Stuart R. Gallant, MD, PhD

Okay, here’s the premise of today’s post:  you have contracted with a company outside the US (maybe in Germany, China, or India) to manufacture your company’s active pharmaceutical ingredient (API), and now you need that API in the US to manufacture your company’s drug product (DP).  After you manufacture the drug product, you want to ship vials to Europe.  How do you do it?  To add a little more flavor, assume that the investigational new drug (IND) application has not been filed, and you need the release of the US DP to allow you to file the IND.

Ex-US to US

It goes without saying that this shipment represents your company pushing a lot of chips onto the table, but you should be careful not to go all-in.  If you have 10 kilos of API in China, make two shipments 5 kilos and 5 kilos.  (Planes do fall out of the sky.)

Now that you have decided on the shipment amount, you have a bunch of other decisions to make:

• Find your logistics company:  Hopefully, you began working on this months before your shipment.  You want a logistics company with global reach and a focus on pharmaceutical shipments.  Interview candidates for:  1) GMP compliance, 2) customer service.  In my opinion, the real weakness of pharmaceutical logistics is the subcontractors.  The logistics company has a good deal of control of their own employees, but no logistics company can cover the globe with FTEs, so subcontractors are inevitable.  Regarding customer service, an important question is:  how will you get in touch with them when there is a problem and how will they work to resolve the problem?  You will also need a customs broker and a bond, but the logistics company will guide you through that.
• Pick a shipping container:  Your logistics company will have validated shipping containers dispersed around the world.  The go to brand is the “Credo”.  You want a container big enough for your shipment, but not too big.  If you use an overlarge container, it costs more to ship, and it may not fit on the narrow-body planes that a lot of airlines are using during the pandemic.  Make sure that a “temp tale”, also known as a data logger, is included inside each shipping container.  You will receive the temperature data as a PDF after the shipment is complete.  (Note:  I am assuming that your API is already in its full, labeled container closure before it goes into the validated shipping container.)
• Making out your shipping paperwork:  To bring a shipment into the US, you will need:
  • Pro-forma invoice:  Your logistics company probably has a template pro-forma invoice; it includes the shipment description (to and from addresses, contents, tare and gross weight, etc.).  Key items include:  HTS code [1], FDA product code [2], and ACE code.  The HTS code gives the identity of what you are shipping.  The ACE (“Automated Commercial Environment”) code is used by the computer system which determines which agencies review your shipment.
  • Certificate of analysis for your API.
  • Safety data sheet (SDS)—this used to be called the material safety data sheet (MSDS), and I still use that term because some people don’t recognize the term SDS
  • TSCA memo:  This document states that your shipment is not subject to the Toxic Substances Control Act.
  • Prototype exemption memo:  This document states that your shipment is not subject to customs fees (if appropriate).
  • USDA memo:  This document provides reassurance that your shipment is not of animal origin (if appropriate).
  • End use letter:  This plain-language summary of what the shipment is, where it comes from and where it is going is your first and last line of defense for the shipment.  Hopefully, the customs agent reads this first, so that all the other paperwork makes sense to him or her.  And, in the case that the agent has concerns, a plain language summary can sometimes alleviate them without a hold being placed on your shipment.
• API shipments prior to active IND:  You will recall that the premise of this post is that the API shipment is being made prior to filing the IND application.  This is a very common circumstance.  To file the IND application, you will need release data for the drug product, but you won’t have that until you have successfully shipped the API into the country to manufacture the DP (in this scenario).  The FDA may not clear the shipment without an active IND.  This is a chicken-and-egg type problem, and you will need to discuss it with your logistics company to determine which solution is most relevant for your drug.  It is important to carefully consider the HTS and ACE codes as you address this issue.
• Timing of customs clearance:  Your logistics company will control timing of the shipment.  Something to bear in mind is that customs agents generally work Monday to Friday.  So, your shipment may be picked up on a Friday to fly from the US to EU (see discussion below regarding EU shipments) and arrive at the port of entry on Saturday, but it will wait at the port of entry until Monday when it can be cleared.
• The shipment itself:  You will provide a pick-up date at the starting point and the logistics company will make the pick-up.  The logistics team will check the shipment from end to end prior to placing it on the airplane.  lf there is a problem with the HTS code or pro-forma invoice, they will request you to correct the problem and resubmit your paperwork.  Once the shipment is cleared through customs, then it can be put on the airplane.  If the shipment is delayed, the logistics company will transfer the shipment to a fresh conditioned shipper, ensuring that the shipment stays at temperature.
• What can go wrong:  Pretty much anything can go wrong.  I once had a shipment that was literally lost for about 5 days near Munich (yikes!).  The most likely problem is that a customs agent will be confused by your paperwork and hold your shipment.  (Remember customs agents look at everything from farm equipment to supercomputers.  They have a very low threshold for putting a shipment on hold if the paperwork doesn’t look correct.  In that case, you’ll get an email with questions to be resolved before your shipment starts moving again.)  The other common thing that can be a problem is that your shipment is held for some mysterious reason (maybe there aren’t any wide-body planes going out of LAX to your destination, but no one realized that would be a problem until your shipment which is too large for a narrow-body was stuck in LA).  So, keep on top of the shipment—make sure you know where it is going and when it is making its next move—hopefully you picked a logistics company that can support your high level of interest.
• What to do after delivery:  Once your shipment arrives, you will feel better, but you have one more thing to do: get hold of the temp-tale data and review it.  If there were temperature excursions, you’ll need to address them.  I’ve only had one shipment with an unresolvable excursion, but it was bad (ask me sometime what happens when a soluble protein solution has an extended low temperature deviation—yikes!).

