Gray Market Imports and Other Trademarked Goods

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 133

RIN 1515-AB49

Gray Market Imports and Other Trademarked Goods

AGENCY: Customs Service, Department of the Treasury.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This document proposes to amend the Customs Regulations in

light of the 1993 decision of the U.S. Court of Appeals for the

District of Columbia in Lever Bros. Co. v. United States. In line with

that decision, the proposed rule would, 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. The proposed

restrictions would 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 proposed

restrictions would not be applicable if the otherwise restricted

articles are labeled in accordance with proposed standards to eliminate

consumer confusion.

In addition, it is proposed to reorganize the Customs Regulations,

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.

DATES: Comments must be received on or before May 26, 1998.

ADDRESSES: Comments (preferably in triplicate) must be submitted to and

may be inspected at the Regulations Branch, U.S. Customs Service, 1300

Pennsylvania Avenue, NW., 3rd Floor, Washington, DC 20229.

FOR FURTHER INFORMATION CONTACT: Michael Smith, Intellectual Property

Rights Branch, (202-927-2330).

SUPPLEMENTARY INFORMATION:

Background

On January 15, 1993, the United States Court of Appeals for the

District of Columbia issued a decision in Lever Bros. Co. v. United

States, 981 F.2d 1330 (D.C. Cir. 1993) (Lever) regarding certain

prohibitions against the importation of certain ``gray market'' goods.

In general, gray market goods are articles that are genuine but are not

authorized for importation by the U.S trademark owner. In light of this

decision, a number of regulatory changes to part 133, Customs

Regulations (19 CFR part 133) are proposed.

The Lever Decision

Lever Brothers Company (``Lever U.S.'') owned the domestic

trademarks ``SHIELD'' and ``SUNLIGHT,'' and manufactured products in

the United States bearing those trademarks. Lever Brothers Limited

(``Lever U.K.'') owned the foreign trademarks ``SHIELD'' and

``SUNLIGHT,'' and manufactured products abroad bearing those

trademarks. Lever U.S. and Lever U.K. were affiliated through Unilever,

a Dutch company. The Lever court proceeded on the uncontested

assumption that the articles produced for the U.S. and foreign markets

respectively differed in terms of composition, and performance

characteristics, among other things.

A third party, unrelated to either Lever U.S. or Lever U.K.,

imported into the United States, without the authorization of Lever

U.S., ``SHIELD'' deodorant soap and ``SUNLIGHT'' dishwashing products

manufactured abroad by Lever U.K. Customs declined to restrict these

importations, based on Sec. 133.21(c)(2) of the Customs Regulations, 19

CFR 133.21(c)(2), which states that no protection against unauthorized

genuine goods bearing otherwise restricted marks is provided when the

foreign and domestic trademark owners are subject to common ownership

or control.

Lever U.S. brought suit to compel Customs to deny entry, claiming

that the differences between the Lever U.K. and Lever U.S. products

resulted in consumer confusion and deception about the nature and

origin of the imported merchandise, thereby constituting a violation of

section 42 of

[[Page 14663]]

the Lanham Act, 15 U.S.C. 1124. The Appellate Court found that section

42 of the Lanham Act precludes the application of Customs' affiliate

exception with respect to physically, materially different goods. The

Court of Appeals affirmed the District Court's ruling that section 42

of the Lanham Act bars the importation of such goods. The District

Court was directed to issue an injunction requiring Customs to exclude

from entry the ``SHIELD'' and ``SUNLIGHT'' products at issue.

Protection Against Gray Market Goods

Currently, Customs enforces restrictions against trademarked gray

market goods with two exceptions found in Sec. 133.21(c): the

``affiliate'' exception of Sec. 133.21(c)(2), and the ``same owner''

exception of Sec. 133.21(c)(1). (In this document, for the sake of

simplicity, except where the ``same owner'' exception and the

``affiliate'' exception are separately mentioned and distinguished,

these exceptions will be referred to generically as the ``affiliate

exception'', the term used in Lever.)

