[Federal Register Volume 89, Number 65 (Wednesday, April 3, 2024)]
[Notices]
[Pages 23036-23038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07065]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Omega-3-Acid 
Ethyl Esters Capsules

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 Omega-3-Acid Ethyl Esters Capsules. Based upon the 
facts presented, CBP has concluded that the Norwegian-origin Omega-3-
Acid Ethyl Esters do not undergo a substantial transformation in China 
when combined with certain inactive ingredients and encapsulated into 
dosage form.

DATES: The final determination was issued on March 28, 2024. A copy of 
the final determination is attached. Any party-at-interest, as defined 
in 19 CFR 177.22(d), may seek judicial review of this final 
determination no later than May 3, 2024.

FOR FURTHER INFORMATION CONTACT: Mitchell Emery, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of Trade, at (202) 
325-0321.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on March 28, 
2024, U.S. Customs and Border Protection (CBP) issued a final 
determination concerning the country of origin of Omega-3-Acid Ethyl 
Esters Capsules for purposes of title III of the Trade Agreements Act 
of 1979. This final determination, Headquarters Ruling (HQ) H331488, 
was issued at the request of Epic Pharma LLC, under procedures set 
forth at 19 CFR part 177, subpart B,

[[Page 23037]]

which implements Title III of the Trade Agreements Act of 1979, as 
amended (19 U.S.C. 2511-18). In the final determination, CBP has 
concluded that, based upon the facts presented, the Omega-3-Acid Ethyl 
Esters are not substantially transformed in China when combined with 
certain inactive ingredients and encapsulated into dosage form.
    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.

Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.
HQ H331488
OT:RR:CTF: VS H331488 MLE
CATEGORY: Origin
Mr. Pei Zhang, Ph.D., Associate Director, Regulatory Affairs, Epic 
Pharma, LLC, 227-15 N Conduit Avenue, Laurelton, NY 11413

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. 2511); Subpart B, Part 177, CBP Regulations; Country of 
Origin of Omega-3-Acid Ethyl Esters Capsules.

    Dear Mr. Zhang:
    This is in response to your March 29, 2023 request, on behalf of 
Epic Pharma, LLC, for a final determination concerning the country of 
origin of certain Omega-3-Acid Ethyl Esters capsules pursuant to Title 
III of the Trade Agreements Act of 1979 (``TAA''), as amended (19 
U.S.C. 2511 et seq.), and subpart B of Part 177, U.S. Customs and 
Border Protection (``CBP'') Regulations (19 CFR 177.21, et seq.). Epic 
Pharma, LLC, is a party-at-interest within the meaning of 19 CFR 
177.22(d)(1) and 177.23(a) and is therefore entitled to request this 
final determination.
FACTS
    Epic Pharma is a New York-based company specializing in the 
production of generic pharmaceuticals. At issue in this case are Omega-
3-Acid Ethyl Esters capsules, which you describe are intended as an 
``adjunct to diet to reduce triglyceride (`TG') levels in adult 
patients with severe (>=500 mg/dL) hypertriglyceridemia.'' You state 
that Omega-3-Acid Ethyl Esters, which are the sole Active 
Pharmaceutical Ingredient (``API'') in the final product, are produced 
in Norway. You state that in China the API is combined with inactive 
ingredients of various origins to produce the finished capsules.
    The manufacturing processes in China include the following: first, 
inactive ingredients including gelatin glycerin, and purified water are 
combined to create an encapsulating gel. Second, the API is 
encapsulated into dosage form. Third, imprinting ink is applied for any 
trademark or content information.
    You state that ``[n]o change in name occurs in China because the 
product is referred to as `Omega-3-Acid Ethyl Esters' both before and 
after encapsulation.'' You also state that the processes performed to 
produce the final product do not result in any changes to the chemical 
characteristics of the Omega 3-Acid Ethyl Esters, or to any other 
ingredients. Finally, you claim that no change in use occurs, as the 
product retains the same predetermined medicinal use. In short, you 
characterize the operations in China as purely mechanical, intended to 
process the Omega-3-Acid Ethyl Esters into dosage form.
ISSUE
    What is the country of origin of the Omega-3-Acid Ethyl Esters 
capsules for the 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 CFR 177.21-177.31, which implements Title 
III of the TAA, as amended (19 U.S.C. 2511-2518).
    CBP's authority to issue advisory rulings and final determinations 
is set forth in 19 U.S.C. 2515(b)(1), which states:
    For the purposes of this subchapter, the Secretary of the Treasury 
shall provide for the prompt issuance of advisory rulings and final 
determinations on whether, under section 2518(4)(B) of this title, an 
article is or would be a product of a foreign country or 
instrumentality designated pursuant to section 2511(b) of this title.
Emphasis added.

