Contract manufacturing: you outsource the making, not the responsibility

How the arrangement works

FDA guidance defines contract facilities as parties that perform one or more manufacturing operations on behalf of an owner^[1]. You bring the specification: a formula, a tech pack, drawings or an approved sample. The contract manufacturer brings the plant and the staff, may buy the materials too, and produces to that specification. Contract manufacturing is the general term; OEM vs ODM describes who supplies the design. Buying a factory's ready-made product under your label is a lighter version of the same deal.

What you are buying is capacity and know-how, not a way to hand off your accountability. The regulators below each say so in their own words.

Responsibility stays with the brand

• Drugs. FDA guidance says each party is responsible for ensuring CGMP compliance for the manufacturing activities it performs^[1]. FDA also regards contract facilities as an extension of the manufacturer's own facility^[2], and its guidance on quality agreements says such agreements cannot be used to delegate the legal duty to comply with CGMP^[1].
• Dietary supplements. FDA's compliance guide gives the example of a manufacturer that contracts out packaging and labeling and then distributes the product: it is ultimately responsible for the dietary supplement it releases for distribution^[3].
• Cosmetics. The responsible person, meaning the manufacturer, packer, or distributor whose name appears on the label^[4], must submit a cosmetic product listing for each cosmetic product^[5]. That is your brand, not the factory. Facility registration falls on the person that owns or operates the facility^[5], which for outsourced production is the contract manufacturer, and registered facilities must renew the registration every two years^[6]. MoCRA exempts certain small businesses from facility registration and product listing requirements^[6], except for some higher risk products, so a small brand or a small lab may not have to file. Ask for the facility's FDA registration number, and note that FDA does not issue certificates or other documents to verify cosmetic facility registration^[6], so a registration "certificate" is not an FDA document.

Put the split of duties in writing

EU good manufacturing practice for medicines sets a strict model that is worth borrowing for any regulated category. It requires a written contract that clearly establishes the duties of each party^[7]. It holds the brand, which it calls the contract giver, ultimately responsible^[7] for controlling the outsourced work, and says the manufacturer should not subcontract any of that work without the contract giver's prior evaluation and approval^[7].

A workable contract with an overseas contract manufacturer covers at least:

• the specification, with tolerances, and the approved sample it is judged against;
• approved materials and suppliers, and no substitutions without your written consent;
• who tests what, at which stage, and who decides whether a batch is released;
• no subcontracting of any step without your approval;
• ownership of your formula, designs, molds and tooling;
• what happens to goods that fail inspection, and who pays for rework or replacement.

Example: what a contract manufacturing quote covers

Line	Per unit
Ingredients to your formula	$0.62
Filling, capping and labeling	$0.28
Tube and carton	$0.35
Batch testing, spread over the run	$0.05
Factory price per unit, at 5,000 units	$1.30
Freight, duty and entry costs to your warehouse	$0.24
Landed cost per unit	$1.54

Illustrative figures, not a quote. Real prices depend on the spec, quantity and factory.

Ask for a quote broken down like this. It shows which lines fall as quantity rises, which inputs you could source yourself, and whether testing has been priced in at all. A quality inspection before shipment and a factory audit before the first order are the two checks that give the written contract teeth.