MAR 2-05 CO:R:C:V 732337 LR
Donald W. Lewis, Esq.
Freeman, Wasserman & Schneider
300 Metropolitan Square
655 Fifteenth Street, NW.
Washington, D.C. 20005
RE: Country of Origin Marking of Cooked Shrimp
Dear Mr. Lewis:
This is in response to your letter dated September 8, 1988,
submitted on behalf of the National Fisheries Institute (NFI),
requesting a ruling on the country of origin marking requirements
for imported raw shrimp which is cooked in the U.S. We have also
considered the supplemental letter dated January 9, 1989, from
the NFI and the arguments that were raised during a meeting at
Customs on April 14, 1989.
FACTS:
According to your submission, raw shrimp is imported into
the U.S. in three different forms: (1) shell-on shrimp
(commercially known as "green headless shrimp"), (2) peeled,
undeveined shrimp ("PUD shrimp"); and (3) peeled and deveined
shrimp ("P&D shrimp)". The shrimp are imported frozen in either
five pound or two kilogram blocks.
After importation, the shrimp are thawed, washed, graded
and cooked. In some cases, the shrimp are also peeled and
deveined. According to the NFI submission, the objectives of the
cooking operations are to coagulate the protein and raise the
temperature of the core of the shrimp above 167 degrees
Fahrenheit to kill any pathogens.
The first step in the cooking operations is the dipping of
the raw shrimp into a solution of salt and sodium
tripolyphosphate (TPT). The salt enhances the flavor and
texture, while the TPT stabilizes the loss of moisture during
processing. In some cases, the shrimp are also marinated in
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herbs and spices to further enhance their flavor. The second
step consists of the cooking of the raw shrimp by any one of
three alternate methods. The first method utilizes high pressure
cookers which employ steam under pressure to cook batches of the
raw shrimp. The second method utilizes a continuous hot air oven
in which very hot and humid air is blown over a moving belt
carrying shrimp though the oven. The third method involves
boiling the shrimp on either a batch or continuous basis. The
actual cooking times needed to achieve these objectives vary
depending upon the type of cooker used and the size of the
shrimp. As a general rule, a batch steam cooker is operated for
about 20-25 minutes which includes a heating up period, a cooking
period from 1 to 5 minutes, and a cooling down period. When
shrimp are cooked in a continuous hot air oven, the cooking times
vary from about 2 to 7 minutes. No information was provided as
to the cooking period when the shrimp are boiled. After cooking,
the shrimp are immersed in a series of water baths, which is
followed by a second freezing operation.
You state that cooking is a sophisticated process which
produces significant changes in chemical composition, moisture
content, physical appearance, marketability and cost per pound.
The temperature at which the shrimp are cooked and the timing of
the operation is said to require constant adjustment in order to
produce a consistent cooked product from an inconsistent raw
product.
With regard to chemical composition, cooking results in the
coagulation of the protein in the raw shrimp, changes the levels
of ash, cholesterol, fatty acids, vitamins and minerals, and
causes a moisture loss. As to marketability, cooking reduces the
shelf life of the product from about one year to three to six
months and is said to result in a different commercial commodity.
With regard to physical appearance, cooking turns the shrimp a
uniform dark pink irrespective of the various colors of the raw
product, changes the color of the meat from a translucent or
opaque color to white, and changes the texture of the meat from
watery or mushy to one which is firm and slightly resilient.
Finally, the cooking process allegedly adds approximately 14 to
21 percent to the cost of a pound of green headless shrimp and
about 35 percent to the cost of a pound of PUD or P&D shrimp. In
light of these changes, it is claimed that the imported shrimp is
substantially transformed into a new and different article which
is not required to be labeled as a foreign product.
Two Headquarters Rulings (HQ), 070395, June 6, 1983,
pertaining to roasting of green coffee beans, and 726040, August
30, 1984, pertaining to roasting of macadamia nuts, are cited in
support of your contentions. In both cases, Customs determined
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that the roasting process resulted in a substantial
transformation. In your opinion, cooking of shrimp involves more
extensive processing than roasting. It was also argued during
the meeting that the two court decisions, Koru North America v.
U.S., Slip Op. 88-162 (Court of International Trade, decided
November 23, 1988) and The Torrington Co. v. U.S. 764 F.2d 1563
(1985) support a finding of substantial transformation in this
case. 1/
Finally, it was stated during the meeting that there are
stronger quality controls in the U.S. market so that the consumer
would want to know that the shrimp are processed in the U.S.
ISSUE:
For purposes of 19 U.S.C. 1304, does the cooking of shrimp
constitute a substantial transformation?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires that, unless excepted, every article of foreign
origin, or its container, must be legibly, permanently, and
conspicuously marked to indicate the country of origin to an
ultimate purchaser in the U.S. The primary purpose of the
country of origin marking statute 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)
(quoted in Globemaster, Inc. v. United States, 68 Cust. Ct. 77,
79-80, 340 F. Supp. 975-76 (1972) and National Juice Products
Association v. United States, 10 CIT 48, 628 F. Supp. 978 (1986).
