Country of Origin of Processed Eels
Mar. 3, 2021
By: Chaney A. Finn
Customs usually analyzes the country of origin of an imported product using the “substantial transformation” test. As we have discussed in the past, the substantial transformation test is changing, as Customs modifies its understanding of the terms of the test. In H311331 (December 16, 2020) Customs addressed the essential character of processed seafood.
American Eel Depot (AED) challenged the origin of imported products from China that were subject to Section 301 duties. The product at issue was frozen roasted (broiled) eel that was hatched in either the United States or Europe, harvested, and shipped to China to mature to commercially viable size. The importer claimed that either the United States or the country of harvest in Europe should be the origin.
Once the eels matured, they were processed, packaged, and exported back to the U.S. The processing of the eel included trimming of the fins, deboning, washing, and roasting. With the associated processing of the product, the question of substantial transformation arises. Substantial transformation is the result of a process that produces as product with a new name, character, or use than was possessed by the article prior to processing. Without a substantial transformation, the origin of this particular product would be either U.S. or a country in Europe, neither of which would be subject to Section 301 duty.
AED argued that during processing the eels were not skinned or filleted which would otherwise change the essential shape as a whole fish. The company argued that the lack of skinning and filleting meant there was not a substantial transformation, as outlined in New York Ruling Letter (“NY”) R04129. This ruling outlined a process where catfish that were harvested in the U.S. but raised, processed, and packaged in China remained of U.S. origin because the essential character of the catfish was not changed. Furthermore, in NY R04074 catfish that were filleted during the processing were determined by CBP to be of Chinese origin due to the change of character resulting from the fish meat being separated into individual strips of fish flesh. AED argued that in conjunction with the rulings listed above, the eel did not undergo substantial transformation as the eel was not filleted and therefore, maintains its shape as an eel.
Customs found that during the eel deboning process eel were cut down the center, parallel to the backbone from the head to the tail fin such that the backbone and skeletal structure could be removed. This process is similar to the fillet process with an important distinction that as the eel is deboned, there is skin or membrane remaining that connects the strips of fish flesh. However, CBP ruled that the elongated tubular shape of the eel was no longer present as a result of the deboning process. The eel had undergone substantial transformation since original shape of the eel was lost during the deboning process which occurred in China, resulting in Chinese origin subject to Section 301 duty.
If you have any questions about the use of the substantial transformation test as it applies to your good, do not hesitate to contact any trade professional at Barnes, Richardson & Colburn, LLP.