Building a US Brand for a Chinese Manufacturer: What the US-Side Partner Needs to Know
- Jeff Chang
- 17 hours ago
- 9 min read
A Chinese company makes a solid product. They want to build a brand in the United States. They need someone on the ground to run operations, manage logistics, and be the face of the business here. That someone is you.
Maybe you have industry connections. Maybe you bring sales expertise or knowledge of the US market. Maybe you have an existing relationship with the manufacturer. Whatever the reason, you have been brought in as the US-side partner in a venture that will import products from China and sell them under a brand in the American market.
This is a proven business model. Chinese manufacturers across industries, from consumer electronics to appliances to outdoor recreation equipment, are increasingly looking to move beyond OEM and white-label arrangements and establish their own branded presence in the US. The opportunity can be significant. But the legal architecture you build at the outset will determine whether this venture protects your interests or leaves you exposed.
This article walks through the key legal considerations for US-side partners entering these arrangements. It is not a substitute for legal advice on your specific situation.
Building a US Brand for a Chinese Manufacturer: Why the Legal Structure Matters Before Day One
Building a US brand for a Chinese manufacturer is a proven path, but it comes with legal complexity that needs to be addressed at formation. When a Chinese manufacturer and a US-side partner launch a brand together, they are creating a business with built-in complexity. There is an international supply chain, shared (and sometimes competing) interests, intellectual property that needs to live in the right place, and regulatory exposure on multiple fronts.
The decisions you make before forming the entity and signing agreements will shape everything that follows: how profits are distributed, who controls the brand, what happens if the relationship breaks down, and how attractive the business looks to a potential buyer down the road.
Getting the structure right at the start is significantly less expensive than fixing it later. Unwinding a poorly structured international venture, especially one with IP complications, can cost multiples of what proper setup would have required.
Entity Structure and Ownership
Most ventures of this type form a US corporation or LLC to serve as the import and distribution vehicle. The entity is typically co-owned by the Chinese manufacturer (or its principals) and the US-side partner.
Several structural questions need to be addressed early.
Entity type. Corporations and LLCs each have advantages. Corporations offer a more familiar governance framework (board of directors, officers, shareholder voting) and may be preferred if the long-term goal is a sale to a strategic buyer. LLCs offer more flexibility in how profits and losses are allocated among members, which can matter when the parties are contributing different things (capital vs. operational expertise, for example). Tax treatment differs as well, and the right choice depends on each party's situation.
Ownership split. This is often the first negotiation. The Chinese manufacturer may be contributing product, supply chain access, and capital. The US-side partner may be contributing market knowledge, operational management, and relationships. These contributions are not easy to value against each other, and there is no formula. What matters is that the agreed split is documented clearly and that both sides understand what they are getting.
Governance and control. Ownership percentage does not always equal control. A shareholders' agreement (or operating agreement for an LLC) should address who makes which decisions, what requires a simple majority versus a supermajority vote, and which actions require unanimous consent. This is where US-side partners need to pay close attention.
If the Chinese manufacturer holds a majority stake, the default rules of corporate law give them broad authority to make decisions unilaterally. Without negotiated protections built into the governance documents, the majority owner can set compensation, approve related-party transactions, and make other decisions that directly affect the minority partner's economic interest. A well-drafted shareholders' agreement can change that dynamic significantly, but these protections need to be negotiated before the entity is formed, not after.
Transfer restrictions and exit provisions. The shareholders' agreement should also address what happens when someone wants out, or when one party wants to sell to a third party. There are established legal mechanisms that protect minority partners in a sale scenario and that give majority owners the ability to move forward with a transaction. Without these provisions in place, a business separation can become extremely difficult to navigate, especially in international ventures where the parties are separated by an ocean, different legal systems, and potentially different expectations about how disputes get resolved.
The Supply Agreement
The US entity will be purchasing products from the Chinese manufacturer. This is a related-party transaction, and it needs a formal agreement.
Pricing. The price at which the manufacturer sells to the US entity is not just a business decision. It has tax implications (the IRS requires related-party transactions to be priced at arm's length under IRC Section 482) and customs implications (CBP scrutinizes related-party import values). Setting prices too low can trigger IRS reallocation of income and penalties. Setting them in a way that does not reflect market rates can create customs valuation problems. These two frameworks do not always point in the same direction, so the pricing structure needs to account for both.
For a deeper treatment of transfer pricing and customs compliance in this context, see our article: US Subsidiary of Chinese Company: 29 Compliance Questions Answered.
Delivery terms and risk of loss. The agreement should specify which Incoterms apply and when title and risk transfer from the manufacturer to the US entity. This determines who bears the risk if goods are damaged or lost in transit and who is responsible for import clearance and duties.
Quality standards and warranties. The manufacturer should warrant that products meet specified quality standards and comply with applicable US regulations (safety certifications, labeling requirements, material restrictions). The agreement should address what happens when products are defective, including return procedures, replacement timelines, and who bears the cost.
Product liability allocation. Under US law, every entity in the distribution chain can be liable for harm caused by a defective product, including the US importer and distributor. The supply agreement should include indemnification provisions requiring the manufacturer to stand behind its products. But indemnification from a Chinese entity can be difficult to enforce, so the US entity should also maintain its own product liability insurance.
Trademark and Brand Strategy
This is often the most consequential decision in the entire venture, and the one that gets the least attention at the outset.
