[Federal Register Volume 64, Number 36 (Wednesday, February 24, 1999)]
[Rules and Regulations]
[Pages 9058-9065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4531]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Part 133
[T.D. 99-21]
RIN 1515-AB49
Gray Market Imports and Other Trademarked Goods
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document amends the Customs Regulations in light of Lever
Bros. Co. v. United States (D.C. Cir. 1993). In line with that
decision, the rule will, upon application by the U.S. trademark owner,
restrict importation of certain gray market articles that bear genuine
trademarks identical to or substantially indistinguishable from those
appearing on articles authorized by the U.S. trademark owner for
importation or sale in the U.S., and that thereby create a likelihood
of consumer confusion, in circumstances where the gray market articles
and those bearing the authorized U.S. trademark are physically and
materially different. These restrictions apply notwithstanding that the
U.S. and foreign trademark owners are the same, are parent and
subsidiary companies, or are otherwise subject to common ownership or
control. The restrictions are not applicable if the otherwise
restricted articles are labeled in accordance with a prescribed
standard under the rule that eliminates consumer confusion.
In addition, the Customs Regulations are reorganized, with respect
to importations bearing recorded trademarks or trade names, in order to
clarify Customs enforcement of trademark rights as they relate to
products bearing counterfeit, copying, or simulating marks and trade
names, and to clarify Customs enforcement against gray market goods.
EFFECTIVE DATE: March 26, 1999.
FOR FURTHER INFORMATION CONTACT: John F. Atwood, Intellectual Property
Rights Branch, (202-927-2330).
SUPPLEMENTARY INFORMATION:
Background
Section 42 of the Lanham Act, 15 U.S.C. 1124, protects against
consumer deception or confusion concerning an article's origin or
sponsorship by restricting the importation of trademarked goods under
certain circumstances. When an article is the domestic product of the
U.S. trademark owner, that owner exercises control over the use of the
trademark and the resulting goodwill. Similarly, Customs has taken the
position that an article bearing an identical trademark and produced
abroad by the U.S. trademark owner, a parent or subsidiary of the U.S.
trademark owner, or a party subject to common ownership or control with
the U.S. trademark owner, would be under the constructive control of
either the U.S. trademark owner or a party who owned or controlled the
U.S. trademark owner.
Customs has long taken the position that enforcement of the
distribution rights of a gray market article produced abroad by a party
related to the U.S. trademark holder was a matter to be addressed
through private remedies. This is known as the ``affiliate exception''
to Customs enforcement of restrictions under section 42 of the Lanham
Act against the importation of gray market goods. Thus, Customs
Regulations do not provide for restrictions on the importation of such
gray market articles.
In this regard, ``gray market'' articles, in general, are articles
that the U.S. trademark owner has not authorized for importation or
domestic sale, although the articles in fact bear genuine trademarks
that are identical to or substantially indistinguishable from those
appearing on articles that the U.S. trademark owner has so authorized.
Until Lever Bros. Co. v. United States, 981 F.2d 1330 (D.C. Cir.
1993) (Lever), the applicability of the affiliate exception depended
simply on the presence of the genuine trademark and the existence of
the relevant relationship between the companies, and was not contingent
on whether the gray market articles were the same as, or different
from, the articles that the U.S. trademark holder had authorized for
importation or domestic sale.
In Lever, the court drew a distinction between identical goods
produced abroad under the affiliate exception and goods produced abroad
under the affiliate exception that were physically and materially
different from the goods authorized by the U.S. trademark owner.
[[Page 9059]]
The court in Lever found that section 42 of the Lanham Act precluded
Customs application of the affiliate exception with respect to
physically, materially different goods.
Accordingly, by a document published in the Federal Register (63 FR
14662) on March 26, 1998, Customs proposed to make its regulations (19
CFR part 133, subpart C) consistent with Lever to protect against
consumer confusion as to the source or sponsorship of imported gray
market goods, even if the goods were produced by the owner of the U.S.
trademark or by a party related to the U.S. trademark owner.
Under the proposed rule, however, the trademarked gray goods would
not be restricted from importation, if they bear a prescribed label,
informing the ultimate retail purchaser that they were not authorized
by the U.S. trademark owner and were physically and materially
different from the goods that were so authorized.
To enable and assist Customs in determining the scope of what is
physically and materially different, a U.S. trademark owner under the
proposed regulatory changes would need to submit an application for
``Lever-rule'' protection (Sec. 133.2(e)), including a summary of the
physical and material differences between the gray market goods and
those goods authorized by the U.S. trademark owner for importation or
sale. This would result in Customs publishing a notice in the Federal
Register, giving interested parties an opportunity to comment on the
request for protection, before making a final determination in the
matter. If Customs determined to grant protection, a notice to this
effect would likewise be published in the Federal Register.
