CLA-02 RR:CR:SM 563056 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. 1101-04-100175; 9817.85.01; Prototypes
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, Cephalon, Inc. (“Cephalon”) and by your office.
FACTS:
On October 23, 2003, the protestant imported 7.48 kilograms of a drug known as CEP 1347, 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 II clinical trial for Parkinson’s disease. The protestant further states that CEP 1347 has no commercial purpose in the U.S. and that all of the amounts would be consumed in the clinical testing. Moreover, the clinical study consists of 800 patients and is expected to last through 2006.
On November 18, 2003, the Port issued a CF 29 to the protestant, stating that an increase in duties is being proposed. The port asserted that the subject merchandise does not qualify under subheading, 9817.85.01 and therefore, should be re-classified under subheading, 2934.99.4400, HTSUS, which is dutiable at $0.04/kg + 7.5%. The subject entry was liquidated on March 12, 2004 and 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 CEP 1347 is solely for the purpose of a Phase II clinical trial for Parkinson’s disease, and it is claimed that by definition, clinical trials are conducted for the purpose of “testing” and “product evaluation” where the effectiveness and safety of a drug is tested in a controlled environment. The protest also provides an excerpt of a FDA document concerning the “Drug Review Process” that addresses the aim in Phase II clinical trials which is to test the effectiveness of a drug. Based on the information the protestant has furnished, we agree that the use of the imported CEP 1347 in this Phase II clinical trial satisfies the condition of “testing, product evaluation, or quality control purposes” under Note 6.
The quantity of the imported merchandise is 7.48 kilograms. The protestant claims that this quantity is a normal “noncommercial quantity in accordance with industry practice” as required by subparagraph (b)(i) of Note 6 and that the entire quantity would be used in the clinical trial. As evidence that the importation is in a “noncommercial quantity in accordance with industry practice,” an article from the American Neurological Journal describing a similar clinical study on Parkinson’s disease was submitted. According to the article, 800 patients with early Parkinson’s disease took part in the Deprenyl and Tocopherol Antioxidative Therapy of Parkinsonism (DATATOP) trial which ran approximately 14-months and involved dosages of 10 mg/day of open-label deprenyl for a number of patients. Similarly, the CEP 1347 clinical study consists of 800 patients solely for the purpose of a clinical trial for Parkinson’s disease. Thus, the DATATOP trial illustrates that the importation of 7.48 kilograms of CEP 1347 would comply with the requirement of “noncommercial quantities in accordance with industry practice.”
In further compliance with the conditions set forth for classification under HTSUS subheading 9817.85.10, CEP 1347 will be consumed in its entirety during the clinical trials and therefore, we find that the CEP 1347 will not be commercially sold as required by subparagraph (b)(ii) of Note 6. Moreover, the imported CEP 1347 does not apply to any of the restrictions in subparagraph (c) of Note 6, i.e. quantitative restrictions, antidumping or countervailing duty orders.
Because we find that the subject merchandise falls under the provision for prototypes classified under subheading 9817.85.01, HTSUS, we do not address the port’s proposed classification.
HOLDING:
Based on the information provided by both the protestant and the port, the importation of CEP 1347 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