MAR-05 RR:CR:SM 560931 KKV
Mr. Charles A. Castille, Jr.
Mr. Don Savely
SAV-CAS, L.L.C.
212 North Chestnut
Lafayette, LA 70501
RE: Request for binding ruling regarding the country
of origin of imported crawfish; substantial
transformation; National Juice Products; Koru
North America; HRL 560904; C.S.D. 88-10; HRL
731763; whole crawfish; crawfish tails
Dear Mr. Castille and Mr. Savely:
This is in response to your letter dated March 23,
1998, which requests a binding ruling regarding the tariff
classification and country of origin of crawfish, which was
addressed to the National Commodity Specialist Division, New
York, but subsequently forwarded to our office for response.
FACTS:
On August 1, 1997, the Department of Commerce published
in the Federal Register the final determination of its
sales-at-less-than-fair-value (LTFV) investigation of
freshwater crawfish tail meat from the People's Republic of
China (PRC) (62 Fed. Reg. 41347). Subsequently amended to
correct ministerial errors, Antidumping Duty Order A-570-848
(62 Fed. Reg. 48218 (September 15, 1997) covers "freshwater
crawfish tail meat, in all its forms (whether washed or with
fat on, whether purged or unpurged), grades, and sizes;
whether frozen, fresh, or chilled; and regardless of how it
is packed, preserved, or prepared" and orders assessment of
antidumping duties on all unliquidated entries of crawfish
tail meat from the PRC entered, or withdrawn from warehouse,
for consumption on or after March 26, 1997. Specifically
excluded from the order are "live crawfish and other whole
crawfish, whether boiled, frozen, fresh or chilled" and
"saltwater crawfish of any type, and parts thereof."
You indicate that SAV-CAS, L.L.C. plans to import
crawfish into the U.S. and request a binding ruling
regarding the tariff classification and country of origin of
crawfish from China as well as the applicability of the
antidumping order in the following scenarios:
Scenario #1
Whole, boiled crawfish is shipped from China to
the United States, either fresh or frozen. The
merchandise is shipped to a cold storage facility
in Texas and exported to Mexico for further
processing. In Mexico, the processor will remove
the heads and shells, save fat from the heads, de-vein the tail meat, add back the fat, vacuum pack,
freeze and ship the merchandise to the U.S.
Scenario #2
Boiled, de-veined, shelled, frozen crawfish tail
meat is exported from China to the U.S., where it
is subsequently shipped in-bond to Mexico for
further processing. In Mexico, the merchandise is
breaded and seasoned and shipped to the U.S.
Scenario #3
Boiled, de-veined, shelled, frozen crawfish tail
meat is exported from China to the U.S. for
further domestic processing. In the U.S., the
merchandise is breaded and seasoned.
ISSUE:
What is the country of origin of freshwater
crawfish tail meat which has been processed as set
forth above?
LAW AND ANALYSIS:
With regard to country of origin, you assert that, in
each of the three fact scenarios presented, the imported
crawfish from China is substantially transformed into a new
and different article, resulting in a change in the country
of origin of the imported merchandise.
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)).
In National Juice Products v. United States, 628 F.
Supp. 978, 10 CIT 48 (CIT 1986), the court 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 HRL 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 manufacturing juice concentrate and
not the domestic processing. The court stated that:
[T]he 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.
Customs has previously considered the country of origin
of crawfish tails which have undergone multi-country
processing. In Headquarters Ruling Letter (HRL) 560904,
dated June 22, 1998, Customs considered whole, cooked
crawfish imported into the U.S. for additional processing
which included re-cooking, heading, shelling and de-veining
operations. Customs determined that the imported product
("whole" crawfish) and the processed article (crawfish
"tails") were essentially the same thing - cooked crawfish.
Customs concluded that, despite a slight change in
appearance, the fundamental character (i.e., quality) of the
crawfish had already been determined at the time of
importation. Lastly, Customs found that the domestic
processing operations were operations that merely rendered
the product ready for eating and were so simple in nature
that they could easily be performed by consumers in their
own kitchens. Upon concluding that the domestic processing
operations did not result in a material change in name,
character or use of the imported product, Customs held that
the crawfish had not been substantially transformed into a
product of the U.S. but retained its foreign origin.
