# HQ 962921

December 11, 2000

CLA-2 RR:CR:GC 962921 AM

**CATEGORY:** CLASSIFICATION

**TARIFF NO.:** 3004.90.90, 2106.90.99

Port Director of Customs

2^nd^ and Chestnut Streets

Philadelphia, PA 19106

**Re:** Protest 1101-99-100114; SB-207499 and placebo capsules

Dear Port Director:

This is in regard to protest 1101-99-100114, concerning your
classification of SB-207499 and placebo capsules under the Harmonized
Tariff Schedule of the United States (HTSUS). The merchandise was
entered on February 9, 1998, and the entry was liquidated on January 22,
1999, under subheading 3824.90.26, HTSUS, as a preparation of the
chemical or allied industries, not elsewhere specified or included. A
protest was timely filed on April 22, 1999.

**FACTS:**

SB-207499 (Ariflo) capsules are imported by Smith Kline Beecham
Pharmaceuticals from the United Kingdom for use in Food and Drug
Administration (FDA) clinical trials under Investigational New Drug
(IND) number 48224. SB-207499 is being investigated for use in the
treatment of chronic obstructive pulmonary disease (COPD). SB-207499 is
a selective, second generation, oral phosphodiesterase 4 (PDE4)
inhibitor. Gelatin capsules are filled with SB-207499 and inert
ingredients and imported packaged for disbursement in the clinical
trial.

The placebos contain starch 1500, lactose, and magnesium stearate.
Gelatin capsules designed to look exactly like those filled with the
SB-207499 mixture are filled with the above placebo ingredients. Thus
the placebos are specially formulated for use in clinical trials of
SB-207499 and could not be used for any other purpose. The placebo
capsules are imported packaged for disbursement in the clinical trial,
separately from the SB-207499 capsules, but entered in the same shipment
as the SB-207499 capsules.

Protestant argues that SB-207499 capsules should be classified under
subheading 3004.90.90, HTSUS, as medicaments. Protestant also argues
that placebo capsules should be classified with the SB-207499 capsules
as composite goods under General Rule of Interpretation (GRI) 3(b). In
the alternative, protestant argues that the placebo capsules should be
classified under subheading 9602.00.10, HTSUS, as worked unhardened
gelatin and articles thereof.

**ISSUE:**

\(1\) Whether capsules containing SB-207499 used in clinical trials for
the treatment of COPD are classified in subheading 3004.90.90, HTSUS, or
in subheading 3824.90.90, HTSUS.

(2) Whether placebo capsules for use in clinical trials are classified
    as a composite good with the active drug capsules used in the same
    clinical trials or separately in subheading 2106.90.99, HTSUS,
    subheading 3824.90.26, HTSUS, or subheading 9602.00.10, HTSUS.

    **LAW AND ANALYSIS:**

Merchandise imported into the U.S. is classified under the HTSUS. Tariff
classification is governed by the principles set forth in the General
Rules of Interpretation (GRIs) and, in the absence of special language
or context that requires otherwise, by the Additional U.S. Rules of
Interpretation. The GRIs and the Additional U.S. Rules of Interpretation
are part of the HTSUS and are to be considered statutory provisions of
law.

GRI 1 requires that classification be determined first according to the
terms of the headings of the tariff schedule and any related section or
chapter notes and, unless otherwise required, according to the remaining
GRIs taken in order. GRI 6 requires that the classification of goods in
the subheadings of headings shall be determined according to the terms
of those subheadings, any related subheading notes and mutatis mutandis,
to the GRIs. In interpreting the HTSUS, the Explanatory Notes (ENs) of
the Harmonized Commodity Description and Coding System may be utilized.
The ENs, although not dispositive or legally binding, provide a
commentary on the scope of each heading, and are generally indicative of
the proper interpretation of the HTSUSA. See T.D. 89

80, 54 Fed. Reg. 35127 (August 23, 1989).

GRI 2(b) explains that heading references to substances include goods
that contain that substance in a mixture or consist partly of that
substance. The rule directs classification of these mixtures according
to the terms of GRI 3. However, the EN to GRI 2(b) specifically states:
\"Mixtures being preparations described as such in a Section or Chapter
Note or in a heading text are to be classified under the provisions of
Rule 1.\"

GRI 3 provides for the classification of goods that are *prima facie*
classifiable under two or more headings. The rule states, in pertinent
part, as follows:

> \(a\) The heading which provides the most specific description shall
> be preferred to headings providing a more general description.
> However, when two or more headings each refer to part only of the
> materials or substances contained in mixed or composite goods or to
> part only of the items in a set put up for retail sale, those headings
> are to be regarded as equally specific in relation to those goods,
> even if one of them gives a more complete or precise description of
> the goods.
>
> \(b\) Mixtures, composite goods consisting of different materials or
> made up of different components, and goods put up in sets for retail
> sale, which cannot be classified by reference to 3(a), shall be
> classified as if they consisted of the material or component which
> gives them their essential character, insofar as this criterion is
> applicable.
>
> \(c\) When goods cannot be classified by reference to 3(a) or 3(b),
> they shall be classified under the heading which occurs last in
> numerical order among those which equally merit consideration.

