K MART CORPORATION, PETITIONER V. CARTIER, INC., ET AL.

   47TH STREET PHOTO, INC., PETITIONER V. COALITION TO PRESERVE THE
INTEGRITY OF AMERICAN TRADEMARKS, ET AL.

   UNITED STATES OF AMERICA, ET AL., PETITIONERS V. COALITION TO
PRESERVE THE INTEGRITY OF AMERICAN TRADEMARKS, ET AL.

   No. 86-495, 86-624 and 86-625

   In the Supreme Court of the United States

   October Term, 1986

   On Writ of Certiorari to the United States Court of Appeals for the
District of Columbia Circuit

   Brief for the Federal Petitioners

                       PARTIES TO THE PROCEEDING

   The petitioners are K mart Corporation (No. 86-495);  47th Street
Photo, Inc. (No. 86-624);  and the United States of America, James A.
Baker III, Secretary of the Treasury, and William von Raab,
Commissioner of Customs (No. 86-625).  The respondents in each of the
three consolidated cases are Cartier, Inc., Charles of the Ritz Group,
Ltd., and Coalition to Preserve the Integrity of American Trademarks
(COPIAT).  /*/

            TABLE OF CONTENTS
   Parties to the proceeding
   Opinions below
   Jurisdiction
   Statute and regulation involved
   Question presented
   Statement
      A. Introduction
      B. Proceedings below
   Summary of argument
   Argument:
      The Customs Service regulation sets forth a permissible
      interpretation of Section 526 of the 1930
      Tariff Act
      A. Section 526 was enacted to protect U.S. trademark
         owners that had acquired their rights
         from foreign trademark owners; there is no
         evidence that Congress understood or intended
         it to apply where the foreign and U.S. trademark
         owners are the same or related companies
      B. The Customs Service regulation is a reasonable
         interpretation of Section 526
      C. The Treasury Department's interpretation is
         entitled to particular deference in this instance
   Conclusion
   Addendum

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-32a /1/ ) is
reported at 790 F.2d 903.  The opinion of the district court (Pet.
App. 34a-50a) is reported at 598 F.Supp. 844.

                             JURISDICTION

   The judgment of the court of appeals (Pet. App. 51a) was entered on
May 6, 1986.  Petitions for rehearing were denied on July 18, 1986
(Pet. App. 53a).  The United States' petition for a writ of certiorari
(No. 86-625) was filed on October 16, 1986, and was granted on
December 8, 1986.  The jurisdiction of this Court rests on 28 U.S.C.
1254(1).  /2/

                    STATUTE AND REGULATION INVOLVED

   The relevant statute and regulation are reproduced in the Addendum
to this brief.

                          QUESTION PRESENTED

   Section 526 of the Hawley-Smoot Tariff Act of 1930, 19 U.S.C. 1526,
restricts the unauthorized importation of foreign merchandise bearing
a trademark that is registered in the United States Patent and
Trademark Office and owned by a United States citizen, corporation, or
association.  The question presented in this case is whether a Customs
Service regulation is valid which permits the importation of foreign
merchandise bearing a trademark identical to a U.S. registered
trademark when (1) the foreign and U.S. trademarks are owned by the
same person;  (2) the foreign and U.S. trademark owners are subject to
common ownership or control;  or (3) the trademark was applied under
authorization of the U.S. trademark owner.

                               STATEMENT

   A. Introduction

   The Fordney-McCumber Tariff Act of 1922, ch. 356, 42 Stat. 858 et
seq. (the 1922 Tariff Act) and the Hawley-Smoot Tariff Act of 1930,
ch. 497, 46 Stat. 590 et seq. (the 1930 Tariff Act) are best known for
their sweeping revision of U.S. policy on tariffs and trade.  /3/ This
case concerns a little noticed non-tariff provision of those statutes,
added as a floor amendment to the 1922 Tariff Act (see Section 526, 42
Stat. 975), reenacted as Section 526 of the 1930 Tariff Act (46 Stat.
741), and now codified (as amended) at 19 U.S.C. 1526, which restricts
the unauthorized importation of goods bearing U.S. trademarks.  The
question is whether a Department of the Treasury regulation, which
interprets Section 526 as not prohibiting "parallel" importation of
genuine trademarked goods under certain circumstances, is valid.  The
answer will determine the fate of an important segment of the American
retailing industry.  /4/

   Section 526(a) of the 1930 Tariff Act makes it unlawful "to import
into the United States any merchandise of foreign manufacture if such
merchandise * * * bears a trademark owned by a citizen of, or by a
corporation or association created or organized within, the United
States, and registered in the Patent and Trademark Office by a person
domiciled in the United States * * * unless written consent of the
owner of such trademark is produced at the time of making entry." 19
U.S.C. 1526(a).  /5/ Section 624 of the 1930 Tariff Act provides that
"the Secretary of the Treasury is authorized to make such rules and
regulations as may be necessary to carry out the provisions of this
chapter." 19 U.S.C. 1624.  Under the Treasury Department's regulation
interpreting Section 526 (the "Customs Service regulation" set forth
at 19 C.F.R. 133.21), an American firm that purchases the right to use
a foreign mark as a U.S. trademark receives protection from attempts
by others to import foreign merchandise (including "genuine"
merchandise manufactured by the owner of the foreign mark) bearing the
same or a similar mark.  The regulation does not provide that
protection, however, when the owners of the foreign mark and the U.S.
trademark are the same, or are under common ownership or control, or
the use of the foreign mark was authorized by the U.S. owner (ibid.).
For convenience, we refer to this as the Customs Service regulation's
"common control" exception.  /6/

   Many foreign manufacturers distribute their merchandise in this
country through American subsidiaries, sometimes called "authorized
distributors," that own the U.S. trademarks.  Those firms, which are
subject to the Customs Service regulation's common control exception,
face sharp competition from "parallel importation":  other firms
(which may or may not also be related to the foreign manufacturer)
acquire foreign goods bearing a genuine mark and supply them to U.S.
retailers at prices lower than the U.S. trademark owner charges.  /7/
The driving force behind parallel importation is a matter of
considerable debate.  American discount retailers, such as petitioners
K mart Corporation and 47th Street Photo, Inc., claim that parallel
importation is a market response to attempts by foreign manufacturers
to charge higher prices for their goods within the United States than
elsewhere in the world (86-495 Pet. 5-7;  86-624 Pet. 2-3).  Firms
subject to the "common control" exception, such as respondents
Cartier, Inc. and Charles of the Ritz Group, Ltd., contend, to the
contrary, that parallel importers are taking a "free ride" on their
advertising and promotional expenditures (Br. in Opp. 2-4).  The
Federal Trade Commission's Bureaus of Competition, Consumer
Protection, and Economics recently concluded that "(t)he available
data on gray market imports are much too sketchy and anecdotal to
determine reliably which theory or theories are valid." /8/

   Various U.S. trademark owners subject to the common control
exception have joined forces through a trade association, respondent
Coalition to Preserve the Integrity of American Trademarks (COPIAT),
and have mounted a broad campaign, in legislative, administrative, and
judicial forums, to reverse the Customs Service regulation.  /9/
Congress has made no change in the present law thus far.  The
President's Economic Policy Council, in conjunction with the
Department of the Treasury and the Customs Service, is now conducting
a policy review of the matter.  /10/ The courts have, in several
cases, rejected respondents' legal objections.  /11/ The court below
concluded, however, that the Treasury Department's long-standing
interpretation of Section 526, currently embodied in the Customs
Service regulation, is impermissible.

   B. Proceedings Below

   COPIAT brought this action in the U.S. District Court for the
District of Columbia, seeking injunctive and declaratory relief
against the United States, the Secretary of the Treasury, and the
Commissioner of Customs.  COPIAT urged that the Customs Service
regulation is inconsistent with Section 526 and with Section 42 of the
Lanham Act, which forbits the importation of goods bearing marks that
"copy or simulate" U.S. trademarks (15 U.S.C. 1124).  /12/ K mart
Corporation and 47th Street Photo, Inc., intervened as defendants.

   The district court concluded that the Customs Service regulation is
valid (Pet. App. 34a-50a).  The court first rejected (id. at 36a) 47th
Street Photo's motion to dismiss on the ground that the Court of
International Trade has exclusive jurisdiction, pursuant to 28 U.S.C.
1581, over challenges to regulations interpreting Section 526.  See
Vivitar Corp. v. United States, 761 F.2d 1552 (Fed. Cir. 1985), cert.
denied, NO. 85-411 (Jan. 13, 1986).  The court then agreed with 47th
Street Photo (Pet. App. 37a-39a) that Section 42 of the Lanham Act
does not provide a ground for relief in the present case, because that
provision forbids only the importation of items bearing counterfeit or
spurious trademarks, and dismissed COPIAT's Lanham Act claim.  The
court next addressed COPIAT's claim that the Customs Service
regulation is inconsistent with Section 526 (Pet. App. 39a-48a).  The
court concluded that the regulation represents a "sufficiently
reasonable" interpretation of the statute, "supported by the
legislative history, judicial decisions, legislative acquiescence, and
the long-standing consistent policy of the Customs Service" (id. at
48a).  The court added that "(t)he regulations clearly implement the
limited purpose for which section 526 was enacted" (ibid.).

   The court of appeals affirmed the district court's jurisdictional
ruling (Pet. App. 4a-8a) but reversed the determination that the
Customs Service regulation is valid (id. at 8a-31a).  The court of
appeals stated that "Section 526 does not, on its face, admit of any
exceptions based upon the relationship of the American and foreign
trademark owners or upon whether the American owner has authorized the
use of the trademark abroad" (id. at 10a).  It concluded that
"Congress' intent in Section 526 is clear" (id. at 11a) and refused to
give deference to the Treasury Department's regulatory interpretation
(ibid.).  The court ruled, in the alternative, that the "regulations
are invalid because they do not constitute a reasonable interpretation
of Section 526" (ibid.).  The court found the Customs Service
regulation to be inconsistent with the purpose, legislative history,
and past interpretations of the statute (id. at 11a-28a).

   The court of appeals also rejected the district court's conclusion
that the history of the Customs Service regulation "reveals 'a pattern
of legislative acquiescence'" (Pet. App. 29a (quoting id. at 46a)) and
the Federal Circuit's prior decision that the Customs Service
regulations may be upheld "'as a reasonable exercise of
administratively initiated enforcement'" (id. at 31a (quoting Vivitar,
761 F.2d at 1571)).  The court of appeals nevertheless concluded that
"injunctive relief is inappropriate at this juncture of the
controversy" (Pet. App. 32a) and remanded the case to the district
court with instructions "to issue a declaratory judgment that the
Customs regulations in question, 19 C.F.R. Section 133.21(c)(1)-(3),
are contrary to Section 526 of the Tariff Act of 1930, 19 U.S.C.
Section 1526, and hence unlawful" (ibid.).  The court did not address
the Lanham Act claim (id. at 9a).

