CLA-2 RR:CR:GC 963030 AM
Ms. Minnie B. Briones
H & C Industries, Inc.
1311 Crenshaw Blvd.
Torrance, CA 90501
Re: “Coenzyme Q10"
Dear Ms. Briones:
This is in reference to your letter of July 8, 1999, to the Director, Customs National Commodity Specialist Division, concerning the classification, under the Harmonized Tariff Schedule of the United States (HTSUS) of "Coenzyme Q10”. Your letter was referred to this office for reply. We regret the delay.
In preparing our response, we have reviewed the decisions in New York ruling letter (NY) 864936, dated August 1, 1991, and Headquarters ruling letter (HQ) 953627, dated July 26, 1993. We have determined that the classification for Coenzyme Q10 set forth in those rulings is in error.
Pursuant to section 625(c)(1) Tariff Act of 1930 (19 U.S.C. 1625(c)(1)) as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, (Pub. L. 103-82, 107 Stat. 2057, 2186), notice of revocation of NY 864936 and HQ 953627 is expected to be published on November 1, 2000, in the CUSTOMS BULLETIN. See HQ 964415, dated October 16, 2000, which revoked NY 864936 and HQ 964416, dated October 16, 2000, which revoked HQ 953627.
FACTS:
Coenzyme Q10, also known as Ubiquinone 50 and ubidecarenone, has the chemical structure C59H90O4, and the chemical name 2-(3, 7, 11, 15, 19, 23, 27, 31, 35, 39 - decamethyl - 2, 6, 10, 14, 18, 22, 30, 34, 38-tetracontadecaenyl)-5, 6-dimethoxy-3- methyl-1, 4-benzoquinone. Ubidecarenone has a CAS registry # 303-98-0 and is listed in Table 1 to the Pharmaceutical Appendix to the Tariff Schedule. It is imported in bulk as a yellow to orange crystalline powder.
According to the Merck Index, §9974, 1679, (Twelfth Edition, Merck & Co., Inc., 1996), Coenzyme Q10 is one of a family of organic chemical compounds known predominantly as ubiquinones, but also called coenzymes Q. Ubiquinone structures are based on the 2,3-dimethoxy-5-methylbenzo-quinone nucleus with a variable terpenoid side chain containing one to twelve mono-unsaturated trans-isoprenoid units with 10 units being the most common in animals. According to the existing dual system of nomenclature, the compounds can be described as coenzyme Qn, where n = 1 - 12 and represents the number of terpenoid units in the side chain or ubiquinone (x), where x is any multiple of 5 and designates the total number of carbon atoms in the side chain. Differences in properties are due to the difference in the length of the side chain. Naturally occurring members are the coenzymes Q6-Q10. The entire series has been prepared synthetically. Id.
Merck also assigns a therapeutic category of "Cardiotonic" to Coenzyme Q10. The Explanatory Notes of the Merck Index state:
Therapeutic Category and Therapeutic Category (Veterinary). In most cases, therapeutic categories correspond to those published in the USP Dictionary of USAN and International Drug Names. However, in instances where there is no listing, or where the USAN Council has listed a mechanism of action, a therapeutic category has been assigned which most closely describes the indication claimed by the manufacturer, or reported in the clinical literature. When available, mode of action information is included in the literature references section of the monograph. Monographs for human drugs have been indexed by both therapeutic category and biological activity beginning on page THER-1.
Id. at xi.
Coenzyme Q10, ubiquinone or ubidecarenone are not listed in the Therapeutic Category and Biological Activity Index (THER-1 and following). Moreover, in the 2000 edition of the USP Dictionary of USAN and International Drug Names, 748, (U.S. Pharmocopeia, 2000), the "Ubidecarenone" listing does not contain a description of a "therapeutic category" or "mechanism of action."
Ubiquinone has recently been designated as an Orphan Product by the Food and Drug Administration (FDA) (see "List of Orphan Product Designations for December 1999") as a substance used in the "treatment of mitochondrial cytopathies." To this date, however, a marketing date has not been assigned. Atovaquone, an analog of ubiquinone, has been approved for marketing as an Orphan Drug in the treatment of Pneumocystis carinii, an opportunistic infection most commonly affecting people with AIDS. However, an analog of a substance is not the substance itself. Moreover, The Orphan Drug Act (21 U.S.C. 360, et seq.) defines Orphan products as ones used to treat diseases or conditions affecting fewer than 200,000 persons in the United States. Such small patient populations reduce profit potential for sponsors, so the Act grants special privileges and marketing incentives.
ISSUE:
Whether "ubiquinone or Coenzyme Q10" imported as a yellow to orange crystalline powder is classified in subheading 2914.69.20, HTSUS, the provision for "[K]etones and quinones . . .: [O]ther: [D]rug," or in subheading 2914.69.90, HTSUS, the provision for "[K]etones and quinones . . .: [O]ther: [O]ther."
