I am preparing to establish a US branch, what legal aspects should I be careful about?

Hello. I am an international trade specialist attorney at Daeryun Law Firm.

US branch establishment is an act of newly setting the company's legal and tax status within the US, so legal review at the early stages is very important.

In particular, the cosmetics industry has special legal environments such as US FDA regulations, labeling standards, and ingredient regulations, so prior risk management is essential.

In the US, depending on the form of branch, legal liability, tax structure, and possibility of attracting investment vary greatly.

Therefore, the most appropriate structure must be selected by comprehensively reviewing the company size, future investment plans, and relationship with the Korean head office.

Since the US has both federal law + state law applied simultaneously, the choice of state for establishment has very practical meaning. Therefore, an appropriate state must be selected according to the business model, manpower size, and product distribution method.

Additionally, the US requires the following matters from companies that manufacture or import cosmetics.

· Compliance with ingredient labeling standards

· Product efficacy labeling regulations: Risk of being classified as drugs

· Regulations on prohibited ingredients such as colorants and preservatives

· Whether manufacturing facilities are registered

· Side effect reporting obligations

Even one incorrectly indicated labeling or advertising phrase can result in the FDA sending a warning letter or product recall measures.

If sales within the US are conducted after US branch establishment, when problems with the product occur, the manufacturer, importer, and seller can all be held liable.

Therefore, the following matters must be preemptively organized.

· Subscription to product liability insurance

· Documentation of refund and recall processes

· Separation of branch responsibility scope and head office responsibility

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

In particular, since punitive damages are possible in the US, prior preparation is essential.

The US has different labor standards in each state, and user responsibility is heavier than in Korea, so related systems must be firmly prepared.

Daeryun Law Firm's international trade specialist attorneys collaborate with related legal experts such as US attorneys with US law advisory and customs specialist members with customs broker qualifications to provide one-stop support from overseas corporation establishment structure design, FDA and import regulation review, trademark and intellectual property protection, contract review and dispute prevention, to international taxation and transfer pricing analysis, so we recommend receiving expert review at the pre-establishment stage.