Parallel import

Aparallel importis a non-counterfeitproductimported from another country without the permission of theintellectual propertyowner. Parallel imports are often referred to asgrey productand are implicated in issues ofinternational trade,andintellectual property.

Parallel importing is based on concept ofexhaustion of intellectual property rights;according to this concept, when the product is first launched on the market in a particular jurisdiction, parallel importation is authorized to all residents in the state in question.Some countries allow it but others do not.

Parallel importing of pharmaceuticals reduces price of pharmaceuticals by introducing competition;TRIPS agreementin Article 6 states that this practice cannot be challenged under the WTO dispute settlement system and so is effectively a matter of national discretion.

The practice of parallel importing is often advocated in the case of software, music, printed texts and electronic products, and occurs for several reasons:

1. Different versions of a product are produced for sale in different markets. For example, the UK edition ofTop Gear Magazineis officially sold in the UK, andTop Gear Australiais officially sold in Australia. However, some unofficial distributors inAustraliaalso sell the UK edition ofTop Gear Magazine.
2. Companies, either the manufacturer or the distributor, set differentprice pointsfor their products in different markets. Parallel importers ordinarily purchase products in one country at a price (P1) which is cheaper than the price at which they are sold in a second country (P2), import the products into the second country, and benefitting fromarbitrage,sell the products in that country at a price which is usually between P1 and P2.
3. Consumers who are able to obtain more competitively priced items and may be able to avoid local sales taxes, are placed on an even footing with consumers who have less access to overseas sales online.
4. Some advocacy groups support parallel importing on the grounds of enhancing the free flow of information.

International approach

Parallel importing is regulated differently in different jurisdictions; there is no consistency in laws dealing with parallel imports between countries. Neither theBerne Conventionnor theParis Conventionexplicitly prohibit parallel importation.

Australia

The Australian market is an example of a relatively small consumer market which does not benefit from theeconomies of scaleand competition available in the larger global economies. Australia tends to have lower levels of competition in many industries and oligopolies are common in industries like banking, supermarkets, and mobile telecommunications.

Private enterprise will use product segmentation strategies to legally maximise profit. This often includes varying service levels, pricing and product features to improve the so-called "fit" to the local marketplace. However, this segmentation may mean identical products at higher prices. This can be termed price discrimination.With the advent of the Internet, Australian consumers can readily compare prices globally and have been able to identify products exhibiting price discrimination, also known as the "Australia Tax".

In 1991, the Australian Government resolved to remove parallel import restrictions from a range of products except cars. It followed this up with legislation making it legal to source music and software CDs from overseas and import them into Australia. An Australian Productivity Commission report recommended in July 2009 that legislation be extended to legalise the parallel importing of books, with three years' notice for publishers.The commission also recommended abolishing restrictions on parallel importing of cars.

The Federal Court of Australiadecisionhas ruled that parallel imported items with valid trademarks are subject toSection 123 of the Trade Mark Act.

Various Australian Parliament committees have investigated allegations of price discrimination.

European Union/European Economic Area

TheEuropean Union(andEuropean Economic Area) require the doctrine of international exhaustion to exist between member states, but EU legislation for trademarks, design rights and copyright prohibits its application to goods put on the market outside the EU/EEA.

Germany

InGermany,theBundesgerichtshofhas held that thedoctrine of international exhaustiongoverns parallel importation, subject to the EU rules above.

Hong Kong

In Hong Kong, parallel importation is permitted under both the Trade Mark and (amended) Copyright Ordinance before The Copyright (Amendment) Ordinance 2007 came into force 6 July.

Japan

Japan's intellectual property rights law prohibits audiovisual articles marketed for export from being sold domestically, and such sale of "re-imported" CDs are illegal.

United States

In the United States, courts have established that parallel importation is legal.In the case ofKirtsaeng v. John Wiley & Sons, Inc.,the US Supreme Court held that thefirst-sale doctrineapplies to copies of a copyrighted work lawfully made abroad, thus permitting importation and resale of many product categories.

Moreover, the Science, State, Justice, and Commerce, and Related Agencies, Appropriations Act of 2006 prohibits future free trade agreements from categorically disallowing the parallel import of patented products.

Automobiles

Main article:Grey import vehicle

United States

The United States has unique automobile design legislation administered by theNational Highway Traffic Safety Administration.Certain car makers find the required modifications too expensive. In the past, this created demand forgrey import vehicles,where certain models are modified for individual customers to meet these requirements at a higher cost than if it had been done by the original manufacturer. This procedure interferes with the marketing scheme of the manufacturer, who might plan to import a less powerful car and force consumers to accept it. The Imported Vehicle Safety Compliance Act of 1988 basically ended the gray market by requiring manufacturer certification of U.S.-bound cars.

Parallel-imported foodstuffs, etc.

Markets for parallel imports and locally made products sometimes exist alongside each other even though the parallel imports are markedly more expensive. This may be for various reasons, but is mostly observed in foodstuffs and toiletry.

Due to the nature of hotels, travellers often have little information on where to shop except in the immediate vicinity. Grocery shops opened to serve brand-name hotels often feature parallel-imported foodstuffs and toiletry to cater to travellers so that they can easily recognise the product they have been using at home.

