CON 9-09
OT: RR: CTF: ER
H307613 HvB
Port Director Christopher D. Mason
U.S. Customs and Border Protection
c/o Machinery Center of Excellence and Expertise
POE-Miami International Airport
4200 NW 21st Street
Concourse D - North Terminal 2nd Floor
Miami, FL 33122
Attn: Sarah May, Entry Specialist, Team 30
Re: Internal advice; eligibility of testing procedures for duty-free treatment of blood glucose meters, temporary importations under bond
Dear Port Director:
This case was initiated by a ruling request that Gray Robinson, P.A. filed on behalf of Trividia Health on November 27, 2019.
FACTS:
In that letter, Trividia Health (“Trividia”) requested a binding ruling regarding whether its blood glucose meters are eligible for duty free entry per subheading 9813.00.30, of the Harmonized Tariff Schedule of the United States (“HTSUS”) as temporary importations under bond (“TIB”). This request was prompted by the port’s denial of Trividia’s request for an extension of the TIB under subheading 9813.00.30, which provides for “articles intended solely for testing, experimental or review purposes.” Because advance rulings cannot be based on current or previous transactions, we have converted Trividia’s ruling request into a Request for Internal Advice, pursuant to 19 C.F.R. § 177.11. In addition to the ruling request, our decision below takes into consideration email correspondence with counsel and a teleconference meeting with counsel and Trividia officials on June 26, 2020.
The internal advice request concerns nine entries of goods described as “blood glucose monitors.” On November 18, 2018, Trividia entered the subject blood glucose meters under HTSUS subheading 9813.00.05, which provides for “articles to be processed into articles manufactured or produced in the United States.” On October 29, 2019, Trividia filed an Application for Extension of Bond for Temporary Importation with the port. In response, upon review of the entry paperwork, the port found that the repackaging of the blood glucose meters did not qualify for duty free entry under subheading 9813.00.05, HTSUS, as articles “to be repaired, altered or processed (including processes which result in articles manufactured or produced in the United States),” because repackaging of the blood glucose meters with other items into kits does not meet the requirements for duty-free entry under 9813.00.05, HTSUS.
CBP issued a Form 29 Notice of Action to Trividia, and recommended that Trividia file a ruling request to determine whether the articles are classifiable as “articles for testing …” under subheading 9813.00.30, HTSUS. The port extended liquidation of the entry until November 6, 2019, pending the determination of a binding ruling. The port now asks us to confirm whether Trividia’s testing processes of the blood glucose meters qualify for “testing” as provided under subheading 9813.00.30, HTSUS.
The Blood Glucose Meters (“BGM”) are battery-operated medical devices which enable persons with diabetes to monitor and measure their blood glucose levels at home. The U.S. Food and Drug Administration (“FDA”) regulates BGMs as Class II medical devices and assigns a Unique Device Identifier (“UDI”) to each BGM unit, which enables the consumer to obtain information about the unit and to obtain safety or recall information from FDA. Trividia imports the BGMs from Taiwan prior to testing and inspecting them at its Fort Lauderdale facility. Subsequently, the BGMS are combined with test strips and other items to form a BGM starter kit, which is then exported to the customer. The BGMs cannot function without test strips, which are manufactured at the Fort Lauderdale facility.
Before they are combined into kits with the test strips, the BGMs are subjected to a series of diagnostic operations, which Trividia delineates as “non-functional testing/inspections” and “functional tests.” During the “non-functional” tests, Trividia inspects the BGMs to ensure that they conform to certain industry/regulatory standards and that units are properly configured, for example, the test strip connector, buttons, and product configuration. For the second series of operations, Trividia uses a proprietary meter processing fixture to test whether the BGM is functional. Trividia’s counsel explained that the meter processing fixture system is comprised of both hardware and software. The fixture is integrated with a software system to run a series of tests to insure the BGM meets specifications and operates as intended. For example, the fixture is used to determine whether the product’s internal diagnostics are accurate, whether internal serial numbers conform to product labels, and to verify if particular parts (such as the battery and memory) are properly calibrated.
Those BGMs that have passed the above-described evaluations and inspections are then packaged into kits with the test strips. Trividia evaluates each lot (or shipment) of BGMs but, it does not test every single unit within each lot. Instead, Trividia tests samples within each lot. For problems that are discovered during the tests, Trividia will correct it on-site or conduct further evaluation of the lot or unit, depending on the nature of the problem. For example, if Trividia discovers that a BGM has an incorrect time/date setting, then Trividia will resolve the error on site and then export the BGM with its kit within a year of entry. Trividia has a minimum threshold for how many units within each lot are tested. This number varies depending on a variety of criteria, such as lot size. Depending on the nature of the problem, BGM may test each unit within each lot if a threshold problem arises. If too many meters within a particular lot fail Trividia’s inspection or diagnostic processes, Trividia designates the lot as “non-conforming” and refers it to its research and development facility in Ft. Lauderdale for further evaluation/repair. In such cases, the entry of that lot may be extended to allow for evaluation, or the lot is re-exported to Taiwan to be re-worked. In other cases, Trividia may scrap/destroy the lot.
