CON-9-04-CO:R:C:E 223589 DHS
John S. Rode, Esq.
Rode & Qualey
295 Madison Avenue
New York, New York 10017
RE: Temporary importation under bond for processing and testing
experimental pharmaceutical products; Subheading 9813.00.05
HTSUS; Subheading 9813.00.30; 19 CFR 10.39(a)
Dear Mr. Rode:
This is in response to your letter of November 26, 1991, on
the application of subheading 9813.00.05 and 9813.00.30 of the
Harmonized Tariff Schedule of the United States (HTSUS), to
pharmaceutical products imported in bulk and dosage forms, for
use in performance research and development testing.
FACTS:
Boehringer Mannheim Pharmaceutical Corporation (BMPC)
proposes to import new drug substances (chemical compounds), in
bulk and dosage forms, from Germany and Italy for specified
research and development testing required by the Food and Drug
Administration (FDA) as a condition to obtaining FDA approval for
the sale of new pharmaceutical products in the United States.
The required research and testing will be conducted as an
integral part of clinical trials to be performed by BMPC and its
subcontractors to whom BMPC will supply the experimental
compounds, free of charge. The drug substances will be used in
both bulk and final dosage forms (i.e., tablets, capsules, and
solutions contained in ampuls) as prescribed in the pertinent
protocols established and supervised by the FDA. All of the drug
substances, except the drugs which will be used for stability
testing and retention samples, will be administered to and
consumed by the patients participating in the clinical trials, or
otherwise physically destroyed in conjunction with the clinical
trials.
The experimental chemical compounds which are imported as
bulk drug substances will be processed into dosage forms by BMPC,
or by one of its subcontractors. Ownership of the drugs will
always be held by BMPC. Subsequently, these capsules, tablets,
and ampuls containing the solution of the chemical compound will
be consumed in the clinical trials in the same manner as the
premeasured imported dosages.
You have stated that BMPC, and its subcontractors, will
maintain records to show the place, date, and other relevant
circumstances pertaining to the consumption of the tablets,
capsules or solution as required by the FDA protocols.
Furthermore, BMPC will retain strict inventory control over every
importation, and all imported material. All recordkeeping and
inventory procedures will be sufficient to satisfy the
requirements of Subheading 9813.00.30, HTSUS, and Subchapter XIII
U.S. Note 3, Subheading 9813.00.05, HTSUS and U.S. Note 2(b).
A portion of the imported chemical compound, from the bulk
and dosage forms, will be designated for stability testing or as
retention samples. The purpose of stability testing is to
determine the length of time during which a particular drug
substance will maintain its potency. Whereas, retention samples
are retained for analytical evaluation after a particular passage
of time. Since this portion of the importation will not be
destroyed or exported before the expiration of the bond period,
BMPC will enter the chemical compound to be used for the
retention samples and the stability testing as a consumption
entry.
Finally, you have stated that similar merchandise has been
imported through Dulles International Airport, but has not been
entered under either of these subheadings.
ISSUE:
Whether the processing and testing of the experimental
pharmaceutical products permits their entry under subheadings
9813.00.30 and 9813.00.05, HTSUS, (formerly items 864.30 and
864.05, TSUS).
LAW AND ANALYSIS:
Under subheading 9813.00.30, HTSUS, articles intended solely
for testing, experimental, or review purposes may be entered
duty-free, temporarily, under bond for their exportation within
one year from the day of importation unless an extension for one
or more additional periods, which when added to the initial
period does not exceed three years, is granted by the district
director. Likewise, articles to be repaired, altered or
processed (including processes which result in articles
manufactured or produced in the United States) may be entered
under subheading 9813.00.05, HTSUS.
The procedure described to obtain FDA approval of the
chemical compound is a test or experiment within subheading
9813.00.30, HTSUS, since the drugs are administered to selected
patients as a means of testing the drug itself and its effect on
the general class of humans, as opposed to, the effect on a
particular patient's malady. See, HRL 214134, dated April 23,
1982.
Under U.S. Note 3, upon satisfactory proof that any article
admitted under subheading 9813.00.30, HTSUS, has been destroyed
because of its use for any purpose provided for therein, the
obligation under the bond to export such article shall be treated
as satisfied.
Pursuant to 19 CFR 10.39(a), in the case of articles entered
under subheading 9813.00.30, HTSUS, which are destroyed because
of their use for the purposes of importation, the bond charge
shall not be cancelled unless there is submitted to the district
director a certificate of the importer that the articles were
destroyed during the course of a specifically described use, and
the district director is satisfied that the articles were so
destroyed as articles of commerce within the period of time
during which the articles may remain in the Customs territory of
the United States under bond.
