Bills Digest No.
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Law and Bills Digest Section
Purpose of the Bill
Structure of the Bill
Policy position of non-government
Position of major interest groups
Statement of Compatibility with Human
Key issues and provisions
Date introduced: 17
House: The Senate
Science, Energy and Resources
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
All hyperlinks in this Bills Digest are correct as
at October 2020.
The purpose of the Competition and Consumer Amendment
(Australian Consumer Law—Country of Origin Representations) Bill 2020 (the
Bill) is to amend the Competition and
Consumer Act 2010 (the CCA) to widen the definition of what
constitutes the ‘substantial transformation’ of goods for the purposes of ‘safe
harbour’ provisions relating to country of origin representations.
The Bill is a step ‘towards implementing
commitment to establish robust country of origin labelling laws for
Australian made complementary medicines’.
The Bill has one schedule, and a single amendment.
Country of origin claims are representations about where a
good’s ingredients or components came from and/or where it underwent
processing. Such representations can be made explicitly or tacitly, using words
and/or pictures. Common examples include claims that a particular good or product
was ‘made’, ‘produced’ or ‘grown’ in a certain country – for example,
Australia. Further, certain imported goods must be correctly labelled with a
trade description that includes the country where the goods were made or
produced before they can be imported into Australia.
Schedule 2 to the CCA sets out the Australian
Consumer Law (ACL). Within the ACL are important consumer protections,
including but not limited to:
broad prohibition against engaging, in trade or commerce, in conduct that is
misleading or deceptive—or is likely to mislead or deceive
specific prohibition against making a false or misleading representation, in
trade or commerce, about the place of origin of goods.
From as early as 1998, amendments were made to the CCA
(then known as the Trade Practices Act 1975) to insert what were
colloquially known as ‘safe harbour’ provisions.
These provisions established the regime for determining when goods would, and
would not, be regarded as made in, or produced in, Australia—partly by
reference to the extent to which production or transformation occurred in
Australia. As such, they determine when country of origin representations about
goods can be made without the risk of breaching consumer protections.
Those amendments occurred in response to an ongoing debate
about the test relating to whether goods are entitled to be labelled ‘Made in
Australia’. Senator Bob Brown stated:
The Greens are saying `Made in Australia' should mean `Made
in Australia' ... I give the example of a bottle of cordial. It is entirely
possible under this legislation, because the manufacturing costs are a major
component, that you could have Tasmanian raspberries going into one bottle of
cordial and being put on the shelf and a mixture of raspberries from Chile and
South Africa and maybe some from Australia going into a second bottle and being
put on the shelf, and both of them will have `Made in Australia'. The consumer
will not be able to know which is the real homemade produce through and through
and which is the fake.
Concerns about what ‘Made in Australia’ means in relation
to goods, food and country of origin indicators more generally, were addressed in
2017 by clarifying the meaning of the term substantially transformed.
The concept of ‘substantial transformation’ is universally
recognised and of significant importance in administering the customs and trade
laws, forming the basis for the World Trade Organization’s (WTO’s)
international rules of origin.
Where the good in question is not wholly manufactured, produced, or grown
within a single country, the concept of substantial transformation
comes into play. The essence of substantial transformation rules is that a
product cannot be said to originate in the country of exportation if it was not
manufactured there, satisfies a threshold percentage value of locally or
regionally produced inputs, or undergoes other processes that add a minimum
value to the goods (expressed by ad valorem percentage).
The purpose of the Competition and
Consumer Amendment (Country of Origin) Act 2017 (2017 Act) was
to simplify the test that is used to justify a claim that certain foods were
‘made in’ a specified country of origin. In particular, it clarified the
meaning of the term substantially transformed in the ‘safe
harbour’ provisions of the ACL.
Goods can claim to be grown in, produced
in or made in a country only if they meet specific
in and produced in mean that all of the significant
ingredients of the good are from, and all, or virtually all the processing
occurred in, the country claimed as origin
in (or manufactured in) means that the goods underwent their last
substantial transformation in the country claimed as origin.
A good is said to have been substantially
transformed in a country if the end product is fundamentally different
in identity, nature or essential character from all of its ingredients or
components that were imported into that country.
‘Australian Made’ logo
In 1986 the Australian Government commissioned the
introduction of the Australian Made logo.
It was officially launched by then Prime Minister, Bob Hawke. It was to be
administered by the Advance Australia Foundation for the next ten years. The
logo reverted back to the Australian Government when the Foundation went into
voluntary liquidation in 1996.
The Australian Made, Australian Grown (AMAG) logo is now administered
by Australian Made Campaign Limited (AMCL), a not-for-profit public company
established in 1999 by the Australian Chamber of Commerce and Industry and the
network of state and territory chambers of commerce, with the cooperation of
the Federal Government.
AMCL does not receive government funding for its core
operations, which are licensing companies to use the logo and promoting
Australian products both in Australia and overseas. In 2002, the Federal
Government transferred ownership of the logo to AMCL via a Deed of Assignment
and Management, which sets out strict conditions under which AMCL may
administer the logo.
At present the use of the Australian Made logo (and its
variations) is permitted where the country of origin safe harbour requirements
as set out in the Act and ACL are met.
As a result of the 2017 Act reforms, the
Commonwealth assumed responsibility for use of the AMAG logo on food products
sold in Australia under the terms of the Country of Origin Food
Labelling Information Standard 2016 (the Information Standard).
This means the AMAG kangaroo and related logos now form part of a new
country-of-origin information panel which is mandatory for most Australian food
Importantly however, AMCL retains responsibility for voluntary licensing of the
use of the AMAG logo on all other products and goods sold in Australia and
overseas (including complementary medicines).
the complementary medicines industry
Complementary medicines can be defined as including ‘a
diverse range of products with intended therapeutic benefits’ such as:
minerals and supplements
homeopathic and traditional medicines
supplements comprised of herbal and traditional ingredients (for example,
echinacea, ginseng, primrose oil, olive leaf extract, spirulina and ginkgo
supplements (such as fish oils and omega fatty acids, calcium, glucosamine,
probiotics, proteins and other mineral supplements).