Restrictions Under Section 42 and the Lever Decision

Section 42 of the Lanham Act, 15 U.S.C. 1124, protects against

consumer deception or confusion about 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. Enforcement of the distribution rights of such an

article produced abroad by a party related to the U.S. trademark holder

was a matter to be addressed through private remedies. Therefore,

Customs regulations do not provide for restrictions on the importation

of such gray market goods. Prior to Lever, the applicability of this

``affiliate exception'' depended simply on the presence of the genuine

trademark and the existence of the relevant intracompany relationship,

and was not contingent on whether the gray market articles were the

same as, or different from, the articles authorized for importation or

sale in the United States.

However, the Court of Appeals in Lever drew a distinction between

identical goods produced abroad under one of the scenarios contemplated

by the affiliate exception and goods that are physically and materially

different from the goods authorized by the U.S. trademark owner.

Although the injunction in Lever was specifically limited to the

articles at issue therein--``SHIELD'' deodorant soap and ``SUNLIGHT''

detergent--the Court of Appeals'' interpretation of the Lanham Act was

not so limited and, absent some specially differentiating feature,

would apply equally to other physically and materially different ``gray

market'' goods. In addition, it seems clear that the Lever opinion

should also apply not only to the ``affiliate'' exception of

Sec. 133.21(c)(2), but also to the ``same owner'' exception of

Sec. 133.21(c)(1). Customs proposes to make its regulations consistent

with Lever to protect against consumer confusion as to the source or

sponsorship of imported goods--notwithstanding that they are (1)

produced by the owner of the U.S. trademark, (2) a parent or subsidiary

of the U.S. trademark owner, or (3) a party subject to common ownership

or control with the U.S. trademark owner--when the goods bear a mark

identical to, or substantially indistinguishable from, a domestically

registered trademark and are found to be physically and materially

different from goods authorized by the U.S. trademark owner.

Customs proposes regulations that will continue to apply the

current restrictions on the importation of gray market goods bearing

legitimate trademarks that are identical to or substantially

indistinguishable from trademarks on articles authorized for

importation or sale in the United States under scenarios where the

affiliate exception does not apply. The new restrictions that are being

proposed also will ban, upon application by the trademark owner, even

in affiliate exception scenarios, the importation into the United

States of articles bearing genuine trademarks but that are materially

and physically different and which are not authorized by the U.S.

trademark owner. In the latter case, however, the restrictions will not

apply when the imported article also bears a label that would inform

the ultimate retail purchaser in the United States of the gray market

identity of the product. This exception is contained in an exception to

the restrictions that is outlined more fully below.

The Proposed Labeling Exception

In Lever, the Court of Appeals specifically notes that section 42

of the Lanham Act forbids importation of merchandise bearing a mark

that shall copy or simulate a trademark registered in accordance with

its provisions. In the Court's opinion, the Lanham Act appears on its

face to aim at deceit and consumer confusion; when identical trademarks

have acquired different meanings in different countries, one who

imports the foreign version to sell it under that trademark will (in

the absence of some ``specially differentiating feature'') cause the

confusion Congress sought to avoid. The Customs Service believes that

an informative label appearing prominently on such trademarked gray

market goods would constitute a ``specially differentiating feature''

of the kind referred to by the Court.

Customs believes that a label can serve as an appropriate means of

eliminating potential harm if the label makes clear that an article is

materially and physically different from the product authorized by the

trademark owner for importation or sale in the U.S. and is imported

without authorization. Customs believes that a labeling exception to

the new restrictions is consistent with the principles enunciated in

Lever. In other words, where an article which is produced abroad by a

party authorized to do so, bearing a genuine trademark, and imported

without the authorization of the U.S. trademark owner, also bears a

label in accordance with the proposed rule, Customs will regard the

label as qualifying possible erroneous inferences regarding the

characteristics of the article that might be drawn by the consumer from

the trademark alone. Where such a label is present to modify the

message regarding product characteristics that ordinarily may be

communicated by the trademark standing alone, so as to eliminate the

likelihood of consumer confusion, the Customs Service will conclude

that the trademark, under those circumstances, does not ``copy or

simulate'' the U.S.-registered mark. Such a label would modify any

inference that may be drawn by the consumer from the trademark so as to

eliminate the likelihood of consumer confusion.