                          SUMMARY OF ARGUMENT

   The purpose of Section 526 of the 1930 Tariff Act was to protect
the legitimate expectations of American firms that had acquired
foreign marks for use in the United States.  Congress did not intend,
by enacting that section, to create a mechanism to help foreign or
multinational firms enforce exclusive U.S. distribution arrangements.
Accordingly, the Treasury Department has long interpreted Section 526
to permit the importation of genuine trademarked merchandise where the
owners of the foreign mark and the U.S. trademark owners are
substantially identical companies or are subject to common control.
The court of appeals erred in rejecting the Treasury Department's
longstanding and reasonable construction of a statute that it is
charged with administering.  See Chevron U.S.A. Inc. v. NRDC, Inc.,
467 U.S.C. 837, 842-845 (1984).  Any change in the government's policy
in this complex and sensitive area should emanate from the legislative
or executive branch rather than from the courts.

   A. As both the court of appeals and respondents acknowledge,
Congress enacted Section 526 in response to a particular case, A.
Bourjois & Co. v. Katzel, 275 F. 539 (2d Cir. 1921), rev'g 274 F. 856
(S.D.N.Y. 1920), rev'd, 260 U.S. 689 (1923), which overturned a
preliminary injunction protecting a U.S. trademark owner who had
purchased a foreign trademark from importation of goods bearing that
mark.  Congress acted for the purpose "of protecting the property
rights of American citizens who have purchased trade-marks from
foreigners" (62 Cong. Rec. 11603 (1922) (Sen. Sutherland)) and
exhibited no clear understanding or intention as to how, if at all,
Section 526 would apply outside of that particular situation.  There
is, however, concrete evidence in the legislative record that Congress
did not intend to create a mechanism to help foreign or multinational
firms enforce exclusive U.S. distribution arrangements.

   B. Congress expressly empowered the Treasury Department "to make
such rules and regulations as may be necessary to carry out the
provisions of  the 1930 Tariff Act " (19 U.S.C. 1624).  The Customs
Service regulation implementing Section 526 "is 'reasonably related to
the purposes of the enabling legislation' " and is therefore valid.
E.g., Mourning v. Family Publications Service, Inc., 411 U.S. 356, 369
(1973).  In order to protect "property rights of Americans," the
regulation generally prohibits unauthorized importation of trademarked
items.  When (as in Katzel) an independent American company purchases
U.S. trademark rights from a foreign manufacturer, the American
company will receive full protection against unauthorized importation
of goods bearing that mark.  In order not to furnish a mechanism to
assist foreign and multinational firms in enforcing exclusive U.S.
distribution arrangements, the regulation provides a limited exception
when the foreign and domestic trademark owners are the same or subject
to common control, or when the trademark was applied by authorization
of the U.S. trademark owner, so that in these situations the Customs
Service is not required to exclude genuine goods sold for lower prices
in overseas markets.

   C. The Treasury Department's interpretation is entitled to
particular deference in this instance.  First, the Treasury Department
has adhered to its basic interpretation of Section 526 for over 50
years.  Although the exact terms of the Treasury Department's
exception have varied somewhat, the exception has been part of the
regulations since 1936.  This longstanding and consistent
interpretation is entitled to considerable weight.  E.g., Zenith Radio
Corp. v. United States, 437 U.S. 443, 450 (1978).  Congress has been
informed repeatedly of the Customs Service regulation and has declined
to alter it.  Indeed, Congress took note of the Treasury Department's
interpretation in 1978, when it amended Section 526.  Second, the
domestic retailing industry has placed substantial and justified
reliance on the Treasury Department's interpretation.  Given this
substantial investment-backed reliance, the expert agency's
longstanding construction should not be disturbed except for the most
compelling reasons.  E.g., Udall v. Tallman, 380 U.S. 1, 18 (1965).

   Both Congress and the Executive Branch are currently reviewing the
government's policy toward parallel imports.  The Treasury
Department's adherence to its longstanding interpretation of Section
526 is particularly appropriate at this time in light of those
on-going studies of this complicated and controversial matter.

                               ARGUMENT

 THE CUSTOMS SERVICE REGULATION SETS FORTH A PERMISSIBLE
INTERPRETATION OF SECTION 526 OF THE 1930 TARIFF ACT

   The phenomenon of parallel importation raises important and
difficult issues of international trade policy and economic theory.
Both Congress and the Executive Branch are now reviewing those issues,
and (in part because commercial interests on both sides have much at
stake) the debate is a heated one.  The issue here, however, is not
whether the Treasury Department's interpretation of Section 526 of the
1930 Tariff Act is wise as a policy matter.  The sole question before
this Court is whether the Customs Service regulation, which permits
parallel importation in certain circumstances, is a permissible
interpretation of the statute.  This Court's decision in Chevron
U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837 (1984), lays out the general
framework for answering that question.

   Chevron states that the initial inquiry, always, is "whether
Congress has directly spoken to the precise question at issue" (467
U.S. at 842).  "If the intent of Congress is clear, that is the end of
the matter;  for the court, as well as the agency, must give effect to
the unambiguously expressed intent of Congress" (id. at 842-843
(footnote omitted)).  If, however, the court finds that Congress has
not addressed the precise question presented, the court must then
determine "whether the agency's answer is based on a permissible
construction of the statute" (id. at 843 (footnote omitted)).  The
touchstone for that determination is reasonableness (id. at 844, 845).
 An agency's interpretation of the meaning or reach of a statute is
entitled to special deference when, for example, the decision involves
reconciling conflicting policies or requires more than ordinary
knowledge of the matters subject to agency regulation (ibid.).

   When the language of Section 526 is read in light of its
legislative history, it is apparent that Congress did not have a clear
intent concerning the reach of Section 526.  The Customs Service
regulation reasonably interprets and implements Congress's apparent
purpose and is entitled to judicial deference.  Congress may, of
course, clarify or modify its purposes in light of current conditions
-- or in response to the lobbying efforts of the private petitioners
and respondents in this case.  And the Administration's on-going
policy review may provide a new understanding of the parallel
importation phenomenon today, which may prompt the Treasury Department
to revise the regulation.  But in the interim, the courts should defer
to the agency's responsible decision to retain its longstanding
regulations and preserve the status quo.

 A. Section 526 Was Enacted To Protect U.S. Trademark Owners That Had
Acquired Their Rights From Foreign Trademark Owners;  There Is No
Evidence That Congress Understood Or

               Intended It To Apply Where The Foreign And

               U.S. Trademark Owners Are The Same Or Related Companies

   Section 526 of the 1930 Tariff Act prohibits the importation of
foreign merchandise bearing a U.S. trademark "owned by a citizen of,
or by a corporation or association created or organized within, the
United States" unless written consent of the trademark owner is
produced at the time of making entry.  19 U.S.C. 1526.  When used
today in ordinary parlance, this language, standing alone, would
normally be taken to refer to a U.S. corporation without regard to any
relationship it may have to a foreign person or firm.  But the special
emphasis in this trade regulation law on protecting United States
citizens, associations, and corporations, is a sharp departure from
the language of trademark law /13/ and invites further inquiry into
whether Congress had in mind a more specific protection of Americans
and American firms.  That inquiry reveals that "Congress has not
addressed the precise question at issue" (Chevron, 467 U.S. at 843).

   This Court has recognized on a number of occasions that the
"circumstances of the enactment of particular legislation may persuade
a court that Congress did not intend words of common meaning to have
their literal effect." Watt v. Alaska, 451 U.S. 259, 266 (1981);  see,
e.g., FDIC v. Philadelphia Gear Corp., No. 84-1972 (May 27, 1986),
slip op. 5-6;  United States v. Riverside Bayview Homes, Inc., No.
84-701 (Dec. 4, 1985), slip op. 10.  "It is a 'familiar rule, that a
thing may be within the letter of the statute and yet not within the
statute, because not within its spirit, nor within the intention of
its makers.'" California Federal Savings & Loan Ass'n v. Guerra, No.
85-494 (Jan. 13, 1987), slip op. 10-11 (citation omitted).  /14/

   The Guerra decision is particularly instructive.  The issue there
was whether the Pregnancy Discrimination Act of 1978 (the PDA), which
provides that pregnant women "shall be treated the same (as other
persons) for all employment-related purposes" (42 U.S.C. 2000e(k)),
preempted a state law providing special leave and reinstatement rights
for pregnant employees.  The PDA's language, when read literally,
commands that there be neither more favorable nor less favorable
treatment for pregnant women.  However, when the Court examined that
language "against the background of its legislative history and
historical context" (Guerra, slip op. 10), it concluded (contrary to
our urging as to the legislative history /15/ ) that the statute was
passed for the limited purpose of overruling the Court's decision in
General Electric Co. v. Gilbert, 429 U.S. 125 (1976).  The Court
adopted a correspondingly limited interpretation of the broad
statutory language, holding that the PDA imposes a floor but not a
ceiling on the rights accorded to pregnant employees (Guerra, slip op.
11-12).

   Similar reasoning should control this case.  Here, as in Guerra,
Congress legislated in response to a particular judicial precedent.
Section 526 was a hastily drafted reaction to the Second Circuit's
decision in A. Bourjois & Co. v. Katzel, 275 F. 539 (1921), rev'g 274
F. 856 (S.D.N.Y. 1920), rev'd, 260 U.S. 689 (1923), which overturned a
preliminary injunction protecting a U.S. trademark owner who had
purchased a foreign trademark from importation of goods bearing that
mark.  /16/ The legislative history reveals that Section 526 was
intended to address the situation present in Katzel.  Congress wished
to protect the expectations of an independent American firm that
purchased domestic trademark rights;  it had no intention to create a
mechanism to help foreign or multinational firms enforce exclusive
U.S. distribution arrangements.  Here, as in Guerra, the broad
statutory language must be read in light of the limited objectives
Congress intended to achieve.  See also, e.g., Kelly v. Robinson, No.
85-1033 (Nov. 12, 1986), slip op. 6;  Offshore Logistics, Inc. v.
Tallentire, No. 85-202 (June 23, 1986), slip op. 13.

   1. The facts of Katzel are straightforward.  A. Bourjois & Co., an
American company, purchased from Wertheimer & Cie., a French
partnership, the French company's U.S. cosmetics business, including
the U.S. trademark and exclusive domestic right to sell "Poudre Java,"
an internationally recognized face powder (274 F. at 857-858).  Eight
years later, Bourjois brought a trademark infringement action against
another domestic party -- Katzel -- that had purchased Wertheimer's
product abroad and resold it in its French packing, marked "Poudre de
riz de Java" (ibid.).  The district court, responding to Bourjois'
request for a preliminary injunction excluding Katzel's imports,
stated (id. at 859):

      If an American business concern buys all of the rights, as in
      the case at bar, of a business established here by a foreign
      concern, and then the foreign concern is nevertheless at liberty
      to compete with the American concern, the result will be that
      the purchase of rights, under such circumstances, will give
      little or no protection;  and the foreign concern, as well as
      the domestic concern, will be seriously injured in the long run,
      because American capital certainly will not be invested, and
      foreign concerns will find it difficult to sell the rights which
      they have developed in this country.

