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HQ 559420





June 7, 1996

CLA-2 RR:TC:SM 559420 KKV

CATEGORY: CLASSIFICATION

TARIFF NO: 9811.00.60

District Director
U.S. Customs Service
Charlotte, NC 28217

RE: Application for Further Review of Protest No. 1512-95-100134; applicability of duty exemption under HTSUS subheading 9811.00.60 to pharmaceutical products; sample; individually unmarked tablets imported in bulk; outside container;

Dear Sir:

The above-referenced protest, filed by Glaxo, Incorporated, concerns your classification and duty assessment for CEFTIN ( Cefuroxide Axetil) Tablets 250 Mg. under subheading 3004.20.0060, Harmonized Tariff Schedule of the United States. Protestant claims that the articles at issue are eligible for a complete duty exemption under subheading 9811.00.60. Two samples were submitted for our consideration.

FACTS:

The subject protest was filed in connection with an entry consisting of a CEFTIN (Cefuroxide Axetil) Tablets 250 Mg. The shipment was entered at the port of Charlotte, North Carolina, on December 2, 1994. On December 14, 1994, an entry summary (CF 7501) was filed which entered the merchandise under subheading 3004.20.0060, Harmonized Tariff Schedule of the United States (HTSUS), and the entry was liquidated accordingly, on March 24, 1995, at a rate of 3.7% ad valorem. The subject protest, timely filed on June 20, 1995, contests the liquidation, asserting that the goods are eligible for liquidation under subheading 9811.00.60, HTSUS, as samples, and thus qualifies for duty free treatment.

Two samples were submitted for our examination. The first sample consists of four bottles containing CEFTIN for Oral Suspension (cefuroxime axetil powder for oral suspension). Because the entry under protest concerns CEFTIN tablets rather than loose powder, the sample submitted is of no relevance to the matter at hand. The second sample consists of two blister packs, each of which contains two CEFTIN (cefuroxime axetil) tablets 250 Mg., Batch No. B4194MA, expiration date October 1997, which the Protestant asserts is a finished pack of tablets covered by the subject entry.

ISSUE:

Whether the pharmaceutical products are entitled to duty-free treatment under subheading 9811.00.60, HTSUS.

LAW AND ANALYSIS:

Subheading 9811.00.60, HTSUS, provides for the free entry of:

[a]ny sample ... valued not over $1 each, or marked, torn, perforated or otherwise treated so that it is unsuitable for sale or for use otherwise than as a sample, to be used in the United States only for soliciting orders for products of foreign countries.

In determining the eligibility of merchandise for entry under this section, the controlling factor is whether the importer uses the samples for the purpose of soliciting purchase orders for foreign merchandise and the creation of demand for future orders. In Italian Drug Importing Co. v. United States, 46 Cust. Ct. 243, C.D. 2263 (1961), the court allowed the free entry of vitamins marked "Sample - not for sale" which were distributed to physicians without charge for their patients. In Headquarters Ruling Letter (HRL) 556174, dated December 4, 1991, Customs determined that tablets imported in vials or blister packages marked "Sample - not for sale" for the purpose of distributing them to physicians in order to create a market in the U.S., qualified as samples under subheading 9811.00.60, HTSUS.

With regard to pharmaceutical tablets imported in bulk for repackaging for distribution as samples, it has generally been Customs position that a designation of the merchandise as samples marked on the outside of the container is insufficient. In HRL 555619, dated October 29, 1990, Customs held that tablets imported in bulk and not individually marked or treated in some way to distinguish them from standard merchandise could not be considered "samples" within subheading 9811.00.60, HTSUS.

We further held that the mere marking of the outer container of the bulk merchandise would not be sufficient to ensure that the tablets are rendered "unsuitable for sale or for use otherwise than as a sample" since the tablets could be distributed through regular commercial channels and not used as samples for taking orders. However, Customs held that, if the tablets in their condition as imported are individually marked "Sample," they could be treated as samples and could be eligible for free entry under subheading 9811.00.60, HTSUS, upon proof that the tablets will be distributed to physicians to give to their patients in order to stimulate future orders of the foreign product.