In the first fact scenario presented, whole, cooked
crawfish is shipped from China to the United States and
exported to Mexico, where it is headed, peeled, de-veined
and rejoined with head fat lost during processing prior to
being vacuum-packed and frozen for shipment. With the
exception of the restoration of the head fat, the processing
operations performed here are identical to those completed
in HRL 560904, 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. Despite the fact that the product imported into
Mexico is "whole" crawfish whereas the processed product is
crawfish "tails," the article imported into the Mexico and
the finished article are essentially the same thing - cooked
crawfish. The fact that the products may have different
modifiers is not determinative. See HRL 560904, supra. See
also HRL 731763, dated May 17, 1989 {imported frozen "shell-on" shrimp, "peeled, unde-veined shrimp" ("PUD shrimp") and
peeled and de-veined shrimp ("P&D shrimp") which were
thawed, washed, graded, cooked and, in some cases, peeled
and de-veined, were essentially "shrimp" both before and
after processing and did not undergo a substantial
transformation} and Customs Service Decision (C.S.D.) 86-26
("fresh" broccoli processed into "frozen" broccoli or
"chopped" broccoli did not constitute a substantial
transformation).
Likewise, in the first fact scenario, the domestic
processing does not change the fundamental character of the
imported crawfish. Like the crawfish in HRL 560904, supra,
the fundamental 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. See also
C.S.D. 88-10 (also published as HRL 731472, dated June 23,
1988) (imported frozen, raw, headed, shell on, shrimp which
were subsequently thawed, sorted, iced, peeled, de-veined,
iced and packaged were not substantially transformed because
the fundamental character of the processed shrimp (quality
and size) was present at the time of importation) and HRL
731763, supra. Similar to the imported orange juice
concentrate in National Juice, supra, the crawfish imported
into Mexico imparts the essential character to the finished
product.
Lastly, the use of the product is not changed as a
result of the processing operations complete in Mexico. The
operations performed here are identical to those performed
upon the crawfish in HRL 560904, supra, which we concluded
were 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. See also C.S.D. 88-10,
supra and HRL 731763, supra. The added step of restoring
natural juices lost during processing is likewise a simple
matter and we do not find it to be determinative
Based on the information provided in the first fact
scenario, whole crawfish exported into Mexico do not undergo
a material change in name, character or use, as a result of
processing which includes heading, peeling, de-veining,
restoring of natural juices, vacuum-packing and freezing,
and thus, are not substantially transformed into a product
of Mexico. Accordingly, upon importation into the U.S., the
country of origin of the processed crawfish tails in the
first scenario is China, for duty purposes.
In the second scenario, boiled, de-veined, shelled,
frozen crawfish tail meat is exported from China to the
U.S., where it is subsequently shipped in-bond to Mexico
where it is breaded and seasoned before return to the U.S.
In the third scenario, boiled, de-veined, shelled, frozen
crawfish tail meat is exported from China to the U.S., where
it is breaded and seasoned.
It has generally been Customs position that coating and
encapsulating operations do not result in a substantial
transformation. In HRL 557201, dated November 17, 1993,
Customs held that, while the encapsulation process added
certain qualities to the wire which did not exist prior to
such operation, the essential character of the bunched wire,
as a conductor of electricity, was not changed because of
the enhancements attributable to the insulating material.
With regard to food products in particular, in HRL 733908,
dated April 11, 1991, Customs considered breakfast cereal
imported into the U.S. for additional processing which
consisted of sugar coating, vitamin fortification, packaging
and other miscellaneous processing. Customs determined that
although the processing may be necessary for the product to
be marketable and may add value, upon importation into he
U.S., the product looked like breakfast cereal, had the
consistency of breakfast cereal and had all the main
ingredients of breakfast cereal, as the sugar and vitamins
had already been added prior to importation. Inasmuch as
the domestic processing did not alter the fundamental
character of the product, which was already present at the
time of importation, it did not constitute a substantial
transformation. Likewise, in HRL 084928, dated September
19, 1989, Customs held that imported whole, pitted dates
were not substantially transformed by maceration, chopping
heat-drying and sugar-coating as the processed dates were
essentially the same, and were recognizable as, the imported
dates.
Neither the courts nor Customs has specifically ruled
on the effects of seasoning and breading operations upon the
foreign-origin status of crawfish imported into the U.S. [We
do note, however, that in HRL 559793, dated July 1996,
Customs held that cutting into portions, battering and
breading blocks of domestic Alaskan Pollock resulted in a
commercially different products which were ineligible for
preferential duty treatment under subheading 9802.00.50,
HTSUS.]
With regard to the processing of the crawfish in
scenarios #2 and #3, it is important to note that one of the
basic characteristics of crawfish which renders it desirable
as a foodstuff is its ability to take on the flavors of
those items with which it is combined. Because of this
permeable nature, when subjected to seasoning operations,
the flavoring rapidly penetrates and is completely absorbed
by the crawfish meat, permanently altering the taste of the
article. When subjected to additional breading operations,
the loose particles of the breading material adhere to the
surface of the crawfish meat, creating a layer of solid
crust which acts as barrier to further penetration. Unlike
the breakfast cereal in HRL 733908, supra, and the dates in
HRL 084928, supra, the combined seasoning and breading
operations performed upon the subject crawfish are not a
mere surface application, but permanently alter one of the
fundamental characteristics of the underlying crawfish meat
- its taste. Thus, as a result of seasoning and breading,
the imported crawfish undergoes a change in character.
