HQ W563169

August 31, 2007

CLA-02 OT:RR:CTF:VS W563169 NL

CATEGORY: CLASSIFICATION

Tariff No.: 9817.85.01, 2930.90.29, 2930.90.49, 2932.99.70, 2933.29.35,
2933.99.79, 2933.99.97, 2934.99.39, 2934.99.90

Area Port Director

Customs and Border Protection

# 605 W. 4^th^ Ave., Rm 205

Anchorage, AK 99501

# Attn: Jeff Schlies, IS

Re: Protest AFR No. 3195-04-100142; Polypeptides; 9817.85.01 Prototype
Treatment; Additional U.S. Rule of Interpretation 1(b); Actual Use; 19
CFR 10.134; Classification

Dear Port Director:

This is our decision on the application for further review (AFR) of
protest no. 3195-04-100142, timely filed against your classification of
polypeptides, under the Harmonized Tariff Schedule of the United States
(HTSUS). Our decision follows a teleconference held on June 8, 2005,
between counsel for the protestant, American Peptide Company, Inc. (APC)
and members of the staff of the Office of Regulations and Rulings,
Tariff Classification and Marking Branch and Valuation and Special
Programs Branch.

We have granted the protestant's request for confidentiality for the
structural formulas and amino acid chain sequences of the imported
polypeptides, in accordance with CBP Regulations section 177.2(b)(5) (19
CFR 177.2(b)(5)).

**FACTS:**

The subject protest covers two entries of polypeptides. Entry
112-xxxx148-3 was made classifying the 32 polypeptides under 2937.19.00,
HTSUS, as hormones. Entry 112-xxxx639-1 was made classifying the
polypeptides under subheading 2106.10.00, HTSUS, as food preparations. A
CF 29, Notice of Action, was issued with respect to each entry on
December 11, 2003, notifying the protestant that Customs and Border
Protection (CBP) proposed to liquidate each entry under heading 2933,
HTSUS, which covers heterocyclic compounds with nitrogen hetero-atom(s)
only. The entries were liquidated under subheading 2933.99.79, HTSUS on
February 20, 2004. On May 20, 2004, APC filed a protest against the
classification of the polypeptides in the two entries. The documentation
submitted with the protest, providing information with regard to the
polypeptides, is limited to the polypeptides imported under entry
112-xxxx148-3. The protestant has agreed to have the protest decided on
the basis of the information provided with respect to entry
112-xxxx148-3.

The protest presents two principal claims. First, the protestant asserts
that the polypeptides are eligible for treatment as prototypes under
subheading 9817.85.01, HTSUS. Subheading 9817.85.01 provides duty-free
treatment for prototypes to be used exclusively for development,
testing, product evaluation or quality control purposes, subject to
certain conditions set forth in the applicable legal notes. The second
principal claim of the protest is against CBP's classification of the
polypeptides in heading 2933, HTSUS. We turn first to APC's arguments
for prototype treatment.

[9817.85.01 Prototype Treatment]{.underline}

The protestant notes that the polypeptide materials are unique organic
compounds that were imported to be tested for pharmaceutical potential.
The protestant further notes that the materials were imported in
limited, noncommercial quantities to be used exclusively for testing and
research. In these respects the importation is said to be comparable to
the circumstances and materials approved for subheading 9817.85.01
treatment in HQ 562174 (June 19, 2002) and NY K85984 (June 1, 2004).

It is further argued that subheading 9817.85.01's prohibition on sale of
imported prototypes was not violated, because no such sale took place
after importation.

By a supplemental submission dated July 13, 2005, counsel provided a
statement by a company officer regarding the purposes and patterns of
its polypeptides importations, together with information concerning
research objectives and Food and Drug Administration (FDA) approval
procedures.

We note that the importer's claim for subheading 9817.85.01 treatment
was raised for the first time at protest following liquidation. At entry
the importer self-classified the polypeptides in heading 2937, HTSUS. In
this regard the instant protest differs from the facts in the cited CBP
precedents, which were either prospective rulings or protests in which a
subheading 9817.85.01 declaration for prototype treatment was made at
importation.

