MAR 2-05 CO:R:C:V 732337 LR
District Director of Customs
Charleston, South Carolina
RE: Country of Origin Marking of Canned Crab meat
Dear Sir:
This is in response to the April 19, 1989, memorandum from
the Assistant Special Agent in Charge requesting a ruling on the
country of origin marking requirements of imported crab meat
which is processed in the U.S. We have also considered the
information submitted directly by Golden Harbor Seafood, Inc. and
the National Blue Crab Association.
FACTS:
Crabs are caught in China where they are cooked, chilled
and the meat is extracted. The extracted crab meat is packed in
plastic bags, frozen in blocks and boxed for shipment to the U.S.
Upon arrival in the U.S., the crab meat is placed in a freezer
and is thawed as it is needed to fill orders. The thawed crab
meat is placed on a conveyor belt for inspection and sorting
according to the size of the muscle fibers. The segregated meats
are inspected a second time for the removal of any extraneous
material. After the second inspection, similar sized domestic
and foreign crab meats are blended small with small, medium with
medium, large with large, and claw with claw. The blend
generally consists of approximately 20% domestic and 80% foreign
crab meat. The blended crab meat is packed in 8 ounce cans and
is then subjected to a pasteurization process involving a
substantial heat treatment followed by chilling at 35 degrees F.
The cans of crab meat are rinsed and labeled.
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ISSUE:
For purposes of 19 U.S.C. 1304, whether crab meat which has
been extracted from the shell and imported into the U.S. in
frozen blocks, is substantially transformed when it is processed
in the U.S. by thawing, sorting by size and to remove extraneous
material, blending with domestic crab meat, packing in cans and
pasteurization.
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 defined as 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 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 crab meat) 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
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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 crab meat is considered the ultimate purchaser and must be
advised of its country of origin.
Whether a substantial transformation has occurred depends
upon a comparison of the article before the processing which is
claimed to effect such transformation and the article after the
processing. It is a well-settled principle of customs law that
in order 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).
Although neither the courts nor Customs has specifically
ruled on the country of origin marking requirements of imported
crab meat which is further processed in the U.S., two court
decisions involving the country of origin marking requirements
applicable to imported food products, one on orange juice and
another on fish, and two recent Customs decisions regarding
imported shrimp are instructive.
In 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 in HQ
728557, September 4, 1985, published as C.S.D. 85-47, 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 concentrate and not the domestic processing. The
court stated that "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 repacked orange juice
products had to be marked with the country of origin of the
imported concentrate.
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In Koru North America v. United States, Slip Op. 88-162,
Court of International Trade, decided November 23, 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.
The fact that the products also have different tariff
classifications was found to be additional evidence of
substantial transformation.
Based on the rationale of National Juice Products, supra,
Customs determined in HQ 731472, June 23, 1988, published as
C.S.D. 88-10, 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."
More recently, Customs applied the same rationale in
determining that imported shrimp which is peeled, deveined and
cooked in the U.S. is not substantially transformed (HQ 731763,
May 17, 1989). Customs found that these processing operations
are minor ones which leave the identity of the imported shrimp
intact and likened the cooking process to other processes which
had previously been determined not to result in substantial
transformation, i.e., blanching of broccoli (HQ 729365, June 2,
1985, published as C.S.D. 86-26), roasting of pistachio nuts
(T.D. 85-158, June 2, 1985) and smoking of salmon (HQ 729256, May
23, 1988).
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The crab meat which is the subject of this inquiry is
processed by thawing, sorting by size and to remove extraneous
matter, blending with domestic crab meat, packing in cans, and
pasteurization. For the reasons indicated below, we conclude
that none of these operations taken individually or together is
sufficient to substantially transform the crab meat into a
product with a different name, character or use.
First, Customs has consistently ruled that neither the
thawing nor freezing of a product substantially transforms it.
For example, in the shrimp rulings, the product was imported in a
frozen condition, and was thawed, processed and frozen in the
U.S. In the broccoli ruling, the product was imported in a fresh
condition and was processed and frozen in the U.S. In National
Juice, the concentrate was imported in a frozen condition and was
thawed, processed, and in some cases, frozen in the U.S. In each
case, no substantial transformation was found because any change
resulting from thawing and/or freezing was deemed insignificant.