The Explanatory Memorandum to the Bill notes that the
complementary medicines sector ‘expressed concerns’ at the time that the 2017
Act reforms were being considered, that many of their products would no
longer meet the ‘tightened requirements of the substantial transformation test’. These concerns were confirmed in guidance
published by the Australian Competition and Consumer Commission (ACCC) in March
2018 and a Federal Court case.
About the Nature’s
Care Manufacture case
The decision by the Federal Court in Nature’s Care Manufacture
Pty Ltd v Australian Made Campaign Limited is illustrative of the problem
for the complementary medicines industry in Australia.
In that case the Federal Court considered whether an Australian manufacturer
could label its capsules as ‘Made in Australia’. The relevant capsules were
filled with fish oil imported from Chile and Vitamin D imported from China. The
capsules were made using gelatine sheets which were themselves manufactured
from gelatine powder, purified water and glycerol. The glycerol is imported
from Indonesia but the water and the gelatine powder were sourced in Australia.
The Federal Court determined that the goods did not satisfy
the definition of ‘Made in Australia’ and so was not entitled to be licenced to
use the ‘Made in Australia’ logo on the grounds that mere encapsulation did not
represent ‘substantial transformation’ of a product as required under the ACL.
The outcome of the Nature’s Care Manufacture case was
consistent with earlier guidance by the ACCC.
The ACCC publication entitled Country
of Origin Labelling for Complementary Healthcare Products: A Guide for Business
sets out the ACCC’s interpretation of the application of the ACL to
manufacturing and production processes commonly used in the Australian
complementary medicine industry. 
It identifies a number of processes that would not bring about a substantial
transformation of goods.
In relation to encapsulating imported actives
(including the addition of bulking oils and other excipients such as Vitamin E
(added to prevent oxidisation)), the ACCC concluded this process is unlikely to
‘constitute a substantial transformation’ as following encapsulation the
finished product ‘is not fundamentally different and will have retained the
identity, nature and essential character of the imported active(s)’.
However the ACCC considered that tablet manufacture
is likely to amount to a substantial transformation. This is because the
process is a multi-step procedure that involves three key stages: the blending
(wet or dry), granulation and compression of actives and excipients (including
binders and disintegrants) into tablet forms. As such, where imported actives
and imported excipients undergo the full tableting process to transform raw
bulk materials into a tablet in Australia, the ACCC was of the view that this
would likely result in a substantial transformation occurring in Australia.
In relation to herbal extraction (extracting a
herb’s medicinal profile (that is, the active) out of the raw or dried
materials using a solution of alcohol and water or glycerine and water) the
ACCC noted this process is likely to amount to a substantial transformation
where ‘raw imported ingredients are processed in Australia to isolate the
herbal active(s)’. However, the ACCC noted that ‘herbal extracts purchased
overseas and bottled in Australia would not meet the safe harbour criteria for
making a ‘made in’ claim, even if additional ingredients are added during the
A similar approach was adopted in relation to essential
oils. The ACCC noted that essential oils are found in the flowers,
seeds, roots and various other parts of plants and are commonly extracted from
the raw material by one of two key methods: distillation or cold pressing. The
ACCC noted that processing of imported raw plant material in Australia to draw
out its volatile aromatic compounds is likely to result in a substantial
transformation of the raw imported product. However, merely importing essential
oils and bottling them in Australia or blending imported essential oils in
Australia would not meet the test for substantial transformation.
Finally, the ACCC noted that in relation to semi-solid
formulations (mostly creams or ointments that, unlike many therapeutic
goods, are applied topically rather than ingested) the processing of ‘raw
imported ingredients into a semi-solid preparation that has been chemically and
physically modified to penetrate the skin or mucosa by the active may support a
‘made in’ claim’.
However, it also notes that ‘if a cream or lotion is imported in bulk and
combined with other minor ingredients like fragrances, pigments or
preservatives, the mixing of the imported ingredients’ in Australia would not
amount to a substantial transformation.
The Regulation Impact Statement noted that one impact of
the 2017 Reforms is purportedly:
... the very real possibility of disinvestment and offshoring
of production because the manufacturing activities undertaken in Australia are
not recognised as meeting safe harbour “Made in Australia” claims under the Competition
and Consumer Act 2010. Elements of the Sector have questioned what benefit
there is in maintaining a domestic manufacturing presence if they are unable to
claim their products are ‘Australian made’ under the safe harbour defences of
the Competition and Consumer Act 2010. Manufacturers find this
especially concerning given all manufacturing activity is regulated by the
Therapeutic Goods Administration under the Therapeutic Goods Act 1989 and
transformation of raw imported ingredients is conducted in Australia.
More specifically the Regulation Impact Statement reports
that before the 2017 reforms, there were around 185 licensees of the AMAG logo
from the complementary medicines sector, including firms licenced to use the
logo AMAG that ‘may not own production or manufacturing facilities in
Australia’ and after the 2017 Act reforms, ‘34 licences were resigned
due to non-compliance with the safe harbour defence’.
Further, a key purported impact of the 2017 Act
reforms and reduced access to the AMAG logos relates to export markets as:
... the AMAG logo is a key marketing tool for both domestic
(especially in the Daigou market) and export markets, particularly markets like
The Regulation Impact Statement noted that the
complementary medicines sector believes the negative effects of the 2017 Act
... on origin labelling for complementary medicines are
inadvertent, but significant damage to brands and sales is occurring, particularly
in growing export markets although the Sector has not provided data that
supports this contention.
The Bill is predicated on the need to rectify the
purported negative impact of the above changes on the complementary medicine
industry in Australia.
Following representations by the complementary medicines
sector about the purported impact of the 2017 Act reforms, the Minister
for Industry, Science and Technology established a taskforce (the Complementary
Medicine Taskforce (CMT)) to ‘review the industry's concerns and identify
As part of this process, the CMT undertook a survey to gather the views of the
sector regarding the 2017 Act reforms.
That survey and other consultation processes informed the CMT’s Report
(the CMT Report), which was made publically available (in part) as a result of
a freedom of information request.
