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What a skincare manufacturing agreement should cover

Reviewed by our formulation chemist team. Updated October 2026.

A clause-by-clause guide to the manufacturing and supply agreement between your brand and a contract manufacturer, with what each clause should say, the questions to ask and the mistakes that cost brands money.

Not legal adviceThis guide explains common contract terms so you can prepare and negotiate. It is not a contract template and not legal advice. Have a lawyer in your country review any agreement before you sign it.

Short answer

A skincare manufacturing and supply agreement fixes what the factory makes (the specification and the approved sample), who owns the formula and the artwork, the minimum order, forecasts, prices and how they can change, payment terms, lead times and delivery terms, how defects are inspected and remedied (usually with AQL sampling), batch records and retained samples, recalls, liability and insurance, who carries each regulatory duty in each market, how the relationship ends and how disputes are settled. For a first small order, a written quote, a purchase order and the manufacturer's terms often do the job; a full agreement pays off when you reorder, ask for exclusivity or sell through retailers.

What the agreement is, and when you need one

A manufacturing and supply agreement (sometimes called a contract manufacturing agreement or MSA) is the long-term contract between your brand and the company that makes your product. It sets the rules once; each order then follows them through a purchase order (PO).

Situation	What is usually enough
Samples and formula development	A quote, the manufacturer's terms and a mutual NDA (non-disclosure agreement)
First production order of one or two products	A written quote, a PO that refers to it, the approved sample and specification, and the manufacturer's standard terms
Reorders, several SKUs, a custom formula, exclusivity requests	A manufacturing and supply agreement with a specification annex
Selling to retailers or distributors, or large volumes	The agreement plus a quality agreement, insurance certificates and a recall plan

Our payment safety guide covers what to put in writing before a first deposit. This page goes deeper, clause by clause, for when the relationship is worth a full agreement.

The document set: agreement, quality agreement, POs

Master agreement
The commercial and legal terms: scope, ownership, prices, payment, liability, term, termination, law and disputes.
Specification annex per product
The approved sample reference, INCI list, pH and viscosity ranges, fill volume and tolerance, container, closure, label and box versions, shelf life and storage conditions. Update it by signed revision when anything changes.
Quality agreement
Who does which quality task: incoming material checks, batch release, COA content, retained samples, complaint handling, change notices, audits. Retail buyers and EU Responsible Persons often ask for one.
Purchase orders
Product, quantity, price, delivery date and Incoterm for each order. The agreement should say the agreement wins if a PO term conflicts with it.

Clause by clause

The table lists each clause, what it should cover, and what to ask for. Where KoreanOEM publishes its own position, it is in the last column.

