Chapter 2
Key issues
Submissions
2.1
The submissions received by the committee reflect a wide range of views:
some submissions supported the amendment without qualification; several
provided in-principle support; and others strongly opposed the bill.
2.2
However, it should be noted that some submissions that were against the
provisions of the bill did, in fact, support its general intention to make country-of-origin
labelling (CoOL) of food more transparent and clear.
Public hearing
2.3
At the public hearing evidence was given by a diversity of interest
groups, some of which supported the amendment, others of which did not.
2.4
The committee also heard evidence from officers of two government departments
that work closely on CoOL issues, The Treasury and the Department of Industry,
Innovation, Science, Research and Tertiary Education (DIISRTE).
Committee clarification of the bill
2.5
The bill was introduced as a private senator's bill by Senator Christine
Milne, the leader of the Australian Greens. In the hearing held in Hobart on
18 February 2013, Senator Milne was clear about the need to adjust the bill in
order to strike a better balance between the interests of Australian primary
producers and those of Australian manufacturers and food processors. Senator
Milne said:
...since releasing the bill and getting it into this process I
have had a chance to talk to a lot of people and recognise that we have to
retain a made in Australia or processed in Australia component of labelling
because of manufacturing jobs. I have let people know that is clearly something
we want to do....We need to make sure that people know that a product is
processed in Australia in terms of the jobs.[1]
Support for the bill
Consumer support for tighter CoOL
legislation
2.6
Many submissions supported better CoOL for Australian food. This support
clustered around two main themes:
- a desire to support local producers and industries; and
- the belief that current labelling terminology and standards are confusing
or misleading.
The desire to support local
producers and industry
2.7
The committee received a number of submissions from individuals whose
submissions were based on form letters available online. Many of these used a
generic text supporting the bill:
Country of Origin Labelling is vital to the protection and
promotion of this country's food and its producers.
As a consumer I am eager to buy from local growers and
processors but am unable to rely on food labels with misleading claims about
the origin of food and fresh produce.[2]
2.8
Consumer support for more transparent CoOL labelling was also referred
to by several submissions, citing CHOICE 2011 survey work on CoOL, which found that
90 per cent of Australian consumers would like clearer CoOL information on
products they buy.[3]
These submissions included those made by the Horticulture Taskforce, the
Australian Manufacturing Workers Union (AMWU) and the People's Food Sovereignty
Alliance.[4]
2.9
For example, the People's Food Sovereignty Alliance stated in its
submission:
There is clear evidence, produced by CHOICE and others, that
the current proliferation of country of origin claims made on food labels
creates confusion in the minds of Australian consumers. There is good evidence
that a majority of people want to support local farmers and food producers, but
that the current legislative and regulatory framework prevents them from doing
so.[5]
2.10
Mr Kirkland from CHOICE elaborated on this theme at the hearing:
...we feel there is a need to re-examine the system of
county-of-origin food labelling in Australia. It is an important and priority
consumer issue based on the research that we have done. When it comes to
choosing what food to buy, our research shows that origin is second only to the
actual ingredients themselves, so it is one of the biggest issues for
consumers. While consumers care about where their food comes from, origin
labelling is valued for some foods more than others. So, in general, the
fresher the food, the less processed the food, the much more important it is
for consumers. For very highly processed foods it tends to be less of a
concern, but we still think it is important that the labelling system is
accurate and understandable.
We do feel—and our research bears out—that the current system
of food labelling is confusing and is poorly understood by consumers.
Peak body support for new CoOL
legislation
2.11
Many of the submissions made by peak bodies representing primary
producers also argued that Australia needs better CoOL legislation. Some of
these submissions maintained that Australia would be better served by new CoOL
provisions than education campaigns informing consumers about the current
framework.
