CLA-2 OT:RR:CTF:TCM H231485 TNA
Port Director
Service Port-San Juan, PR (Area Port)
U.S. Customs and Border Protection
#1 La Puntilla Street, Room 214
San Juan, PR 00901
Attn: Mayra Asencio, Senior Import Specialist
RE: Application for Further Review of Protest No. 4909-12-100456; Classification of Darunavir Ethanolate (CAS Registry # 635728-49-3)
Dear Port Director:
The following is our decision on the Application for Further Review of Protest No. 4909-12-100456, dated June 6, 2012, filed on behalf of Janssen Ortho, LLC (“Janssen Ortho” or “Protestant”), regarding the classification of Darunavir Ethanolate (CAS Registry # 635728-49-3) under the Harmonized Tariff Schedule of the United States (HTSUS). In coming to our decision, we have taken into account arguments presented to members of my staff in a meeting at our offices on December 13, 2012, as well as a supplemental submission made on December 21, 2012.
FACTS:
The subject merchandise consists of Darunavir ethanolate (CAS Registry # 635728-49-3), an HIV protease inhibitor that is indicated for the treatment of Human Immunodeficiency Virus (HIV). It functions by way of blocking protease, a protein that HIV needs to make copies of itself. It is imported in the form of a white to off-white powder. Its chemical name is: Carbamic acid, N-[(1S,2R)-3-[[(4-aminophenyl)sulfonyl](2-methylpropyl)amino]-2-hydroxy-1-(phenylmethyl) propyl], (3R,3aS,6aR)-hexahydrofuro[2,3-b]furan-3-yl ester, compound with ethanol (1:1). Its chemical formula is C27H37N3O7S • C2H5OH.
The subject Darunavir ethanolate consists of Darunavir (CAS Registry # 206361-99-1) compounded with ethanol in a 1:1 ratio. Darunavir (CAS Registry # 206361-99-1) is amorphous, which impacts the manufacturability of the drug product and is less stable over time. Compounding the Darunavir (CAS Registry # 206361-99-1) with ethanolate creates a crystalline form which is more stable and increases its bioavailability. Darunavir ethanolate is the active pharmaceutical ingredient (“API”) for the drug Prezista (Darunavir).
CBP sent a sample of the subject merchandise to a CBP laboratory for testing. The resulting laboratory report, NY Laboratory Report Number 20111340A, issued on October 11, 2012, describes the Darunavir ethanolate as a “pseudo-polymorphic form which includes a stoichiometric quantity of co-crystallized ethanol.” Polymorphism in pharmaceuticals is often characterized by the drug’s ability to exist as two or more crystalline phases that have different arrangements and/or conformations of the molecules in the crystal lattice. Furthermore, amorphous solids consist of disordered arrangements of molecules and do not possess a distinguishable crystal lattice. Solvates are crystalline solid adducts containing either stoichiometric or nonstoichiometric amounts of a solvent incorporated within the crystal structure. If the incorporated solvent is water, the solvates are also commonly known as hydrates. See http://www.fda.gov/ohrms/dockets/ac/02/briefing/3900B1_04_Polymorphism.htm.
The merchandise was entered on September 27, 2010 under subheading 3003.90.00, HTSUS, as “Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale: Other.” On December 9, 2011, U.S. Customs and Border Protection (“CBP”) liquidated the merchandise in subheading 2935.00.95, HTSUS, which provides for “Sulfonamides: Other: Other: Other.” The importer timely filed its protest and AFR on June 6, 2012, claiming classification as entered.
ISSUE:
Whether Darunavir ethanolate (CAS Registry # 635728-49-3) is classified as a chemical of heading 2935, HTSUS, or as a medicament of heading 3003, HTSUS?
LAW AND ANALYSIS:
This matter is protestable under 19 U.S.C. §1514(a) (2) as a decision on classification and duty rate. The protest was timely filed, within 180 days of liquidation of the entry. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2) (B) (ii), (iii) (codified as amended at 19 U.S.C. § 1514(c) (3) (2006)).
