22 August, 2017
In response to consumer feedback and government consultation and review, the new Country of Origin Food Labelling Information Standard 2016 (the Standard)1 were introduced last year and take mandatory effect from 1 July 2018.
Key points
The Standard introduces stricter labelling requirements for all food sold for retail sale in Australia.
Both priority and non-priority food products must be labelled in accordance with the Standard, including information about where the food product was grown, produced, made or packed in.
Other key changes include changes to the country of origin safe harbour provisions, and a new record-keeping and substantiation obligation for business in relation to country of origin claims.
With less than a year to go before the Standard becomes mandatory, businesses should remind themselves of the labelling and new record-keeping requirements imposed under the Standard.
Our list of 10 key questions that businesses should be asking is available here.
WHAT ARE THE CURRENT REQUIREMENTS?
Currently, the country of origin labelling requirements for food items are mandated under Australia New Zealand Food Standards Code 1.2.11 (Food Standards Code). Under the Food Standards Code, it is presently mandatory to include a country of origin statement on most food items for retail sale and to specifically identify:
the country or countries of origin where the food was made, produced or grown; and
that the food is a mix of either (i) local and imported ingredients or (ii) imported ingredients.
WHEN DOES IT COMMENCE?
The Standard commenced on 1 July 2016. Businesses involved in the supply chain of food products for retail sale in Australia have two years to implement changes before the Standard takes mandatory effect from 1 July 2018.
Any existing stock that has been labelled on or before 30 June 2018 in accordance with the existing Food Standards Code can continue to still be sold to consumers after 1 July 2018 until the shelf life expiry date.2
WHAT ARE THE KEY SIMILARITIES WITH THE CURRENT SYSTEM?
The Standard sees the continuation of the mandatory country of origin labelling requirements, but imposes much stricter requirements for the labelling that must be attached to the item or displayed at the point of sale.
Aligned with the current system, the Standard does not require country of origin labelling for food products that are:
- sold to the public for immediate consumption by restaurants, schools, a caterer or self-catering institution, prisons, hospitals or medical institutions;
- made and packaged on the premises where they are sold (for example, bakeries);
- delivered, packaged and ready for consumption, as ordered by the consumer, other than sold from a vending machine (for example, home delivered pizza);
- sold at fundraisers; and
- for special medical purposes.
WHAT ARE THE NEW COUNTRY OF ORIGIN FOOD LABELLING REQUIREMENTS?
The exact labelling requirements under the Standard differ depending on whether the food is classified as a ‘priority’ or ‘non-priority’ product.
Non-priority foods are foods falling within the following categories:
- seasonings;
- confectionery;
- biscuits and snack food;
- bottled water;
- soft drinks and sports drinks;
- tea and coffee; and
- alcoholic beverages.
LABELLING PRIORITY FOODS
Priority foods are all foods other than non-priority foods. Different labelling requirements apply depending on whether the food is:
- packaged food, other than fresh fruit and vegetables in transparent packaging,
- fresh fruit and vegetables in transparent packaging, and
- unpackaged meat, fish, fruit and vegetables.
Priority foods must bear a mark that identifies the country in which the food was grown, produced, made or packed in, with Australian country of origin claims subject to more specific requirements regarding the use of the kangaroo logo and a bar chart with the ingoing percentage of Australian ingredients. These requirements are optional for non-priority foods, which, at a minimum, must bear a statement indicating the country in which the food was grown, produced, made or packed in.
WHEN CAN A FOOD CLAIM TO BE GROWN, PRODUCED, MADE OR PACKED IN A COUNTRY?
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Food may be described as ‘grown’ or ‘produced’ in a country if all of its significant ingredients3 are from, and virtually all of the processing is undertaken, in that country.
Food may be described as ‘made’ in a country if it underwent its last substantial transformation in that country.
Goods are ‘substantially transformed’ if (1) the goods can claim to be grown or produced in that country, or (2) as a result of one or more processes undertaken in that country, the goods are fundamentally different in identity, nature or essential character from all of their ingredients or components that were imported into that country.4
Food may be described as ‘packed’ in a country if it cannot claim to have been grown, produced or made in a country. Labelling requirements for foods that are ‘packed’ in Australia will vary depending on whether the source of the ingredients is from one or more countries.
All imported foods grown, produced or made in an overseas country, must have a country of origin statement in a clearly defined box. The Standard does not impose labelling requirements for foods solely intended for export.5
SEASONAL PRODUCE
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The production of some food products will include ingredients that might vary in terms of the proportion by weight in the final product, or source depending on the seasonality of the ingredient and other market factors such as price, and supply and demand.