2.12
The submission made by the Horticulture Taskforce, which represents many
peak bodies for regional and specific fruit and vegetable primary producers,
supported all provisions of the bill: the proposed simplified CoOL system, the
90 per cent threshold for "Made of Australian Ingredients", the
water-neutral position for processed goods, and the cessation of the terms
"Produce of Australia" and "Product of Australia".[6]
2.13
In his opening statement, Mr Seymour elaborated on the Horticulture
Taskforce's position:
...we believe that an informed consumer is the bedrock of an
efficient, effective and fair marketplace where foreign and local producers can
properly compete. The current food labelling system is confusing and ambiguous.
It does not allow consumers to make clear and informed choices based on the
origin of their food. This, in turn, hurts Australian producers.[7]
2.14
This view was supported by evidence given by Ms Moloney of the
Australian Food Sovereignty Alliance:
We support this bill because it places Australian farmers in
the spotlight. Currently non-Australian farmers and producers have a
competitive advantage whereby they are allowed to declare their produce 'made
in Australia' when that is not true to what this phrase implies. Through this
bill there is an opportunity to financially and socially support our farmers
through endorsing an appropriate country-of-origin labelling system. We live in
a time when Australian farmers are an ageing population; they are literally
walking off their farms at increasing rates. Research shows that levels of
suicide and depression for farmers are double the national average. This bill
is a very clear action that will help support our farmers in becoming more
viable. In doing so, we will help rural and regional communities to not only
survive but to thrive.[8]
2.15
The Horticulture Taskforce supplied the committee with specific examples
of products where Australian growers are put at a disadvantage by current CoOL
regulations. These included goods sold in pre-wrapped packages, trays or frozen
bags, where a small proportion of local produce is mixed with imported produce so
that the claim can be made that the goods are made from 'local and imported'
ingredients, without specifying the proportion of imported product used. The
examples provided were whole or processed mushrooms in trays, lemons, apples
and other fruit and vegetables, either whole in trays or in processed products,
as well as the imported pulp of bananas, avocados and passionfruit.[9]
2.16
The Horticulture Taskforce also highlighted the use of Australian place names
on products that consist of entirely imported ingredients, particularly in the
case of apples. It also drew the committee's attention to one case where the Australian
flag was used on an imported product for an Australia Day promotion.[10]
2.17
Ms Dowell of the Australian Manufacturing Workers Union (AMWU) noted
that changes in the country-of-origin of products used in supermarket home
brands could also be misleading for consumers. She said:
...with supermarket own labels, quite often people will read
them once to see where the country of origin is, but the country of origin will
regularly change. However, the product will still have the same label on it,
sitting on the same spot on the shelf. So you can pick up a can of peaches,
which I did, and find that they are 'Product of Australia', but within a very
short period of time they were 'Product of South Africa', which is what they
still are. In many cases they will start out using Australian raw materials and
making them in Australia in order...to get buyer loyalty, and then, when they
have done that, they will go to another supplier. The suppliers change
regularly, but there is nothing anywhere there that tells people that. A lot of
consumers have only read it once and they think, 'Yes, that's good.' They do
not read it again. You would have to read it every single time you pick those
products up. Whereas labelled products will actually have clear labels that
say, 'This is an Italian brand of tomatoes,' or whatever, supermarkets' own
labels do not.[11]
Support for the bill's intention
2.18
Other submissions were more guarded, voicing support for the intention
of the bill, but not its substance. For instance, the Australian Made Campaign (Limited)
(AMCL) stated:
AMCL acknowledges the shortcomings in the current labelling
regime and welcomes the proposal before Parliament as stimulating discussion on
an important issue. However we believe the proposal as it stands requires
substantial revision before it could be considered an acceptable alternative to
the current food labelling system.[12]
2.19
And Growcom, a peak body for Queensland agricultural producers,
submitted that it strongly supported the intention of the bill, but not its
detail. However, it claimed that further education programs about the current
legislative framework for consumers would not address the real, underlying
problem:
The current labelling scheme is too vague, and many consumers
easily misunderstand the intended meaning of the labels... It has been argued
that the meaning of current labels can be better communicated to consumers,
removing the need for changes to the labelling scheme. However, the vague
messages and risk of misinterpretation would remain... Growcom argues that some
simple modifications of the labelling scheme would provide a more elegant and enduring
solution.[13]
Positive effects on Australian primary
producers, manufacturers and retailers
2.20
Some submissions stated that better CoOL legislation would benefit parts
of the Australian primary production, manufacturing and retail sectors.