Further Review of Protest No. 4909-12-100456 is properly accorded to Protestant pursuant to 19 C.F.R. §174.24(b) because it is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of CBP or his designee or the Customs courts. Specifically, the Protestant argues that in NY N014112, dated July 19, 2007, CBP classified Darunavir in subheading 2935.00.60, HTSUS, but that the merchandise discussed in NY N014112 consisted only of Darunavir. Thus, Protestant argues that NY N014112 did not address the issue of whether Darunavir ethanolate, which is the merchandise at issue in this protest, is a mixture or a compound for purposes of classification.
Merchandise imported into the United States 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 which 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 for all purposes.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in their appropriate order.
The HTSUS headings under consideration are the following:
2935.00 Sulfonamides:
Other:
Drugs:
2935.00.60 Other
Other:
2935.00.95 Other
3003 Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale:
3003.90.00 Other
Legal Note 1 to Chapter 29, HTSUS, reads, in pertinent part:
Except where the context otherwise requires, the headings of this chapter apply only to:
Separate chemically defined organic compounds, whether or not containing impurities…
(d) Products mentioned in (a), (b) or (c) above dissolved in water
General Note 13 to the HTSUS, states, in relevant part:
Whenever a rate of duty of “Free” followed by the symbol “K” in parentheses appears in the “Special” subcolumn for a heading or subheading, any product (by whatever name known) classifiable in such provision which is the product of a country eligible for tariff treatment under column 1 shall be entered free of duty, provided that such product is included in the pharmaceutical appendix to the tariff schedule. Products in the pharmaceutical appendix include the salts, esters and hydrates of the International Non-proprietary Name (INN) products enumerated in table 1 of the appendix that contain in their names any of the prefixes or suffixes listed in table 2 of the appendix, provided that any such salt, ester or hydrate is classifiable in the same 6-digit tariff provision as the relevant product enumerated in table 1.
In understanding the language of 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 at the international level, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
Part A of the General Explanatory Notes to Chapter 29, HTSUS, defines, in relevant part, a “separate chemically defined compound” as:
[a] substance which consists of one molecular species (e.g., covalent or ionic) whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram….
Separate chemically defined compounds containing other substances deliberately added during or after their manufacture (including purification) are excluded from this Chapter…
The separate chemically defined compounds of this Chapter may contain impurities (Note 1(a))…
The term “impurities” applies exclusively to substances whose presence in the single chemical compound results solely and directly from the manufacturing process (including purification). These substances may result from any of the factors involved in the process and are principally the following:
Unconverted starting materials.
Impurities present in the starting materials.
Reagents used in the manufacturing process (including purification).
By-products.
The EN for heading 2935, HTSUS, states, in pertinent part, the following:
Sulphonamides have the general formula (R1SO2NR2R3) where R1 is an organic radical of varying complexity having a carbon atom directly attached to the SO2 group and R2 and R3 are either: hydrogen, another atom or an inorganic or organic radical of varying complexity (including double bonds or rings). Many are used in medicine as powerful bactericides.
The EN for heading 3003, HTSUS, states, in relevant part, the following:
This heading covers medicinal preparations for use in the internal or external treatment or prevention of human or animal ailments. These preparations are obtained by mixing together two or more substances. However, if put up in measured doses or in forms or packings for retail sale, they fall in heading 30.04.
The heading includes:
(1) Mixed medicinal preparations such as those listed in an official
pharmacopoeia, proprietary medicines, etc., including those in the form of gargles, eye drops, ointments, liniments, injections, counter-irritant and other preparations not falling in heading 30.02, 30.05 or 30.06.
However, this should not be taken to mean that preparations listed in an official pharmacopoeia, proprietary medicines, etc. are always classified in heading 30.03. For example, anti-acne preparations which are designed primarily to cleanse the skin and which do not contain sufficiently high levels of active ingredients to be regarded as having a primary therapeutic or prophylactic effect against acne are to be classified in heading 33.04.