## Tariff Classification

The protestant takes the position that the polypeptides are properly
classifiable under subheading 2937.19.00, HTSUS, as "\[h\]ormones,
prostaglandins, thromboxanes and leukotrienes, natural or reproduced by
synthesis; derivatives and structural analogues thereof, including chain
modified polypeptides, used primarily as hormones: Polypeptide hormones,
protein hormones and glycoprotein hormones, their derivatives and
structural analogues: Other." In the alternative, the protestant takes
the position that the polypeptides are classifiable under subheading
2942.00.50, HTSUS, as "\[o\]ther organic compounds: Other," in
accordance with Note 3 of Chapter 29, while maintaining the polypeptides
may also be described under other headings of Chapter 29.

The polypeptides at issue are customer-requested, custom-made,
research-grade polypeptides, consisting of chains of amino acids,
produced from synthetic hormones. The polypeptides do not have Chemical
Abstract Service ("CAS") numbers. The protestant states:

> The principal purpose of the...research-grade peptides is potentially
> to modify cell and organ structures. The individual chain may not
> function with the cell in the manner intended.

The protestant has provided CBP with structural diagrams of the chemical
formulas of the 32 polypeptides which are the subject of entry
112-xxxx148-3, and a certificate of analysis for each one, giving the
amino acid sequence, molecular weight, purity level, peptide content,
appearance, solubility, counter ion, and result of Mass Spectrometer
analysis. The protestant has also provided a description of the
manufacturing process for the polypeptides.

According to the protestant, upon importation, the polypeptides undergo
testing to determine whether they have pharmaceutical potential. The
polypeptides are used exclusively for drug testing and research, and
have no known purpose other than initial-stage drug discovery research
and development. With regard to use of the polypeptides as hormones, the
protestant states as follows:

> \[B\]ased on the knowledge and experience of \[the protestant\], the
> principal use of all research-grade peptides is for the peptide chain
> to attach to the cell receptors to result in the modification of the
> cells' functionality. Dependent upon the results of the research and
> analysis, this action may or may not occur.

The commercial invoices provided with respect to the subject entries,
include a six-digit reference number for each polypeptide. The invoice
for each entry also includes the statement: "peptide for laboratory
research use only, ...not for used \[sic\] in animal or human."

The protestant selected three polypeptides from entry 112-xxxx148-3, as
representative of all of the imported polypeptides.

**ISSUE:**

What is the classification of the imported polypeptides?

**LAW AND ANALYSIS:**

Initially we note that the matter is protestable under 19 U.S.C.
§1514(a)(2) as a decision on classification, and that the protest was
timely filed, within ninety days of the liquidation of the entries.

## Prototype Treatment under subheading 9817.85.01, HTSUS

Pursuant to § 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), articles classified as "prototypes" under the Act may
be imported duty free. To provide for duty-free entry of prototypes,
section 1433 of the PDTA inserted a new subheading 9817.85.01 in
Subchapter XVII of Chapter 98, HTSUS, providing for:

> Prototypes to be used exclusively for development, testing, product
> evaluation, or quality control purposes . . .

The PDTA also added a new Note 6 in Subchapter XVII of Chapter 98. Note
6 defines prototypes for the purposes of HTSUS subheading 9817.85.01 and
sets forth certain conditions and limitations governing classification
in the subheading. This Note provides in part:

> \(a\) 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 postproduction
> stage **and are to be used** **exclusively** for development, testing,
> product evaluation, or quality control purposes; and (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).

The PDTA and subheading 9817.85.01 became effective upon enactment on
November 9, 2000. CBP proposed implementing regulations in 2002. 67 FR
10636, March 8, 2002. The final regulation became effective on December
2, 2004. 69 FR 63445, November 2, 2004. Accordingly, as of February 20,
2004, the date of liquidation of the subject entries, no regulation
specific to subheading 9817.85.01 was in place. However, as discussed
below, at the time of entry there were relevant HTSUS provisions as well
as a regulation covering the eligibility for treatment under "actual
use" classification provisions. [See]{.underline} 19 CFR 10.131-.138.

