OT:RR:CTF:FTM H316006 PJG
Center Director
Agriculture and Prepared Products Center of Excellence and Expertise
U.S. Customs and Border Protection
301 E. Ocean Blvd.
STE: 7 APP 032 BL
Long Beach, California 90802
Attn: Bryan F. London, Import Specialist
RE: Application for Further Review of Protest No. 0401-20-101543; Section 301; Country of origin of Norway lobster tails
Dear Center Director:
This is in reference to the Application for Further Review (“AFR”) of
Protest No. 0401-20-101543, timely filed on May 15, 2020, by Livingston International Professional Services, LLC on behalf of Clearwater Fine Foods USA, Inc. (“Protestant”). This decision concerns the country of origin of Norway lobster tails and the applicability of Section 301 duties to the merchandise.
FACTS:
In its protest and supplemental materials, the Protestant states that the Norway lobsters are “trawl-caught and tailed onboard vessels registered in Great Britain.” The lobster tails are landed at ports in Scotland and “transported by refrigerated trucks to processing plants in …Scotland where they are washed, graded, individually quick frozen …, weighed, packed, passed through metal detectors, and placed into cold storage.” The lobster tails with the shell on are then shipped to China for additional processing, including thawing, de-shelling, de-veining, vacuum tumbling, freezing, grading, glazing, refreezing, packaging in plastic bags, passing through metal detectors, and packing into cartons. In its entries into the United States, the Protestant declared that the country of origin of the lobster tails was Great Britain.
The U.S. Trade Representative (“USTR”) issued a Federal Register Notice on September 21, 2018, announcing, in part, a list of subheadings under the HTSUS that are subject to an additional 25 percent ad valorem rate of duty imposed by subheading 9903.88.03, HTSUS, for products of China that are entered for consumption, or withdrawn from warehouse for consumption, on or after January 1, 2019. See 83 Fed. Reg. 47977 (Sept. 21, 2018). Included in that list is subheading 0306.15.00, HTSUS. Id.
U.S. Customs and Border Protection (“CBP”) issued a Notice of Action on March 3, 2020, citing to Headquarters Ruling Letter (“HQ”) H026522, dated July 16, 2008, and asserting that the country of origin of the lobster tails was China. In accordance with the determined country of origin and Section 301 of the Trade Act of 1974 (“Section 301”), CBP assessed additional duties of 25 percent ad valorem.
The decision protested is the country of origin of the lobster tails and the applicability of the Section 301 duties for six entries made between February 2019 and December 2019, and liquidated on March 20, 2020 and April 3, 2020. Protestant claims that the country of origin of lobster tails is Great Britain and, therefore, these products are not subject to the Section 301 duties.
ISSUES:
Whether the country of origin of the Norway lobster tails is Great Britain or China.
Whether the Norway lobster tails are subject to Section 301 duties.
LAW AND ANALYSIS:
Initially, we note that this matter is protestable under 19 U.S.C. § 1514(a)(2) as a decision on classification and rate and amount of duties chargeable. The protest was timely filed within 180 days of liquidation. See 19 U.S.C. § 1514(c)(3).
Protestant alleges that Further Review of Protest No. 0401-20-101543 should be accorded pursuant to 19 C.F.R. § 174.24(a) because the decision against which the protest was filed is alleged to be inconsistent with a ruling of the Commissioner of CBP or his designee, or with a decision made by CBP with respect to the same or substantially similar merchandise. We find that Further Review of Protest No. 0401-20-101543 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(a).
The subject merchandise was entered and liquidated in subheading 0306.15.00, HTSUS, which provides for “Crustaceans, whether in shell or not, live, fresh, chilled, frozen, dried, salted or in brine; smoked crustaceans, whether in shell or not, whether or not cooked before or during the smoking process; crustaceans, in shell, cooked by steaming or by boiling in water, whether or not chilled, frozen, dried, salted or in brine; flours, meals and pellets of crustaceans, fit for human consumption: Frozen: Norway lobsters.” The classification of the merchandise is not in dispute in this AFR. Subheading 0306.15.00, HTSUS, is included in the list of subheadings that are subject to the additional 25 percent ad valorem duty rate imposed by subheading 9903.88.03, HTSUS, for products of China that are entered for consumption, or withdrawn from warehouse for consumption, on or after January 1, 2019. See 83 Fed. Reg. 47977 (Sept. 21, 2018). The subject merchandise was entered after January 1, 2019 and therefore, may be subject to the additional duties. To determine whether the additional duty rate applies to the subject merchandise, CBP must consider whether the subject merchandise is a product of China.