(2) Preparations containing a single pharmaceutical substance together with an excipient, sweetening agent, agglomerating agent, support, etc.
As an initial matter, we note that in New York Ruling Letter (NY) N014112, dated July 19, 2007 and issued to protestant, classified Darunavir (CAS Registry #206361-99-1) imported in bulk. The ruling notes that the ruling request letter was dated July 11, 2007 for a product named Darunavir and also known as TMC-114, a protease inhibitor for the treatment of HIV. Protestant now claims that the merchandise classified in that ruling was in fact Darunavir ethanolate. In support, Protestant produced its original ruling request letter which gives the CAS number, name, formula and structural diagram of Darunavir. It also notes that it is known as TMC-114, which, in the CAS Registry, is listed as another name for Darunavir (CAS Registry #206361-99-1). Lastly, the request letter does contain, in one line of text, the name Darunavir ethanolate, but there is no CAS number or other identifying information for Darunavir ethanolate (CAS Registry # 635728-49-3) in the letter requesting a ruling. Therefore, we conclude that NY N014112 classifed Darunavir (CAS Registry #206361-99-1) and did not reach the question of classification of Darunavir ethanolate (CAS Registry # 635728-49-3). Hence, NY N014112 is not precedent for the classification of Darunavir ethanolate (CAS Registry # 635728-49-3) as the compounds are not substantially similar. Darunavir ethanolate (CAS Registry # 635728-49-3) is in a crystalline rather than an amorphous form and has different properties regarding stability and bioavailablility. Lastly, under importer’s obligation of reasonable care, upon receiving NY N014112 in 2007, Protestant should have noted that the ruling was for Darunavir (CAS Registry #206361-99-1). If protestant had wanted a ruling for Darunavir ethanolate (CAS Registry #635728-49-3), it should have clearly expressed itself in follow-up correspondence, such as a request for reconsideration. No such correspondence was received by this office.
Protestant next argues that darunavir ethanolate is not a separate chemically defined compound of Chapter 29, HTSUS, at all, but rather a mixed pharmaceutical product of heading 3003, HTSUS. For instance, on page two of its December 21 submission, Protestant argues that the critical criterion for determining whether a chemical compound remains classified in the chapter is whether its molecules can be separated by physical or mechanical means, such as with hydrogen bonds, or whether it requires a chemical reaction, as would covalent or ionic bonds. This argument is not supported by the language of the HTSUS or ENs, nor is it supported by case law or prior CBP rulings. While the ENs list covalent and ionic bonds as examples of bonds in separate chemically defined compounds, it is clearly not an exhaustive list.
Furthermore, Protestant’s novel theory on the classification of chemical compounds containing hydrogen bonds is incorrect on its face because hydrated molecules are classified in Chapter 29, and they contain hydrogen bonds between molecules. Noting that Chapter 29 includes hydrates, protestant argues that hydrates are subject to Chapter note 1(d) as molecules “dissolved in water.” We disagree. A hydrate is defined as “a compound of water with another compound or an element, e.g. hydrate of chlorine.” See www.oed.com. A “hydrate” is also defined as “a compound, typically a crystalline one, in which water molecules are chemically bound to another compound or an element.” See http://oxforddictionaries.com/definition/english/hydrate. Further definitions include “a solid compound containing water molecules combined in a definite ratio as an integral part of the crystal.” See http://www.thefreedictionary.com/ hydrate. Another site defines hydrate as “any of a class of compounds containing chemically combined water.” See http://dictionary.reference.com/ browse/hydrate. Nowhere in either definition is the term “dissolved” mentioned. To state that a hydrate is a molecule dissolved in water is a misrepresentation of the reaction that actually occurs. “To dissolve” is defined as “to melt or reduce into a liquid condition.” See www.oed.com. Other sources define the term similarly. See http://www.thefreedictionary.com/ dissolved (defining “to dissolve” as “to reduce (solid matter) to liquid form; melt.”) As a result, hydrates cannot be said to be dissolved in water because they are typically solid powders. Rather, hydrated forms of ionic or covalently bonded compounds are described in Note 1(a) to Chapter 29, HTSUS, as separate chemically defined compounds and are not described by Note 1(d).
