Lonza, Inc. v. U.S., 94-1335

• Decision Date: 31 January 1995
• Docket Number: No. 94-1335,94-1335
• Citation: 46 F.3d 1098
• Parties: LONZA, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1098

46 F.3d 1098

16 ITRD 2551

LONZA, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 94-1335.

United States Court of Appeals Federal Circuit.

Jan. 31, 1995.

Jack D. Mlawski, Galvin & Mlawski, New York City, argued, for plaintiff-appellant. With him on the brief was John J. Galvin.

Bruce N. Stratvert, Atty., Commercial Litigation Branch, Dept. of Justice, Washington, DC, argued, for defendant-appellee. With him on the brief were Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director and Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office. Also on the brief was Jacob D. Diamond, Office of Asst. Chief Counsel, Intern. Trade Litigation, U.S. Customs Service, of counsel.

Before PLAGER, Circuit Judge, COWEN, Senior Circuit Judge, and RADER, Circuit Judge.

PER CURIAM.

Lonza, Inc. (Lonza) appeals the decision of the United States Court of International Trade in Lonza, Inc. v. United States, 849 F.Supp. 51 (Ct.Int'l Trade 1994). The court upheld the decision of the United States Customs Service (Customs) classifying imports of ADC-6, an organic chemical compound that is used as an intermediate in the production of the antibiotic Imipenem. Customs had classified the compound as "Oxygen-function Amino-compounds--Other" under subheading 2922.50.50 of the Harmonized Tariff Schedule of the United States (HTSUS). Imports classified under this subheading are dutiable at the rate of 7.9% ad valorem. Lonza agrees that ADC-6 is described under this subheading of HTSUS but argues that the compound should be classified under HTSUS subheading 2941.90.50 entitled "Antibiotics-Other", dutiable at the lower rate of 3.7% ad valorem.

It is well established that the meaning of a tariff term is a question of law reviewable de novo by this court, while the determination of whether a particular article fits within that meaning is a question of fact, reviewable for clear error. See Simod Am. Corp. v. United States, 872 F.2d 1572, 1576, 7 Fed.Cir. (T) 82, 86 (1989). We have applied that standard in our consideration of the record, including the briefs and arguments of counsel, and conclude that the Court of International Trade correctly held that the chemical compound in issue was properly classified by the Customs Service. Lonza has not shown that the court's findings of fact are clearly erroneous. We adopt the opinion of the Court of International Trade for the reasons stated in its opinion, a copy of which is attached as an Appendix.

APPENDIX

Slip Op. 94-50

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: RICHARD W. GOLDBERG, JUDGE

LONZA, INC.,

Plaintiff,

v.

UNITED STATES,

Defendant.

Court No. 90-03-00143

[Judgment for defendant.]

Dated: March 25, 1994

Galvin & Mlawski (Jack D. Mlawski, John J. Galvin), for plaintiff.

Frank W. Hunger, Assistant Attorney General; Joseph I. Liebman, Attorney-in-Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Bruce N. Stratvert), for defendant.

OPINION

GOLDBERG, Judge:

This matter is before the court following trial de novo. Plaintiff, Lonza, Inc. ("Lonza"), challenges the decision of the United States Customs Service ("Customs") to classify imports of ADC-6, ¹ an acyclic organic compound, as other oxygen-function amino-compounds under subheading 2922.50.50 of the Harmonized Tariff Schedule of the United States ("HTS"). ² Lonza argues that although ADC-6 is described by this subheading, ADC-6 is more properly classified under subheading 2941.90.50, HTS, as other antibiotics. ³ Lonza notes that if its merchandise is classifiable under two competing headings within this chapter, the heading that is last in numerical order prevails. HTS, Section VI, Chapter 29, Note 3. The government urges that ADC-6 is not susceptible to dual classification, and that therefore Customs' classification should be affirmed.

Lonza's claim for classification of ADC-6 under subheading 2941.90.50 is predicated upon application of a broad definition of the tariff term "drugs" that has developed over the past seventy years. This definition finds most recent expression in the predecessor to the HTS, the Tariff Schedules of the United States ("TSUS"). The issues before the court, then, are: (1) whether and to what extent this definition has survived enactment of the HTS; (2) if it does remain applicable, whether this definition impacts the classification of antibiotics under the HTS; and (3) if it does apply to the classification of antibiotics under the HTS, whether ADC-6 meets this definition. Because the court finds that the TSUS definition of "drugs" does not apply to the classification of antibiotics under the HTS, Customs' classification of ADC-6 is affirmed.