    The Secretary of the Treasury's authority mentioned above, along 
with other customs revenue functions, are delegated to CBP in the 
Appendix to 19 CFR Part 0--Treasury Department Order No. 100-16, 68 
Fed. Reg. 28, 322 (May 23, 2003).
    The rule of origin set forth under 19 U.S.C. 2518(4)(B) states:
    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 CFR 177.22(a).
    In rendering advisory rulings and final determinations for purposes 
of U.S. Government procurement, CBP applies the provisions of subpart B 
of Part 177 consistent with the Federal Procurement Regulation 
(``FAR''). See 19 CFR 177.21. In this regard, CBP recognizes that the 
FAR restricts the U.S. Government's purchase of products to U.S.-made 
or designated country end products for acquisitions subject to the TAA. 
See 48 CFR 25.403(c)(1).
    The FAR, 48 CFR 25.003, defines ``designated country end product'' 
as: a WTO GPA [World Trade Organization Government Procurement 
Agreement] country end product, an FTA [Free Trade Agreement] country 
end product, a least developed country end product, or a Caribbean 
Basin country end product.
    Section 25.003 defines ``WTO GPA country end product'' as an 
article that:
    (1) Is wholly the growth, product, or manufacture of a WTO GPA 
country; or
    (2) In the case of an article that consists in whole or in part of 
materials from another country, has been substantially transformed in a 
WTO GPA country 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 transformed. The term refers to a product offered for 
purchase under a supply contract, but for purposes of calculating the 
value of the end product includes services (except transportation 
services) incidental to the article, provided that the value of those 
incidental services does not exceed that of the article itself.
    As indicated above, the Omega-3-Acid Ethyl Esters are produced in 
Norway, which is a WTO GPA country. See FAR, 48 CFR 25.003. The 
encapsulation process takes place in China, which is not a designated 
country for the purpose of government procurement.
    In order to determine whether a substantial transformation occurs, 
CBP

[[Page 23038]]

considers the totality of the circumstances and makes such 
determinations on a case-by-case basis. The country of origin of the 
item's components, extent of the processing that occurs within a 
country, and whether such processing renders a product with a new name, 
character, and use are primary considerations in such cases. 
Additionally, CBP considers factors such as the resources expended on 
product design and development, the extent and nature of post-assembly 
inspection and testing procedures, and worker skill required during the 
actual manufacturing process when determining whether a substantial 
transformation has occurred. No one factor is determinative.
    In deciding 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 held that the processing of 
pharmaceutical products from bulk form into measured doses does not 
result in a substantial transformation of the product, even when the 
API is combined with other inactive ingredients. 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; HQ 
H284694, dated August 22, 2017, and New York Ruling (``NY'') C85112, 
dated March 27, 1998.
    For instance, in HQ 561975, CBP held that the processing of 
imported bulk Japanese-origin anesthetic drugs into dosage form in the 
United States did not constitute a substantial transformation. Although 
the bulk form of the drug underwent testing operations, filtering, and 
packaging in the United States, these processes did not change the 
chemical or physical properties of the drug. Furthermore, there was no 
change in the product's name, which was referred to as sevoflurane in 
both its bulk and processed form. Additionally, because the imported 
bulk drug had a predetermined medicinal use as an anesthetic drug, the 
processing in the United States did not result in a change in the 
product's use. The country of origin of the finished product was 
therefore Japan.
    More recently, in HQ H284694, CBP reviewed the country of origin of 
quinine sulfate capsules. In that case, the German-manufactured API 
quinine sulfate was exported to India in bulk form, where it was 
combined with several inactive ingredients, granulated, sieved and 
placed into gelatin capsules. No change in its name occurred because 
the product was referred to as ``quinine sulfate'' both before and 
after processing. Additionally, no change in character occurred because 
the product maintained the same chemical and physical properties in its 
processed form. Finally, because the product had a predetermined 
medical use as an antimalarial drug, no change in use occurred after 
processing. Therefore, the county of origin of the final product 
remained Germany.
    Similar to the encapsulation here, in NY C85112, CBP reviewed the 
country of origin of leuprolide acetate, sold under the trade name 
Lupron Depot 7.5 mg. In that case, U.S.-manufactured leuprolide acetate 
powder was exported to Japan where it was combined with certain 
excipients and encapsulated 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. 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.
    The facts here closely follow the cases cited above, as does our 
decision. The processing of bulk imported pharmaceuticals into dosage 
form, even with the addition of inactive ingredients, will not result 
in a substantial transformation. In this case, the processing begins 
with the Norwegian-origin bulk Omega-3-Acid Ethyl Esters, and after the 
product is processed and combined with inactive ingredients in China, 
it results in Omega-3-Acid Ethyl Esters capsules. There is no change in 
name after processing. Furthermore, no change in character occurs in 
China, as the Omega-3-Acid Ethyl Esters maintain the same chemical and 
physical properties both before and after processing. Finally, because 
the Omega-3-Acid Ethyl Esters have a predetermined medical use to 
``reduce TG levels in adult patients with severe (>=500 mg/dL) 
hypertriglyceridemia,'' no change in use occurs after it is processed 
in China. Under these circumstances, and consistent with previous CBP 
rulings, we find that the county of origin of the final product is 
Norway, where the active pharmaceutical ingredient was produced.
HOLDING
    Based on the information outlined above, we determine that the 
Omega-3-Acid Ethyl Esters made in Norway, do not undergo a substantial 
transformation when encapsulated into individual doses and combined 
with inactive ingredients in China. Therefore, the country of origin of 
the Omega-3-Acid Ethyl Esters capsules for purposes of U.S. Government 
procurement is Norway.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 CFR 177.29. Any party-at-interest other 
than the party which requested this final determination may request, 
pursuant to 19 CFR 177.31, that CBP reexamine the matter anew and issue 
a new final determination. Pursuant to 19 CFR 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 U.S. Court of International Trade.

    Sincerely,

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

[FR Doc. 2024-07065 Filed 4-2-24; 8:45 am]
BILLING CODE 3314-88-P