MAR-2 OT:RR:CTF:VS H228315HkP
Doreen Edelman, Esq.
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
920 Massachusetts Avenue, NW
Suite 900
Washington, DC 20001
RE: Monistat M3 and M7 Cream Combination Packs; M3 Suppository Combination Pack; Country of Origin Marking; NAFTA
Dear Ms. Edelman:
This is in response to your letters, dated July 30, 2012, submitted on behalf of your client, Insight Pharmaceuticals, LLC (“Insight”). You requested binding rulings on whether three lines of Monistat products, the M3 and M7 Cream Combination Packs, and the M3 Suppository Combination Pack, imported from Canada, qualify for duty preference under the North American Free Trade Agreement (“NAFTA”), and on the correct country of origin marking requirements for these products.
FACTS:
According to the information submitted, Insight will import miconazole nitrate from a non-North American Free Trade Agreement (“NAFTA”) country into Canada, where it will be processed into Monistat “M3” and “M7” creams and M3 suppositories. The creams and suppositories are used to treat vaginal yeast infections. Miconazole nitrate is an antifungal agent that prevents fungal enzyme production and is the active pharmaceutical ingredient (API) in the products. The M3 cream has a 4% concentration of API, and the M7cream and the M3 suppositories have a 2% concentration.
The miconazole nitrate imported into Canada is a white granular powder, classified under subheading 2933.29 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Through a complex manufacturing process, described in detail to CBP, the miconazole nitrate is mixed with inactive ingredients such as benzoic acid, cetyl alcohol, isopropyl myristate, polysorbate 60, potassium hydroxide, propylene glycol, water, and stearyl alcohol to create the creams. These inactive ingredients are manufactured in NAFTA and non-NAFTA countries and are classified outside of Chapter 30, HTSUS. The API and inactive ingredients are processed into oil-in-water emulsions in which the API is suspended to make the creams. The suppositories are created by mixing the API and inactive ingredients (a hydrogenated vegetable oil base) from a non-NAFTA country using a variety of processes and injecting the mixture into rolls of plastic film, which is then cooled and cut into final dose form. The resulting creams and suppositories, classified under subheading 3004.90, HTSUS, are packaged in Canada with other items for retail sale and exported to the U.S. The Monistat products imported into the U.S. are also classified under subheading 3004.90, HTSUS, as medicaments.
The M3 Suppository Combination Pack contains 3 suppositories, 3 applicators and a tube of itch-relief cream.
The M3 Cream Combination Packs imported into the U.S. contain:
3 pre-filled applicators; or
3 pre-filled applicators and itch-relief cream.
The M7 Cream Combination Packs contain:
7 pre-filled applicators and a tube of itch-relief cream; or
Prescription strength cream with 7 applicators, itch relief cream and 6 cool wipes; or
Prescription strength cream and 7 applicators; or
Prescription strength cream and 1 applicator.
All the products in the packages, except for the creams and suppositories, are manufactured in a NAFTA country, as is the packaging itself.
ISSUES:
Whether Monistat M3 and M7 Combination Packs qualify for preferential duty treatment under NAFTA.
What is the country of origin for marking purposes of the Monistat M3 and M7 products imported from Canada?
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 classifications of the non-originating ingredients in the Monistat creams and suppositories, we find that each ingredient makes the requisite tariff shift under GN12(t)/Chapter 30(9). Consequently, the Monistat M3 and M7 Combination Packs are 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.
The M3 and M7 Cream Combination Packs and the M3 Suppository Combination Pack imported from Canada are made up of various combinations of tubes of prescription strength cream (used internally with applicators), suppositories, applicators (some pre-filled with cream), tubes of itch relief cream, and sometimes wipes, for the treatment of vaginal yeast infections. The tubes of prescription strength cream and external itch-relief cream, suppositories, and pre-filled applicators are classified under heading 3004, HTSUS, and the applicators and wipes are classified outside of that heading. Under General Rule of Interpretation 3(b), a good consisting of at least two different articles classified in different headings that are packaged together to meet a particular need or carryout a specific activity and imported in retail packaging is classified as a set. A good consisting of different materials or made up of different components is a composite good. See GRI 3(b) and Explanatory Note to GRI 3(b). Accordingly, we find that the Monistat Combination Packs imported into the United States are sets pursuant to GRI 3(b), except for the Combination Packs that contain pre-filled applicators only, which are composite goods pursuant to GRI 3(b).
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. As the Monistat M3 and M7 Cream Combination Packs are sets and the M3 Suppository Combination Pack is a composite good, 19 C.F.R. § 102.11(a) and (b) do not apply. Section 102.11(c) provides for the country of origin marking of sets and composite goods:
Where the country of origin cannot be determined under paragraph (a) or (b) of this section and good is specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture or composite good pursuant to General Rule of Interpretation 3, the country of origin of the good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of 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.
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.
Under 19 C.F.R. § 102.18(b)(1), the essential character of a good can be determined by looking at the components that do not meet the tariff shift rule. In this case, the suppositories, pre-filled applicators, and tubes of cream do not meet the tariff shift rules. We find the origin of the M3 and M7 Combination Packs is imparted by the suppositories, pre-filled applicators, and tubes of cream (as applicable to the product’s contents). The creams and suppositories manufactured in Canada are classified under subheading 3004.90, HTSUS, and consist of miconazole nitrate from a non-NAFTA country, classified under subheading 2933.29, HTSUS, and inactive ingredients from NAFTA and non-NAFTA countries. As stated above, the applicable change in tariff classification set out in section 102.20 provides for 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 not less than 40 percent by weight of the total therapeutic or prophylactic content. The miconazole nitrate from the non-NAFTA country, classified in subheading 2933.29, HTSUS, undergoes the requisite tariff shift. However, since it is the active ingredient in the creams and suppositories and, therefore, represents the therapeutic component of these subheading 3004.90 goods, the domestic content requirement of the section 102.20 rule will not be satisfied. Accordingly, the country of origin of the creams, suppositories, and pre-filled applicators will be the country of origin of the non-NAFTA API.
Nonetheless, 19 C.F.R. § 102.19(a) provides:
Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of § 181.1(q) of this chapter is not determined under § 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin (see § 181.11 of this chapter) has been completed and signed for the good.
The NAFTA preference override applies to originating goods for which the country of origin found under section 102.11 or 102.21 is not a NAFTA country, which is the situation here. See generally Headquarters Ruling Letters (HQ) H213715, dated June 29, 2012; HQ H086568, dated May 18, 2011; HQ H073511, dated December 1, 2009; and HQ H031320, dated October 20, 2008 (foreign components comprising essential character of originating goods were used to determine countries of origin under 19 C.F.R. § 102.11(b); however, the NAFTA preference override applied because the foreign origin meant the origin was not determined to be a good of a single NAFTA country). The tubes of creams, suppositories, and pre-filled applicators are not goods of a single NAFTA country under section 102.11(a) or (b). As such, they may be products of Canada under the NAFTA preference override if they undergo production other than “minor processing” in Canada.
“Production is defined as “growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good.” 19 C.F.R. § 102.1(n). “Minor processing” is defined as including,”(1) mere dilution … that does not materially alter the characteristics of the good … (6) Putting up in measured doses, packing, repacking, packaging, repackaging, (7) testing, marking, sorting or grading” 19 C.F.R. § 102.1(m).
In HQ H213715, CBP determined that mixing Swiss-origin API with various excipients and binders and compressing the mixture into tablets, which were then coated, was more than minor processing. In this case, the miconazole nitrate is mixed with various excipients and binders during several different complex processing operations. Accordingly, we find that the operations in this case constitute more than minor processing. As such, the country of origin of the Monistat M3 and M7 Combination Packs under 19 C.F.R. § 102.19 is Canada, the last NAFTA country in which they underwent production, provided that Certificates of Origin are completed and signed for the goods.
HOLDING:
Under 19 C.F.R. § 102.11(c), the Monistat M3 and M7 Combination Packs imported from Canada qualify to be marked as goods of Canada.
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 & Special Programs Branch