OT:RR:CTF:VS H284692 RMC
Kevin J. Maynard
Wiley Rein LLP
1776 K St. NW
Washington, DC 20006
Re: U.S. Government Procurement; Country of Origin of Niacin ER Tablets; Substantial Transformation
Dear Mr. Maynard:
This is in response to your letter, dated March 20, 2017, requesting a final determination on behalf of Lupin Pharmaceuticals, Inc. (“Lupin”) pursuant to subpart B of Part 177 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. Part 177). Under these regulations, which implement Title III of the Trade Agreements Act of 1979 (“TAA”), as amended (19 U.S.C. § 2511 et seq.), CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or for products offered for sale to the U.S. Government. This final determination concerns the country of origin of niacin ER tablets. As a U.S. importer, Lupin is a party-at-interest within the meaning of 19 C.F.R. § 177.22(d)(1) and is entitled to request this final determination.
You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
Lupin is a subsidiary of Lupin Limited, one of the five largest pharmaceutical companies in India. At issue in this case are niacin ER tablets, in doses of 500 milligrams, 750 milligrams, and 1000 milligrams, which you describe as “an antihyperlipidemic agent . . . used in patients with primary hyperlipidemia and mixed dyslipidemia.”
The manufacturing process for Lupin’s niacin ER tablets begins in either Belgium or Switzerland, where the active pharmaceutical ingredient (“API”) nicotinic acid (chemical formula C6H5NO2) is produced. You state that the Belgian or Swiss nicotinic acid is the only active ingredient in the finished pharmaceutical product. However, the finished product contains a number of other inactive ingredients, which you describe as excipients. These ingredients are combined with the Belgian or Swiss API in India during the manufacturing process. The ingredients include the following:
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The manufacturing processes performed in India include the following four steps: First, the API and inactive ingredients are sifted and blended. Second, the materials are granulated, and then sieved. Third, the blend is compressed into tablets and the tablets are coated. Finally, in the fourth step, the finished tablets are packaged into approved packaging.
You state that the processes performed to produce the finished niacin ER tablets do not result in any change to the chemical characteristics of the Belgian or Swiss API or to any other ingredients. You also state that the medicinal use, molecular formula, and solubility of the API are unchanged by the manufacturing operations in India. In short, you characterize the Indian operations as mere processing of bulk API into 500-milligram, 750-milligram, and 1000-milligram dosage form.
ISSUE:
What is the country of origin of the niacin ER tablets for purposes of U.S. Government procurement?
LAW AND ANALYSIS:
Pursuant to subpart B of Part 177, 19 C.F.R. § 177.21 et seq., which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. Government.
Under the rule of origin set forth under 19 U.S.C. § 2518(4)(B):
An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.
See also 19 C.F.R. § 177.22(a).
A substantial transformation occurs when an article emerges from a process with a new name, character, and use different from that possessed by the article prior to processing. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); and National Juice Products Ass’n v. United States, 628 F.Supp. 978 (Ct. Int’l Trade 1986).
In determining whether a substantial transformation occurs in the manufacture of chemical products such as pharmaceuticals, CBP has consistently examined the complexity of the processing and whether the final article retains the essential identity and character of the raw material. To that end, CBP has generally held that the processing of pharmaceutical products from bulk form into measured doses does not result in a substantial transformation of the product. See, e.g., Headquarters Ruling (“HQ”) 561975, dated April 3, 2002; HQ 561544, dated May 1, 2000; HQ 735146, dated November 15, 1993; HQ H267177, dated November 5, 2016; HQ H233356, dated December 26, 2012; and, HQ 561975, dated April 3, 2002.
For example, in HQ H267177, CBP held that Indian- and Chinese-origin Acyclovir was not substantially transformed in the United States when it was combined with excipients and processed into tablets. In that case, the Indian or Chinese Acyclovir was the only active pharmaceutical ingredient in the final product. Accordingly, we found that the processing performed in the United States did not result in a change in the medicinal use of the finished product. Furthermore, the Acyclovir maintained its chemical and physical characteristics and did not undergo a change in name, character, or use. Consistent with our previous rulings, we held that processing the Acyclovir into dosage form and packaging it for sale in the United States did not constitute a substantial transformation. Accordingly, the country of origin of the final product for purposes of U.S. Government procurement was either China or India, where the active ingredient was produced.
Similarly, in HQ H233356, CBP held that the processing and packaging of imported mefenamic acid into dosage form in the United States did not constitute substantial transformation. Based on previous CBP rulings, we found that the specific U.S. processing—which involved blending the active ingredients with inactive ingredients in a tumbler and then encapsulating and packaging the product—did not substantially transform the mefenamic acid because its chemical character remained the same. Accordingly, we held that the country of origin of the final product was India, where the mefanamic acid was produced.
In HQ 561975, we also held that the processing of imported bulk Japanese-origin anesthetic drugs into dosage form in the United States did not constitute substantial transformation. Although the bulk form of the drug underwent testing operations, filtering, and packaging in the United States, these processes did not change the chemical or physical properties of the drug. Furthermore, there was no change in the product’s name, which was referred to as sevoflurane in both its bulk and processed form. Additionally, because the imported bulk drug had a predetermined medicinal use as an anesthetic drug, the processing in the United States did not result in a change in the product’s use. The country of origin of the finished product was therefore Japan.
Here, as in the cases cited above, the processing of bulk imported pharmaceuticals into dosage form will not result in a substantial transformation. In this case, the processing begins with Belgian- or Swiss-origin bulk nicotinic acid and, after this product is combined with inactive ingredients in India, results in niacin ER tablets in individual doses of 500 milligrams, 750 milligrams, or 1000 milligrams. Although Lupin refers to the final product as niacin, it is also commonly known as nicotinic acid. See WebMD, Niacin ER, http://webmd.com/drugs/2/drug-3745-9126/niacin-oral/niacin-extended-release-oral/details (last visited June 22, 2017). Because the product is referred to as nicotinic acid both before and after the Indian processing, no change in name occurs in India. Furthermore, no change in character occurs in India because the nicotinic acid maintains the same chemical and physical properties both before and after the Indian processing. Finally, because the imported, bulk-form nicotinic acid had a predetermined medicinal use as an antihyperlipidemic agent, no change in use occurs after processing in India. Under these circumstances, and consistent with previous CBP rulings, we find that the country of origin of the final product is Belgium or Switzerland, where the active ingredient was produced.
HOLDING:
The country of origin of the niacin ER tablets for purposes of U.S. Government procurement is Belgium or Switzerland.
Notice of this final determination will be given in the Federal Register, as required by 19 C.F.R. § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 C.F.R. § 177.31, that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 C.F.R. § 177.30, any party-at-interest may, within 30 days of publication of the Federal Register Notice referenced above, seek judicial review of this final determination before the Court of International Trade.
Sincerely,
Alice A. Kipel, Executive Director
Regulations & Rulings
Office of Trade