In addition to these proposed changes, Customs also proposed to
reorganize and renumber the remainder of subpart C, part 133, for
editorial clarity. None of the proposed clerical changes, other than
those relating to the Lever decision, would alter Customs enforcement
practices.
Discussion of Comments
Twenty commenters responded to the notice of proposed rulemaking.
The major issues raised by the commenters, together with Customs
analysis, are presented below.
Labeling Provision
Comments
The label in proposed Sec. 133.23(b) is not consistent with the
Lever decision's rationale, language, or spirit. Customs does not have
jurisdiction to establish a consumer labeling requirement of this type
under that decision.
Because the proposed label fails to meet the court's disclosure
standard for genuine gray market imports, it is inadequate to eliminate
consumer confusion and protect the trademark owner in the case of non-
genuine (i.e., materially different) imports. Generally, case law under
the Lanham Act has explicitly rejected the notion that disclaimers
absolve infringing conduct. Courts dealing with this issue have
rejected such disclaimer language.
The Lever decision does not indicate that a labeling statement,
such as the one proposed by Customs, would be adequate to cure
potential consumer confusion. In any event, the label as proposed does
not provide enough information to the consumer to eliminate the
likelihood of confusion as to the nature and quality of the goods. The
label exception ignores trademark owners' rights. Even if the product
reaches the consumer with the label intact, the trademark owner's
reputation and goodwill are likely to suffer.
Physically and materially different gray market goods bearing the
proposed label are not equal to the goods that are perceived as
``genuine'' by the American consumer. Thus, an unfair burden is placed
on U.S. trademark owners to correct any confusion caused by the label.
Even if it were otherwise acceptable, the language of the label would
have to be changed to provide that the product is not genuine. The
label exception amounts to unfair competition and represents an undue
emphasis on price as just one of the many factors entering into a
consumer's purchasing decision.
The label is not permanent and could be removed after importation.
If a label is allowed, it should be affixed in the same manner as a
country of origin label under the marking law (19 U.S.C. 1304). Customs
should specify what civil penalties would be imposed on persons
intentionally removing, obliterating, or concealing the labels prior to
sale to retail customers. Customs should also consider seeking
authority to impose criminal penalties for such intentional acts.
Alternatively, the proposed rule should be changed to provide that
Customs will review alternative labels. The proposed ``label'' should
be presented merely as an acceptable form of labeling, not the
exclusive form of labeling, allowable to permit importation. Importers
should be permitted to affix labels after importation. Consumer
confusion is eliminated by affixing the labels prior to distribution
into commerce; the absence of labels on products at the time they
arrive in the U.S. is of no consequence.
The label should not be required in order to import gray market
goods in situations where the sale of the goods with the prescribed
label would violate some state or Federal law. In particular, the label
provision could result in violation of Food and Drug Administration
(FDA) or other Federal labeling requirements, such as those of the
Bureau of Alcohol, Tobacco and Firearms (BATF). Such violations could
place the public at risk. In such instances, the labeling provision
under the proposed rule as a prelude to importation should be excused.
Customs Responses
The court in Lever provided that confusion will be caused in the
absence of some ``specially differentiating feature'' that will
distinguish gray market articles that are physically and materially
different from articles authorized by the U.S. trademark holder.
Customs is of the opinion that the label as prescribed in
Sec. 133.23(b) constitutes a specially differentiating feature under
Lever. The Lever decision does not specifically address labeling, an
issue that was not before the court. Customs does not believe that the
absence of language in the opinion expressly sanctioning the use of a
label precludes Customs, as the agency responsible for enforcing the
statute, from exercising its rule making authority to interpret the
statute so as to permit the use of a label to identify a physically and
materially different gray market good, to differentiate it from the
authorized product, and thus dispel consumer confusion.
Customs believes that a label that makes clear that the gray market
product is physically and materially different from the U.S. trademark
owner's product is an appropriate means of dispelling consumer
confusion and eliminating potential harm, for purposes of importation.
This is for Customs entry purposes only. It is emphasized that Customs
is not making an infringement decision. The language of the label is
intended to inform the consumer that the product is not authorized by
the U.S. trademark owner for importation and that the product is
physically and materially different from the authorized product. To
accomplish this purpose, the required label language in Sec. 133.23(b)
is slightly revised by this final rule. Customs is of the opinion that
this language is sufficient to alert the U.S. consumer to the fact that
the product is not authorized by the U.S. trademark owner.
[[Page 9060]]
Customs believes that legitimate gray market goods are ``genuine''
in the sense that the goods were produced and marketed abroad by
authority of the trademark owner. Customs' role is limited. The rule,
as proposed and adopted, imposes an import restriction; it is not
intended to address all infringement and consumer protection issues.
Customs is of the opinion that informing the U.S. consumer that the
product is not authorized by the U.S. trademark owner for importation
and that the product is physically and materially different provides
sufficient information to alert U.S. consumers to such differences and
satisfies the obligation of Customs with regard to regulation of
importation. As indicated in Sec. 133.23(b), other information designed
to further dispel consumer confusion may be added to the standard
language.