The proposed regulations implement the responsibility of the

Customs Service as the agency charged with the enforcement of the law

to do so in a reasonable manner, and to promulgate appropriate rules

regarding how it will interpret and apply section 42 of the Lanham Act.

The proposed rules

[[Page 14664]]

establish the criteria that Customs will apply in carrying out its

responsibilities concerning the importation of gray market goods. These

rules are limited to the importation requirements of section 42 of the

Lanham Act and do not apply to other provisions of the Act. To be

eligible for the exception to the restriction, the label must be

conspicuous and legible and appear in proximity to the trademark in its

most prominent location on the article or retail packaging of the

product. Where the likelihood of consumer confusion is eliminated by an

acceptable, qualifying label which clearly informs the consumer about

the nature of a product, Customs will except the product bearing such a

label from the restrictions on importing physically and materially

different gray market products.

The Customs Service is not imposing a regulatory requirement for

the labeling of gray market goods. Customs proposes herein an exception

to the new restriction on physically and materially different gray

market products as described above. The proposed rule is intended to

ensure that an acceptable label will be sufficiently conspicuous and

legible and in sufficient proximity to the most prominent display of

the trademark on the good or its package so as to eliminate inferences

which might be drawn in the absence of such label.

In the view of Customs, the information conveyed by a label of the

type proposed herein would eliminate consumer confusion and inform any

reasonably alert or informed customer as to the characteristics of the

goods. Armed with that information, the consumer would then be free to

proceed based on his own determination of self-interest, weighing

quality, price and other factors. The proposed exception for

conspicuously labeled gray market imports would preserve the integrity

and commercial value of the U.S. registered mark and eliminate consumer

confusion regarding the source or sponsorship of the goods. Further, it

would prevent the Lanham Act protection from being invoked

inappropriately as a barrier to trade, while permitting consumer

choice, promoting price competition, and avoiding injecting the Customs

Service into intracompany world market division arrangements or

disputes.

Customs is proposing standard language for the label that will

except gray market goods from the new restriction on importation of

such goods that are physically and materially different. The purpose of

the proposed rule is to implement the Lever decision, and the label

language has been designed to address simply and narrowly the factors

on which the Court of Appeals for the D.C. Circuit focused in its

ruling, namely, the gray market identity of the goods and the fact of

physical and material difference. To the extent that an individual

importer chooses to design a label that contains additional, product

specific data, this is expressly permitted by the proposed rule.

A single label will reduce the administrative burden on Customs and

promote consistency in the treatment of gray market imports subject to

the rules. Customs believes that it will simplify the labeling process

for importers, reducing costs and the risk that a process of individual

label review and approval by Customs could cause delay and serve as a

barrier to trade. Finally, Customs believes that a single label may

achieve general recognition among consumers as a gray market label

whereas a multiplicity of individual labels actually might create

consumer confusion as to the significance of the labels.

The Customs Service believes that the proposed rule extends the

appropriate protection under the trademark laws to owners of a U.S.

trademark while not permitting those laws to be used as a shield

against competition. In eliminating the risk of consumer confusion, the

interest of the consumer in product choice and price competition in the

marketplace should be considered along with the interest of the U.S.

trademark holder in protecting its goodwill and reputation. The Customs

Service believes that the right of the mark owner is limited to

protection that addresses the potential damage to the mark owner. The

identity and reputation of the domestic mark owner can be preserved and

the public interest served by effectuating open and informed

competition.

The Proposed Amendments

A critical step in applying the Lever decision is defining the

scope of ``physically and materially different.'' The Lever court did

not provide specific criteria for determining when products should be

considered physically and materially different. Customs recognizes that

no bright line test can be established which would delineate the

relevant difference(s) among the multitude of products that may be

involved in the gray market. Such determinations are inherently fact

specific and must be made on a case-by-case basis. Customs also

recognizes, however, that without certain guidelines, the importing

public cannot reasonably expect Customs consistently to protect owners

of U.S.-registered trademarks while facilitating the flow of legitimate

commercial trade. With that in mind, Customs proposes to amend its

regulations to include categories of information that trademark owners

may provide to Customs for consideration in its determination as to

whether certain trademarks may be entitled to protection under the

rationale of Lever and the new rules promulgated herein (``Lever-rule''

protection).

