WASHINGTON — It’s bad enough that Mexico’s economy went south in December, crimping cosmetics sales there for the foreseeable future. But now, U.S. cosmetics firms are concerned doing business there could boomerang to hurt them.
At issue is the potential use of Mexico as a platform for shipping gray market goods back to the U.S., or even manufacturing illegal knockoffs of high-profile cosmetics, especially fragrances, and exporting them to the U.S.
“The concern is that once we start taking down trade barriers under NAFTA, will we still have the same trademark and copyright protections that we have in the U.S.?” said Robert Brady, president of Parfums Givenchy.
Brady also is a board member of COPIAT, the Coalition to Preserve the Integrity of American Trademarks, a group of U.S. manufacturers. COPIAT executives say they have fought for years to stem the practice of parallel imports, commonly called gray market goods, whereby branded products with registered trademarks are shipped to a country besides the U.S. and then exported back to the U.S., or a nation such as Mexico.
The U.S.-based firms contend such practices undercut their ability to maintain a cosmetic’s image in a given market, since gray market versions of the identical product are sold at deep discounts, often by mass retailers and even gas stations.
Coalition members claim these cosmetics may be sold beyond their expiration date, leaving consumers with a “stale” product that can hurt the firm’s reputation.
Following a series of court victories several years ago, some COPIAT companies have been successful in having the U.S. Customs Service seize their own products being imported to the U.S. via the gray market.
Brady reported just such a recent Customs seizure of Givenchy fragrances being imported into Los Angeles from Asia. There also have been reports of Customs actions against the importation of counterfeit cosmetics and other products.
“At this point, it appears as if the level of protection we have most recently come to enjoy in the U.S. would be protected under NAFTA,” should cosmetics be imported from Mexico via the gray market or shipped there from a non-NAFTA country, Brady said.
“However, this situation is not totally clear,” he continued, “and that is why COPIAT and Givenchy have hired [the Washington law firm] Covington & Burling to research the situation for us.”
During the heated NAFTA debate in fall 1993, U.S. Trade Representative Mickey Kantor repeatedly assured Congress that U.S. trade law and legal protections would not be compromised once the U.S. became a free trade partner with Mexico and Canada.
Nonetheless, Brady said U.S. firms have reason for concern. “We don’t understand the legal system in Mexico as well as we do here in the U.S., or their level of enforcement and culture,” he explained.
Brady added the NAFTA pact is a complex legal document that physically is so large “you need a step ladder to go through it. I understand that we should be afforded the same level of protection under NAFTA [in Mexico] as we have now [in the U.S.], but it’s better to be certain of this and be able to take the necessary preventive measures now, as opposed to having to resort to remedies later.”