The room-sized safe is filled with Seiko watches, tens of thousands of them stacked in boxes and cartons, destined for discount stores all over the United States.
They are part of a "gray market" in brand name imports that come into this country legally, but outside the regular distribution channels. Most are purchased overseas at prices that are far below what the authorized American distributors pay and are sold at heavy discounts through outlets as varied as the K mart chain and W. Bell & Co. catalogue stores.
New York City, through such outlets as the low-overhead 47th Street Photo, serves as the center of the country's gray market activities.
To many shoppers it seems like a dream come true -- name brand cameras, electronic goods, watches and even the fanciest perfumes and most expensive champagnes at discounts of as much as 30 percent under list price.
So a $200 Seiko watch retails at stores that buy through the gray market for $140 to $160, while a $60 bottle of Dom Perignon champagne goes for $40 at California wine shops that stock up at an unauthorized, gray market distributor.
The price difference on cameras appears to have narrowed in recent years, partly because the regular dealers of such popular brands as Nikon, Canon, Minolta and Hasselblad have lowered their prices. Photographers, however, still say they can get better buys at New York discount stores than at shops in Hong Kong, which were once known for having the lowest camera prices in the world.
According to industry estimates, one in four Seiko watches is sold through gray market dealers. So are $190 million of the $1.1 billion in total imports of photographic equipment, including nearly 30 percent of all Nikon cameras and lenses. Charles of the Ritz estimates that the number of unauthorized stores carrying its French perfumes is seven times greater than its 1,300 licensed dealers.
With a 22 percent growth in gray market sales between 1982 and 1983, the authorized distributors are fighting back in the courts, on Capitol Hill and through federal regulatory channels. They have formed an association -- the Coalition to Preserve the Integrity of American Trademarks (COPIAT) -- that accuses gray market dealers of violating their exclusive rights to sell trademarked products in the U.S. market.
"These people get a free ride on the reputation we've built" for our trademarked products, said Robert Miller, president of Charles of the Ritz, which markets French perfumes supplied by Yves St. Laurent in the United States.
"I feel we have been deprived by a quirk in the law of the right to protect our greatest asset, our brand name," said Robert Pliskin, president of Seiko Time Inc., a wholly owned subsidiary of Hattori Seiko Co. Ltd., the Japanese makers of Seiko watches.
Nikon President Herbert Sax said the gray market has driven prices so low that his company's profit margin is too tight for comfort. Its net worth has shrunk 35 percent in the past three years.
So far COPIAT has achieved little success in the courts, losing a key case last week. The International Trade Commission, however, handed down a landmark ruling last month excluding foreign-made Duracell batteries on the grounds that their sale violates the American company's trademark rights here. That decision, which can still be overruled by the Reagan administration, could curtail imports of goods through gray market channels.
The U.S. Customs Service also is studying possible new regulations, but key congressional committee chairmen have suggested that any changes in the law or its interpretation should come from Congress, not administrative action.
Gray market goods now enter the country legally under a 14-year-old Customs regulation that says a company holding rights to a trademarked product in the United States can block unauthorized imports only if it purchased the rights from an unrelated foreign manufacturer. Authorized distributors -- many of whom are wholly owned subsidiaries of foreign manufacturers such as Seiko Time -- argue that the regulation goes against the intent of Congress.
While the arguments go on in the power corridors of Washington and in courts across the country, gray market imports pour into the country for bargain-hungry Americans.
Where the goods come from, however, is one of the gray market importers' deepest secrets. They fear their sources would be cut off in a flash by manufacturers if they were publicized.
Nikon found that most of its products enter the gray market from Japan, where they are made, and that Hong Kong is another major supplier. Hasselblad, a Swedish-made camera, listed West Germany as the source of 40 percent of its cameras that wind up on the gray market, with Hong Kong running second with 20 percent.