Although a different solvate form, containing ethanol instead of water, the subject Darunavir ethanolate contains hydrogen bonds and is imported as a solid powder. Thus, its Darunavir molecule cannot be said to be “dissolved” in the ethyl alcohol. To the contrary, the ethyl alcohol is bonded within the crystal lattice by hydrogen bonds in a similar fashion to hydrated molecules of Chapter 29, HTSUS, creating a separate chemically defined compound of Note 1(a) to Chapter 29. It has a definitive structural diagram and contains a sulfonamide, heterocycle containing oxygen only, carbamate (carboxymide), alcohol, and amine with ethanol incorporated into the crystal lattice by hydrogen bonds in a one to one ratio. See NY Laboratory Report NY20111340A. The laboratory also noted than an x-ray crystal structure of the subject merchandise had been published by an international division of the Protestant, and that the unit cell was comprised of four repeating units of Darunavir ethanolate. Therefore, the entire molecular entity of the subject merchandise constitutes a separate chemically defined organic compound within the meaning of Note 1 to Chapter 29, HTSUS, and the definition found in the general ENs to Chapter 29, HTSUS. As such, we find protestant’s argument is not a plausible way to interpret Note 1 to Chapter 29, HTSUS.
In addition, we note that in Metchem v. United States, 441 F.Supp.2d 1269 (2006), the court found that basic nickel carbonate, with a chemical formula of (xNiCO3 x yNi(OH)2 x zH20), was essentially a mixture of nickel carbonate and nickel hydroxide bound to water. Citing the ENs to Chapter 28, HTSUS, and lexicographic sources, the court required that a “separate chemically defined compound” consist of “one molecular species… whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram [and whose] elements… combine in a specific characteristic proportion determined by the valency and the bonding requirements of the individual atoms. The proportion of each element is constant and specific to each compound.” Metchem v. United States, 441 F.Supp.2d 1269, 1273. In finding that basic nickel carbonate was not a separate chemically defined compound of Chapter 28, HTSUS, the court stated that:
In the instant case, the basic nickel carbonate at issue does not meet this definition of “separate chemically defined compound.” Whereas chemical compounds nickel carbonate (NiCO3), nickel hydroxide (Ni(OH)2), and water (H20) each possess a constant ratio of elements, the basic nickel carbonate at issue is a variable mixture of nickel carbonate, nickel hydroxide, and water, which may be represented by a broad range of chemical formulas. See D. Ex. F at 7 (stating that the most common forms of basic nickel carbonate “range from 2NiCO3 × 3Ni(OH)2 × XH2O to NiCO3 × Ni(OH)3 × XH2O”). Basic nickel carbonate will always have at least one (NiCO3) and one (Ni(OH)2), although potentially more than one of each. If it is hydrated, the basic nickel carbonate will also contain at least one (H20). Id. Such a mixture of compounds does not fall within the definition of “separate chemically defined compound.” See USR Optonix, 362 F.Supp.2d at 1374 (concluding that a mixture of “yttrium oxide containing an indeterminate amount of europium,” represented by the formula Y[2]0[3]:Eu, “does not conform to the Explanatory Note definition of ‘separate chemically defined compound’”).
Id. at 1274.