The label should help protect U.S. trademark owners because it
should put consumers on notice that the imported article is not
authorized by the U.S. trademark owner. Currently, Customs position is
that physically and materially different goods could enter U.S.
commerce where the trademark does not qualify for gray market
protection. Under the amended regulation, where Lever-rule protection
is granted, such goods may enter the U.S. only if they are labeled as
required by this rule. To this extent, greater protection and product
differentiation is provided under the new regulation.
The primary purpose of the label is not to promote price
competition. Previously, where trademarks did not qualify for gray
market protection, physically and materially different goods were
imported into the U.S. without any differentiating information to
inform the consumer. Because these products contained no specially
differentiating feature prior to the labeling provision in this
regulation and were permitted to be imported, the amended regulation
provides the consumer with information that differentiates the imported
physically and materially different product from the authorized product
of the U.S. trademark owner. To this extent, any burden on the
trademark owner is lessened by the labeling provision in the
regulation. For additional clarity, the language on the label in
Sec. 133.23(b) is slightly changed to read as follows: ``This product
is not a product authorized by the United States trademark owner for
importation and is physically and materially different from the
authorized product.''
Because it is within Customs' jurisdiction to enforce gray market
restrictions, the label informs the consumer that the imported product
is not the product authorized by the U.S. trademark owner. Customs is
implementing the Lever decision, relating to the importation of
physically and materially different goods, by adopting a prescribed
label as the ``specifically differentiating feature''. Customs is of
the opinion that it has the authority to establish a label that will
avoid the Lever-rule prohibition. The label is not a requirement, but
rather a ``safe harbor'' option.
With regard to removal of the label, the regulation provides that
the label is to remain on the product until the first point of sale to
a retail consumer in the U.S. The requirement that the label be placed
next to the trademark in its most prominent location insures that the
consumer is alerted to the label and the physical and material
difference between the products. The labeling provision is not governed
by the regulations on country of origin marking. With regard to
penalties for intentionally removing, obliterating, or concealing the
label prior to the first sale to retail customers, the removal of the
label after importation and prior to retail sale could result in
seizure and forfeiture of the goods (19 U.S.C. 1595a(c)(2)(C)).
Imported goods that are subject to Lever-rule protection must have
a label conforming to Sec. 133.23(b) applied prior to release of the
goods by Customs. The label may be applied after the articles are
presented for entry but prior to release of the goods. To clarify this
point, Sec. 133.23(d) is revised to indicate that if goods are detained
under Lever-rule protection, the label must then be placed on the goods
before they are entered.
The labeling provision does not supersede any Federal or state
labeling requirement. Additionally, the Bureau of Alcohol, Tobacco and
Firearms laws make an exception for other labels required by Federal
law. The label provision does not nullify or supersede any Federal
statute or regulation regarding the article or its labeling.
Physical-and-Material-Differences Standard
Comment
The physical and material differences standard in proposed
Sec. 133.2(e) should be broadened. Later court decisions following
Lever have spoken only of ``materially different goods'', and have held
that ``any difference'' between the product authorized by the trademark
owner and the unauthorized goods creates a presumption of consumer
confusion sufficient to support a trademark infringement claim.
Although the Lever decision did involve products which were both
physically and materially different from the product authorized for
sale in the U.S., no rationale exists for confining the import
restriction to physically and materially different goods, while
allowing goods that are physically similar, but different in other
material respects, to be freely imported. A number of courts have found
that a difference can be ``material'' without having to also be a
``physical'' difference. The proposed rule ignores the importance of
material differences such as packaging, quality control, and handling.
Nothing in the Lever decision suggests that only physically different
imports are subject to seizure. The proposed rule should be withdrawn
and a revised materiality test should be issued that encompasses the
full range of physical and non-physical differences deemed relevant
under the Lanham Act.
Customs Response
The Lever court applied a standard using both physical and material
differences. The regulation, applying the Lever standard, is the extent
to which Customs will enforce such protection. However, the Lever court
did not set out the parameters of the ``physically and materially
different'' standard. In setting out categories that fall within the
standard set by the Lever court, Customs will use the guidelines
contained in Sec. 133.2(e) as a starting point for determining if
protection is warranted under the Lever decision. In particular,
Sec. 133.2(e)(5) provides that Customs will consider other
characteristics that can be described with particularity and that would
likely result in consumer deception or confusion under the law. The
bases explicitly enumerated for granting Lever-rule protection are not
all inclusive.
Application for ``Lever-Rule'' Protection
Comments
Interested (third) parties should not be involved in an application
for protection. Application for Lever protection could likely turn into
a contested adversarial proceeding. Customs should use the same or
similar procedures used to record trademarks to process applications
for Lever protection. Customs currently makes its own decision whether
gray market protection should be granted. Similarly, there is no reason
to give third parties a role in the application process.