Customs has also determined that sorting a product
according to size or to remove extraneous matter is not a
substantial transformation. See HQ 730058, June 2, 1987
(sorting of imported pecans to remove shell pieces and cutting to
uniform size not a substantial transformation); C.S.D. 88-10 and
HQ 731763, supra (sorting of shrimp by size not a substantial
transformation); HQ 724640, July 2, 1984, published as C.S.D. 84-
112, (filtration of honey to remove contaminants not a
substantial transformation). Customs is of the opinion that the
sorting process does not change the product in any material way.
Customs position on blending a product from one country
with the same product of another country is that this process is
a mere combining rather than a transforming. See C.S.D. 84-112,
supra (blending of foreign honey with domestic honey not a
substantial transformation); HQ 724872, March 1, 1984 (blending
of Canadian maple syrup with domestic syrup not a substantial
transformation); and National Juice Products, supra, (blending of
imported orange juice concentrate with domestic concentrate not a
substantial transformation).
One of the two remaining processes to which the imported
crab meat is subjected is pasteurization. This is a process
which exposes the product to a high temperature in order to
destroy certain microorganisms and prevent or arrest
fermentation. Customs has ruled that this process and other
similar processes (e.g., flash heating and blanching) do not
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effect a substantial transformation because they maintain and
preserve the characteristics of the imported product rather than
change them. In C.S.D. 85-47, supra, upheld in National Juice,
Customs ruled that orange juice concentrate which was pasteurized
and otherwise processed in the U.S. was not substantially
transformed. Although there was no separate discussion regarding
pasteurization, Customs found, and the court agreed, that there
was no fundamental change in the product as a result of the U.S.
processing. In the honey ruling, Customs ruled that flash
heating, another heating process which destroys yeast and
prevents fermentation, does not constitute a substantial
transformation (C.S.D. 84-112, supra). See also C.S.D. 86-26,
supra (blanching vegetables, a process which prepares them for
freezing whereby the vegetables are subjected to steam heat to
partially cook and retard any deterioration of the vegetable from
within, does not effect a substantial transformation).
The remaining domestic processing operation to be
considered is packing the crab meat in cans. Two court decisions
are relevant to this discussion. In William Camp Co. v. United
States, T.D. 48623, 24 CCPA 142 (1936), the Court of Customs and
Patent Appeals considered whether the marking "Packed in Japan"
was acceptable on canned salmon under {304 of the Tariff Act of
1930. Although the decision indicates that the salmon was
processed and packed in Japan, the particular facts are sketchy
and there is no indication of what that processing involved. In
this regard, the court indicates that the term "packed in Japan"
clearly implies that the fish were not only packed in cans in
Japan, but were also prepared for ultimate consumption in that
country and concludes that the marking was acceptable. We note,
however, that while in some instances preparing a product for
ultimate consumption will also substantially transform it (e.g.,
the processing performed in Koru, supra), in other cases it will
not (e.g., the processing performed in National Juice, supra).
Because the court did not indicate how the salmon was prepared
for ultimate consumption, the case is not instructive on the
issue of substantial transformation. It is clear that William
Camp Co. does not stand for the proposition that canning alone is
a substantial transformation.
In National Juice, some of the orange juice concentrate was
similarly packed in cans before sale to the ultimate purchaser.
Despite plaintiff's contention that cost of packing the product
in cans played a significant role in preserving the retail
product, the court rejected plaintiff's argument that this cost
was a factor in determining whether an article has undergone a
substantial transformation.
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There is also one Customs Headquarters information letter
and an unpublished ruling on the issue of canning. In an
information letter dated April 24, 1978, 709011, Customs informed
the inquirer that "snails which are defrosted and canned in
France would be considered a product of France, for purposes of
19 U.S.C. 1304, as canning is considered to result in a
substantial transformation." No further details or discussion is
included. In an unpublished ruling letter concerning the country
of origin marking requirements for mushrooms grown and packed in
brine or frozen in Taiwan and China and processed in Hong Kong by
cleaning, boiling, slicing, canning and sterilizing, Customs
found that for purposes of country of origin marking, the
mushrooms are substantially transformed in Hong Kong and are
required to be marked as a product of Hong Kong when imported
into the U.S. HQ 712811, September 18, 1980. 1 /
We believe that neither the information letter nor the
mushroom ruling is consistent with the rationale of National
Juice and the numerous Customs rulings regarding the country of
origin marking requirements of imported foods products which are
repacked in the U.S. Section 134.25, Customs Regulations (19 CFR
134.25), makes it clear that imported articles which are repacked
in the U.S. are subject to the requirements of 19 U.S.C. 1304.
