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HQ 563139




February 8, 2005

CLA-02 RR:CR:SM 563139 AL

Category: CLASSIFICATION

Port Director
U.S. Customs and Border Protection
Second and Chestnut Streets, Room 102
U.S. Customs House
Philadelphia, Pennsylvania 19106

Attention: Mr. Dennis Cordisco

RE: AFR/Protest No. 1101-04-100176; 9817.85.01; Prototypes; Investigational New Drug (“IND”)

Dear Port Director:

The above-referenced protest has been forwarded to this office for further review. The following decision is based on the consideration of points raised by the protestant, Ortho McNeil Pharmaceuticals, Inc. (“Ortho McNeil”) and by your office.

FACTS:

On December 2, 2003, the protestant imported 102.8 kilograms of a chemical compound known as TMC-114, into the United States, claiming classification under subheading 9817.85.01, Harmonized Tariff Schedule of the United States (“HTSUS”). According to the protestant, the subject merchandise was imported solely for the purpose of a Phase IIB pre-production trial “to assess its efficacy as an active ingredient in a drug to treat HIV-1, Human immunodeficiency virus.” The protestant states that TMC-114 has no commercial purpose in the U.S. and that it was approved under the Investigational New Drug (“IND”) protocol administered by the U.S. Food and Drug Administration (“FDA”). The protestant further emphasized that the IND protocol limits the drug from being sold commercially. According to the letter, dated August 4, 2004, from the senior scientist involved in the clinical study, the duration of the study is 48 weeks and involves about 600 patients. The dose ranges from 800 to 1200 milligrams per day.

The Port asserts that the subject merchandise does not qualify under subheading 9817.85.01, HTSUS because it believes that the imported subject merchandise is past the testing stage to qualify under this provision. Therefore, the Port liquidated the subject entry on March 12, 2004, asserting that the subject merchandise does not qualify under subheading, 9817.85.01. The protest was received on June 10, 2004.

ISSUE:

Whether the subject merchandise qualifies for duty-free treatment as a prototype under subheading 9817.85.01, HTSUS.

LAW and ANALYSIS:

Initially, we note that the protest was timely filed under the statutory and regulatory provisions for protests (see 19 USC § 1514 and 19 CFR Part 174).

Pursuant to § 1433 of the Product Development and Testing Act of 2000 (PDTA), enacted as part of the Tariff Suspension and Trade Act of 2000 (Pub. L. 106-476), articles classified as “prototypes” under the Act may be imported duty free. To provide for duty-free entry of prototypes, section 1433 of the PDTA inserted a new subheading 9817.85.01 in Subchapter XVII of Chapter 98, HTSUS, providing for:

Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes . . .

The PDTA also added a new Note 6 in Subchapter XVII of Chapter 98. Note 6 defines prototypes for the purposes of HTSUS subheading 9817.85.01 and sets forth certain conditions and limitations governing classification in the subheading. This Note provides:

(a) For purposes of this subchapter, including heading 9817.85.01, the term “prototypes” means originals or models of articles that – (i) are either in the preproduction, production, or postproduction stage and are to be used exclusively for development, testing, product evaluation, or quality control purposes; and (ii) in the case of originals or models of articles that are either in the production or postproduction stage, are associated with a design change from current production (including a refinement, advancement, improvement, development, or quality control in either the product itself or the means for producing the product).

For purposes of clause (i), automobile racing for purse, prize, or commercial competition shall not be considered to be “development, testing, product evaluation, or quality control.”

(b)(i) Prototypes may be imported only in limited noncommercial quantities in accordance with industry practice. (ii) Except as provided for by the Secretary of the Treasury, prototypes or parts of prototypes may not be sold after importation into the United States or be incorporated into other products that are sold.

(c) Articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders may not be classified as prototypes under this note. Articles subject to licensing requirements, or which must comply with laws, rules, or regulations administered by agencies other than the United States Customs Service before being imported, may be classified as prototypes if they comply with all applicable provisions of law and otherwise meet the definition of “prototypes” under paragraph (a).

Based on the information you provided, the subject merchandise satisfies the conditions set forth for classification under HTSUS subheading 9817.85.10, and criteria of Note 6, Subchapter XVII, Chapter 98. According to the protest, the importation of TMC-114 is solely for the purpose of a Phase IIB pre-production trial to determine whether TMC-114 would be an effective ingredient for a drug to treat HIV-1. The protestant provided the following: a copy of the IND Application which was indicated to have been approved by the FDA, and a letter, dated August 4, 2004, which outlined the disposition of the 102.8 kilograms of TMC-114. The IND protocol is for investigational purposes to determine whether an active ingredient can be used as a drug. TMC-114 is under the IND protocol and therefore, is simply being imported to the United States to be tested and evaluated. Based on this information, we agree that the use of the imported TMC-114 in this pre-production Phase IIB trial satisfies the condition of “testing, product evaluation, or quality control purposes” under Note 6 and is not past the testing stage to qualify under this provision.

The quantity of the imported merchandise is 102.8 kilograms. The protestant outlined in the August 4, 2004 letter, the use of the 102.8 kilograms of TMC-114, conveying that such quantity is a normal “noncommercial quantity in accordance with industry practice” as required by subparagraph (b)(i) of Note 6. The protestant also asserted that the current quantities are in accordance with FDA requirements by way of the IND protocol. Therefore, based on this information, we agree based on this information that the importation of 102.8 kilograms of TMC-114 would comply with the requirements of “noncommercial quantities in accordance with industry practice.”

In further compliance with the conditions set forth for classification under HTSUS subheading 9817.85.10, TMC-114 will be consumed in its entirety during the clinical trials and therefore, we find that the TMC-114 will not be commercially sold as required by subparagraph (b)(ii) of Note 6. It was also indicated by the protestant that under the IND protocol, the FDA prohibits commercial sales. And lastly, the imported TMC-114 does not apply to any of the restrictions in subparagraph (c) of Note 6, i.e. quantitative restrictions, antidumping or countervailing duty orders.

HOLDING:

Based on the information provided by both the protestant and the port, the importation of TMC-114 satisfies the conditions set forth for classification under HTSUS subheading 9817.85.10 and therefore, qualifies for duty-free treatment as a prototype.

This protest should be allowed.

In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), 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 in accordance with this 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 CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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