Foodstuffs and toiletry made from different plants may vary in quality because different plants may use materials or reagents (such as water used for washing, food additives) from different sources, although they are usually subject to the same standards by internal QC or public health authorities. A person may be allergic to the foodstuff or toiletry made by some plants but not others.

To sum up, the major reasons for such a market are:

• Lack of information
• Recognisability
• Avoidance of risk due to products by different plants

Issues

A manifestation of the philosophical divide between those who support various intellectual property andthose who are critical of it,is the divide over the legitimacy of parallel importation. Some believe that it benefits consumers by lowering prices and widening the selection and consumption of products available in themarket,while others believe that it discourages intellectual property owners from investing in new andinnovativeproducts. Some also believe that parallel imports tend to facilitatecopyright infringement.

This tension essentially concerns therightsanddutiesof a protectedmonopoly.Intellectual property rights allow the holder to sell at a price that is higher than the price one would pay in acompetitive market,but by doing so the holder relinquishes sales to those who would be prepared to buy at a price between the monopoly price and the competitive price. The presence of parallel imports in the marketplace prevents the holder from exploiting the monopoly further bymarket segmentation,i.e. by applying different prices to different consumers.

Consumer organisationstend to support parallel importation as it offers consumers more choice and lower prices, provided that consumers retain equivalent legal protection to locally sourced products (e.g. in the form ofwarrantieswith international effect), and competition is not diminished.

However, such organisations also warn consumers of certain risks in using parallel-imported products. Although the products may have been made to comply with the laws and customs of their place of origin, these products or their use may not comply with those in places where they are used, or some of their functions may be rendered unusable or meaningless (which may needlessly drive up prices). Electronic devices, however, suffer less from this type of risk because newer models support more than one user language.

Examples

Australia

Importation ofcomputer gamesand computer game hardware fromAsiais a common practice for some wholesale and/or retail stockists. Many consumers now take advantage of on-line stores inHong Kongand theUnited Statesto purchase computer games at or near half the cost of a retail purchase from the Australian RRP. Often the versions sold by the Asian retailers are manufactured in Australia to begin with. An example isCrysis,which was available from Hong Kong on-line stores for approximately $50 AUD but whose retail cost in Australia was close to $100. Crysis was sold in Asia using identical versions of the game box and disc, right down to including Australian censor ratings on the box.

Hong Kong

See also:Parallel trading in Hong Kong

Importation ofColgatetoothpastefromThailandintoHong Kong.The goods are bought in markets where the price is lower, and sold in markets where the price of the same goods is, for a variety of reasons, higher. Electronic goods like Apple'siPadare frequently imported in Hong Kong before they're official and resold to South-East Asian early adopters for a premium.

New Zealand

The practice exists of luxurycardealers inNew ZealandbuyingMercedes-BenzvehiclesinMalaysiaat a low price, and importing the cars into New Zealand to sell at a price lower than the price offered by Mercedes Benz to New Zealand consumers.There are also many parallel import dealers of electronics hardware. Parallel importing is allowed in New Zealand and has resulted in a significant lowering of margins on many products.

Poland

There is an opinion, not scientifically proven, but very popular among people in Poland that "Western" washing powders are more effective in cleaning than Polish, because chemistry companies allegedly produce items of higher quality for Western Europe. Because of that, there are companies and online stores importing Western chemistry supplies to Poland (for example from Germany), even if similar brands are available there.

Russia

According toAnatoliy Semyonov,trademark rights exhaustion turned national in 2002, and, as of April 2013, an act is being prepared that could make original goods imported without a permission of the producer officially "counterfeit" (by replacing things on which "a trademark is located illegally" with things "on which an illegally used trademark is located" ). He notes that, according to theCriminal Code,illegal use of a trademark can be punished up to 6 years of imprisonment; and a similar article in theOffences Codemakes goods with an illegal copy of a trademark subject to confiscation.

In 2022, following the exit of various Western firms from Russia as a result of theRussian invasion of Ukraine,a parallel import scheme was legalized to allow certain goods into Russia.In September, thetrade minister,Denis Manturov,stated that Russian consumers would be able to buy the newly announcediPhone 14,despiteApplehalting all sales in the country. Apple products were already being re-exported and sold in Russia through the scheme, although at a higher price.

European Union

SomeSony PSPvideo game consoles were imported into theEuropean Economic Areafrom Japan up to twelve months prior to the European launch. The unusual component of this example is that some importers were selling the console for a higher price than the intended EU price, taking advantage of the relative monopoly they enjoyed. After the release the console was commonly imported from the USA where it was retailed for much lower price.

Other example is smart phones, which were being imported from China, where an average device could be boughtfor about $100 while a similar device would be retailed for about €200 in the EU.

See also

• Counterfeit consumer goods
• Exhaustion of rights
• Grey market
• Grey import vehicle
• Import scene
• Importation right
• Parallel importing in video games
• Track and trace

Bibliography

• The Gray Blogis a blog dedicated to parallel market legal issues.
• Australian Library and Information Association - Statement on Parallel Importing
• Statement on parallel import and export, or parallel tradeArchived13 April 2018 at theWayback Machine
• Australian Productivity Commission 2009: "Restrictions on the Parallel Importation of Books"- The Australian Productivity Commission report, released 14 July 2009, presented original research to advocate the removal of parallel import restrictions on books.