Comments on the bill
The committee received submissions from various industry groups and one
General support for the bill
All of the submissions supported the intent of the bill and the broader Country
of Origin Labelling reforms that the bill contributes towards. For example, the
Australian Food and Grocery Council (AFGC):
...supports the urgent passage of the Bill to provide certainty
for industry through the transition period to the new Country of Origin
The passage of the legislation will provide the sectors with
the confidence to implement the labelling changes across product ranges in a
timely fashion and within the two year transition period which has already
Similarly, the Tasmanian Farmers and Graziers Association, a
longstanding supporter of strong Country of Origin labelling, considered that
increased levels of consumer information will only empower consumer choice.
In the context of the broader reforms, the Australian Industry Group (Ai Group)
...the Government on the responsive role that it has undertaken
in bringing revised country of origin food labelling requirements to fruition.
This has been a major and comprehensive process and the Government should be
recognised for the constructive and collaborative manner in which it has
consulted and developed this new system which aims to meet the many and varied
objectives of numerous stakeholders.
Despite the broad support for the bill, some stakeholders raised
specific concerns with the provisions of the bill. These concerns are explored
Removal of the 50 per cent production cost test
The bill proposes to remove the 50 per cent cost production cost test
for companies to claim that a product was 'Made in' a country. This change will
assist manufacturers for which the test was problematic. For example, the
Australian Made Campaign Limited (AMCL) highlighted that businesses had
difficulty assessing compliance with this criterion for a number of reasons:
Uncertainty about the origin of ingredients or components, either
because suppliers don't know or variability due to availability.
Detailed production information may not be available from
Taking into account currency fluctuations, calculating overheads
and allocating proportions to individual products.
In addition, the removal of the test may also support more efficient Australian
manufacturers that were potentially penalised under the existing regime:
...a small factory with outdated machinery and a higher level
of manual processing may be able to meet the 50% while a more highly automated
production process may not, even where they are producing the similar products
from identical inputs.
The removal of the test may also result in manufacturing companies that
use high value key ingredients being able to make 'made in' claims. The AMCL
Our understanding is that removal of the 50% test will result
in more companies in the pharmaceuticals/complementary medicines and
industrial/agricultural chemicals industries being able to make Made in
Australia claims. These are industries where the principal active ingredients
are relatively high cost and generally not manufactured in Australia.
While acknowledging the benefits of removing the 50 per cent test, AMCL
raised concerns that it may also result in adverse consequences for some
Australian manufacturers of inputs:
This will occur where a manufacturer opts to source cheaper
inputs offshore, knowing that it will not affect their capacity to make a Made
in Australia claim. An example of this is a manufacturer of soft gel capsules
who currently purchases gelatin from an Australian manufacturer because it
assists them to meet the 50% threshold. The local packaging industry may also
be impacted adversely by this change.
With the removal of the 50 per cent test, AMCL indicated:
Greater guidance on what does and does not constitute
substantial transformation for different types of products may mitigate the
impact on Australian suppliers...
The importance of guidance material was also highlighted by a number of
other stakeholders, particularly in relation to what constitutes substantial
Definition of 'substantial transformation'
While there was widespread support for this provision, stakeholders also
raised concerns about the changes to the definition of substantial
transformation and the development of associated guidance materials.
The AFGC emphasised the importance of upholding Australia's reputation
for quality food products and high safety and quality assurance standards that
apply in domestic processing facilities:
When determining the processes which qualify for substantial
transformation, the Government should ensure that equal consideration is given
to the consumers' desire to support value-added products that are underpinned
by Australia's world‑class food safety systems. In particular, the
Government should provide labelling guidance for goods that do not qualify as
substantially transformed but which may breach Australian consumer law if
labelled as 'Packed in Australia' when they have in fact undergone further
The AMCL contended the that current and proposed definition of
'substantial transformation' are:
...very far from providing a clear and objective criterion against
which to assess claims.
The phrase 'fundamentally different in identify, nature or
essential character' is highly subjective and open to interpretation.
