OT:RR:CTF:VS H290268 JMV
U.S. Customs and Border Protection
Pharmaceutical, Health & Chemicals Center
237 West Service Road, Champlain NY
RE: Protest and Application for Further Review 0401-16-100032; prototype; Sulfo-SPDB
Dear Director:
This is in response to the Application for Further Review (“AFR”) of Protest No. 0401-16-100032, received on June 23, 2016, and filed against Customs and Border Protection's (CBP's) decision to liquidate the merchandise at issue under subheading 2933.99.79, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Heterocyclic compounds with nitrogen hetero-atom(s) only: Other: Other.” The Protestant, ImmunoGen, Inc., seeks treatment of the merchandise under subheading 9817.85.01, HTSUS, which provides for "Prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes," or in the alternative under subheading 2933.39.41, HTSUS, which provides for "Heterocyclic compounds with nitrogen hetero-atom(s) only: Compounds containing an unfused pyridine ring (whether or not hydrogenated) in the structure: Other: Other: Drugs: Other."
FACTS:
The merchandise at issue is Sulfo-SPDB which is a compound in Phase II of Food and Drug Administration (“FDA”) testing. Based on the chemical structure, the compound is a modified aromatic, heterocyclic compound containing both a succinimide ring, and an unfused pyridine ring.
The compound was not sold after importation but was used for attachment to a monoclonal antibody to create an antibody-drug conjugate (“ADC”). The ADC is designed as a targeted therapy for cancer treatment. The shipping invoice for the merchandise indicates that the goods were for research purposes only, and not for commercial purposes.
CBP liquidated the entry classifying the merchandise under subheading 2933.99.79, HTSUS, on January 8, 2016. The Protestant timely filed the protest on June 23, 2016, claiming the merchandise is properly classifiable as a prototype under subheading 9817.85.01, HTSUS, or in the alternative under subheading 2933.39.41, HTSUS.
Protestant submits that the merchandise meets all of the requirements of a prototype for classification under subheading 9817.85.01, HTSUS, including "limited noncommercial quantity" as Protestant submits that the quantity imported was only that needed to support two clinical trials. Protestant submits that the merchandise will be consumed in the clinical trials, and any portion that is not consumed will be disposed of properly in accordance with applicable regulations. Your office denied Protestant’s claim for subheading 9817.85.01, HTSUS treatment because the Protestant did not declare its intent to clear the shipment under subheading 9817.85.01, HTSUS at the time of entry, citing the “Info: Guidance for Pharmaceutical Imports” Memorandum of June 29, 2011, which references Headquarters Ruling Letter (“HQ”) W563169, dated August 31, 2007 and 19 CFR §§ 10.133 and 10.134 as support for this decision.
ISSUE:
Whether the entered merchandise is entitled to treatment as a prototype under subheading 9817.85.01, HTSUS.
LAW AND ANALYSIS:
Subheading 9817.85.01, HTSUS provides for “prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes.” U.S. Note 7 to Subchapter XVII , Chapter 98, HTSUS, provides, in relevant part:
The following provisions apply to heading 9817.85.01 :
(a) For purposes of this subchapter, including heading 9817.85.01 , the term "prototypes" means originals or models of articles that –
(i) are either in the preproduction, production, or post production stage and are to be used exclusively for development, testing, product evaluation, or quality control purposes;
(ii) in the case of originals or models of articles that are either in the production or postproduction stage, are associated with a design change from current production (including a refinement, advancement, improvement, development, or quality control in either the product itself or the means for producing the product).
(b) (i) Prototypes may be imported only in limited noncommercial quantities in accordance with industry practice.
(ii) Except as provided for by the Secretary of the Treasury, prototypes or parts of prototypes may not be sold after importation into the United States or be incorporated into any other products that are sold. . . .
In previous rulings, we have found that the testing of compounds to determine whether they were of pharmacological interest fell within the preproduction stage of pharmaceuticals. In HQ H254047, dated November 4, 2014, CBP determined that various unique organic compounds imported in limited quantities for pharmaceutical research and drug discovery were prototypes. See also, HQ 562174, dated June 19, 2002, (finding that, when all other conditions of Note 7 are met, imported organic compounds that were to be tested to determine whether they had properties that were of interest for further pharmaceutical research were prototypes).