   The court observed (id. at 860) that the record did not indicate
whether the foreign manufacturer knew of or consented to Katzel's
action.  It also stated that Section 27 of the Trademark Act of 1905
(the precursor of Section 42 of the Lanham Act), which directed the
Customs Service to exclude "imported merchandise which shall copy or
simulate the name of any domestic manufacture" (33 Stat. 730) did not
provide a remedy in these circumstances.  /17/ It nevertheless
enjoined Katzel's importation, fashioning an equitable remedy to deal
with this unusual situation (274 F. at 860).  /18/

   The Second Circuit reversed (275 F. at 539).  The court assumed
that "it would be a breach of the French firm's obligations (under the
assignment contract) to sell its face powder in this country" (id. at
540).  The court stated that the question, however, was whether Katzel
has "the right to sell this article under the trademarks which truly
indicate its origin" (ibid.).  It concluded that trademark law did not
prohibit that practice, reasoning that a trademark simply demonstrates
"the origin of the goods they mark" and that "(i)f the goods sold are
the genuine goods covered by the trademark, the rights of the owner of
the trade-mark are not infringed" (id. at 543).  The court, finding
that Bourjois could not state a claim of trademark infringement,
reversed the district court's preliminary injunction order.

   2. American trademark owners, many of whom had acquired foreign
trademarks from the Custodian of Alien Property during and after World
War I, sought an immediate legislative remedy, even though the Supreme
Court had agreed to review the Second Circuit's decision.  /19/ Their
efforts resulted in enactment of Section 526 of the 1922 Tariff Act.
The brief legislative record indicates that Congress enacted Section
526 for the narrow purpose "of protecting the property rights of
American citizens who have purchased trade-marks from foreigners" (62
Cong. Rec. 11603 (1922) (Sen. Sutherland)) and that Congress had no
understanding that its hastily drafted remedy would extend beyond that
situation.  When Congress reenacted Section 526 as part of the 1930
Tariff Acft, it also expressed an understanding that the provision had
a limited scope, suggesting that it protected only domestic firms from
infringement of their marks.  In both instances, Congress did not
consider or address the subtle, complex, and potentially far-reaching
problems that can arise when, as here, foreign trademark owners create
American subsidiaries for the purpose of marketing goods under U.S.
trademarks.

   a. The House Conference report on the 1922 Tariff Act provides a
short description of Section 526.  /20/ That report cites (by indirect
reference) the Katzel decision, and indicates that Section 526 would
provide the remedy that the court of appeals had denied "in order to
protect the American manufacturer or producer" (H.R. Conf. Rep. 1223,
67th Cong., 2d Sess. 158 (1922)).  The report notes that the provision
was amended in conference to limit that protection to trademarks owned
"by a citizen of the United States or by a corporation or association
created or organized within the United States" (ibid.).

   The legislative debate surrounding this enactment reveals that
Section 526 was proposed on the Senate floor as one of the "midnight
amendments" to the 1922 Tariff Act.  62 Cong. Rec. 11602 (1922).  /21/
Its original language provided in pertinent part (ibid.):

      it shall be unlawful to import into the United States any
      merchandise if such merchandise * * * bears a trade-mark
      registered in the Patent Office by a person domiciled in the
      United States * * * unless written consent of the owner of such
      trademark is produced at the time of making entry.

   The Senate allotted ten minutes for its debate (62 Cong. Rec.
11585-11586 (1922)).  During that brief period, the proponents
repeatedly assured their fellow senators that Section 526 was intended
to serve the limited purpose of protecting Americans who purchased
U.S. trademark rights from foreign trademark owners.

   Senator Moses raised an initial objection to Section 526 precisely
because the provision was intended only to reverse the result in
Katzel.  62 Cong. Rec. 11603 (1922).  /22/ Senator Sutherland, the
chief proponent, did not disagree with that characterization.
Instead, he defended that objective, stating (ibid. (emphasis added)):

         Mr. President, all that this paragraph does is to prevent
      fraud, and I believe that the Senate is in favor of protecting
      the property rights of American citizens who have purchased
      trade-marks from foreigners, and when these foreigners
      deliberately violate the property rights of those to whom they
      have sold these trade-marks by shipping over to this country
      goods under those identical trade-marks.

   Senator Sutherland repeatedly emphasized that Section 526 was
designed for the specific purpose of protecting American citizens who
purchased U.S. trademark rights to a product manufactured abroad.
/23/

   Senator McCumber, the other principal spokesman for Section 526,
concurred in Senator Sutherland's assessment.  He observed that "the
courts have held that we can not prevent any product being shipped
into the United States if it is in violation of a trade-mark where the
foreign maker has sold trade-mark and all, patent and everything, in
the United States." 62 Cong. Rec. 11604 (1922) (emphasis added).  Sen.
McCumber cited the specific case of "Bayer's" aspirin, stating (ibid.
(emphasis added)):

      Suppose not only the patent but the trade-mark * * * is sold to
      an American concern outright.  * * * Then the German firm,
      notwithstanding that they have sold all rights, including the
      trademark, begin to ship in Bayer's Aspirin with the same kind
      of a trade-mark * * *.  According to the decision that was read
      by the Senator from West Virginia (Mr. Sutherland) the American
      purchasers of these rights are entirely unprotected, and this is
      to give the opportunity to protect the American purchaser.  That
      is all there is to it, and there is no treaty against it.

   Senator McCumber later emphasized that Section 526 was intended to
protect the American purchaser by serving as a "prohibition against
the violation of his contract" (ibid.).  His comments, like those of
Senator Sutherland, convincingly demonstrate that Section 526 was
adopted for the limited purpose of protecting the legitimate
expectations of American citizens who purchase U.S. trademark rights.
/24/

   The legislative debate demonstrates, with equal persuasiveness,
that Congress did not directly consider the problem presented in this
case:  whether, if a foreign trademark owner has created a U.S.
subsidiary for the purpose of marketing its goods under a U.S.
trademark, the U.S. Customs Service must prevent parallel importation
of goods manufactured by the foreign firm.  The debate contains no
discussion of that possibility.  Senator Lenroot's inquiries
approached (but did not reach) the issue at the close of the debate.
He asked whether a foreign trademark owner who employed an American
agent to register his trademark would be entitled to the protection
offered by the legislation.  /25/ His question, and the answer he
received, demonstrate that Congress did not have a clear understanding
of how Section 526 would affect any situation other than that
presented in Katzel.  However, the colloquy did establish that
Congress had no intention of providing a mechanism to help foreign or
multinational corporations enforce exclusive U.S. distribution
arrangements.

   Senator Lenroot apparently feared that, under the literal language
of the floor proposal, a foreign trademark owner might obtain a U.S.
monopoly for the distribution of his product, enforced by the Customs
Service, by simply employing an American agent to register his
trademark in the United States.  He posed the following hypothetical
question (62 Cong. Rec. 11605 (1922)):

      We will assume that Pears' soap * * * is not registered in the
      United States.  It is sold in the general markets throughout the
      world, but the makers of Pears' soap desire a monopoly in the
      United States.  They have American agents who register a
      trademark of Pears' soap here in the United States.

         I want to inquire whether any American could purchase Pears'
      soap abroad and import it without the written consent of their
      agent here in the United States, and if not, why not?

   Senator McCumber plainly believed that Section 526 would not apply.
 He responded, "if there has been no transfer of trade-mark, that
presents an entirely different question" (ibid. (emphasis added)).  He
added, "The mere fact of a foreigner having a trade-mark and
registering that trade-mark in the United States, and selling the
goods in the United States through an agency, of course, would not be
affected by this provision" (ibid. (emphasis added)).  Senator Lenroot
reiterated his concern that, under the literal language of the
statute, "Pears' soap could not be bought in the markets of the world
and sold here without the written consent of the Pears Soap Co., or
their agent" if the company simply arranged for an American to
register its domestic trade-mark (ibid.).  Before Senator McCumber
could respond, time ran out on the debate (ibid.).  But the
House-Senate conference amended Section 526 to preclude the potential
problem that Senator Lenroot had perceived.  /26/

   Thus, when Section 526's language is read in light of its
proponents' explanations, it becomes apparent that Congress had no
concrete understanding or intention that it would bar importation
outside of the situation, as in Katzel, where an American entity
purchased U.S. trademark rights from the foreign trademark owner.
/27/ All that can be said with certainty is:  (1) Congress intended to
protect American firms that had acquired U.S. trademark rights from
foreign trademark owners;  and (2) at the same time, Congress was
concerned (as demonstrated by the Lenroot-McCumber exchange and the
resulting amendment of the proposed statutory language) that Section
526 not give foreign manufacturers a means to enforce exclusive U.S.
distribution arrangements.

   The context and character of the debate further support this
conclusion.  The 1922 Tariff Act was a massive undertaking that filled
over 100 pages of the Statutes at Large and resulted from a voluminous
legislative history.  Section 526 was a minor non-tariff provision of
that Act, was first considered on the Senate floor, was allotted a
mere ten minutes of debate, and was one of over 4,000 proposed
amendments considered by the House-Senate conferees.  See S. Conf.
Rep. 253, 67th Cong., 2d Sess. (1922);  H.R. Conf. Rep. 1223, supra.
Plainly, the breadth of Section 526's language was the product of
hasty drafting rather than a conscious intent to prevent importation
of U.S. trademarked goods in every instance.  /28/ Congress did not
(indeed, could not) give careful attention to every potential
ramification of that floor amendment.  Instead, it relied on the
representations of Section 526's sponsors, who maintained that Section
526 was designed to provide special protection to Americans who
purchased U.S. rights from foreign trademark owners.  /29/ And it left
the implementation of the provision to the Treasury Department,
empowering the agency to "make such rules and regulations as may be
necessary to carry out the provisions of this Act" (Section 623, 42
Stat. 988).  There is no reason whatever to conclude that Congress
intended that Section 526 would reach far beyond the specific
situation that prompted its proposal and passage.  Cf. American
Trucking Ass'ns v. United States, 344 U.S. 298, 307-308 (1953).

   b. When Congress enacted the 1930 Tariff Act, it revisited Section
526.  The House bill (H.R. 2667, 71st Cong., 1st Sess. (1929))
provided for reenactment of Section 526(a) without substantive change.
 H.R. Rep. 7, 71st Cong., 1st Sess. 234 (1929).  The Senate proposed,
however, to modify the provision by omitting the clause that permitted
a U.S. trademark owner to consent to the admission of foreign
manufactured goods bearing his trademark.  S. Rep. 37, 71st Cong., 1st
Sess. 75 (1929);  71 Cong. Rec. 3871 (1929).  /30/ The proposal would
have represented a dramatic shift in purpose;  it sought to prevent
American firms from relocating their manufacturing plants overseas.
See S. Rep. 37, supra, at 75.  Its principal proponent, Senator Reed,
explained, "We have been protecting the owner of the trade-mark.  Now,
we want to protect the American labor that goes to make these
articles" (71 Cong. Rec. 3873 1929)).  The Senate passed the Reed
proposal following extensive debate on the effects of foreign
relocation of American businesses.  See 71 Cong. Rec. 3871-3876,
3889-3906, 4497-4498 (1929).  The House-Senate conferees ultimately
rejected the proposal and Congress reenacted Section 526 without
substantive change.  See H.R. Conf. Rep. 1326, 71st Cong., 2d Sess.
112 (1930);  72 Cong. Rec. 7870 (1930).