BACKGROUND

The subject merchandise was entered into the United States at JFK International Airport on April 2, 1989. Customs liquidated the entry on July 21, 1989, and Lonza filed its protest on September 27, 1989. Customs denied this protest on March 16, 1990, and Lonza commenced this action contesting that denial on March 22, 1990. All liquidated duties have been paid. The court exercises its jurisdiction pursuant to 28 U.S.C. Sec. 1581(a).

The following evidence was presented at trial. ADC-6 is used by Merck & Company, Inc. ("Merck") in the domestic production of Imipenem, a member of the beta-lactam family of antibiotics. The term "beta-lactam antibiotics" is a general descriptor of a family of related analogs which includes, inter alia, penicillins, cephalosporins, carbapenems, penems, and monobactams. Lactams are defined as organic chemical compounds formed by the intra-molecular dehydrative cyclization of a carboxylic acid and an amine. In the case of ADC-6, the amino and carboxylic acid termini are joined by the elimination of one molecule of water, to form a four-membered lactam ring. Beta-lactams are four-membered ring lactams which are so named because the amino group involved in forming the cycle is located on a carbon atom "beta" to the carboxylic acid. All currently marketed beta-lactam antibiotics contain the four-membered beta-lactam ring.

Scientific research indicates that the beta-lactam ring is responsible for the ability of beta-lactam antibiotics to kill bacteria. As a result, the beta-lactam ring is also referred to as the killing site. Beta-lactam antibiotics bind themselves to the cell walls of bacteria, operating to inhibit cell-wall synthesis and thus killing the bacteria. While five- and six-membered lactams are quite stable, four-membered ring beta-lactams are susceptible to opening of the ring by hydrolysis. When the four-membered beta-lactam ring is broken by hydrolyzing the amide bond, the ability of all beta-lactam antibiotics to kill bacteria is destroyed.

Imipenem is a member of the carbapenem class of antibiotics, and is heterocyclic in chemical structure. Originally, Imipenem was derived from thienamycin. In commercial production, however, Imipenem is synthesized from ADC-6; thienamycin does not exist at any point in this synthesis. In contrast to thienamycin, which is produced naturally by microorganisms, ADC-6 is produced synthetically.

Imipenem also contains a hydroxyethyl side-chain, in addition to its four-membered ring. The purpose of this side-chain is twofold. First, the side-chain contains a recognition element that enables the antibiotic to identify target bacteria. Second, the side-chain protects the antibiotic from beta-lactameses. Target bacteria defend against an antibiotic by producing enzymes, called beta-lactameses; these enzymes are capable of hydrolyzing the amide bond, thereby cleaving the four-membered beta-lactam ring and thus rendering the antibiotic ineffective. Imipenem's side-chain protects against hydrolysis by these bacterial enzymes.

Merck uses Imipenem in the production of PRIMAXIN TM, a potent broad spectrum antibacterial agent intended for intravenous administration. Imipenem itself cannot be administered to patients because it is destroyed by the body's enzymes, and because it exhibits kidney toxicity. As a result, PRIMAXIN TM is formulated from a combination of three elements: the antibiotic Imipenem; an inhibitor to protect the antibiotic against destruction by enzymes; and a buffer to protect against kidney toxicity. Imipenem by itself has never been approved for use as a medicine.

Synthesis of Imipenem is a multi-step process during which ADC-6 undergoes various chemical reactions. The structural elements of Imipenem that are contributed by ADC-6 include the four-membered beta-lactam ring as well as the hydroxyethyl side-chain. In fact, ADC-6 contributes every atom used to form each of these components. Imipenem thus retains the ADC-6 "moiety" or major portion of the ADC-6 molecule. Removal of the ADC-6 moiety from Imipenem would yield a simple unsaturated carboxylic acid; this acid would lack a beta-lactam ring and would be devoid of the ability to kill or inhibit the growth of bacteria. As a result, Lonza concludes that ADC-6 imparts therapeutic properties to the antibiotic Imipenem. Lonza also argues that ADC-6, a chemical intermediate used in the production of Imipenem, is properly considered an ingredient used in the production of a medicine.

DISCUSSION

Prior to enactment of the HTS, imported chemical compounds that: (1) possessed therapeutic properties; and, (2) were chiefly used as ingredients in medicines, merited classification as drugs. Lonza argues that this definition continues to apply under Chapter 29 of the HTS. Before addressing this issue, the court will first examine the evolution of the definition of the tariff term "drugs."

A. Historical Evolution of the Tariff Term "Drugs"

The Customs Simplification Act of 1954 directed the Tariff Commission to compile a revision of customs laws classifying imports for tariff purposes. The Commission submitted the Tariff Classification Study to Congress and the President on November 15, 1960; a...