2.21
Coles stated in the hearing that the introduction of its
Australian-sourced home-branded lines had been a success:
Senator COLBECK: Okay. Back in 2005-06, you moved to a
fairly deliberate policy of sourcing a number of your home-branded products
locally and probably stole a march on the rest of the industry. Can you give us
a sense of the consumer reaction to those products? Your Australian peas, for
example, would be one that I would recognise, to start with. But can you give
us a sense of the reaction to that and where they have fitted into the broader
market?
Mr Mara: Yes, we went into the market with Simplot, as
you probably know, making Coles branded products down in Tasmania. The consumer
response has been very positive. I will not give you a percentage over the phone,
but we do provide those kinds of numbers in terms of the relative popularity of
the leading brands. But they have been very successful for our frozen vegetable
range...[14]
2.22
The Australian Seafood Industry Alliance applauded the underlying
intention of the bill and the amendments
it proposes. The Alliance stated that 'there is an urgent need for government
intervention in mandating consumer value labels in the recent Blewett Review'.[15]
However, it also stated that the bill needs to be developed further, especially
as far as seafood CoOL provisions were concerned and proposed two additional
amendments focussed on CoOL for seafood.[16]
2.23
The Australian Manufacturing Workers' Union (AMWU) expressed concern
that the good reputation that Australia's manufacturing sector currently has, is
being cheapened by vagaries in CoOL laws. The Secretary of the Food and
Confectionary Division of the AMWU, Ms Dowell stated that:
...[the Measurement Institute in Melbourne who do testing on
imported goods] said to me that, depending on how high the risk is, that
determines how much testing they might do. So, obviously, if a pallet of food
comes in from New Zealand they do not really bother about that too much,
because New Zealand has pretty good quality, and they might take a couple of samples.
But if it comes in from China—which is a high-risk country—they will take more
samples and they will be more rigorous about the testing.
In many cases, they might not test a consignment at all if it
comes from a low-risk country. That is what they told me. They said that when
they do test things they test them for the normal things that they would test
for here, which has proven to be a mistake in the past with, particularly,
stuff from China where they still use DDT, which we do not test for here because
we do not use it...
Having worked in the food industry, the level of testing in a
factory in Australia is pretty high. You are constantly testing what goes
through the line and reviewing it. It is quite different to having a container
load of food coming in and taking a can off every eighth pallet. Your chances
of finding something in that sort of testing regime are not as high as the
standards that we have here.
[CHAIR]: So to be very clear: the country of
manufacture is very important for Australian consumers because that will
indicate to us whether or not that food was manufactured under particular
hygienic or sanitary conditions that we have come to expect from an Australian
standard?
Ms Dowell: That is right.[17]
2.24
Ms Dowell also highlighted the central difficulty of amending CoOL laws
– creating a regulatory environment that supports Australian primary producers,
whilst also meeting the needs of the business and manufacturing sectors:
There are a number of issues in the bill that we think need
to be taken up, particularly how it reflects on manufacturing. We are quite
supportive of the fact that obviously the original intent of what has been put
forward is to deal with making sure that, as much as possible, raw materials
can be sourced from within Australia, but we also want to make sure that there
is an incentive for our manufacturers not just to use Australian raw materials
but to provide the same high levels of quality in manufacturing as they do at
this particular point in time.[18]
2.25
Although the AFGC opposed the bill, the matter of the safety, quality
and standards of the Australian food processing industry as a positive selling
point, both for domestic and international markets, was also drawn out during
the public hearing:
[CHAIR]: ...Do you think the Australian public is aware
of any differences [in Australia compared to other countries], if they do exist,
in manufacturing standards when it comes to food preparation?
