## Facts

- The consolidated cases involved “gray-market” goods: foreign-manufactured products bearing a valid U.S. trademark imported without the U.S. trademark holder’s consent.
- Section 526 of the Tariff Act of 1930 prohibited importation of foreign-manufactured merchandise bearing a trademark “owned by” a U.S. citizen or U.S.-organized corporation, unless the trademark owner’s written consent was produced at entry.
- The U.S. Customs Service issued regulations allowing importation in three situations: (1) the foreign manufacturer and U.S. trademark owner were the same entity; (2) the foreign manufacturer and U.S. trademark owner were subject to “common control”; and (3) the foreign manufacturer was an independent foreign licensee authorized to use the mark.
- U.S. trademark owners and a trade group challenged the regulations as unlawfully narrowing § 526’s import ban.

## Issues

1. Whether Customs could permissibly interpret § 526 to allow importation when the foreign manufacturer and the U.S. trademark owner are the same entity.
2. Whether Customs could permissibly interpret § 526 to allow importation when the foreign manufacturer and the U.S. trademark owner are under common control.
3. Whether Customs could permissibly interpret § 526 to allow importation of goods made by an independent foreign licensee without written consent produced at entry.

## Decision

- The Supreme Court affirmed in part and reversed in part the D.C. Circuit.
- The Court upheld the “same-entity” exception as a permissible interpretation of § 526.
- The Court upheld the “common control” exception as a permissible interpretation of § 526.
- The Court invalidated the “authorized-use” (independent foreign licensee) exception as inconsistent with § 526’s written-consent-at-entry requirement.
- Justice Kennedy announced the judgment and wrote the principal opinion; different majorities supported different parts of the result.

## Legal Principles

- When statutory language does not directly resolve a specific application, courts may sustain an agency’s reasonable construction of the statute within the agency’s delegated authority.
- Section 526’s reference to a trademark “owned by” a U.S. person or corporation left room for administrative interpretation in corporate-relationship settings (including same-entity and commonly controlled entities).
- An agency regulation is invalid when it conflicts with an express statutory condition, such as § 526’s requirement that the trademark owner’s written consent be produced at the time of entry.
- Customs may treat importation within a single trademark-owning economic enterprise (same entity or common control) differently from importation involving independent foreign licensees.

## Conclusion

The Court sustained Customs rules permitting certain gray-market imports where the U.S. trademark owner and foreign manufacturer were the same entity or under common control, but struck down Customs’s allowance for independent foreign licensee goods because it dispensed with § 526’s explicit requirement of written consent produced at entry.


K Mart Corp. v. Cartier, Inc., 486 U.S. 281 (1988)