OT:RR:CTF:VS H289711 EE
Stephen E. Ruscus
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
RE: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. § 2511); Subpart B, Part 177, CBP Regulations; Paroxetine Hydrochloride tablets
Dear Mr. Ruscus:
This is in response to your correspondence of July 7, 2017 and supplemental submission of August 7, 2017, requesting a final determination on behalf of Acetris Health, (“Acetris”), pursuant to subpart B of Part 177, U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 177.21 et seq.). A meeting was held with the counsel for Acetris on August 8, 2017.
This final determination concerns the country of origin of the Paroxetine Hydrochloride tablets. We note that Acetris 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 in your request will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
The merchandise at issue are Paroxetine Hydrochloride tablets. You state that Acetris is a generic pharmaceutical distributor specializing in providing cost effective products to the U.S. Government. Acetris has its principal place of business in Allendale, NJ. Among the products Acetris sells to the U.S. Government are Paroxetine Hydrochloride tablets, which are psychotropic drugs used in the treatment of major depressive disorder, obsessive compulsive disorder, pain disorder, social anxiety disorder, generalized anxiety disorder, and post-traumatic stress disorder.
You state that Acetris procures the Paroxetine Hydrochloride tablets from Aurolife Pharma LLC (“Aurolife”), located in Dayton, NJ. Aurolife, which is a wholly-owned subsidiary of company X in India, is a generic pharmaceutical product manufacturer in the specialty and niche areas. Aurolife manufactures the Paroxetine Hydrochloride tablets supplied to Acetris in a U.S. Food & Drug Administration (“FDA”) approved cGMP compliant manufacturing facility, located in Dayton, NJ, from several active and inactive ingredients procured domestically and abroad. The active pharmaceutical ingredient (“API”) of the Paroxetine Hydrochloride tablets is Paroxetine Hydrochloride, which Aurolife sources from company X in India.
You state that the Paroxetine Hydrochloride tablets supplied to Acetris are the result of a complex production process that occurs in Aurolife’s New Jersey facility involving the combination of the API with multiple inactive ingredients, including some intermediates that are mixed in order to aid the conversion of the multiple ingredients. The production of Paroxetine Hydrochloride tablets employs processes that convert these ingredients into finished, medically effective dosage tablets (10mg, 20mg, 30mg, and 40mg tablets). You state that this processing changes the properties and characteristics of the API, materially enhancing the pharmacokinetics of the resulting drug.
You state that the process of converting these multiple ingredients into the Paroxetine Hydrochloride tablets occurs entirely within the United States. The ingredients processed in the United States are sourced from a variety of suppliers, both United States and foreign, as follows:
Material
Country
Paroxetine Hydrochloride USP
India
Dibasic Calcium Phosphate Dihydrate
USA
Dibasic Calcium Phosphate Anhydrous
Country A
Lactose Monohydrate USNF
Country B
Sodium Starch Glycolate USNF
Country C
Magnesium Stearate USNF
USA
Opadry yellow 13F52249 IH
USA
Opadry Pink 15B54027 IH
USA
Opadry Blue 12B50610 IH
USA
The processing that occurs in the United States includes the following:
Dibasic calcium phosphate dihydrate and dibasic calcium phosphate anhydrous are non-hygroscopic hydrophobic diluents added to the paroxetine hydrochloride to improve drug stability.
Lactose monohydrate is added as a bulking agent for better manufacturability and to have suitable tablet weight so that the patient can easily take the medication.
Sodium starch glycolate is added as a disintegrant to provide easy dispersion of the tablet when ingested by the patient, which enhances the drug release process, bioavailability and absorption leading to pharmacokinetic profiles equivalent to the brand product (Paxil®) for therapeutic equivalency.
Magnesium stearate is added to create a hydrophobic environment around particles which provides a lubrication effect during the production process. Lubricant mixing is carefully done to ensure that the drug releasing profile and pharmacokinetics are not influenced by this hydrophobic environment.
Coloring agents and film coating are added to give each strength a distinct name and character. Film coating is performed using polymers which imparts a protective barrier for each strength of the drug and to mask the taste.
Finally, the tablets are packed into suitable containers which are capable of retaining the overall integrity of the quality attributes and minimizing discoloration, thereby permitting a more stable product whose therapeutic effectiveness as a drug is sustainable.
You submitted product labels for the Paroxetine Hydrochloride tablets. You also submitted a shipping label and the Materials Safety Data Sheet (“MSDS”) for the API, Paroxetine Hydrochloride. Additionally, you provided a manufacturing flow chart depicting the various steps which occur in the United States to make the API and other ingredients into the final Paroxetine Hydrochloride tablets.
ISSUE:
What is the country of origin of the Paroxetine Hydrochloride tablets for purposes of U.S. Government procurement?
LAW AND ANALYSIS:
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, 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.).
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).
In rendering advisory rulings and final determinations for purposes of U.S. Government procurement, CBP applies the provisions of subpart B of Part 177 consistent with Federal Acquisition Regulations. See 19 C.F.R. § 177.21. In this regard, CBP recognizes that the Federal Acquisition Regulations restrict the U.S. Government's purchase of products to U.S.-made or designated country end products for acquisitions subject to the TAA. See 48 C.F.R. § 25.403(c)(1). The Federal Acquisition Regulations define “U.S.-made end product” as:
. . . an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States 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 transformed.
