The Gray Blog

The Moscow News Weekly reports on a crackdown by the government of the Russian Federation against gray market electronics. In an effort to re-engineer the current market, the government is temporarily discontinuing import duties on digital cameras and cellular phone components while, on the other hand, Russian Customs begins recording the serial numbers of all laptops and other digital devices imported into Russia. The goal is to encourage domestic assembly and to discourage cheap parallel market imports which presently constitute a substantial majority of Russian imports.

In an effort to show their support for this new policy initiative, some of the largest chain stores in the nation have signed a declaration circulated by the Russian Association of Trading Companies and Manufacturers of Consumer Electronics and Computers (RATEK),committing to purchase goods from authorized suppliers.  Some experts have expressed doubt in the policy’s effectiveness.
For the full article click here.

The Telegraph of Calcutta, India, reported this Thursday that Apple has delayed the release of the now famous iPhone in India until mid 2008. Although India is one of the world’s fastest growing cell phone markets, release of the iPhone is being delayed until a year after US release and half a year after release in Europe. The Telegraph attributes the delay to Apple’s fears of gray market sales and compares the situation to that of the iPod about which it says “official sales of the iPod are dwarfed by indistinguishable lookalikes in the grey market.” Clearly the Telegraph was not referring to gray market sales but to counterfeits and look alike knock offs.  Rumor has it that the iPhone’s activation mechanism will prevent traditional parallel market sales.  Only time will tell.  Unfortunately for Indian consumes that time won’t arrive for a while.

The Spanish affiliate of LG Electronics, the Korean electronic manufacturer, has renewed its claims that Spain is losing millions of Euros in taxes as a result of parallel market sales. According to LG Spain, the failure to pay import taxes gives parallel market importers a substantial advantage over the authorized reseller.

In addition, LG Spain and its partners, claim that the country is injured because parallel market importers fail to pay electronic residue fees. Under Spanish law all manufacturers and importers of electronics are obligated to register with the Registry of Industrial Businesses for Residues of Electronic Aparatuses and Electronics [Establecimientos Industriales para Residuos de Aparatos Eléctricos y Electrónicos (REI)] The purpose of the REI is to then determine the percentage of materials that each manufacturer is introducing into the marketplace in order to calculate the electronic residue handling fees that the manufacturer must pay. Of the approximately 10,000 manufacturers in the Spanish market only approximately 10% are allegedly registered.

LG Spain’s battle against parallel market resellers of , principally, CD and DVD players and recorders in Spain has been on-going for several years. In November of 2005, LG Spain reported that it has lost over 10 million Euros to parallel market imports the previous year. In response, LG announced an ambitious two-stage strategy of notifying unauthorized resellers and launching legal actions against those that did not reach amicable settlements. (Under European law importing products bearing copyrighted works without the consent of the copyright owner is actionable. See article regarding CD Wow case earlier in this blog).

There were no subsequent press releases regarding the success or failure of this approach. Clearly, the latest statements suggest that the parallel market sales continue to pose a problem for LG Spain.

U.S.Customs and Border Protection is in the midst of a crackdown against portable music players that contain a variation on the game Tetris. Dozens of seizures have already taken place involving thousands of such players many of them in-transit to Latin America. The basis for the seizures has generally been “counterfeit version of Tetris software.” It appears from some reports, however, that in some cases the software may be infringing but not necessarily counterfeit. Due to the large number of seizures, Customs still has not issued decisions on pending petitions. If your client is purchasing MP4 or MP3 music players abroad, have them confirm that the players do not contain a Tetris variation before importing into the U.S. for domestic consumption or transshipment.