MAR-2-05 CO:R:C:V 733865 NL
Robert Slomovitz
Chief, National Import Specialist Branch 1
New York Seaport
U.S. Customs Service
6 World Trade Center
New York, NY 10048
RE: Country of Origin Marking - Frozen Loins of Tuna; Substantial
Transformation; South Africa; Koru North America v. U.S.;
William Camp Co. v. U.S.; Canned Tuna.
Dear Mr. Slomovitz:
This is in response to your request for internal advice
dated October 4, 1990 (your file 855875), concerning the country
of origin marking of tuna which is processed prior to importation
into the U.S., where it is to be canned.
FACTS:
Your inquiry is prompted by a letter dated August 24, 1990,
from an importer, Ocean Packing Corp., White Plains, New York.
Ocean Packing asks whether it is permitted to purchase whole raw
frozen tuna from Taiwanese vessels, offload the tuna in South
Africa where it will be cleaned, cooked, frozen, and shipped to
the U.S. as whole, cooked loins of tuna. We assume that the
importer's concern is with the consequences of a Customs
determination that the imported tuna loins are products of South
Africa.
It is evident from the memorandum submitted by your office
that Ocean Packing Corp. has supplied additional information
orally concerning the nature of the proposed operations. The
processing in South Africa would consist of thawing the whole
frozen tuna, cooking it, and removing the head and skin. The two
chunks of meat on either side of the backbone (the loins) are
then separated and the backbone removed. Finally, the dark meat,
belly flaps, and rib bones are removed, and the remaining cooked
tuna loins are packaged and frozen. The importer advises that
the loins would be imported for processing by tuna canners.
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According to a recent report of the International Trade
Commission, the use of tuna loins as stock for canned tuna is a
new industry development which allows canners to realize cost
savings for labor and transportation compared to processing whole
tuna. Tuna; Competitive Conditions Affecting the U.S. and
European Tuna Industries in Domestic and Foreign Markets, ITC
Publication 2339, December, 1990. Imports into the U.S. of
frozen tuna loins rapidly increased from 132 metric tons in 1986
to 3,600 metric tons 1989, and during the first nine months of
1990 a total of over 19,000 metric tons was imported with a value
of over $50 million. Id. at 3-25. The use of loins as a raw
material on a large commercial scale is the result of changes in
the technology for freezing and thawing the loins, which have
reduced or eliminated quality differences between canned tuna
produced from whole raw tuna and the same product made from
frozen tuna loins.
Your memorandum notes that after importation into the U.S.
the frozen tuna loins would undergo further processing to emerge
in its final retail form as canned tuna. The loins must be
thawed, cut into can-sized chunks, and canned with added salt,
water, oil, or other packing media. When the cans have been
packed and weighed, they are exhausted, vacuum sealed, and
cleaned. Then the cans are retorted (a process which
accomplishes final preservation for long shelf life) in a
pressure chamber to re-cook the tuna. Finally, the cans are
cooled, labeled, and packaged in cartons.
It is the opinion of your office, based upon an extensive
review of the applicable precedents, that the processing in South
Africa would not effect a substantial transformation of the whole
frozen tuna, and that as imported into the U.S. the frozen whole
tuna loins should be marked to indicate that they are products of
Taiwan.
ISSUE:
After processing in South Africa, what is the country of
origin of the tuna loins?
LAW AND ANALYSIS:
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 U.S. shall be marked in a
conspicuous location 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 U.S. the
English name of the country of origin of the article.
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
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U.S.C. 1304. As defined at 19 CFR 134.1(d), the "ultimate
purchaser" is generally the last person in the U.S. to receive
the article in the form in which it was imported. A purchaser or
manufacturer who converts or combines an article into an article
having a new name, character, or use will be considered the
ultimate purchaser of the imported article within the meaning of
19 CFR 134.35. That provision implements the substantial
transformation principle as set forth in United States v. Gibson-
Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940). Pursuant
to this principle, an article is considered to originate in the
country of manufacture, production, or growth, unless thereafter
substantially transformed in another country into an article
having a new name, character, or use. See, 19 CFR 134.1(d)(1).
Under established precedent the country of origin of fish,
if taken outside the territorial waters of a country, i.e.,
beyond its sovereignty, is considered to be the country of the
flag of the catching vessel. Koru North America v. U.S., 701 F.
Supp. 229, 231 (CIT 1988). Here, the initial country of origin
of the tuna is Taiwan, the country of the catching vessels.
Thereafter, the tuna will acquire a new country of origin only if
substantially transformed in another country prior to importation
into the U.S.