The Standard requires labelling to show the varying percentages of Australian-sourced ingredients. In addition to the mandatory kangaroo logo and bar chart, the label must contain explanatory text stating:
- the average (rather than the minimum) proportion of ingredients, by ingoing weight, that is Australian content;6 and
- where consumers can find more information about the proportion of Australian ingredients in the food product they are purchasing.7
SUBSTANTIATING COUNTRY OF ORIGIN CLAIMS
Businesses should also be aware that the Standard introduces significant new record-keeping requirements to substantiate country of origin claims.8 Businesses will need to ensure that adequate systems are in place to record information such as traceability information, the percentage of Australian content, production dates and batch or lot information production records.
Records in relation to a food product must be kept for one year after the sale of product. These records can be requested by, and must be provided to, the Australian Competition and Consumer Commission (the body responsible for enforcing the Competition and Consumer Act 2010 (Cth)) at any time.9
WHAT ARE THE CONSEQUENCES OF NON-COMPLIANCE?
Under the Australian Consumer Law (ACL), it is illegal for a business to make false or misleading representations (express or implied) that food items (or ingredient components of food items) intended for sale in Australia were grown, produced, made or packed in a particular country when this is not the case.10
Failure to comply with the Standard is a serious offence and can result in civil pecuniary penalties of up to $1.1 million (in the case of a corporation) and/or $220,000 (in the case of an individual).11 Other remedies include orders for disqualification, damages, injunctions to prevent continued prohibited conduct, corrective advertising and refunds.
The ACCC can also issue infringement notices and impose enforcement and compensation orders such as court enforceable undertakings.
CHANGES TO COUNTRY OF ORIGIN SAFE HARBOUR DEFENCES
An additional and more recent change is the enactment in February 2017 of the Competition and Consumer (Country of Origin) Act 2017 (Cth), which has changed the former safe harbour regime for country of origin claims (in relation to both food and consumer products generally) under the ACL.
Under the previous regime, a person was not liable for misleading and deceptive conduct in relation to a country of origin claim in relation to goods if it could satisfy either the ‘50% of production cost’ test, or the ‘substantial transformed’ test.
The new regime:
- removes the ‘50% of production cost’ test, which recognises the complexity and variability of global production lines; and
- introduces the new definition of ‘substantially transformed’ as discussed above.
WHAT ARE THE NEXT STEPS FOR FOOD MANUFACTURERS AND RETAILERS?
Companies in the supply chain of the sale of food items in Australia should be aware of the obligations imposed by the Standard and ACL in relation to labelling, advertising, sales and marketing of food items. All food labels and promotional materials should be reviewed to determine whether they are compliant with the Standard. Businesses will also need to implement adequate systems to comply with the new record-keeping obligations.
Food manufacturers and retailers should also have in place clear procedures for signing off on representational materials and effective complaints handling procedures at retail, customer service and head office levels. In particular, food manufacturers and retailers that declare average proportions need to review these claims at least every two years and to ensure that the reference source consumers are directed to is entirely accurate and up to date at all times.
ENDNOTES
- The Standard is made under section 134 of the Australian Consumer Law.
- At the expiry of the transition period, Parliament intends to revoke the currently operational Food Standards Code.
- The requirements for Australian grown or produced claims are stricter. To make claims that a food product is grown or produced in Australia, it is necessary for all of its ingredients (not merely the significant ingredients) to be grown or produced in Australia.
- Australian Consumer Law, s 255(2). This definition excludes minor processes such as slicing, freezing, canning, bottling, crumbing, reconstituting or packing.
- Australian food manufacturers and retailers exporting food products overseas can choose to use the domestic label overseas, but there is no obligation to do so. Importantly, if the company is intending to use the kangaroo logo on exported food products, they need to obtain a licence from the Australian Made Campaign Limited.
- Country of Origin Food Labelling Information Standard 2016, s 11(2). The average proportion of Australian content may be calculated over a continuous one, two or three year period and may be relied upon for labelling purposes for a period of up to two years.
- Country of Origin Food Labelling Information Standard 2016, s 13. This information can be made available by the inclusion of a barcode, a website or telephone number.
- Country of Origin Food Labelling Information Standard 2016, s 31(1).
- Country of Origin Food Labelling Information Standard 2016, ss 31(2) and 32(2).
- Australian Consumer Law, ss 136 and 137.
- Australian Consumer Law, ss 203 and 224.
For further information, please contact:
Yilong Li, Herbert Smith Freehills
yilong.li @hsf.com
