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U.S. trade court: Tariff classification of pharmaceutical packaging system

Tariff classification, pharmaceutical packaging system

The U.S. Court of International Trade today granted summary judgment for an importer of pharmaceutical equipment with respect to the tariff classification of its “automated pharmacy system” machine (a pill dispensing and packaging system).

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The case is: McKesson Canada Corp. v. United States, Slip Op. 19-26 (CIT February 28, 2019). Read the trade court’s opinion [PDF 570 KB]

Summary

The merchandise—an automated pharmacy system machine that dispenses and packages pills for use in hospitals and retail pharmacies—was imported in 2008.

U.S. Customs and Border Protection (CBP) liquidated the entries in 2009, classifying the merchandise under the residual basket subheading 8479.89 of the Harmonized Tariff Schedule of the United States (HTSUS) for “[m]achines and mechanical appliances having individual functions, not specified or included elsewhere in [Chapter 84]: Other” and subject to a customs duty rate of 2.5% ad valorem.

The company filed a protest, and requested a ruling as to the proper classification of the merchandise. CBP issued a letter ruling in 2009, and in that ruling, described the merchandise as a “composite machine” that includes “a labeling machine, a hopper, packaging and a dispensing machine.” CBP further asserted that the packaging was “ancillary to the performance of the machine’s dispensing function” and excluded heading 8422.

The company asserted that the merchandise was properly classified under HTSUS heading 8422—a heading that applied for a composite machine having a sole or principal function of packing.

Before the trade court, the parties filed cross-motions for summary judgment. The trade court today granted the company’s motion and denied the government’s motion.

As noted by the court, the dispute focused on whether the sole or principal function of the machine was performed by the device’s packing machinery. The court described the production process, and concluded that the machinery “creates a container by packing and wrapping the pharmaceuticals within a packaging material” so the appropriate term was within heading 8422 “other packing or wrapping machinery.”

 

For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
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John L. McLoughlin
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Andy Siciliano
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E: asiciliano@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
T: 212-954-3094
E: labad@kpmg.com

Irina Vaysfeld
Principal
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E: ivaysfeld@kpmg.com

Amie Ahanchian
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Robert Waldrop
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E: rwaldrop@kpmg.com

Gisele Belotto
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E: gbelotto@kpmg.com

Christopher Young
Principal
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E: christopheryoung@kpmg.com

Andy Doornaert
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E: adoornaert@kpmg.com

George Zaharatos
Principal
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E: gzaharatos@kpmg.com

Jessica Libby
Managing Director
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E: jlibby@kpmg.com

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