Parallel imports, which are sometimes referred to as "grey market" imports, are cross broder trade in a product, without the permission of the manufacturer or publisher. Parallel imports take place when there exists significant price differences for the same good in different markets. There is trade in parallel imports in a wide range of goods, including such items as pianos, automobiles, motorcycles, chemicals, pharmaceuticals, computers, cameras, Levi jeans, music CDs and ski equipment.

Manufacturers or publishers who oppose parallel imports make a number of arguments against parallel imports. For example, they express concern that parallel imports may be substandard products or even counterfeits, and may be difficult to support or service. They also express concern that the inability to charge higher margins in some markets may undermine their ability to service products. A variety of consumer interests that support parallel imports say that measures to deal with substandard products or counterfeits can be addressed with or without parallel imports, that consumers benefits from cross border trade can be substantial, outweighing the risks, and that parallel imports permit smaller or less competitive markets to benefit from competition in more competitive markets.

There are substantial price differences for pharmacuetical in different markets. These price differences are due to local market conditions. The market conditions may be based upon many factors, such as differences in intellectual property rules or incomes, but also the degree of competition among producers. Thus, for example, while the USA has relatively high levels of intellectual property protection, it also has aggressive market competition for drugs within therapeutic classes, driven by "managed care" polices, resulting in lower negotiated prices for many drugs.

Forexamples of differences in drug prices between countries, see the comparison of EC and USA HIV drug prices from Table 1 of CPT's coments on South Africa parallel imports legislation, or Dr. K Balasubramaniam's (Health Action International) study of prices for Ranitiidine (Zantac), Amoxicillin (Amoxicillin, Amoxil, Trimox) or Captopril (Capoten). One observes wide ranges in drug prices. For example, prices for SmithKline Beechman's version of Amoxil was $8 in Pakistan, $14 in Canada, $16 in Italy, $22 in New Zealand, $29 in the Philippines, $36 in the USA, $34 in Malaysia, $40 in Indonesia, and $60 in Germany. In other examples, Bristol-Myers Squibb sells Taxol, an important cancer drug, for less in some markets outside the United States, but insists on charging more for ddI, an AIDS drug, in New Zealand than in the US. BK Keayla's comparisons of prices of three drugs in India, Pakistan, Indonesia, UK and the USA provide further examples. Glaxo's prices for Zantac and Voveran were lower in the UK than in Indonesia, for example, despite Indonesia's low income. On the other hand, Glaxo, Ciba-Geigy and Pfizer charged from 43 to 69 times as much for the same drug in the United States as they did in India. By permitting some form of parallel imports, countries can shop around and get better prices, using market forces to lower national expenditures on pharmaceuticals.

Manufactures or publishers engage in a variety of techniques to stop parallel imports, such as restrictive contracts with distributors, regulatory barriers (by national Food and Drug Administration agencies) or claims that parallel imports violate territorial restrictions on patent, copyright or trademark rights under intellectual property laws.

In general, parallel imports are permitted under International agreements on intellectual property. The technical issue is the so called "exhaustion" of an intellectual property right, which is also sometimes referred to as the "first sale doctrine." Under the theory of the "first sale" or the "exhaustion of rights," the owner of intellectual property cannot control the resale of a legally purchased good, and parallel imports are legal. Under the WTO/TRIPS rules, countries are permitted to decide for themselves how to handle parallel imports. The key section of the TRIPS is Article 6, Exhaustion, which reads: For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 35 and 46 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights." Regional trade agreements such as NAFTA or the European Union have their own rules regarding parallel imports.

Every country has trade in parallel imports. Restrictions on parallel imports exist only for certain types of goods. For example, in the United States, parallel trade is not permited for some copyrighted goods, and regulatory authorities restrict parallel imports of pharmaceuticals. Many European countries have significant trade in pharmaceutical parallel imports, particularly within the EU itself, but also from outside the EU, including imports from the USA market to the EU. In some countries efforts to discourage parallel imports are considered violations of anti-monopoly laws. For example, the Japan FTC recently told a firm that it would face civil and criminal sanctions unless it ceased its efforts to prevent parallel imports of Steinway pianos from Holland in Japan. The United States has been extremely aggresive in attacking parallel imports for a wide range of goods, even by claiming that used Japanese automobiles were copyrighted goods (as three dimensional representations of blueprints), and could not be imported into New Zealand. On the other hand, parallel imports rountinely flow into the United States for many goods. One reason that countries do not want to forgo parallel imports is to remain competitive in world markets, by getting the best world prices for goods. Electronic commerce is also making it difficult to resist parallel imports. In the heat of a dispute over parallel imports in New Zealand, the US Ambassador to New Zealand admitted he bought his books from www.amazon.com, a US firm that sells books over the Internet. The European Commission recently announced it wants to expand the use of electronic commerce for pharmaceutical products, across national borders.

In some cases governments may want to regulate parallel imports of certain goods. This might include such measures as labeling products as parallel imports, disclosures regarding the status of product warranties on parallel imported goods, or even licensing of parallel importers in order to assure product quality.