Separate to the process undertaken by the CMT, the
Department of Industry, Science, Energy and Resources (the Department)
undertook a public consultation process. That process included:
a range of stakeholders about the consultation process and opportunity to make
submissions, including the CMT
to examine consumer preferences for the use of the AMAG logo on a range of
complementary healthcare products including both qualitative research (focus
groups) and an online survey of 2,091 consumer respondents
consulting and receiving submissions regarding a Consultation
Regulation Impact Statement
of the CMT survey results and the CMT Report findings.
Following the CMT's report and the Department’s consultation
process the Government put a reform proposal to the states and territories
through the Consumer Affairs Forum (CAF), which the relevant state and
territory Ministers agreed to.
The Bill is part of that process.
Role of the Therapeutic
In Australia, complementary medicines are regulated as
therapeutic goods under the Therapeutic Goods
Act 1989 (TGA Act) by the Therapeutic Goods Administration
(TGA). The TGA provides a national system of regulatory controls relating to
the quality, safety, efficacy, performance and timely availability of
therapeutic goods used in Australia or exported from Australia, including
One such regulatory control is the TGA’s Good
Manufacturing Practice (GMP) principles and procedures.
The goal of the GMP is to ensure that products are consistently produced and
controlled to the quality standards appropriate to their intended use. This is
achieved, in part via quality control methods including sampling,
specifications and testing along with documentation and release procedures to
ensure that materials are not released for use, nor products released for sale
or supply, until their quality has been judged to be satisfactory.
Whilst not explored in detail in this Bills Digest, in
simple terms complementary medicines must be entered in the Australian Register
of Therapeutic Goods (ARTG) in order to be legally imported, exported,
manufactured or supplied to consumers. Further, the TGA Act requires
that manufacturers of certain types of therapeutic goods, including
complementary medicines, hold a licence. A TGA licence is required regardless
of whether the ingredients of the relevant complementary medicine are sourced
internationally or locally.
Importantly, in order to obtain a licence, an Australian
manufacturer must demonstrate compliance with the GMP. This is usually, but not
always, done through an on-site inspection. Overseas manufacturers can obtain
GMP certification following a successful on-site inspection by the TGA, or via
a desk-top assessment (such assessments are determined in part by the
agreements and arrangements in place between the TGA and other comparable
overseas regulators, provided that the products are also regulated as medicines
in the other country).
As noted in the Regulation Impact Statement, Australian
complementary medicine manufacturing facilities generally perform one or more
of the following steps:
of dosage form (this includes blending, bulk manufacture, preparation of bulk
product, and finished product manufacture)
chemical and physical
compliance with the GMP amount to substantial transformation?
The Regulation Impact Statement and CMT Report reported a
common concern among complementary medicines industry participants that the ACL
operates to prevent ‘Australian made’ (that is, Australian origin) claims in
relation to goods where:
... all manufacturing activity is regulated by the Therapeutic
Goods Administration under the Therapeutic Goods Act 1989 and
transformation of raw imported ingredients is conducted in Australia.
As noted in the Regulation Impact Statement:
The Sector believes the substantial transformation test is
not an appropriate measure of the transformation imported raw materials undergo
to become complementary medicines manufactured in Australia. Some product lines
do not meet the test, despite being well established, Australian manufactured
products and regulated in accordance with the Therapeutic Goods
Administration’s (TGA) Good Manufacturing Practice (GMP).
The CMT Report similarly noted:
... the Sector proposed a regulatory fix which would allow
Therapeutic Goods Administration (TGA) compliance to be the basis of using the
AMAG logo... The Sector argues that in the eyes of the consumer, the high
regulatory standards of product and process safety stipulated by the TGA, not
the source of ingredients, qualifies their products for an Australian country
of origin claim.
From this and other parts of the Regulation Impact
Statement and CMT Report it can be inferred that at least some complementary
medicine industry participants appear to be advocating that the mere
manufacture of complementary medicines in Australia in accordance with the
TGA’s GMP should provide a basis for making ‘Australian made’ /
Australian-origin claims about those goods.
In December 2019, in response to the concerns raised by the
complementary medicines industry the Government:
... restored access to 'Australian Made' claims for
complementary medicines manufactured in Australia, by enacting the Competition
and Consumer Amendment (Australian-made Complementary Medicines) Regulations
2019. These 2019 regulations were an interim solution.
The effect of the Competition and
Consumer Amendment (Australian-made Complementary Medicines) Regulations 2019
medicines (this may include vitamin, mineral or herbal products)
as medicines under the TGA Act and associated Regulations and
are either listed or registered on the ARTG
can rely on the safe harbour provision in the ACL. It does
this by providing that a complementary medicine can rely on the safe harbour
provision in clause 255 of the Australian Consumer Law where:
has undergone the last process in the manufacture of dosage form step of its
manufacture in Australia and
premises subject to a licence in relation to that manufacturing step for that
complementary medicine under the TGA Act and in compliance with the
Importantly however, subregulation 92AA(4) provides that
the following steps do not amount to the last step in the manufacture of the
dosage form of complementary medicines that amounts to a substantial
transformation of a good for the purposes of a country of origin claim under
of the dosage form of medicines in containers
of the dosage form of medicines
of the dosage form of medicines
of the dosage form of medicines (whether in packaging or not)
of the dosage form of medicines
for supply of the dosage form of medicines.
The proposed amendment is stated to be the first of three
related reforms: the other two are a change to the Competition and
Consumer Regulations 2010 (Regulations) and the creation of an information
standard for Australian manufactured complementary medicines.
The Department conducted a consultation on a proposed Information Standard for Country
of Origin Labelling for Complementary Medicines from 28 August 2020 to 24 September
At the time of writing submissions to the consultation were not available.
The effect of the amendment and two other reforms will be
to ensure that manufacturers of complementary medicines can make
representations regarding the country of origin of their products without
breaching other provisions of the CCA.
In addition however, it appears that the intention of the
additional reforms that the Bill will facilitate is to enable mere compliance
with the Therapeutic Goods Administration’s Good Manufacturing
to permit an Australian-origin claim to be made about a complementary medicine
and/or use of an Australian Made, Australian Grown logo on the product.