CBP has ruled that chemical materials for pharmaceutical investigation
may be eligible for tariff treatment as prototypes. HQ 562174 (June 19,
2002); HQ 563056 (Oct. 15, 2004).

Classification as a prototype under subheading 9817.85.01 is dependent
on the actual use of the merchandise, because this subheading contains
the phrase "to be used exclusively for" (development, testing, product
evaluation, or quality control purposes). If the merchandise is actually
used for the purposes enumerated under subheading 9817.85.01, and there
is otherwise compliance with applicable relative legal notes and
regulations, classification will be under Chapter 98 no matter what the
classification of the merchandise would otherwise be. Like other actual
use provisions of the HTSUS, classification under subheading 9817.85.01
is subject to Additional U.S. Rule of Interpretation 1(b), which
provides:

> 1\. In the absence of special language or context which otherwise
> requires . . .
>
> \(b\) a tariff classification controlled by the actual use to which
> the imported goods are put in the United States is satisfied only if
> such use is intended *at the time of importation,* the goods are so
> used and proof thereof is furnished within 3 years after the date the
> goods are entered.

AUSRI 1(b) (emphasis added). Under §10.133 of the general actual use
regulation, the requirement of intended actual use at the time of
importation is reiterated. As evidence of such intention, §10.134
requires the importer at the time of entry either to file a declaration
as to the intended use of the merchandise or to indicate an actual use
subheading and reduced or free rate of duty on the entry form. As noted
above, the protestant did neither of these things, but instead claimed
prototype treatment for the first time at protest.

The Court of International Trade recently has considered exactly this
type of situation. In [Tradewind Farms, Inc., v United
States]{.underline}, 2007 Ct. Intl. Trade LEXIS 62, \*; SLIP OP. 2007-62
(April 30, 2007), the court characterized the issue as a procedural one
of whether the protestant had demonstrated compliance with the law and
regulations relating to notice of the intended use of the merchandise.
As in the instant protest, the importer did not file a declaration of
intended use; nor was the merchandise entered under an actual use
provision. Thus, said the court, the importer was insisting that its
protest of Customs' denial of actual use classification evidenced its
intention to actually use the merchandise for the prescribed purpose.
The court could find no indication in the regulation (10.134) or
elsewhere that the filing of a protest could be substituted for the
regulation's specific notice procedures. The court concluded that the
filing of a protest could not substitute for the actual notice to
Customs at the time of entry that is afforded either by the declaration
of actual use or the making of entry under one of the actual use tariff
provisions. The court considered one of these types of actual notice to
be threshold procedural requirements for classification under the actual
use provision.

The analysis and conclusion of the CIT's [Tradewind Farms]{.underline}
decision apply with regard to this part of the instant protest. Because
the protestant APC failed to file a declaration of actual use or to
enter the goods under subheading 9817.85.01, HTSUS, no actual notice to
Customs of prototype use was provided. The protestant failed to take a
procedural step that is essential to the orderly administration of
duty-free prototype treatment under subheading 9817.85.01, HTSUS.

Because this part of the protest is denied on procedural grounds, we do
not reach APC's arguments concerning the statutory prohibition on the
sale of prototype materials. Instead we turn to classification of the
goods within Chapter 29, HTSUS.

## Tariff Classification of Polypeptides

Merchandise is classifiable under the HTSUS in accordance with the
General Rules of Interpretation (GRIs). The systematic detail of the
HTSUS is such that most goods are classified by application of GRI 1,
that is, according to the terms of the headings of the tariff schedule
and any relative Section or Chapter Notes. In the event that the goods
cannot be classified solely on the basis of GRI 1, and if the headings
and legal notes do not otherwise require, the remaining GRIs 2 through 6
may then be applied in order.

