The Competition and Consumer Amendment (Country of Origin) Bill 2016 (Bill) was passed by the Senate on 8 February 2017 and will commence the day after it receives royal assent, which is imminent.
The passage of this legislation represents another step in delivering comprehensive reforms to country of origin food labelling in Australia. The Bill amends the Australian Consumer Law (ACL) to simplify the test used to justify a country of origin “made in” claim. The Bill compliments and enhances the effectiveness of the Country of Origin Food Labelling Information Standard (the Standard) that commenced on 1 July 2016. The Standard introduced new labels for food grown, produced or made in Australia that include the kangaroo logo, together with a bar chart and text to indicate the proportion of Australian ingredients. For more information about the Standard, click here to read our article.
Why is there a need for reform?
The ACL provides for a series of “safe harbours” relating to claims “made”, “produced” or “grown” in a particular country. If the relevant criteria are met, your country of origin representations will not be taken to be false or misleading. You can claim that products are “Made in Australia” if you can demonstrate that:
- the product was substantially transformed in Australia; and
- 50% or more of the total cost of producing or manufacturing the product was incurred in Australia.
The “substantial transformation test” in its present form allows you to make claims like “Made in Australia from local and imported ingredients” when food is only minimally processed in Australia. The “50% production cost test” is difficult to administer given the number of variables that affect production costs, including input price changes, seasonal availability of ingredients and changes to manufacturing processes.
What changes does the Bill implement?
The Bill aims to simplify and clarify when you can make “made in” claims by implementing the following amendments:
- changing the definition of “substantial transformation”; and
- removing the “50% production cost test”.
Goods will be considered to have been “substantially transformed” in Australia if, as a result of one or more processes undertaken in Australia, goods are fundamentally different in identity, nature or essential character from all of their ingredients or components that were imported into Australia. This makes clear that importing ingredients and undertaking minor processes that merely change the form or appearance of imported goods (such as dicing or canning) are not sufficient to justify a “made in” claim.
The “50% production cost test” is now redundant as the Standard introduced labels showing the percentage of Australian ingredients in products.
The only criteria relevant to “made in” claims is whether the product is “substantially transformed” in Australia.
What you should do now
If you have not done so already, you should:
- review your food products to ascertain whether they are “substantially transformed” in Australia; and
- amend or adjust marketing messages to ensure that “made in” claims are appropriately used in light of the new criteria.