   The 1929 floor debate says little about the perceived scope of
Section 526, and what it does say further confuses the picture.
Senator Reed expressed his belief that the provision was designed to
prevent actual trademark infringement, stating (71 Cong. Rec. 3873
(1929) (emphasis added)):

      At the present time the tariff laws forbid the importation of an
      article bearing a trade-mark registered in America unless the
      owner of that trade-mark consents in writing to the importation.
       Obviously the purpose of that provision is to protect the
      American owner of the trade-mark against importations of
      articles which have been stamped with his mark without his
      consent.  That is all right as a protection of the American
      owner of the trade-mark.

   Senator George opposed Senator Reed's proposal but agreed with
Reed's interpretation of the current law, stating (id. at 3872
(emphasis added)):

      The section, as it exists in the present law, provides means
      whereby a manufacturer in this country can register his
      trade-mark * * * and prevent the importation of merchandise
      bearing an infringing trade-mark.

   That interpretation differs from the view, repeatedly expressed in
the 1922 Senate debate, that Section 526 would protect the rights of
American citizens who, as in Katzel, purchased trademarks from foreign
entities.  But more importantly, even the interpretation offered in
1930 suggests that Section 526 was not intended to reach every case
that could fall within its literal language.  Here, as in the 1922
debate, Congress gave no indication that Section 526's protection
would be available when a foreign trademark owner created a domestic
subsidiary that would distribute trademarked items within the United
States.  And here, as in the 1922 Tariff Act, Congress empowered the
Treasury Department "to make such rules and regulations as may be
necessary to carry out the provisions of this Act." Section 624, 46
Stat. 759 (presently codified at 19 U.S.C. 1624).  /31/

   3. The legislative record offers no support for the court of
appeals' statement that "the statute embodies a purpose as sweeping as
the terms its drafters employed" (Pet. App. 12a).  And the court is
simply incorrect in asserting (id. at 14a-15a) that in Section 526
Congress "rejected without qualification the legal theory underlying
the Second Circuit's opinion in Katzel -- the view that a trademark
genuine in a foreign country is necessarily genuine here as well --
and enshrined the alternative 'territoriality' approach into law":
Section 526 is an importation statute that does not deal with the
nature or reach of trademarks at all.

   The court rests its conclusion that Section 526 expresses a
"territoriality" approach to trademark law primarily on its reading of
the House Conference report, which characterizes Section 526 as
reversing Katzel's denial of an import exclusion (H.R. Conf. Rep.
1223, supra, at 158).  See Pet. App. 15a.  The court states that the
"report's reference to Katzel mistakenly identifies it as an import
exclusion case rather than an infringement case;  more important,
however, is the report's reflection of Congress' sweeping rejection of
prevailing legal doctrine" (ibid.).  We submit, however, that the
Conference report was correct and the court below was mistaken.
Bourjois did sue Katzel on a trademark infringement theory, but the
Second Circuit's Katzel decision reviewed the district court's grant
of a preliminary injunction excluding Katzel's imports.  The Second
Circuit reversed the district court's order on the ground that
existing law gave the trademark owner no right to exclude genuine
goods;  Congress, in response, gave the Customs Service and private
parties (through a private injunctive remedy) the express right to
exclude such goods.  See 19 U.S.C. 1526(a)-(c).  Congress showed no
interest in redefining the character or concept of a trademark;
instead, it sought to provide a particular form of protection for
persons in Bourjois' situation, who had purchased a trademark from its
foreign owner.  /32/

   The 1922 legislative debate bears out this interpretation.  No
senator suggested that Section 526 would clarify or alter the
character of the property right represented by a trademark.  Instead,
the sponsors repeatedly emphasized that the provision would provide
protection for rights already in existence.  /33/ The court below
mistakenly perceives some support for its interpretation in the
Lenroot-McCumber colloquy, stating that "the appropriate inference to
be drawn is that Senator Lenroot was correct in fearing that the
statute meant exactly what it said" (Pet. App. 19a).  Senator
McCumber's response and the conferees' subsequent amendment
demonstrate, however, that the proposed language was broader than the
sponsors' understanding of the provision.  And the court's reliance on
speculation and strained inference underscores the absence of a clear
legislative intent.  Indeed, the court generally concedes (id. at
16a-17a, 19a) that the statements of Section 526's sponsors do not
support its interpretation.  /34/

   The court's reading of the legislative history of the 1930
reenactment is also unpersuasive.  The court states that Senator
Reed's "failed amendment further demonstrates Congress's understanding
that Section 526 absolutely barred importation of goods bearing an
American company's trademark without the company's consent" because,
if the Treasury Department's interpretation is correct, the failed
amendment "would have been wholly ineffectual and purposeless" (Pet.
App. 20a (footnote omitted)).  This logic is flawed for at least three
reasons.  First, Senator Reed's proposal was not simply an amendment
of Section 526;  it was an enactment of new legislation, under the
same section number, for a completely different purpose.  One cannot
presume that language taken from a repealed statute must necessarily
convey the same meaning in subsequent legislation, particularly when
the ultimate object of the new enactment is dramatically different.
/35/ Second, if Senator Reed's proposal became law, his purpose would
have been fully effectuated because the Treasury Department would have
considered the legislative history and applied the statute in
accordance with the legislature's intent.  Senator Reed's purpose
would have been thwarted only if (as in the present case, see note 34,
supra) a court applied the statute without regard to the proponents'
professed purposes.  Finally, Senator Reed himself expressed a narrow
reading of the existing law, stating that its purpose was to protect
the American trade-mark owner "against importations of articles which
have been stamped with his mark without his consent" (71 Cong. Rec.
3873 (1929)).  /36/

   In sum, we submit that it is not clear that Congress had any
understanding or intention as to the "precise question at issue"
(Chevron, 467 U.S. at 843), the exclusion of trademarked goods where
the owner of the U.S. trademark is not, as in Katzel, a U.S. purchaser
but an affiliate of the foreign trademark owner.  Chevron dictates
that, under these circumstances, "the question for the court is
whether the agency's answer is based on a permissible construction of
the statute" (id. at 843 (footnote omitted)).  As we show in the
following section, the Treasury Department's construction of Section
526 is plainly reasonable.

 B. The Customs Service Regulation Is A Reasonable Interpretation of
Section 526

   The 1930 Tariff Act gives the Treasury Department power to ensure
that Section 526 is applied in a manner faithful to congressional
intent:  "the Secretary of the Treasury is authorized to make such
rules and regulations as may be necessary to carry out the provisions
of this chapter." 19 U.S.C. 1624.  /37/ This Court has stated that
similar broad grants of authority demonstrate that Congress intended
to vest "considerable discretion" in the agency.  SEC v. Jerry T.
O'Brien, Inc., 467 U.S. 735, 745 (1984).  The Court, in turn, has
developed a "well established" standard for judging the agency's
action, Mourning v. Family Publications Service, Inc., 411 U.S. 356,
369 (1973), stating (ibid. (footnote omitted)):

      Where the empowering provision of a statute states simply that
      the agency may "make . . . such rules and regulations as may be
      necessary to carry out the provisions of this Act," we have held
      that the validity of a regulation promulgated thereunder will be
      sustained so long as it is "reasonably related to the purposes
      of the enabling legislation." Thorpe v. Housing Authority of the
      City of Durham, 393 U.S. 268, 280-281 (1969).

   See, e.g., FCC v. Schreiber, 381 U.S. 279, 292 (1965);  American
Trucking Ass'ns, 344 U.S. at 308-312;  Norwegian Nitrogen Co. v.
United States, 288 U.S. 294, 321-322 (1933).

   In the present case, the Treasury Department cannot fulfill its
statutory responsibility by approaching Section 526 on a "purely
linguistic level" (Riverside Bayview Homes, slip op. 10).  /38/ Here,
as in Riverside, such a "simplistic response" does justice neither to
the problems faced by the agency in defining the scope of its
regulatory mandate, nor to the realities of its enforcement
responsibilities (ibid.).  The Treasury Department must necessarily
"look to the legislative history and underlying policies of its
statutory grants of authority" (ibid.).  The resulting Customs Service
regulation represents a conscientious and reasonable attempt to
fulfill the apparent intent of Congress.  There can, we think, be no
serious dispute that the regulation is "reasonably related to the
purposes of the enabling legislation."

   As we have observed, the legislative history of Section 526 does
not explain the statute's scope and purposes in a clear, or even
consistent manner, but the legislative debates do confirm two points:
first, Congress wished to protect American citizens who purchase
foreign trademarks for domestic use (see pages 18-20, supra);  and
second, Congress had no understanding that it was providing a
mechanism to help foreign or multinational firms enforce exclusive
U.S. distribution arrangements (see pages 20-23 and note 26, supra).
The Customs Service regulation, set forth at 19 C.F.R. 133.21,
provides the protection Congress sought to provide while excluding
cases that, as best the agency could determine, Congress had no wish
to reach.

   The Customs Service regulation provides full protection for an
American company that, like the plaintiff in Katzel, purchases a
trademark from its foreign owner for domestic use.  If an unrelated
American company acquires the trademark from the foreign trademark
owner (and complies with Section 526's registration and filing
requirements), the Customs Service will exclude articles "bearing a
trademark identical with" the acquired mark (see 19 C.F.R. 133.21).
Thus, the regulation serves the basic objective that Congress
expressed throughout the debate.  /39/

   The Customs Service regulation provides, however that Section 526
is inapplicable when the "foreign and the U.S. trademark * * * are
owned by the same person or business entity" or when the "foreign and
domestic trademark * * * owners are parent and subsidiary companies or
are otherwise subject to common ownership or control." 19 C.F.R.
133.21(c)(1)-(2).  /40/ That exception is, first of all, consistent
with Congress's dominant objective.  The cases governed by the
exception (which we describe collectively as "common control"
situations, see page 4, supra) are plainly distinguishable from the
cases with which Congress was explicitly concerned -- situations where
an independent American company purchases U.S. trademark rights from
the foreign owner of the mark.

   For example, it makes little sense to speak of a foreign trademark
owner "deliberately violat(ing) the property rights" (62 Cong. Rec.
11603 (1922) (Sen. Sutherland)) of its domestic subsidiary.  More
generally, protecting the legitimate expectations of a U.S. purchaser
of a trademark against the foreign trademark owner (and other firms
that are distributing goods manufactured by the foreign trademark
owner) is altogether different from protecting a corporate group that
includes the foreign trademark owner against parallel importation of
the group's goods.  /41/

   Conversely, if Section 526 were applied in common control
situations, the statute would create a legal vehicle by which a
foreign or multinational trademark owner could enforce an exclusive
distributorship conferred on the U.S. branch or member of the
corporate group.  The Lenroot-McCumber colloquy and the subsequent
conference revision of Section 526 (see pages 21-22, supra) suggest
that Congress certainly had no intention to provide such a vehicle and
would have wanted to prevent such practices.

   The Customs Service regulation also states that Section 526 is
inapplicable when the imported item bears a trademark "applied under
the authorization of the U.S. owner" (19 C.F.R. 133.21(c)(3)).  That
provision serves to distinguish another "common control" situation
that is quite different from the Katzel problem.  When the U.S.
trademark owner authorizes the use of his mark overseas, he may be
able, by contractual arrangements, to prevent goods manufactured by
the foreign licensee from entering the U.S. and competing with his
own.  But to the extent that he cannot, there is no evidence that
Congress intended that Section 526 would protect him from foreign
competition resulting from his own licensing.  Once again, the Customs
Service regulation represents a reasonable attempt to effectuate the
dominant congressional goals.