The HTSUS subheadings under consideration are as follows:

2930 Organo-sulfur compounds:

2930.90 Other:

Aromatic:

Other:

2930.90.29 Other................................

Other:

Other:

Acids:

2930.90.49 Other........................

2932 Heterocyclic compounds with oxygen hetero-atom(s) only:

Other:

2932.99 Other:

Aromatic:

Other:

2932.99.70 Other.............................

2933 Heterocyclic compounds with nitrogen hetero-atom(s) only:

Compounds containing an unfused imidazole ring

> (whether or not hydrogenated) in the structure:

2933.29 Other:

Aromatic or modified aromatic:

Other:

Other:

2933.29.35 Products described in

> additional U.S. note 3 to section VI......\........
>
> Other:

2933.99 Other:

Aromatic or modified aromatic:

Other:

Other:

2933.99.79 Products described in

> additional U.S. note 3 to section VI............

Other:

Other:

2933.99.97 Other...............................

2934 Nucleic acids and their salts, whether or not chemically defined;
other heterocyclic compounds:

Other:

2934.99 Other:

Aromatic or modified aromatic:

Other:

Other:

2934.99.39 Products described in

> additional U.S. note 3 to section VI............

Other:

Other:

2934.99.90 Other...............................

2937 Hormones, prostaglandins, thromboxanes and leukotrienes, natural or
reproduced by synthesis; derivatives and structural analogues thereof,
including chain modified polypeptides, used primarily as hormones:

> Polypeptide hormones, protein hormones and glycoprotein hormones,
> their derivatives and structural analogues:

2937.19.00
Other..........................................................

2942.00 Other organic compounds:

2942.00.50
Other...................................................................

With regard to the protestant's argument that the imported polypeptides
are classified as hormones under heading 2937, HTSUS, Chapter 29, Note
8, provides as follows for the purposes of heading 2937:

> \(a\) the term "[hormones]{.underline}" includes hormone-releasing or
> hormone-stimulating factors, hormone inhibitors and hormone
> antagonists (antihormones);
>
> \(b\) the expression "[used primarily as hormones]{.underline}"
> applies not only to hormone derivatives and structural analogues used
> primarily for their hormonal effect, but also to those derivatives and
> structural analogues used primarily as intermediates in the synthesis
> of products of this heading.

Emphasis in original.

Heading 2937, HTSUS, is a use provision. Additional U.S. Rule of
Interpretation 1(a) provides, in pertinent part, that "a tariff
classification controlled by use (other than actual use) is to be
determined in accordance with the use in the United States at, or
immediately prior to, the date of importation, of goods of that class or
kind to which the imported goods belong, and the controlling use is the
principal use." In this case, the imported polypeptides are custom-made
for the importer, and there is no indication that the same polypeptides
are used by anyone else in the U.S., other than the companies which
obtain the polypeptides from the protestant. The protestant has not
established that either the three selected representative polypeptides,
or any of the other polypeptides are principally used as hormones. The
protestant's statement that "the individual chain may not function with
the cell in the manner intended," and the statement that the intended
result for the polypeptide chain to attach to the cell receptors, "may
or may not occur," indicate that the function of the polypeptides is
unknown at the time of their importation. Further indicating that the
polypeptides are not used as hormones, is the statement on the invoice:
"peptide for laboratory research use only, ...not for used \[sic\] in
animal or human."

In understanding the language of the HTSUS, the Harmonized Commodity
Description and Coding System Explanatory Notes may be utilized. The
Explanatory Notes (ENs), although not dispositive or legally binding,
provide a commentary on the scope of each heading of the HTSUS, and are
the official interpretation of the Harmonized System at the
international level. *See* T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August
23, 1989).

The ENs to 29.37 exclude products not having a hormonal effect, but
having a hormone-like structure, and products having a hormonal effect,
but not having a hormone-like structure. Therefore, in order to be
classified in heading 2937, HTSUS, a product must have both a hormonal
effect and a hormone-like structure.

