Everything about Parallel Import totally explained
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,
HIV/AIDS management, and
intellectual property.
The practice of parallel importing occurs because 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're 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
Australia
Importation of Computer Games and 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 an Australian RRP store, and 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.
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 importing isn't illegal 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. 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
EEA (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.
International approach
Parallel importing is regulated differently in different jurisdictions; there's 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 6th 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, parallel importation is prohibited, and the United States Trade Representative lobbies other governments to prevent parallel importation in their respective jurisdictions. The US also maintains a "common-control exception" for parallel imports in trademarked goods. This principle permits trademark owners to block parallel imports except when both the foreign and US trademarks are owned by the same entity or when the foreign and US trademark owners are in a parent-subsidiary relationship.
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 for 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've 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're 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, 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's 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, 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 isn't 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're 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.
Further Information
Get more info on 'Parallel Import'.
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