Mr Dawson: I think the general view would be that we
have high standards—and we do—around food safety through the manufacturing
process. Consumers therefore would be more comfortable about food that is
manufactured, processed in Australia, to the extent that they are concerned
about those matters. So, yes, I do think it gives them some comfort if there is
an indication that the food was processed and manufactured here versus
offshore. Again, in a sense, even if all the ingredients came from overseas but
the processing is done here, it abides by the regulatory system here, it
generates jobs here, in our view, a 'Made in Australia' tag is still valid or
still should be able to be used on those products. If we want the indication
that the ingredients were predominantly or all imported, then we say 'Made in
Australia with imported ingredients' and that tells the consumer that value-add
occurred here, manufacturing was here, standards applied here and the raw
ingredients came from overseas.[19]
2.26
This was supported by evidence given by the Department of Industry,
Innovation, Science, Research and Tertiary Education (DIISRTE). The
department's answers to questions put on notice stated:
There is broad consensus within the Australian food industry,
across both primary producers and food processors, that Australia’s national
reputation for food security and quality translates to an international brand
identity that fosters positive consumer responses, particularly in Asia.[20]
Committee view
2.27
The committee understands that Australian consumers have a substantial
appetite for more information about where the food they buy is grown, processed
and manufactured. However, the committee has seen in this inquiry that although
support for the intention of the bill is substantial, support for the substance
of the amendments is not. The committee is of the view that the proposed
amendments need further consideration and work.
Recommendation 1
2.28
The committee recommends that the bill as drafted should not be passed.
Opposition to the bill
2.29
Several organisations that made submissions commented that, although
they strongly supported the intention of the bill in making CoOL clearer, the proposed
amendments require additional clarification and modification to be
fit-for-purpose.
2.30
Criticisms fell into four main categories:
- the amendment does not distinguish between packaged and non‑packaged
foods sufficiently and has the potential to create loopholes for imported fresh
goods processed and packaged in Australia;
- the amendment does not sufficiently define 'substantially
transformed';
- the threshold of 90 per cent excluding water for the term
"Made of Australian Ingredients" does not accommodate some industries
where water is a defining part of the product, particularly the brewing
industry; and
- compliance with the bill may affect Australia's manufacturing
sector negatively.
Insufficient distinction between
packaged and non-packaged foods
2.31
Some submitters were concerned that the proposed amendment does not distinguish
between packaged and non-packaged foods. Australian Pork Limited, the peak body
for Australian pork producers stated:
APL is supportive of a distinction between food and other
goods in labelling matters, but is concerned that the Bill as it is lacks
internal consistency as it creates different labelling requirements for
packaged and unpackaged foods.[21]
2.32
The Horticulture Taskforce provided an example of where the proposed
amendments would introduce a potential loophole. This loophole could allow
imported fresh food processed in Australia and sold in packages to be sold as
Australian processed goods with no CoOL under the proposed amendments. Mr Seymour,
the Deputy Chair of the Horticulture Taskforce, stated:
Our primary objective is to point out to the Committee the
need for the Bill to include a specific new provision to cover regulated fresh
food displayed for retail sale in a package. The Bill in its current form does
not specifically address the situation where fresh fruit and vegetables (whole
or cut) is displayed and sold in a package (for example fresh oranges contained
in a netting bag, or cut mushrooms packaged in a plastic tray and covered with
plastic wrap). Items 4 and 5 of section 137A refer only to fresh food “other
than in a package” or “unpackaged food”.
It is unclear if Items 2 and 3 of section 137A, dealing with
packaged food “comprised of ingredients or components” grown in Australia, are
intended to cover regulated fresh food in a package. We do not believe that
this was the intention.
