June 22, 1998
MAR-05 RR:CR:SM 560904 KKV
Mr. Gregory P. Benhard Louisiana Premium Seafoods, Inc.
P.O. Box 68 Palmetto, LA 71358-0068
RE: Request for binding ruling regarding the country of origin marking requirements applicable to whole crawfish imported for further processing in the U.S.; re-cooking; heading; peeling; de-veining; not a substantial transformation; National Juice Products; Koru North America; C.S.D. 88-10; HRL 731763
Dear Mr. Benhard:
This is in response to your letter dated February 16, 1998, which requests a binding ruling regarding the country of origin marking requirements applicable to whole crawfish imported from China for further processing in the U.S. Specifically, you inquire whether imported crawfish is substantially transformed in the U.S. as a result of post-importation processing and whether the finished product may be marked, "Product of USA."
You indicate that Louisiana Premium Seafoods, Inc.
imports whole, cooked crawfish from China into the U.S. On those occasions where your firm experiences a surplus of the product, it is further processed in the U.S. by recooking, removing the head, peeling and de-veining. We are informed that the domestic processing results in a substantially increase in the cost of the finished product (i.e., the processed tail meat is 15% of the original weight and the cost of the end product is more than twice the cost of the imported whole, cooked product).
Whether imported whole, cooked crawfish is substantially transformed into a product of the U.S. for purposes of 19 U.S.C. 1304 by domestic processing which includes recooking, heading, shelling and de-veining operations.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the United States 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 United States the English name of the country of origin of the article. By enacting 19 U.S.C.
1304, Congress intended to ensure that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will. United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 C.A.D. 104 (1940).
Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as:
The country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of this part; however for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Accordingly, the country of origin of an article is the country in which it was wholly manufactured or, if processed in several countries, the country in which the article last underwent a substantial transformation. The well-established test for determining whether a substantial transformation has occurred is derived from language enunciated by the court in Anheuser-Busch Brewing Association v. United States, 207 U.S. 556, 562 (1908), which defined the term "manufacture" as follows:
Manufacture implies a change, but every change is not manufacture and yet every change in an article is the result of treatment, labor and manipulation. But something more is necessary, as set forth and illustrated in Hartranft v.
Wiegmann, 121 U.S. 609. There must be transformation; a new and different article must emerge, having a distinctive name, character or use.
Simply stated, a substantial transformation occurs "when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing." See Texas Instruments, Inc.
v. United States, 69 CCPA 152, 681 F.2d 778 (1982) (cited with approval in Torrington Co. v.
United States, 764 F. 2d 1563, 1568 (1985)).
Although neither the courts nor Customs has specifically ruled on the country of origin marking requirements of imported crawfish tail meat which has undergone multi-country processing, two court decisions involving the country of origin marking requirements applicable to imported food products (one on orange juice and another on fish) and two Customs decisions regarding imported shrimp are instructive.
In National Juice Products v. United States, 628 F.
Supp. 978, 10 CIT 48 (CIT 1986), the Court of International Trade considered the effects of domestic processing upon frozen orange juice concentrate imported into the U.S. The court upheld Customs determination in C.S.D. 85-47 (also published as HQ 728557, dated September 4, 1985), that the imported orange juice concentrate is not substantially transformed when it is mixed with other batches of concentrate, either foreign or domestic, water, orange essences, orange oil and in some cases, fresh juice and either packaged in cans and frozen or pasteurized, chilled and packed in liquid form. Customs found, and the court agreed, that the domestic processing did not produce an article with a new name, character or use because the essential character of the final product was imparted by the imported concentrate and not the domestic processing. The court stated that "the retail product in this case is essentially the juice concentrate derived in substantial part from foreign grown, harvested and processed oranges. The addition of water, orange essences and oils to the concentrate, while making it suitable for retail sale does not change the fundamental character of the product, it is still essentially the product of the juice of oranges." Therefore, the repacked orange juice products had to be marked with the country of origin of the imported concentrate.
In Koru North America v. United States, 12 CIT 1120, 701 F. Supp. 229 (1988), the court considered whether the processing of headed and gutted fish in South Korea by thawing, skinning, boning, trimming, freezing and packaging, changed the name, character or use of the fish so as to effect a substantial transformation and render Korea the country of origin for purposes of 19 U.S.C. 1304. The court concluded that the processing performed in Korea constituted a substantial transformation because it changed the name of the article from "headed and gutted fish" to "individually quick-frozen fillets" and more importantly, because it vastly changed the fish's character. In this regard, the court noted that while the fish arrive in Korea with the look of a whole fish, when they leave they no longer possess the essential shape of the fish. The court also noted that the fillets are considered discrete commercial goods which are sold in separate areas and markets. The fact that the products also have different tariff classifications was found to be additional evidence of a substantial transformation.
