C. David DeBenedetti, an associate at the Warsaw office of SALANS Law Firm, talks to Beata Gołębiewska.

What are the greatest barriers to Polish products being sold in the United States?
Aside from the dollar's current weakness, the greatest barriers for companies who are able to produce a salable product are psychological: on both sides of the ocean. First, on the American side, although generalizations are subject to exception, the market is incredibly different from the Polish or European market. There are far fewer products competing for shelf space: while Europe has opened its internal borders, domestic European companies have become subject to greater competition, leading to a greater number of brands being available. The U.S. market, on the other hand, consolidated long ago. So, it is difficult for a new company, with a new product to break into such a huge market.

On the Polish side, companies with a successful product line and available capital seem unwilling to invest the great sums required in a product up front and unwilling to put good investment bankers on retainer in order to find the necessary capital from other sources. Introducing a new product to market takes market research, in some circumstances, permits, contacts in the relevant industry, marketing expertise, a distribution system, and a sales force, and the costs for all of these must be borne before a product is actually sold. It seems that the unwillingness to bear these costs and take the risk is the reason that the marketing successes of Polish products, post 1989, can be credited to U.S. distributors, not the Polish producers. As these American companies took the risk of bringing a product to market, they have the right to enjoy the great majority of the profits, which leaves Polish producers with a U.S. market position, but without the significant profits that they could have earned if they had incurred the initial costs and developed or acquired the necessary expertise and contacts.

Are there any legal barriers to the importation of Polish products or to the establishment of a business in the United States?
With certain exceptions, no. The United States, like any other country, has regulated industries and products, but those are comparatively few and far between.

How could a Polish company start exporting to the United States?
The legal steps are comparatively simple. A company would need to either: 1) enter into a distribution agreement with an established U.S. company; 2) create a U.S. company and start from scratch; or 3) acquire a U.S. company. Before doing so, the market research and arranging for formalities would be necessary.

Entering into a distribution agreement can take many forms, but in reality, the profit usually goes to the company that does the most work and takes the most risks. Aside from price, the two key issues will of course be sales targets and exclusivity. Any professional counterpart to a distribution agreement, who will be bearing some or all of the marketing costs, will insist on (and should receive) exclusivity. Products do not sell themselves, and if a company is going to invest in the build up of a brand, then it needs to be protected so that it can enjoy the profits from a successful venture.

Creating a U.S. company is a comparatively simple process, which I can generally accomplish (in Delaware) in a day or two. The type of entity (i.e., corporation, limited-liability company, limited partnership) is a tax/business-driven question. As a general rule on place of incorporation, if a company intends to do business nationwide, then it is best to incorporate in Delaware (which has the most company friendly laws). Otherwise, if a company intends to do business within only one state, then it is preferable to incorporate in that specific state.

Acquisition of a U.S. company with a relevant market share is a complicated process, but could provide the most efficient way to get products to market. Also, with low-interest loans available, it may be possible to leverage that purchase to minimize out of pocket expenses of the investor.

Are there any particular opportunities for Polish companies in the United States?
Specifics are too numerous to mention here, but the weak dollar and the unsure U.S. economy give companies with capital and a good product the opportunity to move directly into the States: by acquiring a U.S. company with existing market share, but a weak financial position. Acquisition of such a company could help overcome the barriers to the U.S. market that I mentioned before. Also, the changing American/Polish relationship due to recent worldwide events has created a much more favorable opinion of Poland, which could hopefully reflect in consumer taste, to a company that moves quickly.

C. David DeBenedetti recently moved back to the Warsaw office of SALANS. David worked in the Warsaw office from 1997 until 2001, and spent 2001 to 2003 in the New York office of SALANS. He specializes in cross-border aspects of inbound and outbound transactions.