U.S. Distribution and Sales Agent Agreements for European Manufacturers: The Clauses That Decide the Relationship
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- October 30, 2026
U.S. Distribution and Sales Agent Agreements for European Manufacturers: The Clauses That Decide the Relationship
Most European manufacturers enter the American market the same way: not with a subsidiary, not with an acquisition, but with a signature on a distribution agreement. A company in Brescia or Stuttgart finds a U.S. distributor at a trade show, the distributor sends over a contract, the manufacturer’s legal team in Europe gives it a quick read without involving U.S. counsel, and the relationship begins. Three years later the distributor is the manufacturer’s entire American business, and the contract that governs it was never really negotiated.
That contract is the highest-leverage document in the whole market entry. It decides who owns the customer relationships, who carries the credit risk, what happens to the brand if the relationship ends, whether the manufacturer can be sued in Ohio, and in some states whether the manufacturer has accidentally created a franchise. It also sits on a legal foundation that is different from Europe’s in ways that are not obvious from the text. What follows is a clause-by-clause account of where European assumptions and U.S. law part ways, written for the export manager and the owner who will sign.
Two words that change everything
The first decision is not a clause. It is the word used to describe the counterparty.
A distributor buys the product. Title passes, the distributor resells at its own price, and the distributor’s customers are the distributor’s customers. The manufacturer’s credit exposure is to one party, the distributor, and the distributor’s insolvency is the manufacturer’s problem only to the extent of unpaid invoices.
A sales agent does not buy anything. The agent solicits orders in the manufacturer’s name, the manufacturer invoices the end customer, and the agent earns a commission. The manufacturer keeps the customer relationship and the margin, and takes on the credit risk of every U.S. buyer the agent brings in.
Europeans tend to assume that the agent model is the more protected one, because in Europe it is: the Commercial Agents Directive and the national laws that implement it, including the indemnity provisions of the Italian Civil Code, give agents substantial rights on termination. The United States has no federal equivalent. What it has instead is a patchwork, and the patchwork is where the surprises come ashore.
In the contract: say explicitly which model applies, and make every other clause consistent with it. An “agent” who holds inventory and sets prices will be treated as something else when a dispute arrives.
The commission statutes nobody in Europe has heard of
Thirty-five U.S. states have enacted laws protecting independent sales representatives, and they bind out-of-state and foreign manufacturers that use reps in those states. California’s version is representative of the strict end. A manufacturer using an independent rep to solicit orders in California must have a written contract stating the commission rate and how it is computed, when commissions are paid, the territory, any exceptions, and any chargebacks. Each payment must come with an accounting. A manufacturer that willfully fails to put the contract in writing, or willfully fails to pay commissions as the contract provides, is liable for three times the damages proved, plus attorney’s fees. The statute says any attempt to waive these rights is void.
The European manufacturer that engages a U.S. rep on a handshake, or on a two-page European template, and later disputes a commission, is walking into treble damages it did not know existed.
In the contract: if the model is an agency contract, you would need to draft it according to the most stringent statute where the rep will work, then pay commissions on the schedule the contract dictates everytime.
Termination: the protection you assume is not there, and the protection you did not expect is
European suppliers come to termination with the Directive in mind: notice periods, goodwill indemnity, compensation for the agent’s lost clientele. Under general U.S. contract law none of that applies. A distribution agreement ends on the terms it states. If it says either party may terminate on ninety days’ notice, that is the deal, and the distributor who built the territory over a decade receives what the contract gives and nothing more.
Then the patchwork reappears. A handful of states have dealer protection statutes of general application; Wisconsin’s Fair Dealership Law is the best known, and Puerto Rico’s Law 75 is stricter still. Many more states protect dealers in specific industries, motor vehicles, farm and construction equipment, alcoholic beverages, among others, with good-cause requirements and cure periods that override the contract. A manufacturer of agricultural machinery terminating a dealer in Iowa, or a winery terminating a distributor in almost any state, is in a statutory regime whether the contract mentions it or not.
In the contract: state the term, the renewal mechanics, the grounds for termination, the notice periods, and what happens to inventory, open orders, customer data, and marketing materials on exit. Then check the statutes of each state in the territory for the product category. The contract cannot override them, but it can be drafted to live within them.