In the present case, we note that the phrase “separate chemically defined compound” appears in Chapter 29, HTSUS. It is the same phrase that was before the Metchem court in the context of Chapter 28, HTSUS. As such, we find that the Metchem court’s definition of this phrase applies to Chapter 29, HTSUS, as well, and we examine whether the subject Darunavir ethanolate meets this definition. The darunavir is bonded to the ethanol in a constant ratio of elements, as it requires one molecule of darunavir for every molecule of ethanol. This was in contrast to the nickel carbonate at issue in Metchem. The subject Darunavir ethanolate can also be represented by a definitive structural diagram. Furthermore, the Darunavir and the ethanol are combined in a specific characteristic proportion determined by the valency and the bonding requirements of the individual atoms. The proportion of each element is also constant and specific to each compound. As such, it meets the Metchem court’s definition of a separately chemically defined compound. As a result, we find that the subject merchandise is classified in Chapter 29, HTSUS.
In particular, heading 2935, HTSUS, provides for sulfonamides, which are compounds with the general formula (R1SO2NR2R3). See heading 2935, HTSUS, and EN 29.35. Furthermore, many are used in medicine as powerful bactericides. See EN 29.35. The subject Darunavir ethanolate has this chemical structure and is used as an antiviral. Protestant cites to Lonza, Inc. v. United States, 46 F.3d. 1098 (Fed. Cir. 1995) for the proposition that such bulk antivirals are classified in heading 3003, HTSUS as medicaments. This, too, is incorrect. Drug products that are separately identifiable chemical compounds are classified in Chapter 29. As Darunavir ethanolate is such a compound and not a mixture of two or more compounds, it cannot be classified in heading 3003, HTSUS, whether or not it can be described as a therapeutic substance under Lonza.
In addition, the exemplars of heading 3003, HTSUS, include preparations containing a single pharmaceutical substance and an excipient, agglomerating agent, etc; nutritional preparations for intravenous preparation only; medicinal compounds from vegetable extract; among other things. See EN 30.03. The subject merchandise does not comport with these exemplars. Excipients, for example, are typically inert substances used as a diluent or a vehicle for a drug, such as binders, coatings, flavors, colors, etc. See, e.g., http://pubs.acs.org/cen/ whatstuff/86/8601sci3.html. Aside from the fact that the subject Darunavir ethanolate has a crystal lattice structure, the ethanol has become a part of that structure. Furthermore, the ethanol does not participate in the protease inhibition exhibited by the drug; rather, its purpose is to maintain the crystalline physical structure of the bulk molecule, which has more desirable physical and biological properties than the amorphous form of darunavir. Thus, the ethanol is part of the crystal lattice structure of the drug itself and is, as a result, not an excipient.
We also note that the ethanolate is not simply another ingredient that is added to the Darunavir for the final formulation into the drug Prezista. To the contrary, Prezista contains a number of ingredients, such as cellulose, silica, talc and titanium dioxide. We do not find any of these ingredients in the subject Darunavir ethanolate. See, e.g., http://www.ema.europa.eu/docs/en_GB/ document_library/EPAR_Scientific_Discussion/human/00707/WC500041754.pdf (listing the ingredients of Prezista, a list which does not include ethanolate). Furthermore, therapeutic substances are accounted for as “drugs” within Chapter 29, HTSUS, and many are afforded duty-free treatment under General Note 13. As a result, we find that the subject merchandise is not described by the terms of heading 3003, HTSUS.
Protestant cites Headquarters’ Ruling Letters (HQ) 083175 and HQ H004099 in support of classification in heading 3003, HTSUS. However, these rulings can be distinguished from the present case. In HQ 083175, for example, the subject merchandise was excluded from Chapter 29, HTSUS, because it contained significant amounts of lactose and mannitol, which had been specifically added as stabilizers and which were specifically excluded by the ENs of Chapter 29, HTSUS. See HQ 083175. In the present case, by contrast, the subject merchandise meets the terms of Chapter 29, HTSUS, and does not contain ingredients that are specifically excluded. Furthermore, in HQ H004099, the mineral oil at issue was a by-product in the distillation of petroleum to produce gasoline, and was used for reasons of safety in manufacturing, transport, handling and storage without rendering the product particularly suitable for specific use. As such, CBP found that it remained classified in Chapter 29, HTSUS, because it met the terms of Note 1(e) to Chapter 29, HTSUS, and remained classified in Chapter 29, HTSUS. In the present case, by contrast, the subject merchandise remains classified in Chapter 29, HTSUS, because it meets the terms of Note 1(a) to Chapter 29, HTSUS.
