Parallel import

A parallel import is a non-counterfeit product imported from another country without the permission of the intellectual property owner. Parallel imports are often referred to as grey product, and are implicated in issues of international trade, and intellectual property.

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. E.g.: Top Gear Magazine (UK Edition) is officially sold in UK and Top Gear Magazine (Australian Edition) is officially sold in Australia. However some unofficial distributors in Australia also sell Top Gear Magazine (UK Edition).
2. Companies, either the manufacturer or the distributor, set different price points for 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 sell the products in that country at a price which is usually between P1 and P2. See arbitrage.
3. Consumers who are able to obtain more competitively priced items, and can choose to avoid local sales taxes which may not be regarded as entirely appropriate, are placed on an even footing with consumers who have less access to overseas sales online.^[1]
4. Some advocacy groups support parallel importing on the grounds of enhancing the free flow of information.^[2]

Examples

Australia

Importation of computer games and computer game hardware from Asia is a common practice for some wholesale and/or retail stockists. Many consumers now take advantage of online stores in Hong Kong and the United States to 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 is Crysis, which was available from Hong Kong online 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.

The importation of power tools is a serious issue as they present significant safety risks for tradespeople and consumers alike. Many trade employers are forced to warn staff of the risks involved with grey market powertools as injuries occur often on worksites.

In 2000 the Australian Government resolved to remove parallel import restrictions from a range of products except cars, and 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.^[3]

Hong Kong

Importation of Colgate toothpaste from Thailand into Hong 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's iPad are frequently imported in Hong Kong before they're official and resold to South-East Asian early adopters for a premium.

New Zealand

The practice of luxury car dealers in New Zealand buying Mercedes-Benz vehicles in Malaysia at 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.^{[citation needed]} 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.

United States

The United States has unique automobile design legislation under the National Highway Traffic Safety Administration. Certain car makers find the required modifications too expensive. This creates demand for grey import vehicles, where certain models are modified for individual customers to meet these requirements, at a higher expense than if this were done by the original manufacturer on an assembly line. 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. This happened in 1981 with the Mercedes-Benz W126.

United Kingdom

The importation of Sony PSP video game consoles in to the European Economic Area from 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.

International approach

Parallel importing is regulated differently in different jurisdictions; there is no consistency in laws dealing with parallel imports between countries. Neither the Berne Convention nor the Paris Convention explicitly prohibit parallel importation.

Germany

In Germany, the Bundesgerichtshof has held that the doctrine of international exhaustion governs parallel importation. The European Union allows the doctrine of international exhaustion to exist between member states, but not outside the EU.

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.^[4]

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, legal precedent indicates that parallel importation is legal,^[5] although no definitive laws exist on the matter.

Anti-Counterfeiting Trade Agreement

With the ACTA, the possibility of harmonization of laws regarding parallel imports comes into picture.
Article 23.2 ACTA obliges the parties of the ACTA to "provide for ciminal procedures and penalites" in cases listed later in that article. In contrast to art. 1 EP does the ACTA not exclude parallel imports from its scope^[6].

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 intellectual property and those 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 the market, while others believe that it discourages intellectual property owners from investing in new and innovative products. Some also believe that parallel imports tend to facilitate copyright infringement and software piracy.

This tension essentially concerns the rights and duties of a protected monopoly. Intellectual property rights allow the holder to sell at a price that is higher than the price one would pay in a competitive 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 by market segmentation, i.e. by applying different prices to different consumers.

Consumer organisations tend 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 of warranties with 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.

See also

• Exhaustion of rights
• Track and trace
• Counterfeit consumer goods
• Import scene
• Parallel importing in video games

References

1. ^ http://www.alia.org.au/advocacy/copyright/your.ques.answered.html
2. ^ http://www.alia.org.au/advocacy/copyright/your.ques.answered.html
3. ^ http://www.mondaq.com/australia/article.asp?articleid=83242
4. ^ http://www.news.gov.hk/en/category/lawandorder/071212/html/071212en08002.htm Seven arrested for copyright infringement
5. ^ [1]
6. ^ http://www.iri.uni-hannover.de/tl_files/pdf/ACTA_opinion_110211_DH2.pdf

• Hays, Thomas (2003). Parallel Importation Under European Union Law. Sweet & Maxwell. ISBN 0-42186-300-5.  (Hardcover, 488 pages)

• Stothers, Christopher (2007). Parallel Trade in Europe: Intellectual Property, Competition and Regulatory Law. Hart Publishing. ISBN 1-84113-437-6.  (Hardcover, 526 pages)

The Gray Blog is a blog dedicated to parallel market legal issues.

Australian Library and Information Association - Statement on Parallel Importing

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.