There appears to be a gap in the Bill, and the Taskforce
believes that the legislation must mandate a clear statement identifying the
country where packaged fresh food was grown.[22]
2.33
The Horticulture Taskforce felt this was important to include in the
amendments to the current legislation because of the increasing popularity of
packaged food and pre-processed packaged vegetables. The Taskforce commented
that this was especially because these products are favoured by younger
demographics of consumers, which could make these loopholes more of an issue in
the future if they were not addressed now.[23]
Committee view
2.34
The committee agrees that the amendments as drafted would leave a
loophole for processed packaged goods and, moreover, that they do not
sufficiently recognise the distinction between packaged and non-packaged fresh
food.
'Substantially transformed'
insufficiently defined
2.35
Many of the submissions and witnesses commented that both the current
legislation and the proposed bill do not sufficiently define what constitutes
'substantial transformation' of products or goods. Although this is primarily
to do with the current legislation – rather than the proposed amendments – the
committee feels it is a significant enough issue to warrant some discussion
here, as it may inform future work on new or amended CoOL standards.
2.36
Current CoOL legislation states that goods are 'substantially
transformed' in a country when they 'undergo a fundamental change in that
country in form, appearance or nature such that the goods existing after the
change are new and different goods from those existing before the change'.[24]
2.37
The Australian Competition and Consumer Commission (ACCC) has noted in
its current guidelines for Australian CoOL legislation that processing imported
and Australian ingredients into a finished product (such as a cake) would most
likely be recognised as a substantial transformation, but that less significant
changes to ingredients may not be. The example the ACCC cited in this second
instance is the reconstitution of imported fruit concentrate, regardless whether
Australian water, sugar, preservatives and packaging were used in this process.[25]
2.38
Evidence presented to the committee noted that the threshold for
substantial transformation is, at present, set very low. Some goods may be
labelled as 'made in Australia', even if all the main ingredients have been
imported if they have undergone 'substantial transformation', and providing
that 50 per cent of the cost of production is incurred in Australia, as per the
current legislation.[26]
2.39
The importance of these arrangements was drawn out in AMCL's submission:
Our major area of concern is in the interpretation of the
term 'substantial transformation' in regard to food products, particularly as
set out in the ACCC booklet 'Food and beverage industry: country of origin
guidelines to the Trade Practices Act'. Under these guidelines, mixing,
homogenisation, coating and curing are all processes "likely to be
considered as substantial transformation".
Thus, mixed diced vegetables, blended fruit juice, crumbed
prawns and ham and bacon, may qualify as Australian Made even though all the
major ingredients may be imported, as long as 50% of the cost of production is
incurred in Australia.[27]
2.40
This issue was drawn out in AMCL's appearance at the public hearing:
Senator MILNE: ...I wanted to go to one thing in your
submission and is something that comes up all the time, which is part of the
complexity of this issue—that is, the rules around substantial transformation.
You have identified in your submission many of the concerns that people have
about mixed diced vegetables, blended fruit juices or crumbed prawns et cetera.
Can you tell me how you would redefine 'substantial transformation'?
Mr Harrison: We are not seeking to amend the actual
provisions in the act or how the act defines 'substantial transformation'. What
we have sought to do is say that, certainly in the food area, there seems to be
some slippage in the system with products that the consumer might generally
think to be Australian; but, whilst they have been by definition substantially
transformed here, the product itself is ostensibly an imported product. That is
where imported pork can become bacon, imported concentrate juice can become
reconstituted fruit juice and imported fish can be crumbed in Australia. There
are a range of processes, such as those for coffee beans, slicing and dicing
vegetables and seasoning and homogenising, that we have identified, and we have
said that the problem is not so much the definition—because how you define
'substantial transformation' is always going to be a little bit problematic,
but the act has a definition and we are comfortable enough with that—but,
rather, working out what processes do not constitute 'substantial
transformation'. It is a bit of an affirmative action thing. We are really
doing it because we want to preclude some end results from meeting the
'substantial transformation' test. The impact of that is that, if a piece of
crumbed fish cannot be called 'Made in Australia' because it has not met one of
the two pillars to stand on—it might meet the 50 per cent-plus cost test but it
does not meet the 'substantial transformation' test because we have said that
process does not constitute substantial transformation—then for the purposes of
the 'Australian made' logo, if that company want to use the logo, they need to
go to one of the other logos used.[28]
2.41
The Australian National Retailers Association (ANRA) supported this
view:
ANRA feels it would be more appropriate to 'tighten up' the
definition of substantial transformation for 'made in ' or 'product of' claims.
