The answer isn't a simple yes or no. MoCRA is a significant U.S. federal law, and your eligibility for an exemption depends entirely on your U.S. sales figures, the specific activities your facility performs, and the types of products you sell. Being a small or Australian-based business isn't enough on its own.
This article provides a clear decision path to help you determine your status. We'll walk through how to confirm your business activities, calculate your three-year sales average, screen your products for restricted categories, and understand which FDA obligations remain even if you are exempt.
Key Takeaways
- The MoCRA small-business exemption is conditional and relieves you of specific obligations like facility registration and product listing, but not all FDA requirements.
- Eligibility hinges on your average gross annual U.S. cosmetic sales over the previous three years being below a specific threshold (statutorily US$1,000,000, adjusted for inflation). You must verify the official 2026 inflation-adjusted amount.
- Manufacturing or processing even one "high-risk" product—like certain eye-area cosmetics or long-lasting makeup—can disqualify your facility from the exemption, regardless of your revenue.
- Even if exempt, you should maintain detailed records to prove your eligibility, monitor for changes that could affect your status, and regularly reassess your obligations.
Who qualifies for the MoCRA small-business exemption in 2026?
The exemption is designed for smaller players, but the definition is very specific. It applies to owners or operators of facilities that manufacture or process cosmetic products intended for distribution in the United States.
This distinction is critical. The rules generally do not apply to:
- Retailers
- Salons
- Distributors
- Businesses that only label, package, hold, or distribute products made elsewhere
If your business only sells cosmetics made by a third-party contract manufacturer, it is the manufacturer's facility—not your brand—that is subject to registration.
The Three-Year Sales Test
To qualify for the exemption, your business must have an average gross annual sales of cosmetic products in the United States for the previous three years of less than US$1,000,000, adjusted for inflation.
Important: This is not your worldwide turnover or total company revenue. It is a precise calculation based only on your U.S. cosmetic sales.
As of late 2026, the FDA has not published the final inflation-adjusted figure for this period. You must consult the official FDA MoCRA guidance for the confirmed 2026 threshold before making a final decision.
How to Calculate Your Average U.S. Sales
To determine your average, you simply add your gross U.S. cosmetic sales from the last three years and divide by three.
Hypothetical Example:
- 2023 U.S. Cosmetic Sales: US$250,000
- 2024 U.S. Cosmetic Sales: US$400,000
- 2025 U.S. Cosmetic Sales: US$500,000
- Total: US$1,150,000
- Three-Year Average: US$1,150,000 / 3 = US$383,333
In this example, the business's average is well below the US$1,000,000 base threshold, making it a potential candidate for the exemption, provided it doesn't handle restricted products.
Include sales from all channels, brands, and related entities as required by FDA guidance. If your product could be classified as both a cosmetic and an over-the-counter (OTC) drug (such as an anti-dandruff shampoo or SPF moisturiser), you must assess how to treat those sales.
While the FDA does not currently require businesses to submit formal exemption applications, you must keep internal revenue records that support your calculation. The FDA's guidance on registration and listing clarifies that it does not provide exemption certificates, so the burden of proof rests with you.
Which MoCRA requirements does the exemption cover—and which remain?
Exempt status brings significant relief, but it is not a free pass from FDA oversight. You still need a clear split between requirements that fall away and duties that stay in force.
What the Exemption Generally Covers
For a qualifying small business, the exemption typically removes the requirement for:
- Facility Registration: You do not need to register your manufacturing/processing facility with the FDA.
- Cosmetic Product Listing: You do not need to submit a detailed list of each cosmetic product you market in the U.S.
- Good Manufacturing Practices (GMPs): You will likely be exempt from the specific GMP regulations that the FDA is establishing under MoCRA.
What the Exemption Does NOT Cover
Even if your facility is exempt, your business and its products must still comply with other fundamental FDA rules. Key continuing obligations include:
- Product Safety: You must ensure your products are safe for consumers and maintain records substantiating their safety.
- Proper Labelling: Your products must not be misbranded. Labels must be truthful and contain all required information, such as an ingredient list and contact details for reporting adverse events.
- Adulteration: Your products must not be adulterated, meaning they cannot be manufactured in unsanitary conditions or contain any poisonous or deleterious substance.
- Serious Adverse Event Reporting: Report any serious adverse event (such as infection or significant disfigurement) to the FDA within 15 business days. Keep health-related adverse event records for three years if you qualify as a small business (six years for larger firms).
Warning: Is Your Product Also a Drug? If your product makes claims to treat or prevent a disease or affect the structure or function of the body, the FDA may regulate it as both a cosmetic and a drug. Examples include moisturisers with sun protection or deodorants with antiperspirant claims. The MoCRA small-business exemption does not apply to separate drug registration and listing requirements.