As discussed above, country of origin claims are
representations about where a good’s ingredients or components came from and/or
where it underwent processing. Country of origin claims can be made using words
and/or pictures. Common examples include claims are that a particular good or product
was ‘made’, ‘produced’ or ‘grown’ in a certain country – for example,
The rules governing the veracity of such claims are
governed by Australian domestic law. However, they are also influenced by
Australia’s World Trade Organization (WTO) commitments. The need for such rules
is to answer the question—if goods are made, manufactured, processed or
assembled in one country from articles grown, produced, made, manufactured or
processed in another country or countries, which country can truly claim to be
the country of origin of the finished product?
This will be achieved by creating an explicit power to
prescribe one or more processes which will be deemed to satisfy the definition
of ‘substantially transformed’ for the purposes of the country of origin
provisions of the Act, which the Government advises is intended to be used in
relation to complementary medicines.
However, the potential operation of the Bill is not confined to complementary
medicines and could be used to alter when other goods are considered to have
been ‘substantially transformed’ for the purposes of the country of origin
provisions of the Act.
origin labelling framework: the WTO Agreement on Rules of Origin
A more broadly and deeply integrated global economy has
made it more difficult to determine a product’s country of origin, with raw
materials and other inputs criss-crossing different parts of the globe to be
used as inputs in dispersed manufacturing facilities before a final product is
Rules of origin criteria have therefore been developed to define where a
product was made so as to enable attribution of one country of origin to each
The effective determination of where a product was made is
significantly implicated in the practical application of other trade policy
measures, including trade preferences under free trade agreements (preferential
rules of origin).
Australia is a signatory to the WTO Agreement on Rules
of Origin (the RoO Agreement) which seeks to ensure that country of
origin requirements do not restrict, distort or disrupt international trade and
are applied without discrimination across countries on a consistent, uniform
and impartial basis.
The RoO Agreement also allows each WTO member to determine its own
country of origin regime.
Australian laws and regulations on rules of origin are designed to conform to
the RoO Agreement.
The RoO Agreement
The RoO Agreement represents an on-going attempt by
WTO member states to harmonise non-preferential rules of origin in relation to
The purpose of the RoO Agreement was to achieve a harmonised system of
determining the country of origin of goods
including complementary medicines. The Harmonisation Work Programme (HWP) is a
joint effort by the WTO and the World Customs Organization (WCO), tasked with
drafting binding international non-preferential rules of origin.
The RoO Agreement and the work to date by the HWP when
viewed alongside each other provide guidance regarding when goods have been ‘substantially
transformed’ in relation to the country of origin of goods. Despite commencing
in 1998, the HWP is not completed.
As such about 40 WTO members, including Australia, currently apply national
rules of origin for non-preferential purposes along WTO guidelines.
Australia applies its non-preferential rules of origin in
accordance with the RoO Agreement, and participates actively in the work
of the WTO Committee on Rules of Origin (CRO), as well as the Technical
Committee on Rules of Origin (TCRO).
The RoO Agreement endorses the ‘last significant
transformation’ concept as the main origin-determining principle that will be
adopted once the HWP is completed.
Importantly the RoO Agreement allows for different methods to help
determine whether a ‘significant transformation’ has taken place including:
change in tariff heading
processing operations and
In summary, when more than one country is concerned in the
production of the good (for example, a complementary medicine) then its origin
is the country where the last ‘substantial transformation’ was carried out, and
this can be assessed by one of the methods noted above.
the RoO agreement to the Bill
The above origin-determining mechanisms entered into force
on 1 January 1995.
At present, only the obligations contained in Article 2 of the RoO Agreement
are binding on Australia and other WTO members.
Article 2 provides that Australia and other WTO members
can enact laws in relation to the country of origin of goods based on a change
in tariff heading, specific processing operations and value added percentages,
provided the rules applied to imports and exports are ‘not more stringent’ than
those applied to determine ‘whether or not a good is domestic’ and:
not discriminate between other Members, irrespective of the affiliation of the
manufacturers of the good concerned
not used as instruments to pursue trade objectives directly or indirectly
restrictive, distorting, or disruptive effects on international trade and
administered in a consistent, uniform, impartial and reasonable manner.
That is, Article 2 of the RoO Agreement allows
members to specify manufacturing processes as a prerequisite for the
determination of the country of origin of goods
and hence allows Australia to determine what manufacturing processes can
support the origin of a good (such as a complementary medicine) being ‘Australian’.
However, members have the obligations noted above when doing so.
Whilst not explored in this digest in detail, the
consolidated text draft of non-preferential rules of origin provides that
processes that can amount to ‘substantial transformation’ include:
provided the reduction or elimination of impurities results in a good suitable
for various applications, most relevantly including pharmaceutical and medical
reactions that result in a molecule with a new structure by breaking
intramolecular bonds and by forming new intramolecular bonds, or by altering
the spatial arrangement of atoms in a molecule other than dissolving in water
or other solvents, the elimination of solvents including solvent water or the
addition or elimination of water of crystallization
and blending provided it results in the production of a good having physical or
chemical characteristics which are relevant to the purposes or uses of the good
and are different from the input materials.
Importantly however, the consolidated text draft of
non-preferential rules of origin provides that ‘mere pressing of tablets or by
mere encapsulation’ is not a process that amounts to substantial
transformation in relation to a number of ‘medicaments’ where the medicaments
... mixed or unmixed products for therapeutic or prophylactic
uses, put up in measured doses or in forms or packings for retail sale.
‘Medicaments’ is a term for substances used for medical
treatment and therefore encompasses complementary medicines. As such, the above
applies to goods including ‘medicaments containing vitamins or other products’.
manufacturing processes and substantial transformation
As noted above, Australian complementary medicine
manufacturing facilities generally perform one or more of the steps noted
earlier. Whilst these processes may result in manufacturers incurring
significant costs, it is likely that under current RoO Agreement rules,
the consolidated text draft of non-preferential rules of origin and ACL only
some of them would be considered to meet the ‘substantially transformed’
requirement that allows an origin claim to be made.
In relation to manufacture of dosage form the CMT Report
notes this process usually entails:
... the process of formulating the active ingredient(s),
usually in combination with excipients, into the form in which they are
marketed for administration to the patient/consumer, e.g. tablet, cream either
ready for assembly into final containers or in individual containers ready for
assembly to final packs.
