The Competition and Consumer Amendment (Country of Origin) Bill 2016 (Bill), an important part of the Turnbull Government’s country of origin labelling reform package, was read a second time last week.
The reforms aim to provide consumers with clearer, meaningful and easy to find country of origin information so they can make informed purchasing decisions. If passed, the reforms will also satisfy a key commitment of the Agricultural Competitiveness White Paper released last year, which is to improve country of origin labelling in order to provide clearer information to consumers about the origin of their food without imposing excessive costs on businesses.
The Country of Origin Food Labelling Information Standard 2016 (Standard) (made under the Australian Consumer Law (ACL)), another integral part of the reform package, was tabled separately and commenced on 1 July 2016.
Issues with the current ‘Made in Australia’ test
The ACL currently provides for ‘safe harbour defences’ against proceedings for misleading or deceptive country of origin claims about goods which permit businesses to claim their products are ‘Made in Australia’ if they can demonstrate that:
- their product was substantially transformed in Australia; and
- 50 per cent or more of the total cost of producing or manufacturing their product was incurred in Australia. The business must therefore consider whether the product would continue to meet this requirement with potential input price changes, seasonal availability of ingredients and changes to manufacturing processes.
What are the proposed changes
The Bill also removes the 50 percent production cost test, recognising that it had become redundant with the introduction of the new Standard which requires businesses to show the percentage of Australian ingredients on their labels.The Government claims the proposed reforms will provide businesses with increased certainty about what constitutes, and does not constitute, ‘substantial transformation’. The removal of the 50 per cent production cost test will also relieve unnecessary time and cost on businesses. However, this needs to be balanced against the cost of amending labels to comply with the Standard requirements.
Country of Origin labelling has been a focus for the ACCC and this is likely to continue with $4.2 million in additional funding being provided to the ACCC to undertake compliance and enforcement activities in relation to the new requirements. The Government is also funding a $15.2 million information campaign to ensure consumers and businesses understand the revised framework.
What this means for businesses?
The Bill proposes altering the definition of ‘substantial transformation’, clarifying that minor processes such as packaging, slicing, diluting, trimming, crumbing or canning imported goods will not be sufficient to justify origin claims such as ‘made in Australia’. That is, goods cannot be claimed to be ‘made in’ Australia just because their form or appearance has changed.
This test has been criticised as confusing and misleading and is said to encourage meaningless claims like ‘Made in Australia from local and imported ingredients’ when food has undergone minimal processing in Australia.