As indicated above, this provision requires country of origin
marking on repacked J-list articles and other articles incapable
of being marked. In our view, packing in cans, is a repacking
operation which falls within the purview of this provision
inasmuch as it does not change the essential character of the
imported crab meat but merely puts the crab meat in a condition
ready for sale. We see no reason why crab meat packed in cans
should be treated differently than crab meat packed in other
types of containers.
1/ This unpublished ruling, which involves different merchandise
than the imported crab meat now under review, does not establish
a position under the terms of 19 CFR 177.10(c). See Superior
Wire v. United States 669 F. Supp. 474 (CIT 1987) affirmed 867
F.2d 1409 (Fed. Cir. 1989). Moreover, for all practical
purposes, section 1907(b) of the Omnibus Trade and
Competitiveness Act of 1988 (Pub. L. 100-418) makes the mushroom
ruling a nullity. The statute provides that imported preserved
mushrooms shall not be considered to be in compliance with
section 304 of the Tariff Act of 1930 (19 U.S.C. 1304) or any
other law relating to the marking of imported articles unless the
containers thereof indicate in English the country in which the
mushrooms were grown.
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Considering the effect of the domestic processing as a
whole on the imported crab meat, we find that the processing does
not substantially transform it into a product with a new name,
character or use. With regard to name, we note that although the
imported product may be referred to merely as crab meat and the
finished product as canned crab meat, the name of the product,
i.e., crab meat, remains essentially the same. The use of the
product is also unchanged as a result of the domestic processing.
The use of the product is determined prior to importation when
the crab meat is extracted from the shell. At that time, the
product can no longer be used as whole crab, but can only be used
as crab meat. The sorting, blending and other domestic
processing steps do not change this use. 2/ Finally, the
character of the crab meat is not changed by the domestic
processing. Unlike the processing performed in Koru which
"vastly changed the character of the fish" from a product with
the look of a whole fish to fillets, the domestic processing of
the imported crab meat leaves the character of the product
virtually unchanged. The finished product looks very similar to
the imported product, undoubtedly tastes very similar and has the
same characteristics of the imported crab meat (e.g., the quality
of the crab meat and the size of the muscle fibers is
predetermined). We believe the variety of the crab determines
the character of the crab meat, not the sorting, blending,
canning and other minor processing performed in the U.S.
Therefore, we find that the essential character of the product is
imparted by the imported crab meat and not the domestic
processing. Both at the time of importation and after the
domestic processing, the product is essentially the meat from
crabs.
Based on the above considerations, we conclude that the
imported crab meat is not substantially transformed as a result
of the domestic processing. Therefore, the consumer who obtains
the crab meat after the processing is the ultimate purchaser.
This determination 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, be able to buy or refuse
to buy them, if such marking should influence his will. This
purpose is not served if the canned crab meat is not required to
indicate the country of origin of the imported product.
2/ Customs has ruled that for purposes of the coastwise laws that
crab meat, whether or not canned and/or cooked, is a
substantially enough different product from the whole crab from
which it is extracted so as to constitute a new and different
product. See HQ 109504, August 12, 1988; affirmed HQ 109793,
May 31, 1989.
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HOLDING:
For purposes of 19 U.S.C. 1304, the domestic processing of
imported crab meat by thawing, sorting, blending with domestic
crab meat, canning and pasteurization does not constitute a
substantial transformation. Accordingly, the repacked crab meat
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. So long as the
country of origin of the crab meat is clearly stated, the label
may also indicate that the crab meat is processed in the U.S.
EFFECTIVE DATE:
To enable processors sufficient time to obtain properly
labeled new containers for the imported crab meat and to deplete
much of the present inventory, the ruling will apply to crab meat
imported for consumption or withdrawn from warehouse on or after
January 1, 1990.
Sincerely,
Harvey B. Fox
Director, Office of
Regulations and Rulings