Thus, in addition to the current information described in

Sec. 133.2, Customs Regulations (19 CFR 133.2), Customs will consider

the following:

1. The 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(s);

3. The performance and operational characteristics of both the

authorized and gray market product(s);

4. Differences between the authorized and gray market products

resulting from legal or regulatory requirements, certification, etc.;

5. Other characteristics that can be described with particularity

by the U.S. owner claiming gray market protection. Such characteristics

must clearly distinguish authorized articles from gray market articles,

applying criteria which establishes the protection of the statute,

namely protection from consumer confusion and deception.

In each case, any proffered characteristic must be supported by

competent evidence. Customs recognizes that it cannot anticipate all of

the considerations that may lead to a finding of ``physical and

material difference,'' but Lever suggests certain categories of

information which are appropriate. The last criterion above leaves open

the possibility that unspecified information may be considered at

Customs' discretion.

Owners claiming gray market protection under the proposed provision

should be aware that Customs will require the grounds for claiming

physical and material differences to be stated with particularity. Any

such request lacking in specificity will be rejected.

T.D. 92-60

On June 26, 1992, Customs published in the Federal Register (57 FR

28605) a Notice of Court Order, notifying owners of trademarks recorded

with Customs that the Lever court had ordered Customs to provide

protection against physically and materially different gray market

products. To date, two applications have been received,

[[Page 14665]]

requesting protection. The first, on behalf of the owner of the

``Duracell'' trademark, was denied. See 57 FR 46063. The second, on

behalf of the owner of the ``Yamaha'' trademark, was suspended

following the public comment period, following the issuance of the

decision of the appellate court in Lever. Customs will no longer accept

applications under the June 26, 1992, Federal Register notice. Any

further applications must be made after the final amendments resulting

from this notice of proposed rulemaking become effective, and must be

in compliance therewith. The ``Yamaha'' application will be evaluated

in this fashion, and a decision thereon published in the Federal

Register.

Proposed Amendment of Recordations

Customs anticipates that the owners of U.S. registered trademarks

currently recorded with Customs who believe that they may now be

entitled to protection (``Lever-rule'' protection) from gray market

importations under the regulatory changes, if adopted, may submit

requests to Customs concerning their eligibility, along with detailed

explanations of the reasons for their perceived eligibility. Any party

applying for ``Lever-rule'' protection must also submit a summary of

the physical and material differences relied on in support of its

application. At approximately 30-day intervals, Customs will publish in

the Federal Register a list of those trademarks for which ``Lever-

rule'' protection for physically and materially different gray market

products has been requested including summaries of the physical and

material differences. Interested parties shall then have 30 days in

which to comment on the request(s). At the end of the 30-day comment

period, Customs shall examine the request(s) and any comments from the

public before issuing a determination on whether ``Lever-rule''

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 Federal

Register a notice that a trademark will receive ``Lever-rule''

protection. Subsequent importations of physically and materially

different products will be denied entry; the merchandise will be

detained under the procedures described in proposed Sec. 133.25 of the

Customs Regulations (proposed 19 CFR 133.25), and be subject to seizure

after 30 days pursuant to 19 U.S.C. 1595a(c)(2)(C), unless the

physically and materially different product bears in a conspicuous

location a legible label stating that ``This product is not the product

authorized by the United States trademark owner for importation and is

physically and materially different.'' Other information designed to

dispel consumer confusion may also be added. Proposed Sec. 133.23(d)

will permit an importer to establish, during the 30-day detention

period, that the detained merchandise is not physically and materially

different from the product authorized for importation or sale in the

U.S. by the U.S. trademark owner. Merchandise seized under the

regulations may be subject to a petition for relief under the

provisions of Secs. 133.51 and 133.52 and part 171, Customs Regulations

(19 CFR part 171).

Additional Proposed Regulatory Changes

In addition to the gray market regulation changes being proposed

herein, Customs proposes to reorganize and renumber the remainder of

subpart C, part 133. These changes are intended to clarify Customs

enforcement of trademark rights as they relate to products bearing

counterfeit, or copying or simulating marks and names, and to clarify

Customs enforcement generally against gray market goods. None of the

clerical proposals made in this connection, other than those stemming

from the Lever decision, alters Customs enforcement practices.

