OT:RR:CTF:VS H213715 BGK
George R. Tuttle
Law Offices
One Embarcadero Center, Suite 730
San Francisco, California 94111-4044
RE: Country of Origin; NAFTA Preference Override; tablets
Dear Mr. Tuttle:
This is in response to your request for a binding ruling on behalf of Genentech Inc. concerning the NAFTA eligibility and country of origin for Valcyte Tablets.
FACTS:
Valganciclovir, the active ingredient in Valcyte, is imported into Canada from Switzerland, and is stated to be classified under subheading 2933.59, Harmonized Tariff Schedule of the United States (HTSUS). Valganciclovir enters Canada in a granular or powder form. It is mixed with various ingredients, stated to be of U.S. origin via a wet granulation process and compressed into tablet shape. The tablets are then coated and packaged. Upon importation into the U.S., the tablets are stated to be classified under subheading 3004.90, HTSUS. The remaining ingredients mentioned above are classified as follows:
Povidone K 29/32
Subheading 2933.99.9700, HTSUS
Crospovidone XL NF
Subheading 2933.99.9700, HTSUS
Microcrystalline Cellulose
Subheading 3912.90.0010, HTSUS
Stearic Acid
Subheading 2915.70.0120, HTSUS
Opadry Pink (coating)
Subheading 3824.90.9290, HTSUS
ISSUE:
Whether the Valcyte tablets qualify for preferential duty treatment under the North American Free Trade Agreement (NAFTA).
LAW AND ANALYSIS:
General Note (GN) 12, HTSUS, incorporates Article 401 of the NAFTA into the HTSUS. GN 12 (a)(i), HTSUS, provides, in pertinent part, that:
Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "CA" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
Accordingly, the Valcyte tablets will be eligible for the “Special” “CA” rate of duty provided they are deemed to be NAFTA originating under the provisions of GN 12(b), HTSUS, and they qualify to be marked as a product of Canada under the NAFTA Marking Rules, set forth in Part 102 of the Customs Regulations (19 C.F.R. § 102).
NAFTA Originating
GN 12(b) provides in relevant part:
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if – . . .
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--
A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note[.]
Originating good status is conferred on goods classified under subheading 3004.90, HTSUS, by Chapter 30(9), GN 12(t), which allows:
A change to subheading 3004.90 from any other subheading, except from subheading 3006.92.
Based on the classifications provided, we find the valganciclovir from Switzerland undergoes the applicable change in tariff classification. As the other ingredients are U.S. originating materials, they are not required to undergo the change in tariff classification. As such, the Valcyte tablets qualify as originating under GN 12(b). However, in accordance with GN 12(a), the Valcyte tablets must also qualify to be marked as a product of Canada to be eligible for NAFTA preferential treatment.
Marking
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 U.S. the English name of the country of origin of the article. 19 U.S.C. § 1304(a). Part 134, Customs Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304.
Section 134.1(b) of the regulations, defines "Country of origin" as:
the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
19 C.F.R. § 134.1(b). Section 134.1(j) provides that the “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the regulations, defines a "good of a NAFTA country" as “an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.”
The NAFTA Marking Rules are set forth in 19 C.F.R. Part 102. Section 102.11(a) contains the “General rules” for determining country of origin:
(a) The country of origin of a good is the country in which:
The good is wholly obtained or produced;
The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
In this situation, the Valcyte tablets are neither wholly obtained nor produced in Canada, nor are they exclusively produced from Canadian materials. Therefore, section 102.11(a)(3) must be considered in order to determine the country of origin. The rule for subheading 3004.90, HTSUS, the classification of the Valcyte tablets upon importation into the U.S., is listed in section 102.20 as:
A change to subheading 3004.90 from any other subheading, except from subheading 3003.90 or 3006.92, and provided that the domestic content of the therapeutic or prophylactic component is no less than 40 percent by weight of the total therapeutic or prophylactic content.
