Clearing up customer confusion, but at what cost to trade?
The recent outbreak of hepatitis A linked to a brand of imported frozen berries has placed a greater urgency on providing clearer country-of-origin labelling in Australia.
Greens leader Senator Christine Milne has introduced into parliament a bill to amend country-of-origin labelling of food, including mandatory obligations for various label claims, changing the criteria for making claims such as ‘Grown in …’ and ‘Product of …’, and prohibiting the use of ‘Made in …’
The objective is to assist consumers in making more informed decisions based on where products originate (with many consumers favouring food products that are locally produced and sourced).
Although there are likely to be implications for local manufacturers and food producers, proposed changes to Australian country-of-origin labelling laws may have significant implications for those non-Australian manufacturers and food producers that wish to export food products to this country.
The proposed laws would apply equally to both Australian and non-Australian manufacturers and food producers that sell their food products in Australia.
However, any change to the existing framework, should it restrict trade or encourage consumers or producers to substitute imported products or ingredients with Australian products or ingredients, could be seen as inconsistent with a range of Australia’s international trade agreements and create an unfair advantage for Australian producers or manufacturers.
The key proposals in the bill are:
Such claims as ‘Manufactured in Australia’ and ‘Australian manufactured’ must only be made for packaged food that has been substantially transformed in Australia by way of processing and where at least 50 per cent of the total cost of processing the food is incurred in Australia.
This proposal is intended to replace the current ‘Made in’ claim, which would no longer be permitted. Current law permits ‘Made in’ claims where:
The goods have been ‘substantially transformed’ in the country identified.
Fifty per cent or more of the cost of producing or manufacturing the goods have been incurred in that country.
Currently, a product can state it is ‘Made in Australia’ if 51 per cent of the value of the product has been ‘substantially transformed’ in Australia – including not just the consumable product itself, but also the packaging. In theory, a product can be completely imported but simply mixed or packaged locally, and still be labelled ‘Australian made’.
According to Senator Milne, the amendment is intended to achieve these improvements:
It will clarify for consumers that the label is about where the food has been processed, not where the ingredients are from, and so provide a strong label identifying local manufacture, to help Australians support local jobs in food processing.
It will help prevent imported food from masquerading as Australian content, by making it clear that the label speaks only to the processing, not the ingredients.
The amendment also provides for the creation of regulations to provide clear guidance on the meaning of ‘substantial transformation’ in relation to food processing.
The proposed changes will also remove the ability to make qualified claims such as ‘Made in Australia from local and imported ingredients’, which provides no detail on the exact origin of all the ingredients in a product, or where it was packaged.
Such claims as ‘Product of Australia’, ‘Produce of Australia’, ‘Australian product’ or ‘Australian produce’ must be made where food has been wholly manufactured or processed in Australia and where all the significant ingredients of the food are grown in Australia.
The criteria proposed for making such claims will remain unchanged. Current law permits such claims where:
All, or virtually all, of the production or manufacturing processes happen in the country identified.
All of the significant ingredients or components come from the country identified.
All other packaged food that has minimal processing in Australia but is not ‘substantially transformed’ must be labelled ‘Packaged in Australia’. This also removes the ability of manufacturers to make qualified and non-specific claims that are currently permitted, eg, ‘Packaged in Australia from local and imported ingredients’.
Unpackaged food
The bill also extends mandatory labelling to all unpackaged food for retail sale, subject to certain exemptions.
For unpackaged food grown in Australia (subject to meeting this criteria), there must be a label on or in connection with the display and there must be a statement on the label that says ‘Grown in Australia’, ‘Product of Australia’ or ‘Produce of Australia’.
For the purposes of the bill, ‘Grown in’ means if the food, ingredient or component:
Is materially increased in size or materially altered in substance in the country by natural development.
Germinated or otherwise arose in, or issued in, the country.
Is harvested, extracted or otherwise derived from an organism that has been materially increased in size, or materially altered in substance, in the country by natural development.
Currently, a ‘Grown in’ claim is only permitted where:
At least 50 per cent of the total weight comprises ingredients or components grown and processed in the country identified.
Virtually all production or manufacturing processes happened in that country.
Each significant ingredient or significant component was grown and processed only in that country.
For all other unpackaged food that is displayed for retail sale, but that is not grown in Australia, there must be a statement on the label that identifies the country or countries of origin of the food, or indicates that the food is local food, imported food, or a mix of local and imported food, as the case may be.
A number of inquiries have been made into Australia’s food labelling system in the past 10 years, and country-of-origin labelling has been the topic of many public reviews as well as many unsuccessful legislative reform attempts in this period.
In part, many previous reform proposals have been rejected on the basis that, if they proceeded, Australia would be favouring its local producers in breach of its international obligations.
Australia is party to a range of binding international trade agreements that relate to country-of-origin food labelling. Generally, these arrangements ensure that Australia’s domestic regulation cannot create a barrier to trade or distort trade in favour of its domestic markets. As a party to these agreements, Australia must ensure that its domestic regulations are compliant with a range of obligations that work to that general objective.
The federal Government, in determining whether to change the existing laws in light of the bill, will consider and need to balance a number of competing issues, and has a difficult job in ensuring there is no impediment to non-Australian manufacturers/food producers and/or providing non-tariff trade protection to industries, but providing clear information to Australian consumers who wish to make an independent choice to support Australian farmers or Australian food manufacturers.
Kathryn Edghill
Lead Partner
Kathryn is the lead partner of the firm’s Australian Competition Law practice, with more than 25 years’ experience specialising in competition law with particular emphasis on the anti-competitive conduct, consumer protection and franchising provisions of the Competition and Consumer Act.
Kathryn Edghill
Lead Partner
Kathryn is the lead partner of the firm’s Australian Competition Law practice, with more than 25 years’ experience specialising in competition law with particular emphasis on the anti-competitive conduct, consumer protection and franchising provisions of the Competition and Consumer Act.
Amy Cowper
Senior Associate
Amy is a Senior Associate in the firm’s Competition and Regulatory Law practice group and provides extensive advice in relation to competition and consumer law and food and therapeutic goods compliance.
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