As such, in some circumstances this could amount to
a substantial transformation as understood under the RoO Agreement and
consolidated text draft of non-preferential rules of origin. For example, the
pressing of tablets which contain a number of active ingredients may well
qualify as a substantial transformation, but this will turn on the number of
active ingredients in the tablets, whether they are mixed in the process and
whether the active ingredients were otherwise processed or altered in the
country before being pressed into a tablet.
However, the RoO Agreement and consolidated text
draft of non-preferential rules of origin make it clear that ‘mere
encapsulation’ of active ingredients, or pressing of tablets with only one
active ingredient, will not amount to a substantial transformation, a position that
the Federal Court confirms applies in relation to encapsulation under the ACL.
This means that it is likely that only certain forms of
the manufacture of dosage forms of complementary medicines could potentially
meet the substantial transformation requirement in order to provide a basis for
an Australian-origin claim as understood under the RoO Agreement and
consolidated text draft of non-preferential rules of origin and ACL.
At the time of writing the Bill had not been referred to any
committee for inquiry.
Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
made no comment about the Bill.
position of non-government parties/independents
The Opposition supports the Bill.
At the time of writing the position of other
non-government parties and independents on the measures proposed by the Bill
could not be determined.
major interest groups
The complementary medicine sector appears supportive of
the proposed changes in general terms, given its advocacy for easier access to
the origin-claim safe harbour defences in the Act and ACL and use of AMAG
logos on products manufactured in Australia in compliance with the TGA’s licencing
requirements (including the GMP).
and consumer groups
In contrast, the CMT Report noted that consumer groups did
not support the use of TGA compliance as a basis for using the AMAG logo and
... to see the same labelling on complementary medicine
products that apply to priority food labelling. Furthermore they expressed
support of upholding the current safe harbour defences including the definition
of substantial transformation, as reducing the strictness around the safe
harbour defences would not be in the interest of consumers or the reputation of
the AMAG logo.
The CMT Report also noted that the results of a consumer
survey it had conducted found that:
Most participants believed that both the current and previous
AMAG labelling rules were too relaxed. Although the new rules were seen to be a
slight improvement by some, they were still perceived as not strict enough.
Whilst the CMT Report noted that consumers agreed products
that are ‘Made in Australia’, even with imported ingredients ‘should be able to
use the AMAG logo’ provided the product was ‘accompanied by the origin of
ingredients and proportion’,
this would appear to suggest that consumers may not support changes to the
current AMAG labelling rules which are linked to the current safe harbour rules
in the Act and ACL, which the Bill seeks to amend specifically to make
it easier for complementary medicines to make Australian-origin claims.
The Regulation Impact Statement (RIS) notes that consumers
preferred that the existing rules on substantial transformation for all
products remain in force and applicable to complimentary medicines.
The RIS also noted that the survey conducted as part of the consultation
process ‘clearly indicated that consumers want accurate information on the
origin of their products’ and that this includes ‘whether or not the products
they consume contain imported ingredients’.
The survey also found that:
Consumers expressed a preference that if the government is to
seek a regulatory outcome to allow for “Australian Made” claims for Australian manufactured
complementary medicines, then that origin claim should be accompanied by a
representation of the proportion of Australian ingredients.
In this regard the RIS noted:
The Consultation RIS stepped out for consumers some of the
regulatory activities the TGA undertook and the manufacturing processes
conducted by manufacturers in Australia using imported ingredients, but
consumers were not convinced that the AMAG logo could be appropriately applied.
The RIS also noted a ‘strong assumption’ by consumers that
a vitamin tablet, or similar claiming to be of Australian origin was made
from Australian ingredients, in an Australian manufacturing facility.
In that regard, the RIS further noted that prior to the 2017
Act reforms consumers wanted the requirements for making Australian origin
claims tightened, particularly where ingredients were imported, but cared
little about relative costs of production.
The CMT report conducted its own research into the views of consumers and found
similar attitudes in consumers despite the 2017 Act reforms.
In particular the CMT Report noted:
Once consumers had questioned the origin of ingredients, they
became concerned about the ‘Made in Australia’ message being misleading as
although ‘Made in Australia’, it may in fact be from imported ingredients.
The RIS also noted that consumers did not identify the
mismatch between TGA regulation of manufacturing and the substantial
transformation tests under the ACL as contributing to consumer confusion
or that the 2017 law change affected consumers in any way.
The CMT Report noted that the consumer research it commissioned did not support
the contention that ‘in the eyes of the consumer, the high regulatory standards
of product and process safety stipulated by the TGA, not the source of
ingredients, qualifies their products for an Australian country of origin
The precise details of any changes to when
Australian-origin claims can be made under the ACL will be affected by
changes to the Regulations and creation of a new Information Standard
applicable to complimentary medicines facilitated by passage of the Bill.
However, the above appears to suggest that consumers are unlikely to support
changes that would allow easier access to the origin-claim safe harbour
defences in the Act and ACL and use of AMAG logos on products
manufactured in Australia under a licence issued by the TGA, particularly if
such changes were not accompanied by a requirement to display the origin of
ingredients and their proportion of the product.
The Explanatory Memorandum notes that the Bill is expected
to have nil financial impact on the Commonwealth.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.
Joint Committee on Human Rights
At the time of writing the Parliamentary Joint Committee
on Human Rights had not considered the Bill.
The Bill contains one item in Schedule 1; proposed
paragraph 255(2)(c) of the ACL. As noted elsewhere in this Digest,
currently clause 255 of the ACL provides the safe harbour defences with
respect to country of origin claims. Table item 3 to subclause 255(1) provides
that a representation that goods were ‘made in’ a particular country (for
example, Australia) can be made where the goods were last substantially
transformed in that country.
As such, and as examined in detail in the background
section of this Digest, a key issue is whether the relevant goods are substantially
transformed in Australia. If they are, then a ‘made in’ or other
similar Australian-origin claim can be made. If not, then such claims would,
for example, expose the manufacturer to liability on the basis of engaging in
misleading or deceptive conduct under the ACL with respect to the origin
of the goods.
