HQ 561507 - Country of origin and marking requirements applicable to pharmaceutical products manufactured in the U.S. and packaged in Mexico - United States International Trade Commision Rulings

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HQ 561507

September 28, 2000

MAR 05 RR:CR:SM 561507 KKV

CATEGORY: MARKING

Alan G. Minsk, Esq.
Arnall, Golden & Gregory, LLP
2800 One Atlanta Center
1201 West Peachtree Street
Atlanta, GA 30309-3450

RE: Country of origin and marking requirements applicable to pharmaceutical products manufactured in the U.S. and packaged in Mexico

Dear Mr. Minsk:

This is in response to your letter dated September 2, 1999, which requests a ruling regarding the country of origin and marking requirements applicable to pharmaceutical products which are manufactured in the United States and packaged in Mexico. We regret the delay in responding.

FACTS:

You indicate that your client, a United States-based manufacturer of over-the-counter (OTC) pharmaceutical products, intends to mix and compress a variety of OTC drug products, to be sold in tablet form, in the United States and place the tablets, which are in final form, into foil blister strips. These blister strips, together with U.S.-manufactured folding cartons will be shipped to Mexico. For purposes of this ruling, we are assuming that the pharmaceutical products exported to Mexico are of U.S. origin.

In Mexico, employees will place the blister strips into the printed folding cartons, glue the ends of the cartons together, bundle the cartons into selling units and place the units into corregated containers for shipment to the United States. You inquire whether, as a result of packaging operations in Mexico, the tablets will be required to be marked “Made in Mexico” upon their return to the U.S.

ISSUE:

What is the country of origin of drug tablets manufactured in the United States and packaged in Mexico?

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), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as:

The country of manufacture, production, or growth of any article of foreign origin entering the United States. 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.

Section 134.1(j) 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.

Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for the purposes of country of origin marking and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2. Paragraph (a) of this section states that the country of origin of a good is the country in which:

The good is wholly obtained or produced;
The good is produced exclusively from domestic materials; or 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.

Since the subject drug tablets are neither wholly obtained or produced in Mexico, nor produced exclusively from domestic (i.e., Mexican) materials, origin cannot be determined under sections 102.11(a)(1) and 102.11(a)(2) and analysis moves to section 102.11(a)(3).

Section 102.11(a)(3) provides that the country of origin is the country in which “each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 CFR 102.20...” The term “foreign material” is defined in 19 CFR 102.1(e) 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.” Therefore, in order to determine whether Mexico is the country of origin, we must look at those materials whose country of origin is other than Mexico, which in this case are the drug tablets of U.S. origin. Although we have not been supplied with the tariff classification for the many varieties of drug tablets exported to Mexico, we note the applicability of section 19 CFR 102.17, which provides, in pertinent part, as follows:

A foreign material shall not be considered to have undergone an applicable change in tariff classification specified in section 102.20 or 102.21 or to have met any other applicable requirements of those sections merely by reason of one or more of the following:

(c) Simple packing, repacking or retail packaging without more than minor processing;

Because the subject tablets undergo no processing operations in Mexico other than simple packaging, the tablets will not meet the requisite tariff shift conditions in ANY rule set forth in 19 CFR 102.20, regardless of the ultimate classification of each separate product. Thus, country of origin cannot be determined under this section, and analysis proceeds to 19 CFR 102.11(b), which 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:

Is the country or countries of origin of the single material that imparts the essential character of the good, or

If the material that imparts the essential character of the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method provided under the Appendix to part 181 of the Customs Regulations.

Under the facts presented, section 102.11(b)(2) is inapplicable to the drug tablets, which are neither specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3. Accordingly, the next rule to be applied to determine origin is 19 CFR 102.11(b)(1), which requires a determination as to the single material that imparts the essential character of the good.

“Material” is defined in 19 CFR 102.1(1) as “a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components.” When determining the essential character of a good under 19 CFR 102.11, we note that 19 CFR 102.18(b)(1), provides that only domestic and foreign materials that are classified in a tariff provision from which a change is not allowed under the 102.20 specific rule or other requirements applicable to the good shall be taken into consideration. Section 102.18(b)(1)(iii), Customs Regulations (19 CFR 102.18(b)(1)(iii)), provides that if there is only one material that is classified in a tariff provision from which a change in tariff classification is not allowed, then that material will represent the single material that imparts the essential character to the good under 19 CFR 102.11.

Here, the article imported into Mexico for processing consists of a single material - the drug tablets of U.S. origin, which, as previously discussed, will not undergo the requisite tariff shift as a result of processing in Mexico. Therefore, it is this single material which imparts the “essential character” to the good. Accordingly, the country of origin of the packaged drug tablets is the United States, pursuant to 19 CFR 102.11(b)(1). Inasmuch as the marking requirements of 19 U.S.C. 1304 are applicable only to articles of “foreign origin,” the packaged tablets are not required to be marked upon importation into the United States. We note that claims of domestic origin is a matter under the jurisdiction of the Federal Trade Commission (FTC). Therefore, should you wish to mark the articles with the phrase “Made in the USA” we recommend that you contact that agency at the following address:

Federal Trade Commission
Division of Enforcement
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580.

HOLDING:

On the basis of the information provided, the country of origin of drug tablets manufactured in the United States and subsequently packaged in Mexico is the United States, pursuant to 19 CFR 102.11(b)(1). Accordingly, the returned tablets are exempt from the marking requirements of 19 U.S.C. 1304 upon importation into the U.S.

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
Commercial Rulings Division

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