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HQ 224645




June 3, 1993

CON-9 CO:R:C:E 224645 TLS

CATEGORY: ENTRY

Mr. Ralph Sheppard
Adduci, Mastriani, Meeks & Schill
330 Madison Avenue
New York, New York 10017

RE: Ruling request concerning cancellation of temporary importation bond (TIB) through the exportation of merchandise on first-in, first-out (FIFO) basis; C.S.D. 86-16; Customs ruling HQ 222827; Harmonized Tariff Schedule of the United States Annotated subheadings 9813.00.05, 9813.00.30.

Dear Mr. Sheppard:

We have reviewed the above-referenced request for a ruling and made the following decision as a result.

FACTS:

Your client proposes to import pharmaceutical products under a temporary importation bond (TIB) using two different Harmonized Tariff Schedule of the United States (HTSUS) provisions. Both HTSUS provisions allow for duty-free entry of merchandise for processing and testing respectively. The imported product will be finished into a complete product during processing and destroyed during testing. During the processing, ingredients are added only to allow for tableting, encapsulation, or the manufacturing of creams or injectables. This is necessary to allow for the consumption of the products during testing.

To complete the TIB requirements for exportation or destruction, it is proposed that the importer be allowed to account for the imported merchandise on a first-in, first-out (FIFO) basis. The imported merchandise is to be commingled with fungible duty-paid merchandise. The drugs as shown on the entry invoices after tableting, encapsulation, or other processing will be tested. The test records will show the drug, as invoiced, was the article tested rather than being tested as an ingredient of a new drug. None of the processes will change the identity of the drug; those processes will change only the form rather than change the drug into a new drug.

ISSUE:

Whether the proposed transaction is proper under existing TIB requirements.

LAW AND ANALYSIS:

This office has ruled before that merchandise classified under two different HTS subheadings may be entered under the same TIB. Customs ruling HQ 222827 (March 1, 1991). In that case, the merchandise was also finished into a complete product during processing and then destroyed during clinical trial testing. The importer has stated that such will be the case here. The testing will involve the consumption of the product by volunteers, which is well settled to be a destruction for TIB purposes. Consistent with HQ 222827, the products must not be manufactured or altered into something different from the imported products during processing. This office has received written assurance from the importer's legal counsel that the imported products will not be changed during processing. Thus, the subject merchandise classified under 9813.00.05 and 9813.00.30 may be entered under the same TIB.

Pursuant to 19 CFR 10.39(a), in the case of articles entered under subheading 9813.00.30 which are destroyed because of their use for the purposes of importation, the bond charge shall not be canceled unless the importer submits to the district director a certificate of the importer that the articles were so destroyed as articles of commerce within the period of time during which the articles may remain in the Customs territory of the United States under bond. This ruling is being made with the understanding that the importer will provide such certification.

We have repeatedly ruled that substances or drugs imported for testing which are not destroyed or consumed by such testing, must be destroyed. Furthermore, it has been held that a drug will not be considered destroyed unless it can be shown that because of the length of such testing, the drugs have completely deteriorated. C.S.D. 80-24. The drugs which have not completely deteriorated must be exported timely or the importer will incur liquidated damages.

To the extent that the imported merchandise is fungible with the duty-paid merchandise it will be commingled with, is destroyed (or exported) within the bond period, and the bond holder always has enough merchandise on hand to cancel whatever bonds that are outstanding, we find it is permissible to allow the TIB to be canceled using the FIFO accounting method. C.S.D. 86-16 (December 9, 1985); C.S.D. 84-12 (June 30, 1983). We emphasize here that what is being permitted here is a TIB cancellation using the FIFO method, not substitution same condition drawback. Hence, C.S.D. 86-16 should be strictly followed in this instance as it applies to TIB transactions.

HOLDING:

Merchandise classified under two different HTSUSA subheadings may be entered under that same temporary importation bond. Certification of the destruction proposed must be provided to the district director to validate cancellation of the bond.

A TIB that involves imported merchandise commingled with fungible duty-paid merchandise may be cancelled using the FIFO method of accounting in accordance with C.S.D. 86-16.

Sincerely,

John Durant, Director

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