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A parallel import, also known as a grey product, refers to a genuine (ie. non-counterfeit) product placed on the market in one country, which is subsequently imported into a second country without the permission of the owner of the intellectual property rights which attach to the product in the second country. Parallel importation is synonymous with involvement in the grey market, and concerns issues of international trade.
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.
Examples
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.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 the same as or lower than the price offered by Mercedes Benz to New Zealand consumers. There are also many parallel import dealers of electronics hardware. Parallel Imported LTD is the largest known dealer in New Zealand. They are now operating four large stores throughout New Zealand.United States
Similarly, car makers from one country might not wish to market one model of their cars in another, due to the expense required to meet safety and emissions requirements. Some high-performance 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 slightly less powerful car, but the modifier "stole their thunder". This happens in the US as concerns some expensive German cars, especially those that have had their power boosted by after-market garages.United Kingdom
The importation of Sony PSP videogames consoles in to the EEA from Japan up to 12 months prior to the European launch. The unusual component of this example is that importers were selling the console for a higher price than the intended EU price.International approach
Parallel importation is regulated differently in different jurisdictions; there is no consistency in laws dealing with parallel importation 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.Japan
Japan's intellectual property rights law prohibits audiovisual articles marketed for export from being sold domestically, and such sale of "reimported" CD's are illegal.United States
In the United States, parallel importation is prohibited, and the United States Trade Representative lobbies other governments to prevent parallel importation in their respective jurisdictions.Parallel imported foodstuff 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 due to various reasons, but is mostly observed in foodstuff 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 foodstuff and toiletry to cater to travellers so that they can easily recognise the product they have been using at home.
Foodstuff 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 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 than the best one 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, ie. 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 (eg. 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
"Parallel import"