Internal Advice; Tariff classification of Chlortetracycline Hydrochloride,Chlortetracycline Feed Grade Concentrate, and Neomycin Sulfate

HQ H325604 August 31, 2023 OT:RR:CTF:FTM H325604 JER CATEGORY: Classification TARIFF NO.: 2941.30; 2941.90 JoAnne Colonnello, Center Director Pharmaceuticals, Health, and Chemicals Center of Excellence and Expertise U.S. Customs and Border Protection 301 E. Ocean Blvd., Suite 700 Long Beach, California 90802 ATTN: Ms. Cathy Sheridan, Import Specialist RE: Internal Advice; Tariff classification of Chlortetracycline Hydrochloride, Chlortetracycline Feed Grade Concentrate, and Neomycin Sulfate  Dear Center Director, This letter is in response to the internal advice request, dated April 13, 2022, initiated by Transmodal Corporation, on behalf of Pharmgate, LLC (“Pharmgate” or “Importer”), concerning the tariff classification of three (3) products used in animal feed under the Harmonized Tariff Schedule of the United States (“HTSUS”). The Importer requested that certain information submitted in connection with this internal advice be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the Importer’s request for confidentiality is approved. The information contained within brackets in the internal advice decision will not be released to the public and will be withheld from the published version of this decision. FACTS: The merchandise at issue consists of three (3) products identified as: (1) Chlortetracycline Hydrochloride (“CTC-HCI”); (2) Chlortetracycline Feed Grade Concentrate (“CTC-FG”); and (3) Neomycin Sulfate. These products are intended for use in treating various animal diseases and infections. The requestor describes the products as follows: Chlortetracycline Hydrochloride (CTC-HCI) Chlortetracycline Hydrochloride (“CTC-HCI”) is a broad-spectrum substance for use in the manufacture of veterinary drug products, namely Veterinary Feed Directive (“VFD”) Type A medicated articles and Oral Dosage forms such as Pharmgate’s Pennchlor 64 product. Chlortetracycline Hydrochloride is a yellow powder. It is soluble in water and in alcohol. It dissolves in solutions of alkali hydroxides and carbonates. It is a tetracycline group antimicrobian. CTC-HCI contains up to 90% of Chlortetracycline Hydrochloride as an active ingredient; up to 6% of [***] as a minor component; up to 6% of related substances; up to 2% of water; and up to 0.5% of ethanol as a residual solvent. It has the generic name of chlortetracycline hydrochloride. The manufacturing process consists of fermentation for [***] hours and a recovery process. Chlortetracycline is produced through fermentation, the culturing of the streptomyces aureofaciens microorganism. The strain of the microorganism goes through continual screening to select a strain with the highest chlortetracycline production. It is shipped in 25kg bulk containers. Following importation, CTC-HCI is used to manufacture Pharmgate’s Pennchlor 64 product. The Pennchlor 64 retail labeling states the following: “Chlortetracycline HCI, Soluble Powder Concentrate; Antibiotic for animal use in drinking water. CAUTION: Federal law restricts medicated feed containing this veterinary feed directive (VFD) drug to use by or on the order of a licensed veterinarian.” Chlortetracycline Feed Grade Concentrate (CTC-FG) Chlortetracycline Feed Grade Concentrate (CTC-FG) is a broad-spectrum substance that is used in the manufacture of veterinary drug products, namely Veterinary Feed Directive (VFD) Type A medicated articles such as Pharmgate’s Pennchlor and Deracin products. It is described as a fine brown powder or granular substance with a characteristic smell. CTC-FG is composed of the active ingredient of Chlortetracycline at 22-24%. It also contains minor components of up to [***] and [***]. Impurities include up to 3% of related drug substances and up to 8% of moisture. Up to 57% of Calcium carbonate is present along with 3% of sugar, 2% fat, and 3% protein. The Deracin 50 Meal retail label states the following: “Deracin 50 Meal Type A Medicated Article; Active drug ingredients: Chlortetracycline as Chlortetracycline Calcium Complex equivalent to 50 grams Chlortetracycline Hydrochloride/lb.; Ingredients: Dried Streptomyces aureofaciens fermentation product in a carrier suitable for incorporation in feed.” The Pennchlor 50 is described as “free-flowing meal feed medication.” The retail label on the Pennchlor 50 product states: “Pennchlor 50 Type A Medicated Article; Active drug ingredients: Chlortetracycline as Chlortetracycline Calcium Complex equivalent to 50 grams Chlortetracycline Hydrochloride/lb.; Ingredients: Chlortetracycline, Calcium Carbonate, Roughage Products and Mineral Oil. Additionally, the retail label reads: “CAUTION: Federal law restricts medicated feed containing this veterinary feed directive (VFD) drug to use by or on the order of a licensed veterinarian.” The manufacturing process of CTC-FG is conducted in two parts: fermentation and recovery. The Chlortetracycline is produced through fermentation and the culturing of the Streptomyces aureofaciens microorganism. The strain of the microorganism then goes through continual screening to select for a strain with the highest Chlortetracycline production. The post-importation finished products, Pharmgate’s Deracin 50, Pennchlor 50, and Pennchlor 64, are manufactured from the imported CTC-FG or CTC-HCI. These products claim to treat a number of diseases. For instance, the product claims to treat chickens from diseases such as infectious synovitis, chronic respiratory disease, and E. coli infections. Turkeys are said to be treated from diseases such as infectious synovitis, hexamitiasis, paratyphoid, and bluecomb. Swine are claimed to be treated from diseases such as jowl abscesses, leptospirosis, bacterial enteritis, porcine proliferative, and enteropathies. Finally, cattle are said to be treated from diseases such as anaplasmosis, bacterial enteritis, and bacterial pneumonia. Neomycin Sulfate Neomycin Sulfate is a sulfate salt of a type of neomycin, which is an antibacterial substance produced by the growth of Streptomyces fradiae Waksman (Fam. Streptomycetaceae), or a mixture of two or more such salts with the main component being neomycin B sulfate. It contains the active ingredients Neomycin B (main component) comprising 80%, Neomycin A (minor component) at 2%, and Neomycin C (minor component) comprising 3% to 15%. The manufacturing process for Neomycin Sulfate begins with classical fermentation, which includes five-steps. The steps are: inoculation, seed fermentation, fermentation, purification, and final preparation. The imported Neomycin Sulfate is said to be a broad-spectrum antibiotic drug substance for use in the manufacture of both Dosage forms and Veterinary Feed Directive (VFD) Type A medicated articles such as Pharmgate’s Neo-Oxy products. According to Pharmgate, these three products, CTC-HCI, CTC-FG, and Neomycin Sulfate, are imported into the United States and formulated into finished products at the Pharmgate manufacturing facilities. The finished products (e.g., Pennchlor, Deracin, Oxytetracycline Neomycin) are said to be sold to licensed feed mills, farmers, and manufacturers of medicated feed articles for use in livestock feeds to treat and control various infections and diseases that occur in livestock animals. Pharmgate claims that these animal feed products are FDA compliant and that the medicated feeds (i.e., finished products Pennchlor, Deracin, Oxytetracycline Neomycin) are prescribed by a veterinarian to treat various illnesses in livestock animals. Pharmgate describes Chlortetracycline and Neomycin as antibiotics produced through fermentation. It claims that both of these drug substances go through extensive purification processes to remove all of the fermentation media and microorganisms, and to form water soluble salts (hydrochloride and sulfate, respectively). The balance of the purified drugs is the drug substance, and the remaining components are minor to include fermentation analog and its salts. The Pharmgate website provides product information, use levels, dosage calculations, method of delivery, VFD, and other prescription requirements for its Tetracycline and Neomycin products. According to Pharmgate, the Chlortetracycline (“CTC”) is an antibiotic drug substance that is manufactured through the fermentation of the Streptomyces aureofaciens microorganism. The fermentation broth is treated with calcium carbonate to form a calcium complex of the fermentation biomass (drum run). This calcium complex is then filtered, dried, milled/sieved, blended, and packaged. The amylase is an enzyme added to break down the starches of the fermentation media into sugars. The sugars and fats are consumed by the microorganism during the fermentation process that runs for 80 to 160 hours. The fermentation media is composed of approximately 10% carbohydrates. By the end of the fermentation process there is less than 3% sugar present. Starch and sugar are not added to the CTC-FG drug substance. Chlortetracycline Hydrochloride and Neomycin Sulfate are both said to be purified drug substances and with monographs in the U.S. Pharmacopeia (USP). Neomycin sulfate is said to be approved for use in both human and animal drugs, including both veterinary soluble powders and Type A medicated articles. According to Pharmgate, these products are delivered in oral dosage forms via water soluble powders, tablets, boluses, and