CLA-2-84:OT:RR:NC:1:104
Mr. John M. Peterson
Mr. Matthew G. Shaw
Neville Peterson LLP
17 State Street – 19th Floor
New York, NY 10004
RE: The tariff classification of an automated pharmaceutical distribution system from South Korea
Dear Messrs. Peterson and Shaw:
In your letter dated August 26, 2009 on behalf of McKesson Automation Inc. you requested a tariff classification ruling.
The Automated Pharmacy System (referred to in the submitted literature as the “ATDPS”) is designed to dispense various medications. The system is used in hospitals or high dispensing rate pharmacies. The ATDPS is available in different models, i.e., JV-330SL, JV-350SL, JV-400SL and JV-500SL. Literature was submitted on the JV-400 SL Model. However you indicate that while the number of storage hoppers may vary by model, the operation of the models remains essentially the same. Housed in a single cabinet measuring approximately six feet high and three feet wide on each side, the system is capable of processing sixty (60) medications per minute for unit dose pharmaceuticals and fifty (50) medications per minute for multiple dose pharmaceuticals.
The ATDPS features an LCD touch screen which is used to input data concerning the prescriptions to be dispensed. The ATDPS features a number of automatic data processing servers which control the operation of the system and track the inventory of pharmaceuticals. After the user inputs the appropriate data, the ATDPS retrieves the desired product from its storage area. The upper portion of the ATDPS contains a number of storage hoppers for various types of prescription pharmaceuticals. Storage hoppers may feature electronic chips which allow verification of a hopper’s identity and contents. The retrieved product is then positioned for packaging. Packaging materials are fed through a thermal printer assembly which prints data concerning the prescription on the packaging material. The product is then deposited onto the packaging material which is subsequently sealed by means of a heater cover/heater roller. The processed prescription is then dispensed through a slot on the front of the ATDPS.
You assert that the ATDPS is a “composite machine” whose primary function “is that of packaging pharmaceuticals into individually labeled single dose or multi-dose packages” and, as such, you believe subheading 8422.40.91, Harmonized Tariff Schedule of the United States (HTSUS), applies. Said subheading provides for other packing or wrapping machinery. In your submission, you cite HQ ruling 962415 dated February 22, 2000 in which the “Sure-Med”, an automated distribution machine which dispensed pre-filled syringes, vials, pills and ampoules, was ruled to be classified in subheading 8479.89.97, HTSUS, as other machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter (i.e., chapter 84). However, as you point out, the “Sure-Med” differs from the ATDPS in that there is no mention of any packaging being done with the “Sure-Med”. Thus, it is this office’s opinion that HQ 962415 is inconclusive when addressing heading 8422, HTSUS, as it applies to the ATDPS.
Your cited HQ ruling 962415 also discusses the applicability of heading 8476, HTSUS, which provides for automatic goods-vending machines. Following the rationale set forth in HQ 962415, the ATDPS is not a vending machine of heading 8476, HTSUS, as there is no monetary exchange between the purchaser, i.e., the patient, and the ATDPS in order to acquire the pharmaceutical product. Rather, the product is being dispensed to a third party, e.g., a pharmacist. In view of these facts, heading 8476, HTSUS, can be eliminated from consideration in this instance.
You also refer to NY C88238 dated July 14, 1998 which addressed the classification of the Haystack Automatic Compound Management System (“Haystack”), a modular system used to retrieve chemicals for use in pharmaceutical research. Following the position put forth in HQ 958629 dated February 21, 1996 and HQ 958641 dated April 29, 1996 regarding heading 8479, HTSUS, and Section XVI, Note 4, the various modules of the Haystack were separately classified in their own respective headings rather than in heading 8479, HTSUS. Prior to 2002, Customs held that functional units could not be classified in heading 8479 as that heading does not describe any machine by a clearly defined function. However, it should be noted that both HQ 958629 and HQ 958641 predate HQ 965637 dated July 16, 2002 in which HQ stated,
With respect to a robot system which, in accordance with this decision, would be classifiable as a functional unit, imported incomplete or unfinished, HQ 962105 stated on p. 5, “[W]e have consistently held that functional units cannot be classified in heading 8479, HTSUS, as that heading does not describe any machine by a clearly defined function.” This statement is incorrect and no longer represents Customs position on this issue. A fair and reasonable reading of Section XVI, Note 4, HTSUS, leads us to conclude that goods qualifying as functional units, incomplete or unfinished, are eligible for classification in heading 8479, HTSUS, provided it is the heading appropriate to the function performed by the whole, and the terms and conditions for classification in heading 8479 are satisfied.
Taking into account CBP’s current position on Section XVI, Note 4 as it relates to heading 8479, HTSUS, it is this office’s opinion that NY C88238 is not relevant in this case. In addition, as this office agrees with your opinion that the ATDPS is classifiable as a composite machine, any discussion on functional units is rendered moot.
The ATDPS pharmacy system is a composite machine that incorporates a labeling machine, a hopper, packaging and a dispensing machine. The various modules prepare the medications in a form so that the pharmacy system can dispense the medicine in the correct dosage prescribed. Thus, the packaging is ancillary to the performance of the machine’s dispensing function and Heading 8422, HTSUS, is excluded.
In accordance with Section XVI, Note 3, it is this office’s opinion that the ATDPS is a composite machine consisting of various processing modules which consecutively perform complementary separate functions which are described in different headings of Section XVI. These complementary functions contribute to the principal function of the composite machine, i.e., the distribution of pharmaceuticals.
The applicable subheading for the Automated Pharmacy System (ATDPS) described above will be 8479.89.9899, HTSUS, which provides for Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and mechanical appliances: Other…Other…Other. The rate of duty will be 2.5% ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Patricia O’Donnell at (646) 733-3011.
Sincerely,
Robert B. Swierupski
Director
National Commodity Specialist Division