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CBP Affirms Exception to Substantial Transformation Rule for Certain Drug Products

Monday, July 09, 2018
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has issued a final determination concerning the country of origin of Malarone brand tablets that may be offered to the U.S. government under an undesignated government procurement contract. Any party-at-interest may seek judicial review of this determination by Aug. 8. 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.

The tablets at issue consist of a fixed-dose combination of active pharmaceutical ingredients atovaquone and proguanil hydrochloride that, according to the petitioner, together provide a more effective treatment for malaria than either of those substances alone. The APIs are manufactured in India and subsequently imported into Canada for further processing, which includes combining the APIs with inactive ingredients to produce granules, milling the granules into a dry powder, and compressing the powder into tablets. The tablets are then shipped to the U.S. for packaging and labeling for sale.

CBP concludes in ruling HQ H290684 that the combination of the two APIs and the inactive ingredients to form tablets in Canada results in a substantial transformation. While CBP has generally held that the processing of pharmaceutical ingredients from bulk form into measured doses does not result in a substantial transformation, it has also held that a substantial transformation occurs when such processing involves the combination of two or more APIs and the resulting combination offers additional medicinal benefits compared to taking each API alone. CBP therefore finds that the country of origin of these tablets for purposes of U.S. government procurement is Canada.

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