in feed as a milk replacer. The CTC products are said to consist of 22 to 24% Chlortetracycline as their active ingredient and are said to be 50% antibiotic overall. ISSUE: What is the proper classification of Chlortetracycline Hydrochloride, Chlortetracycline Feed Grade Concentrate, and Neomycin Sulfate? LAW AND ANALYSIS: Merchandise imported into the United States is classified under the Harmonized Tariff Schedule of the Unites States (“HTSUS”). Tariff classification is governed by the principles set forth in the General Rules of Interpretation (“GRIs”) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied. The HTSUS headings under consideration are as follows: 2309 Preparations of kind used in animal feeding: 2309.10.00 Dog or cat food, put up for retail sale…. * * * 2309.90 Other: 2309.10.10 Mixed feeds or mixed feed ingredients…. * * * 2941 Antibiotics * * * 2941.30 .00.00 Tetracycline and their derivatives; salts thereof…. * * * 2941.90 Other: 2941.90.10 Natural…. 2941.90.10.10 Aminoglycoside antibiotics…. * * * The Legal Notes to Chapter 23, HTSUS, provide, in pertinent part, as follows : Note 1. Heading 2309 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and byproducts of such processing. Additional U.S. Note 1. The term “mixed feeds and mixed-feed ingredients” in subheading 2309.90.10 embraces products of heading 2309 which are admixtures of grains (or products, including byproducts, obtained in milling grains) with molasses, oilcake, oil-cake meal or feedstuffs, and which consist of not less than 6 percent by weight of grain or grain products. The Legal Notes to Chapter 29, HTSUS, provide, in pertinent part, as follows: Note 1. Except where the context otherwise requires, the headings of this chapter apply only to: (a) Separate chemically defined organic compounds, whether or not containing impurities; * * * The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HTSUS and are thus useful in ascertaining the proper classification of the merchandise. See T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989). The ENs to heading 2309, HTSUS, provide, in pertinent part: This heading covers sweetened forage and prepared animal feeding stuffs consisting of a mixture of several nutrients designed : to provide the animal with a rational and balanced daily diet (complete feed); to achieve a suitable daily diet by supplementing the basic-farm produced feed with organic or inorganic substances (supplementary feed) ; or for use in making complete or supplementary feeds. (II) OTHER PREPARATIONS PREPARATIONS DESIGNED TO PROVIDE THE ANIMAL WITH ALL THE NUTRIENT ELEMENTS REQUIRED TO ENSURE A RATIONAL AND BALANCED DAILY DIET (COMPLETE FEEDS) * * * (3)   “Function” nutrients. These are substances which promote the assimilation of carbohydrates, proteins and minerals. They include vitamins, trace elements and antibiotics. Lack or deficiency of these nutrients usually causes disorders. (B) PREPARATIONS FOR SUPPLEMENTING (BALANCING) FARM-PRODUCED FEED (FEED SUPPLEMENTS) Farm produced feed is usually rather low in proteins, minerals or vitamins. The preparations devised to compensate for these deficiences, so as to ensure a well-balanced animal diet, consist of proteins, minerals or vitamins plus additional-energy feeds (carbohydrates) which serve as a carrier for the other ingredients. (C) PREPARATIONS FOR USE IN MAKING THE COMPLETE FEEDS OR SUPPLEMENTARY FEEDS DESCRIBED IN (A) AND (B) ABOVE These preparations, known in trade as “premixes”, are, generally speaking, compound compositions consisting of a number of substances (sometimes called additives) the nature and proportions of which vary according to the animal production required. These substances are of three types: (1)   Those which improve digestion and, more generally, ensure that the animal makes good use of the feeds and safeguard its health: vitamins or provitamins, aminoacids, antibiotics, coccidiostats, trace elements, emulsifiers, flavourings and appetisers, etc. * * * (b) Preparations consisting of an active substance of the type described in (1) above with a carrier, for example products of the antibiotic manufacturing process obtained by simply drying the mass, i.e., the entire contents of the fermentation vessel (essentially mycelium, the culture medium and he antibiotic). The resulting dry substance, whether or not standardized by adding organic or inorganic substances, has an antibiotic content generally ranging between 8 % and 16 % and is used as basic material in preparing, in particular, “premixes”. * * * The preparations of this group should not, however, be confused with certain preparations for veterinary uses. The latter are generally identifiable by the medicinal