United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1996 HQ Rulings > HQ 559297 - HQ 559499 > HQ 559424

Previous Ruling Next Ruling
HQ 559424




November 9, 1995

MAR-2-05 R:C:S 559424 MLR

CATEGORY: MARKING

Ms. Diane Servello
Granutec, Inc.
4409 NW Airport Drive
Wilson, NC 27896-9673

RE: Country of origin marking for antihistaminic capsule product; diphenhydramine hydrochloride; pregelatinized starch; magnesium stearate; encapsulation; Canada; NAFTA; Article 509

Dear Ms. Servello:

This is in reference to your letter of August 31, 1995, requesting a ruling concerning the country of origin marking requirements for antihistaminic capsule products.

FACTS:

Granutec, Inc. manufactures an antihistaminic capsule product containing 25 mg of diphenhydramine hydrochloride, 180 mg of pregelatinized starch, and 0.51 mg of magnesium stearate per capsule. It is stated that the diphenhydramine component is imported from Japan under subheading 2922.19.15, Harmonized Tariff Schedule of the United States (HTSUS). In North Carolina, the Japanese-origin diphenhydramine hydrochloride, the active ingredient, will be compounded with the inactive ingredients, i.e., the pregelatinized starch and magnesium stearate which are of U.S. -origin. This bulk powder will be shipped to Canada along with empty gelatin capsule shells of U.S. origin. The encapsulated product will be returned to Granutec in the U.S. where a gelatin band will be applied to seal the capsules.

It is stated that the Japanese diphenhydramine component contributes 8 percent of the value of the finished capsule. New York Ruling Letter (NYRL) 812814 dated July 26, 1995, states that the encapsulated product is classifiable under subheading 3004.90.90, HTSUS.

ISSUE:

What are the country of origin marking requirements applicable to the antihistaminic capsule product?

LAW AND ANALYSIS:

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

Section 134.1(b), interim regulations, defines "country of origin" as:

The country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of this part; however for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. (Emphasis added.)

Section 134.1(j), interim regulations, provides that the "NAFTA Marking Rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g), interim regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA Marking Rules set out at 19 CFR Part 102, interim regulations.

Section 102.11, interim regulations, sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11(a), interim regulations, states that the country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

In this case, the applicable rule is section 102.11(a)(3), interim regulations. "Foreign material" is defined in section 102.1(e), interim regulations, as "a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced." Accordingly, in order to determine whether Canada is the country of origin, we must look at those materials whose country of origin is other than Canada.

In this case, NYRL 812814 states that the capsules containing the antihistaminic drug, diphenhydramine hydrochloride, are classifiable under 3004.90.90, HTSUS. The diphenhydramine hydrochloride after it is blended with the inactive ingredients into a bulk powder in the U.S. and shipped to Canada is classifiable under subheading 3003.90, HTSUS. The empty gelatin capsule shells of U.S. origin are classifiable under heading 9602, HTSUS. The applicable change in tariff classification set out in section 102.20(f), Section VI, Chapters 28 through 38, 3004.9 of the interim regulations provides:

3004.9 ... A change to subheading 3004.90 from any other subheading, except from subheading 3003.90, provided that the domestic content of the therapeutic or prophylactic component/s is no less than 40 percent by weight of the total therapeutic or prophylactic content.

Therefore, only the empty gelatin capsules classifiable under heading 9602, HTSUS, undergo the requisite change in tariff classification. Since the bulk powder exported from the U.S. to Canada is classifiable under subheading 3003.90, HTSUS, it will not undergo the applicable tariff shift. Accordingly, for purposes of determining the country of origin of the antihistaminic capsule product, section 102.11(b) of the hierarchial rules must be applied.

Section 102.11(b), interim regulations, provides that:

Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good ...

When determining the essential character of a good under section 102.11, interim regulations, section 102.18(b) provides that only domestic and foreign materials that are classified in a tariff provision from which a change is not allowed shall be taken into consideration, and that in deciding among these materials, consideration is given to various factors, including the nature of the material or component, bulk, quantity, weight, value, and the role of a constituent material in relation to the use of the goods.

Based upon the above factors, we find that the single material that imparts the essential character to the antihistaminic capsule product is the bulk powder. Accordingly, the country of origin of the antihistaminic capsule product pursuant to section 102.11(b)(1), interim regulations, is the country of origin of the bulk powder. As stated above, the bulk powder blended in the U.S. is classifiable under subheading 3003.90, HTSUS, and it consists of Japanese-origin diphenhydramine hydrochloride, classifiable under subheading 2922.19.15, HTSUS, and U.S.-origin pregelatinized starch and magnesium stearate. The applicable change in tariff classification set out in section 102.20(f), Section VI, Chapters 28 through 38, 3003.90 of the interim regulations provides:

3003.90 ... A change to subheading 3003.90 from any other subheading, provided that the domestic content of the therapeutic or prophylactic component/s is no less than 40 percent by weight of the total therapeutic or prophylactic content.

The diphenhydramine hydrochloride from Japan, classifiable under subheading 2922.19.15, HTSUS, undergoes the requisite tariff shift. However, since the diphenhydramine hydrochloride is the active ingredient of the bulk powder, and, therefore, represents the therapeutic component of this 3003.90 good, the domestic content requirement of the section102.20 rule will not be satisfied. Accordingly, the country of origin of the bulk powder, and, therefore, the antihistaminic capsule product will be Japan.

HOLDING:

Based upon the information provided, pursuant to section 102.11(b)(1), interim regulations, the country of origin of the antihistaminic capsule product is the country of origin of the bulk powder. The country of origin of the bulk powder, pursuant to section 102.11(a)(3), interim regulations, will be Japan unless the domestic content requirement is satisfied.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling

See also: