MAR-2 OT:RR:CTF:VS H174396 HkP
Robert Leo, Esq.
Meeks, Sheppard, Leo & Pillsbury
355 Lexington Avenue, Suite 1400
New York, NY 10017
RE: NAFTA; Country of Origin Marking; Monistat products
Dear Mr. Leo:
This is in response to your letter dated July 8, 2011, on behalf of your client McNeil-PPC, Inc. You requested a binding ruling on whether Monistat® cream qualifies for preferential duty treatment under the North American Free Trade Agreement (NAFTA), and on the country of origin marking requirements.
FACTS:
According to the information submitted, Monistat is an over-the-counter product for the treatment of vulvovaginal candidiasis and the relief of external vulvar irritation. The active ingredient (API) in Monistat is miconazole nitrate, USP (CAS# 22832-87-7), a topical antifungal drug. Its concentration varies by formulation but is generally between two and four percent. The API is manufactured in the U.S. and exported to Canada for processing into the final cream formulations, which are oil-in-water emulsions in which the drug is suspended. The inactive ingredients in Monistat products are benzoic acid, BHA, mineral oil, peglicol 5 oleate, pegoxol7 stearate, and purified water, and are manufactured outside the territories of the NAFTA Parties. According to your submission, miconazole nitrate is classified in subheading 2933.29.20, Harmonized Tariff Schedule of the United States (HTSUS). The inactive ingredients are classified in chapter 27, HTSUS (BHA and mineral oil), chapter 28, HTSUS (distilled water), chapter 29, HTSUS (benzoic acid), and chapter 39, HTSUS (peglicol 5 oleate and pegoxol7 stearate). The formulation known as Monistat cream is classified under subheading 3004.90, HTSUS.
Monistat products (pre-filled ovules - inserts filled with Monistat cream, a tube of Monistat cream, and a plastic, unfilled applicator) are imported from Canada packaged together for retail sale in combination packs. The ovules and the applicator are manufactured in the U.S. and are not processed in Canada. The retail packages are delivered to retail shops in shipping cartons that are then discarded.
ISSUES:
Whether Monistat cream qualifies for preferential duty treatment under NAFTA.
Whether the Monistat cream is excepted from the country of origin marking requirements of 19 U.S.C. § 1304.
LAW AND ANALYSIS:
NAFTA Duty Preference
Article 401 of NAFTA is incorporated into General Note (GN) 12 of the HTSUS. Note 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 medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses … or in forms or packings for retail sale, classified under subheading 3004.90, HTSUS, by GN 12(t)/Chapter 30(9), which allows:
A change to subheading 3004.90 from any other subheading, except from subheading 3006.92.
Based on the stated classifications of the non-originating ingredients in Monistat cream, we find that each ingredient makes the requisite tariff shift under GN12(t)/Chapter 30(9). Consequently, the Monistat cream is eligible for preferential duty treatment under NAFTA. In addition, pursuant to GN 12(a)(i), in order to receive preferential duty treatment under NAFTA, the goods must qualify to be marked as goods of Canada.
Marking
Section 304 of the 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 United States 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 United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. §1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co., 27 CCPA 297, 302, C.A.D. 104 (1940). Part 134, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. §134) implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304.
Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines "country of origin" as:
[T]he country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 the meaning of [the marking laws and regulations]; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Part 102 of the CBP Regulations (19 C.F.R. § 102.0) sets forth the NAFTA Rules of Origin for country of origin marking purposes. 19 C.F.R. § 102.11 provides, in pertinent part:
The following rules shall apply for the purposes of determining the country of origin of imported goods other than textile and apparel products covered by § 102.21.
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
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.
19 C.F.R. § 102.20, Rule 3004.90 provides:
A change to subheading 3004.90 from any other subheading, except from subheading 3003.90 or 3006.80, 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.
You argue that sections 102.11(a)(1) and 102.11(a)(2) cannot be used to determine the country of origin of the Monistat cream because the cream is neither wholly obtained or produced in Canada, nor is it produced exclusively from domestic (Canadian) materials. See section 102.1(d) (“‘Domestic material’ means a material whose country of origin as determined under these rules is the same country as the country in which the good was produced.”). Further, because Monistat cream is formulated in Canada but the therapeutic component of the cream, the API, is not of Canadian origin, the rule for subheading 3004.90 is not met because the 40 percent domestic content requirement is not satisfied. We agree with your analysis that the country of origin for marking purposes cannot be determined under section 102.11(a).
19 C.F.R. § 102.11 (b) provides, in relevant part:
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 to the good[.]
Section 102.18(b) states, in pertinent part:
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.
….
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.
As previously stated, the section 102.20 specific rule for subheading 3004.90 requires that the therapeutic or prophylactic component in the final product be at least 40 percent domestic. The API in Monistat cream cannot meet the requirements of the tariff shift rule because it has no domestic (Canadian) content. Based on these facts and section 102.18(b)(1), you argue that under section 102.11(b)(1) the country of origin for marking purposes would be the country of origin of the API.
We agree. Under the provisions of this rule, the essential character of a good can be determined by looking at the components that do not meet the tariff shift rule. See 19 C.F.R. § 102.18(b)(1). In this case, the essential character of Monistat cream is conveyed by the U.S.-origin API, because the API is the only ingredient that is not allowed to change tariff classifications under the section 102.20 rule. See 102.18(b)(1)(iii). Applying the provisions of section 102.11(b)(1), we find that the country of origin of Monistat cream for marking purposes is the United States.
19 C.F.R. § 102.19(b) provides:
If, under any other provision of this part, the country of origin of a good which is originating within the meaning of § 181.1(q) of this chapter is determined to be the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States.
Section 102.1 (a) states, “’Advanced’ in value means an increase in the value of a good as a result of production with respect to that good, other than by means of those ‘minor processing’ operation described in paragraphs (m)(5), (m)(6), and (m)(7) of this section.”
As a result of blending the API with inactive ingredients in Canada, the API is suspended in an emulsion so that it can be applied as a cream. As a result of being made into a cream, the API is clearly advanced in value. Based on section 102.19(b), we find that Canada is the country of origin of the Monistat cream for Customs duty purposes. However, as the Monistat cream, ovules, and applicators are products of the U.S. exported and returned, they are exempt from the marking requirements pursuant to 19 C.F.R. § 134.32(m). Please note that if you wish to indicate that the Monistat products are "Made in USA", the marking must comply with the requirements of the Federal Trade Commission (FTC). We suggest that you direct any questions on this issue to the FTC.
HOLDING:
Monistat cream qualifies for preferential duty treatment under NAFTA. Canada is the country of origin for Customs duty purposes. However, as a product of the U.S., the Monistat cream is not required to be marked.
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 and Special Programs Branch