most suitable structure.

Because federal law and state law apply simultaneously in the United States, the choice of the state of incorporation carries very practical significance, so you must select an appropriate state according to your business model, workforce size, and product distribution method.

In addition, the United States requires the following of companies that manufacture or import cosmetics.

· Compliance with ingredient labeling standards

· Regulation of product efficacy claims: the risk of being classified as a drug

· Regulations on prohibited ingredients such as colorants and preservatives

· Whether the manufacturing facility is registered

· The obligation to report adverse effects

Even a single mislabeled item on a label or in advertising copy can result in the FDA sending a warning letter or in a product recall.

If sales take place within the United States after establishing a U.S. branch, the structure is such that, should a problem arise with the product, the manufacturer, importer, and seller may all bear liability.

Therefore, to establish a U.S. branch, you must proactively put the following matters in order.

· Obtaining product liability insurance

· Documenting the refund and recall processes

· Separating the scope of the branch's liability from that of the headquarters

· Setting indemnification clauses and jurisdiction clauses in contracts with business partners

In particular, because punitive damages are available in the United States, advance preparation is essential.

Because labor standards differ from state to state in the United States and the employer's liability is heavier than in Korea, you must firmly prepare the systems related to establishing a U.S. branch.

At Daeryun Law LLC, international trade attorneys collaborate with related legal experts, such as a foreign attorney (U.S.) advising on U.S. law and a customs specialist holding a licensed customs broker qualification, to provide one-stop support ranging from designing the structure for establishing an overseas corporation, reviewing FDA and import regulations, protecting trademarks and intellectual property rights, and reviewing contracts and preventing disputes, to analyzing international taxation and transfer pricing, so we recommend that you obtain a professional review at the stage before establishing a U.S. branch.