The burden should be on the ``gray marketeer'' to rebut a
presumption of
[[Page 9061]]
infringement. The proposed rule is unsound in shifting to the trademark
owner the burden of demonstrating that the gray market import infringes
the owner's trademark rights. The proposed rule should be withdrawn and
re-issued to provide that once the U.S. trademark owner has shown a
material difference, whether physical or not, the burden is on the
``gray marketeer'' to rebut a presumption of infringement.
The comment period provided in proposed Sec. 133.2(f) is too long
for applications for Lever-rule protection. By publishing in the
Federal Register, at approximately 30-day intervals, a list of those
trademarks for which gray market protection has been requested,
followed by another 30-day period for comments, and then allowing time
for a Customs determination of eligibility and subsequent publication
in the Federal Register of a notice to this effect, a full calendar
quarter will have gone by before protection may be afforded. This
amounts to a virtual public invitation to import surges of a product
that ultimately is excluded. No more than half this time should be
tolerated.
Customs Responses
As part of the application process provided in Sec. 133.2(f), as
proposed, Customs would have published in the Federal Register, at
thirty-day intervals, a list of trademarks for which Lever-rule
protection was requested. After a thirty-day comment period, Customs
would determine whether to grant Lever-rule protection. If Lever-rule
protection was granted, Customs would then publish in the Federal
Register a notice that the trademark would receive Lever-rule
protection.
However, in response to the comment regarding the length of the
application process, Customs has determined to revise the application
process in Sec. 133.2(f) by eliminating the thirty day comment period.
To further expedite the application process while safeguarding the
rights of the parties involved, Customs will publish a list of
trademarks and the specific products for which Lever-rule protection
was requested in the Customs Bulletin, rather than in the Federal
Register. Customs will endeavor to process applications for Lever-rule
protection as promptly as possible. Where Lever-rule protection is
granted, Customs will publish in the Customs Bulletin a notice that the
trademark will receive Lever-rule protection. Section 133.2(f) is
revised accordingly.
If a trademark owner has applied for and received Lever-rule
protection, goods that bear the protected trademark and are physically
and materially different from the U.S. trademark owner's product
initially will be detained. The trademark owner is not required to
demonstrate that the gray market import infringes its trademark rights.
Once the goods have been detained, the burden is on the importer to
show either that the goods are identical and Lever-rule protection
should not apply, or that an exception is applicable. With regard to
the disclosure of proprietary information, upon application for Lever-
rule protection, in addition to specific physical and material
differences, the trademark owner must submit a summary of the physical
and material differences, which need not disclose proprietary
information.
Effect of Rule on Exclusion Orders
Comment
The proposed rule should not have any retroactive effect or affect
general exclusion orders issued by the U.S. International Trade
Commission (USITC), cease and desist orders of the USITC, or Customs
enforcement of existing orders. Trademark owners who have obtained
injunctions or exclusion orders relating to the importation and sale in
the United States of gray market goods should not be forced to apply
for protection under the proposed rule. In addition, no ``gray
marketeer'' previously enjoined or excluded by court order from
importing or selling gray market goods in the United States should be
able to circumvent the injunction or exclusion order through Customs
proposed labeling exception.
Customs Response
The regulation is prospective only and will not be applied
retroactively. The rule should not undermine exclusion orders or court
orders enjoining the importation of goods. Customs expects that the
courts and the USITC will take the rule into consideration when
fashioning injunctions or exclusion orders that are relevant to the
regulations.
Conclusion
In view of the forgoing, and following careful consideration of the
comments received and further review of the matter, Customs has
concluded that the proposed amendments, with the changes discussed
above, should be adopted.
Additional Changes
For greater clarity: in Sec. 133.2(e), in the first sentence, the
word ``specific'' is added after the words ``between the'' and before
the words ``articles authorized for importation or sale in the United
States''; and, in Sec. 133.2(e)(1) the word ``specific'' is added after
the word ``The'' and before the words ``composition of both the
authorized and gray market products''. For enhanced editorial accuracy,
the heading of subpart C, part 133, is slightly revised.
Regulatory Flexibility Act and Executive Order 12866
This final rule document implements a court decision intended to
protect products with valid U.S. trademarks against infringing imports.
For this reason, pursuant to the provisions of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.), it is hereby certified that the
rule does not have a significant economic impact on a substantial
number of small entities. Any economic impact is a consequence of the
Lever decision. Accordingly, it is not subject to the regulatory
analysis requirements of 5 U.S.C. 603 and 604. Nor does the rule meet
the criteria for a ``significant regulatory action'' as specified in
E.O. 12866.