Explanatory Note (IX) (page 4) to GRI 3(b) states:

> For the purposes of this Rule, composite goods made up of different
> components shall be taken to mean not only those in which the
> components are attached to each other to form a practically
> inseparable whole but also those with separable components, provided
> these components are adapted one to the other and are mutually
> complementary and that together they form a whole which would not
> normally be offered for sale in separate parts.

Examples of the latter category of goods are:

> \(1\) Ashtrays consisting of a stand incorporating a removable ash
> bowl.
>
> \(2\) Household spice racks consisting of a specially designed frame
> (usually of wood) and an appropriate number of empty spice jars of
> suitable shape and size.
>
> As a general rule, the components of these composite goods are put up
> in a common packing.

The HTSUS headings under consideration are as follows:

2106 Food preparations not elsewhere specified or included:

3004 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:

3824 Prepared binders for foundry molds or cores; chemical products and
preparations of the chemical or allied industries (including those
consisting of mixtures of natural products), not elsewhere specified or
included; residual products of the chemical or allied industries, not
elsewhere specified or included:

9602 Worked vegetable or mineral carving material and articles of these
materials; molded or carved articles of wax, of stearin, of natural gums
or natural resins, of modeling pastes, and other molded or carved
articles, not elsewhere specified or included; worked, unhardened
gelatin (except gelatin of heading 3503) and articles of unhardened
gelatin:

In the May 24, 2000, CUSTOMS BULLETIN, Vol. 35, No 21, Customs published
a document entitled "Guidance Concerning the Tariff Classification of
Pharmaceutical Products Imported for Clinical Research." There, Customs
announced its intention to classify pharmaceutical products imported in
dosage form for use in clinical trials as \"medicaments\" of heading
3004, HTSUS.

SB-207499 has been approved by the FDA for Investigational New Drug
\[IND\] status and has been issued IND #48224. Presently, the capsules
are imported for use in clinical trials where they are administered to
patients suffering from a specific disease (COPD), so as to cure such
condition. Hence, SB-207499 capsules are used as a medicine and should
be classified in heading 3004 as a medicament when in capsule form.

We now move to the classification of the placebo capsules. In New York
Ruling Letter (NY) F84592, dated April, 11, 2000, Customs classified a
placebo, in tablet form, imported for experimental purposes in heading
2106, HTSUS, the provision for \"food preparations not elsewhere
specified or included.\" The placebo in that case was said to be
composed of microcrystalline cellulose, pregelatinized starch, sodium
starch glycolate, copovidone (a binder), talc, magnesium stearate, and
colloidal silicon dioxide, which are similar to the ingredients of the
placebo in the instant case.

Proceeding through the other classification headings under
consideration, we note that placebos contain no active drug substance.
Therefore, they are not \"medicaments for therapeutic or prophylactic
uses\" of heading 3004. Their only use is in the clinical trials of a
substance absent from the placebo capsules. They are not themselves used
for therapy or prophylaxis, as they do not contain the active ingredient
necessary to treat or prevent disease. Instead, they are used to provide
a control group for the collection of data.

Nevertheless, counsel for the protestant argues that the placebos and
the SB-207499 are shipped together as composite goods and used in
conjunction with one another in the same clinical trials. Counsel
insists that the placebos must therefore be classified together with the
active drug capsules under heading 3004.

Counsel\'s argument is specious. First, in order to consider
classification as a composite good of GRI 3(b), the placebos can not be
classifiable by the terms of the headings using GRI 1. As noted above,
the goods are classifiable by the terms of the headings in heading 2106,
HTSUS, as a food preparation. The capsules contain foodstuffs (starch
and lactose encapsulated in gelatin), the placebos are prepared by the
mixing of ingredients and filling of the capsules, and the placebos are
ingested.

*Arguendo*, the placebos can not be classified simply by the terms of
the headings and consideration under GRI 3(b) is necessary. To bolster
this argument, counsel cites language in the ENs which states that
composite goods include \". . .those with separable components, provided
these components are adapted one to the other and are mutually
complementary and that together they form a whole . . . .\" (EN (IX) to
GRI 3(b)). Counsel sites this language out of context and thus
misinterprets the meaning of the ENs. Composite goods made up of
components are exemplified in the EN as an ashtray bowl and stand or a
spice rack frame and fitted spice bottles. The separable components in
these examples are adapted one to the other, that is, used together, and
are mutually complementary, that is, form a whole good.

