By Louis Harkell March 19, 2019 16:48 BST
Photo Credit: hlphoto / Shutterstock
BOSTON, US -- US squid fishing companies which ship squid to China for cleaning and processing are currently not levied US import tariffs of 10% when they bring it back for domestic sale, industry sources at Seafood Expo North America in Boston told Undercurrent News.
The situation has arisen due to US country of origin rules and interpretations of what constitutes “substantial transformation".
The squid in question is US-caught longfin inshore squid (Loligo pealeii) and Boston squid (Illex illecebrosus), also known as northern shortfin squid, both fished in the northwest Atlantic. US fishing firms often ship the squid whole round in frozen blocks to China, where it is cleaned and processed in factories to produce rings and tubes. Squid products are then shipped back to the US packaged for retail.
Despite the squid's long journey from ocean to plate and value addition, in the eyes of US customs authorities, the final imported product is American, not Chinese. "The squid is exported under one [harmonized system] code and imported under the same code," an industry source who did not wish to be quoted by name explained to Undercurrent News.
The reason can be found in Article 19 of US Customs and Border Protection. The country of origin of a product -- and, by extension, what customs and border inspection procedures apply -- is determined by the interpretation of this article.
Article 19 states: the country of origin is "the country of manufacture, production or growth of any article of foreign origin entering the US". For another country to become the ‘country of origin’, “further work or material added to an article in another country must effect a substantial transformation”.
Photo Credit: Lydia Vero/Shutterstock.com
Based on US customs' rules, squid turned into calamari rings and tubes is not considered substantial transformation. The result: no US tariffs on Boston squid or inshore longfin squid cleaned and processed in China.
The seafood industry, with its global supply chain, has posed difficult questions about how to interpret Article 19.
In a submission to the Agricultural Marketing Service (AMS) of the US Department of Agriculture dated March 2004, a shrimp company in Hindustan, India, sought clarification whether shrimp farmed and harvested in Bangladesh but processed at its facilities in India would count as Indian shrimp. In a letter submitted on the firm’s behalf, it was stated the shrimp would undergo heading, shelling, deveining, cooking, freezing or "some combination of these processes".
Myles Harmon, director of the commercial rulings division at AMS at the time, replied the shrimp would still count as Bangladeshi shrimp. “The shrimp processed in India as described, would not be substantially transformed. The country of origin of the imported shrimp would be Bangladesh," he said.
In another ruling from 1988, however, a court determined that thawing, skinning, boning, trimming, freezing, and packaging headed and gutted (H&G) fish did constitute a substantial transformation.
The court concluded that the processing performed in South Korea of fish into "quick- frozen" fillets substantially transformed the H&G fish "because there was a change in name and character".
Photo Credit: Shutterstock
Ref: https://www.undercurrentnews.com/2019/03/19/us-squid-imports-from-china-avoid-10-tariffs-under-country-of-origin-rules/
