[Federal Register Volume 83, Number 131 (Monday, July 9, 2018)]
[Notices]
[Pages 31764-31766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14632]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Malarone 
Tablets

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Notice of final determination.

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SUMMARY: This document provides notice that U.S. Customs and Border 
Protection (``CBP'') has issued a final determination concerning the 
country of origin of Malarone tablets. Based upon the facts presented, 
CBP has concluded that the country of origin of the Malarone tablets is 
Canada for purposes of U.S. Government procurement.

DATES: This final determination was issued on July 2, 2018. A copy of 
the final determination is attached. Any party-at-interest may seek 
judicial review of this final determination within August 8, 2018.

FOR FURTHER INFORMATION CONTACT: Ross M. Cunningham, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of Trade, 
(202) 325-0034.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on July 2, 2018, 
pursuant to subpart B of Part 177, U.S. Customs and Border Protection 
Regulations (19 CFR part 177, subpart B), CBP issued one final 
determination concerning the country of origin of Malarone tablets, 
which may be offered to the U.S. Government under an undesignated 
government procurement contract. This final determination (HQ H290684) 
was issued under procedures set forth at 19 CFR part 177, subpart B, 
which implements Title III of the Trade Agreements Act of 1979, as 
amended (19 U.S.C. 2511-18). In the final determination, CBP concluded 
that the processing in Canada will result in a substantial 
transformation. Therefore, the country of origin for purposes of U.S. 
Government procurement of the Malarone tablets is Canada.
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that a 
notice of final determination shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, CBP Regulations (19 CFR 177.30), provides that any 
party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial 
review of a final determination within 30 days of publication of such 
determination in the Federal Register.

    Dated: July 2, 2018.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.
HQ H290684
July 2, 2018
OT:RR:CTF:VS H290684 RMC
CATEGORY: Origin
Nicolas Guzman
Drinker Biddle & Reath LLP
1500 K Street NW
Suite 1100
Washington, DC 20005-1209

Re: U.S. Government Procurement; Country of Origin of Malarone Tablets; 
Substantial Transformation

Dear Mr. Guzman:
    This is in response to your letter, dated September 13, 2017, 
requesting a final determination on behalf of GlaxoSmithKline LLP 
(``GSK'') pursuant to subpart B of Part 177 of the U.S. Customs and 
Border Protection (``CBP'') Regulations (19 C.F.R. Part 177). A 
teleconference was held with counsel for GSK on June 8, 2018.
    This final determination concerns the country of origin of Malarone 
tablets. As a U.S. importer, GSK is a party-at-interest within the 
meaning of 19 C.F.R. Sec.  177.22(d)(1) and is entitled to request this 
final determination.

FACTS:

    GSK is a global healthcare company that researches, develops, and 
manufactures pharmaceutical medicines, vaccines, and consumer 
healthcare products. At issue in this case are tablets sold under the 
brand name Malarone, which are indicated for the prevention and 
treatment of acute, uncomplicated Plasmodium falciparum malaria. GSK 
states that Malarone tablets have been shown to be effective in regions 
where other malaria drugs such as chloroquine, halofantrine, 
mefloquine, and amodiaquine may have unacceptable failure rates, 
presumably due to drug resistance.
    According to the FDA prescribing information, Malarone is a fixed-
dose combination of atovaquone and proguanil hydrochloride. See 
Prescribing Information, https://www.fda.gov/ohrms/dockets/ac/05/briefing/2005-4089b1_05_05_atovaquone.pdf (last visited Dec. 11, 2017). 
The chemical name of atovaquone 11 is trans-2-[4-(4 
chlorophenyl)cyclohexyl]-3-hydroxy-1,4-naphthalenedione and the 
molecular formula for atovaquone is C22H19ClO3. The chemical name of 
proguanil hydrochloride is 1-(4-chlorophenyl)-5-isopropyl-biguanide 
hydrochloride and the chemical formula for proguanil hydrochloride is 
C11H16ClN5<bullet>HCl. Each Malarone Tablet contains 250 milligrams of 
atovaquone and 100 milligrams of proguanil hydrochloride.
    The FDA prescribing information also describes the microbiology or 
``mechanism of action'' of atovaquone and proguanil hydrochloride. It 
states that atovaquone and proguanil hydrochloride ``interfere with 2 
different pathways involved in the biosynthesis of pyrimidines required 
for nucleic acid replication. Atovaquone is a selective inhibitor of 
parasite mitochondrial electron transport. Proguanil hydrochloride 
primarily exerts its effect by means of the metabolite cycloguanil, a 
dihydrofolate reductase inhibitor. Inhibition of dihydrofolate 
reductase in the malaria

