CLA–2 OT:RR:CTF:TCM H191901 AMM
Center for Excellence and Expertise (CEE)
One Penn Plaza, 10th Floor
New York, NY 10119
Attn: Leon Hayward, Director
RE: Internal Advice; Classification of Chemical Libraries; Prototypes; 9817.85.01
Dear Mr. Hayward,
This is in regard to a Request for Internal Advice No. 11/031 from the Center for Excellence and Expertise (CEE), initiated on behalf of Astra-Zeneca Pharmaceuticals, LP (Astra-Zeneca), pursuant to 19 CFR §177.11. At issue is the classification of chemical libraries (in the form of microwell plates), under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The merchandise at issue consists of microwell plates. These are plastic plates containing anywhere from 96 to 384 individual wells. Each well holds 12.5 microliters, but generally only contains 500 nanoliters of a given chemical. The chemicals themselves are either in solid form, dispersed in water, or dispersed in the chemical dimethyl sulfoxide (DMSO).
The chemicals imported on the microwell plates are intended for use in pharmaceutical research and drug development. Specifically, the chemicals contained in the instant microwell plates are used for enzyme and whole cell testing. The testing is done to screen the imported chemicals for specific activity in the presence of a given reagent or cell. An automated process takes up the compounds and dispenses them into other containers which hold the reagent or cell necessary for a specific assay. The purpose of these tests is, essentially, to determine if a reaction occurs.
Astra-Zeneca has provided sample information with regard to one microwell plate containing 96 wells. Furthermore, they have provided the chemical structure diagram for each of the 96 chemicals contained in this plate. For ease of discussion, CBP will discuss the classification of this exemplar.
ISSUE:
What is the proper classification of the instant microwell plate under the HTSUS?
LAW AND ANALYSIS:
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied.
The 2013 HTSUS provisions at issue are as follows:
2934 Nucleic acids and their salts, whether or not chemically defined; other heterocyclic compounds:
Other:
2934.99 Other:
Aromatic or modified aromatic:
Other:
Other:
2934.99.39 00 Products described in additional U.S. note 3 to section VI
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3822 Diagnostic or laboratory reagents on a backing and prepared diagnostic or laboratory reagents, whether or not on a backing, other than those of heading 3002 or 3006; certified reference materials:
Diagnostic or laboratory reagents on a backing, prepared diagnostic or laboratory reagents, whether or not on a backing, other than those of heading 3002 or 3006:
3822.00.50 Other
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9817.85.01 Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes
GRI 3 states:
When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
GRI 5 states, in pertinent part:
In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein:
* * *
(b) Subject to the provisions of rule 5(a) above, packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.
GRI 6 states:
For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.
Additional U.S. Rule of Interpretation 1(b) states, in pertinent part:
In the absence of special language or context which otherwise requires—
* * *
(b) a tariff classification controlled by the actual use to which the imported goods are put in the United States is satisfied only if such use is intended at the time of importation, the goods are so used and proof thereof is furnished within 3 years after the date the goods are entered;
* * *
Additional U.S. Note 2 to Section VI (which covers Chapter 29), HTSUS, states, in pertinent part:
For the purposes of the tariff schedule:
(a) The term “aromatic” as applied to any chemical compound refers to such compound containing one or more fused or unfused benzene rings;
(b) The term “modified aromatic” describes a molecular structure having at least one six-membered heterocyclic ring which contains at least four carbon atoms and having an arrangement of molecular bonds as in the benzene ring or in the quinone ring, but does not include any such molecular structure in which one or more pyrimidine rings are the only modified aromatic rings present;
* * *
Additional U.S. Note 3 to Section VI, HTSUS, states:
The term “products described in additional U.S. note 3 to section VI” refers to any product not listed in the Chemical Appendix to the Tariff Schedule and —
* * *
(b) Which the importer certifies not to have a C.A.S. registry number and not to be listed in the Chemical Appendix to the Tariff Schedule, either under the name used to make Customs entry or under any other name by which it may be known.
