HQ 731472

June 23, 1988

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

CATEGORY: Marking

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.

BACKGROUND:

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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FACTS:

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.

ISSUE:

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.

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 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.

HOLDING:

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.

Sincerely,

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

Association

P.O. Box 50774

New Orleans, LA 70150