diff --git a/api/spec/requests/spree/api/orders_spec.rb b/api/spec/requests/spree/api/orders_spec.rb
index ce7d5190d16..e1671123c48 100644
--- a/api/spec/requests/spree/api/orders_spec.rb
+++ b/api/spec/requests/spree/api/orders_spec.rb
@@ -523,14 +523,15 @@ module Spree::Api
       let(:billing_address) {
         { name: "Tiago Motta", address1: "Av Paulista",
                                 city: "Sao Paulo", zipcode: "01310-300", phone: "12345678",
-                                country_id: country.id }
+                                country_id: country.id, state_id: state.id }
       }
       let(:shipping_address) {
         { name: "Tiago Motta", address1: "Av Paulista",
                                  city: "Sao Paulo", zipcode: "01310-300", phone: "12345678",
-                                 country_id: country.id }
+                                 country_id: country.id, state_id: state.id }
       }
       let(:country) { create(:country, { name: "Brazil", iso_name: "BRAZIL", iso: "BR", iso3: "BRA", numcode: 76 }) }
+      let(:state) { create(:state, country_iso: 'BR')  }
 
       before { allow_any_instance_of(Spree::Order).to receive_messages user: current_api_user }
 
diff --git a/api/spec/requests/spree/api/users_spec.rb b/api/spec/requests/spree/api/users_spec.rb
index 8908695fab1..4fa5eb4022f 100644
--- a/api/spec/requests/spree/api/users_spec.rb
+++ b/api/spec/requests/spree/api/users_spec.rb
@@ -44,6 +44,8 @@ module Spree::Api
 
       it "can update own details" do
         country = create(:country)
+        state = create(:state)
+
         put spree.api_user_path(user.id), params: { token: user.spree_api_key, user: {
           email: "mine@example.com",
           bill_address_attributes: {
@@ -51,7 +53,7 @@ module Spree::Api
             address1: '1 Test Rd',
             city: 'City',
             country_id: country.id,
-            state_id: 1,
+            state_id: state.id,
             zipcode: '55555',
             phone: '5555555555'
           },
@@ -60,7 +62,7 @@ module Spree::Api
             address1: '1 Test Rd',
             city: 'City',
             country_id: country.id,
-            state_id: 1,
+            state_id: state.id,
             zipcode: '55555',
             phone: '5555555555'
           }
@@ -72,6 +74,8 @@ module Spree::Api
 
       it "can update own details in JSON with unwrapped parameters (Rails default)" do
         country = create(:country)
+        state = create(:state)
+
         put spree.api_user_path(user.id),
           headers: { "CONTENT_TYPE": "application/json" },
           params: {
@@ -82,7 +86,7 @@ module Spree::Api
               address1: '1 Test Rd',
               city: 'City',
               country_id: country.id,
-              state_id: 1,
+              state_id: state.id,
               zipcode: '55555',
               phone: '5555555555'
             },
@@ -91,7 +95,7 @@ module Spree::Api
               address1: '1 Test Rd',
               city: 'City',
               country_id: country.id,
-              state_id: 1,
+              state_id: state.id,
               zipcode: '55555',
               phone: '5555555555'
             }
diff --git a/core/lib/spree/testing_support/factories/address_factory.rb b/core/lib/spree/testing_support/factories/address_factory.rb
index 86567470cd0..44533605f50 100644
--- a/core/lib/spree/testing_support/factories/address_factory.rb
+++ b/core/lib/spree/testing_support/factories/address_factory.rb
@@ -24,21 +24,19 @@
     phone { '555-555-0199' }
     alternative_phone { '555-555-0199' }
 
-    state do |address|
-      Spree::State.joins(:country).where('spree_countries.iso = (?)', country_iso_code).find_by(abbr: state_code) ||
-        address.association(
-          :state,
-          strategy: :create,
-          country_iso: country_iso_code,
-          state_code: state_code
-        )
-    end
-
     country do |address|
       if address.state
         address.state.country
       else
-        address.association(:country, strategy: :create, iso: country_iso_code)
+        Spree::Country.find_by(iso: country_iso_code) ||
+          address.association(:country, strategy: :create, iso: country_iso_code)
+      end
+    end
+
+    after(:build) do |address, evaluator|
+      if address&.country&.states_required? && address.state.nil? && address.state_name.nil?
+        address.state = address.country.states.find_by(abbr: evaluator.state_code) ||
+          create(:state, country_iso: address.country.iso, state_code: evaluator.state_code)
       end
     end
   end
diff --git a/core/lib/spree/testing_support/factories/country_factory.rb b/core/lib/spree/testing_support/factories/country_factory.rb
index fef80feae87..bfb4e12c72c 100644
--- a/core/lib/spree/testing_support/factories/country_factory.rb
+++ b/core/lib/spree/testing_support/factories/country_factory.rb
@@ -20,7 +20,6 @@
     iso3 { carmen_country.alpha_3_code }
     numcode { carmen_country.numeric_code }
 