Currently subclause 255(2) provides that:
(2) Goods were substantially transformed in a
goods met, in relation to that country, the requirements of item 1 or 2 in the
second column of the table in subsection (1); or
(b) 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.
Paragraph 255(3)(a) then provides that the Regulations can
prescribe (in relation to particular classes of goods or otherwise) processes
or combinations of processes that ‘do not have the result’ of the
goods being ‘fundamentally different in identity, nature or essential character
from all of their ingredients or components’ and therefore substantially
In addition, paragraph 255(3)(b) provides that the Regulations
can also ‘include examples’ (in relation to particular classes of goods or otherwise)
of processes or combinations of processes that ‘for the purposes of’ subclause
255(2) do ‘have the result’ of the goods being fundamentally
different in identity, nature or essential character from all of their
ingredients or components that were imported into that country.
introduced as an interim measure operate by defining which of the TGA’s GMPs performed
under a TGA-issued manufacturing licence within Australia can or cannot support
an Australian-origin claim. That is, which TGA GMP-compliant manufacturing
processes performed in Australia under a TGA-issued manufacturing licence amount
to a substantial transformation and which do not.
Proposed paragraph 255(2)(c) will provide that goods
will have been substantially transformed in a country if ‘the goods underwent
in that country one or more processes prescribed by the regulations’. That is,
it would not contain the requirement that such specified processes result in
the good having a ‘fundamentally different’ identity, nature or essential
character from ‘all of their ingredients or components that were imported into
Table item 4 to subclause 255(1) provides that a representation
in the form of a mark specified in an Information Standard relating to country
of origin labelling of goods (such as those the Government notes its intention
to introduce if the Bill is passed) may be used if the requirements under the
Information Standard are met. Currently the AMAG logo is specified as a mark
relating to the origin of goods in the Country of Origin Food
Labelling Information Standard 2016.
The power to make Information Standards in clause 134 of the
ACL can be used to provide a safe harbour for country of origin claims under
table item 4 to subclause 255(1).
the amendment legally necessary?
The drafting of subclause 255(3) and the interaction with
subclause 255(2) is open to different interpretations.
On one hand, it appears arguable that the drafting of
subclause 255(3) means that the regulation making power is limited to prescribing
or including examples of processes that do or do not otherwise ‘have the
result’ of the goods being ‘fundamentally different in identity, nature or
essential character from all of their ingredients or components’ (that is,
On the other hand, paragraph 255(3)(a) could be
interpreted as allowing the regulations to prescribe that certain processes do
not result in a substantial transformation occurring when otherwise under the
legislation they would be regarded as doing so. Likewise paragraph 255(3)(b)
could be interpreted as allowing the regulations to include examples of
processes that substantially transform goods when otherwise they would not meet
the legislative requirements.
As such, it would appear that the Bill is only legally
current regulation making power is limited to prescribing processes that do not
otherwise result in the goods being substantially transformed and/or
current regulation making power to include examples of processes that result
in the goods being substantially transformed has no legal effect because the
requirement that the goods be genuinely substantially transformed imposed
by subclause 255(2) must still be satisfied, even where the relevant processes
are listed as examples in the regulations under paragraph 255(3)(b).
This would appear to suggest that the amendment proposed
by the Bill is only necessary if there is an intention to expand the definition
of substantially transformed to allow Australian-origin claims to be made in
circumstances where at a facility in Australia, a relevant TGA licensed manufacturing
process, which would not otherwise result in the good having a ‘fundamentally
different’ identity, nature or essential character from ‘all of [its]
ingredients or components that were imported into that country’ (for example,
mere encapsulation of imported fish oils, of the pressing of tablets that only
contain one active ingredient), is to be specified in the Regulations. That is,
if a process otherwise meets the requirement for substantial transformation in
Australia then the ACL already allows an Australian origin claim to be made,
regardless of whether or not the process is listed in the regulations as an
example of a process that results in the goods being substantially transformed.
Proposed paragraph 255(2)(c) will allow the
Regulation to provide that certain processes that occur in Australia amount to
a substantial transformation (and therefore permit Australian-origin claims)
even if that process does not result in the goods having a ‘fundamentally
different’ identity, nature or essential character from all of ‘their
ingredients or components that were imported into that country’.
lowering the substantial transformation test for a specific sector
Depending on the final contents of the Regulations and
Information Standard to follow the passage of the Bill, there is a risk that sector-specific
reforms enabled by the Bill would undermine the ‘consistency of a single
Australian origin test’ – a feature attractive for consumers and that promotes
greater consumer confidence in products making such claims.
The author of this Digest was unable to locate any current
examples of where mere compliance with Australian manufacturing, safety or
other Regulation enables an Australian-origin claim to be made about goods. For
example, mere compliance with Australian food standards does not, of and by
itself, permit Australian-origin claims to be made about food products.
This means that if mere compliance with a TGA-regulated,
GMP-compliant manufacturing process at a facility in Australia that does not
result in the good being substantially transformed allows Australian-origin
claims to be made about the product in question, this would appear to place the
complementary medicines industry in a unique position compared to other Australian
industries and sectors. Such a use of the Regulations would appear, for
complementary medicines alone, to equate ‘made in accordance with Australian
law’ and ‘Australian made’.
It is, however, difficult to state this with any certainty
as the proposed amendment only opens the way for future Regulations. As far as
can be ascertained, no exposure draft Regulations have yet been prepared. If
and when the appropriate Regulations are prepared, they will be subject to
review by the Senate Standing Committee for the Scrutiny of Delegated
Legislation, and to disallowance motions in the Parliament.
This will provide the Parliament with the opportunity to consider whether the
Regulation appropriately or inappropriately allows certain GMP-compliant
processes to support a claim that goods were substantially transformed (for
example, mere encapsulation).
the amendment the optimal regulatory response to the issue?
The Regulation Impact Statement specifically recommended
against making any changes to the country of origin rules in ACL
generally and in relation to complementary medicines specifically. As noted in
On the basis of the scant ‘evidence’ received to this RIS in
the form of data, such as lost jobs, a slowing industry, widespread consumer
confusion or plant closures and the like, a clear case for change has not been
demonstrated. In circumstances, where there is a lack of evidence of a problem,
the maintenance of the status quo is preferred.