Note 1 to Chapter 29, HTSUS, states, in pertinent part:
Except where the context otherwise requires, the headings of this chapter apply only to:
(a) Separate chemically defined organic compounds, whether or not containing impurities;
* * *
(e) Products mentioned in (a), (b) or (c) above dissolved in other solvents provided that the solution constitutes a normal and necessary method of putting up these products adopted solely for reasons of safety or for transport and that the solvent does not render the product particularly suitable for specific use rather than for general use;
* * *
U.S. Note 1 to Chapter 98, HTSUS, states: “The provisions of this chapter are not subject to the rule of relative specificity in general rule of interpretation 3(a). Any article which is described in any provision in this chapter is classifiable in said provision if the conditions and requirements thereof and of any applicable regulations are met.”
U.S. Note 7 to Subchapter XVII of Chapter 98 (which covers subheading 9817.85.01), HTSUS, states, in pertinent part:
(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
* * *
(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).
Statistical Note 1 to Subchapter XVII of Chapter 98, HTSUS, states, in pertinent part:
For statistical reporting of merchandise under subheading[] …9817.85.01, …:
(a) Report the 8-digit number (or 10-digit number, if any) found in this subchapter in addition to the 10-digit number appearing in chapters 1-97 which would be applicable but for the provisions of this subchapter;
* * *
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to consult, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89–80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
EN 3(b) to GRI 3 states:
(VI) This second method relates only to:
* * *
(ii) Composite goods consisting of different materials.
* * *
It applies only if Rule 3(a) fails.
(VII) In all these cases the goods are to be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
(VIII) The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.
* * *
The General EN to Chapter 38 states, in pertinent part: “This Chapter covers a large number of chemical and related products. It does not cover separate chemically defined elements or compounds …”
EN 38.22 states, in pertinent part:
[P]repared laboratory reagents include not only diagnostic reagents, but also other analytical reagents used for purposes other than detection or diagnosis. Prepared diagnostic and laboratory reagents may be used in medical, veterinary, scientific or industrial laboratories, in hospitals, in industry, in the field or, in some cases, in the home.
Reagents of this heading are either on a backing or in the form of preparations and thus comprise more than a single constituent. For example, they may consist of admixtures of two or more reagents or of single reagents dissolved in solvents other than water.
* * *
Reagents of this heading may also be put up in the form of kits, consisting of several components, even if one or more components are separate chemically defined compounds of Chapter 28 or Chapter 29[.]
* * *
The reagents of this heading should be clearly identifiable as being for use only as diagnostic or laboratory reagents. This must be clear from their composition, labelling, instructions for in vitro or laboratory use, indication of the specific diagnostic test to be performed or physical form (e.g., presented on a backing or support).
With the exception of the products of Chapter 28 or 29, for the classification of certified reference materials, heading 38.22 shall take precedence over any other heading in the Nomenclature.
* * *
A. Classification under 9817.85.01, HTSUS
The chemicals to be imported on the instant microwell plate are in the pre-production stage, and are to be used exclusively for development and testing of new pharmaceuticals. Therefore, CBP finds that these chemicals meet the definition of “prototype” given in U.S. Note 7(a)(i) to Subchapter XVII to Chapter 98, HTSUS. Furthermore, the quantities of the chemicals imported on the instant microwell plate are “noncommercial quantities,” satisfying Note 7(b)(i) to Subchapter XVII to Chapter 98, HTSUS. See Headquarters Ruling Letter (HQ) 563056, dated October 15, 2006.
However, Astra-Zeneca has not provided sufficient information to prove that, in all cases, U.S. Notes 7(b) and 7(c) to Subchapter XVII of Chapter 98, HTSUS, are satisfied. For example, U.S. Note 7(b)(ii) to Subchapter XVII of Chapter 98, HTSUS, prohibits (with certain exceptions) resale of the chemicals, or incorporation of those chemicals into other products. CBP has learned that, in certain cases, these microwell plates are exchanged within the pharmaceutical industry. If this is to be the case, then Note 7(b)(ii) would not be satisfied. See, e.g., NY K85984 (finding that U.S. Note 7(b)(ii) was satisfied because contract of sale forbade the importer from re-selling compound library). Also, U.S. Note 7(c) to Subchapter XVII to Chapter 98, HTSUS, precludes articles subject to quantitative restrictions, antidumping orders, or countervailing duty orders from classification as “prototypes.” This determination is based on the chemicals being imported, and must be made at the Port of Entry.