Paperwork Reduction Act
The collection of information related to this final rule has been
previously reviewed and approved by the Office of Management and Budget
(OMB) in accordance with the Paperwork Reduction Act of 1995 and
assigned OMB Control Number 1515-0114. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a valid control number assigned by OMB.
This document restates the collection[s] of information without
substantive change.
Comments concerning suggestions for reducing the burden of the
collections of information should be directed to the Office of
Management and Budget, Attention: Desk Officer for the Department of
the Treasury, Office of Information and Regulatory Affairs, Washington,
D.C. 20503. A copy should also be sent to the Regulations Branch,
Office of Regulations and Rulings, U.S. Customs Service, 1300
Pennsylvania Avenue, NW., 3rd Floor, Washington, D.C. 20229.
List of Subjects in 19 CFR Part 133
Copyrights, Customs duties and inspection, Fees assessment,
Imports, Penalties, Prohibited merchandise, Reporting and recordkeeping
requirements, Restricted merchandise (counterfeit goods), Seizures and
forfeitures, Trademarks, Trade names, Unfair competition.
[[Page 9062]]
Amendments to the Regulations
Part 133, Customs Regulations (19 CFR part 133), is amended as set
forth below.
PART 133--TRADEMARKS, TRADE NAMES, AND COPYRIGHTS
1. The general authority citation for part 133 continues to read as
follows, and the specific sectional authority for part 133 is revised
to read as follows:
Authority: 17 U.S.C. 101, 601, 602, 603; 19 U.S.C. 66, 1624; 31
U.S.C. 9701.
Section 133.1 also issued under 15 U.S.C. 1096, 1124;
Sections 133.2 through 133.7, 133.11 through 133.13, and 133.15
also issued under 15 U.S.C. 1124;
Sections 133.21 through 133.25 also issued under 15 U.S.C. 1124,
19 U.S.C. 1526;
Sections 133.26 and 133.46 also issued under 19 U.S.C. 1623;
Sections 133.27 and 133.52 also issued under 19 U.S.C. 1526;
Section 133.53 also issued under 19 U.S.C. 1558(a).
2. Section 133.2 is amended by adding new paragraphs (e) and (f) to
read as follows:
Sec. 133.2 Application to record trademark.
* * * * *
(e) ``Lever-rule'' protection. For owners of U.S. trademarks who
desire protection against gray market articles on the basis of physical
and material differences (see Lever Bros. Co. v. United States, 981
F.2d 1330 (D.C. Cir. 1993)), a description of any physical and material
difference between the specific articles authorized for importation or
sale in the United States and those not so authorized. In each
instance, owners who assert that physical and material differences
exist must state the basis for such a claim with particularity, and
must support such assertions by competent evidence and provide
summaries of physical and material differences for publication. Customs
determination of physical and material differences may include, but is
not limited to, considerations of:
(1) The specific composition of both the authorized and gray market
product(s) (including chemical composition);
(2) Formulation, product construction, structure, or composite
product components, of both the authorized and gray market product;
(3) Performance and/or operational characteristics of both the
authorized and gray market product;
(4) Differences resulting from legal or regulatory requirements,
certification, etc.;
(5) Other distinguishing and explicitly defined factors that would
likely result in consumer deception or confusion as proscribed under
applicable law.
(f) Customs will publish in the Customs Bulletin a notice listing
any trademark(s) and the specific products for which gray market
protection for physically and materially different products has been
requested. Customs will examine the request(s) before issuing a
determination whether gray market protection is granted. For parties
requesting protection, the application for trademark protection will
not take effect until Customs has made and issued this determination.
If protection is granted, Customs will publish in the Customs Bulletin
a notice that a trademark will receive Lever-rule protection with
regard to a specific product.
3. Part 133 is amended by revising subpart C to read as follows:
Subpart C--Importations Bearing Registered and/or Recorded
Trademarks or Recorded Trade Names
Sec.
133.21 Articles bearing counterfeit trademarks.
133.22 Restrictions on importation of articles bearing copying or
simulating trademarks.
133.23 Restrictions on importation of gray market articles.
133.24 Restrictions on articles accompanying importer and mail
importations.
133.25 Procedure on detention of articles subject to restriction.
133.26 Demand for redelivery of released merchandise.
133.27 Civil fines for those involved in the importation of
counterfeit trademark goods.
Subpart C--Importations Bearing Registered and/or Recorded
Trademarks or Recorded Trade Names
Sec. 133.21 Articles bearing counterfeit trademarks.
(a) Counterfeit trademark defined. A ``counterfeit trademark'' is a
spurious trademark that is identical to, or substantially
indistinguishable from, a registered trademark.
(b) Seizure. Any article of domestic or foreign manufacture
imported into the United States bearing a counterfeit trademark shall
be seized and, in the absence of the written consent of the trademark
owner, forfeited for violation of the customs laws.