Which products and business activities can disqualify a business?
This is where many businesses get tripped up. Even if your U.S. sales are well below the threshold, manufacturing or processing just one product from a "high-risk" category can make your facility ineligible for the small-business exemption.
According to the FDA, these categories include:
- Products that regularly contact the eye's mucous membrane. Examples include waterline eyeliners, mascara, and some false-eyelash adhesives.
- Products that are injected. This covers injectable cosmetics promoted for uses such as wrinkle reduction.
- Products intended for internal use. Examples include ingestible "beauty from within" products marketed as cosmetics.
- Products that alter appearance for more than 24 hours, where removal is not part of normal use. Examples include certain long-lasting hair dyes, some nail products, and temporary tattoos.
The "One-Strike" Rule
Screen your entire product portfolio, including items you contract-manufacture for other brands. According to FDA guidance, if a facility manufactures or processes any product in these high-risk categories, the owner or operator must register the facility.
That registration must cover all cosmetics made at the facility, not just the disqualifying product.
Borderline Products
Classification isn't always straightforward. Whether a product falls into a restricted category depends on its intended use, claims, ingredients, and how consumers typically use it.
The FDA generally does not expect facial cleansers or moisturisers to regularly contact the eye's mucous membrane, but a product's formulation or marketing can change that assessment.
Before you treat the exemption as settled, match your claims, application methods, and duration of effect against the FDA's definitions.
How to document and monitor exemption status in 2026
Relying on an exemption requires diligence. You can't just "set it and forget it." You need a clear process for documenting your eligibility and monitoring for any changes that could affect your status.
Follow this practical four-step review:
- Map Your Activities: Confirm every manufacturing or processing activity your facility performs for products sold in the U.S.
- Calculate Your Sales Average: Tally your U.S. cosmetic sales for 2023, 2024, and 2025 to calculate the three-year average.
- Classify Every Product: Screen your entire product line against the four high-risk categories to ensure none are present.
- List Remaining Obligations: Document the MoCRA duties that still apply, such as adverse event reporting and safety substantiation.
Create a Compliance File
We recommend maintaining an internal compliance file to support your position. This file should contain:
- Revenue reports detailing your U.S. cosmetic sales calculations.
- Product formulas, intended-use records, and labels for every product.
- Details of your manufacturing facilities and any related agreements.
- A log of all adverse event reports and investigations.
- Copies of the official FDA guidance you relied upon for your decision.
Maintaining organised financial records is key to proving your eligibility. For Australian businesses relying on this exemption, VJM Global can help keep your sales records, cross-border compliance administration, and documentation controls audit-ready. For specific FDA legal or regulatory advice, always consult a qualified U.S. professional.
Monitor for Triggers
Your exemption status is not permanent. You must reassess it whenever a significant change occurs, such as:
- Revenue growth that pushes your three-year average over the threshold.
- Launching a new product that falls into a high-risk category.
- Changing a product's formula or marketing claims.
- Acquiring another brand with a different product mix.
Beyond monitoring these triggers, keep the bigger picture in view: compliance with U.S. MoCRA is separate from your obligations under Australian law. Coordinate your analysis with Australian export, labelling, and consumer safety requirements as well.
Disclaimer: This article is for informational purposes only and was written based on information available in 2026. Regulations can change. You must confirm the current legal position with official FDA materials and consult qualified legal or regulatory professionals before making any registration decisions.
Frequently Asked Questions
What are the FDA requirements for cosmetics?
Cosmetics must be safe for consumers, properly labelled, and not adulterated or misbranded. Under MoCRA, manufacturers may also face facility registration, product listing, and adverse event reporting duties, unless an exemption applies.
Is FDA approval required for cosmetics?
No, cosmetic products and ingredients do not need premarket approval from the FDA. The main exception is colour additives, which must be approved for their intended use. If a product is also a drug, separate requirements apply.
Who is exempt from FDA registration?
The MoCRA facility registration exemption is for facilities whose owner has less than US$1,000,000 (adjusted for inflation) in average annual U.S. cosmetic sales over the prior three years. This exemption does not apply if the facility manufactures or processes certain high-risk products.
Does a small business still need to list cosmetic products with the FDA?
If you qualify for the small-business exemption and do not handle restricted products, you are also exempt from mandatory MoCRA product listing. Confirm your status against current FDA guidance.
What happens if a small cosmetic business exceeds the MoCRA revenue threshold?
If your average U.S. sales exceed the threshold, you lose exempt status. You must then meet MoCRA requirements, including facility registration and product listing by the stated deadlines.