LAW AND ANALYSIS:
Merchandise imported into the U.S. is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context that requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any related section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs. In interpreting the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUSA. See T.D. 89 80, 54 Fed. Reg. 35127 (August 23, 1989).
Heading 2914, HTSUS, is the only heading at issue. Under GRI 6, the following subheadings are relevant to the classification of this product:
Ketones and quinones, whether or not with other oxygen function, and their halogenated, sulfonated, nitrated, or nitrosated derivatives (con.):
* * * * *
2914.69 Other:
Drugs
* * * * *
2914.69.9000 Other
In both HQ 953627 and NY 864936, this merchandise was classified in subheading 2914.69.20, HTSUS, due to the erroneous assumption that it has therapeutic properties as a cardiovascular drug or pharmaceutical intermediate. Chapter 29 of the HTSUS, with exceptions inapplicable here, provides only for "[s]eparate chemically defined organic compounds, whether or not containing impurities." Note 1(a), Chapter 29, HTSUS. Hence, the instant merchandise, an unmixed compound, imported in bulk for incorporation within pharmaceutical or other products, is appropriately classified in Chapter 29, HTSUS.
However, the “drugs” provisions of Chapter 29 have a specific meaning as enunciated in Lonza, Inc. v. U.S., 46 F.3d 1098 (Fed. Cir. 1995). The first part of the Lonza test requires that a substance have "therapeutic or medicinal" properties. "Therapeutic" and "medicinal" have been judicially construed to mean "[h]aving healing or curative powers" and "curing, healing, or relieving," respectively. The second requirement for classification as "drugs" under Lonza is that substances be "chiefly used as medicines or as ingredients in medicines." The phrase "chiefly used" indicates that classification as a drug depends upon principal use. "[A] tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation . . .." Additional U.S. Rule of Interpretation 1(a), HTSUS.
These goods are not chiefly imported for pharmaceutical research or therapeutic treatment. The therapeutic category assigned to ubiquinone in the Merck Index is not dispositive. This category was most probably assigned according to the information "reported in the clinical literature." While a large amount of material published in the scientific literature indicates that Coenzyme Q10 possesses medicinal properties, we were unable to locate any reference to Coenzyme Q10 which would lead us to believe that it is principally used as a medicine or as an ingredient in a medicine.
Even though the substance has recently been designated an Orphan product, this is not sufficient to classify the substance under the drug provisions of the HTSUS for tariff purposes. By definition, Orphan drugs are useful to less than 200,000 people in this country. Furthermore, ubiquinone is not presently marketed, even as an Orphan drug, for treatment of mytochondrial cytopathies, or any other known condition or disease. Instead, the substance is marketed as a dietary supplement in compliance with the Dietary Supplement Health and Education Act of 1994 containing the legally required disclaimer that "the product is not intended to diagnose, treat, cure or prevent any disease." It therefore can not be argued that Coenzyme Q10 is principally used as a therapeutic substance "having healing or curative powers."
Nor can it be argued that inclusion in the Pharmaceutical Appendix of the HTSUS automatically imbues a substance with therapeutic properties. The Pharmaceutical Appendix was incorporated into the HTSUS by Presidential Proclamation. See Proclamation No. 6763, 60 Fed. Reg. 1007 (1994). This Proclamation also added General Note 13 to the HTSUS. General Note 13 states that whenever a rate of duty of "Free" followed by the symbol "K" in parentheses appears in the "Special" column for a tariff provision, products classifiable in such provision shall be entered free of duty, provided that such product is listed in the Pharmaceutical Appendix.
The Pharmaceutical Appendix does not broaden or narrow the scope of the "drugs" provisions. There are 54 eight-digit "drugs" provisions within Chapter 29, HTSUS, which are subject to duty. Each of these provisions has a "K" in the "Special' column, indicating that drugs, which are included in the Pharmaceutical Appendix, are duty-free while drugs not included in the Pharmaceutical Appendix are subject to duty.
The statement of administrative action and subsequent presidential proclamations (adding items to the Pharmaceutical Appendix) indicate that inclusion within the Pharmaceutical Appendix is the means by which duty-free treatment is to be extended to new pharmaceuticals. A product need not be considered a “drug” in order to be included in the Pharmaceutical Appendix. In fact, a "K" appears in the "Special" column adjacent to subheading 2914.69.90, HTSUS, the non-drug provision considered here.
HOLDING:
Coenzyme Q10 is classified in subheading, 2914.69.90, HTSUS, the provision for "[K]etones and quinones . . .: [O]ther: [O]ther."
Sincerely,
John Durant, Director
Commercial Rulings Division