Shedding Light on the Gray Market

Counterfeit goods and other methods of product reproduction that infringe upon the intellectual property of the owner are strictly illegal, and heavily regulated, especially within the US. The gray, or “grey”, market however, enjoys much fewer limitations as the goods are authentic and obtained by legal means. “Gray goods”  are legally manufactured goods purchased from certified distributors, which are then resold, generally, without the permission of  the trademark holder. Though this channel is completely legitimate and lawful, there are some important trade and import restrictions surrounding gray market merchandise that must be adhered to. For example, if an Argentine company has a trademark and participates freely in the US market, there is no CBP restriction on its products’ entry into United States by other importers.   However, if the owner of that trademark is a U.S. entity, any imported product bearing the trademark becomes a restricted gray market article.  Click here to learn more.

A restricted gray market article is a foreign-made article bearing a genuine trademark owned and recorded by a  U.S. entity, imported without the authorization of the U.S. trademark owner.  In other words, gray market goods bear a genuine  mark which has been applied with the approval of the trademark owner, but the approval is limited to sales in a country other than the United States.  Restricted gray market merchandise will be seized for a violation of  19 U.S.C. 1526(b) if discovered by CBP.

Only trademarks which are recorded with CBP are entitled to gray market protection. Whenever a CBP Inspector queries the CBP Intellectual Property database, he or she will check the recordation file screen to determine whether the “Genuine Trademarked Articles Restricted” box states “Y” or “N”. If the box associated with that section is marked with a “Y”, it indicates that no one, except the trademark holder or his designee, may import genuine articles bearing that trademark. So if the goods are genuine, and a “Y” appears in the trademark recordation screen, the goods may not be imported without the U.S. trademark owner’s consent.

If, however, the box is marked with an “N”, this indicates that gray market goods bearing that mark may be imported by anyone, without restriction and regardless of whether the trademark holder consented.   This does not exempt Counterfeit goods from being seized, regardless of whether there is CBP recordation.  Read about the Supreme Court’s ruling in favor of the gray market in a suit against EBay and other discount retailers.

It is imperative to familiarize yourself with the ownership and recordation of trademarks in the U.S. before you attempt to import goods.  More and more often, companies are taking action to protect their product from unauthorized distribution, and Customs continues to strictly clamp down on restricted gray market items. Knowing your rights, and those of the trademark owner, can help you avoid a costly seizure of legally purchased goods.

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