OT:RR:CTF:FTM H331430 MJD
Jingyu Deng
West Sea Family Fishery Group Co.
181 S Franklin Ave., Suite 703
Valley Stream, New York 11581
Re: Country of Origin of Frozen Fish; Section 301 Measures
Dear Mr. Deng:
This is in response to your request for a binding ruling, dated March 27, 2023, concerning the country of origin of frozen fish from Canada processed in China and imported into the United States. Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for review. Our ruling is set forth below.
FACTS:
The merchandise at issue is frozen fish. According to your request, your company purchases frozen whole fish from Canada. The fish under consideration are Pacific Ocean Perch (Sebastes Alutus), Black Cod (Anoplopoma Fimbria), and Pacific Cod (Gadus Macrocephalus). The fish are all wild caught in the Gulf of Alaska in Canadian waters. The fishing vessel that captures the fish is registered in Prince Rupert, Canada. The fish are frozen and then shipped directly to China where they will be cut, cleaned, and packaged at a factory in a Free Trade Zone (“FTZ”) in China. In the FTZ, the fish undergo one of five processes resulting in five different fish products. The five fish products are the following:
Product A (Pacific Ocean Perch): The fish is descaled, gilled, and gutted.
Product B (Pacific Ocean Perch): The fish is descaled, gilled, and gutted. The fish is cut open so that the two sides of the fish lay flat on each side. The eyes and bones are still intact.
Product C (Black Cod): The fish is descaled, gilled, gutted, and beheaded.
Product D (Pacific Cod): The fish is cut into fillet pieces.
Product E (Pacific Cod): The fish is cut into darne pieces.
After the fish are processed in China, products A, B, and C are packaged in sealed plastic bags, and products D and E are packaged in retail paper boxes. Products A, B, and C are classified in subheading 0303.89.00, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Fish, frozen, excluding fish fillets and other fish meat of heading 0304: Other fish, excluding edible fish offal of subheadings 0303.91 to 0303.99: Other.” Products D and E are classified in subheading 0304.95.10, HTSUS, which provides for “Fish fillets and other fish meat (whether or not minced), fresh, chilled or frozen: Other, frozen: Fish of the families Bregmacerotidae, Euclichthyidae, Gadidae, Macrouridae, Melanonidae, Merlucciidae, Moridae and Muraenolepididae, other than Alaska Pollock (Theragra chalcogramma): In bulk or in immediate containers weighing with their contents over 6.8 kg each.”
ISSUES:
What is the country of origin of the frozen fish?
Are the frozen fish subject to Section 301 trade remedies?
LAW AND ANALYSIS:
Country of Origin
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 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. The Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is 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. Friedlander & Co., 27 C.C.P.A. 297 at 302 (C.A.D. 104) (1940).
Part 134, Customs and Border Protection Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 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 to render such other country the “country of origin” within the meaning of this part.” A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, and use, which differs from the original material subjected to the process. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
The Court of International Trade indicated in Koru North America v. United States, 701 F. Supp. 229, 232 (Ct. Int’l Trade 1988) that the “Law of the Flag” applies to the country of origin of seafood, which means that the country of origin of the seafood follows the flag of the catching vessel. However, the Court also indicated that we need to consider whether the seafood is subsequently substantially transformed in another country. Id. at 234. In Koru North America, the Court considered whether the processing of be-headed and gutted fish (in South Korea) by thawing, skinning, de-boning, trimming, glazing, freezing, and packaging, constituted a substantial transformation. Id. at 235. The Court concluded that the fish that had been filleted no longer possessed the essential shape of a fish, and that the filleted fish had become its own discrete commercial good distinct from the whole fish when it first arrived in South Korea. Id.
CBP has also addressed the country of origin of fish and whether a substantial transformation has occurred. For example, in New York Ruling Letter (“NY”) N304050, dated May 28, 2019, CBP found that smelt harvested in Canadian waters and frozen in a plant in Canada, then exported to China where the fish was “thawed, deheaded, gutted, refrozen, packed” and shipped back to Canada was a product of Canada. Likewise, in NY R04129, dated June 15, 2006, CBP held that catfish fingerlings from the United States remained products of the United States despite being raised, fed, harvested, gutted, skinned, frozen and packaged, but not filleted, in China. CBP explained that “[t]he skinning and gutting of the fish . . . represent[ed] a basic level of processing that advance[d] the fish as a marketable commodity, without altering its commercial character as ‘whole catfish.”
Conversely in NY N320603, dated August 16, 2021, CBP held that the country of origin of Yellowfin Tuna caught by Chinese-flagged vessels and processed in Japan was a product of Japan. On the Chinese-flagged vessels the fish were gilled and gutted. Then the fish were exported to Japan where their tails and heads were removed, they were split into pieces, and had their fin bones and spines removed. The remaining loins had the dark flesh and skin removed, and then the belly of the fish were cleared of small bones and bloodlines. Similarly, in NY N284246, dated April 6, 2017, CBP held that salmon “harvested, and then headed, gutted, and frozen in the United States” then exported to China where the salmon was filleted, then sent back to the United States where the salmon fillets were “thawed, cut into smaller pieces, and marinated” was substantially transformed in China.
