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What are Grey Market Goods?
Michael C. Dennis, MBA, CBF

Business Credit Concepts
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United States manufacturers often find themselves in the unlikely position of competing against their own goods imported from abroad. These competing products are called grey-market goods. Grey-market goods are products sold in the United States that were lawfully produced here or elsewhere, which the manufacturer did not intend for sale in the U.S. market. Three distinct scenarios are the most common sources of parallel imports.

  1. A manufacturer may manufacturer goods in the U.S. for export sale and find that the merchandise has been diverted back to the United States market either before or after export the planned exportation.
  2. Goods made abroad by a foreign licensee may be imported into the United States without the authorization of the U.S. licensor.
  3. Goods made abroad either by the manufacturer or a licensee may be imported into the U.S. market to compete with goods offered by the manufacturer.

In many cases, the disadvantages of buying grey market goods may outweigh the cost savings. For example, grey market goods may not be covered by the manufacture's warranty. If the product does come with a warranty, it may not be valid in the U.S. If such a product breaks or is defective, the manufacturer may choose not be honor the warranty.

In some instances, the product may not comply with U.S. safety laws and may require costly adjustments prior to being used legally within the U.S. - not to mention the fact that the labels, operating manuals and other instructions are usually in a foreign language.

The primary distinguishing features of a grey market sale are low price combined with the fact that the seller is not authorized to sell the merchandise in question in the U.S. Health and safety problems are additional areas of concerns.

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