Should the Port of Entry be satisfied that the importer has met the requirements of U.S. Notes 7(b) and 7(c) to Subchapter XVII of Chapter 98, HTSUS, the instant merchandise would be properly classified under subheading 9817.85.01, HTSUS. This conclusion is consistent with HQ 562174, dated June 19, 2002, wherein CBP considered the classification of organic chemical compounds imported on trays, substantially similar to the description of the instant microwell plates. CBP described the merchandise in the following manner:
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.
* * *
See HQ 562174. CBP found that this merchandise met the definition of “prototypes” contained in U.S. Note 7(a)(i) (then Note 6(a)(i)) to Subchapter XVII of Chapter 98), HTSUS. Furthermore, CBP found that this merchandise was properly classified under subheading 9817.85.01, HTSUS (on the condition that U.S. Notes 7(b) and 7(c) are satisfied), which provides for “Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes”. See HQ 562174; NY K85984. See also HQ 562557, dated November 21, 2002; HQ 563056; H105255, dated March 23, 2011.
B. Classification under Chapters 1-97 of the HTSUS
When merchandise is entered under subheading 9817.85.01, HTSUS, the importer must report the 10-digit number appearing in chapters 1-97 which would be applicable but for subheading 9817.85.01, HTSUS. See Statistical Note 1 to Subchapter XVII of Chapter 98, HTSUS. Therefore, CBP must consider the classification of the instant microwell plate under Chapters 1 through 97, HTSUS.
EN 38.22 states that “heading 38.22 shall take precedence over any other heading in the Nomenclature.” Therefore, it is appropriate to first consider whether the instant product would be properly classified under heading 3822, HTSUS, which provides in pertinent part for “[P]repared … laboratory reagents, whether or not on a backing …”.
Although the term “reagent” is not defined in the HTSUS, CBP has recently considerd the meaning of this term. In HQ H129336, dated July 11, 2011, CBP stated:
A reagent is “a substance employed as a test to determine the presence of some other substance by means of the reaction which is produced. Now, any substance employed in chemical reactions.” The Compact Oxford English Dictionary, Second Edition (p. 271, 1991). Such substances are also called reactants. A reactant is defined as “a substance that is consumed in the course of a chemical reaction. It is sometimes known, especially in the older literature, as a reagent, but this term is better used in a more specialized sense as a test substance that is added to a system in order to bring about a reaction or to see whether a reaction occurs (e.g. an analytical reagent).”Compendium of Chemical Terminology, IUPAC Recommendations, Second Edition. (p. 342, 1997).
Typically, a reagent is mixed with another chemical, reacts with it, and is consumed in that reaction, creating a different set of chemicals. For instance, silver nitrate is a reagent used for the detection of certain halide ions (chloride, iodide, bromide), particularly for chloride. When clear silver nitrate and sodium chloride solutions are combined, the silver and chloride ions react with one another to form a silver chloride solid precipitate and a solution of sodium nitrate. Hence, the addition of silver nitrate to a clear sodium chloride solution allows one to detect the presence of chloride in the solution, because the white silver chloride precipitate could not have formed without its presence.
* * *
The instant merchandise is used for enzyme and whole cell testing. The imported chemicals are screened for specific activity in the presence of a given reagent or cell. An automated process takes up the compounds and dispenses them into other containers which hold the reagent or cell necessary for a specific assay. The purpose of these tests is, essentially, to determine if some sort of reaction occurs – to discover whether any of the imported chemicals are “reagents.” It is not known beforehand which of the chemicals will meet that definition, as this is the purpose of the testing. It is possible that none of the imported chemicals will react in the desired fashion. Therefore, none of the chemicals contained on the instant microwell plate are properly classified under heading 3822, HTSUS, because they do not meet the definition of “reagent.”
In general, chemical compounds are classified under the various headings of Chapters 28, 29, or 38, HTSUS, depending on their individual chemical structures. See Note 1 to Chapter 28, HTSUS; Note 1 to Chapter 29, HTSUS; General EN to Chapter 38. The importer has provided the chemical structure of each of the 96 chemicals contained in the instant microwell plate. Review of these chemical structures indicates that they are all organic chemicals, classifiable in Chapter 29, HTSUS. Many of the chemicals are either aromatic or modified aromatic compounds, and meet the definitions contained in U.S. Note 2 to Section VI, HTSUS. The importer asserts that the individual compounds are identified only by chemical structure, and that no formulas, names, or CAS numbers are currently available. The 96 individual chemicals would be individually classifiable under seven different headings of Chapter 29, specifically under 2914, 2924, 2925, 2932, 2933, 2934, and 2935, HTSUS.