   In short, the Customs Service regulation is fully consistent with
Congress's apparent intent.  It identifies and advances the primary
congressional purposes that motivated the formulation and passage of
Section 526.  The regulation can properly be characterized as
"necessary to carry out the provisions of this chapter" (19 U.S.C.
1624).  It is, beyond question, "'reasonably related to the purposes
of the enabling legislation.'" Mourning, 411 U.S. at 369 (quoting
Thorpe v. Housing Authority of the City of Durham, 393 U.S. 268,
280-281 (1969)).  /42/

 C. The Treasury Department's Interpretation Is Entitled To Particular
Deference In This Instance

   This Court has "long recognized that considerable weight should be
accorded to an executive department's construction of a statutory
scheme that it is entrusted to administer" (Chevron, 467 U.S. at 844).
 /43/ There is special cause for deference in this instance.  First,
the Treasury Department has adhered to its basic interpretation of
Section 526 since 1936, more than 50 years.  Congress, during that
period, has repeatedly been informed of the agency's interpretation
and has declined to alter the statute.  And second, domestic retailers
have placed substantial reliance on the agency's interpretation.  As
the Second Circuit stated, the decision whether to revise this
established regulatory policy "is a matter for the legislative or
executive branch and not for the judiciary." Olympus Corp. v. United
States, 792 F.2d 315, 321 (1986);  accord Lever Bros. Co. v. United
States, Civ. No. 86-3151 (D.D.C. Jan. 21, 1987), slip op. 7.

   1. This Court generally "accord(s) great weight to the longstanding
interpretation placed on a statute by an agency charged with its
administration." NLRB v. Bell Aerospace, 416 U.S. 267, 275 (1974).
See, e.g., FDIC v. Philadelphia Gear Corp., slip op. 11-13.  As the
district court recognized (Pet. App. 48a), this is certainly such a
case.  The Treasury Department first explicitly adopted its
interpretation more than 50 years ago.  This interpretation, retained
through nine presidential administrations, has occasionally sparked
controversy and has shown some expansion and contraction over that
past half-century.  Nevertheless, the basic concept has been
steadfastly followed.  "This longstanding and consistent
interpretation is entitled to considerable weight." Zenith Radio Corp.
v. United States, 437 U.S. 443, 450 (1978).

   The Treasury Department explicitly adopted a "same company"
exception in 1936, invoking its authority under Sections 526 and 624
of the 1930 Tariff Act and Section 27 of the Trademark Act of 1905.
T.D. 48537, 70 Treas. Dec. 336-337 (J.A. 27-30).  /44/ Under this
exception, Section 526's protection was denied if there existed a
substantial identity between the foreign and domestic trademark
owners.  That interpretation was retained when the Treasury Department
reissued the regulation in 1937 (J.A. 31-38), in 1943 (J.A. 39-44),
and 1947 (J.A. 45-51).  /45/ The Treasury Department maintained that
interpretation, without change, for 17 years.  /46/

   In 1953, the Treasury Department modified its regulation in
response to the passage of the Lanham Act, which superseded the
Trademark Act of 1905.  See T.D. 53399 (J.A. 55-59).  Treasury
retained the "same company" exception, but it also added a "related
company" exception (borrowing a definition from Section 45 of the
Lanham Act, 15 U.S.C. 1127), that would apply when a foreign trademark
owner "legitimately controls, or is controlled by," the domestic
trademark owner "in respect to the nature and quality of the goods * *
* in connection with which the mark is used" (J.A. 56).  /47/ Treasury
retained that exception until 1959 (see T.D. 54932 (J.A. 60-61)), when
it sought legislation that would expressly deny protection to a
broader class of "affiliated companies" as well.  /48/ Congress failed
to act on that legislation.  Meanwhile, Customs continued, under its
"same company" exception, to deny Section 526's protection to wholly
owned subsidiaries and companies subject to common corporate control.
/49/ In 1972, following notice and public comment (35 Fed. Reg. 19269
(1970)), /50/ the Treasury Department issued the present Customs
Service regulation, which clarifies and continues the practices
established over 50 years ago.

   Thus, while there has been some change in the definition of the
exception, the Treasury Department's regulations have at all times
during the past one-half century denied the protection of Section 526
where the foreign and domestic trademark owners are the same or
closely related firms.  For 17 years, the Treasury Department
permitted importation of trademarked goods when the foreign and
domestic trademark owners were the "same person," a phrase understood
to include parent and subsidiary.  In the following five-year period,
the regulation contained the somewhat broader term "related company."
For the last 27 years, the Treasury Department has followed an
interpretation that permits importation in common ownership or control
situations.

   Congress has revisited Section 526 on numerous occasions over the
past fifty years and has never stated any disagreement with the
Treasury Department's regulations.  /51/ Congress acknowledged the
present Customs Service regulation, with apparent approval, when it
passed the Customs Procedural Reform and Simplification Act of 1978
(CPRSA), Pub. L. No. 95-410, 92 Stat. 888 et seq., and the Trademark
Counterfeiting Act of 1984 (TCA), Pub. L. No. 98-473, Ch. XV, 98 Stat.
2178 et seq.  Under these circumstances, the Treasury Department's
interpretation is entitled to special deference.  See, e.g., CFTC v.
Schor, No. 85-621 (July 7, 1986).  /52/

   The CPRSA amended Section 526 to create the so-called "tourist"
exception to the section's import prohibitions.  The courts had long
construed Section 526 to exclude foreign manufactured goods bearing a
U.S. trademark regardless of whether the importer was a commercial
enterprise or an American tourist returning from abroad.  See Sturges,
48 F.2d at 1037.  The CPRSA permitted American tourists to return from
abroad with limited quantities of trademarked merchandise for their
personal use.  See 19 U.S.C. 1526(d).  The House report describing
that amendment specifically alluded to the Customs Service regulation,
stating:

      This section has been consistently interpreted by the United
      States Customs Service for the past 20 years as excluding from
      protection foreign-produced merchandise bearing a genuine
      trademark created, owned, and registered by a citizen of the
      United States if the foreign producer has been authorized by the
      American trademark owners to produce and sell abroad goods
      bearing the recorded trademark.

   H.R. Rep. 95-621, 95th Cong., 1st Sess. 27 (1977).  Congress again
took note of the Treasury Department's interpretation when it enacted
the TCA.  That statute established criminal sanctions and other
remedies "to help combat the mushrooming traffic in counterfeit goods
and services." S. Rep. 98-526, 98th Cong., 2d Sess. 2 (1982).
However, the Senate Committee on the Judiciary was careful to
emphasize that the legislation "does not include within its coverage
so-called 'gray market' goods" (id. at 3).  The Committee stated
(ibid.):

      The importation of such goods is legal under certain
      circumstances.  For example, the Treasury Department has long
      interpreted section 526 of the Tariff Act of 1930 * * * to
      permit the importation of such goods when the foreign and
      domestic users of the trademark are affiliated through common
      ownership and control.  See 19 C.F.R. 133.21(c).

   2. It is not surprising, given the Treasury Department's
longstanding interpretation of Section 526, an interpretation
specifically noted by the Congress, that a large segment of the
domestic retailing industry has placed substantial investment-backed
reliance on the Customs Service regulation.  The existence of such
reliance interests provides another reason why the Treasury
Department's interpretation is entitled to particular deference.  See
Zenith Radio Corp. v. United States, 437 U.S. at 457.

   The Customs Service regulation was issued in its present form
(after notice and comment) in 1972 and has remained unchanged for 15
years.  During that period, many domestic retailers, such as K mart
Corporation and 47th Street Photo, have built substantial businesses
and associated consumer goodwill based on the availability of parallel
imports.  The actual volume of parallel imports may be open to debate,
but there can be no doubt that many domestic retailers (and their
customers) now rely on parallel imports as their preferred source for
foreign-made merchandise.

   If this Court were to invalidate the Customs Service regulation,
that segment of the domestic retailing industry would be seriously
injured.  Many such retailers, including small enterprises that have
made substantial investments in justifiable reliance on the
regulation, could conceivably be forced out of business.  "In light of
these substantial reliance interests, the longstanding administrative
construction of the statute should 'not be disturbed except for cogent
reasons.'" Zenith Radio Corp., 437 U.S. at 457-458 (quoting McLoren v.
Fleischer, 256 U.S. 477, 481 (1921));  accord Udall v. Tallman, 380
U.S. 1, 18 (1965).

   It is particularly appropriate for the Court not to disturb
legitimate commercial expectations in this instance.  Numerous lower
courts have upheld the Customs Service regulation.  /53/ And both
Congress and the Administration are reviewing the government's present
policy in this area and are attempting to learn more about the
parallel importation phenomenon.  /54/ Thus, COPIAT's members could
ultimately receive the protection they demand as a result of a
congressional or administrative policy judgment.  But if this Court
invalidates the Customs Service regulation, and Congress later
concludes that the regulation states the appropriate policy, it may be
impossible for Congress to restore the status quo ante.  See 132 Cong.
Rec. S8742 (daily ed. June 26, 1986) (Sen. Chafee).

   In sum, the Treasury Department has acted well within its powers
under 19 U.S.C. 1624 in issuing the Customs Service regulation.  That
longstanding regulation reasonably interprets and implements
Congress's purposes in enacting Section 526 of the 1930 Tariff Act.
This Court should give particular deference to the Treasury
Department's expert judgment in this complex and sensitive area.

                              CONCLUSION

   The judgment of the court of appeals should be reversed.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   RICHARD K. WILLARD

      Assistant Attorney General

   LOUIS R. COHEN

      Deputy Solicitor General

   JAMES M. SPEARS

      Deputy Assistant Attorney General

   JEFFREY P. MINEAR

      Assistant to the Solicitor General

   DAVID M. COHEN

   VELTA A. MELNBRENCIS

   ROBERT V. ZENER

   ROBERT K. RASMUSSEN

      Attorneys

   ROBERT M. KIMMITT

      General Counsel

   LESLIE A. HULSE

   MICHAEL LEVITIN

      Attorneys Department of the Treasury

   MICHAEL SCHMITZ

      Chief Counsel

   ALFONSO ROBLES

      Attorney United States Customs Service

   FEBRUARY 1987

   /*/ COPIAT is a non-profit organization composed of the following
members:  AC & R Advertising, Inc., Alfin Fragrances, Inc., American
Cyanamid Company/Jacqueline Cochran, American Watch Association,
Auto-Time, Avon Products, Inc., Baccarat, Inc., Bercut-Vandervoort &
Co., Brielle Galleries, Brown & Company, Inc., Calvin Klein Cosmetics
Corp., Canon U.S.A., Inc., Carl Zeiss, Inc., Cartier, Inc., Charles of
the Ritz Group, Ltd., Citizen Watch Company of America, Inc., Colonia,
Inc., Computer Retail Trade Association, Cosmair, Inc., Dennis Time
Company, Dial Corporation/Greyhound Corp., Diodon, Inc., Distilled
Spirits Council of the U.S., Inc., Duracell, Inc., Electronic
Industries Association/Consumer Electronics Group, E. Leitz, Inc.,
Estee Lauder, Inc., Giorgio, Inc., Perfume Division, G-K-G, Inc.,
G.M.I. Photographic, Inc., Halston Fragrances, Inc., Joseph E. Seagram
& Sons, Inc., Maier & Berkele, Mimco, Minolta Corporation, National
Association of Beverage Importers, Inc., Nikon, Inc., North American
Watch Corporation, NETCO, Omichron Corporation, P. Robertet, Inc.,
Paco Rabanne Parfums, Parfums Givenchy, Inc., Parfums Stern, Inc.,
Parfums Worth Corp., Pentax Corporation, PFW, Division of Hercules,
Inc., Photographic Manufacturers and Distributors Association, Inc.,
Photographic Trade News, Polaris Optics, Procter & Gamble Company,
Revlon, Inc., Richardson-Vicks, Inc., Schneider Corporation of
America, Seiko Time Corporation/Hattori Corporation of America, Sinar
Bron, Inc., Sony Corporation of America, Stanhill Enterprises, Inc.,
Texchron, Inc., Tokina Optical Corporation, Victor Hasselblad, Inc.,
Warner Cosmetics Incorporated, Weil Ceramics & Glass, Inc., and The
Wilkes Group, Inc.

