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HQ 962923





October 26, 2000

CLA-2 RR:CR:GC 962923 AM

CATEGORY: CLASSIFICATION

TARIFF NO.: 3004.90.90, 2106.90.99

Port Director of Customs
2nd and Chestnut Streets
Philadelphia, PA 19106

RE: Protest 1101-99-100129; SR-57746A and placebo capsules

Dear Port Director:

This is in regard to protest 1101-99-100129, concerning your classification of SR-57746A and placebo capsules under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

SR-57746A one and two milligram capsules are imported by Sanofi Pharmaceuticals from Great Britain for use in Food and Drug Administration (FDA) clinical trials. SR-57746A is being investigated for use in the treatment of Amyotrophic Lateral Sclerosis (ALS/Lou Gehrig's Disease). SR-57746A has the molecular formula 1-(2-naphth-2-ylethyl)-4-(3-trifluoromethylphenyl)- 1,2,3,6-tetrahydropyridine hydrochloride. According to patent #6,043251, SR-57746A is premixed with the following excipients: modified corn starch, microcrystalline cellulose, anhydrous colloidal silica and magnesium stearate. Gelatin capsules are filled with the mixture and imported packaged for disbursement in the clinical trial.

The placebos contain pre-gelatinized starch (amulym), lactose (4-Beta-D-Galactoisido)-D-Glucose), colloidal silicon dioxide (silicianhydride), and Magnesium stearate (octoadecanoic acid, magnesium salt.) Gelatin capsules designed to look exactly like those filled with the SR-57746A mixture are filled with the above placebo ingredients. Thus the placebos are specially formulated for use in clinical trials of SR-57746A and could not be used for any other purpose. The placebo capsules are imported packaged for disbursement in the clinical trial, separately from the SR-57746A capsules, but entered in the same shipment as the SR-57746A capsules.

The merchandise was entered on May 4, 1998, and the entry was liquidated on February 12, 1999, under subheading 3824.90.90, HTSUS, as a preparation of the chemical or allied industries, not elsewhere specified or included. A protest was timely filed on May 11, 1999.

Protestant argues that SR-57746A capsules should be classified under subheading 3004.90.90, HTSUS, as medicaments. Protestant also argues that placebo capsules should be classified with the SR-57746A capsules as composite goods under General Rule of Interpretation (GRI) 3(b). In the alternative, protestant argues that the placebo capsules should be classified under subheading 9602.00.10, HTSUS, as worked unhardened gelatin and articles thereof.

ISSUE:

(1) Whether capsules containing SR-57746A used in clinical trials for the treatment of ALS are classified in subheading 3004.90.90, HTSUS, or in subheading 3824.90.90, HTSUS.

Whether placebo capsules for use in clinical trials are classified as a composite good with the active drug capsules used in the same clinical trials or separately in subheading 2106.90.99, HTSUS, subheading 3824.90.90, HTSUS, or subheading 9602.00.10, HTSUS.

LAW AND ANALYSIS:

Merchandise imported into the U.S. is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context that requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law. GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any related section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs. In interpreting the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUSA. See T.D. 89 80, 54 Fed. Reg. 35127 (August 23, 1989).

GRI 2(b) explains that heading references to substances include goods that contain that substance in a mixture or consist partly of that substance. The rule directs classification of these mixtures according to the terms of GRI 3. However, the EN to GRI 2(b) specifically states: "Mixtures being preparations described as such in a Section or Chapter Note or in a heading text are to be classified under the provisions of Rule 1."

GRI 3 provides for the classification of goods that are prima facie classifiable under two or more headings. The rule states, in pertinent part, as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

Explanatory Note (IX) (page 4) to GRI 3(b) states:

For the purposes of this Rule, composite goods made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole but also those with separable components, provided these components are adapted one to the other and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts.

Examples of the latter category of goods are:

(1) Ashtrays consisting of a stand incorporating a removable ash bowl.

(2) Household spice racks consisting of a specially designed frame (usually of wood) and an appropriate number of empty spice jars of suitable shape and size.

As a general rule, the components of these composite goods are put up in a common packing.

The HTSUS headings under consideration are as follows:

2106 Food preparations not elsewhere specified or included:

3004 Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses or in forms or packings for retail sale:

3824 Prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included; residual products of the chemical or allied industries, not elsewhere specified or included:

9602 Worked vegetable or mineral carving material and articles of these materials; molded or carved articles of wax, of stearin, of natural gums or natural resins, of modeling pastes, and other molded or carved articles, not elsewhere specified or included; worked, unhardened gelatin (except gelatin of heading 3503) and articles of unhardened gelatin:

In the May 24, 2000, CUSTOMS BULLETIN, Vol. 35, No 21, Customs published a document entitled “Guidance Concerning the Tariff Classification of Pharmaceutical Products Imported for Clinical Research.” There, Customs announced its intention to classify pharmaceutical products imported in dosage form for use in clinical trials as "medicaments" of heading 3004, HTSUS. Here, SR-57746A has been approved by the FDA for Investigational New Drug [IND] status and has been issued IND #52,209. Presently, the capsules are imported for use in clinical trials where they are administered to patients suffering from a specific disease (ALS), so as to cure such condition. Hence, SR-57746A capsules are used as a medicine and should be classified in heading 3004 as a medicament when in capsule form.

We now move to the classification of the placebo capsules. In New York Ruling Letter (NY) F84592, dated April, 11, 2000, we classified a placebo, in tablet form, imported for experimental purposes in heading 2106, HTSUS, the provision for "food preparations not elsewhere specified or included." The placebo in that case was said to be composed of microcrystalline cellulose, pregelatinized starch, sodium starch glycolate, copovidone (a binder), talc, magnesium stearate, and colloidal silicon dioxide.