ISSUE:
May the blood glucose meters be entered temporarily duty-free under subheading 9813.00.30, HTSUS, as articles intended solely for testing, experimental or review purposes when not all BGMs are tested?
LAW AND ANALYSIS:
General Note 1, HTSUS, mandates that all merchandise imported into the United States is subject to duty unless specifically exempted therefrom. Pursuant to U.S. Notes 1(a) and (c) of Subchapter XIII of Chapter 98 of the HTSUS, which contains subheading 9813.00.30, HTSUS, “articles intended solely for testing, experimental or review purposes…” may be entered into the United States temporarily free of duty under a TIB, for exportation within one year from the date of importation. This is referred to as a “TIB,” i.e., temporary importation under bond. The one year period may be extended for additional periods, which when added to the initial period, does not exceed three years. See 19 C.F.R. § 10.37. The imported merchandise may not be imported for the purpose of a sale or sale on approval. Subchapter XIII of Chapter 98 of the HTSUS, U.S. Note 1 (a).
CBP has addressed the scope of the term “testing” in previous rulings. A controlling factor under subheading 9813.00.30, HTSUS is whether there is a legitimate test, experiment, or review of the imported article within the meaning of the law. (See generally Customs Service Decisions (C.S.D.) 82-64, 83-45 and 84-59). How the BGMs themselves are to be tested or how they are to be used in connection with a test or a review is the focus of whether the articles are eligible for temporary entry under this particular subheading. See, e.g., HQ 228619, dated Sept. 11, 2001 (finding that the primary purpose of importing race car engines was to use them in races and that testing was an incidental use). Furthermore, in C.S.D. 84-45 (17 Cust. B. & Dec. 804, dated Jan. 11, 1983), we stated that for purposes of entry under TIB, the statute is “not limited to the performance of ritualized testing operations upon imported equipment, but also extends to cover less rigorous procedures so long as they are designed to yield information about the imported articles which was not known prior to completion of the procedures."
For example, in HQ 226271, dated August 30, 1995, in which approximately two hundred and twenty BMW vehicles were sent to the U.S. for evaluation, we explained that our determination rested upon “whether there was a legitimate test, experiment, or review of the imported article within the meaning of the law.” In HQ 226271, supra, the importer wanted to import the BMW Z-3 roadster model to test American reaction to that specific model, and proposed to import the vehicles for the sole purpose of obtaining consumers’ reactions to the car, in order to determine whether the United States would be a suitable market for the Z-3 roadster. Each tester was to be asked to provide a detailed evaluation of the vehicle after driving and evaluating it. This form asked testers to evaluate forty different vehicle characteristics on a scale of 1 to 5 and to provide remarks on the criteria given. These results were then to be tabulated into a report and provided to the manufacturer of the BMW Z-3. Modifications would be made (where practicable) prior to the vehicles’ production and sale within the United States. We held that the BMW vehicles were eligible for entry under 9813.00.30, finding that that there was an intention to test each vehicle that was imported.
In subsequent rulings, we have explained the scope of the statutory term “solely” in subheading 9813.00.30, HTSUS. In HQ 216531 (C.S.D. 84-59; 18 Cust. B. & Dec. 992), dated Dec. 28, 1983, we permitted entry under subheading 9813.00.30, HTSUS, for testing Canadian locomotives in the United States to yield previously unknown information. The testing equipment and facilities of the railway company were located in the United States and not available in Canada, and the testing was the primary purpose of the importation. As we explained in HQ 216531, supra, “solely” is not to be interpreted as “exclusively.” Therefore, subjecting articles being tested to other uses is not prohibited as long as such uses are necessary or can reasonably be calculated to assist in the testing.” However, in HQ 228619, supra, we held that imported racecar engines consisting of prototype engines imported for track testing and development engines used in races did not qualify for entry under subheading 9813.00.30, HTSUS. This was because testing was not the primary purpose of the entry of the engines. Our analysis found that, despite testing and extensive analysis being performed, the primary purpose of the importation of the engines was to use them in races, whether as the actual race car engines, in qualifying races, or as spares. Therefore, CBP has held that, in addition to the procedures described constituting testing, i.e., providing information on the imported articles that was not known prior to the completion of the procedures described, the testing must be the primary purpose for importation. See HQ 230497 (June 26, 2014).
