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HQ 732337

August 16, 1989

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

CATEGORY: MARKING

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.

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
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.

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).

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
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.

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.

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.

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

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