Proceeding through the other classification headings under consideration, we note that placebos contain no active drug substance. Therefore, they are not "medicaments for therapeutic or prophylactic uses" of heading 3004. Their only use is in the clinical trials of a substance absent from the placebo capsules. They are not themselves used for therapy or prophylaxis, as they do not contain the active ingredient necessary to treat or prevent disease. Instead, they are used to provide a control group for the collection of data.

Nevertheless, counsel for the protestant argues that the placebos and the SR-57746A are shipped together as composite goods and used in conjunction with one another in the same clinical trials. Counsel insists that the placebos must therefore be classified together with the active drug capsules under heading 3004.

Counsel's argument is specious. First, in order to consider classification as a composite good of GRI 3(b), the placebos can not be classifiable by the terms of the headings using GRI 1. As noted above, the goods are classifiable by the terms of the headings in heading 2106, HTSUS, as a food preparation. The capsules contain foodstuffs (starch and lactose encapsulated in gelatin), the placebos are prepared by the mixing of ingredients and filling of the capsules, and the placebos are ingested.

Arguendo, the placebos can not be classified simply by the terms of the headings and consideration under GRI 3(b) is necessary. To bolster this argument, counsel cites language in the ENs which states that composite goods include ". . .those with separable components, provided these components are adapted one to the other and are mutually complementary and that together they form a whole . . . ." (EN (IX) to GRI 3(b)). Counsel sites this language out of context and thus misinterprets the meaning of the ENs. Composite goods made up of components are exemplified in the EN as an ashtray bowl and stand or a spice rack frame and fitted spice bottles. The separable components in these examples are adapted one to the other, that is, used together, and are mutually complementary, that is, form a whole good.

The drug and placebo in the instant case, while they complement the purpose of the clinical trials, do not make up a whole good. They are not fitted together or used together by the end user, the patient in the clinical trial. The language of the EN makes clear that the mutually complementary components must form a whole good, not intangible data. This argument is further supported by the fact that the EN notes that generally, components are packaged together. Here, the placebo and the drug are specifically not packaged together because such packaging would frustrate the design of the study leaving no control group to measure the effectiveness of the drug against.

Next, we consider heading 3824, HTSUS, the provision for " chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included." Chapter 38 note 1(b) specifically excludes: "[M]ixtures of chemicals with foodstuffs or other substances with nutritive value, of a kind used in the preparation of human foodstuffs (generally, heading 2106)." As noted above, the placebos contain foodstuffs (starch and lactose encapsulated in gelatin), and they contain chemicals (silicianhydride, magnesium stearate). While this particular mixture is specially formulated for use in a placebo capsule, the ingredients are of a kind found in dietary supplements and other foodstuffs. Thus, the placebos are a mixture of chemicals with foodstuffs that are specifically excluded from classification in Chapter 38, HTSUS.

Next, we consider heading 9602, HTSUS. Counsel argues that GRI 3(a) directs that the placebo capsules should be classified in subheading 9602.00.1080, HTSUS, the provision for ". . . articles of unhardened gelatin: [W]orked unhardened gelatin and articles thereof: [O]ther [than unfilled gelatin capsules]" as the more specific provision. In so arguing, counsel concedes that the capsules could be classified under heading 2106, HTSUS.

GRI 1 mandates comparison of headings to headings, not headings to subheadings. Only the capsule part of the placebo is an article of unhardened gelatin. Therefore, heading 9602, HTSUS, describes part only of the good whereas heading 2106, HTSUS, describes the whole placebo including the unhardened gelatin which itself constitutes a foodstuff.

Before considering a GRI 3 mixture analysis, we must first methodically work through the GRIs. In applying GRI 2(b), we are prevented from proceeding to GRI 3 in this case by the language in the EN: "[M]ixtures being preparations described as such in a Section or Chapter Note or in a heading text are to be classified under the provisions of Rule 1." The placebos at issue are just such a preparation. They are specifically prepared for a clinical trial of SR-57746A. The placebos contain similar ingredients to the inert ingredients of the SR-57746A capsules. The placebo capsule is prepared to appear identical to the SR-57746A capsules. Heading 2106, HTSUS, the provision for "[F]ood preparations not elsewhere specified or included," fully describes the placebos.

In an attempt to prove that filled gelatin capsules are specifically provided for in heading 9602, HTSUS, as articles of gelatin other than unfilled gelatin capsules, counsel jumps to the statistical provisions at the ten-digit level. However, counsel misreads this provision. The word "other" does not, as counsel suggests, refer to the word "unfilled" which would support the classification of "filled" gelatin capsules within the subheading. Instead, the word "Other" means, "articles of worked unhardened gelatin other than unfilled gelatin capsules." These articles could be any articles of worked unhardened gelatin except unfilled gelatin capsules. Thus, the language of the subheading does not mandate classification of "filled" gelatin capsules in subheading 9602.00.1080, HTSUS. In fact, all of the cases counsel cites to support this argument classify only unfilled gelatin capsules in subheading 9602.00.10, HTSUS. (See NY D89279, dated November 16, 1999, NY D80818, dated November 12, 1998, and NY 811937, dated June 29, 1995).

HOLDING:

Capsules containing SR-57746A as their active ingredient are classified in subheading 3004.90.90, HTSUS, as “other” medicaments and should be entered free of duty. Placebo capsules are classified in subheading 2106.90.99, the provision for "[F]ood preparations not elsewhere specified or included: [O]ther: [O]ther: [O]ther." The protest is ALLOWED in part and DENIED in part.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

John Durant, Director

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