As the instant microwell plate is prima facie classifiable under more than one heading, GRI 3 applies. Because each heading only refers to individual chemicals within the microwell plate, these headings are to be regarded as equally specific. See GRI 3(a).
The instant microwell plate is a composite good, consisting of a plastic container which holds 96 different chemicals. GRI 3(b) directs us to consider whether any of the headings under consideration provide the “essential character” of the instant microwell plate. See EN(VI)(ii) to GRI 3(b). The essential character may be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the article. See EN(VIII) to GRI 3(b).
The nature of each of the 96 chemicals, and their individual roles in relation to the use of the article, are all identical. Each is an organic compound, and each is being tested for activity in the presence of a given cell in exactly the same manner. Therefore, these factors do not inform the essential character of the article. Likewise, the weight and value of each chemical is nearly identical, and provide no impact on the essential character.
Therefore, we turn to the bulk and quantity characteristics. After reviewing the list of the 96 chemicals submitted by the importer, CBP has found that the chemicals are classifiable in one of seven different headings. Specifically, thirty-five (35) of the chemicals are classifiable under heading 2934, HTSUS, thirty (30) of the chemicals are classifiable under heading 2933, HTSUS, and twenty (20) of the chemicals are classifiable under heading 2935, HTSUS, while the remaining eleven (11) chemicals are classifiable under headings 2914, 2924, 2925, and 2932, HTSUS. Because the highest bulk and quantity of chemicals are classifiable under heading 2934, HTSUS, they determine the essential character of the microwell plate. Accordingly, the instant product is properly classified under heading 2934, HTSUS, by operation of GRI 3(b).
With regard to classification at the subheading level, GRI 6 applies. The thirty-five (35) chemicals classified under heading 2934, HTSUS, are classified under three different subheadings. Specifically, twenty-five (25) of the chemicals are classifiable under subheading 2934.99.3900, HTSUSA (annotated), while the remaining ten (10) chemicals are classified under subheadings 2934.10.1000, 2934.20.4000, and 2934.99.9000, HTSUSA. As the instant product is prima facie classifiable under more than one subheading, GRI 3 applies, mutatis mutandis, to the subheadings. Because each subheading only refers to individual chemicals within the microwell plate, these headings are to be regarded as equally specific. See GRI 3(a). Moving on to GRI 3(b), essential character of the instant product may be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the article. See EN(VIII) to GRI 3(b). As discussed above, it is the bulk and quantity which determines the essential character of the microwell plate. Accordingly, the instant product is properly classified under subheading 2934.99.3900, HTSUSA, which provides for “[O]ther heterocyclic compounds: Other: Other: Aromatic or modified aromatic: Other: Other: Products described in additional U.S. note 3 to section VI”, by operation of GRI 6 and GRI 3(b).
HOLDING:
The instant microwell plate may be entered under heading 9817.85.01, HTSUS, which provides for “Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes,” by operation of U.S. Note 1 to Chapter 98, HTSUS, provided that proof is submitted to the Port indicating that U.S. Notes 7(b)(ii) and 7(c) to Subchapter XVII to Chapter 98, HTSUS, are satisfied. If the importer chooses this option, they must indicate that, for the instant product, subheading 2934.99.3900, HTSUSA, would be applicable but for the provisions of Subchapter XVII of Chapter 98, HTSUS, in accordance with Statistical Note 1(a) to Subchapter XVII of Chapter 98, HTSUS. The column one, general rate of duty is free.
If the importer is unwilling or unable to satisfy the requirements listed above with respect to Chapter 98, HTSUS, provisions, the instant microwell plate would be properly classified, by application of GRI 3(b) and GRI 6, under heading 2934, HTSUS, specifically under subheading 2934.99.3900, HTSUSA, which provides for “Nucleic acids and their salts, whether or not chemically
defined; other heterocyclic compounds: Other: Other: Aromatic or modified aromatic: Other: Other: Products described in additional U.S. note 3 to section VI”. The column one, general rate of duty is 6.5% ad valorem.
Duty rates are provided for the internal advice applicant’s convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
You are directed to mail this decision to the internal advice applicant, no later than 60 days from the date of this letter. On that date 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 public methods of distribution.
Sincerely,
Myles B. Harmon, Director
Commercial Trade Facilitation Division