Things to Consider Before Moving Your Production to Another Country (including the USA)

Many US companies are reconsidering their productions lines, after years of persistent supply chain disruptions and the more recent introduction of fluctuating tariffs. This re-evaluation typically leads to three primary strategic options: keeping things as they are and accepting higher production costs due to tariffs (particularly for production in China), moving production to a country or region with more favorable trade agreements (often termed “nearshoring” or “friendshoring”), or bringing manufacturing back to the United States (“reshoring”).  

We’re going to look more closely at moving production to another region or country, or to the US in this article. We’ll delve into legal considerations that come with these strategic shifts: 

Geopolitical Stability, Trade Agreements, and US Regulations 

The relationship between the US and the country to which you may relocate production is going to play a critical role in the success and resiliency of your supply chain. While it’s not always simple to predict future geopolitics, you should consider the current and historic relationship between the US and the country that may inherit your business prior to making the change. This includes assessing: 

For Nearshoring/Friendshoring: 

Previously, companies tended to nearshore production to Mexico and Canada as a result of the US-Mexico-Canada Agreement (USMCA). This agreement provides duty-free access for qualifying goods among member countries through to 2026, but it does appear unlikely to be renewed on the current terms. Companies entering agreements with suppliers based on the USMCA should ensure terms are sufficiently flexible or have a short-term contract at this point.  

Other regions might offer similar beneficial trade agreements or generally lower tariff regimes, and these are currently being negotiated. Researching existing and potential future trade agreements is crucial to ensure preferential access to key markets and avoid unexpected cost increases. 

It’s also worth considering the relationship between the US and the target country. Regions less prone to sudden policy changes, sanctions, or export bans offer greater long-term supply chain predictability (unfortunately, the US is renegotiating the terms of trade with essentially all key partners at the moment, so we do recognize that this is challenging). That said, the due diligence requirements placed on production from certain politically volatile or high-risk countries (like China) should be a major consideration. 

For Reshoring to the US: 

Producing goods entirely within the US eliminates import tariffs on finished products, and duties would only apply to any imported raw materials or components. This can change the financial equation, making domestic production more cost-competitive. 

Companies exploring reshoring should also investigate to learn whether there are tax credits or other benefits available for increasing or relocating production to the US (outside of reducing tariff risk and associated costs). States and local governments may offer their own tax credits and grants. 

The final consideration here is that, while generally stable, US regulations around permitting, zoning, and environmental issues are comprehensive and vary by locality. Thorough due diligence is required before reshoring. 

Worker Conditions and Standards 

While the broader “ESG” acronym may no longer be as uniformly “in vogue” as a standalone concept, the underlying environmental, social, and governance factors remain critical and often heightened considerations for businesses. Companies face significant and tangible risks related to climate impacts on their supply chains, severe reputational and legal consequences for human rights abuses and greenwashing claims, and an increased need for robust corporate governance in today’s uncertain economic environment. 

For Nearshoring/Friendshoring: 

Climate-Related Risks: When considering new regions, assess the climate-related risks that could impact the stability of your supply chain, such as increasing frequency of extreme weather events, water scarcity, or resource availability. Understanding the country’s carbon emissions commitments and vulnerability to climate change is crucial for long-term operational resilience. 

Human Rights and Labor Standards: The risk of encountering slavery, bonded labor, or child labor in supply chains remains a severe concern, since these can carry the risk of reputational damage and potential legal enforcement actions. Companies must conduct rigorous due diligence, looking into the country’s minimum wage standards, existing labor laws, and track record on human rights. Robust contractual requirements for labor standards, alongside independent auditing, should be non-negotiable. 

Corporate Governance: Evaluate the transparency and regulatory oversight within the target country to position your company for compliance, and build trust with investors and consumers. 

For Reshoring to the US: 

Climate Resilience: While domestic production can mitigate some global climate risks, companies must still assess localized climate vulnerabilities (e.g., regional droughts, floods, or extreme temperatures) that could impact US facilities. It’s also worth looking into climate initiatives at the state and local levels to get a grasp on climate-related compliance requirements.  

Robust Labor Protections: The US has well-established federal and state labor laws that reduce exploitation and ensure worker safety. Adherence to these standards mitigates the risk of modern slavery or child labor within your operations. That said, it does also mean that labor and worker safety costs will be higher when compared to many other countries. Companies should ensure their hiring and employment practices align with all US federal laws and relevant state laws. 

Heightened Corporate Governance: Strong corporate governance within the US includes clear lines of authority, transparent financial reporting, robust risk management frameworks, and ethical leadership to ensure long-term stability and investor confidence. US regulations and shareholder expectations place a high premium on transparent and effective governance structures. 

“Made in USA”: If you produce goods in the US, you may benefit from the “Made in USA” marketing advantage, which can resonate with consumers and investors. 

Intellectual Property Protections 

Any change in jurisdiction means new intellectual property (IP) protections. Protecting your innovations and proprietary information is paramount regardless of where you produce your goods. 

For Nearshoring/Friendshoring: 

It will be important to register your trademarks, patents and other IP in any country or region you’re seriously evaluating for production to reduce the impact of counterfeits. This is only a starting point, however.  

It’s also important to investigate whether that country has a reputation for actually enforcing those IP protections. If enforcement is a concern, you’ll need to consider whether those obstacles can be overcome through strategies such as segmenting production steps across different suppliers or protecting the information through stringent trade secrets with robust confidentiality agreements. 

For Reshoring to the US: 

Companies that manufacture in the US benefit from direct legal recourse and the ability of agencies like U.S. Customs and Border Protection (CBP) to actively prevent the import of counterfeit goods. This typically provides a higher degree of security for proprietary designs and processes. 

Cyber Resiliency and Privacy 

The costs of cybercrime are approaching, if not already in, the tens of trillions annually, and they’re still rising. Protecting sensitive company data, customer information, and operational technology is non-negotiable. 

For Nearshoring/Friendshoring: 

The cyber resiliency of the infrastructure and regulatory framework in any country you’re considering moving production to, as well as any local government initiatives to improve cyber resiliency, should be weighed up. Some regions may have less developed cybersecurity regulations or infrastructure, and you’ll need to carefully weigh the risks here with any cost benefits. 

In any event, you must require your suppliers to meet minimum cybersecurity standards and to implement specific protections to guard any personal information you share (particularly if you engage in direct-to-consumer shipping) as well as your company’s IP. Due diligence on a potential partner’s cybersecurity posture is critical. 

For Reshoring to the US: 

Companies handling consumer data, will need to understand and adhere to both federal  US data privacy regulations, such as sector-specific laws like HIPAA or GLBA, as well as a patchwork of state-specific laws. The California Consumer Privacy Act (CCPA) was the first such law, but now nearly 20 states have enacted their own comprehensive data privacy laws, each with unique requirements concerning consumer rights, contract requirements, and breach response.  The benefit of producing locally is that you’re more likely to have access to a broader range of experienced counsel who are ready to help you navigate the privacy and cybersecurity challenges locally. This can include:  

• Mapping data flows to understand where and how consumer data is collected, stored, and used;  

• Inventorying supply chains, tech stacks, and vendor contract requirements;  

• Implementing privacy-by-design principles into company processes and technologies;  

• Developing consumer request procedures to effectively manage access, deletion, and opt-out requests; and  

• Staying current with legal developments as new privacy laws and amendments are proposed and passed.  

Whether you choose to optimize your supply chain through strategic nearshoring or commit to bringing production fully back to the US, a thorough understanding of the legal landscape is key. Proactive engagement with legal counsel can help you navigate these complex considerations and build a resilient and compliant production strategy. 

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