In C.S.D. 88-10 (also published as HQ 731472, dated June 23, 1988) Customs considered the effect of domestic processing on foreign-origin shrimp. In that case, green (raw), headed (without heads), frozen shrimp, with shell on, was imported into the U.S. where it was thawed, sorted, iced, peeled, de-veined, iced and packaged. Customs determined that the processing did not result in a material change of name (i.e., from "frozen shrimp" to "peeled and de-veined" frozen shrimp). Likewise, Customs determined that the processing did not result in a change in the character of the imported product, stating:
The quality and size of the product is attributable to the imported product and not the domestic processing. While the peeling and de-veining changes the physical appearance of the shrimp to a certain degree and renders the product ready for eating, in our opinion the change is minor and does not fundamentally change the character of the imported product. We believe that in this case the imported shrimp similarly imparts the essential character to the final product.
Finally, Customs determined that the domestic processing did not significantly change the product's intended use, which was primarily dictated by the nature (raw) and size of the imported article, as these attributes had already been determined at the time of importation. Accordingly, based on the rationale of National Juice Products, supra, Customs held that the peeling and de-veining of shrimp in the U.S., which did not change the name, character or use of the imported product, did not constitute a substantial transformation.
The same rationale was applied in HRL 731763, dated May 17, 1989, where Customs considered raw, frozen shrimp imported into the U.S. in three different forms: 1) shell-on shrimp (commercially known as "green headless shrimp"); 2) peeled, unde-veined shrimp ("PUD shrimp"); and 3) peeled and de-veined shrimp ("P&D shrimp)." After importation, the shrimp was thawed, washed, graded, cooked and, in some cases, also peeled and de-veined. Customs referenced its previous holding in HRL 731472, supra, and considered whether the additional cooking operations were sufficient to effect a substantial transformation of the imported merchandise. Customs determined that the imported merchandise did not undergo a change in name as a result of processing, as the article was referred to as "shrimp" both before and after the cooking operations. While noting that the cooking process produced some changes in the color, texture and chemical composition, Customs determined that the character of the shrimp ( i.e, size and quality) was unaffected by domestic cooking operations. Lastly, Customs concluded that the use of the product was unchanged as a result of the cooking process, as this process, like the peeling and de-veining in C.S.D. 88-10, supra, is essentially a simple process which may be performed in the kitchen of a consumer, and which all shrimp must undergo before consumption.
In the matter under consideration, whole, cooked, frozen crawfish, with shell on, classifiable under subheading 0306.19.0010, HTSUS, is imported into the U.S.
from China, and undergoes post-importation processing which includes re-cooking, heading, peeling and deveining operations. For processing to effect a substantial transformation, a new and different article must emerge, with a new name, character, or use different from that possessed by the article prior to processing." See Texas Instruments, supra.
Unlike Koru, supra, where the processing of fish resulted in a change in the name of the article, from "headed and gutted fish" to "individually quick-frozen fillets," the crawfish undergo no such distinctive change of name as a result of the domestic processing. The article imported into the U.S. and the finished article are essentially the same thing - cooked crawfish. Despite the fact that the product imported into the U.S. is "whole" crawfish whereas the processed product is crawfish "tails," the fundamental identity of the crawfish is maintained throughout, and is not lost or subordinated in the processed product. As with the shrimp in HRL 731763, supra, the fact that the products may have different modifiers is not determinative. See also C.S.D. 86-26 ("fresh" broccoli processed into "frozen" broccoli or "chopped" broccoli did not constitute a substantial transformation).
Likewise, the domestic processing does not change the fundamental character of the imported crawfish. Like the shrimp in C.S.D. 88-10 and HRL 731763, supra, the character of the crawfish (i.e., quality) has already been determined at the time of importation into the U.S. Although the domestic processing changes the appearance of the crawfish to a certain degree, it does not impact the fundamental nature of the article. Like the imported orange juice concentrate in National Juice, supra, the crawfish imported into the U.S. imparts the essential character to the finished product.
Lastly, the use of the product is not changed as a result of the domestic processing operations. Re-cooking, heading, peeling and de-veining are simple operations which render the product ready for eating. While the added convenience of having these processes completed may be a factor considered by a purchaser, these processes may easily be performed by consumers in their own kitchens.
Based on the above considerations, we conclude that the process of re-cooking, heading, peeling and de-veining is not a substantial transformation but rather, a minor one which leaves the identity of the imported crawfish intact. Therefore, for purposes of 19 U.S.C. 1304, imported crawfish is not substantially transformed into a product of the U.S.
by post-importation processing but remains a product of China. Accordingly, upon importation into the U.S., the certification procedures of 19 CFR 134.25 must be satisfied and upon completion of domestic processing, the finished article must be marked with its country of origin.
Based upon the information provided, frozen, cooked crawfish from China, imported into the United States for domestic processing operations consisting of re-cooking, heading, peeling and de-veining, is not substantially transformed into a product of the U.S. but remains a product of China. Accordingly, upon importation into the U.S., the certification procedures of 19 CFR 134.25 must be satisfied and, upon completion of domestic processing, the finished product must be marked with its country of origin.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.
John Durant Director Commercial Rulings Division