Comments

Before adopting this proposal, consideration will be given to any

written comments that are timely submitted to Customs. All such

comments will be available for public inspection in accordance with the

Freedom of Information Act (5 U.S.C. 552), Sec. 1.4, Treasury

Department Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs

Regulations (19 CFR 103.11(b)), during regular business days between

the hours of 9:00 a.m. and 4:30 p.m. at the Regulations Branch, 1300

Pennsylvania Avenue, NW., 3rd Floor, Washington, DC 20229.

Regulatory Flexibility Act and Executive Order 12866

The proposed rule would generally reflect case law intended to

protect products with valid U.S. trademarks against infringing imports.

Hence, pursuant to the provisions of the Regulatory Flexibility Act (5

U.S.C. 601 et seq.), it is hereby certified that the proposed rule, if

adopted, will not have a significant economic impact on a substantial

number of small entities. Accordingly, the rule is not subject to the

regulatory analysis requirements of 5 U.S.C. 603 and 604. Nor does the

proposed 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 notice of proposed

rulemaking 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. Although this document restates the collection(s) of

information without substantive change, comments are specifically

requested concerning:

Whether the collection of information is necessary for the proper

performance of the functions of the Customs Service, including whether

the information will have practical utility;

The accuracy of the estimated burden associated with the proposed

collection of information (see below);

How to enhance the quality, utility, and clarity of the information

to be collected;

How to minimize the burden of complying with the proposed

collection of information, including the application of automated

collection techniques or other forms of information technology; and

Estimates of capital or startup costs and costs of operation,

maintenance, and purchase of services to provide information.

The collection of information related to this proposed regulation

is in Sec. 133.2. This information is necessary in order to enable

Customs to protect products with valid U.S. trademarks against

infringing imports. The collection of information is voluntary. The

likely respondents are businesses.

Estimated total annual reporting and/or recordkeeping burden:

________ hours.

Estimated average annual burden hours per respondent and/or

recordkeeper:

Estimated number of respondents and/or recordkeepers:

Estimated annual frequency of responses:

Comments on the collection 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, DC 20503. A copy should also be sent to the

Regulations Branch,

[[Page 14666]]

Office of Regulations and Rulings, U.S. Customs Service, 1300

Pennsylvania Avenue, NW., Washington, DC 20229. Comments should be

submitted within the same time frame as comments on the substance of

the proposal.

Drafting Information

The principal author of this document was Russell Berger,

Regulations Branch, U.S. Customs Service. However, personnel from other

offices participated in its development.

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.

Proposed Amendment

It is proposed to amend part 133, Customs Regulations (19 CFR part

133), as set forth below.

PART 133--TRADEMARKS, TRADE NAMES, AND COPYRIGHTS

1. The general authority citation for part 133 would continue to

read as follows, and the specific sectional authority for part 133

would be 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;

Section 133.52 also issued under 19 U.S.C. 1526;

Section 133.53 also issued under 19 U.S.C. 1558(a).

2. It is proposed to amend Sec. 133.2 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 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 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) At approximately 30-day intervals, Customs will publish in the

Federal Register a list of those trademarks for which gray market

protection for physically and materially different products has been

requested and summaries of physical and material differences.

Interested parties shall then have 30 days in which to comment on the

request(s). At the end of the 30-day comment period, Customs shall

examine the request(s) and any comments from the public 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 Federal Register

a notice that a trademark will receive Lever rule protection.

3. It is proposed to amend part 133 by revising subpart C to read

as follows:

Subpart C--Importations Bearing Recorded Trademarks or 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.

Subpart C--Importations Bearing Recorded Trademarks or 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/

[[Page 14667]]

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 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 the product authorized by the United

States trademark owner for importation and is physically and

materially different.''

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.

(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.

[[Page 14668]]

(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 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 restrictions

apply, to permit the establishment of whether any of the circumstances

described in Sec. 133.22(c) or Sec. 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 Sec. 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. 133.62 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.

Samuel H. Banks,

Acting Commissioner of Customs.

Approved: March 5, 1998.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 98-7969 Filed 3-25-98; 8:45 am]

BILLING CODE 4820-02-P