(c) Notice to trademark owner. When merchandise is seized under
this section, Customs shall disclose to the owner of the trademark the
following information, if available, within 30 days, excluding weekends
and holidays, of the date of the notice of seizure:
(1) The date of importation;
(2) The port of entry;
(3) A description of the merchandise;
(4) The quantity involved;
(5) The name and address of the manufacturer;
(6) The country of origin of the merchandise;
(7) The name and address of the exporter; and
(8) The name and address of the importer.
(d) Samples available to the trademark owner. At any time following
seizure of the merchandise, Customs may provide a sample of the suspect
merchandise to the owner of the trademark for examination, testing, or
other use in pursuit of a related private civil remedy for trademark
infringement. To obtain a sample under this section, the trademark/
trade name owner must furnish Customs a bond in the form and amount
specified by the port director, conditioned to hold the United States,
its officers and employees, and the importer or owner of the imported
article harmless from any loss or damage resulting from the furnishing
of a sample by Customs to the trademark owner. Customs may demand the
return of the sample at any time. The owner must return the sample to
Customs upon demand or at the conclusion of the examination, testing,
or other use in pursuit of a related private civil remedy for trademark
infringement. In the event that the sample is damaged, destroyed, or
lost while in the possession of the trademark owner, the owner shall,
in lieu of return of the sample, certify to Customs that: ``The sample
described as [insert description] and provided pursuant to 19 CFR
133.21(d) was (damaged/destroyed/lost) during examination, testing, or
other use.''
(e) Failure to make appropriate disposition. Unless the trademark
owner, within 30 days of notification, provides written consent to
importation of the articles, exportation, entry after obliteration of
the trademark, or other appropriate disposition, the articles shall be
disposed of in accordance with Sec. 133.52, subject to the importer's
right to petition for relief from the forfeiture under the provisions
of part 171 of this chapter.
Sec. 133.22 Restrictions on importation of articles bearing copying or
simulating trademarks.
(a) Copying or simulating trademark or trade name defined. A
``copying or simulating'' trademark or trade name is one which may so
resemble a recorded mark or name as to be likely to cause the public to
associate the copying or
[[Page 9063]]
simulating mark or name with the recorded mark or name.
(b) Denial of entry. Any articles of foreign or domestic
manufacture imported into the United States bearing a mark or name
copying or simulating a recorded mark or name shall be denied entry and
subject to detention as provided in Sec. 133.25.
(c) Relief from detention of articles bearing copying or simulating
trademarks. Articles subject to the restrictions of this section shall
be detained for 30 days from the date on which the goods are presented
for Customs examination, to permit the importer to establish that any
of the following circumstances are applicable:
(1) The objectionable mark is removed or obliterated as a condition
to entry in such a manner as to be illegible and incapable of being
reconstituted, for example by:
(i) Grinding off imprinted trademarks wherever they appear;
(ii) Removing and disposing of plates bearing a trademark or trade
name;
(2) The merchandise is imported by the recordant of the trademark
or trade name or his designate;
(3) The recordant gives written consent to an importation of
articles otherwise subject to the restrictions set forth in paragraph
(b) of this section or Sec. 133.23(c) of this subpart, and such consent
is furnished to appropriate Customs officials;
(4) The articles of foreign manufacture bear a recorded trademark
and the one-item personal exemption is claimed and allowed under
Sec. 148.55 of this chapter.
(d) Exceptions for articles bearing counterfeit trademarks. The
provisions of paragraph (c)(1) of this section are not applicable to
articles bearing counterfeit trademarks at the time of importation (see
Sec. 133.26).
(e) Release of detained articles. Articles detained in accordance
with Sec. 133.25 may be released to the importer during the 30-day
period of detention if any of the circumstances allowing exemption from
trademark or trade name restriction set forth in paragraph (c) of this
section are established.
(f) Seizure. If the importer has not obtained release of detained
articles within the 30-day period of detention, the merchandise shall
be seized and forfeiture proceedings instituted. The importer shall be
promptly notified of the seizure and liability to forfeiture and his
right to petition for relief in accordance with the provisions of part
171 of this chapter.
Sec. 133.23 Restrictions on importation of gray market articles.
(a) Restricted gray market articles defined. ``Restricted gray
market articles'' are foreign-made articles bearing a genuine trademark
or trade name identical with or substantially indistinguishable from
one owned and recorded by a citizen of the United States or a
corporation or association created or organized within the United
States and imported without the authorization of the U.S. owner.
