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HQ 562734

August 13, 2003

CLA-2 RR:CR:SM 562734 DLD


TARIFF NO.: 9817.85.01

Port Director
Port of Newark, New York
C/O Residual Liquidation and Protest Branch Bureau of Customs & Border Protection
1210 Corbin Street
Elizabeth, NJ 07201

RE: Request for Further Review of Protest 4601-02-100161; prototypes

This is in response to the request for further review of Protest Number 4601-02-100161. The protest was filed on January 17, 2002, on behalf of Catalytica Pharmaceutica [now DSM Pharmaceuticals, Inc., hereafter “DSM”] of Greenville, North Carolina. The protest states that the merchandise, chiral lactone, was erroneously entered under subheading 2932.29.5050, HTSUS, at a 3.7% duty rate. The protest contends that the proper classification of the imported good is as a prototype under subheading 9817.85.01, HTSUS, a duty-free provision. The chiral lactone is stated to be a “key starting material in the synthesis of (-) DAPD,” a new pharmaceutical intended for the treatment of viral infection.


The imported merchandise, called chiral lactone (2-(R)-4-oxo-[1,3]-dioxolan-2-ylmethyl 2’-methylpropanoate) was entered on February 21, 2001, under subheading 2932.29.5050, HTSUS, at a duty rate of 3.7%. It is now contended that the proper tariff provision is subheading 9817.85.01, HTSUS, as a prototype. This provision is free of duty. The entry was liquidated as dutiable on January 4, 2002. A protest was timely filed on January 17, 2002. The port of Newark, New Jersey on April 1, 2003, declined to grant the protest based on two points. First, the amount of the imported chemical, 57.86 kilograms, was too large to fulfill the requirement that the importation be only in limited noncommercial quantities in accordance with industry practice. Second, it was 2.
stated that only goods of Chapter 85, HTSUS, are eligible for duty-free entry as prototypes under subheading 9817.85.01, HTSUS.

In response to our request for additional information of April 30, 2003, it was indicated that the 57.86 kilograms of chiral lactone, as shown on Ascot Chemicals Invoice 101162, were imported by, and delivered to, Catalytic Pharmaceuticals Inc (DSM). The “Invoice Address” on Invoice 101162 is Triangle Pharmaceuticals Inc. DSM states that “the chiral lactone intermediate will be used to produce a product for our customer, Triangle Pharmaceuticals.” The chiral lactone was used to produce DAPD, diaminopurine dioxolane, “a new pharmaceutical currently in Phase I clinical evaluation for the treatment of viral infection. The (-) DAPD is under clinical investigation by Triangle Pharmaceuticals, Inc. under US IND #57.159” [fax of March 1, 2001, from Ascot Fine Chemicals of Cambridge, England]. As noted by DSM, the chiral lactone is one of twelve chemicals making up DAPD. It undergoes three chemical reaction steps and becomes part of subsequent intermediate molecules. This is the response of Headquarters to the request for further review, which was received at Customs Headquarters on April 16, 2003.


Whether the subject importation of chiral lactone qualifies for duty-free treatment as a prototype under subheading 9817.85.01, HTSUS.


Subheading 9817.85.01, HTSUS, allows duty-free entry of prototypes when certain conditions are met. Chapter 98, Subchapter XVII, U.S. Note 6(a)(i), HTSUS (hereinafter “U.S. Note 6(a)(i)”), defines prototypes, for the purposes of the Tariff Schedule, as originals or models of articles which are either in the pre-production, production or postproduction stage. Articles entered as prototypes under subheading 9817.85.01, HTSUS, must be used exclusively for the purposes of:

Product evaluation, or
Quality control.

Pursuant to U.S. Note 6(b)(i), articles claimed as prototypes may be imported only in the noncommercial quantities which are usual in the industry. U.S. Note 6(b)(ii), HTSUS, states that prototypes or their parts may not be sold after importation. Pursuant to U.S. Note (6)(c), articles may not be classified as prototypes if they are subject to: 3.

Quantitative restrictions,
Antidumping orders, or
Countervailing duty orders.

However, articles which must comply with:

Laws administered by agencies other than Customs, Rules administered by agencies other than Customs, Regulations administered by agencies other than Customs, or Licensing requirements,
may be classified as prototypes if they satisfy the applicable requirements and are otherwise eligible as prototypes within the meaning of U.S. Note 6.

