MAR 2-O5 CO:R:C:V 731472 LR

Mr. William D. Chauvin
Executive Director
American Shrimp Processors Association
P.O. Box 50774
New Orleans, Louisiana 70150

Re: Country of Origin Marking Requirements for Shrimp Processed in the U.S. by Shelling and Deveining

Dear Mr. Chauvin:

This ruling is in further response to our letter dated May 16, 1988, stating our position that the peeling of imported shrimp does not constitute a substantial transformation. We advised you that a ruling would follow.


On April 13, 1988, the Customs Service seized certain foreign shrimp that had been repacked into boxes that labeled the shrimp as a product of the U.S. In some cases, the shrimp was merely repacked from one box to another. In other cases, the shrimp was also deveined and peeled. Though never the subject of a formal ruling, Customs specifically advised numerous processors who are members of your association, as well as the National Marine Fisheries Service (NMFS) as early as 1984, that containers of imported shrimp must be marked to indicate the foreign country of origin of the shrimp. Although the position of the Customs Service has remained constant, i.e. that the mere repacking or repacking along with deveining and/or peeling is not a substan- tial transformation and that country of origin marking is required, it has come to our attention that the NMFS advised shrimp repackers that such labeling was not required. The purpose of this ruling is to clarify any misunderstandings that may have resulted. While your letter addresses only shelling, the letter from the NMFS addresses both shelling and deveining. Our ruling, which covers both shelling and deveining, will be published in the Customs Bulletin, a publication that is widely disseminated to members of the importing community.

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The imported product is green headless frozen shrimp (i.e., shrimp which has been headed). After importation, the shrimp is thawed, sorted, iced, peeled, deveined, iced and packaged. The peeling and deveining (removal of the intestinal tract) is done either by automated or semi-automated machinery. The domestic processing results in some weight loss which increases the remaining per pound product cost. (For example, we are told that a processor normally yields 80 percent of the original weight after peeling 70-90 count size Chinese white shell-on shrimp. By virtue of the weight loss alone, this increases the price per pound from $2.00 to $2.50. After adding the cost of processing and profit, the product is sold for $3.10). Although not specifically stated, it would appear that the removal of the shell from larger imported shrimp would result in a greater percentage yield of the original weight and would result in a smaller percentage increase in price.


Whether containers of imported shrimp must be marked to indicate the country of origin after the shrimp has been deveined and peeled in the U.S.


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 United States. 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 ___, 628 F. Supp. 978 (1986).

The regulations implementing the statute 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 article is further manufactured in the

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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 (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 certi- fication procedures, which are for the purpose of ensuring that despite the repacking, the ultimate purchaser will be advised of the country of origin, apply to imported J-list articles proces- sed and repacked after importation unless the articles are sub- stantially transformed prior to repacking. Absent a substantial transformation, the consumer or other recipient of the shrimp is considered the ultimate purchaser and is entitled to be informed of the country of origin of the shrimp.

In order for a substantial transformation to be found, an article having a new name, character and 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). The issue before the Customs Court in that case was whether hairbrushes and toothbrushes manufactured in the U.S. by inserting bristles into wooden handles imported from Japan were required to be marked as pro- ducts of Japan. After careful examination of the statute and its legislative history, the court concluded that Congress had not intended the marking requirements to continue to apply to an imported article which is used in the U.S. as a material in the manufacture of a new article having a new name, character and use, and which consequently loses its separate identity in the finished product.

This decision was followed and quoted extensively in Grafton Spools, Ltd. v. United States, 45 Cust. Ct. 16, 22, C.D. 2190 (1960), in which empty metal spools imported from England and wrapped in the U.S. with inked ribbons to create typewriter ribbons and business machine ribbons were found to have lost their identity in the finished product. The court observed that

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what the ribbon manufacturers were selling were ribbons, which of course had to be wound on a spool, but it was the ribbon and not the spool which the manufacturer's customers were interested in purchasing.

A more recent court decision on the issue of country of origin marking is Uniroyal Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982), aff'd, 702 F.2d 1022 (Fed Cir. 1983). In this case the merchandise before the Court of International Trade consisted of "footwear uppers consisting of complete shoes except for an outsole...," manufactured in Indonesia and imported into the U.S. where a pre-shaped rubber outsole was affixed and the complete shoe was sold to retailers. The question was whether the addition of the outsoles substantially transformed the uppers so that the uppers did not have to be individually marked as a product of Indonesia.