Turning to prepared fish products, the rule has long been
that the country in which the the fish was prepared for
consumption and packed in cans is the country of origin. See,
William Camp Co. v. United States, 24 CCPA 142-144 (1936)(the
term "packed in" is an acceptable designation of origin for
canned salmon; holding limited to fish products.) Although the
Court of Customs and Patent Appeals in the William Camp case did
not explicitly apply the substantial transformation principle,
the holding suggests that the court considered the conversion of
freshly caught fish into the preserved, canned product to be a
substantial transformation. The Camp case is not controlling in
the instant situation, however, because the processing at issue
falls short of the complete preparation of canned fish. Only if
the entire process, including canning, was accomplished in South
Africa would the Camp case supply the controlling rule.
Nevertheless, it remains to be considered whether under more
recent precedents the tuna is substantially transformed. In Koru
North America, supra, the Court of International Trade held that
the processing of frozen eviscerated New Zealand Hoki fish, with
heads and tails removed, into individually quick frozen (IQF)
fish fillets in Korea, effected a substantial transformation so
as to make the fillets products of Korea. The processing in
Korea consisted of thawing, skinning, and boning the fish, then
slicing it into Hoki fillets. Finally, they were glazed,
individually quick frozen, and packaged. The Koru decision
recognized this processing as creating a new and different
article - an individually quick frozen fish fillet - from one
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having the appearance (largely) of a whole fish. The court found
the fillets to be a separate product which is sold in separate
areas and markets, and found in this processing changes in the
name, character, and use of the article.
In our opinion, the instant request concerns processing
which is substantially the same as in Koru, and we conclude that
the Court of International Trade's holding in Koru is controlling
in this matter. A comparison of the two processes indicates that
in fact, the South African processing is more extensive than the
Korean processsing in Koru. The whole, frozen tuna undergo
processing in South Africa which removes all the portions of the
whole fish which are not usable for canned tuna. The remaining
product, the loins, are functionally identical to the fillets
which resulted from the processing in Koru. By contrast, the
Hoki fish arrive in Korea with heads, tails, and viscera removed.
From an article with the look of whole fish a separate product is
created, namely, tuna loins. As indicated in the findings of the
International Trade Commission, the frozen cooked loins of tuna
are a new commercial product. We find this to be the case even
though it is not yet a product fully prepared for retail sale as
canned tuna. The change in the character of the article from one
having the appearance of a whole fish to one having lost that
shape, and now butchered, cooked, and frozen, is sufficient to
satisfy the "character" prong of the name, character, or use
test. In addition, there is the change of name from "frozen
whole tuna" to "cooked frozen tuna loins". In sum, it is our
opinion that on the basis of the holding in Koru the South
African processing effects a substantial transformation such
that the tuna loins are products of South Africa.
It is noted that there is a change in tariff classification
which results from the processing. The frozen, whole tuna, as
imported into the U.S., would be classifiable under heading 0303,
Harmonized Tariff Schedule of the United States (HTSUS), which
provides for frozen fish excluding fillets. The frozen, cooked
tuna loins are classifiable in heading 1604, HTSUS, under the
provision for "Prepared or preserved fish".
It is further noted that the articles provided for under
heading 1604 include canned tuna. Thus, insofar as the Tariff
Schedules are additional evidence of substantial transformation,
they indicate that the processing of the loins after importation
into the U.S. to produce canned tuna is not significant.
Independently, it is our opinion that the packing of the prepared
tuna loins into cans is mere packing, and does not effect a
substantial transformation. This is not to be confused with the
packing considered in the William Camp case, supra, in which the
processing at issue appears to have included all the cutting,
trimming, and preservation steps as well as placing the product
in cans. As previously stated, Customs continues to recognize
all these steps together as effecting a substantial
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transformation of fish products.
Section 319 of the Comprehensive Anti-Apartheid Act of 1986
(22 U.S.C. 5069), prohibits the importation into the U.S. of any
article for human consumption that is a product of South Africa.
As the tuna loins are products of South Africa under tariff
principles of substantial transformation, for the reasons stated
herein, they may not be imported into the U.S.
HOLDING:
Processing in South Africa which converts frozen, whole tuna
into frozen, cooked loins of tuna effects substantial
transformation of the whole, frozen tuna, and the cooked loins of
tuna are prohibited from importation into the U.S. under section
319 of the Comprehensive Anti-Apartheid Act of 1986.
Sincerely,
John Durant
Director, Commercial
Rulings Division