Clause	What it should cover	What to ask for	KoreanOEM's published position
Parties and definitions	Full legal names, registration numbers, addresses; definitions of Product, Specification, Batch, Defect, Territory	The legal entity that signs is the one you pay and the one named on the invoice	Idenbrick Co., Ltd., Busan, business registration number 439-88-03275
Scope	Which services: formula development, raw material purchase, container and box sourcing, filling, labeling, testing, documents, registrations	A list of what is included in the unit price and what is extra	Stock container and one-color printed label in the unit price; paper boxes optional and never in the unit price
Specification and approved sample	The signed specification and a retained approved sample ("golden sample") that each batch is compared with; tolerances for color, scent, texture, pH, viscosity and fill	Sign and date the approved sample; keep one yourself	Production starts after you approve the pre-production sample
Formula ownership and confidentiality	Who owns the formula, the process and the test data; what the manufacturer may reuse; confidentiality term; return or destruction of information	Ownership in writing before development starts; see our formula ownership guide	A custom formula developed for a brand is not offered to other brands; mutual NDA signed online in My page
Exclusivity	Formula, market or channel exclusivity, its territory and duration, and any volume condition to keep it	Tie exclusivity to a realistic minimum yearly volume rather than asking for it unconditionally	Tell us the market and channel; agreed per project
MOQ and forecasts	Minimum order per SKU and per batch; rolling forecasts (for example 6 to 12 months); which part of a forecast is binding	Non-binding forecasts except a short firm window; the cost if you cancel after materials are bought	From 500 units for ready library serums, creams and ampoules (see fees)
Ordering	How POs are placed and confirmed, how long the manufacturer has to accept, how changes are handled	Written confirmation of every PO with a ship date	Written quote within 1 to 2 business days
Pricing and price changes	Unit prices per volume tier, the currency, the Incoterm, how long prices hold, and when they can change (raw material costs, exchange rates)	Notice before any price change and the right to place a last order at the old price; open-book evidence for large increases	Every price is FOB Incheon; price breaks of about 20% at 1,000 units and 40% at 10,000 against the 500-unit price
Payment terms	Deposit, balance, currency, method, bank charges; how bank details may change	A balance due before shipment or on documents, not full prepayment; bank detail changes only by signed letter confirmed by phone	50% deposit, 50% before shipment, by bank wire in USD or KRW; never full prepayment before you approve a pre-production sample
Lead times and delivery	Lead time from PO or sample approval; the Incoterm and place; what happens if the date slips	A remedy for long delays (for example the right to cancel and recover the deposit)	Production about 4 to 5 weeks after sample approval (4 to 6 with a custom formula); QC and documents about 1 week; FOB Incheon by default, DDP quoted per shipment
Quality	GMP standard, batch testing, COA content, release rules, the right to audit	ISO 22716 named, a COA per batch, audit or video tour rights with notice	ISO 22716 facility; COA and microbiology for every batch
Acceptance and defects	Inspection window after delivery, AQL sampling plan, defect classes, hidden defects, remedy (remake, credit, refund), who pays freight on returns	See the AQL section below; agree the inspection window in days from arrival	Agree per project
Batch records and retained samples	How long batch records and retained samples are kept and how fast the manufacturer must produce them for an investigation	A stated period at least as long as the shelf life plus a margin	Agree the period in writing for your project
Change control	Notice before any change to formula, raw material grade or supplier, process or site	Prior written notice and your approval for changes that affect the label, claims or registrations	Agree per project
Recalls and complaints	Who decides on a recall, who notifies authorities, who pays, cooperation and traceability duties	Cost follows cause: the party at fault pays; both cooperate within set hours	Batch number and expiry printed on every unit
Liability and indemnities	Warranties (made to spec, under GMP, title), indemnities for manufacturing defects and for claims and labels, caps and exclusions	Mutual indemnities matched to control: the manufacturer for manufacturing defects, the brand for claims, marketing and label content it supplied	Agree per project
Insurance	Product liability insurance for both sides, minimum limits, certificates of insurance, additional insured status	Check what your marketplace or retailer requires first; see our liability insurance guide	Ask us for the documents your insurer needs
Regulatory responsibilities	Who is the legal responsible person in each market and who files what (see the table below)	A responsibilities table annexed to the agreement	MoCRA listing filed by our team, USD 150 per SKU; EU and UK through our partner
Packaging supply	Who sources containers and boxes, who approves them, brand-supplied components, allowed spoilage, storage of leftover packaging	A fit and leak check with the formula before mass filling; a spoilage allowance in percent	Custom container sourcing USD 199 for up to 2 products, with a fit and leak check; see custom packaging sourcing
IP and artwork	Brand owns its trademark, label and box artwork; who owns dielines, printing plates and molds; no use of your brand by the manufacturer without consent	Mold and tooling ownership stated, plus the right to move tooling at the end	No design services: we provide the dieline, print specs and a file check; the brand or its designer supplies artwork
Term and termination	Initial term, renewal, notice period, termination for breach or insolvency, what survives	A last-time buy, use of leftover packaging, and handover of documents	See the termination section
Force majeure	Events outside control (disasters, war, port closures, sudden export bans); notice; the right to cancel after a long delay	A time limit, for example 60 or 90 days, after which either side may cancel the affected PO	Agree per project
Governing law and disputes	Which country's law, negotiation and mediation steps, arbitration institution, seat and language	Arbitration with a named institution and seat; see the disputes section	Agree per project
Boilerplate	Notices (email addresses), assignment, entire agreement, language version that prevails, signatures	English as the prevailing language if you do not read Korean	Email in English, Korean, Chinese and Japanese

Quality, acceptance and defects (AQL)

Most disputes are about whether a batch is good. Agree the test in advance, so nobody argues about it after delivery.