In HQ 966670, dated December 22, 2003, a product classified as a
hormone, under heading 2937, HTSUS, was found to have both a
hormone-like structure and a hormone-like effect, in conformity with the
ENs.

Finally, by selecting representative polypeptides, the protestant
appears to take the position that all polypeptide chains can be
classified as hormones. Such a position is inconsistent with the
requirement that for classification under a use provision, the principal
use of the imported merchandise must be established. Not all
polypeptides are classified as hormones. Polypeptides were classified
under heading 2933, HTSUS, and not as hormones in HQ 089353, dated
November 7, 1991, and New York Ruling Letter (NY) G81655, dated January
24, 2001.

As the polypeptides are not classifiable as hormones, they are
classified according to their structures. In classification of
polypeptides by their structures, the presence of an aromatic,
heterocyclic compound containing oxygen hetero-atoms only, and other
heterocyclic compounds, are considered.

In classification of polypeptides by their structures, the presence of
an aromatic heterocyclic containing oxygen hetero-atoms only chemical,
and other heterocyclic compounds are considered. Upon review, it was
determined that the three claimed representative polypeptides were
classified incorrectly upon liquidation under subheading 2933.99.79,
HTSUS, and therefore we have examined and determined the classification
for each of the 32 polypeptides imported in entry 112-xxxx148-3. The
imported polypeptides are classified as follows according to their
structures:

[HTSUS Subheading]{.underline} [Polypeptide(s) by reference
number]{.underline}

2930.90.29 323604

2930.90.49 323542

2932.99.70 323276, 323277, 323278, 323397, 323283, 323287, 323288,
323289, 323290, 323291, 323292, 323295,

> 323296

2933.29.35 323505, 323512

2933.99.79 323533

2933.99.97 323506

2934.99.39 323273, 323274, 323275, 323279, 323280, 323281,

> 323284, 323285, 323293, 323294, 323297, 323437

2934.99.90 323435

Because documentation pertaining to the structures of the polypeptides
imported under entry 112-xxxx639-1 was not provided, there is no basis
to alter the classifications of those polypeptides liquidated by CBP.

The protestant takes the position that although the polypeptides a re
specifically described in certain headings of Chapter 29, HTSUS, under
Note 3 to Chapter 29, they should be classified in heading 2942, HTSUS.
Heading 2942, HTSUS, provides for "\[o\]ther organic compounds." Note 3
provides that "\[g\]oods which could be included in two or more of the
headings of this chapter are to be classified in that one of those
headings which occurs last in numerical order." The protestant takes the
position that the polypeptides at issue are described in heading 2942,
HTSUS, and therefore, based on Note 3, should be classified therein. On
this basis the protestant asserts that HQ 089353, dated November 7, 1991
was incorrectly decided because Note 3 to Chapter 29, HTSUS, was not
applied, in contradiction of GRI 1, requiring that the Chapter notes be
utilized in classification. In HQ 089353, Note 3 was considered, and it
was determined that since heading 2942, HTSUS is a basket provision, it
would not be considered a possible classification unless all other
provisions fail.

A basket provision covers merchandise not elsewhere described.
Classification in a basket provision "is appropriate only when there is
no tariff category that covers the merchandise more specifically." [Apex
Universal, Inc. v. United States]{.underline}, 22 C.I.T. 465, 471
(1998). The products at issue cannot be included in heading 2942, HTSUS,
because they are described in other headings of the Chapter, and
therefore do not meet the terms of heading 2942, HTSUS. Specifically as
the polypeptides are already described elsewhere, they are not
"\[o\]ther organic compounds." If the protestant were correct in its
argument, no product classified in Chapter 29 would be classified in any
heading but 2942, HTSUS, because any article described in any heading of
chapter 29, would also be described in heading 2942, HTSUS. Under this
argument, even hormones classifiable under heading 2937, HTSUS, would
have to be classified under heading 2942.