The Ai Group raised concerns about the interpretation of the new
definition as it has been applied to some confectionary industry examples, as
provided in the Explanatory Memorandum. In particular, the Ai Group argued that
the additional processing in Australia to convert industrial chocolate into a
consumer‑ready finished product is complex and adds significant product
Where industrial chocolate is imported into Australia, it is
likely to be melted and conched in conching equipment, transferred through a
series of food safety critical control points to a tempering machine. The
process of tempering changes the chemical structure of the chocolate to
ultimately give the consumer finished product it shine, snap, mouthfeel and
associated organoleptic properties, such as smell, taste and texture.
The Ai Group contended that the additional processing of industrial
chocolate in Australia does represent a substantial transformation and urges
the government to consult widely with industry in determining what constitutes
a substantial transformation under this legislation.
Ocean Oils provided details of what it considers to be manipulation of
the previous Country of Origin labelling regime by various Australian
manufacturers which import bulk raw materials (in this case, a specialty marine
lipid known as 'Squalene') and package them into bottles of soft gel capsules
for retail sale.
Ocean Oils contended that the packaging of this product does not
constitute a 'substantial transformation' because the material inside the final
product is identical to the raw material. However, Ocean Oils noted that:
Although we are the only Australian manufacturer of Squalene
and although we sell not one drop of our Squalene in Australia, there
are presently 59 brands of 'Australian Made' Squalene endorsed by
the Australian Made Campaign Limited (AMCL) and all 'regulated' by the
Australian Competition and Consumer Commission (ACCC)...In addition, a recently
completed Market Research Report undertaken on our behalf by the good people at
Austrade China has revealed that there are 23 brands claiming to be
'Australian' or 'Australian Made' endorsed Squalene in the China market. 
[Emphasis in original]
Further, Ocean Oils reported that the Country of Origin claims being
made by competitors are:
...severely impacting on our ability to sell genuine Australian
Squalene in legitimate competition with incredible amounts of cheap, imported
'Australian' and 'Australian Made' endorsed Squalene...
Ocean Oils supported the position described in the explanatory
memorandum whereby importing goods and undertaking minor process that merely
change their form or appearance are not sufficient to justify a 'Made in'
claim. Further, Ocean Oils requested that the improved guidance material
clearly indicate that the packaging of Squalene and other marine derived health
supplements does not constitute a substantial transformation of the product.
An industry consultation process on the meaning of 'substantial
transformation' is being undertaken by the Country of Origin Taskforce (though
the Department of Industry, Innovation and Science) which will contribute to
the development of guidance material being prepared by the Australian
Competition and Consumer Commission (ACCC). This guidance material is intended
to provide further information and examples to complement the changes proposed
in the bill.
Noting this, however, the AMCL highlighted the limitations in the
usefulness of guidance material:
Although the ACCC [Australian Competition and Consumer
Commission] can and does publish guidelines on country of origin claims in
which it expresses its views on what may or may not constitute substantial
transformation, it acknowledges that 'interpretation of the law will always
ultimately be a matter for the courts' and such interpretation occurs on a case
by case basis.
The AMCL also noted that there was currently no mechanism by which
manufacturers could obtain a definitive answer regarding Country of Origin claims
and this could result in companies being hesitant to make a claim for fear that
competitors would challenge its validity.
The AMCL also noted that it had previously proposed a fee for service mechanism
whereby manufacturers could apply for a ruling on a country of origin claim
within a reasonable timeframe. The US Customs and Border Protection Customs
Rulings is an example of such a system.
The committee notes that the submissions received supported the intent
of the bill and the broader Country of Origin Labelling reforms.
While noting the specific concerns of stakeholders, the committee considers
that most of the issues raised can be appropriately considered through the
development of guidance material and the associated consultation processes.
That said, the committee appreciates that uncertainty can lead to lost
business opportunities and, as such, there could be benefit in the Government exploring
the establishment of a mechanism by which manufacturers can apply for a ruling
on Country of Origin Labelling claims.
The committee recommends the Senate should pass the bill.
Senator Jane Hume
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