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HQ 562889

January 21, 2004

MAR-2-05 RR:CR:SM 562889 DCC


Mr. James K. Kearney

Reed Smith LLP

1301 K Street, NW
Suite 1100 – East Tower
Washington, DC 20005-3373

RE: Country of Origin Marking for Lansoprazole

Dear Mr. Kearney:

This is in response to your letters dated June 6, October 22, 2003, and January 7, 2004, requesting a ruling on behalf of TAP Pharmaceutical Products Inc. (“TAP”). TAP is operated as a joint venture between Takeda Chemical Industries, LTD (“Takeda”) of Japan and Abbott Laboratories of Abbott Park, Illinois. Your request concerns the country of origin marking for the pharmaceutical drug lansoprazole which TAP sells under the trade names Prevacid and Prevpac.


Prevacid and Prevpac are prescription drugs used for the treatment of acid reflux disease, heartburn, and ulcers. The active ingredient in Prevacid and Prevpac is lansoprazole, a white to brownish-white crystalline powder, which inhibits the secretion of gastric acid.

Takeda manufactures lansoprazole in bulk in Italy. After production, the lansoprazole is shipped to Ireland or Japan where Takeda processes it to produce Prevacid and Prevpac.

The first step in the production of Prevacid and Prevpac is converting the bulk lansoprazole into enteric-coated granules. This process involves combining a measured amount of powered lansoprazole with certain binding agents (including magnesium carbonate, low-substituted hydroxypropyl cellulose, hydroxypropyl cellulose, and purified water) on a carrier matrix (consisting of lactose monohydrate and microcrystalline cellulose spheres) using a centrifugal granulator. These spheres are then covered with coating substances (including hydroxypropyl methylcellylose, low-substituted hydroxypropyl cellulose, titanium dioxide, talc, mannitol, and purified water) that form the undercoating of the lansoprazole-coated microgranules.

In the next step, the lansoprazole-coated microgranules are coated with measured amounts of enteric-coating suspension that contains a mixture of methacrylic acid copolymer and other binding agents. The end result of this process is an intermediate product called enteric-coated lansoprazole microgranules. The enteric coating protects the lansoprazole from stomach acid which enables the drug to reach the intestines where it is absorbed by the body. The lansoprazole does not acquire a separate Chemical Abstracts Service (“CAS”) number as a result of the enteric coating.

You claim that the enteric-coating process performed on the lansoprazole in Japan or Ireland is a substantial transformation such that the drug becomes a product of Japan or Ireland.


Whether lansoprazole is substantially transformed by the above-described processing so that the country of origin is Japan or Ireland.


The U.S. law relating to country of origin marking for imported merchandise is found in section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304). This law 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. See 19 U.S.C. § 1304(a).

The purpose of the marking statute is to allow the ultimate purchaser of the goods to know, by simple inspection, specifically where they were made in case such knowledge might influence his or her decision to purchase the goods (i.e., to permit the ultimate purchaser in the United States to choose between domestic and foreign-made products, or between the products of different foreign countries). See, United States v. Friedlaender & Co. Inc., 27 C.C.P.A. 297, at 302 (1940).

The country of origin of an article for U.S. tariff purposes is the country in which the last substantial transformation took place. A substantial transformation occurs when an article is used in a manufacturing process or operation that results in a new article that has a new name, character or use different from that of the original imported article. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); and National Hand Tool Corp. v. United States, 989 F.2d 1201 (Fed. Cir. 1992).

U.S. Customs and Border Protection (“CBP”) has issued several ruling letters concerning the substantial transformation of pharmaceutical drugs. These rulings have generally held that the processing of pharmaceutical products in bulk form into measured doses does not result in a substantial transformation of the product. In Headquarters Ruling Letter (“HRL”) 561975, dated April 3, 2002, CBP found that no substantial transformation resulted from the U.S. processing of the anesthetic drug sevoflurane. The U.S. operations in that case involved processing the drug from bulk form into measured doses, extensive testing, and filtering and packaging the product into bottles. In determining that there was no substantial transformation, CBP noted that there was no change in name (the packaged product was identified as sevoflurane on the label, with the trade name “Ultrane”), little change in the character, and no change in use of the product.

In HRL 561544, dated May 1, 2000, CBP determined that there was no substantial transformation when imported geneticin sulfate was processed into Geneticin Selective Antibiotic. The U.S. processing involved extensive testing, dissolving of the material into a solution by adding purified water, removing contaminants by filtering the solution through sterilizing grade filters, and pumping the resulting Geneticin antibiotic into sterile bottles for use in molecular genetics experiments. CBP held that no substantial transformation results from the U.S. processing as it essentially consists of the removal of impurities from the bulk chemical, and the placement of the chemical into smaller packaging.

