COUNTRY OF ORIGIN MARKING OF IMPORTED COMPONENTS FOR THE PASS Rx PHARMACEUTICAL VERIFICATION DEVICE

N125537 October 29, 2010 MAR-2 OT:RR:NC:N4:414 CATEGORY: MARKING Mr. Jackson Wyatt Moore, Jr. Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. P.O. Box 2611 Raleigh, North Carolina 27602-2611 RE: COUNTRY OF ORIGIN MARKING OF IMPORTED COMPONENTS FOR THE PASS Rx PHARMACEUTICAL VERIFICATION DEVICE Dear Mr. Moore: This is in response to your letter dated September 24, 2010, on behalf of Centice Corporation, requesting a ruling on whether imported components for the PASS Rx pharmaceutical verification device are required to be individually marked with the country of origin if they are later to be processed in the U.S. by a U.S. manufacturer. The PASS Rx is used to analyze, identify and verify brand name and generic pharmaceutical products by comparing the National Drug Code (NDC) barcode contained on a pharmaceutical vial against a two step scientific scan of the vial. The purpose is to provide protection for patients from dispensing errors. The PASS Rx will be used by pharmacists and similar operators. The PASS Rx performs two scans on the pharmaceutical vial. One is accomplished by Raman spectroscopy and results in a molecular-level verification of the contents of the tablets or capsules contained in a pharmaceutical vial. The second scan uses a proprietary and patented optical sensor technology to analyze and compare the size, color and shape of medications in the vial against a scalable database containing the majority of oral solid medications dispensed by pharmacies in the United States. After scanning the NDC barcode on the vial, the PASS Rx device displays an image and description of the drug product that matches the barcode data. After scanning the pharmaceuticals in the vial with the two scans described above, the PASS Rx will verify that the NDC barcode matches the contents. If it is a match, the screen will show a green “verified” screen. If it is a non-match, the device will give an audible beep, and the screen will be red with a visual warning that the NDC barcode data contained on the vial does not match the products contained in the vial. PASS Rx is an assembly composed of numerous electronic circuits, printed circuit boards, a laser, lenses, detectors, wires, motors, fans, bearings, belts, a magnet, LEDs, an LCD, a power supply, machines components, sheet-metal parts, screws, nuts, washers, fasteners and labels enclosed within a steel and molded plastic housing. According to your letter, the components of the device have various countries of origin, and the source countries will vary from time to time. These components have countries of origin other than the United States. Centice purchases components from various third-parties in foreign countries and incorporates them into the customized housing manufactured to Centice’s specifications in the United States. Assembly of PASS Rx device occurs in the United States and encompasses four stages: manufacturing the five major subassemblies from parts sourced in various countries; integrating the five major subassemblies into the housing; loading of critical Unites States-developed and programmed software and testing the devices; packaging for shipping to the end users. The primary hardware subassemblies of the PASS Rx are the spectrometer, the vision camera, the vial transport, the electronics module and the top cover assembly. The spectrometer emits a laser beam to the target vial, reads the reflection from the laser beam and sends the resulting information to the computer processing unit (CPU) for analysis. The vision camera captures a digital image of the vial and sends the information to the CPU for analysis. The vial transport prevents accidental exposure of the operator to laser light using motors, bearings and machined mechanical components that open and close to isolate the vial. The electronics module, which contains the CPU, power supply, fans and other parts and electronics needed to analyze the information from the spectrometer and the vision camera, returns the result to the operator. The top cover assembly includes the housing and the components with which the operator interacts, for example, the display screen. According to your letter, the assembly of the spectrometer, the vision camera, the vial transport, the electronics module and the top cover occurs in the United States. The spectrometer requires the assembly of approximately 67 parts, the vision camera requires the assembly of approximately 22 parts, the vial transport requires the assembly of approximately 105 individual parts, the electronics module requires the assembly of approximately 199 parts on eight separate printed circuit boards, and the top cover subassembly requires the assembly of approximately 89 parts. The proprietary software and the proprietary database were designed, developed and programmed in the United States. The proprietary software and the proprietary database are incorporated into the electronics module and make up the central “brain” of the PASS Rx. The hardware subassemblies would not function without operable software to control the hardware and provide a user interface, and a database against which to compare the results of the spectroscopic scan and the optical scan performed by the device. The software includes a user interface and an analytical layer that processes the information with custom algorithms to identify the contents of a pharmaceutical vial, both visually and chemically. The database contains information about the spectral signature of over 2000 pharmaceutical products sold in the United States. Also, Centice has programmed proprietary calibration software for Centice’s internal purposes. The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), Customs Regulations (19 CFR 134.41(b)), mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain. Section 134.1(d) defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. 19 CFR 134.1(d)(1) states that if an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation of the article. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See, 19 CFR 134.35. In this case, the assembly of the five hardware subassemblies that occurs in the United States, along with the operation of programming the hard drive that resides inside the PASS Rx device with the U.S. origin proprietary software and proprietary database, substantially transforms the imported foreign components into a product with a new name, character and use. Therefore, the U.S. manufacturer is the ultimate purchaser of the imported components and under 19 CFR 134.35 the imported articles would be exempt from marking. Only the outermost containers in which the components are imported must be marked with the country of origin of the country in which they are manufactured. For your information, the Federal Trade Commission has jurisdiction concerning the use of the phrase “Made in the USA” and similar claims of U.S. origin. Whether an article, in this case, the PASS Rx, may be marked with the phrase "Made in the USA" or similar words denoting U.S. origin, is an issue under their authority. Inquiries should be directed to the FTC Division of Enforcement, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580 regarding the propriety of marking indicating that the article is made in the U.S. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Barbara Kiefer at (646) 733-3019. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division