In this case, your office notes that a limited quantity was imported for clinical trials. Your office questions whether the guidance memorandum, which refers to 19 CFR §§ 10.133 and 10.134, was met. As noted in HQ H283095, dated July, 12, 2017, the applicable regulation is not 19 CFR §§ 10.133 and 10.134, but 19 CFR § 10.91, which applies to prototypes used exclusively for product development and testing. The facts of HQ H283095 were very similar to the case at hand. There, only after liquidation under heading 2934, HTSUS, did the Protestant file a protest claiming the merchandise was classifiable as a prototype under subheading 9817.85.01, HTSUS. In HQ H283095, the Port denied the protest citing HQ W563169, in which CBP denied a protest seeking subheading 9817.85.01, HTSUS treatment because the protestant failed to file a declaration of actual use or to enter the goods under subheading 9817.85.01, HTSUS, at the time of entry. However, as indicated by HQ H283095, since the entry at issue in HQ W563169 was liquidated prior to the effective date of 19 CFR § 10.91 (February 20, 2004 and November 2, 2004, respectively), the decision did not apply the language of the applicable regulation. Instead, HQ W563169 relied upon 19 CFR §§ 10.133 and 10.134, which were utilized at the time of the particular entry at issue. As in HQ H283095, because HQ W563169 did not apply 19 CFR § 10.91, it is distinguishable from the matter before us.
Section 10.91, in relevant part, states:
(a) Duty-free entry; declaration of use; extension of liquidation –
(1) Entry or withdrawal for consumption. Articles defined as "prototypes" and meeting the other requirements prescribed in paragraph (b) of this section may be entered or withdrawn from warehouse for consumption, duty-free, under subheading 9817.85.01, Harmonized Tariff Schedule of the United States (HTSUS), on CBP Form 7501 or an electronic equivalent. ...
(2) Importer declaration. (i) Entry accepted as declaration. Entry or withdrawal from warehouse for consumption under HTSUS subheading 9817.85.01 may be accepted by the port director as an effective declaration that the articles will be used solely for the purposes stated in the subheading.
Section 10.91(a)(2)(ii) addresses requests for proof of actual use by the port director for liquidation of merchandise under subheading 9817.85.01, HTSUS, if the port director believes circumstances warrant such a request.
Section 10.91 indicates that entry of the merchandise under subheading 9817.85.01, HTSUS, may be accepted as an effective declaration of the intended use of the merchandise for the purposes stated in the subheading. However, the regulation does not preclude other methods of indicating the intended use of the merchandise at the time of importation. Nor does it indicate that classification of merchandise under subheading 9817.85.01, HTSUS, may only be asserted at the time of importation, and that failure to assert such classification at that time, whether by inadvertence or ignorance, cannot be remedied prior to final liquidation.
In this case, the merchandise was entered as a heterocyclic compound under subheading 2933.99.79, HTSUS. Only after liquidation of the merchandise under subheading 2933.99.79, HTSUS, did the Protestant protest the liquidation and claim the merchandise classifiable under subheading 2933.39.41, HTSUS, and as a prototype of subheading 9817.85.01, HTSUS. However, the intended use of the imported merchandise was clearly stated on the shipping invoice filed with the Entry Summary. Although Protestant did not raise classification as a prototype under subheading 9817.85.01, HTSUS, until filing the protest, under 19 U.S.C. § 1514(a), the Protestant may protest the classification, rate and amount of duties chargeable for their merchandise, and 19 CFR § 10.91 does not limit such a claim to the time of entry. However, if the Port Director wishes to exercise the discretion afforded in 19 CFR § 10.91(a)(2)(ii) and require submission of proof of actual use prior to reliquidation of the entry, the Port Director may do so. To the extent that duty free treatment is provided by subheading 9817.85.01, HTSUS, we do not address the claim of classification under subheading 2933.39.41, HTSUS.
HOLDING:
The sulfo-SPDB, meets the requirements for classification as a prototype under subheading 9817.85.01, HTSUS and the protest should be allowed provided the Port is satisfied that the requirements of 19 CFR § 10.19(a)(2)(ii) have been met.
In accordance with the Protest/Petition Processing Handbook (CIS 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 in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, Regulations and Rulings of the Office of Trade 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