The franchise trap
This is the clause problem that most often produces a genuinely alarmed phone call. Under the Federal Trade Commission’s Franchise Rule, a commercial relationship is a franchise if three elements are present: the distributor operates under or in substantial association with the manufacturer’s trademark, the manufacturer exercises significant control over or provides significant assistance with the distributor’s method of operation, and the distributor makes a required payment to the manufacturer. The payment threshold is low: the rule’s exemption applies only where required payments in the first six months total less than $735, a figure the FTC adjusts for inflation every four years. Purchases of reasonable quantities of inventory at bona fide wholesale prices do not count as a fee, which is what keeps ordinary distribution outside the rule. Training charges, marketing fund contributions, required software, mandatory minimum purchases beyond what a dealer would reasonably stock, these can count.
California goes further. Its Franchise Investment Law captures arrangements in which the manufacturer prescribes a marketing plan in substantial part, the business is substantially associated with the manufacturer’s mark, and a franchise fee is paid, and it requires registration before any offer is made. A relationship that qualifies as a franchise without the manufacturer intending it carries disclosure obligations, registration obligations in registration states, and, under California’s Franchise Relations Act, good-cause and cure requirements on termination. Rescission and damages follow for getting it wrong.
The irony is that the features that trigger franchise status, strong brand association, operational guidance, dedicated showrooms, are exactly what a quality-conscious European manufacturer wants from a U.S. distributor.
In the contract: get the structure reviewed against the franchise definitions before signing, keep required payments outside the definition, and if the business model genuinely is a franchise, treat it as one from the start rather than discovering it in litigation.
Territory, exclusivity, and minimum purchases
Exclusive territories are lawful and common in the United States, and the questions are commercial rather than legal: how large, for how long, and conditioned on what. The clause that makes exclusivity safe for the manufacturer is the minimum purchase commitment, with defined consequences, loss of exclusivity, conversion to non-exclusive status, or termination, if the minimums are missed. Without consequences, a minimum is a hope.
Online sales complicate territory in ways European manufacturers underestimate. A distributor’s website sells nationally by default. The agreement needs to say whether online sales are permitted, into which territories, on which platforms, and under what brand presentation, or the exclusive territory granted to the Texas distributor is being served from New Jersey within a month.
In the contract: define the territory, define the channel, set measurable minimums with stated consequences, and address online sales and marketplaces by name.
Pricing and the antitrust lines
A European manufacturer accustomed to recommending or setting resale prices needs to stop at the U.S. border and ask. Under federal antitrust law, agreements fixing the price at which a distributor resells have been judged under a rule of reason since 2007, which makes them possible but not safe. Several states, California among them, continue to treat minimum resale price agreements as unlawful in themselves under state law. Suggested resale prices, unilateral policies announced by the manufacturer and enforced without agreement, and minimum advertised price programs each sit at different points on the risk scale and need to be drafted with those distinctions in mind.
Price discrimination is the second line. The Robinson-Patman Act restricts selling the same goods to competing distributors at different prices where competition is injured, and federal enforcement of it returned in 2024 after a long dormancy. A manufacturer giving its largest U.S. account a price its other distributors do not get should know what justifies the difference.
In the contract: do not write resale prices into a distribution agreement. If pricing guidance matters, build a lawful policy outside the contract, with counsel.
Tariffs, delivery terms, and who pays when the rules change
If any clause needed a reminder of its importance in 2026, this one received it. In the twelve months to October, the United States ran three different tariff regimes on European goods: the tariffs imposed under emergency powers in 2025, struck down by the Supreme Court on February 20, 2026; a replacement 10 percent global tariff under a different statute, which ran from February 24 to its statutory expiry on July 24, 2026; and the sectoral tariffs that remain in force, including 50 percent on steel and aluminum and 25 percent on copper, extended in 2025 to hundreds of product categories that contain those metals, from industrial machinery to automotive components. Further authorities are available to the administration and refund claims for the struck-down tariffs are being processed. The rate that applies to a given product on a given day is a question for the shipment date, not the signing date.
Contracts drafted in calmer years allocated duties with a single Incoterm and moved on. That no longer works. The agreement needs to say who is the importer of record, who pays duties at the rate in force when goods clear, what happens to agreed prices when a tariff is imposed, raised, struck down, or refunded, and whether either party can renegotiate or exit if a change crosses a threshold. A manufacturer that sold on delivered-duty-paid terms in early 2025 absorbed every one of those changes alone.
In the contract: choose the Incoterm deliberately, name the importer of record, and include a tariff adjustment and change-in-law clause with a mechanism, not just a sentence.
