Contributors

Christian Scali

Founder and Managing Shareholder

Geoff West

Associate

Executive summary

California, the world’s fourth largest economy, presents a compelling opportunity for Italian Small and Medium-Sized Enterprises (SMEs) aiming to expand internationally. With a GDP exceeding $4.5 trillion and a strong consumer appetite for luxury, quality, and innovation, California offers Italian businesses a vast and receptive market, especially in sectors like automotive, fashion, furniture, and food.

The state’s diverse economy, global influence, and cultural affinity with Italian products create a strategic platform for market entry and global exposure. However, success requires navigating significant cultural differences—such as California’s transactional business style versus Italy’s relationship-focused approach—and adhering to a complex legal and regulatory environment characterized by strict labor laws, privacy regulations, and intellectual property protections.

Italian SMEs must undertake thorough market research, legal due diligence, and strategic planning to address tariffs, tax complexities, and import regulations. Choosing the right entry mode and building strong local partnerships are critical steps.

Support from U.S. and California trade agencies, combined with expert local advisors, can facilitate compliance, reduce risk, and optimize operations. By adapting to California’s unique business landscape, Italian companies can unlock significant growth potential and leverage the state’s global influence to expand further into the U.S. and beyond.

Introduction

California stands as a titan, boasting the fourth largest economy in the world as of 2025.[1] For Italian Small and Medium-Sized Enterprises (SMEs) considering international expansion, California offers a unique, dynamic, and rewarding business environment. It represents not only a massive consumer market but also a vibrant, multifaceted economy with an appetite for quality, luxury, and innovation—qualities that align well with the strengths of Italian businesses.

Since the COVID-19 pandemic, the United States, and California in particular, have demonstrated remarkable resilience and growth. Investment levels and per capita GDP have surged, labor markets are expanding, and supply chain issues are stabilizing.[2] For Italian SMEs, California is more than just another market; it is a strategic gateway into the broader U.S. economy and a springboard for global reach.

California’s unique market advantages

California’s gross domestic product (GDP) exceeds $4.5 trillion, with merchandise trade reaching $675 billion in 2024 alone, accounting for nearly 16% of the state’s economic output. California imports consumer goods at a rate nearly three times higher than it exports, resulting in $436 billion worth of manufactured goods consumed annually. For Italian SMEs, this represents a vast, hungry market ripe for quality imports.

Italian products already enjoy a prestigious reputation among California consumers. The “Made in Italy” label is synonymous with luxury, authenticity, and style, especially in sectors such as automotive, fashion, furniture, and food. Californians, with lifestyles and tastes often similar to those in Italy due to comparable climates and cultural affinities, are predisposed to appreciate Italian craftsmanship and design.

Moreover, California’s status as a global trendsetter is unparalleled. For Italian businesses, entering California is not just about accessing local customers—it is about leveraging a platform for global exposure.

Understanding cultural and business differences

While the California market offers immense opportunities, Italian SMEs must approach entry with a keen awareness of cultural and business practice differences. Italian business culture often emphasizes relationships, personal trust, and oral agreements, fostering long-term partnerships based on mutual respect. By contrast, California’s business environment tends to be transactional, speed-oriented, and efficiency-driven, prioritizing clear contracts and value maximization over personal bonds.

This difference can lead to misunderstandings. Italians may find American negotiations brusque or impersonal, while Americans may perceive Italian deals as slow and emotionally entangled. Recognizing and adapting to these differing expectations is critical.

Furthermore, California operates within a complex legal framework that demands rigorous risk management. The U.S. is far more litigious than Italy, requiring companies to implement strong compliance measures and contractual protections. Without local expertise, even the most successful Italian business models risk faltering due to regulatory or cultural missteps.

Having a California-based team—legal advisors, business consultants, and industry experts—acting as cultural and business “translators” is essential. They bridge the gap, ensure compliance, and tailor Italian strengths to the California market.

Legal and regulatory landscape

California’s regulatory environment is one of the most detailed and stringent in the U.S., reflecting the state’s progressive values and commitment to consumer and employee protection, requiring a strong investment in human resources and legal compliance frameworks.