   /1/ "Pet. App." refers to the appendix to the government's petition
for a writ of certiorari (No. 86-625).

   /2/ This Court also granted the petitions in No. 86-495 (filed
September 26, 1986) and No. 86-624 (filed October 16, 1986), arising
from the same judgment, and set the three cases for consolidated
review.  The petitioner in No. 86-624 challenges the lower courts'
jurisdiction.  We will address the question in our response to that
petitioner's brief.

   /3/ See W. Kelly, Studies in United States Commercial Policy 3-68
(1963).

   /4/ Empirical information on the nature and extent of the so-called
"gray market" is quite limited.  Some reports have suggested that
parallel imports have accounted for as much as $7 billion in domestic
sales annually.  See The $7 Billion Gray Market:  Where it Stops,
Nobody Knows, Business Week, Apr. 15, 1985, at 86-87.  We cannot
attest to the accuracy of that figure.

   /5/ Section 526(d), added in 1978, permits Americans returning from
abroad to bring back limited quantities of foreign merchandise bearing
U.S. trademarks.  See 19 U.S.C. 1526(d).

   /6/ The Customs Service regulation is set out at pages 3a-4a,
infra.  We discuss the history of the Customs Service regulation at
pages 37-40, infra.

   /7/ Similarly, some American firms that own U.S. trademarks
authorize foreign manufacturers to produce goods overseas bearing
their marks.  Those firms also encounter competition from parallel
importation.

   /8/ Comments of the Bureaus of Competition, Consumer Protection and
Economics of the Federal Trade Commission on Gray Market Policy
Options Facing the United States Customs Service 2 (Oct. 17, 1986)
(cited hereinafter as FTC Comments).

   /9/ See Eisler, Gray-Market Mayhem:  It's Makers vs. Importers in
Lobbying Onslaught, IX Legal Times, Nov. 17, 1986, at 1, Col 1;
Riley, 'Gray Market' Fight Isn't Black and White, The National Law
Journal, Oct. 28, 1985, at 1, Col. 3.

   /10/ See 51 Fed. Reg. 30024 (1986);  id. at 22005;  50 Fed. Reg.
1655 (1985);  49 Fed. Reg. 29509 (1984);  id. at 21453.

   /11/ See, e.g., Olympus Corp. v. United States, 792 F.2d 315 (2d
Cir. 1986), aff'g 627 F. Supp. 911 (E.D.N.Y. 1985), petition for cert.
pending, No. 86-757;  Vivitar Corp. v. United States, 761 F.2d 1552
(Fed. Cir. 1985), aff'g 593 F. Supp. 420 (Ct. Int'l Trade 1984), cert.
denied, No. 85-411 (Jan. 13, 1986);  Lever Bros. Co. v. United States,
Civ. No. 86-3151 (D.D.C. Jan. 21, 1987).

   /12/ Two members of COPIAT -- Cartier, Inc. and Charles of the Ritz
Group, Ltd. -- were also named as plaintiffs.  We shall refer to the
three plaintiffs collectively as COPIAT.

   /13/ Trademark law permits domestic and foreign trademark owners to
register trademarks in the United States in the same manner and gives
them the same protection (assuming that the mark meets the various
requirements for protection) against infringement;  the only special
rule for foreign owners is that they must designate agents for
service.  See 15 U.S.C. 1051.

   /14/ E.g., Church of the Holy Trinity v. United States, 143 U.S.
457, 459 (1892);  see Train v. Colorado Public Interest Research
Group, Inc., 426 U.S. 1, 10 (1976);  United States v. American
Trucking Ass'ns, 310 U.S. 534, 543-544 (1940).  See also, e.g.,
Chevron, 467 U.S. at 861 ("We are not persuaded that parsing of
general terms in the text of the statute will reveal an actual intent
of Congress." (footnote omitted)).  When expounding a statute, both
the courts and administrative agencies "must not be guided by a single
sentence or member of a sentence, but look to the provisions of the
whole law, and to its object and policy." Kelly v. Robinson, No.
85-1033 (Nov. 12, 1986), slip op. 6;  Offshore Logistics, Inc. v.
Tallentire, No. 85-202 (June 23, 1986), slip op. 13;  Mastro Plastics
Corp. v. NLRB, 350 U.S. 270, 285 (1956);  United States v. Heirs of
Boisdore, 49 U.S. (8 How.) 113, 122 (1850)).  "Of course it is true
that the words used, even in their literal sense, are the primary, and
ordinarily the most reliable, source of interpreting the meaning of
any writing:  be it a statute, a contract, or anything else.  But it
is one of the surest indexes of a mature and developed jurisprudence
not to make a fortress out of the dictionary;  but to remember that
statutes always have some purpose or object to accomplish, whose
sympathetic and imaginative discovery is the surest guide
totheirmeaning." Cabell v. Markham, 148 F.2d 737, 739 (2d Cir.) (L.
Hand, J.), aff'd, 326 U.S. 404 (1945).  See Boston Sand Co. v. United
States, 278 U.S. 41, 48 (1928) (Holmes,J.).

   /15/ See U.S. Amicus Br. 13-15.

   /16/ The court of appeals and COPIAT agree, respectively, that the
Second Circuit's decision was the "major stimulus" (Pet. App. 12a) and
"genesis" (Br. in Opp. 10) of the provision.  See also Coty, Inc. v.
Le Blume Import Co., 292 F. 264, 268-269 (S.D.N.Y. 1923) (L. Hand,
J.);  Sturges v. Clark D. Pease, Inc., 48 F.2d 1035, 1037 (2d Cir.
1931) (A. Hand, J.).

   /17/ The district court apparently concluded that a mark properly
applied abroad does not "copy or simulate" a U.S. mark, stating, "if
an article is genuine, in the sense of defendant's box, it may be
imported into this country, and cannot be stopped at the door of the
custom house" (274 F. at 860).  The court did recognize a distinction
between trademark infringement and the protections offered by Section
27, stating "whether or not the article may be marketed here under a
particular trade-mark is a question to be determined in ascertaining
the rights of parties, quite irrespective of section 27" (274 F. at
860).

   /18/ The court justified its result on the ground that "the
original owner of the business and its trade-marks had completely
parted therewith to a vendee, who had proceeded upon the strength of
his ownership to develop an American market" (274 F. at 860).  As we
explain at note 19, infra, this Court would later rely on that fact to
conclude that Katzel infringed Bourjois' trademark.

   /19/ Bourjois had requested the court of appeals to certify the
case for this Court's review, citing "its supreme importance in view
of the many businesses * * * bought during the European War by
citizens of this country from the Custodian of Alien Property" (275 F.
at 544).  The court denied that request.  Bourjois then filed a
petition for a writ of certiorari, which was granted on November 7,
1921.  257 U.S. at 630.  This Court ultimately reversed the court of
appeals' Katzel decision.  See A. Bourjois & Co. v. Katzel, 260 U.S.
689 (1923).  The Court concluded that Katzel had infringed Bourjois'
U.S. trademark, reasoning that the mark Bourjois had purchased
"indicates in law, and, it is found, by public understanding, that the
goods come from the plaintiff although not made by it." (id. at 692).
The Court did not mention the statutory remedy at issue here.

   /20/ That report states (H.R. Conf. Rep. 1223, 67th Cong., 2d Sess.
158 (1922)):

      A recent decision of the circuit court of appeals holds that
      existing law does not prevent the importation of merchandise
      bearing the same trademark as merchandise of the United States,
      if the imported merchandise is genuine and if there is no fraud
      upon the public.  The Senate amendment makes such importation
      unlawful without the consent of the owner of the American
      trade-mark, in order to protect the American manufacturer or
      producer;  and the House recedes with an amendment requiring
      that the trade-mark be owned, at the time of the importation, by
      a citizen of the United States or by a corporation or
      association created or organized within the United States.

   The Senate Conference report gives no explanation of Section 526.
See S. Conf. Rep. 253, 67th Cong., 2d Sess. 51 (1922).

   /21/ "It was written by a lawyer well known in the precincts of the
Capitol;  it was inserted in the bill originally, without hearing,
upon the votes of four Senators, it was removed from the bill by a
disagreeing vote * * * (and) was put back in the bill among the myriad
of amendments brought in by the committee the other morning after
their midnight session * * *." 62 Cong. Rec. 11602 (1922) (Sen.
Moses).  It was not reviewed by the Committee on Foreign Relations or
the Committee on Patents (ibid.).

   /22/ He observed that "the whole subject matter involved in this
amendment is now before the courts of the United States for
determination.  A case involving its entire principle has been heard
in the circuit court of appeals and is now on its way to the Supreme
Court of the United States for final determination." 62 Cong. Rec.
11603 (1922).

   /23/ See 62 Cong. Rec. 11603 (1922) (describing the bill as a
"prohibition against the shipping over to this country of merchandise
under specific trade-marks which have been bartered away to citizens
of the United States");  ibid. (stating that the bill "only protects a
property right which has been sold");  see also ibid. (Sen. Kellogg)
(describing the bill as a "prohibition against the shipping over to
this country of merchandise under specific trademarks which have been
bartered away to citizens of the United States").  Senator
Sutherland's statements reveal a belief that foreign manufacturers
were responsible for the importation of U.S. trademarked goods.  See
also id. at 11605 (statement of Sen. McCumber).  However, as
previously noted (page 15, supra), the district court in Katzel found
no evidence in the record that the foreign manufacturer directly
participated in the objectionable practices.

   /24/ See also 62 Cong. Rec. 11604 (1922) (statement of Sen.
Simmons) ("if the Bayer Co. puts the trade-mark which now belongs to
American citizens upon those goods the goods are to be excluded,
because it is an invasion of the rights of American citizens");
(ibid.) (statement of Sen. Pomerene) ("this is simply an exercise of
good faith on the part of Congress toward the people who have acquired
the rights to this trade-mark under laws heretofore enacted by the
Congress of the United States").  Indeed, the proponents promptly
revised the provision in response to suggestions that it might be
employed in circumstances other than the case, as in Katzel, where an
American citizen purchased a trade-mark from its foreign owner.  For
example, Senator Lenroot observed that, under the proposed language,
if "an American citizen goes to the city of Toronto and purchases some
goods of American manufacture, bearing an American trade-mark" he
could not return those goods to the United States.  62 Cong. Rec.
11603 (1922).  The proponents promptly amended the proposed language,
expressly limiting its reach to goods of "foreign manufacture" (id. at
11604).  See also note 26, infra.