In coming to this conclusion the RIS noted:
presented by the complementary medicine sector during the consultation process
‘was limited and consequently, a problem with existing laws was not
of the type proposed by the Bill would be ‘likely to offer more benefits to
complementary medicine companies than consumers’
of the type proposed by the Bill may ‘also create a risk to Australian
producers of actives, excipients, fillers and the like as complementary
medicine manufacturers will potentially be able to source these ingredients
cheaper from overseas and continue to use the AMAG logo’.
The CMT Report released under a Freedom of Information
request does not contain its recommendations, and appears to be missing other
information that could assist in determining whether any substantive evidence
supporting the proposed change that the industry has advocated for was provided
to the CMT, but not provided or examined in the RIS consultation processes.
The Bill has its genesis in industry representations to
the Government about purported negative impacts on the sector by the 2017
Act reforms. Whilst the entirety of the CMT Report is not publically
available, the parts of it that are, along with the Regulation Impact Statement,
suggest that there is little in the way of substantive evidence of negative
impacts on the sector (including into the future) flowing from the reforms.
Further, the RIS expressed an unequivocal recommendation
that no changes to the Act and ACL regarding country of origin claims be
made. In addition, it was noted that reforms of the type the Bill will enable are
likely to disproportionately advantage the interests of the complementary
medicine over consumers and may result in increased usage of imported
ingredients in Australian-manufactured complementary medicines at the expense
of locally grown or produced inputs.
As such, based on publically available information it
appears that the Bill and the mooted reforms that will follow should it be
passed by Parliament do not reflect a regulatory response informed by a
substantive body of evidence.
‘safe harbour’ provision (or safe harbour defence) in legislation or a regulation
specifies that certain conduct will be deemed not to violate a given rule. The Competition and
Consumer Act 2010 contains ‘safe harbour’ provisions that allow suppliers
of goods who have satisfied certain requirements to make a country of origin
labelling claims without the risk of being found to have breached the
prohibitions on false, misleading or deceptive conduct. Explanatory
Memorandum, Competition and Consumer Amendment (Australian Consumer
Law—Country of Origin Representations) Bill 2020, p. 2.
reading speech: Competition and Consumer Amendment (Australian Consumer Law —
Country of Origin Representations) Bill 2020’, Senate, Debates, 17
June 2020, p. 3475. ‘Substantial transformation’ is a concept of major
importance in administering the customs and trade laws. Where the good in
question is not wholly manufactured, produced, or grown within a single
country, the substantial transformation rule comes into play. The essence of
the substantial transformation rule is that a product cannot be said to
originate in the country of exportation if it was not manufactured there.
Descriptions) Act 1905 and the Commerce (Trade
Descriptions) Regulation 2016, which set out which goods or classes of
goods require labelling when being imported into Australia, what label is
required and where the label must be applied.
Schedule 2, clause 18.
Schedule 2, paragraph 29(1)(k).
Practices Amendment (Country of Origin Representations) Act 1998.
reading speech: Trade Practices Amendment (Country of Origin Representations)
Bill 1998’, Senate, Debates, 3 July 1998, p. 4885.
there is variation in the practice of governments with regard to the rules of
origin. While the requirement of substantial transformation is universally
recognised, some governments apply the criterion of change of tariff
classification, others the ad valorem percentage criterion and yet others the
criterion of manufacturing or processing operation. In a globalizing world it has
become even more important that a degree of harmonization is achieved in these
practices of Members in implementing such a requirement. See: WCO, ‘Rules
of Origin – handbook’, WCO website, pp. 9-11; W Cook and J Gordon, ‘Rules
of Origin: can the noodle bowl of trade agreements be untangled?’,
Productivity Commission Staff Research Note, Productivity Commission website,
May 2017, p. 6.
and Consumer Amendment (Country of Origin) Bill 2016, Bills digest, 9,
2016–17, Parliamentary Library, Canberra, 13 September 2016.
Schedule 2, subclause 255(1), table items 1 and 2.
Schedule 2, subclause 255(1), table item 3.
Schedule 2, subclause 255(2). The ACL doesn’t define what the terms ‘identity’,
‘nature’ or ‘essential character’ mean. They are generally taken to have their
Made Campaign, ‘About
the logo’, Australian Made website.
Impact Statement (RIS) in Explanatory
Memorandum, Competition and Consumer Amendment (Australian Consumer Law —
Country of Origin Representations) Bill 2020, p. 24.
op. cit., p. 2.
Care Manufacture Pty Ltd v Australian Made Campaign Limited (2018) 363 ALR
717,  FCA 1936.
paragraphs 5 and 6.
paragraphs 55 and 56.
Competition and Consumer Commission (ACCC), Country
of origin labelling for complementary healthcare products: a guide for business,
ACCC, Canberra, March 2018.
of origin labelling for complementary healthcare products’, op. cit., p. 7.
op. cit., p. 2.
reading speech’, op. cit., p. 3475.
op. cit., p. 42.
of Industry, Science, Energy and Resources (DISER), Country
of Origin Labelling Complementary Healthcare Taskforce report, Freedom
of information disclosure log 2019, 19/009, DISER, February 2019.
op. cit., p. 41.
p. 41; DIIS, Eligibility
for origin claims in the Complementary Medicines sector: Consultation
Regulation Impact Statement for the Legislative and Governance Forum on
Consumer Affairs, DIIS, 3 October 2019.
op. cit., pp. 34, 46–47, 49–50, 58–59.
reading speech’, op. cit., p. 3476. The Consumer Affairs Forum (CAF)
‘consists of all Commonwealth, State, Territory and New Zealand Ministers
responsible for fair trading and consumer protection laws. CAF was formerly
known as the Ministerial Council on Consumer Affairs (MCCA). CAF's role is to
consider consumer affairs and fair trading matters of national significance
and, where possible, develop a consistent approach to those issues... Ministers
meet once a year, and there are also several official level committees that
meet throughout the year to discuss specific aspects of consumer protection’:
Affairs Forum’, Australian Consumer Law website, n.d.
op. cit., p. 14.
op. cit., pp. 14-16.
pp. 12, 58.
of Origin Labelling Complementary Healthcare Taskforce (CMT), Report,
Department of Industry, Science, Energy and Resources (DISER), February 2019,
RIS, op. cit., pp. 58, 61–62, 66; CMT, Report, op. cit., pp. 4–5, 27.
reading speech’, op. cit., p. 3476.
