[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