   /25/ The floor proposal, it should be remembered, required
exclusion of imported merchandise "if such merchandise * * * bears a
trade-mark registered in the Patent Office by a person domiciled in
the United States" (62 Cong. Rec. 11602 (1922)).  Section 526, in its
present form, requires American ownership of the trademark as well.

   /26/ As we have previously observed (page 17 & note 25, supra), the
Senate and House conferees revisedSection 526's language to provide
that the import exclusion would apply only if the trademark was both
owned and registered by an American citizen or entity.  That revision
confirmed Senator McCumber's understanding of the legislation.  But it
also set the stage for the present dispute -- whether a foreign
trademark owner could accomplish the same result that Senator Lenroot
feared by incorporating a domestic subsidiary that (like the domestic
agent in Senator Lenroot's example) could invoke the exclusion for the
foreign manufacturer's benefit.  As we discuss later (pages 31-36,
infra) the Treasury Department has reasonably concluded that Congress
would have wished to prevent that result.

   /27/ Section 27 of the 1905 Trademark Act (see page 15, supra)
already broadly prohibited importation of any merchandise "which shall
copy or simulate a trade-mark registered" in the United States.
Section 526 prohibited importation of merchandise that "bears a
trademark owned by a citizen of * * * the United States";  it thus
extended the existing protection (but only as to citizens of the
United States) so as to prohibit importation of goods bearing genuine
trademarks as well as imitation trademarks.  The argument of this
brief is that the Treasury Department could reasonably conclude that
Congress had in mind, as beneficiaries of the extension, only citizens
who had purchased U.S. trademark rights, not U.S. citizens under
common control with the foreign trademark owner.

   /28/ The "circumstances of its drafting" (American Tobacco Co. v.
Patterson, 456 U.S. 63, 68 (1982)) demonstrate that Congress was not
"mindful of every word, of every comma, and of the shading of every
phrase" (id. at 69 (interior quotation marks omitted)).  That fact is
illustrated by Section 526's awkward language and by the actions of
its sponsors.  Notably, in each case where the sponsors encountered
objections that the literal language would reach cases distinguishable
from Katzel, they denied any such intent (and revised the language).
See notes 24 & 26, supra.  Furthermore, the sponsors themselves did
not have a firm grasp of their proposed statutory language or Katzel's
precise facts.  For instance, Senator McCumber stated that for Section
526 to apply, "there must be one domiciled in this country who is the
owner of the trade-mark" (62 Cong. Rec. 11605 (1922)).  However, the
provision proposed on the Senate floor did not contain that
requirement.  See page 18 & note 26, supra.  He (like Senator
Sutherland) also seemed to believe that the foreign trademark owner in
Katzel had participated in the objectionable importation.  See 62
Cong. Rec. 11605 (1922);  note 23, supra.

   /29/ Indeed, only an extraordinary perceptive congressman would
have recognized during the brief floor debate that foreign
manufacturers could conceivably use the proposed legislation to their
advantage by incorporating domestic subsidiaries that would own their
U.S. trademarks.  Foreign ownership of U.S. firms in United States
markets was far less common during that period.  For example, total
direct foreign investment in the United States during that era was
less than one percent of recent figures.  Compare U.S. Dep't of
Commerce, Statistical Abstract of the United States 1986, at 797
(106th ed.) ($159.6 billion in 1984) with U.S. Dep't of Commerce,
Historical Statistics of the United States Pt. 2, at 869 (1975) ($900
million in 1919). And over 96% of all manufactured goods consumed in
the United States during the 1920's were supplied by domestic
producers.  See W. Kelly, Studies in United States Commercial Policy
13 (1963).

   /30/ The Senate also proposed to add a new subsection, Section
526(b), that would have extended this import prohibition to articles
marked with a U.S. patent notice.  See S. Rep. 37, supra, at 75.

   /31/ Section 526 was amended once again, in 1978, to permit
American travelers returning from abroad to bring trademarked goods
into the United States.  See Customs Procedural Reform and
Simplification Act of 1978, Pub. L. No. 95-410, Section 211, 92 Stat.
903 (discussed at pages 41-42, infra).  That amendment did not alter
the statutory language at issue here.

   /32/ See Coty, Inc., 292 F. at 268-269 ("Section 526(a) * * * was
intended only to supply the casus omissus, supposed to exist in
section 27 of the  Trademark  Act of 1905 * * *.") (L. Hand, J.);  cf.
Vandenburgh, The Problem of Importation of Genuinely Marked Goods Is
Not a Trademark Problem, 49 Trademark Rep. 707 (1959).

   /33/ See, e.g., 62 Cong. Rec. 11603 (1922) (Sen. Sutherland) ("I
believe that the Senate is in favor of protecting the property rights
of American citizens who have purchased trade-marks from
foreigners.");  ibid.  ("(Section 526) only protects a property right
which has been sold");  id. at 11604 (Sen. McCumber) ("American
purchasers of (trademark) rights are entirely unprotected, and this is
to give the opportunity to protect the American purchaser.");  ibid.
("(Section 526) is a prohibition against the violation of (the
American trademark purchaser's) contract.");  ibid.  (Sen. Pomerene)
("(Section 526) is simply an exercise of good faith on the part of
Congress toward the people who have acquired the rights to this
trade-mark under laws heretofore enacted by the Congress of the United
States.") Notably, the Senate passed Section 526 without seeking the
advice of the Committee on Patents, which exercised jurisdiction over
trademark matters (id. at 11602 (Sen. Moses)).  If Congress had
intended to "enshrine" a new legal theory of trademarks, it
undoubtedly would have referred the matter to the appropriate
congressional committees.

   /34/ The court suggests that "such statements are best understood
as efforts by proponents of a bill to understate its significance"
(Pet. App. 17a) and that such statements "must be taken with a grain
of salt" (ibid.).  The court's attempt to psychoanalyze the
legislature is, we believe, misguided, and would ultimately pervert
the legislative process.  The passage of legislation frequently
depends on the sponsor's explanation of the purpose and scope of the
proposed bill.  Congress could not fulfill its function (and its
legislative record would become meaningless) if a sponsor's statements
were presumed to state anything other than the legislator's actual
intent.

   /35/ As this Court has stated on other occasions, legislation must
"be treated as a working instrument of government and not merely as a
collection of English words." United States v. Dotterweich, 320 U.S.
277, 280 (1943).  See, e.g., Kelly v. Robinson, slip op. 6 ("(i)n
expounding a statute, we must * * * look to the provisions of the
whole law, and to its object and policy") (quoting numerous cases);
see also Chevron, 467 U.S. at 861 ("the meaning of a word must be
ascertained in the context of achieving particular objectives").

   /36/ The court suggests that "(b)ecause Senator Reed was a
proponent of the effort to strip American trademark owners of the
privilege of consenting to imports, logically the phrase 'without his
consent' in his remarks modifies 'importations' rather than 'stamped
with his mark' " (Pet. App. 20a-21a n.12 (emphasis in original)).
However, logic does not compel (or, strictly speaking) even suggest
that reading.  Senator Reed could, without internal contradiction,
wish to replace a statute that he understood to protect domestic
manufacturers from foreign trademark infringement with a statute that
prevented domestic manufacturers from relocating abroad.  Indeed, that
was his apparent intention (see page 25, supra).  Furthermore, the
court's interpretation, when applied in context (see page 26, supra),
would reduce Senator Reed's statement to an ungrammatical tautology.
And finally, even if the court's strained interpretation were correct,
it would simply render Senator Reed's statement ambiguous on the
precise question presented in this case;  it would not provide
affirmative support for application of Section 526 in the present
situation.

   /37/ The Treasury Department has authorized the Customs Service to
formulate proposed regulations but retains ultimate authority to
approve or reject those proposals.  See Treas. Dep't Order No. 165,
Revised, U.S. Customs Service, Customs Regulations of the United
States TO-1 (1985).  Here, Treasury specifically approved the
pertinent regulation under the authority of 19 U.S.C. 1624.  See 19
C.F.R. 133.21;  37 Fed. Reg. 20677, 20678 (1972).

   /38/ In Riverside, this Court concluded that the Army Corps of
Engineers could reasonably treat adjacent wetlands as "waters of the
United States" (slip op. 9-13).

   /39/ As we have previously noted, Section 526's sponsors suggested
that their provision was necessary to protect American purchasers of
trademarks when "foreigners deliberately violate the property rights
of those to whom they have sold these trade-marks by shipping over to
this country goods under those identical trademarks" (62 Cong. Rec.
11603 (1922) (Sen. Sutherland)).  The Treasury Department has chosen
to apply the import exclusion even when a third party, rather than the
foreign trademark owner, is the exporter.  That choice is certainly
reasonable given that a third party apparently originated the exports
in Katzel.  See page 15, supra.  That situation was not discussed in
the congressional debate, but no one disputes that the Treasury
Department could reasonably conclude that Congress wished to apply
Section 526 in that case.

   /40/ Customs regulations further provide:  "(1) 'Common ownership'
means individual or aggregate ownership of more than 50 per cent of
the business entity;  and (2) 'Common control' means effective control
in policy and operations and is not necessarily synonymous with common
ownership" (19 C.F.R. 133.2(d)).

   /41/ COPIAT asserts that the price differentials that spur parallel
importation arise from (1) genuine differences in quality (including
freshness, availability of service, etc.) and (2) promotional
expenditures by the authorized distributor, on which the parallel
importer obtains a "free ride" (see page 4, supra).  As to point (1),
a contrary argument (whose validity the Court need not decide) is that
if a corporate group needs protection from U.S. sales of genuine but
different quality merchandise, the foreign manufacturer can place
distinguishing labels on the goods sold to or through the authorized
U.S. distribution network.  See also FTC Comments 2 (stating that
"(i)fgray market imports pose consumer deception problems, these
problems already fall within the jurisdiction of the Commission under
Section 5 of the  Federal  Trade Commission) Act").  As to point (2),
a contrary argument (whose validity, again, the Court need not decide)
is that in the case where the foreign and U.S. trademark owners are
the same or commonly owned, that group is not necessarily harmed if
the authorized distributor's promotional activities increase U.S.
sales of other genuine goods.  K mart and 47th Street Photo, of
course, challenge the premise that quality differences and free
riding, rather than price discrimination against U.S. consumers, are
the spur to parallel imports.  All of these matters are quite distinct
from the problem at which Section 526 was aimed.

   /42/ It is noteworthy that the Treasury Department's interpretation
narrows, rather than expands, the reach of Section 526.  This is not a
case where the agency has attempted "to expand its jurisdiction beyond
the boundaries established by Congress" (Board of Governors v.
Dimension Financial Corp., No. 84-1274 (Jan. 22, 1986), slip op. 12
n.6).  Cf. Heckler v. Chaney, 470 U.S. 821, 832 (1985) ("when an
agency refuses to act it generally does not exercise its coercive
power over an individual's liberty or property rights, and thus does
not infringe upon areas that courts are often called upon to protect"
(emphasis in original)).  There is good reason for the Treasury
Department to avoid an expansive interpretation of Section 526.  As we
have already noted (see page 23, supra), its broad language was
apparently the product of hasty draftsmanship rather than a deliberate
intent to achieve broad objectives.

