HQ 731763

May 17, 1989

MAR 2-05 CO:R:C:V 732337 LR

CATEGORY: Marking

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