Gray Market Goods

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Gray market goods are defined as items manufactured abroad and imported into the US without the consent of the trademark holder. Gray market goods are not counterfeits; however, differences may exist between these goods and those goods produced for American sale. Some of these differences may involve warranty coverage or compliance with US regulatory requirements.

The effect of this parallel system is that similar goods are available in the US at different prices. US Customs regulations permit the importation of gray market goods with one exception. This exception protects the trademark holder in its contractual agreement with those firms which the trademark holder chooses to allow to manufacture its goods on the condition that the foreign manufacturer promises not to import the goods in the US. Otherwise, the parallel importation of gray market goods is permissible.

Identification

Gray market goods can be identified in the following ways:
  • The merchandise may not come with a US manufacturer's warranty;
  • The instructions or warranty may be written in a foreign language;
  • The price will probably be lower than the manufacturer's suggested price;
  • Ask the seller or the manufacturer's authorized representative if the merchandise is from the gray market. Merchandise intended for sale in the United States may be determined by registration number;
  • For automobiles, check the vehicle identification number (VIN) with the manufacturer's authorized representative;
  • The merchandise may not be eligible for rebate;
  • The specifications of the merchandise may not comply with US regulatory
  • requirements.


How the Laws Protect You

In New York State, any retail dealer who offers for sale gray market goods must disclose the following information, when applicable:

  • The product is not accompanied by a US warranty;
  • The product is not accompanied by instructions in English;
  • The product is not eligible for a rebate offered by the manufacturer.

The above information must be posted on either a sign attached to the item, a sign at the point of sale such as attached to the cash register, or a sign clearly visible to the customer from the register.

If a merchant violates any of the above provisions, the buyer has up to 20 days from the date of purchase to request a refund or credit on a credit card purchase provided that the item has not been used or damaged by the buyer. Also, the New York State Attorney General can fine organizations that violate the above provisions. Penalties of $500 can be imposed by a court of law for each violation. Gray market goods may also be available by mail order. New York law states that any retail dealer engaged in a mail order business selling gray market merchandise must include the information stated above in its print advertising. The information must be in type of a conspicuous size.



Warranty Protection

Because gray market merchandise was originally intended for sale outside the US, it may come without a US manufacturer's warranty. Ask the retailer if the merchandise carries a US warranty. Also, you may verify whether the product carries a US warranty by examining a copy of the warranty.

You cannot purchase a US manufacturer's warranty for use with a gray market good. However, some merchants do provide warranties or sell service contracts. If so, request that it be in writing, get a copy, and be sure to determine the following:

  • Is the entire product covered? If not, which parts are covered? Is there a service charge? If so, how much? Is labor included in that fee?
  • Who do you call when you need repairs that are covered by the warranty? The dealer? The manufacturer? A service agency?
  • If the manufacturer provides the warranty, confirm whether the non-US warranty will be honored.
  • How long does the warranty last on the entire product? On parts and assemblies?
  • If the warranty provides for reimbursement for the product, is the reimbursement to be made in cash or in credit toward a replacement?
  • Will a replacement product be provided while yours is being repaired?


Gray Market Automobiles

Gray market automobiles are vehicles that were intended for sale outside the US. However, because of fluctuations in currency values, it may be less expensive to import a car than to buy it from a US dealer. If you intend to purchase a gray market automobile, you should be aware of the following:

A. Safety and Pollution Standards Differ

Imported motor vehicles are subject to air pollution control standards enforced by the Department of Transportation (DOT), the Environmental Protection Agency (EPA), and US Customs. Since safety and air pollution standards vary from country to country, it is unlikely that vehicles purchased abroad comply with US standards. Gray market automobiles will often require modifications to satisfy US requirements. These modifications can add a considerable cost on the purchase of the automobile.

Although a non-conforming car may be admitted into the US, by a registered importer and under a bond equal to the price paid for the car or the invoice price, both the DOT and the EPA advise consumers that modifications may be impossible, impractical, or require extensive engineering. Furthermore, they warn that labor and material costs may be unduly expensive.