Furthermore, there is no dispute that the subject merchandise is used as a drug for the treatment of the HIV virus. As such, it is specifically described by the terms of subheading 2935.00.60, which provides for “Sulfonamides: Other: Drugs: Other.” Because we have found that the subject merchandise is described by the terms of subheading 2935.00.60, HTSUS, it is precluded from classification in subheading 2935.00.95, HTSUS, as liquidated.
Subheading 2935.00.60, HTSUS, lists a “K” in the special duty rate column, meaning that merchandise classified there may receive duty-free treatment if it is listed in the Pharmaceutical Appendix. In order to qualify, a product must be listed in Table 1 of the Pharmaceutical Appendix; if these products contain any prefixes or suffixes, these must also be listed in Table 2 for the product to qualify. See GN 13. In the present case, Darunavir is listed in Table 1, but ethanolate is not listed in Table 2. In fact, there are no organic solvents listed in Table 2. Neither is CAS # 635728-49-3 or the chemical formula for Darunavir ethanolate listed in Table 3 of the Pharmaceutical Appendix.
Merchandise receives duty-free treatment if it is listed on the pharmaceutical appendix and if it is listed there “by whatever name known.” See GN 13. Although protestant admits Darunavir ethanolate does not appear in the Pharmaceutical Appendix, it argues that the Darunavir ethanolate it imports is also known by the name Darunavir. We cannot accept this assertion. Darunavir and Darunavir ethanolate are two different compounds. They have distinct CAS numbers, distinct formulas, distinct physical structures and properties. While protestant’s final packaged pharmaceutical product contains the name “Prezista (Darunavir),” the compound Darunavir ethanolate is not known by the name Darunavir in scientific documents. They are not synonyms like acetaminophen and paracetamol which have the exact same chemical structure. To name Darunavir ethanolate “darunavir” leaves off an important part of the chemical formula. As a result, we find that the subject merchandise is ineligible for duty-free treatment via the Pharmaceutical Appendix.
Lastly, Protestant argues that the history of the subject merchandise and the provisions at issue show that the subject merchandise was intended to be included in the Pharmaceutical Appendix. Protestant argues that it was involved in the process of updating the Pharmaceutical Appendix when the subject merchandise was first being imported, and that the government officials with whom they were collaborating indicated that the subject merchandise would be listed. As such, Protestant argues that the fact that ethanolate is not listed in Table 2 of the Pharmaceutical Appendix is an oversight rather than an indication that it should not receive duty-free treatment.
In response, we note that in considering whether a good is listed in the Pharmaceutical Appendix, we can only look at what is actually listed. Products may have been listed, or not listed, for any number of reasons. Granting duty-free treatment for merchandise that is not listed in the Pharmaceutical Appendix simply because there may have been discussions to include it is beyond the scope of our decision-making authority. As such, because the subject Darunavir ethanolate is not listed in the Pharmaceutical Appendix, it does not qualify for duty-free treatment.
HOLDING:
By application of GRI 1, the subject Darunavir ethanolate is classified in heading 2935, HTSUS. It is specifically provided for in subheading 2935.00.60, HTSUS, which provides for: “Sulfonamides: Other: Drugs: Other.” The column one general rate of duty is 6.5%. The Darunvair ethanolate does not qualify for duty-free treatment under the Pharmaceutical Appendix.
Since the rate of duty under the classification indicated above is the same as the liquidated rate, you are instructed to DENY the protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office International Trade, 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 methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division