The regulations implementing the requirements and exceptions
to 19 U.S.C. 1304 are set forth in Part 134, Customs Regulations
(19 CFR Part 134). Under 19 CFR 134.1(d), the ultimate purchaser
is generally the last person in the U.S. who will receive the
article in the form in which it was imported. If an imported
1/ In Torrington, the Court of Appeals for the Federal Circuit
affirmed a decision of the CIT that certain sewing machine
needles may be entered free of duty under the Generalized System
of Preferences. Although the case involved the issue of
substantial transformation, it is not relevant here since Customs
determined in T.D. 86-7 that the decision shall be applied only
in those instances in which the factual situation conforms to the
one on which the decision is based.
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article is further manufactured in the U.S. and the manufacturing
process is merely a minor one which leaves the identity of the
imported article intact, pursuant to 19 CFR 134.1(d)(2), the
consumer or user of the article who obtains the article after the
processing, will be regarded as the ultimate purchaser.
Foreign natural products (such as shrimp) are on the so-
called "J-list" and are excepted from individual marking require-
ments pursuant to 19 U.S.C. 1304(a)(3)(J) and 19 CFR 134.33.
However, the outermost container in which the article ordinarily
reaches the ultimate purchaser is required to be marked to
indicate the origin of its contents. As provided in 19 CFR
134.25, if the imported J-list product will be repacked prior to
sale to the ultimate purchaser, the importer must certify to
Customs that he will properly mark the new package or
alternatively, notify the repacker of the obligation to mark the
new package. The certification procedures, which are for the
purpose of ensuring that the ultimate purchaser will be advised
of the country of origin, apply to imported J-list articles
processed and repacked after importation unless the articles are
substantially transformed prior to repacking. Absent a
substantial transformation, the consumer or other recipient of
the shrimp is considered the ultimate purchaser and must be
advised of the country of origin of the shrimp.
For a substantial transformation to be found, an article
having a new name, character or use must emerge from the
processing. See United States v. Gibson-Thomsen Co, Inc,
27 C.C.P.A. 267, C.A.D. 98 (1940).
Koru North America v. United States, supra, is the most
recent judicial decision involving the issue of substantial
transformation in the context of 19 U.S.C. 1304. Specifically,
the court considered whether the processing of headed and gutted
fish in South Korea by thawing, skinning, boning, trimming,
refreezing 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 marking purposes. 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
substantial transformation.
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In the other recent "food marking case" National Juice
Products, supra, the Court of International Trade considered the
effects, for purposes of marking, of domestic processing of
foreign orange juice concentrate. The court upheld Customs
determination that imported orange juice concentrate is not
substantially transformed when it is mixed with 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 "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
orange juice products had to be marked with the country of origin
of the imported concentrate.
Based on the rationale of National Juice Products, Customs
determined in HQ 731472, June 23, 1988, published as C.S.D. 88-
10 on August 17, 1988, that the peeling and deveining of shrimp
in the U.S. does not change the name, character or use of the
imported product and thus, does not constitute a substantial
transformation. In this regard, Customs stated that: "the
quality and size of the product is attributable to the imported
product and not the domestic processing. While the peeling and
deveining 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."
The issue presented here is whether the additional cooking
operations performed in the U.S. is enough to substantially
transform the imported shrimp so that it does not have to be
labeled as a foreign product. We find that it is not.
Although Customs has not previously ruled on this precise
issue, there are rulings regarding the effects of somewhat
similar processes. For example, in C.S.D. 86-26, June 25, 1986,
Customs determined that for marking purposes, the blanching,
cutting and freezing of broccoli and other vegetables did not
constitute a substantial transformation. Blanching is a process
which prepares vegetables for freezing whereby the vegetables are
subjected to steam heat to partially cook and retard any
deterioration of the vegetable from within. Customs found that
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the blanching and other processing did not change the fundamental
character and identity of the imported broccoli. In this regard,
the ruling states: "despite the fact that the imported product
may be known as "fresh" broccoli whereas the processed products
may be described as "frozen" broccoli or "chopped" broccoli, the
fundamental identity of the imported product (as broccoli) is
maintained, and is not lost or subordinated in the processed
product." The broccoli had been steam blanched for 6 minutes at
210 degrees Fahrenheit. The shrimp undergoes processing similar
to blanching. Like the broccoli, some of the shrimp are
subjected to steam heat for approximately the same amount of time
to raise the internal temperature of the product.
Customs has also ruled on the effects of roasting, another
process which involves the application of high heat to raise the
internal temperature of the product. In T.D. 85-158, dated June
2, 1985 (overruling earlier rulings), Customs found that for
purposes of 19 U.S.C. 1304, the roasting of pistachio nuts for
20-30 minutes to bring the internal temperature of the nut to 280
degrees Fahrenheit, did not substantially transform the nut.
Customs concluded that the physical and commercial changes which
occur in the pistachio nuts as a result of roasting are not
significant and that the identity and use of the pistachio nuts
remains intact. The decision states that roasting appears to be,
like picking, sorting, and bagging, simply one of several
processing steps to which all pistachio nuts are subjected, no
one of which alters or limits the intended or potential
commercial use. See also HQ 730058, June 2, 1987 (roasting of
pecan nuts is not a substantial transformation).