[[Page 31765]]

parasite disrupts deoxythymidylate synthesis.''
    GSK notes that atovaquone by itself is not indicated for the 
prevention or treatment of malaria. By itself, atovaquone is used for 
other purposes, such as the treatment of acute pneumocystis carinii 
pneumonia and cerebral toxoplasmosis. In contrast, proguanil 
hydrochloride can be used to treat malaria. However, GSK cites to 
several academic studies that conclude that the combination of 
atovaquone and proguanil hydrochloride provides a more effective 
treatment compared to taking proguanil hydrochloride alone. GSK 
therefore states that atovaquone and proguanil are ``synergistic in 
their mechanisms of action,'' resulting in the increased effectiveness 
of Malarone tablets compared to taking atovaquone or proguanil 
hydrochloride alone.
    The manufacturing process for GSK's Malarone tablets begins in 
India, where the Malarone tablets' two active pharmaceutical 
ingredients (``APIs''), atovaquone and proguanil hydrochloride, are 
manufactured. After the two APIs are manufactured in India, they are 
imported into Canada for further processing at GSK's Mississauga, 
Ontario facility (``GSK Canada''). At GSK Canada, the two APIs are 
combined in a process that begins by producing a dry mix of the APIs, 
low-substituted hydroxpropyl cellulose NF, microcrystalline cellulose 
NF, and sodium starch glycolate NF. The dry mix is then combined with 
the following inactive ingredients, which are each sourced from the 
United States or a TAA-eligible country, to produce granules:
<bullet> Povidone K30 USP
<bullet> Polaxamer 188 NF
<bullet> Sofium Starch Glycolate NF
<bullet> Hydroxy Propyl Cellulose NF
<bullet> Purified Water USP
<bullet> Microcrystalline Cellulose NF
<bullet> Alcohol USP
    Next, the granules are dried, milled into a dry powder, blended 
with magnesium stearate NF, and compressed into tablets. Finally, a 
film coat mix is added and the tablets are polished.
    Once the manufacturing process is complete, the finished Malarone 
tablets are exported to a GSK facility in Zebulon, North Carolina. 
There, the tablets are packaged and labeled for sale to Prasco 
Laboratories, which markets and distributes the tablets under their own 
labeling as an authorized generic product under an agreement with GSK.

ISSUE:

    What is the country of origin of the Malarone tablets for purposes 
of U.S. Government procurement?

LAW AND ANALYSIS:

    CBP issues country of origin advisory rulings and final 
determinations as to whether an article is or would be a product of a 
designated country or instrumentality for the purposes of granting 
waivers of certain ``Buy American'' restrictions in U.S. law or 
practice for products offered for sale to the U.S. Government, pursuant 
to subpart B of Part 177, 19 C.F.R. Sec.  177.21 et seq., which 
implements Title III of the Trade Agreements Act of 1979, as amended 
(19 U.S.C. Sec.  2511 et seq.).
    Under the rule of origin set forth under 19 U.S.C. Sec.  
2518(4)(B):

    An article is a product of a country or instrumentality only if 
(i) it is wholly the growth, product, or manufacture of that country 
or instrumentality, or (ii) in the case of an article which consists 
in whole or in part of materials from another country or 
instrumentality, it has been substantially transformed into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed.

