The Competition and Consumer Amendment (Country of Origin) Bill 2016 (Bill), which is part of a broader package of reforms to country of origin food labelling in Australia, was passed by the Senate on 8 February 2017 without amendment. It will commence the day after it receives royal assent, which should occur shortly.

As previously blogged, the Bill aims to simplify and clarify the existing country of origin “safe harbour defences” under the Australian Consumer Law, which protect businesses against proceedings for misleading or deceptive conduct for country of origin claims.

The Bill makes the following two key changes to the existing safe harbour defence for making a “Made in Australia” claim:

  • Removal of the “50 per cent production cost” criteria

Businesses will no longer need to show that 50 per cent or more of the total cost of producing or manufacturing their product was incurred in Australia to make a “Made in Australia” claim. Instead, it will be sufficient if they can demonstrate that their product was substantially transformed in Australia.

Many businesses found it challenging to ensure a particular product would meet the “50 per cent production cost” criteria on an ongoing basis, given the number of variables that affect production cost, including input price changes, currency fluctuations, seasonal availability of ingredients and changes to manufacturing processes.

Further, the criteria was considered to be redundant for food products following the recent introduction of the Country of Origin Food Labelling Information Standard 2016 (Standard) which requires businesses making a “Made in Australia” claim about “priority foods” to show the percentage of Australian ingredients in the product on the label. The Standard commenced on 1 July 2016 and businesses are required to comply with the Standard once the transitional period ends on 30 June 2018.

The removal of this criteria is expected to save businesses around $48.5 million in regulatory costs annually, which is in part intended to offset the cost to businesses of implementing the broader reforms introduced by the Standard.

  • Changed definition of “substantial transformation”

The Bill also amends the definition of “substantial transformation”. Goods will be considered to have been substantially transformed in Australia if, as a result of one or more processes undertaken in Australia, they are fundamentally different in identity, nature or essential character from all of the goods’ ingredients or components that were imported into Australia.

This amended definition intends to make it clear that minor processes which merely change the form or appearance of a product (such as packaging, slicing, diluting, trimming, crumbing or canning) will not be sufficient to ground a “Made in Australia” claim. It remains to be seen how the courts and the ACCC will interpret and apply this definition.

The Government has launched an education campaign and provided the ACCC with additional funding of $4.2 million over five years to undertake compliance and enforcement activities in relation to the new country of origin regime. Given the ACCC’s extensive track record to date for enforcement action related to country of origin claims, including against Maggie Beer, Carlton & United Breweries and Basfoods for misleading claims, we expect to see the regulator continuing to be very active in this space.

Further reform signalled

The Government has signalled that its country of origin reform agenda is not yet complete. It:

  • has set up a working group to look specifically at seafood labelling; and
  • is working with food businesses to examine ways to improve the digital infrastructure of the food industry. This may impact future reform, with the potential for a greater focus on information available via digital infrastructure rather than on packaging. The food and beverage industry’s peak body, the Australian Food and Grocery Council, has been a strong advocate for delivering more information about food origin and products generally via digital means.

Despite the recent and proposed further reform, some think the changes still don’t go far enough. Senator Nick Xenophon has suggested that manufacturers should be required to disclose the percentage and country of origin of specific ingredients to the Department of Industry to publish on its website, while Senator Malcolm Roberts has called for a prohibition on blending local and imported ingredients prior to food safety testing. Watch this space for developments.