Medication Dispensers Classifiable as Packing Machines, CIT Says, Overturning CBP Ruling

McKesson had imported the Pacmed machines in 2009, entering them as packing machines of heading 8422, which is duty free. CBP instead liquidated them in the residual heading 8479 as machines “having individual functions, not specified or included elsewhere in [Chapter 84],” dutiable at 2.5%. McKesson protested and requested a ruling, in which CBP confirmed its initial classification.

The Pacmed machines imported by McKesson are used in hospitals and pharmacies to “promote compliance, patient safety and medication management” by meting out, packaging and then dispensing prescribed medication in labeled packages based on the touchscreen input of nurses and pharmacists. Users keep hoppers at the top of the machine filled with various medications, which the machine, when directed, measures into the appropriate doses, packs and seals in plastic packaging and labels with patient and prescription data, including barcodes. The medicine is then retrieved through a slot at the bottom for delivery for patients.

Note 3 to Section XVI says composite machines designed to perform “two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.” The explanatory note to heading 8422 says machines that do packing that also perform other operations remain classifiable as packing machines, provided that the additional operations are “incidental to the packing,” such as weighing or measuring.

McKesson argued the Pacmed machine’s storing, sorting, monitoring and weighing functions are part of the packing process. The principal function of the machine is the packing, it said. For its part, the government said packing is only one of several important functions performed by the machine, and that no single operation is more important than the others, so none can be considered “incidental.”

“The government’s arguments are unconvincing,” CIT said. First, the explanatory note to heading 8422 specifically identifies the weighing, measuring and labeling operations as incidental. The storing function is also incidental, as the storage is only there so there are pills to be packaged. All packaging machines dispense, and the computerized input of the prescriptions is covered by Note 5(e) to Chapter 84, which says machines that work in conjunction with an automatic data processing machine that perform a specific function other than data processing are to be classified according to that specific function.

The government also argued that the “principal purpose” of the Pacmed machine is to “promote compliance, patient safety and medication management,” not to dispense pills. As no heading of Chapter 84 lists that purpose, the machines are classifiable in the residual “other” heading 8479, the government said. According to Note 7 to Chapter 84, any machine “the principal purpose of which is not described in any heading or for which no one purpose is the principal purpose is, unless the context otherwise requires, to be classified in heading 8479,” the government said.

According to CIT, the government was conflating “the aspirational goals of the users of the Pacmed with purpose or use as a classification principle.” Even though briefs in the case used the term “purposes,” these are “goals achieved not only through the use of the Pacmed, but also through the diligence of the health care professionals that stock the machine, prescribe the medication, and deliver the pharmaceuticals to the right patients. Because the Pacmed is properly classified under 8422 as a packing machine, it cannot be classified under the residual heading 8479 by way of Chapter Note 7 or otherwise,” CIT said.

(McKesson Canada Corp. v. U.S., Slip Op. 19-26, CIT # 10-00151, dated 02/28/19, Judge Restani)

(Attorneys: John Peterson of Neville Peterson for plaintiff McKesson Canada Corporation; Justin Miller for defendant U.S. government)