If the Chinese manufacturer already has a trademark registered in China, that registration does not automatically provide protection in the United States. Trademark rights are territorial. The US operates on a "first to use" system, meaning that rights are generally established through actual use of the mark in US commerce, though federal registration provides important additional protections.
The core question is where the US trademark should live. There are several possible structures, and each carries very different implications for who controls the brand, what happens if the business relationship ends, how attractive the business is to a future buyer, and whether the manufacturer can continue using the mark in other markets.
Getting this wrong, or failing to address it at all, is one of the most common and costly mistakes in these ventures. When parties skip the trademark conversation at the outset and let ownership default to whoever files first, the result is often a dispute that is far more expensive to resolve than the planning would have been. The right structure depends on the specific circumstances, including each party's bargaining position, the long-term business plan, and whether the brand has existing recognition in any market.
A note on trademark clearance. Before committing to a brand name in the US market, a clearance search through the USPTO database is essential. A mark that works well in Chinese may conflict with existing US registrations. The cost of discovering a conflict after you have already invested in packaging, marketing, and inventory is substantially higher than running a search beforehand.
Positioning for a Future Sale
Many of these ventures are built with a long-term exit in mind. The Chinese manufacturer wants to establish a brand and a distribution footprint in the US, and at some point, sell the business to a strategic buyer or larger distributor.
If that is the plan, decisions made at formation will affect the exit. A few considerations:
Clean corporate records matter. Buyers in M&A transactions conduct due diligence on everything: corporate formation documents, shareholder agreements, board resolutions, intercompany agreements, IP ownership, tax filings, and regulatory compliance. A business with clean, well-maintained records is easier to sell and commands a better price than one where the buyer's lawyers have to spend weeks untangling the corporate history.
Transfer pricing documentation. Buyers will scrutinize intercompany pricing, and so will the IRS if it audits the transaction. Having a documented transfer pricing methodology in place from the beginning is far better than reconstructing one during a sale process.
IP ownership clarity. A buyer will want to know exactly who owns the brand, whether there are any encumbrances, and what licenses exist. Ambiguity in IP ownership is one of the most common deal-breakers in acquisitions of distribution businesses.
The US-side partner's role in a sale. If you are the operating partner, your employment or management agreement should address what happens in a change of control. Will you stay on? Is there a transition period? Do you receive any additional compensation in connection with a sale? These terms are easier to negotiate when the business is being formed than when a buyer is already at the table.
Regulatory Screening
Depending on the ownership structure and the industry, the venture may need to consider CFIUS (Committee on Foreign Investment in the United States) implications. CFIUS reviews foreign investments in US businesses for national security concerns, and the regulatory environment for Chinese-connected investments has tightened considerably since 2025.
For most consumer product distribution businesses outside of sensitive sectors, CFIUS is less likely to be an issue. But the analysis depends on the specific facts, including the product category, whether there is any technology component, and the ownership structure.
For a detailed overview of the current CFIUS landscape, see our article: Chinese Investment in US Businesses: What the 2025 Rule Changes Allow in 2026.
Frequently Asked Questions
I have been approached by a Chinese manufacturer about partnering to sell their products in the US. Where do I start?
Start by understanding what each side is bringing to the table and what the long-term plan looks like. Is this a distribution arrangement, a joint venture, or something else? What are the ownership expectations? Who will control the brand? These initial conversations shape the legal structure. Before signing anything, get the legal framework right.
Do I need a formal supply agreement if the manufacturer is also a co-owner of the US company?
Yes. The IRS and CBP both expect related-party transactions to be documented with formal agreements reflecting arm's length terms. Operating without one creates tax exposure, customs risk, and makes the business harder to sell.
Should I be concerned about product liability?
Yes. As a US-based distributor, you can be held liable for injuries caused by defective products, even if you had nothing to do with the manufacturing. Product liability insurance is essential, and your supply agreement should include indemnification provisions from the manufacturer.
Can I use the manufacturer's existing Chinese trademark in the US?
Not automatically. Trademark rights are territorial. A Chinese registration does not provide protection in the United States. You will need to file separately with the USPTO, and you should conduct a clearance search before committing to any brand name in the US market.
What if the Chinese manufacturer wants majority ownership?
Majority ownership does not have to mean unchecked control. A well-drafted shareholders' agreement can protect the minority partner in ways that go well beyond the ownership percentage. But these protections need to be negotiated before the entity is formed, not after.
What happens if the relationship does not work out?
This is exactly why the shareholders' agreement needs clear provisions for how one party can exit, how the business gets valued, who keeps the brand, and how disputes get resolved. International business separations are more complicated than domestic ones, and the governing documents should anticipate this possibility.
How Chang Law Group Can Help
We represent US-side partners and Chinese manufacturers in structuring international brand ventures. Our work in this area includes entity formation and governance, shareholders' agreements, intercompany supply agreements, trademark strategy and filing, transfer pricing documentation frameworks, and positioning businesses for eventual sale.
We handle these matters with the benefit of nearly 20 years of legal experience and a deep understanding of how business gets done on both sides of the Pacific.
Contact:
Phone: (617) 307-1238
Email: info@jchanglaw.com
WeChat: ChangLawGroupLLC
Chang Law Group LLC: One Marina Park Drive, Suite 1410, Boston, MA 02210
This article provides general information only and is not legal advice for your specific situation. Reading this post does not create an attorney-client relationship with Chang Law Group. This article may not reflect recent developments or apply to your particular circumstances. Consult Chang Law Group LLC to evaluate your specific situation and options.