In HRL 557248, dated October 18, 1993, pharmaceutical products were imported in bulk contained in drums marked "sample production only." Notwithstanding the petitioner's assertion that the individual identity of the lots designated as samples could be maintained through a computerized inventory control system, Customs found that the marking of the outer containers was not sufficient to ensure that the finished product is unsuitable for sale or for use otherwise than as a sample.

However, in certain limited circumstances, Customs has permitted the entry of individually unmarked pharmaceutical products where the only designation of the product as a sample appeared on the outer container of the bulk merchandise, where certain terms and conditions are met. In seeking relief, Protestant cites HQ 556105, dated October 24, 1991, which was previously issued to the Protestant. Under the facts presented in that case, pharmaceutical tablets, each valued at less than one dollar, were imported into the U.S. in bulk for repackaging and distribution to hospitals and physicians for the purpose of soliciting orders. Upon importation into the U.S., the outside of the container was marked with a sample tablet code and the word "Sample." The individual tablets were not marked as samples. Once in the United States, the tablets were placed in packages marked with the country of origin and the words "Professional Sample - Not for Sale." These sample packages were also marked with a discreet item (product) code and the foreign vendor batch number, which permits the articles to be traced to the import documents. Customs held that the steps undertaken after importation of the tablets were sufficient to ensure that the sample tablets were not commingled with commercial tablets, and permitted the marking of the outer containers stating, "[u]nder these circumstances, and provided a declaration attesting to the intended use of the tablet is filed by the importer with each entry, the pharmaceutical samples will be entitled to duty-free treatment under subheading 9811.00.60."

Review of the record reveals that Protestant did not follow the steps set forth by Customs to ensure that the pharmaceutical products imported in bulk are not commingled with commercial tablets. In HRL 556104, Customs premised eligibility for entry of such
products under subheading 9811.00.60, HTSUS, upon the filing of a declaration of intent at the time of entry of the merchandise, in addition to the marking of the package "Professional Sample - Not For Sale" and the maintenance of a merchandise tracking system, as discussed above. In this case, no such declaration was filed at the time of entry. Moreover, the integrity of the tracking system utilized by the importer is called into question by one of the samples submitted for examination in this case.

One of the samples submitted consists of two blister packs, each of which contains two CEFTIN (cefuroxime axetil) tablets 250 Mg., Batch No. B4194MA, expiration date October 1997, which the Protestant asserts is a finished pack of tablets covered by the subject entry. However, upon review of the invoice submitted with the subject entry, we note that while a corresponding batch number B4194MA appears on the invoice, all merchandise shipped under that invoice carries an expiration date of August 1995 or October 1995, an expiration date two years prior to the date which appears on the submitted sample. Therefore, on the face of the documents presented, there is an insufficient nexus between the merchandise entered and the sample submitted.

Because the importer has failed to submit evidence which satisfactorily demonstrates that the merchandise was properly tracked and, in light of the failure of the importer to file a declaration of intent upon entry of the merchandise, it is our determination that the importer has not complied with the terms and conditions set forth in HRL 556105 to ensure that the tablets imported in bulk are used only as a sample. Because the conditions for such importation were not met, the merchandise is ineligible for entry into the United States under subheading 9811.00.60, HTSUS.

HOLDING:

On the basis of the record provided, the Protestant failed to file a declaration attesting to the intended use of the tablets as a sample at the time of entry and has failed to demonstrate that the pharmaceutical products imported were adequately tracked so as to ensure that the tablets were not commingled with commercial tablets. Therefore, the subject pharmaceutical tablets imported in bulk are not eligible for duty-free treatment under 9811.00.60. Accordingly, the protest is denied in full.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels.

Sincerely,

John Durant, Director

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