MAR-05 RR:CR:SM 562174 NL
Jack D. Mlawski, Esq.
Galvin & Mlawski
440 Park Avenue South, 9th Floor
New York NY 10016-8067
RE: Classification of Organic Compounds for Pharmaceutical Research as Prototypes under Heading 9817.85.01, HTSUS.
Dear Mr. Mlawski:
This is in reply to your letter dated July 3, 2001, on behalf of Merck & Co. (Merck), requesting a ruling that certain organic chemical compounds imported by Merck are eligible for classification as prototypes under heading 9817.85.01, HTSUS.
FACTS:
The merchandise consists of 4” X 6” polypropylene trays described as similar to egg crates, each containing 96 wells. Each well contains a separate organic compound. Some trays are imported in inert dry state, others in a dimethyl sulfoxide (DMSO) solution frozen on dry ice.
The trays are imported in lots of 100 to 200, with each well in each tray containing a unique organic compound. In the U.S., Merck robotically screens each of the compounds to test for pharmaceutical applications. This is a high speed screening process that allows each compound to be tested for different properties. If the screening process identifies a sample having pharmaceutical potential, Merck would order greater volumes for further research and testing.
Merck seeks a ruling that the organic compounds imported in trays are classifiable in subheading 9817.85.01, HTSUS, a duty free provision, as “Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes…”
ISSUE:
Whether the imported compounds are classified as prototypes under subheading 9817.85.01, HTSUS.
LAW & ANALYSIS:
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).
These additions to the HTSUS became effective at enactment of the PDTA on November 9, 2000. Regulations implementing certain provisions of the PDTA proposed by the Customs Service (67 FR 10636, March 8, 2002) are to become effective following notice and comment. However, duty-free treatment for prototypes may be claimed under the Chapter 98, subchapter XVII legal provisions for goods entered after November 9, 2000, as well as retrospectively for entries made under temporary importation bonds.
As set forth in Merck’s submission, the imported organic compounds are to be tested by Merck to determine whether they have properties that are of interest for further pharmaceutical research. Such use of the imported organic compounds is within the scope of: “development”; “testing”; “product evaluation”; or all of the foregoing as provided in subheading 9817.85.01, HTSUS. Merck represents that these imported materials are imported to be used exclusively for these purposes. Accordingly, it may be concluded that these imported organic compounds are described in the legal text of subheading 9817.85.01, HTSUS.
The importations also satisfy the applicable terms of U.S. Note 6 to subchapter XVII of Chapter 98, HTSUS. In accordance with subparagraph (a)(i) of Note 6, the organic compounds are originals of articles that are in the preproduction stage and are to be used exclusively for development, testing or product evaluation. In accordance with subparagraph (b)(1) of Note 6, the organic compounds are to be imported in limited, noncommercial quantities. Finally, pursuant to subparagraph (b)(2)(ii), Merck represents that the compounds will not be sold after importation. (Although there is no representation from Merck, the circumstances suggest that the organic compounds will be wholly unsuitable for incorporation into other articles that might be sold.)
No information has been submitted by Merck concerning the status of the imported compounds under subparagraph (c) of Note 6. Pursuant to this subparagraph articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders may not be classified as prototypes
under this note. Also, 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). Accordingly, this ruling is issued on the assumption that the terms of subparagraph (c) of Note 6 will have been met.
HOLDING:
Organic compounds imported for use as set forth above are eligible for classification in subheading 9817.85.01, HTSUS. The information submitted indicates that the imported organic compounds satisfy the relevant provisions of subparagraphs (a) and (b) to Note 6 to subchapter XVII of Chapter 98, HTSUS. Such classification is correct provided the terms of subparagraph (c) are also 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, Commercial
Rulings Division