We have ruled that less rigorous operations such as visual inspection are permissible testing so long as they are designed to yield information about the imported articles which was not previously known and so long as each article is tested. C.S.D. 83-45, 17 Cust. B. & Dec. 804, (Jan. 11, 1983); see HQ 228255 (Mar. 18, 1999). In C.S.D. 83-45, a company had set up a domestic staging center where each component of an individual computer order was gathered, inspected, and tested to ensure that it conformed to the customer’s specifications. The staging center performed functions which could not be done by the company’s existing facilities, for example, manufacturing and distribution. CBP ruled that gathering (i.e., sorting) was not a “testing” but held that “cold-staging” and “hot-staging” were testing within the meaning of the TIB provision. The cold-staging consisted of unpacking imported computer systems to visually inspect the parts for damage and verifying that the correct peripheral parts and cables were included. The final “hot staging” operation consisted of five major steps: (1) an out-of-box audit, (2) a CPU stand-alone test, (3) the testing of peripherals, (4) a CPU and peripherals test, and (5) a final bench mark testing. During the benchmark tests, the importer conducted exercises in order to determine whether the computer hardware would function in an environment approximate to that of the importer’s customer. We stated that for purposes of entry under TIB, the statute is “not limited to the performance of ritualized testing operations upon imported equipment, but also extends to cover less rigorous procedures so long as they are designed to yield information about the imported articles which was not known prior to completion of the procedures." Id.
In narrow circumstances, we have permitted testing where each piece was not tested. In HQ 221835, dated August 27, 1990, shipments of pecans were divided into samples that underwent separate procedures: (1) cracking of shells to extract, weigh and grade the nuts, (2) laboratory testing to determine the percentage of moisture, (3) visual inspection for mold, and disease and “off-grade nuts.” We found that these steps constituted permissible testing, noting that these operations were taking place because they provided information to the importer nut company to determine what price it should offer for a particular lot of pecans. As in the case before us, not all pecans were tested. However, pecans are substantially different from blood glucose monitors in that the former are naturally occurring products sold in bulk. One pecan in a shipment can be used to determine the characteristics of the next. But, this is not the case of blood glucose monitors, which are regulated medical devices. Therefore, Trividia’s test procedures are distinguishable from the facts in HQ 221835. See HQ 228619 dated Sept. 12, 2001.
Similarly, the tests conducted on the BGMs differ from the facts in HQ 223574 (Mar. 19, 1992). A company imported shipments of leather to inspect them prior to final assembly into shoes in the Dominican Republic. Each shipment of the leather underwent visual inspection. The leather was inspected to ensure that the leather met standards on file for scars, color and other imperfections. In addition, the inspector was required to feel and flex the leather to determine its weight and thickness, and quality. Once a particular shipment of leather passed visual inspection, a sample was then sent to a laboratory for additional testing. We found that the visual inspection qualified as testing, noting that “all of the leather shipments are subject to 100 percent examination.” That is not the case here, as neither 100 % of the BGMs are regularly tested, nor is there any indication that the BGMs are being evaluated to see whether they qualify for additional testing.
Trividia explains that it imports the BGMs to evaluate their functionality, to verify the product configuration, to package the BGMS into starter kits with other items, and to ensure that the BGMs conform to various internal and industry standards. Each lot of BGMs undergoes visual inspection and diagnostic operations. If too many meters within a particular lot fail Trividia’s inspection or diagnostic processes, Trividia designates the lot as “non-conforming” and refers it to its research and development facility in Ft. Lauderdale for further evaluation/repair. The BGM lots which pass Trividia’s tests are then packaged into kits to be exported.
Trividia is not subjecting each individual BGM unit to its diagnostic and inspection procedures, as it will only test each unit if a threshold problem is discovered during testing of the lot. Thus, it cannot be said that the BGMs are being imported for the purposes of testing since every unit does not undergo the inspection and diagnostic procedures. But, all units are packaged in a kit for export. Therefore, it cannot be said that Trividia is importing the BGMs for the purpose of eliciting information about the BGMs, because the intent of importation appears to be repackaging, given that Trividia is not examining or reviewing every unit to ensure the quality and accuracy of each separate BGM. As such, these testing procedures do not constitute “testing” for TIB purposes, under subheading 9813.00.30, HTSUS. See, e.g., HQ 225808, dated May 5, 1995. Accordingly, the subject blood glucose meters are ineligible for duty-free TIB treatment under subheading 9813.00.30, HTSUS, as “articles intended solely for testing, experimental or review purposes….”
As an alternative to the importation procedures described, Trividia may wish to consider establishing a Customs Bonded Warehouse or utilizing a Foreign Trade Zone (“FTZ”) to service the BGMS. See 19 CFR Part 19, 144, and 146.
HOLDING:
Because Trividia does not test each BGM, they are ineligible for duty-free TIB treatment under subheading 9813.00.30, HTSUS.
This ruling is issued under the provisions of Part 177 of Title 19 of the Code of Federal Regulations (19 CFR Part 177). Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.”
You are to mail this decision to the Internal Advice requester no later than 60 days from the date of the decision. At that time, the Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
for Craig T. Clark, Director
Commercial & Trade Facilitation Division