   /43/ "An agency's expertise is superior to that of a court when a
dispute centers on whether a particular regulation is 'reasonably
necessary to effectuate any of the provisions or to accomplish any of
the purposes' of the Act the agency is charged with enforcing;  the
agency's position, in such circumstances, is therefore due substantial
deference." CFTC v. Schor, No. 85-621 (July 7, 1986), slip op. 11.

   /44/ The regulation prohibited entry of articles bearing a
trademark that "copies or simulates" a domestic trademark.  Art.
518(a) (J.A. 27).  It further provided that a genuine foreign
trademark "shall be deemed * * * to copy or simulate" a domestic
trademark.  Art. 518(b) (J.A. 28).  It then stated that an article
shall not be deemed to copy or simulate the domestic trademark if the
foreign and domestic marks "are owned by the same person, partnership,
association or corporation." Ibid.  Prior to 1936, the Treasury
Department's regulations governing Section 526 simply paraphrased the
statute.  See J.A. 17-26.  There is no record of the Customs Service's
practices during that period.

   /45/ In 1937, articles 517 to 522 were renumbered as articles 536
to 541.  They were renumbered as sections 11.14 to 11.17 in 1943 and
retained that designation until 1972.

   /46/ The court of appeals recognized this consistency, but
suggested that the Treasury Department's regulation interpreted only
Section 27 of the Trademark Act of 1905, citing a statement by the
United States Tariff Commission in hearings, conducted in 1944, on
legislation that would become the Lanham Act (Pet. App. 24a).  That
certainly was not (and is not) the view of the Treasury Department,
the cabinet department that Congress has charged with administration
of the statute.  The Treasury Department specifically cited Section
526 in issuing and reissuing the regulations (J.A. 27, 39, 45-46).
And it certainly was not (and is not) the view of the Commissioner of
Customs who, in subsequent correspondence to Senator Douglas (J.A.
52-54), stated that Section 526 is inapplicable "if the United States
trademark owner and the owner of the foreign rights to the same mark
are one and the same person" (J.A. 53).  He further noted that a
"foreign subsidiary or licensee of the United States trade-mark owner
is considered to stand in the same shoes as such trade-mark owner"
(ibid.).

   /47/ The revised regulation also deleted the prior reference to
Section 526, but this change was plainly inadvertent.  Contemporary
commentators uniformly recognized that the regulation interpreted
Section 526.  See Note, Trade-Mark Infringement:  The Power of an
American Trade-Mark Owner to Prevent the Importation of the Authentic
Product Manufactured by a Foreign Company, 64 Yale L.J. 557 (1955);
Derenberg, The Seventh Year of Administration of the Lanham Trade-Mark
Act of 1946, 44 Trademark Rep. 991 (1954);  Important Changes in the
Customs Regulations Concerning Recordation of Trade-Marks and Trade
Names, 44 Trademark Rep. 131, 134 (1954).

   /48/ The reason for the 1959 regulatory revision is somewhat
complex, but does not undermine the consistency of the Treasury
Department's interpretation.  Shortly after the 1953 regulatory
revision, the Treasury Department sought legislation that would
confirm its regulations and extend the exception to include all
affiliated companies.  See S. 2540, 83d Cong., 2d Sess. (1954) (the
Wiley bill);  H.R. 9476, 83d Cong., 2d Sess. (1954) (the Byrnes bill);
 see also S. Rep. 2266, 83d Cong., 2d Sess. 9 (1954);  Hearing on S.
2540 before a Subcomm. of the Senate Comm. on the Judiciary, 83d
Cong., 2d Sess. 93-97 (1954);  Hearings on H.R. 9476 Before the House
Comm. on Ways & Means, 83d Cong., 2d Sess. 6, 9 (1954);  see generally
Note, supra, 64 Yale L.J. at 560-561;  Derenberg, supra, 44
TrademarkRep. at 998.  The legislation was not enacted.  Meanwhile,
the Justice Department's Antitrust Division brought an action urging a
judicial construction of Section 526 that would achieve essentially
the same result.  See United States v. Guerlain, 155 F.Supp. 77
(S.D.N.Y. 1957), vacated and remanded, 358 U.S. 915 (1958), dismissed,
172 F. Supp. 107 (S.D.N.Y. 1959).  See also Recent case, 71 Harv. L.
Rev. 564 (1958);  Derenberg, supra, 44 Trademark Rep. at 998;  Note,
supra, 64 Yale L.J. at 560-561.  The district court accepted the
Antitrust Division's construction (155 F. Supp. at 80);  however,
Solicitor General Rankin declined to defend that judgment in this
Court.  See Guerlain, Inc. v. United States, No. 24 (1958 Term),
Motion to Vacate Judgments.  He stated that the Antitrust Division's
interpretation "is permissible in the light of the relevant
legislative history" (id. at 7), but added that Customs found itself
"legally contrained to grant the claim of statutory protection invoked
by the appellants" (ibid.), presumably because the agency either had
concluded that the appellants did not fall within the "related
company" exception or had lacked sufficient information to make that
regulatory determination.  See Atwood, Import Restrictions on
Trademarked Merchandise -- The Role of the United States Bureau of
Customs, 59 Trademark Rep. 301, 307 (1969);  see also Developments in
the Law:  Trademarks and Unfair Competition, 68 Harv. L. Rev. 814, 914
(1955).  Solicitor General Rankin proposed that, in light of this
conflict, this Court should vacate the judgments and the government
would seek legislation "to make it clear that trademark protection is
not available to prohibit the importation of a product legitimately
marked by an affiliate of the trademark owner" (Motion to Vacate
Judgments at 7-8).  The Court followed that suggestion and the
district court dismissed the actions (172 F. Supp. at 108).  The
government submitted its promised legislation the following year.
H.R. 7234, 86th Cong., 1st Sess. (1959) (the Celler bill).  Meanwhile,
the Treasury Department dropped the "related company" exception from
its regulations (whiule retaining the "same company" exception),
apparently in response to the pending legislation and difficulties in
applying that standard (J.A. 60).

   /49/ See T.D. 69-12 (1968) (J.A. 67);  Letter from Deputy
Commissioner Flinn to Felix V. Levitan (Mar. 15, 1963) (J.A. 63-64);
Letter from Deputy Commissioner Flinn to Walter A. Slowinski (July 2,
1962) (J.A. 62);  see also Atwood, supra, 59 Trademark Rep. at 310
("Related companies may or may not be denied full protection depending
on ownership and control as viewed against the background of Bourjois
v. Katzel, Bourjois v. Aldridge, and Section 526." (footnotes
omitted));  see generally id. at 311-317.

   /50/ Apparently, neither the private petitioners nor COPIAT or any
of its members (see Br. in Opp. 1a-2a), participated in the rulemaking
(see J.A. 75-76).

   /51/ Congress revisited Section 526 on a recurring basis from the
1940s to the present.  It considered the provision in hearings
preceding passage of the Lanham Act, where the U.S. Tariff Commission
described (albeit incorrectly, see note 46, supra) the Treasury
Department's regulations.  See Hearings on H.R. 82 Before a Subcomm.
of the Senate Comm. on Patents, 78th Cong., 2d Sess. 79-91 (1944).
Congress addressed Section 526 again in the Act of July 22, 1954, ch.
558, 68 Stat. 497 et seq., which, among other matters, exempted the
Virgin Islands from Section 526's provisions.  See 48 U.S.C. 1643.  As
we have already mentioned (note 48, supra), Congress visited Section
526 again that year when it considered legislation addressing
"affiliated companies" under the Wiley and Byrnes bills, and in 1959
when it considered similar legislation under the Celler bill.  In
1959, Congress also considered (but did not report or enact) a bill
that would have prohibited the sale of goods of foreign manufacture
bearing U.S. trademarks.  See H.R. 7967, 86th Cong., 1st Sess. (1959)
(the Toll bill).  And in 1968, Congress considered, but did not pass,
a bill that would have repealed Section 526 completely.  See S. 3713,
90th Cong., 2d Sess. (the McClellan bill).  This Court has noted that
deference is "particularly appropriate where * * * an agency's
interpretation involves issues of considerable public controversy and
Congress has not acted to correct any misperception of its statutory
objectives." United States v. Rutherford, 442 U.S. 544, 554 (1979);
see also Haig v. Agee, 453 U.S. 280, 301 (1981);  Red Lion
Broadcasting Co. v. FCC, 395 U.S. 367, 381-382 (1969).  Section 526's
history suggests, at a minimum, that congressional inaction cannot be
attributed to ignorance of the issue.

   /52/ See also, e.g., Young v. Community Nutrition Institute, No.
85-664 (June 17, 1986), slip op. 9;  FDIC v. Philadelphia Gear Corp.,
No. 84-1972, slip op. 11;  United States v. Rutherford, 442 U.S. 544,
554 n.10 (1979);  Chemehuevi Tribe v. FPC, 420 U.S. 395, 410 (1975);
NLRB v. Bell Aerospace Co., 416 U.S. at 274-275.

   /53/ See note 11, supra.  The district courts have generally upheld
the Customs Service regulation as a reasonable interpretation of
Section 526 (Pet. App. 48a;  Olympus Corp., 627 F. Supp. at 922;
Vivitar Corp., 593 F. Supp. at 436;  see also Guerlain, 155 F. Supp.
at 83), while the courts of appeals have sustained the regulation as a
legitimate exercise of enforcement discretion (see Olympus Corp., 792
F.2d at 320;  Vivitar Corp., 761 F.2d at 1571).  We do not believe
that the Customs Service regulation should be viewed as based solely
on enforcement considerations.  It does, however, reflect an exercise
of enforcement discretion in the sense that it represents an agency's
considered judgment that, absent clearer guidance from Congress, the
agency should devote its enforcement resources to the problem that the
legislative history indicates was Congress's specific concern.

   /54/ Last year, Congress commenced consideration of legislation
that would squarely address the issue.  Senator Chafee introduced a
bill that would amend Section 526 to incorporate the Customs Service
regulation.  See S. 2614, 99th Cong., 2d Sess. (1986);  132 Cong. Rec.
S8709, S8741-S8743 (daily ed. June 26, 1986).  The Senate promptly
held hearings on this legislation in which both the private
petitioners and COPIAT participated.  See Gray Market Imports:
Hearing on S. 2614 Before the Subcomm. on International Trade of the
Senate Comm. on Finance, 99th Cong., 2d Sess. (1986).  We expect that
a similar bill, as well as alternative parallel import legislation,
will be introduced this year.  And, as we have already noted (page 5,
supra), the Administration is presently reviewing policy options with
respect to parallel imports.  Many affected parties, including K mart,
47th Street Photo and COPIAT, are participating in the legislative and
administrative review.  Congress and the Executive Branch, unlike the
courts, can evaluate competing arguments from both a policy and a
legal perspective and can then determine whether claims of price
discrimination or "free riding" are valid.

   APPENDIX