This could potentially take the form of specifying the processes or combination
of processes required to satisfy a definition. The 'made in' and 'product of'
claims would essentially become more exclusive, and if Australian consumers
send clear signals through their purchasing patterns then retailers and
manufacturers have a clear incentive to strive for these claims.[29]
2.42
This theme was drawn out by Mr Mara from Coles at the public hearing:
[CHAIR]: In your submission you make the point that
the loss of the substantially transformed test could benefit imports over
products that are made in Australia by Australian workers. Could you elaborate
on that please?
Mr Mara: I guess for the 'Made in Australia' claim,
the transformation test in itself is not a bad test. We would argue I guess
that it is probably a little low. As a consequence of a combination, if you
like, of not having things like pork using words like 'cured' it should have a
higher threshold, essentially. The test itself is fine; it is just the
threshold is probably too low.[30]
2.43
Furthermore, it was suggested in the hearing that the administrative
process around making a claim under Australian Consumer Law should be
expedited. Mr Harrison of the AMCL told the committee that:
We also have a view...that there should be an administrative
provision that enables companies to more easily get a ruling on whether a
product meets the tests required to make a claim under the Australian Consumer
Law. At the moment, the system is fundamentally litigious: you make a claim and
the only way that that claim can be tested is ultimately in a court of law,
when action is taken against the company making the claim. This is a grey area,
and substantial transformation is not clearly defined. We are now saying it
should be more strictly defined by way of precluding some processes. In any
event, we think there is scope for an administrative provision to be put in.[31]
Committee view
2.44
The committee considers that the current definition of substantial
transformation could be more precise and less open to interpretation and manipulation.
The committee recommends that the government should consider ways in which the
CoOL framework in general, and the definition of substantial transformation in
particular, could be made more precise and more beneficial for consumers,
primary producers and manufacturers alike.
Recommendation 2
2.45
The committee recommends that the government should consider developing
a more effective country of origin (CoOL) framework (including a more effective
definition of 'substantially transformed'), which better balances the interests
of consumers, primary producers and manufacturers.
Creating a "negative
list" for substantial transformation
2.46
Over the course of the hearings, there was some discussion on the
creation of a "negative list", which would codify what processes
would not meet the threshold to claim substantial transformation of
goods had occurred in Australia. Although this matter is slightly tangential to
the substance of this inquiry, the committee felt it should be raised as a
potential area that government could examine to improve CoOL in the future.
2.47
There was some backing for the idea by witnesses. For example Ms Crowe,
representing AMCL, stated:
Senator MILNE: Do you support that—a negative list—as
a regulation which could be updated from time to time as required?