Define the defects

Class	Examples in skincare	Typical AQL
Critical	Microbial contamination, wrong product in the container, a missing mandatory warning, glass fragments	0 (any one rejects the lot)
Major	Leaking pump or cap, short fill outside tolerance, pump that does not dispense, wrong or illegible batch or expiry print, color or scent clearly outside the approved sample	1.0 to 2.5
Minor	Small print blemish, light scuff on the bottle, slightly off-center label that does not hide text	2.5 to 4.0

Use a sampling plan

AQL (acceptable quality limit) sampling under ISO 2859-1 tells an inspector how many units to check and how many defects are allowed. The lot size and inspection level give a sample size; the AQL gives the accept and reject numbers.

ExampleA lot of 3,000 serums at general inspection level II gives a sample of 125 units. At AQL 2.5 for major defects, the lot is accepted with up to 7 major defects in the sample and rejected at 8. At AQL 4.0 for minor defects, up to 10 are accepted. Any critical defect rejects the lot. Check the numbers against the ISO 2859-1 tables your inspector uses.

Name the inspection point
Pre-shipment inspection in Korea before the balance payment, inspection on arrival, or both. Pre-shipment is cheaper to fix: the goods are still at the factory.
Set the window
For example, visible defects reported within 14 days of arrival at your warehouse, with photos and batch numbers. Hidden defects (such as separation that appears later) need a longer window tied to the shelf life.
Set the remedy
Remake, replacement, credit on the next order or refund, and who pays freight. Say whether you must return or destroy the defective units.
Agree the referee
If you disagree on a test result, name an independent accredited lab and say who pays (usually the party that turns out to be wrong).

Batch records and retained samples are what make a complaint investigation possible. A good factory keeps both under its GMP system; our ISO 22716 guide explains how. Write the retention period into the agreement rather than assuming one.

Regulatory responsibilities by market

The law names a responsible party in each market, and it is usually the brand or its importer, not the factory abroad. The agreement should say who does each task, so nothing falls between you.

Market	Who the law holds responsible	Tasks to assign in the agreement
United States (MoCRA)	The "responsible person": the manufacturer, packer or distributor whose name appears on the label, usually the brand	Product listing, safety substantiation records, serious adverse event reports within 15 business days, label contact; the factory registers its own facility
European Union	The Responsible Person established in the EU (Articles 4 and 5 of Regulation (EC) No 1223/2009)	CPSR, PIF, CPNP notification, serious undesirable effect reports, GMP statement from the manufacturer
United Kingdom	The UK Responsible Person with a UK address	Safety report, PIF, SCPN notification, SUE reports
Canada	The manufacturer and the importer	Cosmetic Notification Form within 10 days of first sale, bilingual label
Australia	The importer (registered with AICIS)	AICIS registration, ingredient categorization, label under the cosmetics information standard
Other markets	Usually the local importer or notification holder	Registration, local label, documents from the manufacturer (CFS, COA, GMP certificate)

Two duties to split clearly: label content and claims (normally the brand's, because it decides the marketing) and manufacturing records and batch quality (normally the manufacturer's). See our MoCRA guide and EU guide for the details.

Recalls, liability and insurance

Who is liable to consumers: in most markets, the brand named on the label and the importer can be sued for a defective product, even when a factory abroad made it. In the EU, Directive (EU) 2024/2853 on defective products applies to products placed on the market after 9 December 2026 and extends liability to the importer and, where the manufacturer is outside the EU, to its authorized representative and fulfillment service provider. Your contract decides who pays in the end.
Indemnities: an indemnity is a promise to cover the other side's losses for certain claims. A fair split: the manufacturer covers defects in manufacturing (contamination, wrong formula, out-of-spec batches); the brand covers claims it made, label content it supplied and marketing.
Caps: manufacturers often cap liability, for example at the value of the affected orders, and exclude lost profits. Ask that the cap does not apply to confidentiality breaches or deliberate wrongdoing, and that recall costs for a proven manufacturing defect are covered.
Recall plan: agree who decides, who notifies authorities and marketplaces, how fast the manufacturer gives batch records, and how costs are split. Our recalls and adverse events guide has the steps.
Insurance: product liability insurance for the brand is usually required by marketplaces and retailers; ask your insurer which documents it needs from the manufacturer.