Likewise, in Headquarters Ruling Letter (“HQ”) H311331, dated December 16, 2020, CBP found that the country of origin of frozen roasted (broiled) eel harvested in the United States or various European countries, then exported to China where the eels were placed in growing pods until maturity then further processed were substantially transformed in China and thus products of China. In China the eels were “beheaded, deboned, eviscerated, fins removed, trimmed, washed, steamed, roasted (with or without sauce), graded, packed, frozen and exported to the United States.” Specifically, the eels were “cut down the center parallel to the backbone from the head to the tail fin such that the backbone and skeletal structure [could] be removed.” After this process, “[a] strip of membrane on the back of the subject eel remain[ed] intact and connect[ed] the two sides of the eel as it lay flat.” In making a determination, CBP stated that similar to the fish in Koru North America, the eel had lost it essential shape as a fish. CBP concluded by stating that “the once tubular shaped eel no longer possess[ed] the shape of a whole eel – following the operations in China,” and thus had been substantially transformed by the processes in China to emerge as a new product with a new character.
Thus, in the instant case, the issue is whether any of the operations in the China FTZ substantially transform the fish of Canadian origin to products of the FTZ. Products A, B, and C, are similar to the catfish fingerlings in NY R04129, which were of United States origin, that were raised, fed, harvested, gutted, skinned, frozen and packaged, but not filleted, in China and remained a product of the United States. Likewise, products A, B, and C go through a similar process as they are all descaled, gilled, and gutted. While product B is cut open so that it lays flat, it still has its bones and eyes intact, and product C has its head removed, both fish still retain their basic shape as fish. As stated in NY R04129 and which can be applied here, the processes performed on the catfish fingerlings “represent[ed] a basic level of processing that advance[d] the fish as a marketable commodity, without altering its commercial character as ‘whole catfish.” Likewise, we find that the operations performed in China for products A, B, and C, are basic procedures that do not transform the fish into a different product with a new name or character. All three products still retain the basic shape of a fish and are identifiable as a whole fish. Product B is also identical to the smelt of Canadian origin in NY N304050 that was deheaded and gutted in China, yet remained products of Canada. Therefore, we find that products A, B, and C, are not substantially transformed in the China FTZ and remain products of Canada.
In contrast, products D and E are substantially transformed in the China FTZ and are thus products of China. See HQ H017863, dated August 21, 2008 (stating that a product made in a FTZ is the product of the country where the FTZ is located). These products enter the FTZ as whole fish and, while in the FTZ, Product D is filleted and Product E is cut into darne pieces. As stated in Koru North America, a fish that has been filleted has lost its essential shape as a whole fish and becomes its own discrete commercial good distinct from the whole fish. Likewise, Products D and E are transformed so that they no longer possess the essential shape of a whole fish and become their own discrete commercial good, i.e., a fillet (“Product D”) and a darne cut piece (“Product E”). Products D and E are similar to the yellowfin tuna in NY N320603, dated August 16, 2021, which was caught by Chinese-flagged vessels and exported to Japan where the fish was cut so that only the loin remained and was deemed to be a product of Japan.
Products D and E are also like the salmon in NY N284246, dated April 6, 2017, where CBP held that salmon harvested, headed, gutted, and frozen in the United States and then exported to China where they were filleted were substantially transformed in China. Likewise, products D and E are similar to the eel in HQ H311331, dated December 16, 2020, where the product was harvested in the United States or various European countries and then exported to China where it was processed to a degree that it lost its elongated tubular shape and was deemed substantially transformed in China. Therefore, we find that product D which is filleted and product E which is cut into darne pieces is substantially transformed in the China FTZ and therefore a product of China
Section 301 Duties
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25% will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The relevant Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(e), which provides in pertinent part that for the purposes of subheading 9903.88.03, products of China that are classified in the subheadings enumerated in U.S. note 20(f), shall be subject to an additional 25 percent ad valorem rate of duty. Among the subheadings listed in U.S. Note 20(f) is subheading 0304.95.10, HTSUS. Therefore, because products D and E at issue are products of China, and are classified in subheading 0304.95.10, HTSUS, they are subject to Section 301 measures. Accordingly, at the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.03, HTSUS, in addition to subheading 0304.95.10, HTSUS, listed above, for products D and E.
HOLDING:
Based on the information provided, the country of origin of products A, B, and C is Canada. The country of origin of products D and E is China.
As the country of origin of products D and E is China, they are subject to Section 301 measures pursuant to Section XXII, Chapter 99, Subchapter III, U.S. Note 20(e) and U.S. Note 20(f). At the time of importation, you must report the applicable Chapter 99 subheading (here, 9903.88.03, HTSUS), in addition to the primary classification of products D and E, subheading 0304.95.10, HTSUS.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Sarah Kafka, Chief
Food, Textiles and Marking Branch