CLA-2 OT:RR:CTF:TCM H073995 CkG
Nicole Jenkins
Crowell & Morring LLP
1001 Pennsylvania Ave, NW
Washington, DC 20004-2595
Re: Country of Origin of Toprol-XL®
Dear Ms. Jenkins,
This is in reference to your request of August 20, 2009, for a binding ruling on the country of origin marking of Toprol-XL®.
FACTS
The product at issue is the pharmaceutical drug, Toprol-XL®. Toprol-XL® is used in the treatment of hypertension and chronic heart failure. The active ingredient in Toprol-XL® is metoprolol succinate. Each Toprol-XL® tablet consists of coated metoprolol succinate beads combined with an excipient mixture in a tablet form. Each tablet contains multiple pellets of metoprolol succinate, each of which acts as a separate drug delivery unit, thus delivering the metoprolol continuously over the dosage interval (24 hours).
The manufacture of Toprol-XL® takes place in Sweden. The metoprolol succinate beads are formulated by spraying a solution of metoprolol onto cores to create uniformly sized beads. The metoprolol beads are coated with a polymer solution. The coated metoprolol succinate beads are then mixed with excipients and compressed into tablets. The tablets are coated with an additional polymer solution and polished prior to packaging.
ISSUE
Whether the Toprol-XL® undergoes a substantial transformation in Sweden, thus rendering Sweden the country of origin of Toprol-XL® for marking purposes.
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 United States the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 135) implements the country or 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 ofreign 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;….
A substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); and National Juice Products Association v. United States, 628 F. Supp. 978 (Ct. Int’l Trade 1986).
In determining whether a substantial transformation occurs in the manufacture of chemical products such as pharmaceuticals, CBP has consistently examined the complexity of the processing, and whether the final article retains the essential identity and character of the raw material. To that end, CBP has generally held that the processing of pharmaceutical products from bulk form into measured doses does not result in a substantial transformation of the product. See e.g., HQ 561975, dated April 3, 2002; HQ 561544, dated May 1, 2000; and HQ 735146, dated November 15, 1993. In HQ 561975, the anesthetic drug sevoflurane imported into the U.S. in bulk form and processed into dosage form by extensive testing operations, followed by filtering and packaging into bottles, was found not to have undergone a substantial transformation in the U.S. There was no change in name (the product was identified as sevoflurane in both its bulk and processed form). The sevoflurane retained its chemical and physical properties after the U.S. processing. Lastly, because the imported bulk sevoflurane had a predetermined medicinal use as an inhalable anesthetic drug, the processing in the United States resulted in no change in the product’s use. In HQ 561544, Geneticin Selective Antibiotic made by filtration of a solution of Geneticin Sulfate in bulk, powdered form and purified water was not found to have been substantially transformed because the processing in this case essentially involved the removal of impurities from the bulk chemical and the placement of the chemical into smaller packaging.
However, CBP has found a substantial transformation to have occurred where processing significantly increased the effectiveness of the final product. See e.g., HQ 731731, dated February 23, 1989; HQ 563301, dated August 26, 2005; and HQ 563207, dated June 1, 2005. In HQ 731731, for example, CBP found that the processing of vancomycin hydrochloride from its raw form, which is unsuitable for human use, into a usable and injectable antibiotic, constituted a substantial transformation. CBP similarly held in HQ 563301 that raw parathormone was substantially transformed from an unstable, non-sterile, frozen material unsuitable for human use into a pharmaceutical agent ready for human use. In both cases, the further processing included thawing the raw material; testing and adjusting the active ingredient as necessary; mixing the material in a buffer solution; applying nitrogen gas to eliminate possible degradation; filtering the material through a microbial filter, and a three-step freeze drying process.
HQ 563207, in turn, held that a substantial transformation occurred where multiple active chemical ingredients were combined and processed into products with a new character, name or use. At issue in HQ 563207 was the drug Actoplus Met™, a combination of two active pharmaceutical ingredients used in the treatment of diabetes, Pioglitazone HCl and Metformin. Actoplus Met™ showed significantly increased effectiveness in the treatment of type 2 diabetes compared to either active ingredient taken alone.
In Drexel Chemical Co. v. United States, 27 C.I.T. 804 (2003), the Court of International Trade also found that the herbicide Diuron was substantially transformed due to the physical changes that air milling of DCU cake induced—namely, reducing the size of the Diuron particles—and the chemical change as valence bonds were freed. While the Diuron molecule itself remained unchanged throughout the process, the physical and chemical changes to the DCU cake resulted in a usable herbicide. Without the additional processing, the Court found that plant leaves were unable to take in the DCU particles, rendering the Diuron unusable for its intended purpose.
