The Supreme Court, in a ruling likely to save consumers millions, Tuesday upheld the importation of most "gray market goods," expensive trademark items ranging from cameras to perfumes and sold for discount in this country.
The high court affirmed the bulk of a 50-year Customs Service policy allowing such imports if the foreign and U.S. trademarks are owned by the same company or by a parent and its subsidiary.The policy generally has been viewed as a boon to consumers because it enables them to buy expensive foreign-made electronics and other items at discount.
But the justices invalidated one part of the Customs Service regulations allowing such imports whenever the U.S. trademark owner has authorized the use of its trademark abroad by an independent manufacturer.
The 5-4 ruling generally means that K Mart and other discount stores will be able to continue to bypass U.S. authorized dealers and directly import expensive items such as Cartier watches and Charles of the Ritz perfume and sell them at discount in this country.
Writing for the majority, Justice Anthony Kennedy said, "We hold that the Customs Service regulation is consistent with (The Tariff Act of 1930) insofar as it exempts from the importation ban goods that are manufactured abroad by the `same person' who holds the U.S. trademark or by a person who is subject to common control with the U.S. trademark holder."
The gray market case was brought to the high court by K Mart and other discounters appealing a ruling by the U.S. Circuit Court of Appeals for the District of Columbia, which said Customs Service rules allowing the imports violate federal laws giving broad protection to U.S. trademark owners.
The imports at issue are trademarked products manufactured abroad and imported by independent retailers rather than authorized U.S. distributors.
Known as parallel or gray market imports, these goods are generally banned under U.S. trade laws.
However, under the Customs Service policy, such imports have been allowed if the foreign and U.S. trademarks are owned by the same company or by a parent and its subsidiary, or if the U.S. trademark owner had authorized placing the mark on the product.
The Customs Service rules were first challenged in 1984 by the Coalition to Preserve the Integrity of American Trademarks and two of its members, Cartier and Charles of the Ritz.
In other action, the court:
-Upheld the constitutionality of suspension procedures used by the Federal Deposit Insurance Corp. when it removes bank officers at federally insured banks.
-Upheld a decision by the Federal Energy Regulatory Commission that deregulated certain types of natural gas produced in America.
-Found unconstitutional an Ohio law that gives tax breaks to Ohio producers of ethanol sold as a component of gasohol but not producers in other states unless they give similar breaks to Ohio producers.