Parallel Import Laws

Parallel importing is the process of importing a product into the country, which was designated for sale in a different country. A company may create a product that has features specific to the market it is being sold into. It may also make other versions of the product with features that are specific to other markets. If a version with less features is imported at a lower price, into a market where a version with more features is already sold, the manufacturer might feel this violates its intellectual property rights. U.S. laws help manufacturers protect their rights.

Customs Recording

The U.S. Customs and Border Protection (CBP) division of the Department of Homeland Security, has developed procedures designed to protect the intellectual property rights of manufacturers, whose rights are violated by parallel importing. A manufacturer can record its trademark and dress registrations with the CBP. Dress registration involves the registration of any features of your product that has no function, but distinguish your product from those of other manufacturers including distinctive packaging. For example, The McDonalds Happy Meal box would be a trade dress that could be registered. Trademark and trade dress registration is included in federal laws set out in Consolidated Federal Regulation (CFR) 19 CFR section 133.12. Once trademarks and trade dresses are registered, you can apply to record a specific product associated with those registrations, with the CBP and you must include a description of the product along with the names of the licensee or licensees allowed to use them, as set out in regulation 19 CFR 133.13.

The CBP uses the Lever Rule to protect manufacturers from parallel imports. A trademark owner first has to show that the parallel import goods are physically and materially different from the goods the manufacturer officially imports into the United States. The Lever Rule is the result of a decision to this effect, made by the District of Columbia Court of Appeal in the 1993 case, Lever Bros. v. United States. Physical and material differences include the materials used in the construction of a product and differences resulting from regulatory requirements of other markets. Material differences can also include performance and operational features, such as a cell phone that only operates on two bandwidths when the version officially imported into the U.S. operates on three bandwidths and consequently retails at a higher price than the parallel import.

A manufacturer can file a U.S. District Court action against a parallel importer and may ask for financial restitution, including damages, and a court order preventing the parallel importer from importing the products in the future. Manufacturers may cite U.S. laws, such as Sections 32, 42 and 43(a) of the Lanham Act and Section 526 of the Tariff Act. The Lanham Act allows a manufacturer to bring an action against a parallel importer where the parallel imports are materially different from the ones imported officially and where this is likely to cause consumer confusion.