"An article is destroyed when its value, usefulness, and
that which makes it what it is are completely lost." United
States v. Pastene & Co., 22 Treas. Dec. 725, at 727, T.D. 32458
(April 17, 1912). Any article undergoing testing has not lost
its value or usefulness, while it remains under testing, unless
it is destroyed by the testing. An article must be rendered
totally worthless to be considered destroyed. H. A. Johnson Co.
v. United States, 21 Cust. Ct. 56, at 61, C.D. 1127 (August 25,
1948).
Under C.S.D. 80-24, Headquarters Ruling Letter (HRL) 210532,
dated June 30, 1979, we stated that the "Customs Service, not
only under the present law but under its predecessor, section
308(4), Tariff Act of 1930, as amended, has repeatedly ruled that
substances or drugs imported for testing which are not destroyed
or consumed by such testing, must be destroyed." See the
following: Bureau letter to Collector of Customs, Tampa, May 17,
156 (515.23)(fructose used as test with diabetics); Bureau letter
to law firm of O'Conner & Farber, September 12, 1955
(412.6)(common cold medicine for distribution as part of a test);
Bureau letter to Collector, Indianapolis, August 8, 1955
(516.23)(tablets used for testing on persons suffering from
hypertension)."
Accordingly, Customs has consistently held that consumption
by selected patients participating in the test of
pharmaceuticals, would be deemed a destruction for purposes of
section 10.39(a). The chemical compounds used for testing under
the facts presented would therefore, be eligible for treatment
under subheading 9813.00.30, HTSUS.
Conversion of the imported bulk chemical compound into
specific quantities for distribution as medication would
constitue a process of the chemical compound. Therefore,
subheading 9813.00.05, HTSUS, would additionally be applicable to
that merchandise entered in bulk and processed into dosage form.
There is no objection to entering merchandise under more than one
TIB provision on a single entry, when an article is entitled to
entry under multiple provisions due to the use that the article
will be put while in the United States. See, C.S.D. 83-45, HRL
221835, dated August 27, 1990.
However, to qualify for duty-free treatment under these TIB
provisions, the importer must also comply with all of the
accountability requirements under the U.S. Notes of Subchapter
XIII. In particular, subheading 9813.00.05, HTSUS, U.S. Note
2(b) states that if any processing of such merchandise results in
an article manufactured or produced in the United States: (i) a
complete accounting will be made to the Customs Service for all
articles, wastes and irrecoverable losses resulting from such
processing; and (ii) all articles and valuable wastes resulting
from such processing will be exported or destroyed under customs
supervision within the bond period; except that in lieu of the
exportation or destruction of valuable wastes, duties may be
tendered on such wastes at rates in effect at the time of
importation.
To further amplify, in C.S.D. 81-224, Customs found that the
intent of Congress is to allow tender of duty and retention in
the U.S. of valuable waste where exportation or destruction is
uneconomic. Any evidence, satisfactory to the district director,
that is sufficient to identify the valuable waste and show its
description and quantity is adequate. Such evidence might be a
statement of the importer, or other persons having knowledge of
the facts, setting forth the circumstances of the production of
the valuable waste.
You have also pointed out, the chemical compound which will
be used for retention samples and stability testing will be
treated as a dutiable consumption entry since they will not be
destroyed or exported within the requisite statutory period.
This is in conformance with C.S.D. 80-24 (HRL 210532), dated June
30, 1979; wherein, we concluded that drugs undergoing stability
testing "for shelf life" are not considered destroyed within the
meaning of U.S. Note 3 (previously, headnote 3, schedule 8, part
5, subpart C, TSUS), unless it can be shown that because of the
length of such testing, the drugs have completely deteriorated.
The drugs which have not completely deteriorated must be exported
timely or the importer will incur liquidated damages.
Finally, we are unable to approve the segregation procedure
or the method of accounting without the submission of details
regarding this procedure and copies of records demonstrating
compliance with the statutes and regulations. See, 19 CFR
177.2(b) and 177.7.
HOLDING:
Based upon the actions of BMPC to maintain strict inventory
control over every importation and all imported material, to
agree not to sell the imported material and to use and handle the
merchandise entered temporarily free under bond in the manner and
for the purpose of entitling it to duty-free treatment, Customs
holds that:
Subheading 9813.00.30, HTSUS, is applicable to the chemical
compound entered in dosage form for use in tests detailed in this
submission for approval by the FDA.
Subheading 9813.00.30 and 9813.00.05, HTSUS, are applicable
to the chemical compound entered in bulk form which is processed
into dosage form, for use in the previously described tests.
The portion of the chemical compound retained by the
importer for retention samples and stability testing must be
entered as a consumption entry and duty paid.
Sincerely,
John Durant, Director
Commercial Rulings Division