Valganciclovir is classified in subheading 2933.59, HTSUS upon importation into Canada, and therefore, satisfies the tariff shift rule. As the remaining ingredients are classified in subheadings 2933.99, 3912.90, 2915.70, and 3824.90, HTSUS, the other ingredients satisfy the tariff shift rule as well. However, although valganciclovir and the other ingredients meet the tariff shift rule, the valganciclovir is of Swiss origin. As such, the Canadian content of the therapeutic or prophylactic component, the valganciclovir, does not account for 40 percent or more of the tablets. Therefore, the country of origin cannot be determined under 19 C.F.R § 102.11(a).
Accordingly, 19 C.F.R. § 102.11(b) of the hierarchical rules must be applied. Section 102.11(b) provides, in relevant part:
(b) Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:
(1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character of the good[.]
19 C.F.R. § 102.18 provides the following, in relevant part, for determining the material that imparts the essential character,
(b) (1) For purposes of identifying the material that imparts the essential character to a good under § 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good. For purposes of this paragraph (b)(1):
(i) The materials to be considered must be classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule or other requirements applicable to the good under consideration. . . .
(iii) If there is only one material that is classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good, then that material will represent the single material that imparts the essential character to the good under § 102.11.
In this situation, all the ingredients satisfy the tariff shift rule; however, valganciclovir fails the other requirement “that the domestic content of the therapeutic or prophylactic component is no less than 40 percent by weight of the total therapeutic or prophylactic content.” 19 C.F.R. § 102.20. As such, under 19 C.F.R. § 102.18(b)(1)(iii), the valganciclovir imparts the essential character of the good, and under 19 C.F.R. § 102.11(b)(1), provides the country of origin of the Valcyte tablets. Therefore, the country of origin of the Valcyte tablets under section 102.11(b) is Switzerland.
However, 19 C.F.R. § 102.19(a) contains a “NAFTA preference override”:
Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of § 181.1(q) of this chapter is not determined under § 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin . . . has been completed and signed for the good.
19 C.F.R. § 102.19(a) (emphasis added). Section 181.1(q), Customs Regulations, provides that “[o]riginating . . . means a good or material qualifies as originating in the United States, Canada, and/or Mexico under the rules set forth in General Note 12, HTSUS, and the appendix to this part.” As determined above, the Valcyte tablets are originating goods under section 181.1(q).
The NAFTA preference override applies to originating goods for which the country of origin found under sections 102.11(a) and (b) and 102.21 is not a NAFTA country, which is the situation here. See generally, Headquarters Ruling Letters (HRL) H086568, dated May 18, 2011; HRL H073511, dated December 1, 2009; and H031320, dated October 20, 2008 (foreign components comprising essential character of originating goods were used to determine countries of origin under 19 C.F.R. § 102.11(b); however, the NAFTA preference override applied because the foreign origin meant the origin was not determined to be a good of a single NAFTA country). The tablets are not goods of a single NAFTA country under section 102.11(a) or (b). As such, the Valcyte tablets may be products of Canada under the “NAFTA preference override” if they undergo production other than “minor processing.”
“Production is defined as “growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good.” 19 C.F.R. § 102.1(n). “Minor processing” is defined by 19 C.F.R. § 102.1(m), in part, as “(6) Putting up in measured doses, packing, repacking, packaging, repackaging.”
In HRL 563310, dated May 19, 2006, CBP determined that U.S.-origin refrigerant commingled with foreign refrigerant and injected into cans in Mexico with U.S.-origin additives was not minor processing. In this case, the valganciclovir goes through several different processing operations, including mixing with various other excipients and binders. After being compressed into tablets, the tablets also undergo a coating. Accordingly, we find that the operations in this case constitute more than minor processing. As such, the country of origin under 19 C.F.R. § 102.19 is Canada, the last NAFTA country in which the good underwent production, provided that a Certificate of Origin is completed and signed for the good.
HOLDING:
The Valcyte tablets qualify for NAFTA preferential treatment, and the country of origin under 19 C.F.R. § 102.19 is Canada, the last NAFTA country in which the good underwent production, provided that a Certificate of Origin is completed and signed for the good.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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,
Monika R. Brenner
Chief, Valuation & Special Programs Branch