The drug and placebo in the instant case, while they complement the
purpose of the clinical trials, do not make up a whole good. They are
not fitted together or used together by the end user, the patient in the
clinical trial. The language of the EN makes clear that the mutually
complementary components must form a whole good, not intangible data.
This argument is further supported by the fact that the EN notes that
generally, components are packaged together. Here, the placebo and the
drug are specifically not packaged together because such packaging would
frustrate the design of the study leaving no control group to measure
the effectiveness of the drug against.

Next, we consider heading 3824, HTSUS, the provision for \"... chemical
products and preparations of the chemical or allied industries
(including those consisting of mixtures of natural products), not
elsewhere specified or included....\" Chapter 38 note 1(b) specifically
excludes: \"\[M\]ixtures of chemicals with foodstuffs or other
substances with nutritive value, of a kind used in the preparation of
human foodstuffs (generally, heading 2106).\" As noted above, the
placebos contain foodstuffs (starch and lactose encapsulated in
gelatin), and they contain chemicals (silicianhydride, magnesium
stearate). While this particular mixture is specially formulated for use
in a placebo capsule, the ingredients are of a kind found in dietary
supplements and other foodstuffs. Thus, the placebos are a mixture of
chemicals with foodstuffs that are specifically excluded from
classification in Chapter 38, HTSUS.

Next, we consider heading 9602, HTSUS. Counsel argues that GRI 3(a)
directs that the placebo capsules should be classified in subheading
9602.00.1080, HTSUS, the provision for \". . . articles of unhardened
gelatin: \[W\]orked unhardened gelatin and articles thereof: \[O\]ther
\[than unfilled gelatin capsules\]\" as the more specific provision. In
so arguing, counsel concedes that the capsules could be classified under
heading 2106, HTSUS.

GRI 1 mandates comparison of headings to headings, not headings to
subheadings. Only the capsule part of the placebo is an article of
unhardened gelatin. Therefore, heading 9602, HTSUS, describes part only
of the good whereas heading 2106, HTSUS, describes the whole placebo
including the unhardened gelatin which itself constitutes a foodstuff.

Before considering a GRI 3 mixture analysis, we must first methodically
work through the GRIs. In applying GRI 2(b), we are prevented from
proceeding to GRI 3 in this case by the language in the EN:
\"\[M\]ixtures being preparations described as such in a Section or
Chapter Note or in a heading text are to be classified under the
provisions of Rule 1.\" The placebos at issue are just such a
preparation. They are specifically prepared for a clinical trial of
SB-207499. The placebos contain similar ingredients to the inert
ingredients of the SB-207499 capsules. The placebo capsule is prepared
to appear identical to the SB-207499 capsules. Heading 2106, HTSUS, the
provision for \"\[F\]ood preparations not elsewhere specified or
included,\" fully describes the placebos.

In an attempt to prove that filled gelatin capsules are specifically
provided for in heading 9602, HTSUS, as articles of gelatin other than
unfilled gelatin capsules, counsel refers to the statistical provisions
at the ten-digit level. However, counsel misreads this provision. The
word \"other\" does not, as counsel suggests, refer to the word
\"unfilled\" which would support the classification of \"filled\"
gelatin capsules within the subheading. Instead, the word \"Other\"
means, \"articles of worked unhardened gelatin other than unfilled
gelatin capsules.\" These articles could be any articles of worked
unhardened gelatin except unfilled gelatin capsules. Thus, the language
of the subheading does not mandate classification of \"filled\" gelatin
capsules in subheading 9602.00.1080, HTSUS. In fact, all of the cases
counsel cites to support this argument classify only unfilled gelatin
capsules in subheading 9602.00.10, HTSUS. (*See* NY D89279, dated
November 16, 1999, NY D80818, dated November 12, 1998, and NY 811937,
dated June 29, 1995).

**HOLDING:**

Capsules containing SB-207499 as their active ingredient are classified
in subheading 3004.90.90, HTSUS, as "other" medicaments and should be
entered free of duty. Placebo capsules are classified in subheading
2106.90.99, the provision for \"\[F\]ood preparations not elsewhere
specified or included: \[O\]ther: \[O\]ther: \[O\]ther.\" The protest is
ALLOWED in part and DENIED in part.

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](http://www.customs.ustreas.gov/), by means of the
Freedom of Information Act, and other methods of public distribution.

Sincerely,

John Durant, Director

Commercial Rulings Division