48 C.F.R. § 25.003.
A substantial transformation occurs when an article emerges from a process with a new name, character or 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 Association 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, in cases concerning pharmaceutical products, CBP has considered whether the API retained its chemical and physical properties as a result of the processing performed and whether the processing changed the medicinal use of the API.
In HQ H240193, dated July 29, 2013, which concerned the country of origin marking of the brand-name Crestor® (Rosuvastatin Calcium salt) tablets, CBP found that the API imported from two different countries was not substantially transformed when combined with stabilizers and excipients, and manufactured into tablet form in the United States.
HQ H267177, dated November 5, 2015, concerned Acyclovir, a pharmaceutical product used as a synthetic nucleoside analogue active against herpes viruses. The API was manufactured in China and India and shipped to the United States where it underwent five manufacturing steps including the sizing of the active and inactive ingredients, preparation of Acyclovir granules, preparation of the tablet blend, tablet compression, and packaging in high density polyethylene plastic bottles. CBP determined that the processing performed in the United States did not result in a change in the medicinal use of the finished product and the active ingredient. The active ingredient retained its chemical and physical properties and was merely put into dosage form and packaged for sale. The active ingredient did not undergo a change in name, character or use. Therefore, CBP held that no substantial transformation occurred in United States, and Acyclovir tablets were considered a product of the country in which the active ingredient was produced.
HQ H215656, dated January 11, 2013, concerned the country of origin of Rybix ODT, a pharmaceutical product used for the management of moderate to moderately severe pain in adults. The API, tramadol hydrochloride, manufactured in India, was shipped to France where it underwent four processes of manufacturing consisting of the preparation of the API, preparation of the tablet blend, tablet compression, and packaging in blister packs. CBP determined that the processing in France did not result in a change in the medicinal use of the finished product, and the API retained its chemical and physical properties and was merely put into dosage form and packaged. Accordingly, CBP held that no substantial transformation occurred in France.
HQ H233356, dated December 26, 2012, concerned the country of origin of Ponstel, a pharmaceutical product used for the relief of mild to moderate pain caused by primary dysmenorrhea. Mefenamic acid, which is the API in Ponstel, was manufactured in India, and imported into the United States, where it was blended with inactive ingredients and packaged into dosage form. CBP determined that this process did not substantially transform the mefenamic acid because its chemical character remained the same and, therefore, CBP found that the country of origin of the Ponstel capsules was India.
You state that the FDA requires that a unique National Drug Code (“NDC”) be assigned to every drug product such as Paroxetine Hydrochloride tablets, but prohibits that same NDC from being associated with any API, such as Paroxetine Hydrochloride, that has not been demonstrated to be safe and effective and cannot be sold for the treatment of any human disease condition. You also state that the FDA requires the name of the drug product (Paroxetine Hydrochloride tablet) to appear on every drug product label and prohibits use of that name on the label for the API. Further, you state that Paroxetine Hydrochloride is intended only for use by producers for further processing or for research since it is unstable and not fit for medical use and may not be sold to consumers. Additionally, you state that Paroxetine Hydrochloride experiences degradation. For these reasons, you claim that extensive additional processing of the API, sourced in India, with other ingredients must occur to change the API’s properties and make it into a stable drug product whose medical effectiveness as a drug is sustainable.
This office consulted with CBP's Laboratories and Scientific Services Directorate concerning the instant case, which informed us that the imported API, Paroxetine Hydrochloride, retains its chemical and physical properties upon processing in the United States. Increasing the stability of the API and standardizing its concentration do not change the API. Further, the processing performed in the United States does not affect the medicinal use of the API. Based on the information presented, the API does not undergo a change in name, character or use. Therefore, in accordance with the rulings cited, we find that no substantial transformation occurs in United States, and the Paroxetine Hydrochloride tablets would be considered a product of India, where the API was produced, for purposes of U.S. government procurement.
In addition, you asked whether the Paroxetine Hydrochloride tablets are “manufactured in the United States” within the meaning of the term “U.S.-made end products”, as set forth in Section 25.003 of the Federal Acquisition Regulations System, Title 48, Code of Federal Regulations (48 C.F.R. § 25.003), and implemented in 48 C.F.R. § 52.225-5. As stated in 19 C.F.R. § 177.21, subpart B is intended to be applied consistent with the Federal Acquisition Regulations (48 C.F.R. chapter 1). The definition of country of origin in subpart B, 19 C.F.R. § 177.22(a) has two rules (see above) as does 48 C.F.R. § 25.003. The term “manufactured in the United States” in 48 C.F.R. § 25.003 correlates to the first rule of 19 C.F.R. § 177.22(a) which provides that an article is a product of a country or instrumentality if “it is wholly the growth, product, or manufacture of that country or instrumentality”. Since the production of Paroxetine Hydrochloride tablets partially occurs in India, we do not find that they are manufactured in the United States.
HOLDING:
The country of origin of the Paroxetine Hydrochloride tablets for U.S. Government procurement purposes is India.
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 after 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 and Rulings
Office of Trade