After carefully examining both the imported upper and the finished shoe, the court concluded that the imported upper did not lose its distinct identity in the finished shoe and to the contrary, was the very essence of the completed shoe. This was so even though the imported upper could not be sold to or worn by consumers without the heavy rubber outsole being attached and even though following attachment of the rubber outsole the shoe was called by a different name, a deck shoe, rather than an upper or a moccasin.

In the most recent court decision involving a country of origin marking question, National Juice Products Association v. United States, supra, the Court of International Trade upheld Customs determination that imported orange juice concentrate is not substantially transformed when it is domestically processed into retail orange juice products. In that case, the orange concentrate was 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 or oranges."

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The court found that since the U.S. processing did not constitute a substantial transformation, the retail packages of juice had to be marked to indicate the country of origin of the imported concentrate. See also HQ 729365, dated June 25, 1986 (imported broccoli is not substantially transformed when it is processed in the U.S. by cutting, blanching, packaging and freezing; the imported broccoli does not lose its fundamental character and identity and the repacked broccoli is subject to the requirements of 19 U.S.C. 1304).

Applying the principles set forth in the above precedents to the facts in this case, we are of the opinion that the shelling and deveining of foreign shrimp does not constitute a substantial transformation. First, the processing does not result in a change of name that is material. While the imported product may be known simply as frozen shrimp whereas the pro- cessed product may described as "peeled and deveined" frozen shrimp, both products have essentially the same name - frozen shrimp. Such a minor name change is not enough to warrant a finding of substantial transformation.

More importantly, the character of the imported product is not changed by peeling and deveining. Both before and after peeling and deveining, the product is still basically the same, i.e., raw frozen shrimp. 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. Just as the imported orange juice concentrate in National Juice, the imported raw broccoli in HQ 729365 and the imported upper in Uniroyal, imparted the essential character to the final product, we believe that in this case the imported shrimp similarly imparts the essential character to the final product.

Finally, the shelling and deveining operations do not significantly change the product's intended use, which we believe is dictated primarily by the very nature of the product itself (as raw shrimp) and by its size. These criteria are already determined at the time of importation. The purchaser of frozen raw shrimp has already decided that he would like to purchase raw shrimp, that the product will be frozen, and that the raw shrimp will be a particular size. Whether or not the purchaser would also like the added convenience of having it deveined and shelled at the time of purchase is but one factor to consider. We note that peeling and deveining is often performed by many consumers in their own kitchens.

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We are not persuaded by the argument that the processing changes the use of the imported product since peeled shrimp cannot be utilized for any of the shell-on presentations, e.g. "boil and peel", and "tail-on cocktail" dishes. Although the peeling may limit some of the uses of the imported product, this limitation does not equate with substantial transformation. In each of the cases cited above, where the U.S. processing did not effect a substantial transformation, the processed product could no longer be used for certain presentations. For example, after water was added to the orange juice concentrate it could no longer be sold as a frozen concentrated product; nonetheless, it is clear that the addition of water does not effect a substantial transformation. Similarly, after the imported broccoli was cut and frozen, it could no longer be used as broccoli spears. Nonetheless, it was held that both the imported and processed products had essentially the same use.

Based on the above considerations, we find that the peeling and deveining of shrimp does not change the name, character or use of the imported product and thus, does not constitute a substantial transformation. To the contrary, the domestic manufacturing processing is merely a minor one which leaves the identity of the imported article intact. Therefore, the consumer or user of the shrimp who obtains it after the processing is regarded as the ultimate purchaser within the meaning of 19 U.S.C. 1304 and 19 CFR 134.1(d). As such, the repacked shrimp must be labeled to reflect the country of origin of the shrimp. To say that a consumer is not entitled to know the origin of the shrimp by virtue of the peeling and deveining operations would, in our opinion, render the marking statute meaningless.


Foreign shrimp which is processed in the U.S. by peeling, deveining and repacking is not substantially transformed. Therefore, 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 repacked product must be labeled to indicate the country of origin of the shrimp. In addition, the importer of such shrimp is subject to the certification requirements set forth in 19 CFR 134.25.


John Durant, Director
Commercial Rulings Division

CO:R:C:V:LRODBART:gcf 6/22/88 final:gcf 6/23/88

Mr. William D. Chauvin
Executive Director
American Shrimp Processors
P.O. Box 50774
New Orleans, LA 70150