Employment law

California is renowned for its employee-friendly labor laws. The minimum wage is $16.50 per hour statewide, with some cities enforcing even higher wages. And some industries have even higher minimum wages, for example, fast-food and qualifying healthcare workers. To complicate matters, some cities have also adopted specific ordinances for specific industries.[3] Employers must comply with comprehensive standards regarding overtime, meal breaks, sick leave, and workplace safety. Notably, the Private Attorneys General Act (PAGA) empowers employees to sue employers on behalf of co-workers for labor violations, increasing litigation risks.

Privacy and consumer protection

The California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA) set rigorous standards for the handling of personal data, far surpassing many international regulations. Coupled with the state’s Unfair Competition Law, which prohibits deceptive practices, businesses must be transparent and diligent in customer data management and marketing. California’s unique labeling law, Proposition 65, adds additional complexity to any company manufacturing, importing, distributing or selling products in California.

Intellectual property (IP)

The U.S. and California in particular protect intellectual property vigorously, a crucial factor for Italian companies exporting luxury goods, fashion designs, or innovative products. Trademarks, copyrights, patents, and trade secrets enjoy robust safeguards, especially given the technology and creative industries concentrated in Silicon Valley and Los Angeles.

Import regulations

Imports into California are subject to rigorous oversight by both federal and state agencies. At the federal level, key agencies include the Food and Drug Administration (FDA), the Department of Agriculture (USDA), and Customs and Border Protection (CBP). Food products face stringent inspections for safety and labeling compliance. Italian companies must familiarize themselves with these procedures to avoid costly delays. Some non-food items are also subject to FDA oversight and all products destined for California must be assessed for labeling requirements under Proposition 65, which is regulated by the California Office of Environmental Health Hazard Assessment (OEHHA). For agricultural and lifestyle brands, California’s Department of Food and Agriculture (CDFA) regulates the importation of live plants, plant products, seeds, flowers, and untreated wood and soil to prevent the introduction of invasive pests.

Economic and tax considerations

The tax environment in California is complex. Beyond federal taxes, the state imposes its own income and business taxes, and many municipalities levy additional levies. Unlike some other states, California may not recognize certain international treaties fully, which can impact tariff and tax obligations.

Currently, tariffs on Italian imports hover around 10% but are expected to rise to 20% on consumer goods such as apparel and furniture by mid-2025. Despite these tariffs, Italy retains Most Favored Nation (MFN) status, and trade negotiations may yield reductions in the future.

Italian SMEs should work closely with tax professionals versed in both U.S. and Italian systems to optimize their tax strategies and comply with regulations.

Market research and due diligence

Entering a new market demands rigorous market research. California consumers have a well-established affinity for Italian products, viewing them as high-end and desirable. Polls confirm strong demand in automobiles, food, fashion, and luxury home goods.

Financial due diligence is equally critical. Understanding local competitors, distribution networks, consumer preferences, and potential partners reduces risk and informs strategic decisions.

Risk analysis should also consider political stability, currency exchange fluctuations, intellectual property protections, and the legal environment. Italy’s and California’s regulatory frameworks differ substantially; a thorough evaluation protects investments.

Market entry strategies

Italian SMEs typically choose between two main entry strategies:

• Brownfield investment: Acquiring or merging with an existing California company offers rapid market presence but requires handling integration complexities and potentially higher upfront costs.
• Greenfield investment: Establishing a new business entity (branch, partnership, corporation, or LLC) provides full control over operations but demands significant time and resources to set up.

Deciding the best approach requires legal and business guidance tailored to company goals, product types, and market conditions.

Location selection is another key factor. Proximity to the Ports of Los Angeles and Long Beach—the busiest on the West Coast—facilitates efficient import logistics. Other considerations include closeness to target consumers, suppliers, and workforce talent, alongside scalability for growth.

Real estate decisions involve choosing between leasing or purchasing. Most newcomers lease to maintain flexibility during early growth phases. Partnering with knowledgeable real estate brokers accelerates finding ideal premises at favorable terms.