Newark Customs contention that subheading 9817.85.01, HTSUS, applies only to Chapter 85, HTSUS, cannot be supported. The law (§1433 of the Product Development and Testing Act of 2000 (PDTA), enacted as part of the Tariff Suspension and Trade Act of 2000 (Pub.L.106-476)), does not mention any restriction on the range of eligibility within the HTSUS. There is nothing in the law or the U.S. notes to Subchapter XVII, Chapter 98 that supports the port’s view that the “85” in subheading 9817.85.01, HTSUS, means that the subheading is restricted to the provisions of Chapter 85, HTSUS.

Newark Customs other point, however, is well taken. It questions whether the importation satisfies the “limited noncommercial quantities in accordance with industry practice” requirement in U.S. Note 6.(b)(i). Customs Headquarters has issued two rulings pertaining to chemical prototypes to be imported for testing. In Headquarters Ruling Letter (HRL) 562557, dated November 21, 2002, the quantities of the imported samples at issue were “typically less than 100 milligrams, or 0.004 ounce.” In HRL 562174, dated June 19, 2002, the sample of each organic compound under consideration was “approximately .6 to 1 milligram” each. In contrast, the importation in this protest consists of 57.86 kilograms.

As evidence that the importation subject to this protest is in a noncommercial quantity “in accordance with industry practice,” entry documents for “an identical entry cleared by another broker for our client” of what is identified on the Entry Summary (CF 7501) as “lactone: other” were submitted with the protest. The weight of this importation was 10 kilograms. The classification of the importation as a “prototype” under subheading 9817.85.01, HTSUS, went unchallenged by Customs, which the protestant offers as evidence that importations of kilograms of organic chemicals for testing are “in accordance with industry practice.” Triangle Pharmaceuticals was the importer of record on the

entry for the 10 kilogram importation of “lactone: other.” Thus, the 57.86 kilogram entry of the protest and the 10 kilogram entry which was accepted as a prototype were both intended for the same pharmaceutical company, namely, Triangle Pharmaceuticals Inc. Therefore, they cannot be said to be evidence of the quantities representative of “industry practice,” but only the practice of one firm. We are not satisfied, based on the information submitted by the protestant, that the large quantity imported here (57.86 kilograms) qualifies as “limited noncommercial quantities in accordance with industry practice” for purposes of subheading 9817.85.01, HTSUS.

An additional problem with the claim that the chiral lactone should be allowed duty-free treatment as a prototype imported for testing under subheading 9817.85.01, HTSUS, is that the chemical substance which is undergoing testing in the U.S. is not the imported chiral lactone but a chemical known as DAPD. After undergoing three chemical reactions, the chiral lactone comprises less than 30% of the final molecule, DAPD. DSM indicated that Phase I testing by Triangle Pharmaceuticals has been completed and DSM is now “performing process development work as part of providing Phase II clinical material” to their customer, Triangle Pharmaceuticals, for testing. [DSM letter of June 10, 2003]. Therefore, DAPD was not imported but is produced in the U.S. An importation of DAPD is not being protested, but an importation by DSM of chiral lactone. Customs determinations are based on the “condition as imported” of the material imported. In its condition as imported, the chiral lactone is not intended for testing in the U.S. It is undergoing more than the purposes specified in the subheading, wherein the article entered as a prototype must be used “exclusively for development, testing, product evaluation, or quality control purposes.” [Emphasis added.] The chiral lactone is being used in the manufacture of something else-a new and different product-DAPD. This use is not authorized in the subheading or the U.S. Notes. Therefore, it cannot qualify as a prototype under subheading 9817.85.01, HTSUS.


The imported chiral lactone fails to qualify as a prototype under subheading 9817.85.01, HTSUS, because it is not the subject of the testing in the U.S., and the subject of the testing, DAPD, is not the chemical imported. In addition, we are not satisfied, based on the information submitted by the protestant, that the large quantity imported here qualifies as “limited noncommercial quantities in accordance with industry practice.”

Therefore, the chiral lactone of the protest does not qualify as a prototype under subheading 9817.85.01, HTSUS, and the protest should be DENIED.


In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision

Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.


Myles B. Harmon, Director
Commercial Rulings Division

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