Termination and transition

Plan the exit when you sign, because that is when both sides are friendly.

Notice period
Long enough to move production without a stockout: switching a product to a new factory realistically takes several months (samples, stability, registrations, first production).
Last-time buy
The right to place a final order at current prices during the notice period.
Leftover materials
Who pays for raw materials and packaging bought for your forecasts, and whether you can buy or collect brand-printed packaging.
Documents
Copies of everything you own or need: INCI list, specification, COAs, SDS, stability and test reports, safety reports and registrations filed in your name.
Formula and tooling
What transfers depends on your ownership terms; molds and printing plates you paid for should be released to you.
What survives
Confidentiality, liability for products already sold, and recall cooperation continue after the end.

Governing law and disputes: KCAB, ICC

With a manufacturer in Korea and a brand abroad, a court case in either country is slow and a court judgment can be hard to enforce in the other. International arbitration is the usual answer: awards are enforceable in more than 170 countries under the New York Convention, to which Korea has been a party since 1973.

Option	What it is	Rules (as of October 2026)	Fits when
KCAB International	The international arm of the Korean Commercial Arbitration Board, Korea's main arbitration institution, in Seoul	KCAB International Arbitration Rules 2026	Most deals with a Korean manufacturer; costs are generally lower than the large global institutions
ICC	The International Chamber of Commerce's International Court of Arbitration	ICC Arbitration Rules, updated edition in force from 1 June 2026	Larger contracts, or when both sides want a neutral global institution and seat (for example Singapore)
Courts	National courts in the agreed country	Local procedure	Rarely the best choice across borders

A KCAB International model clause names the rules, the number of arbitrators (one or three), the seat (for instance Seoul), the language and the law governing the arbitration agreement. For a small brand, one arbitrator and English keep costs down. Add a step before arbitration: senior managers meet within 30 days, then mediation if both agree.

Choose the governing law of the contract too. If you say nothing, the UN Convention on Contracts for the International Sale of Goods (CISG) may apply automatically between Korea and many countries, including the US, Canada, Australia, Japan, China, Germany and France (not the UK). Some parties exclude it so that only the named national law applies; ask your lawyer which suits you.

How to negotiate, step by step

Write your must-haves first
For most brands: ownership of the custom formula, a defect remedy, no full prepayment, document delivery, a fair exit.
Ask for the manufacturer's standard terms
Mark up their document rather than sending a long template from another industry. Long food or pharma contracts often do not fit cosmetics.
Attach the specification
A clear specification and approved sample prevent more disputes than any liability clause.
Match obligations to control
Each side takes the risk it controls. Brands control claims and marketing; manufacturers control production.
Have it reviewed
A lawyer in your country should review the final draft, especially liability, insurance and governing law.
Keep it alive
Update the specification annex and responsibilities table with every new SKU or market.

Common mistakes

Signing a contract with no specification annex, so "defect" means whatever either side says.
Leaving formula ownership to an NDA, which protects confidentiality but does not transfer ownership.
Asking for unconditional exclusivity with no volume, which manufacturers price in or refuse.
Binding forecasts you cannot meet, or no rule for materials bought for your forecast.
No inspection window or AQL plan, then rejecting a lot months after arrival.
Assuming the factory is the legal responsible person in your market; it usually is not.
Choosing "the courts of the brand's country" for disputes with a manufacturer whose assets are in Korea.
Forgetting the exit: no last-time buy, no document handover, no tooling release.

Checklist

Legal entities, addresses and registration numbers correct
Scope and what is included in the unit price listed
Specification annex and signed approved sample for each SKU
Formula ownership, confidentiality and any exclusivity in writing
MOQ, forecast rules and cancellation costs agreed
Prices, currency, Incoterm and price change notice agreed
Payment milestones and bank detail change rule agreed
Lead times and late delivery remedy agreed
Defect classes, AQL plan, inspection window and remedies agreed
Batch record and retained sample period stated
Change notice rule for formula, materials and site
Recall plan, indemnities, caps and insurance agreed
Regulatory responsibilities table per market annexed
Artwork, dielines and tooling ownership stated
Termination notice, last-time buy and document handover agreed
Governing law, arbitration institution, seat and language chosen; lawyer review done

How KoreanOEM helps

KoreanOEM is a Korean skincare OEM and private label manufacturer: we develop your formula and produce it in Korea, and our terms are published, so you can see most of the commercial clauses before you ask.