"My suppliers get their watches from Seiko," said Dan Rotta, president of Progress Trading Co., which operates out of a building on West 49th Street here that contains the room-sized safe. It specializes in what Rotta calls the "parallel distribution" of Seiko watches.
He will say only that his stock comes from authorized Seiko distributors, mostly in Europe, who add his order to their own and then sell the watches to him at a small markup.
"I place my orders six months in advance," Rotta said. "My orders go right into the Seiko computer, but not under my name."
He said the Japanese maker of Seikos could easily put him out of business by policing orders from dealers. "If someone orders 1,000 watches, give them 500 so they can't sell outside their area," Rotta advised.
He and his attorney, William F. Sondericker, said manufacturers tolerate the gray market because it enables them to increase production and keeps their home factories working.
"The root cause is the manufacturer, who desires to maximize production and sales. At the same time they don't want to let pricing get out of their hands," said Sondericker.
"I am able to charge less for Seiko watches than Seiko Time Inc. charges and still operate profitably because the charges by STI are too high," said Rotta.
"That's a dirty lie," responded Seiko President Pliskin, who added that "there's no earthly way" for the manufacturer to control unauthorized sales. Seiko tried curtailing the output of its Japanese plant, but "it hasn't helped," he said.
"It seems to me the gray market is all over. I see Seikos in all sorts of places, and I didn't sell them. I don't know how they got there."
There is no question, though, that the gray market is fueled by companies that sell goods in foreign markets at prices that are far lower than prices being charged to American distributors and by the strong dollar, which accentuates higher U.S. prices.
Johnson & Johnson, for instance, reported that 177,000 packages of baby powder from its factory in Brazil were put on sale in New York stores at $1.88 a container -- 3 cents less than the U.S. wholesale price. The containers were purchased at the Brazilian factory for 34 cents each, the wholesale price there, and diverted into the U.S. gray market from a shipment supposedly destined for Israel, according to a Johnson & Johnson report to the U.S. Customs Service.
The company said it lost $800,000 in U.S. factory sales from products made overseas and slipped into the United States via gray market channels.
Opium perfumes, sold by Charles of the Ritz to its authorized dealers at $96 an ounce, can be bought retail in Paris from shops on the Avenue des Champs-Elysees and shipped to the United States for $69 an ounce, including customs duty and freight. This is less than the U.S. wholesale price, said Charles of the Ritz's Miller.
With the authorized retail price set at $160, a gray market merchant has plenty of margin to make a profit and still undersell the authorized perfume shops.
Miller blames the difference between U.S. and French prices on the soaring dollar, which has reduced the value of the French franc from 24 cents in 1980 to about 10.6 cents today.
But Joseph W. Rares, whose Original World Wide Ltd. in Miami imports perfumes for the gray market, disputes that. Even when the dollar was at its 1980 level, he said, he was importing perfumes such as Opium from "anywhere where there were duty-free and tax-free shops" because the French manufacturers sell their products wholesale in other parts of the world at between 55 percent and 75 percent of the U.S. price.
Rares said he was buying Opium perfume for about $52 an ounce in mid-1980, when the wholesale price in the United States, according to Miller, was $78.
As attractive as the prices appear, consumers can run into problems buying from gray market suppliers. The U.S. distributors often refuse to honor warranties on items bought through the gray market, and COPIAT members point to what Seiko President Pliskin called "horror letters" from purchasers who have problems.
Gray market suppliers such as 47th Street Photo, however, offer their own warranties, which they claim are as good or better than the authorized ones.
With the exception of the big discount houses, shopping at gray market stores can be a strange experience for an American accustomed to more standard pricing. It is the closest thing in the United States to shopping in a Third World bazaar.
One Washington man who called three New York shops to check on camera prices said none quoted the same figure that was listed in their ads in major photo magazines. A second call within 30 minutes, he said, often brought an entirely different price quote, with some higher and some lower. But all of the prices were substantially less than the ones offered by major Washington camera stores.