Strategic partnerships and networking

Building partnerships with local firms and distributors eases market penetration. However, partner due diligence is critical—aligning business values, goals, and communication styles can prevent costly conflicts.

Risk mitigation strategies include thorough background checks, legal agreements emphasizing liability protections, and ongoing collaboration.

Italian SMEs should leverage trade organizations, chambers of commerce, and networking events to build meaningful local connections.

Operational foundations for success

Operationally, establishing a California presence requires:

• Legal entity formation (or registration if formed in another state) compliant with state and federal law
• Securing necessary permits and zoning approvals
• Recruiting and training local talent familiar with market dynamics
• Protecting intellectual property through trademarks and patents
• Structuring contracts mindful of California’s distinct legal standards

Contract negotiation is a nuanced process, blending cultural understanding with legal savvy. Italian companies benefit from lawyers who understand both jurisdictions.

Funding strategies may involve local banks, venture capital, or parent company resources, adapted to California’s financial landscape.

Support resources for Italian SMEs

Several U.S. government bodies assist foreign businesses entering California:

• The U.S. International Trade Administration (ITA) offers counseling, market research, and introductions to Economic Development Organizations (EDOs) statewide.
• SelectUSA Investment Summit and related events connect investors with state and local officials.
• California hosts more ITA offices than any other state, underscoring its importance in global commerce.

Utilizing these resources can smooth the path to successful market entry.

Why Scali Rasmussen is the best strategic partner for an Italian SME entering California

We have a demonstrated track record on helping foreign companies enter the California market from Mexico, Canada and Europe. Our firm is specifically designed for and dedicated to assisting Italian firms which seek to expand into or already operate in the California marketplace and offers legal services with respect to guiding and managing Italian enterprises with U.S. market entry and operations. Our Italian-Fluent team members are versed in U.S. and Italian business, legal and tax matters and act as business and cultural “translators” for our Italian clients. Our extensive knowledge of the peculiarity of California law in a variety of legal sub-specialties allow us to provide “one shop stop” legal services to new entrants that don’t stop with opening day. Our California-based team includes experts in a variety of areas of law that impact operations and when things don’t go well, our litigation and trial team is standing by to help resolve the dispute or protect you in the event the dispute is not at first resolvable.

Our services and capabilities encompass the following:

• Market entry planning,
• Identification of partners, acquisition targets and California-based team members, including accountants, insurance brokers, and legal specialists,
• Negotiation of key transactions,
• Legal and Tax planning and counsel well-versed in both Italian and U.S. tax law,
• Offices in the U.S in key cities, and
• Legal expertise in corporate transactions and due diligence, product safety, advertising, privacy and employment and wage and hour compliance, licensing and permitting.

We understand the inherent risk in cross-border entry for Italian enterprises and our services seek to reduce project and investment risk. We are a powerful bridge to the most dynamic market and stand ready to assist your market entry plans.

Conclusion

California stands at the crossroads of opportunity for Italian SMEs seeking to expand internationally. With its massive economy, consumer sophistication, and global influence, it offers fertile ground for Italian goods and services.

However, success demands more than ambition. It requires deep market understanding, cultural adaptation, legal compliance, strategic planning, and local partnerships.

By embracing California’s distinct business landscape, Italian companies can not only thrive in the state but also establish a foothold in the broader U.S. and global markets. Now is the time for Italian SMEs to bring their heritage of quality, craftsmanship, and innovation to California’s vibrant economy and write the next chapter of their growth story.

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[1] As measured by the International Monetary Fund (“IMF”) and the US Bureau of Economic Analysis.

[2]“The US Recovery from COVID-19 in International Comparison” (Brookings Institute, October 2024). Although this does not take into effect the unknown consequences of the new Federal administration’s tariff pronouncements.

[3] For example, the LA City Council recently approved an ordinance that imposes a gradual increase in minimum wage to $30/hour starting in July 2025 at $22.50 for hotel and airport workers.