MGO CPA | Tax, Audit, and Consulting Services

Topic: Supply Chain Management

Prepare for These Key Operational Challenges with Your U.S. Expansion

This article is part of an ongoing series, “Navigating the Complexities of Setting Up a Business in the USA”. View all the articles in the series here.

Key Takeaways:

  • Plan for U.S. employee benefits — they differ greatly from other countries and require employer management.
  • Choose the right U.S. location to improve coordination, tax benefits, and operational efficiency.
  • Secure proper insurance and banking solutions to avoid common challenges faced by foreign businesses in the U.S.

~

Expanding into the United States is a strategic move that offers your business significant opportunities for growth — particularly as the U.S. continues to attract substantial foreign direct investment (FDI). Recent data highlights the U.S. as a leading destination for global businesses, but companies entering the U.S. market still face a host of operational challenges. Careful planning and a thorough understanding of the regulatory and logistical landscape are crucial for a smooth transition.

This article delves into the operational considerations your business must address when expanding into the U.S. — focusing on employee benefits, coordination, supply chain management, insurance, and banking.

Importance of Operational Planning

Effective operational planning is the cornerstone of a successful expansion into the U.S. market, especially as FDI continues to drive economic growth in the region. This planning involves not only understanding the regulatory environment but also anticipating challenges related to employee management, supply chains, insurance, and financial operations. Inadequate planning can result in significant delays, increased costs, and potential legal issues — which can be particularly detrimental in a competitive market increasingly influenced by global investment.

Employee Benefits and Regulations

When expanding to the U.S., your company must navigate a complex landscape of employee benefits and regulations — which differ from those in your home country. In many sectors that are seeing increased FDI, such as manufacturing and technology, understanding and managing these benefits is critical to attracting and retaining top talent in the competitive U.S. job market.

  • Differences in Employee Benefits Between the U.S. and Other Countries: In many countries, such as those in the European Union, employee benefits like health insurance and retirement plans are often managed or mandated by the government. However, in the U.S., these benefits are typically the responsibility of the employer. This shift can be surprising for foreign companies, requiring a thorough understanding of U.S. labor laws and regulations.
  • Health Insurance, Retirement Plans, and Other Benefits: U.S. employers are generally expected to provide health insurance as a standard benefit — with medical, dental, and vision benefits often requiring contracts with separate insurance carriers. Employers must typically cover 50% of insurance costs (though minimum coverage varies by state). Many companies also offer retirement plans such as 401(k)s. Navigating the selection and administration of these benefits can be challenging, particularly for small- or medium-sized enterprises. You may need to consult with benefits professionals to stay compliant with U.S. regulations and remain competitive in the job market.
MKT000343-Essential-U.S.-Expansion-Tips

Logistics and Supply Chain Management

Managing U.S. operations efficiently requires careful consideration of location, coordination, and infrastructure needs. Strategic decisions about operational setup can have a notable impact on your overall business success.

  • Choosing the Right Location for Operations: The U.S. is a vast country with significant regional differences in cost, labor availability, and infrastructure. Selecting the right location for your operations can affect everything from shipping costs to employee satisfaction. For instance, companies focused on manufacturing might prefer regions with lower labor costs and favorable tax treatments; those in distribution might prioritize proximity to major logistics hubs.
  • Shipping and Inventory Management: Efficient shipping and inventory management are essential to support product flow and meet customer expectations. Foreign companies in the U.S. often rely on third-party providers to manage these aspects — especially if they lack a physical presence. However, this can create tax obligations in multiple states, as having inventory in a state may trigger state and local tax filing requirements.
  • Obtaining the Necessary Insurance Coverage: Foreign companies often discover their existing insurance policies do not cover their U.S. operations. It’s crucial to secure the appropriate insurance coverage — either through global policies that extend to the U.S. or by obtaining new policies tailored to U.S. risks. Your coverage needs may include general liability, property, product liability, workers’ compensation, and employment practices liability depending on the nature of the business.
  • Challenges in Opening Bank Accounts: Opening a bank account in the U.S. can be a complex process for foreign-owned businesses. Some banks may be hesitant to provide accounts or offer credit facilities to companies without a U.S. presence or substantial collateral. This can limit access to credit and other financial services, making it essential to plan financial operations carefully.

Setting Your Business Up for U.S. Success

Expanding into the U.S. market requires careful consideration of various operational factors — from employee benefits and logistics to insurance and banking. As the U.S. continues to attract substantial foreign direct investment, it is critical to understand and address these challenges to be competitive and position your business for successful growth. By planning accordingly, you can capitalize on the opportunities presented by this dynamic market.

Ready to launch your U.S. expansion? Reach out to our team today to learn how we can help support your operational planning efforts.

Setting up a business in the U.S. requires thorough planning and an understanding of various regulatory and operational challenges. In this series, we will delve into specific aspects of this process, providing guidance and practical tips. Our next articles will explore the complexities of navigating states and local taxes.