-    # FIXME: We should set states required, but it causes failing tests
-    # states_required { carmen_country.subregions? }
+    states_required { carmen_country.subregions? }
   end
 end
diff --git a/core/lib/spree/testing_support/factories/state_factory.rb b/core/lib/spree/testing_support/factories/state_factory.rb
index 9fe2e36f76d..12fa0c4c1cf 100644
--- a/core/lib/spree/testing_support/factories/state_factory.rb
+++ b/core/lib/spree/testing_support/factories/state_factory.rb
@@ -17,9 +17,15 @@
       carmen_subregion do
         carmen_country = Carmen::Country.coded(country.iso)
 
-        carmen_country.subregions.coded(state_code) ||
-          carmen_country.subregions.sort_by(&:name).first ||
+        unless carmen_country.subregions?
           fail("Country #{country.iso} has no subregions")
+        end
+
+        carmen_regions = carmen_country.subregions
+        carmen_regions = carmen_regions.flat_map(&:subregions) if carmen_regions.first.subregions?
+        region_collection = Carmen::RegionCollection.new(carmen_regions)
+
+        region_collection.coded(state_code) || region_collection.sort_by(&:name).first
       end
     end
 
diff --git a/core/spec/lib/spree/core/testing_support/factories/address_factory_spec.rb b/core/spec/lib/spree/core/testing_support/factories/address_factory_spec.rb
index 18d27274439..f5a0d93a429 100644
--- a/core/spec/lib/spree/core/testing_support/factories/address_factory_spec.rb
+++ b/core/spec/lib/spree/core/testing_support/factories/address_factory_spec.rb
@@ -31,17 +31,65 @@
     end
   end
 
-  describe 'when passing in a state and country' do
-    subject { build(:address, country_iso_code: country_iso_code, state_code: state_code) }
+  context 'states and countries' do
+    describe 'country requiring a state' do
+      let(:state) { create(:state, country_iso: 'IT', state_code: 'PE' )}
+      let(:country) { create(:country, iso: 'IT' )}
 
-    context 'when the country has a state with proper code' do
-      let(:country_iso_code) { "US" }
-      let(:state_code) { "NY" }
+      context 'when given a state but no country' do
+        subject { build(:address, state: state) }
 
-      it 'works' do
+        it 'infers the country from the state' do
+          expect(subject).to be_valid
+          expect(subject.state.abbr).to eq("PE")
+          expect(subject.country.iso).to eq("IT")
+        end
+      end
+
+      context 'when given a country but no state' do
+        subject { build(:address, country: country) }
+
+        it 'automatically finds or creates an appropriate state' do
+          expect(subject).to be_valid
+          expect(subject.state.abbr).to eq("AL")
+          expect(subject.country.iso).to eq("IT")
+        end
+      end
+
+      context 'when given a country, no state but a state_name' do
+        subject { build(:address, country: country, state_name: 'Bogus state') }
+
+        it 'does not automatically find or create an appropriate state' do
+          expect(subject).to be_valid
+          expect(subject.state).to be_nil
+          expect(subject.state_name).to eq('Bogus state')
+        end
+      end
+    end
+
+    describe 'country not requiring a state' do
+      subject { build(:address, country: country) }
+      let(:country) { create(:country, iso: 'AI' )}
+
+      it 'does not automatically find or create an appropriate state' do
         expect(subject).to be_valid
-        expect(subject.state.abbr).to eq("NY")
-        expect(subject.country.iso).to eq("US")
+        expect(subject.state).to be_nil
+        expect(subject.country.iso).to eq("AI")
+      end
+    end
+
+    describe 'when passing in a state and country ISO' do
+      subject { build(:address, country_iso_code: country_iso_code, state_code: state_code) }
+
+      context 'when the country has a state with proper code' do
+        let(:country_iso_code) { "US" }
+        let(:state_code) { "NY" }
+
+        it 'works' do
+          expect(subject).to be_valid
+          expect(subject.state.abbr).to eq("NY")
+          expect(subject.country.iso).to eq("US")
+        end
       end
     end
   end
diff --git a/core/spec/lib/spree/core/testing_support/factories/state_factory_spec.rb b/core/spec/lib/spree/core/testing_support/factories/state_factory_spec.rb
index b1fa4e5a43c..2378fb27f5e 100644
--- a/core/spec/lib/spree/core/testing_support/factories/state_factory_spec.rb
+++ b/core/spec/lib/spree/core/testing_support/factories/state_factory_spec.rb
@@ -33,6 +33,26 @@
     end
   end
 
+  describe 'for a country with nested carmen states' do
+    context 'when not given a state_iso' do
+      let(:state) { build(:state, country_iso: "IT") }
+
+      it 'creates the first state for that country it finds in carmen' do
+        expect(state.abbr).to eq("AL")
+        expect(state.name).to eq("Alessandria")
+      end
+    end
+
+    context 'when given a state_iso' do
+      let(:state) { build(:state, country_iso: "IT", state_code: 'PE' ) }
+
+      it 'finds the corresponding state' do
+        expect(state.abbr).to eq("PE")
+        expect(state.name).to eq("Pescara")
+      end
+    end
+  end
+
   describe 'when given a country record' do
     let(:country) { build(:country, iso: "DE") }
     let(:state) { build(:state, country: country) }