The substantial transformation analysis is applicable when determining the country of origin for purposes of applying Section 301 trade remedies. See HQ H301494 (Oct. 29, 2019), HQ H301619 (Nov. 6, 2018); and Belcrest Linens v. United States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984) (stating that “the term ‘product of’ at the least includes manufactured articles of such country or area” and that substantial transformation “is essentially the test used…in determining whether an article is a manufacture of a given country”). The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (1940) (setting forth the three main factors for a substantial transformation determination). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 Ct. Int’l Trade 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
The Court of International Trade indicated in Koru North America v. United States, 701 F. Supp. 229, 232 (Ct. Int’l Trade 1988) that the “Law of the Flag” applies to the country of origin of seafood, which means that the country of origin of the seafood follows the flag of the catching vessel. However, the court also indicated that we need to consider whether the seafood is subsequently substantially transformed in another country. Id. at 234. In Koru North America, the Court considered whether the processing of be-headed and gutted fish (in South Korea) by thawing, skinning, de-boning, trimming, glazing, freezing and packaging – constituted a substantial transformation. Id. at 235. The Court concluded that the fish that had been filleted no longer possessed the essential shape of a fish. Id. As a fillet, the Court noted, that filleted fish had become its own discrete commercial good distinct from the whole fish when it first arrived in South Korea. Id.
HQ H026522, dated July 16, 2008, concerned the country of origin marking of the lobster species Homarus Americanus that were harvested by a Canadian company in the North Atlantic Ocean. The ruling provides the facts as follows:
In Canada, the tails, heads and claws are removed. The bodies of the lobsters are blanched and frozen (in shell) and exported by the Canadian company to China. In China, the lobster meat is picked from the shell, pasteurized and packaged in air-tight six ounce containers. The finished product, which you state is ready to eat, is then imported from China to the United States.
In HQ H026522, the lobster bodies arriving in China were without their heads and claws. However, the bodies still had the essential shape and character of lobsters before processing operations in China. CBP determined that the lobsters were substantially transformed in China because “[t]he canned lobster meat that emerges from the processing in China is an entirely new product than the Canadian origin material” because it “no longer has the essential shape of a lobster.” Additionally, the processing in China rendered the lobsters, in that case, as “ready to eat.” Moreover, in the ruling, CBP distinguished the deshelling of lobster or crab meat from the peeling of shrimp. See id. (stating that peeling shrimp “creates only a minor change in the appearance and use of the shrimp”).
HQ H026522 is distinguishable from this case. The subject merchandise does not emerge from the processing in China as an entirely new product than the product from Great Britain. The Norway lobster tails were originally a product of Great Britain because the lobster was caught and processed into lobster tails onboard vessels registered in Great Britain. These lobster tails were subsequently shipped to China where the frozen tails were thawed, de-shelled, de-veined, vacuum tumbled, placed on trays, frozen, graded, glazed, refrozen, and packed. The removal of the shell in China and subsequent deveining do not substantially transform the lobster tail because both before and after the shelling and deveining, the subject products are essentially the same and remain frozen lobster tails. Additionally, the uncooked and unpasteurized lobster tail is packaged to still resemble a complete lobster tail and is not ready to eat. In contrast, after the processing that occurred in China, the product in HQ H026522 was ready to eat, as a result of the pasteurization, and also no longer resembled the body of the lobster as it appears in the shell because the meat was picked and placed into cans. As a product of Great Britain, rather than China, the subject merchandise is not subject to the Section 301 additional duties.
HOLDING:
The country of origin of the Norway lobster tails is Great Britain. The instant Norway lobster tails are not subject to additional Section 301 duties.
You are instructed to GRANT the protest.
In accordance with sections IV and VI of the CBP Protest/Petition Processing Handbook, you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Any re-liquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings, will make the decision available to CBP
personnel, and to the public on the CBP Home Page at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
For Craig T. Clark, Director
Commercial and Trade Facilitation Division