Payment: 50% deposit and 50% before shipment by bank wire in USD or KRW; never full prepayment before you approve a pre-production sample.
Ownership: a custom formula developed for your brand is not offered to other brands. A mutual NDA can be signed online in My page.
Minimums: ready library formulas from 500 units for serums, creams and ampoules. First orders below 500 units are possible when you share your growth plan (expected volumes for the next orders), reviewed case by case. Adjusted library formulas from 1,000 units (1,500 where the ready minimum is 1,000) and fully custom formulas from 2,000.
Lead times: first lab samples in about 2 to 4 weeks, production about 4 to 5 weeks after sample approval, QC and documents about 1 week.
Quality and documents: ISO 22716 facility, COA and microbiology for every batch, batch number and expiry on every unit, label proof check free on orders where we print the labels.
Delivery: FOB Incheon by default; DDP (door to door, duties and taxes paid) quoted per shipment.

Best price, best cost and the lowest minimum order you cannot find anywhere else. We believe in our customers' vision rather than our own profit, so even if we lose money at the beginning, we still support you.

Get a free quote See how ordering works

Frequently asked questions

What should a skincare manufacturing agreement include?

At least the specification and approved sample, formula ownership and confidentiality, MOQ and forecasts, prices and price changes, payment terms, lead times and the Incoterm, quality and defect terms with an AQL plan, recalls, liability and insurance, regulatory responsibilities per market, termination and transition, and governing law and disputes. Attach a specification annex per product and update it with every change.

What quality and defect terms should I agree (AQL, tolerances)?

Define critical, major and minor defects, set tolerances for fill, pH, viscosity, color and scent against the approved sample, and use ISO 2859-1 AQL sampling, commonly 0 for critical, 1.0 to 2.5 for major and 2.5 to 4.0 for minor defects. Add an inspection window, a remedy (remake, credit or refund) and an independent lab as referee.

Can I get exclusivity on a formula?

Usually yes for a custom or adjusted formula, defined by formula, market or channel, territory and time, often tied to a minimum yearly volume. A ready stock formula is normally not exclusive, though some manufacturers agree channel or country limits.

Can a formula be patented or protected as a trade secret?

A patent is possible only for a truly new and inventive formula or process and requires public disclosure, so most skincare formulas are protected as trade secrets through confidentiality and contract terms. The INCI list is public on every label; the percentages, raw material grades and process are what the contract should protect.

Who is liable for a bad reaction, the brand or the maker?

Toward consumers, the brand named on the label and the importer are usually liable in the US, EU and UK, even when a factory abroad made the product. Between brand and maker, the agreement decides: commonly the maker covers manufacturing defects and the brand covers its claims, label content and marketing.

What is the refund or remake policy for defects?

It depends on the agreement: typical remedies are a remake or replacement, a credit on the next order or a refund, after the defect is confirmed against the approved sample within an agreed inspection window. Put the remedy, the time limits and who pays freight in writing before production.

What are normal payment terms with a manufacturer?

Contract manufacturers commonly ask for a 30% to 50% deposit and the balance before shipment or against documents. KoreanOEM's terms are 50% deposit and 50% before shipment, and never full prepayment before you approve a pre-production sample.

Should disputes go to KCAB or ICC arbitration?

For most contracts with a Korean manufacturer, KCAB International arbitration in Seoul under its 2026 rules is practical and usually cheaper; ICC arbitration suits larger contracts or a neutral seat such as Singapore. Both produce awards enforceable under the New York Convention, which Korea has applied since 1973.

Can I move my product to another manufacturer later?

Yes, if your agreement gives you the documents, the right to use the formula (for a formula you own) and the release of tooling, with a notice period long enough for samples, stability tests and registrations. With a ready stock formula you keep your brand and artwork, but the new factory makes its own version.

Sources

Checked against these sources in October 2026. Rules and fees change; check with the authority or your importer before you sell.