nature and much higher concentrations of the active substance and are often out up in a different way. * * * The heading excludes: (k) Intermediate products of the antibiotics manufacturing process obtained by filtering and first-stage extraction and the residues of this process, with an antibiotic content generally not exceeding 70 % (heading 38.24). * * * The ENs to heading 2491, HTSUS, provide, in part as follows: Heading 29.41 – Antibiotics. * * * Antibiotics are substances secreted by living microorganisms which have the effect of killing other microorganisms or inhibiting their growth. They are used principally for their powerful inhibitory effect on pathogenic microorganisms, particularly bacteria or fungi, or in some cases on neoplasms. They can be effective at a concentration of a few micrograms per ml in the blood. Antibiotics may consist of a single substance or a group of related substances, their chemical structure may or may not be known or be chemically defined. They are chemically diverse and include the following: (1)   Heterocyclic, e.g., novobiocin, cephalosporins, streptothricin, faropenem (INN), doripenem (INN), monobactams (e.g., aztreonam (INN)). The most important of this class are the penicillins* which are secreted by several species of the fungus Penicillium. This class also includes procaine penicillin. (2)   Sugarrelated, e.g., streptomycins*. (3)   Tetracyclines and their derivatives, e.g., chlortetracycline (INN), oxytetracycline (INN)*. (4)   Chloramphenicol and its derivatives, e.g., thiamphenicol and florfenicol. (5)   Macrolides, e.g., erythromycin*, amphotericin B, tylosin. (6)   Polypeptides, e.g., actinomycins, bacitracin, gramicidins, tyrocidin. (7)   Other antibiotics, e.g., sarkomycin, vancomycin. This heading also includes chemically modified antibiotics used as such. These may be prepared by isolating ingredients produced by natural growth of the microorganism and then modifying the structure by chemical reaction or by adding sidechain precursors to the growthmedium so that desired groups are incorporated into the molecule by the cellprocesses (semisynthetic penicillins); or by biosynthesis (e.g., penicillins from selected aminoacids). Natural antibiotics reproduced by synthesis (e.g., chloramphenicol) are classified in this heading, as are certain synthetic products closely related to natural antibiotics and used as such (e.g., thiamphenicol). In this heading, the term “derivatives” refers to active antibiotic compounds which could be obtained from a compound of this heading and which retain the essential characteristics of the parent compound, including its basic chemical structure. This heading does not cover: Antibiotic preparations of a kind used in animal feeding (e.g., dried and standardised complete mycelium (heading 23.09). * * * Applying GRI 1 and analyzing the terms of the headings and chapter notes, we must determine whether the products – Chlortetracycline Hydrochloride (CTC-HCI), Chlortetracycline Feed Grade Concentrate (CTC-FG), and Neomycin Sulfate – are “preparations of a kind used in animal feed” or “antibiotics.” The Importer contends that the subject products are drug substances rather than animal feed and should be classified as antibiotics under heading 2941, HTSUS. Pharmgate highlights that the CTC-FG was approved by the Food and Drug Administration’s (“FDA”) Center for Veterinary Medicine (“CVM”) under Veterinary Master File 005-468, noting that the CTC-FG is a Type A medicated article according to 21 C.F.R. § 558.3(b)(2) (2022). Pharmgate further notes that 21 C.F.R. § 558.6 provides that Type A medicated articles containing Chlortetracycline require that a veterinary feed directive (“VFD”) be issued by a licensed veterinarian for use of Type A medicated articles to make medicated feeds. The Importer also states that the subject Chlortetracycline Hydrochloride and Neomycin Sulfate both fall under the FDA definition of purified drug substances under U.S. Code Title 21, section 321(g)(1) and consist of monographs in the U.S. Pharmacopeia (“USP”) which require a VFD prior to usage. Accordingly, the Importer asserts that these three substances are distinguishable from the preparations used in animal feeds of heading 2309, HTSUS. We note that FDA regulations are not binding on CBP. Moreover, CBP is not required to consider other agency regulations when determining the tariff classification of a product under the HTSUS. Statutes, regulations, and administrative interpretations relating to ‘other than tariff purposes’ are not determinative of CBP classification disputes. See Amersham Corp. v. United States, 5 C.I.T. 49, 56, 564 F.Supp. 813, 817 (1983); see also, Headquarters Ruling Letter (“HQ”) H316751,