Additionally, we find that the seasoning and breading
operations results in a limitation on the end use of the
imported article, a factor previously discussed by Customs
with regard to shellfish in C.S.D. 88-10, supra, where
Customs considered whether imported shrimp were
substantially transformed by peeling and de-veining
operations. Customs rejected the argument that since peeled
shrimp cannot be utilized for any of the shell-on
presentations, e.g. "boil and peel", and "tail-on cocktail"
dishes, the processing changed the use of the imported
product. Relying upon the analysis in National Juice
Products, supra, where the addition of water was
insufficient to constitute a substantial transformation
despite the fact that the orange juice concentrate could no
longer be sold as a frozen concentrated product, Customs
stated that "[a]lthough the peeling may limit some of the
uses of the imported product, this limitation does not
equate with substantial transformation."
With regard to the instant case, however, prior to
seasoning and breading operations the imported crawfish
tails have a large variety of uses. They are suitable for
preparation by many methods (e.g., baking, steaming,
saut‚ing, boiling, deep frying) to be served in a
presentation either alone or as an ingredient (e.g., gumbo,
bisque, etouff‚, etc.). Upon completion of the breading and
seasoning operations, however, the processed crawfish are
essentially suitable only for deep frying. Unlike the
shrimp in C.S.D. 88-10, supra, where processing served
merely to reduce the number of potential preparations, the
processing of the crawfish in the second and third scenarios
results in a product suitable for preparation by a single
method (deep frying), a limitation of such magnitude that it
constitutes a change in the end use of the product.
Based upon the analysis set forth above, we conclude
that the combined seasoning and breading operations
performed upon the crawfish tails, which permanently alter
the flavor of the imported article and render it suitable
for one particular use, are not minor in nature, but result
in the creation of a new article with a character and use
which is different from that possessed by the article prior
to processing. Therefore, in this instance, we find that
the seasoning and breading operations are sufficient to
effect a
substantial transformation that results in a change in the
country of origin of the imported crawfish tails.
Accordingly, based on the information provided in the
second fact scenario, cooked, de-veined, shelled, frozen
crawfish tails exported from China are substantially
transformed into a new and different product with limited
use as a result of breading and seasoning operations
completed in Mexico. Upon importation into the U.S., the
country of origin of the processed crawfish tails in the
second scenario is Mexico, for duty purposes.
Based upon the information provided in the third fact
scenario, cooked, de-veined, shelled, frozen crawfish tails
imported from China, which become a new and different
product with limited use, are substantially transformed into
a product of the U.S. a result of domestic breading and
seasoning operations.
With regard to the assessment of antidumping duties, it
is important to note that the country of origin
determinations made in this ruling are for Customs duty
purposes only. We note that the applicability of
antidumping duties to imported merchandise is solely within
the jurisdiction of the Department of Commerce. Therefore,
it is possible that imported crawfish which are determined
to be a product of Mexico for Customs duty purposes may
still be subject to Antidumping Duty Order A-570-848.
Therefore, for a determination as to the scope of
Antidumping Duty Order A-570-848 and its applicability to
the merchandise described herein, we suggest that you
contact that agency. Also, note that for country of origin
marking purposes the NAFTA Marking Rules set forth in 19 CFR
Part 102 will be applicable for determining the origin of
the crawfish tails imported from Mexico.
HOLDING:
With regard to the first fact scenario, on the basis of
the information provided, whole crawfish exported into
Mexico do not undergo a material change in name, character
or use, as a result of processing which includes heading,
peeling, de-veining, restoring of natural juices, vacuum-packing and freezing, and are not substantially transformed
into a product of Mexico. Accordingly, upon importation
into the U.S., the country of origin of the processed
crawfish tails in the first scenario is China, for duty
purposes.
With regard to the second fact scenario, on the basis
of the information provided, cooked, de-veined, shelled,
frozen crawfish tails exported from China are substantially
transformed into a new and different product with limited
use as a result of breading and seasoning operations
completed in Mexico. Accordingly, upon importation into the
U.S., the country of origin of the processed crawfish tails
is Mexico, for duty purposes.
With regard to the third fact scenario, on the basis of
the information provided, cooked, de-veined, shelled, frozen
crawfish tails imported from China, which become a new and
different product with limited use, are substantially
transformed into a product of the U.S. a result of domestic
breading and seasoning operations.
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.
Sincerely,
John Durant
Director
Commercial Rulings Division