**HOLDING:**

By application of GRI 1, the polypeptides imported under entry
112-xxxx148-3, are classified as follows: 1) 323604 in subheading
2930.90.2900, HTSUSA, which provides for "\[o\]rgano-sulfur compounds:
Other: Aromatic: Other: Other," with a column one, general duty rate of
(in 2003) 6.5% ad valorem; 2) 323542 in subheading 2930.90.4950, HTSUSA,
which provides for "\[o\]rgano-sulfur compounds: Other: Other: Other:
Acids: Other," with a column one, general duty rate of (in 2003) 4.2% ad
valorem; 3) 323276, 323277, 323278, 323397, 323283, 323287, 323288,
323289, 323290, 323291, 323292, 323295, 323296 in subheading
2932.99.7000, HTSUSA, which provides for "\[h\]eterocyclic compounds
with oxygen hetero-atom(s) only: Other: Other: Aromatic: Other: Other,"
with a column one general duty rate of 0.4¢/kg + 7.5% ad valorem; 4)
323505, 323512 in subheading 2933.29.3500, HTSUSA, which provides for
"\[h\]eterocyclic compounds with nitrogen hetero-atom(s) only: Compounds
containing an unfused imidazole ring (whether or not hydrogenated) in
the structure: Other: Aromatic or modified aromatic: Other: Other:
Products described in additional U.S. note 3 to section VI," with a
column one, general duty rate of (in 2003) 7.2% ad valorem; 5) 323533 in
subheading 2933.99.7900, HTSUSA, which provides for "\[h\]eterocyclic
compounds with nitrogen hetero-atom(s) only: Other: Other: Aromatic or
modified aromatic: Other: Other: Products described in additional U.S.
note 3 to section VI," with a column one, general duty rate of (in 2003)
7.2% ad valorem; 6) 323506 in subheading 2933.99.9700, HTSUSA, which
provides for "\[h\]eterocyclic compounds with nitrogen hetero-atom(s)
only: Other: Other: Other: Other: Other," with a column one, general
duty rate of (in 2003) 6.5% ad valorem; 7) 323273, 323274, 323275,
323279, 323280, 323281, 323284, 323285, 323293, 323294, 323297, 323437
in subheading 2934.99.3900, HTSUSA, which provides for "Nucleic acids
and their salts, whether or not chemically defined; other heterocyclic
compounds: Other: Other: Aromatic or modified aromatic: Other: Other:
Products described in additional U.S. note 3 to section VI," with a
column one, general duty rate of (in 2003) 7.2% ad valorem; and 8)
323435 in subheading 2934.99.9000, HTSUSA, which provides for "Nucleic
acids and their salts, whether or not chemically defined; other
heterocyclic compounds: Other: Other: Other: Other: Other," with a
column one, general duty rate of (in 2003) 6.5% ad valorem.

By application of GRI 1, and given that no information regarding the
structures of the polypeptides imported under entry 112-xxxx639-1 was
provided, the polypeptides under entry 112-xxxx639-1 were correctly
classified according to their structures, under subheading 2933.99.7900,
HTSUSA, which provides for "\[h\]eterocyclic compounds with nitrogen
hetero-atom(s) only: Other: Other: Aromatic or modified aromatic: Other:
Other: Products described in additional U.S. note 3 to section VI," with
a column one, general duty rate of (in 2003) 7.2% ad valorem.

The text of the most recent HTSUS and the accompanying duty rates are
provided on the internet at
[www.usitc.gov/tata/hts/](http://www.usits.gov/tata/hts/).

You are instructed to deny the protest, except to the extent
reclassification of the merchandise as indicated above results in a net
duty reduction and partial allowance. In accordance with the
Protest/Petition Processing Handbook (CIS HB, June 2002, pp. 18 and 21),
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 in accordance with the decision must be
accomplished prior to mailing of the decision. No later than sixty days
from the date of the decision the Office of Regulations and Rulings 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 & Trade Facilitation Division