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Drug Packaging System Gets Lower Duty Rate Under Court Decision

Wednesday, March 06, 2019
Sandler, Travis & Rosenberg Trade Report

The Court of International Trade ruled Feb. 28 that an automated pharmacy system is properly classified under HTSUS 8422.40.91 (duty-free) as a composite machine whose sole or principal function is packing. U.S. Customs and Border Protection had argued that this item should be classified as other mechanical appliances under HTSUS 8479.89.98 (2.5 percent duty).

The product at issue is a gravity-fed unit dose or multi-dose pill dispensing and packaging system for use in hospitals and retail pharmacies. It is a composite machine composed of a partially transparent pill canister compartment mounted on top of a lower compartment that includes a printer as well as reels of plastic packaging materials and printer ribbons. The complete unit works alongside a digital scale, a barcode scanner, and a computer workstation.

The CIT concludes that the principal function of the machine is to provide medical professionals with packaged medications in individual, labeled packages and that all other functions (storing, sorting, monitoring, and weighing pills; labeling and printing pouches; data processing; etc.) are incidental. The CIT rejects CBP’s argument that the machine’s principal function (if any) is to distribute pharmaceuticals, stating that this is a multi-step process that also includes obtaining, prescribing, and delivering medication, none of which the machine does.

For assistance challenging a classification or other customs-related issue, please contact Arthur Purcell at (212) 549-0131.

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