Memorandum, op. cit., p. 2.
of Origin labelling for Complementary Medicines: proposed information standard’,
DISER website, n.d.
Goods Administration (TGA), ‘Good manufacturing
practice - an overview’, TGA website, 29 September 2017.
Memorandum, Competition and Consumer Amendment (Australian Consumer Law —
Country of Origin Representations) Bill 2020, p. 2.
Jones and MF Martin, International
trade: rules of origin, Congressional Research Service, Washington DC,
June 2008, p. 11.
of origin set out in a free trade agreement (FTA) play a key role in ensuring
that the economic benefits from trade preferences are granted only to the
countries that are a party to a particular free trade agreement.
Agreement Establishing the World Trade Organization, done at Marrakesh,
15 April 1994,  ATS 8 (entered into force for Australia and generally 1
January 1995), Annex 1A, Agreement on Rules of Origin (WTO Agreement).
Uruguay Round, Agreement on Rules of Origin (RoO Agreement), Part
II, Article 2; ‘Disciplines During the Transition Period’.
Agreement, preamble ‘Members... Desiring to harmonize and clarify rules of
origin’ and Articles 1.2, 2 and 3.
Barceló III, Harmonizing
preferential Rules of Origin in the WTO system, Legal Studies Research
Paper Series, Research paper, 06-049, Cornell Law School, Cornell University,
New York, 2006, p. 6; RoO Agreement, preamble ‘Members... Desiring to
harmonize and clarify rules of origin’ and Articles 1.2, 2 and 3.
Customs Organization (WCO), ‘Agreement
on rules of origin: The Harmonization Work Programme (HWP)’, WCO website;
Work Programme’, WCO website.
information on Rules of Origin’, WTO website; WCO, ‘Rules
of Origin – handbook’, WCO website, p. 2.
Jones and L Wong, International
trade: Rules of Origin, Congressional Research Service,
Washington DC, 3 March 2020, p. 3.
preferential Rules of Origin’, op. cit., p. 5; Jones and Wong, International trade,
op. cit., 3 March 2020, p. 4; Explanatory
Memorandum, Trade Practices Amendment (Country of Origin Representations)
Bill 1998, p. 6: ‘...”substantial transformation‟ will form the basis for
the WTO’s international rules of origin’.
Agreement, op. cit., Articles 2(a)(i), (ii) and (iii) and Articles
9(2)(c)(ii), and (iii).
Agreement, op. cit., Articles 9(1)(b), 9(2)(c)(ii) and (iii) and 2(a)(i),
(ii) and (iii).
preferential Rules of Origin, op. cit., p. 6.
Agreement, op. cit., Article 2(a)(b), (c), (d), (f) and Article 3(c).
art. 2(a)(iii), ‘in cases where the criterion of manufacturing or processing
operation is prescribed, the operation that confers origin on the good
concerned shall be precisely specified’ and (2)(c) ‘[Rules of origin] shall not
pose unduly strict requirements or require the fulfilment of a certain condition
not related to manufacturing or processing, as a prerequisite for the
determination of the country of origin’.
pp. 66, 72, 77, 81, 84, 89, 91, 94, 100 and 105.
Nomenclature; Chapter 30: Pharmaceutical Products’, WCO website.
Care Manufacture Pty Ltd v Australian Made Campaign Limited, op. cit.
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 9, 2020, 6 August 2020, p. 4.
reading speech: Competition and Consumer Amendment (Australian Consumer
Law—Country of Origin Representations) Bill 2020’, Senate, Debates,
27 August 2020, p. 41.
op. cit., generally; CMT, Report, op. cit., p. 4.
Report, op. cit., p. 35.
op. cit., p. 3.
op. cit., pp. 16–17.
op. cit., p. 5: ‘While the 2017 changes to the definition of substantial
transformation were an improvement, the results of this work are not always
black and white, with some contested interpretations of substantial
transformation being raised with the Taskforce. The Sector argues that in the
eyes of the consumer, the high regulatory standards of product and process
safety stipulated by the TGA, not the source of ingredients, qualifies their
products for an Australian country of origin claim. While the Taskforce had
some sympathy for this argument, the consumer research it commissioned does not
support this contention – while consumers value the Australian quality
processes highly they considered the AMAG logo a premium brand which should not
be associated with imported ingredients. In fact, consumers are likely to have
expectations which exceed the current Certified Trade Mark (CTM) rules and Code
of Practice underpinning the use of the AMAG logo.’; p. 32: ‘Consumers feel the
AMAG logo guarantees them a wholly Australian product – from the sourcing of
ingredients through to the manufacture and packaging’; p. 33: ‘Without
expressing the source of the ingredients with the logo, consumers may become
confused and believe the product is wholly Australian, when it is not.’
op. cit., p. 5.
Memorandum, op. cit., p. 2.
Statement of Compatibility with Human Rights can be found at page 4 of the
Explanatory Memorandum to the Bill.
op. cit., p. 26: ‘On 1 July 2016, the Country of Origin Food Labelling
Information Standard 2016 (the Information Standard) came into effect. The
Information Standard sets out mandatory country of origin labelling
requirements for food products sold in Australia. A key feature of the new
labels is the inclusion of the logo as part of the country of origin label for
foods grown, produced or made in Australia. As a consequence of this, the Deed
of Management between AMCL and the Australian Government was amended in January
2017. Under the amended deeds, use of the AMAG logo on food products sold
domestically is free of charge to the producer but must be used under the terms
of the Information Standard published by the Australian Government. AMCL
retains responsibility for licensing use of the logo on other Australian
products sold in Australia and overseas, and on Australian food products sold
overseas.’ (emphasis added).
. Legislation Act
2003 (Cth), section 42.
op. cit., p. 5 (see also p. 69).
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