``Restricted gray market goods'' include goods bearing a genuine
trademark or trade name which is:
(1) Independent licensee. Applied by a licensee (including a
manufacturer) independent of the U.S. owner, or
(2) Foreign owner. Applied under the authority of a foreign
trademark or trade name owner other than the U.S. owner, a parent or
subsidiary of the U.S. owner, or a party otherwise subject to common
ownership or control with the U.S. owner (see Secs. 133.2(d) and
133.12(d) of this part), from whom the U.S. owner acquired the domestic
title, or to whom the U.S. owner sold the foreign title(s); or
(3) ``Lever-rule''. Applied by the U.S. owner, a parent or
subsidiary of the U.S. owner, or a party otherwise subject to common
ownership or control with the U.S. owner (see Secs. 133.2(d) and
133.12(d) of this part), to goods that the Customs Service has
determined to be physically and materially different from the articles
authorized by the U.S. trademark owner for importation or sale in the
U.S. (as defined in Sec. 133.2 of this part).
(b) Labeling of physically and materially different goods. Goods
determined by the Customs Service to be physically and materially
different under the procedures of this part, bearing a genuine mark
applied under the authority of the U.S. owner, a parent or subsidiary
of the U.S. owner, or a party otherwise subject to common ownership or
control with the U.S. owner (see Secs. 133.2(d) and 133.12(d) of this
part), shall not be detained under the provisions of paragraph (c) of
this section where the merchandise or its packaging bears a conspicuous
and legible label designed to remain on the product until the first
point of sale to a retail consumer in the United States stating that:
``This product is not a product authorized by the United States
trademark owner for importation and is physically and materially
different from the authorized product.'' The label must be in close
proximity to the trademark as it appears in its most prominent location
on the article itself or the retail package or container. Other
information designed to dispel consumer confusion may also be added.
(c) Denial of entry. All restricted gray market goods imported into
the United States shall be denied entry and subject to detention as
provided in Sec. 133.25, except as provided in paragraph (b) of this
section.
(d) Relief from detention of gray market articles. Gray market
goods subject to the restrictions of this section shall be detained for
30 days from the date on which the goods are presented for Customs
examination, to permit the importer to establish that any of the
following exceptions, as well as the circumstances described above in
Sec. 133.22(c), are applicable:
(1) The trademark or trade name was applied under the authority of
a foreign trademark or trade name owner who is the same as the U.S.
owner, a parent or subsidiary of the U.S. owner, or a party otherwise
subject to common ownership or control with the U.S. owner (in an
instance covered by Secs. 133.2(d) and 133.12(d) of this part); and/or
(2) For goods bearing a genuine mark applied under the authority of
the U.S. owner, a parent or subsidiary of the U.S. owner, or a party
otherwise subject to common ownership or control with the U.S. owner,
that the merchandise as imported is not physically and materially
different, as described in Sec. 133.2(e), from articles authorized by
the U.S. owner for importation or sale in the United States; or
(3) Where goods are detained for violation of Sec. 133.23(a)(3), as
physically and materially different from the articles authorized by the
U.S. trademark owner for importation or sale in the U.S., a label in
compliance with Sec. 133.23(b) is applied to the goods.
(e) Release of detained articles. Articles detained in accordance
with Sec. 133.25 may be released to the importer during the 30-day
period of detention if any of the circumstances allowing exemption from
trademark restriction set forth in Sec. 133.22(c) of this subpart or in
paragraph (d) of this section are established.
(f) Seizure. If the importer has not obtained release of detained
articles within the 30-day period of detention, the merchandise shall
be seized and forfeiture proceedings instituted. The importer shall be
notified of the seizure and liability of forfeiture and his right to
petition for relief in accordance with the provisions of part 171 of
this chapter.
Sec. 133.24 Restrictions on articles accompanying importer and mail
importations.
(a) Detention. Articles accompanying an importer and mail
importations subject to the restrictions of Secs. 133.22 and 133.23
shall be detained for 30 days from the date of notice that such
[[Page 9064]]
restrictions apply, to permit the establishment of whether any of the
circumstances described in Sec. 133.22(c) or 133.23(d) are applicable.
(b) Notice of detention. Notice of detention shall be given in the
following manner:
(1) Articles accompanying importer. When the articles are carried
as accompanying baggage or on the person of persons arriving in the
United States, the Customs inspector shall orally advise the importer
that the articles are subject to detention.
(2) Mail importations. When the articles arrive by mail in
noncommercial shipments, or in commercial shipments valued at $250 or
less, notice of the detention shall be given on Customs Form 8.
(c) Release of detained articles. (1) General. Articles detained in
accordance with paragraph (a) of this section may be released to the
importer during the 30-day period of detention if any of the
circumstances allowing exemption from trademark or trade name
restriction(s) set forth in Sec. 133.22(c) or 133.23(d) of this subpart
are established.
(2) Articles accompanying importer. Articles arriving as
accompanying baggage or on the person of the importer may be exported
or destroyed under Customs supervision at the request of the importer,
or may be released if:
(i) The importer removes or obliterates the marks in a manner
acceptable to the Customs officer at the time of examination of the
articles; or
(ii) The request of the importer to obtain skillful removal of the
marks is granted by the port director under such conditions as he may
deem necessary, and upon return of the article to Customs for
verification, the marks are found to be satisfactorily removed.