CBP has also used a comparable analysis to determine the applicability of certain special duty provisions relating to articles returning to the U.S. after exportation and alteration abroad. In HQ 555597, dated May 24, 1990, CBP held that a substantial transformation took place for the purpose of classification in 9801.11.10, HTSUS, when the oral contraceptive drugs Norethin and Demulen were manufactured from Norethindrone USP, Ethinyl Estradiol, and Mestranol. The three active chemical ingredients were raw materials in bulk form which were stated to be unsuitable for medical use. The final prescription drugs, in tablet and individual dosage form, were ready for immediate medical application. In NY 864623, dated September 19, 1991, regarding the applicability of subheading 9802.00.50, HTSUS, the coating of Omeprazole pellets with an enteric solution was deemed to create a new and different article for tariff classification purposes by allowing the pellets to remain intact in the stomach but dissolve in the intestine.
In contrast, CBP has consistently held that merely altering the delivery mechanism of the drug does not constitute a substantial transformation. In HQ 562889, dated January 21, 2004, CBP held that the enteric coating of lasoprazole did not cause a substantial transformation because it did not change the chemical composition of the active pharmaceutical ingredient. CBP noted in this case that the enteric coating altered the delivery rate of the drug into the human body, but did not address whether the uncoated drug would remain effective after passage through the stomach and exposure to the stomach’s digestive acids.
Similarly, in HQ 733248, dated August 22, 1990, CBP examined whether Immune Globulin (Human) Fraction II paste of U.S. origin was substantially transformed as a result of processing in Belgium that allowed it to be used intravenously, a faster and more effective delivery mechanism than intramuscular injection, which is how the unprocessed paste was used. The paste was processed by sterile filtering and buffering, and filled into vials and freeze-dried. As a result of this processing, the paste became Immune Serum Globulin Intravenous (“IGIV”), which is administered intravenously. Citing National Juice Products v. United States, 10 CIT 48, 628 F.Supp. 978 (CIT 1986), in which the Court of International Trade held that imported orange juice concentrate was the very essence of the retail product and that the addition of water, orange essences, and oils to the concentrate did not change the fundamental character of the product, CBP found in HQ 733248 that the paste did not undergo a substantial transformation in Belgium because the “paste is the major part of the end product although the minor processing performed in Belgium was necessary to make the final product usable in intravenous form.”
Lastly, in NY C85112, dated March 27, 1998, CBP considered the country of origin marking of a single-dose administration kit of leuprolide acetate for depot suspension. The active ingredient, a synthetic analog of Leuteinizing Hormone-Releasing Hormone), is exported from the U.S. to Japan, where it is encapsulated into sterile microspheres and placed in a dual-chamber syringe. The microencapsulating of the leuprolide acetate modified the delivery rate of the drug into the body from the daily-dosage form. CBP found that the fundamental character of the leuprolide acetate remained unchanged by the processing, and the country of origin of the packaged prefilled dual-chamber syringes remained the U.S.
You claim that a substantial transformation took place in Sweden due to the complexity of the manufacturing process which transforms the raw active ingredient, metoprolol succinate, into Toprol-XL®. You claim that the formulation of Toprol-XL® is more complex, time, cost and labor-intensive than the production of the active pharmaceutical ingredient. However, the complexity of the processing is not in and of itself, a determining factor. The issue is whether the processing resulted in a final product with a new name, character, or use. To that end, you claim that the metoprolol succinate is “unusable, if not toxic” in its raw/bulk form. You submit evidence on the dangers of overdosing on metoprolol, potential side effects, the improved effects of Toprol-XL® compared to other formulations of metoprolol succinate, and bioavailability and metabolism of the drug. None of this supports a finding of substantial transformation. Virtually any substance can be toxic if ingested in an improper manner or with improper dosage. We have consistently held that the processing of pharmaceutical products from bulk form into measured doses does not result in a substantial transformation of the product. We have also held that merely altering the delivery rate of the drug or otherwise improving the delivery mechanism does not constitute a substantial transformation. There is nothing in the evidence you submit to indicate that unformulated metoprolol is unfit for human use—for example, that it would be destroyed by acid in the stomach and thus rendered ineffective absent the polymeric coating. You cite to Basic and Clinical Pharmacology, 11th Edition, the McGraw-Hill Companies, Inc., in support of your statement that proton pump inhibitors such as lansaprazole are inactivated or destroyed by stomach acid without an acid-resistant enteric coating, but provide no evidence that metoprolol reacts similarly.
We do not agree that the processing undergone in Sweden meets the requirements of a substantial transformation. The product, metoprolol succinate, remains metoprolol succinate in a measured dose ready for oral ingestion. Its name, character and use appear unaltered. No substantial transformation therefore occurred in Sweden. The country of origin is therefore the country where the active ingredient was sourced.
HOLDING:
On the basis of the information provided, the metoprolol succinate does not undergo a substantial transformation when formulated in Sweden into Toprol-XL®. The country of origin of Toprol-XL® for marking purposes is the country where the metoprolol succinate was sourced.
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 CBP officer handling the transaction.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division