US to EU

Your API arrived at the US manufacturing site, and they used it to make drug product.  Now you are ready to ship your vials to Europe.  Shipping to the EU is similar to shipping into the US, but there are a few little differences:

• HTS code:  You had a chemical HTS code bringing the API into the US.  Now you will need an HTS code appropriate for drug product.  (And, you will no longer need an FDA product code and ACE code which are only needed for shipments into the US.)
• Value:  We didn’t discuss valuation above (when we brought the API into the US).  In fact, you do need to record a valuation in the pro-forma invoice to bring a shipment into the US, but it has no effect on your customs duties (if you are entitled to use a prototype exemption memo).  Going into Europe, however, you will be subject to customs fees.  To compute the correct valuation for your drug product, you will use “Method 5” [3].  In the past, companies would record a nominal low value (e.g., $1), but using this approach today is likely to get your shipment held up in customs.
• Importer of Record:  From a customs point of view, a local European agent needs to be responsible for fees (the so-called “importer of record”).  It is possible to hire an importer of record, but it is much more straight-forward if your European clinical supplies repository or European CMO will act as importer of record.  (You are still responsible for the fees, but their name is on the paperwork.)  Negotiate that role into your contracts—or heartache will ensue.
• Value Added Tax:  Value added tax strategy is complex.  Working with your European clinical supplies repository or European CMO will be helpful.  VAT can be in the neighborhood of 20% of the value imported, so understanding that it is being correctly assessed and whether your company is entitled to a refund is important.  For instance, API brought into Europe will be charged VAT on arrival, but your company should receive a refund for DP exported from the EU.  The procedures are country specific and detailed, so homework in advance is advisable.
• Import Permit:  Assuming that you have filed an Investigational Medicinal Product Dossier (IMPD), you will be able to obtain an import permit.  You will attach this to the pro-forma invoice, along with the MSDS, certificate of analysis, and end use letter, and that should be sufficient documentation for your shipment.

One final piece of advice—be flexible in how your shipment is run (i.e., dates for the shipment, what size container is used, etc.).  The world supply chain network is stressed.  It wasn’t that long ago that we were worrying if we would be able to ship into the US, not when.  Happy shipping!

[1]  hts.usitc.gov

[2]  www.fda.gov/industry/import-program-resources/product-codes-and-product-code-builder

[3]  ec.europa.eu/taxation_customs/business/calculation-customs-duties/customs-valuation_en

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