(3) Mail importations. Articles arriving by mail in noncommercial
shipments, or in commercial shipments valued at $250 or less, may be
exported or destroyed at the request of the addressee or may be
released if:
(i) The addressee appears in person at the appropriate Customs
office and at that time removes or obliterates the marks in a manner
acceptable to the Customs officer; or
(ii) The request of the addressee appearing in person to obtain
skillful removal of the marks is granted by the port director under
such conditions as he may deem necessary, and upon return of the
article to Customs for verification, the marks are found to be
satisfactorily removed.
(d) Seizure. If the importer has not obtained release of detained
articles within the 30-day period of detention, the merchandise shall
be seized and forfeiture proceedings instituted. The importer shall be
promptly notified of the seizure and liability to forfeiture and his
right to petition for relief in accordance with the provisions of part
171 of this chapter.
Sec. 133.25 Procedure on detention of articles subject to restriction.
(a) In general. Articles subject to the restrictions of
Secs. 133.22 and 133.23 shall be detained for 30 days from the date on
which the merchandise is presented for Customs examination. The
importer shall be notified of the decision to detain within 5 days of
the decision that such restrictions apply. The importer may, during the
30-day period, establish that any of the circumstances described in
Sec. 133.22(c) or Sec. 133.23(d) are applicable. Extensions of the 30-
day time period may be freely granted for good cause shown.
(b) Notice of detention and disclosure of information. From the
time merchandise is presented for Customs examination until the time a
notice of detention is issued, Customs may disclose to the owner of the
trademark or trade name any of the following information in order to
obtain assistance in determining whether an imported article bears an
infringing trademark or trade name. Once a notice of detention is
issued, Customs shall disclose to the owner of the trademark or trade
name the following information, if available, within 30 days, excluding
weekends and holidays, of the date of detention:
(1) The date of importation;
(2) The port of entry;
(3) A description of the merchandise;
(4) The quantity involved; and
(5) The country of origin of the merchandise.
(c) Samples available to the trademark or trade name owner. At any
time following presentation of the merchandise for Customs examination,
but prior to seizure, Customs may provide a sample of the suspect
merchandise to the owner of the trademark or trade name for examination
or testing to assist in determining whether the article imported bears
an infringing trademark or trade name. To obtain a sample under this
section, the trademark/trade name owner must furnish Customs a bond in
the form and amount specified by the port director, conditioned to hold
the United States, its officers and employees, and the importer or
owner of the imported article harmless from any loss or damage
resulting from the furnishing of a sample by Customs to the trademark
owner. Customs may demand the return of the sample at any time. The
owner must return the sample to Customs upon demand or at the
conclusion of the examination or testing. In the event that the sample
is damaged, destroyed, or lost while in the possession of the trademark
or trade name owner, the owner shall, in lieu of return of the sample,
certify to Customs that: ``The sample described as [insert description]
and provided pursuant to 19 CFR 133.25(c) was (damaged/destroyed/lost)
during examination or testing for trademark infringement.''
(d) Form of notice. Notice of detention of articles found subject
to the restrictions of Sec. 133.22 or Sec. 133.23 shall be given the
importer in writing.
Sec. 133.26 Demand for redelivery of released merchandise.
If it is determined that merchandise which has been released from
Customs custody is subject to the restrictions of Sec. 133.22 or
Sec. 133.23 of this subpart, the port director shall promptly make
demand for the redelivery of the merchandise under the terms of the
bond on Customs Form 301, containing the bond conditions set forth in
Sec. 113.62 of this chapter, in accordance with Sec. 141.113 of this
chapter. If the merchandise is not redelivered to Customs custody, a
claim for liquidated damages shall be made in accordance with
Sec. 141.113(g) of this chapter.
Sec. 133.27 Civil fines for those involved in the importation of
counterfeit trademark goods.
In addition to any other penalty or remedy authorized by law,
Customs may impose a civil fine on any person who directs, assists
financially or otherwise, or aids and abets the importation of
merchandise bearing a counterfeit mark (within the meaning of
Sec. 133.21 of this subpart) as follows:
(a) First violation. For the first seizure of such merchandise, the
fine imposed will not be more than the domestic value of the
merchandise (see Sec. 162.43(a) of this chapter) as if it had been
genuine, based on the manufacturer's suggested retail price of the
merchandise at the time of seizure.
(b) Second and subsequent violations. For the second and each
subsequent seizure of such merchandise, the fine imposed will not be
more than twice the domestic value of the merchandise as if it had been
genuine, based on the
[[Page 9065]]
manufacturer's suggested retail price of the merchandise at the time of
seizure.
Raymond W. Kelly,
Commissioner of Customs.
Approved: February 19, 1999.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 99-4531 Filed 2-23-99; 8:45 am]
BILLING CODE 4820-02-P
