CBP Finds API Sets Country of Origin for Government Procurement, Now Faces Legal Challenge
Pharmaceuticals manufactured in the U.S. using active pharmaceutical ingredients sourced from India originate in India for “Buy American” purposes, CBP said in a set of government procurement final determination rulings issued Jan. 30. In a finding now challenged in a lawsuit at the Court of International Trade, CBP found 11 pharmaceutical products distributed by Acetris did not undergo a substantial transformation and are restricted for government procurement purposes.
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In the 11 rulings, CBP continued its long-standing practice in government procurement cases of finding the API determines the country of origin for pharmaceutical products, regardless of subsequent processing, Ted Murphy of Baker & McKenzie said in a blog post. “Of course, CBP in its wisdom gets a different result under the NAFTA Marking Rules, which is maddening,” he said in an aside.
Acetris argued that, despite API being imported from India, the finished pharmaceuticals underwent a complex production process at Aurolife’s U.S. facility that combined the API with multiple inactive ingredients of U.S. and foreign origin to change the properties and characteristics of the API. In API form, the drugs are not suitable for medical use and can’t be sold to consumers. Extensive additional processing of the API must occur to change the API’s properties and turn it into a stable drug that can be safely administered for the treatment of a human disease or condition, Acetris said.
But CBP headquarters said it “consulted with CBP's Laboratories and Scientific Services Directorate concerning the instant case, which informed us that the imported API” for each of the 11 finished drugs “retains its chemical and physical properties upon processing in the United States.” Also, “the processing performed in the United States does not affect the medicinal use of the API. Based on the information presented, the API does not undergo a change in name, character or use. Therefore, in accordance with the rulings cited, we find that no substantial transformation occurs in United States,” and the country of origin of each finished drug remains India for government procurement purposes.
Acetris on March 7 filed cases at CIT challenging each of the rulings. “The case is significant because it means that CBP’s long-standing position of what constitutes a substantially [sic] transformation will be reviewed by an independent, third party — the CIT,” Murphy said in his blog post. “A positive outcome for the company could impact how country of origin is determined for pharmaceutical products across the board.”
The 11 drugs covered by the rulings are rosuvastatin calcium tablets, simvastatin tablets, donepezil hydrochloride tablets, montelukast soium tablets, paroxetine hydrochloride tablets, carvedilol tablets, metoprolol tartrate tablets, gabapentin capsules, lavetiracetam tablets, levofloxacin tablets and entecavir tablets.