A motor vehicle designed primarily for use on public streets must enter the country through a registered importer, or through one who has a contract with such an importer, and its compliance must be established after entry into the US according to certain procedures. A vehicle that cannot be modified to US standards will not be permitted into the country. A non-conforming vehicle can be imported, on the condition that it will be broughtinto conformity within 120 days of entry.

B.Warranty Protection

Unlike an automobile intended for sale in the US, a gray market automobile may not be protected under the manufacturer's warranty. You may be able to purchase a service contract underwritten by an insurance company, but there may be significant restrictions. For example, you may have to provide the money to pay for the contract or service in advance. Furthermore, if your automobile needs repairs, you may be required to file a claim for reimbursement with the company, instead of returning to the car dealer as you would with a car intended for sale in the US. In addition, the buyer of a gray market automobile may not be eligible to participate in the various manufacturer's special mediation and arbitration programs.



Glossary

Black Market
Illegal trading in rationed goods.

Bond
A bond is given to secure performance according to the requirements of the Vehicle Safety Act. It is a bond of the Department of Transportation.

Counterfeits
Goods which are not genuine and are intended to deceive but which bear trademarks without any authorization.

Gray Market Goods
Items manufactured abroad and imported into the US without the consent of the trademark holder

Parallel Imports
Another name for gray market goods.

Service Contract
A service contract is an agreement in which a party other than the manufacturer covers the cost of repairs. You may choose to purchase such an agreement when buying a product such as a car, major appliance or electronic equipment.

Trademark
Any word, name, or symbol used by a manufacturer to identify his goods and to distinguish them from the goods sold by others.

Trademark Infringement
Unauthorized use or imitation of the mark held by another on similar goods.

Warranty
Provides for repairs for a specific time period and is included in the price of a product. For example, all new cars sold through a US dealer come with warranties, come quite extensive or of long duration.



Buyer's Checklist

Before purchasing any merchandise, particularly electronics, determine whether the item is a gray market good.
  • Compare the price of the same product in the regular market. Do the savings associated with purchasing from the gray market exceed the advantages provided by buying a good with a US trademark? Do not forget to consider the value of a US warranty and any rebates you may be required to forego.
  • If you realize within 20 days of your purchase of a gray market item that the required information was not disclosed and you do not wish to own the item, return the merchandise immediately for a refund.
  • If the seller provides warranty coverage, request that it be in writing. Refer to section 7 for a list of issues you should be aware of with respect to warranties.
  • Inspect your merchandise to be sure it is in proper working order. Be aware that merchandise may be damaged and in a way not readilyvisible, and that it is possible that the product may not be in factory-fresh condition, having gone through three or more parties.
  • Make sure that the goods are not old, counterfeit, or discontinued models.
  • Since repair work will most likely not be performed at a manufacturer's authorized service center, be sure to find out (1) where the service will be performed, (2) if the seller is qualified to work on the product, and (3) whether the work will be performed in a setting suitable for precision workmanship according to manufacturer's specifications.
  • If you are considering purchasing a gray market automobile, ensure that it meets US safety and air pollution standards. If it does not, make sure that modifying it will not cost more than the amount you are saving by buying a car from the gray market.


To obtain more information, contact:

The New York State Attorney General's office initiates lawsuits, enforces consumer laws and accepts complaints regarding fraudulent business practices. To reach the New York Attorney General call 212-416-8345 for companies located in the five boroughs of New York, 516-248-3300 for companies in Nassau county, 516-231-2400 for companies in Suffolk county, or (914) 485-3920 for companies in the Mid Hudson area.

For information regarding gray market automobiles, consumers can also contact:

US Department of Transportation
National Highway Traffic Safety Administration
Office of Vehicle Safety Compliance
400 7th Street, S.W.
Washington, DC 20590

US Environmental Protection Agency
Manufacturers' Operations Division
Investigations/Imports Section
401 M Street, S.W.
Washington, DC 20460