Quiz 7: The Legal Environment of International Trade
In summary, free trade between nations is buying and selling of goods without artificially setting the price or quantity; quotas, and subsidies are counter to free trade, the market decides on price and quantity. Selling subsidized foreign goods adversely affects free trade because it allows an international good to be sold at a lower price than it would have if it was not subsidized.
Refer to the case US v Able Time (545 F3d 824) Facts: 1) Able imported watches bearing the "Tommy" logo trademarked by Tommy Hilfiger, Tommy did not sell watches at the time of the case 2) US Customs seized the imports on grounds of counterfeited goods. Able contested that since Tommy did not make watches customs have no right to seize it. District court granted summary judgment in favor of Able. US appealed The appeals court reversed the decision. In justifying its decision, the appeals court applied the intent Tariff Act "The legislative history also refers to counterfeit marks, which shows Congress was not thinking purely in terms of counterfeit products when it enacted the statute." Holding that counterfeiting the mark not necessarily the product is sufficient for violation.
Gray market goods refer to the imported goods that have " legally affixed foreign trademark " on them same as the mark registered in the United States. The goods imported have legal trademark, which is legally acquired abroad and then imported into the United States without the consent of the trademark holder. Redistributors utilize gray markets to take advantage of pricing disparities between two countries and profit from importing similar goods from cheaper markets into more expensive ones. The manufacturers in less developed countries take advantage of cheap labor and raw materials. Moreover, less developed countries usually do not have certain minimum level of regulations in place as United States has and goods are materially different. The trademark holder needs to establish that the gray market goods have "material differences." This encompasses lack of manufacturer's warranty and customer support. In Original Appalachian Artworks, Inc., Appellee, v. Granada Electronics, Inc., Appellant, 816 F.2d 68 (2d Cir. 1987) the court held that "a gray market good can be banned when it materially differs from that of the United States trademark owner." Section 32 (1) (a) of Lanham Act used by the trademark holder to sue for trademark infringement in a case of gray market goods where the seller has not been authorized by the holder of the mark. Moreover, section 42 of the Act is used to bar the import of the gray market goods where the goods are materially different from the goods sold in the United States. Similarly, section 526 of Tariff Act 1922 prohibits the import of the goods manufactured outside United States which bears the trademark owned by a U.S. citizen or corporation without the authorization. In the given case, it is evident that the goods are material different and keeping in the view the interest of the consumers, the gray market goods imported from Mexico should be banned , as it lacks manufacturer's warranty and fails to provide mandated information like, expiration date and nutritional values. Moreover, the product fails the standard labelling.