Coming to America: Challenges in Moving Manufacturing to the U.S.

News of manufacturing companies coming to America or choosing to stay in the U.S. is plentiful of late. Why the focus on American manufacturing? And, perhaps more important, what are the legal and cultural issues facing manufacturers expanding into U.S. facilities?

Why the United States?

• Credibility. Establishing a successful business in America demonstrates a level of maturity, because the U.S. market is very sophisticated and highly competitive. The thought is: if a company can succeed here, it can succeed anywhere.
• Professional Services. American management, sales and marketing expertise remain highly valued. This expertise can be best harnessed through a U.S. entity, which offers familiarity and important tax and financial advantages to U.S. employees.
• Access to Capital. U.S. venture capital still remains a critical source of funding for enterprises of all sizes and stages. While American VCs are prepared to invest all over the world, many find it easier and less risky to invest in a U.S. entity.
• Strategic Partnerships. Many international companies find it easier to establish alliances with U.S.-based businesses, primarily due to the predictability of U.S. laws and corporate governance requirements.
• Business Ethics. Financial and managerial transparency, compliance with legal and ethical standards, and an overall culture of ethical business dealings constitute key pillars of the success of the U.S. economy. Non-U.S. companies can benefit from this culture by establishing U.S. operations.

What Do You Need in the United States?

• Tax Structure. Proper tax planning will result in minimizing the overall tax expenditure of the business and enables the business to deploy its financial resources in the most efficient manner. What may work for Apple could be less efficient for a company with revenues below $100m.
• Contacts. Many business practices, such as key executive recruiting, vendor and partner relations, marketing and sales opportunities, among others, rely heavily on personal contacts. It’s of critical important to find the right individuals that mesh with your company culture.
• Logistics. While the U.S. market is relatively easy to navigate, simple steps—such as obtaining an Employer Identification Number, setting up a bank account, or finding the right location for operations—require a deep and sophisticated understanding of the local market. Legal, business and cultural considerations play an important role.
• Immigration. U.S. immigration laws dealing with non-U.S. personnel are highly complex. Using the wrong immigration attorney or saving money by filling out immigration forms without legal assistance could be highly detrimental. If the wrong steps are taken, remedial efforts will be much less likely to be successful and will definitely cost far more in time and legal fees.
• Employment and Human Relations. A U.S. business must understand the local HR market for stock options and other equity compensation plans, health insurance benefits, retirement plans, severance expectations, and so on, and offer a balanced package that is neither inadequate to attract key employees nor too rich for the particular business.
• Cultural and Business Perspectives. Cultural and business subtleties must be mastered by non-U.S. companies who are seeking to establish a U.S. presence. Knowledgeable advisers can help a foreign company find suitable real estate agents, head hunters, accountants, other professionals and suppliers.

Quite often, the lack of understanding of legal and cultural differences, and the absence of friends or advisers who can offer suggestions, can mean the difference between success and failure for a non-U.S. company trying to establish a presence in the United States. Manufacturers undertaking this huge move need an overall strategic plan that addresses each of the areas mentioned above. By understanding and integrating the diversity of considerations that a company must evaluate, using savvy and well “plugged-in” professionals working together as a team, a manufacturer can expect to create a successful U.S. business.

For more information on services designed for foreign companies interested in doing business in the United States, click here.