See also 19 C.F.R. Sec.  177.22(a).
    A substantial transformation occurs when an article emerges from a 
process with a new name, character, and use different from that 
possessed by the article prior to processing. 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 
Juice Products Ass'n v. United States, 628 F. Supp. 978 (Ct. Int'l 
Trade 1986).
    In determining whether a substantial transformation occurs in the 
manufacture of chemical products such as pharmaceuticals, CBP has 
consistently examined the complexity of the processing and whether the 
final article retains the essential identity and character of the raw 
material. To that end, CBP has generally held that the processing of 
pharmaceutical products from bulk form into measured doses does not 
result in a substantial transformation of the product. See, e.g., 
Headquarters Ruling (``HQ'') 561975, dated April 3, 2002; HQ 561544, 
dated May 1, 2000; HQ 735146, dated November 15, 1993; HQ H267177, 
dated November 5, 2016; HQ H233356, dated December 26, 2012; and, HQ 
561975, dated April 3, 2002. However, where the processing from bulk 
form into measured doses involves the combination of two or more APIs, 
and the resulting combination offers additional medicinal benefits 
compared to taking each API alone, CBP has held that a substantial 
transformation occurred. See, e.g., HQ 563207, dated June 1, 2005.
    For example, in HQ 563207, CBP held that the combination of two 
APIs to form Actoplus Met, an alternative treatment for type 2 
diabetes, constituted a substantial transformation. The first API, 
Pioglitazone HCI sourced from Japan or other countries, functioned as 
an insulin sensitizer that targets insulin resistance in the body. The 
second API, biguanide sourced from Japan, Spain, and other countries, 
functioned to decrease the amount of glucose produced by the liver and 
make muscle tissue more sensitive to insulin so glucose can be 
absorbed. In Japan, the two APIs were mixed together to form a fixed-
combination drug called Actoplus Met. In holding that a substantial 
transformation occurred when the APIs were combined in Japan to produce 
Actoplus Met, CBP emphasized that ``[w]hile we note that pioglitazone 
and metformin may be prescribed separately, the final product, Actoplus 
Met, increases the individual effectiveness of piofliazone and 
metformin in treating type 2 diabetes patients.''
    Similarly, in HQ H253443, dated March 13, 2015, CBP held that the 
combination of two APIs in China to produce Prepopik, ``a dual-acting 
osmotic and stimulant laxative bowel preparation for a colonoscopy in 
adults,'' constituted a substantial transformation. Although the 
importer claimed that Country A-origin sodium picosulfate was the only 
API in Prepopik, CBP found that the Country B-origin magnesium oxide 
ingredient also qualified as an API. CBP further found that taking 
Prepopik had ``a more stimulative laxative effect'' than taking each of 
the APIs individually and therefore held that a substantial 
transformation occurred when the APIs were combined in China.
    Here, as in HQ 563207 and HQ H253443, two separate APIs are mixed 
to create a fixed combination drug that offers additional medicinal 
benefits compared to taking each API alone. The first API, atovaquone, 
is not indicated for the prevention or treatment of malaria. The second 
API, proguanil hydrochloride, is used to treat malaria, but is less 
effective than Malarone. This is because of the ``synergies in [the 
APIs'] method of action,'' which result in a product that 
``interfere[s] with 2 different pathways'' to prevent and treat 
malaria. Under these circumstances, the combination of atovaquone, 
proguanil

[[Page 31766]]

hydrochloride, and inactive ingredients to form Malarone tablets in 
Canada results in a substantial transformation. The country of origin 
of the Malarone tablets is therefore Canada.

HOLDING:

    The country of origin of the Malarone tablets for purposes of U.S. 
Government procurement is Canada.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 C.F.R. Sec.  177.29. Any party-at-interest 
other than the party which requested this final determination may 
request, pursuant to 19 C.F.R. Sec.  177.31, that CBP reexamine the 
matter anew and issue a new final determination. Pursuant to 19 C.F.R. 
Sec.  177.30, any party-at-interest may, within 30 days of publication 
of the Federal Register Notice referenced above, seek judicial review 
of this final determination before the Court of International Trade.

Sincerely,

Alice A. Kipel,
Executive Director, Regulations & Rulings Office of Trade.

[FR Doc. 2018-14632 Filed 7-6-18; 8:45 am]
 BILLING CODE 9111-14-P