Product liability, insurance, and the brand in someone else’s hands
In the United States, everyone in the distribution chain can be held strictly liable for injury caused by a defective product, and the plaintiff’s lawyer will name the manufacturer alongside the distributor. European manufacturers sometimes assume that distance protects them. It does not; it only changes the procedure. The agreement should allocate the risk through mutual indemnities, require the distributor to carry product liability coverage naming the manufacturer as an additional insured, and confirm that the manufacturer’s own coverage responds to U.S. claims, which European policies frequently do not without specific extension.
The brand needs the same attention. A U.S. distributor that registers the manufacturer’s trademark in its own name, or builds the domain names and social accounts under its own ownership, holds the manufacturer hostage at renewal time. The manufacturer should own its U.S. registrations before the distributor sells a single unit, which for a foreign-domiciled company means filing through a U.S.-licensed attorney, and the agreement should license the mark for the term only, with every registration, domain, and account reverting on exit. Technical know-how shared with the distributor needs confidentiality terms that actually meet the U.S. standard for trade secret protection, because under U.S. law information that is not actively protected is not protected at all.
In the contract: indemnities both ways, insurance with the manufacturer named, trademark license for the term only, and confidentiality that would hold up in a U.S. court.
Governing law, forum, and the clause Europeans do not know is there
Three points here, one of them routinely missed.
The missed one first. The United States and Italy are both parties to the United Nations Convention on Contracts for the International Sale of Goods. Unless the parties exclude it, the Convention governs the individual sales of goods made under a distribution agreement between an Italian supplier and a U.S. distributor, displacing the domestic sales law either side expected. Many agreements say “governed by the laws of New York” and never mention the Convention, which does not exclude it. Whether to keep it or exclude it is a real choice with consequences for warranties, remedies, and notice of defects, and it should be made on purpose.
Second, judgments. There is no treaty in force between the United States and the European Union for the mutual recognition of court judgments. A judgment from a U.S. court against an Italian company, or an Italian judgment against a U.S. distributor, has to go through recognition proceedings in the other country before it can reach assets. Arbitral awards do not have that problem: both countries are parties to the New York Convention, under which awards are enforceable across more than 170 states through an established procedure. This is why cross-border distribution agreements so often choose arbitration, and why the seat, rules, language, and carve-outs for urgent court relief need to be drafted with care. We covered how disputes under these contracts actually unfold in our article on what to do in the first 30 to 90 days after a U.S.-Italy contract breaks down.
Third, the statutes above do not care what law the parties chose. A California sales rep statute, a Wisconsin dealership law, a state franchise act: each applies to activity in its state regardless of a governing-law clause pointing elsewhere.
In the contract: decide on the Convention expressly, choose arbitration with a neutral seat unless there is a specific reason not to, and accept that state statutes in the territory will apply on top.
When the distributor is not the answer
Sometimes the exercise of drafting the agreement reveals that the structure is wrong. A manufacturer that wants control of pricing, customer relationships, and brand presentation, and is prepared to carry inventory and credit risk, is describing a subsidiary, not a distributor, and the comparison is worth making before signing a five-year exclusive. We set out that route in our guide to forming a U.S. subsidiary for a European company. A manufacturer that wants a U.S. partner with capital in the game is describing a joint venture, with its own structure and its own problems. The distribution agreement is the lightest of the three, and for most exporters the right one. It just has to be drafted for the country it will operate in.
Where a cross border business law attorney fits
Every clause above has a European side and an American side. The European manufacturer’s commercial expectations, its existing contract templates, its home-country law on agency and sale, and its insurance program all sit on one side. U.S. federal law, the statutes of each state in the territory, and the practice of U.S. courts and arbitral tribunals sit on the other. An agreement drafted by counsel who sees only one side will be fluent in one and silent on the other, and the silences are where the treble damages, the accidental franchises, and the unenforceable terminations come from.
Di Martino Law Group drafts and negotiates U.S. distribution and agency agreements for European manufacturers from both sides at once. As a cross border business law attorney practice working in English and Italian from Los Angeles, with an Italian corporate lawyer on the team who reads the manufacturer’s home-country documents in the original, the firm can tell a client which of its European assumptions survive the Atlantic and which clauses need to be rebuilt. For a manufacturer appointing its first U.S. distributor, or renegotiating one after a year like this one, that review is the difference between a channel and a liability.
If your company sells into the United States through a distributor or sales agent, or is about to, have the agreement reviewed before it is signed or renewed. Contact Di Martino Law Group, an international business law attorney and corporate contract attorney in Los Angeles practice, for a U.S. distribution agreement consultation.