In NY C85112, dated March 27, 1998, CBP reviewed the country of origin of leuprolide acetate, sold under the trade name Lupron Depot 7.5 mg. by TAP Pharmaceuticals. In that case, U.S.-manufactured leuprolide acetate powder was exported to Japan where Takeda Chemical Industries combined it with certain excipients and encapsulated the resulting material into sterile microspheres. The purpose of microencapsulating the leuprolide acetate was to modify its delivery rate from daily into a form that would be released in the human body over a period of one to four months. According to NY C85112, TAP asserted “that the leuprolide acetate is not chemically altered by the microencapsulation process, and that the physiological action of the microencapsulated version is identical to that of the non-microencapsulated leuprolide acetate marketed by TAP in the daily injectable form of this medication.” TAP further claimed that the U.S.-manufactured drug did not lose its identity as a result of the foreign encapsulation processing and therefore did not result in an article having a new name, character or use. CBP determined that the fundamental character of the leuprolide acetate was unchanged by the encapsulation processing and that the foreign processing did not result in a substantial transformation of the U.S.-manufactured leuprolide acetate.

In HRL 731731, dated February 23, 1989, however, CBP found that a substantial transformation resulted when vancomycin hydrochloride imported in bulk powder form was processed in the United States into Sterile Vancomycin Hydrochloride USP, an antibiotic capable of intravenous injection. The U.S. processing was extensive and involved the following operations: (1) testing for potency and, if potency is not adequate, adding more active ingredient; (2) applying nitrogen gas to eliminate possible degradation; (3) dissolving the product into a solution; (4) filtering the solution through a special microbial filter; (5) testing for pyrogenicity; (6) placing the solution into glass vials; and (7) freeze drying the product in a three-step process—freezing to minus 40 degrees centigrade, gradual heating under extreme vacuum conditions, and extracting water.

In the instant case, Takeda processes bulk lansoprazole into dosage form by converting the powder into lansoprazole-coated microgranules that are subsequently covered with an enteric coating. We find that this processing does not result in a substantial transformation. The active pharmaceutical ingredient before and after the processing is lansoprazole. There is no change in the generic name, lansoprazole, which appears along with the trade name, Prevacid or Prevpac, on product marketing information. In addition, lansoprazole has the same chemical abstract number regardless of whether it has an enteric coating. We also note that there is no change in the character of the product, as the chemical and physiological properties of the active pharmaceutical ingredient remain the same after the further processing. Finally, the medicinal use of lansoprazole, i.e., control of gastric acid, does not change as a result the enteric-coating process. Therefore, the country of origin of lansoprazole does not change as a result of processing from bulk form to dosage form, and the drug remains a product of Italy for marking purposes.

With regard to HRL 731731, which you cite in support of your contention that a substantial transformation occurs when lansoprazole in bulk form is processed into dosage form, we do not view that ruling as controlling precedent in the instant case. As noted above, HRL 731731 involved more extensive and complex processing than that in the instant case. The further processing in that case included testing the potency of the raw material and adjusting the active ingredient as necessary, dissolving and filtering the material, testing for pyrogenicity, and a three-step freeze drying process. Therefore, the product and processes described in HRL 731731 cannot serve as controlling precedent for finding that a substantial transformation occurs in the present case.

Finally, you claim that the enteric coating of the granulated lansoprazole which renders the drug fit for human consumption substantially transforms the chemical behavior of the drug. You state that enteric coating process imparts to the lansoprazole the important pharmaceutical function of delayed-release. We believe that the enteric coating of lansoprazole is similar to the foreign encapsulating of leuprolide acetate described in NY C85112. In that case, U.S.-manufactured leuprolide acetate was encapsulated to produce sterile microspheres. Similarly, in the present case lansoprazole is processed to produce enteric-coated lansoprazole microgranules. In both cases, the active pharmaceutical ingredient is encapsulated or coated to alter the delivery rate of the drug into the human body. In NY C85112, the importer claimed that the physiological action of the encapsulated drug is identical to the unprocessed drug. We find the same to be true in this case. Therefore, the enteric-coating process does not cause a substantial transformation and the country of origin of the processed or unprocessed lansoprazole is Italy.


On the basis of the information provided, the lansoprazole does not undergo a substantial transformation by the enteric-coating processing performed in Japan or Ireland. The country of origin of the processed or unprocessed lansoprazole is Italy.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.


Myles B. Harmon, Director
Commercial Rulings Division

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