Navigating Turbulent Times for Global Supply Chain Management

Executive summary

  • Many international companies are struggling with their supply chain management amid external factors playing out on the global stage.  
  • To mitigate the challenges, you should be aware of the current trends in supply management as well as strategies to improve your resilience and flexibility.  
  • Current trends include AI and automation, supply chain as a service, circular supply chains, risk management and stability, and sustainability.  
  • Diversifying your supply chain and creating a backup plan can help you remain agile.  
  • Know the tax implications of your supply chain.

The last two years have seen major disruption in supply chain management — and throughout 2023, that turbulence is expected to continue. The freight supply and demand equation was a common issue during the pandemic and recovery period. We’re now seeing how the Russian-Ukraine conflict is reshaping the global supply chain for many companies. And amid all the economic uncertainty, supply shortages, and rising costs, the U.S. and EU (European Union) have been heavily investing in infrastructure, putting even more pressure on China with the U.S.-imposed tariffs’ strenuous implications.  

While managing your supply chain is currently a challenge, you’re not completely at the mercy of these external factors which are generally outside of your control. There are strategies to mitigate the impact to your supply chain: your goals should be to both improve your supply chain resilience and flexibility to allow you to better manage the disruptions — those foreseen and unforeseen.  

Our International Tax team breaks down some of the current trends and strategies to be aware of.  

Trends in supply chain management

Some of the main trends in supply chain management include artificial intelligence and automation, supply chain as a service, circular supply chains, risk management and stability, and an increased focus on sustainability. Now, more than ever, mid-market multinational companies must be strategic. These additional constraints cause strain on these companies that are being forced to pivot to address these issues among additional disruption.  

Odds are, you’ve been rethinking the way you currently manage your supply chain — because the global situations aren’t changing. The China tariffs are unlikely to disband soon, and there seems to be no end in sight to the Russia-Ukraine conflict.  

Diversifying your supply chain

Many agree that the global supply chain was too dependent on China, and now companies are considering breaking away from the Asia Pacific region to look at the Mexican maquiladora or IMMEX programs. Both these programs are, for all intents and purposes, synonymous, save for one detail: the IMMEX added shelter companies as a modality. Under this shelter program, companies may set up operations in Mexico without establishing a legal Mexican entity.  

These programs have been in existence since the 1960s, so they’ve proven their worth — however, they don’t work for everyone, so it’s worth perusing other options. It’s important to remember that sourcing from vendors in only one location, regardless of where that location is geographically, is accompanied by elevated risk.  

To mitigate this, you should not only diversify your supply chain but also create redundancies to avoid a single point of failure. In addition, bringing your sources of supply closer to where you operate also reduces the opportunity for risk. Engage with new suppliers and manufacturers in the Americas, for instance, and analyze your current suppliers to see if there is any one region you rely on more heavily already, then minimize the distance between your production and purchasing — without, of course, sacrificing quality, cost, control, and reputation. By optimizing your global footprint, you can maximize your production opportunities, minimize risk, and scout new vendors and locations for future efficiency.  

Devising a backup plan for supply chain disruptions to address multiple contingencies  

At the end of the day, we know that no matter how sophisticated or agile your supply chain backup plan is, external factors — which are never static — can affect things in unexpected ways. With rapidly and ceaselessly changing global conditions, there’s no way to account for everything you could encounter.  

But there are ways to prepare. Plan for multiple contingencies, weighing their outcomes. Don’t forget to think broadly and for new opportunities — for example, if you’re looking at expanding into new markets or territories or want to add a new product line, you must assess their plausibleness under a variety of conditions (and not just logistical conditions, like lead times and delivery … but also tax liabilities and compliance, too). 

Keep your supply chain planning agile and ready to evolve by reviewing its current model and updating it to ensure it reflects the restraints and vulnerabilities you’re presently dealing with. By making a step-by-step plan — for multiple scenarios — you can chart your path forward, regardless of what unfolds on the global stage in these uncertain times.  

How MGO can help

Knowing the tax implications of your supply chain is crucial to your global success, and our experienced International Tax team can help you navigate the supply chain turmoil — no matter how turbulent. By reviewing your current supply chain model to determine where your processes can be strengthened and made more efficient, as well as pinpointing your vulnerabilities, we can help you hone your supply chain’s true potential while safeguarding it against whatever comes next.  

About the authors

John Apuzzo is the leader of our International Tax Practice. He supports public and private companies, and high-net-worth individuals, as they conduct business on the global stage. His passion for developing optimal tax strategies helps his clients reinvest in their businesses and enjoy the wealth they have worked so hard to earn. 

Mandy Li is a transfer pricing partner and provides strategic and tactical transfer pricing solutions to public and private multinational organizations. She supports highly complex global engagements, with an emphasis on transactions moving to and from the China region.