Although Customs has ruled that the roasting of coffee
beans and macadamia nuts does result in a substantial
transformation (HQ 722360, June 6, 1984, and HQ 722980, October
17, 1983, both relating to country of origin marking; and 070395,
June 6, 1983, relating to tariff classification), these rulings
are of limited precedential value. This is because of the more
recent rulings on the roasting of pistachio and pecan nuts
mentioned above and a recent ruling on the roasting of coffee, HQ
554971, December 1, 1988, which held that for purposes of the
free entry provisions of General Headnote 3(a), TSUS, which was
replaced by General Note 3(a)(iv), Harmonized Tariff Schedule of
the United States (HTSUS), the sorting, grading, blending, and
roasting of coffee beans is not sufficient to substantially
transform them into a new and different article of commerce.
Finally, in HQ 729256, May 23, 1988, Customs ruled that the
smoking of raw salmon did not result in a substantial
transformation for purposes of marking. The smoking process
involves the introduction of smoke to the product to alter the
taste and render it ready for eating.
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The principle underlying each of the above marking
decisions is that the processing in question did not create an
article with a different name, character or use, but resulted in
minor changes which rendered the product more suitable for
consumption. In each case, Customs concluded that despite some
physical changes that the processing produced to the article in
question, the basic character and use of the product was
attributable to the imported product and not, the domestic
processing.
Applying the principles set forth above to the facts in
this case, we conclude that cooking shrimp, like blanching
vegetables, roasting pistachio nuts and smoking salmon, does not
result in a change in the name, character or use of the imported
product which is significant. First, the name of the product
remains basically the same. Both before and after the cooking,
the product is referred to as shrimp. As indicated in the
broccoli decision, the fact that the product may have a different
modifier preceding it is not determinative.
More important, cooking does not change the fundamental
character of the imported shrimp. Both before and after the
cooking, the product is still basically the same, frozen shrimp.
As stated in our previous shrimp ruling, we are of the opinion
that the character of the shrimp (i.e., its size and quality) is
determined at the time of importation. This character is not
changed significantly by cooking. Although the cooking process
produces some changes in the color, texture and chemical
composition, it does not change the basic shape of the product as
did the processing of a whole fish into fillets in Koru or
change the essential character of the imported product as
described in National Juice. The character of the imported
product, as frozen shrimp, is not lost or subordinated in the
final product.
Finally, we are of the opinion that the use of the product
is not changed as a result of the cooking process. Cooking, like
peeling and deveining, are simple operations which merely render
the product ready for eating. Like roasting of pistachio nuts,
cooking is one process which all shrimp undergo before eating.
Our observation in the earlier shrimp ruling that peeling and
deveining are operations that are easily performed by a consumer
in the kitchen, is also applicable here. Although the cooking of
shrimp in a processing plant involves more sophisticated
machinery, we note that cooking of shrimp can also be performed
in the consumer's kitchen by simply placing the shrimp into
boiling water for a few minutes. In our opinion, none of these
operations is sufficient to render the shrimp outside the purview
of the country of origin marking requirements.
Although the finished product would be classified
differently than the imported product under the Harmonized Tariff
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Schedule of the U.S., a change in tariff classification is but
one factor to consider and is certainly not determinative.
Based on the above considerations, we conclude that the
manufacturing process of peeling, deveining and cooking shrimp is
not a substantial transformation but rather, a minor one which
leaves the identity of the imported shrimp intact. Therefore,
the consumer who obtains the shrimp after the processing is the
ultimate purchaser.
A determination that the imported shrimp is not
substantially transformed as a result of the processing described
above, is consistent with the primary purpose of the country of
origin marking statute which is to mark the goods so that at the
time of purchase the ultimate purchaser may, by knowing where the
goods were produced, by able to buy or refuse to buy them, if
such marking should influence his will. This purpose is not
served if the package of the cooked shrimp is not required to
indicate the country of origin of the imported shrimp. With
regard to the argument that the consumer may want to know that
the shrimp was processed in the U.S. because of higher health
standards, so long as the country of origin of the shrimp is
clearly stated, the label may also indicate that the shrimp is
processed in the U.S.
HOLDING:
For purposes of 19 U.S.C. 1304, the domestic processing of
imported shrimp consisting of peeling, deveining, cooking,
freezing, and repacking, does not constitute a substantial
transformation. Accordingly, the repacked shrimp is subject to
the country of origin marking requirements of 19 U.S.C. 1304 and
19 CFR Part 134 and the importer must follow the certification
procedures of 19 CFR 134.25.
Based on the information we received from the industry
regarding the necessary implementation period for HQ 731472,
covering the marking of imported shrimp which is peeled and
deveined in the U.S., we have determined that a similar
implementation period (approximately 6 months) would be
appropriate in the present case. Accordingly, the ruling will be
effective as to shrimp imported on or after January 1, 1990.
Sincerely,
Harvey B. Fox
Director
Office of Regulations and Rulings