Ms Crowe: Absolutely. The current act, the Australian
Consumer Law, has a provision for regulations to be made to specify which
processes do not constitute substantial transformation. So the mechanism is
already there and this is the path we have gone down. We already have a starter
list, if you like. But we certainly support that proposal—that we list those
processes which should not be considered substantial transformation. For
example, blending imported pineapple juice and imported orange juice is not a
substantial transformation, so such a regulation would mean that that product
cannot be labelled 'made in Australia'.[32]
2.48
This perspective was shared by representatives from CHOICE, who saw
regulation as a way of dealing with a complex issue in a way that would
continue to provide a workable framework for CoOL as manufacturing technology
and techniques develop in the future:
We do not have detailed views around what the [negative list]
regulation might look like. I would agree that it is likely that there will
need to be, as well as any regulations, some guidance, because manufacturing
techniques will continue to evolve, as will the sources of ingredients and the
way in which different products are put together before you reach an end
product. It is important that the system of regulation has enough flexibility
to deal with that. That is why we feel that a regulation is the correct way to
deal with this, because it does allow for some flexibility for it to evolve
over time without ever requiring to go through the normal parliamentary path
that primary legislation would require, but that should be accompanied by
guidance that could evolve even more rapidly and frequently.[33]
2.49
More sceptical views on the possible introduction of a negative list were
expressed by the government departments that appeared at the public hearing. Officials
from The Treasury and DIISRTE stated:
Senator MILNE: ...What is your response to the idea of a
negative list to lift the threshold for what 'substantial transformation' is by
ruling out things that clearly are not substantial transformation?
Mr Francis: My understanding is that what substantial
transformation is a question of law in Australia but will be dealt with in
industry guidance material that is being prepared. Taking the issue of whether
adding water to a juice constitutes a substantial transformation, that is a
matter of law. If in the event it is not a substantial transformation then
someone using the 'made in Australia' claim would be breaching the ACL, because
they would be making a false and misleading representation.
...
Ms Milward-Bason: We have been considering the fact
that substantial transformation can be regulated. At the moment, what we are
trying to do is get together some guidance material on substantial
transformation that is better than what we have at the moment. I believe that
current guidance materials would suggest that adding water to a juice
concentrate would not be substantial transformation. It says that making a cake
from a whole lot of flour, eggs and sugar from other countries would be
substantial transformation. There is really a black and white approach at the
moment.
Our objective with the industry guidance on country of origin
labelling that we are about to start developing in consultation with industry
is to work out what is and is not substantial transformation for some of the
greyer areas. We would rather try doing that through better guidance as what
may or may not be considered to be substantial transformation, knowing that it
is ultimately a question of law and that law trumps guidance. It is certainly a
first attempt to do something more on substantial transformation. We understand
that there is an issue here. Moving straight to regulation could lead to
unintended consequences. Our first step process is to develop the guidance
material for industry. Once we have developed that and it has been disseminated
we have the 2015 consumer survey coming out to measure whether or not that has
improved matters. If we find that there is still a problem that will be the
time for you to consider increasing regulation.[34]
Committee view
2.50
The committee sees the development of a negative list as a potentially
useful tool for making CoOL easier to understand – both for Australian
consumers and for importers, businesses and manufacturers. The committee takes
this opportunity to encourage the government to look into the benefits and
drawbacks of a negative list for substantial transformation.
Recommendation 3
2.51
The committee recommends the government consider the potential benefits
and drawbacks of creating a "negative list" for processes that do not
satisfy the "substantial transformation" test for CoOL purposes.
Potential impact on the brewing
industry
2.52
The Brewers Association stated in its submission that the amendments
would damage Australian brewers, as their products contained a significant
amount of local water and a proportionally high amount of imported ingredients,
including hops. The Association stated:
With specific reference to water as an ingredient, the water
used in brewing is an integral part of the beverage and has a significant
impact on the quality and character of the finished beer. For that reason we
are strongly opposed to the total exclusion of water from the requirement to
calculate the origin of ingredients.[35]
2.53
The potential disadvantage to the Australian brewing industry was also
noted by the AFGC.[36]
Potentially negative effects on
Australia's manufacturing sector
2.54
Several submissions stated that the proposed amendments would be damaging
for Australian manufacturers due to the cost of adapting to a new regulatory
environment. Moreover, there was some suggestion that dropping the
"Product of..." and "Made in..." labels would make it difficult
for consumers to actively choose to support Australian jobs in the
manufacturing sector.
2.55
Ms Milward-Bason of The Treasury was asked if the bill had any
unintended consequences. She replied:
The fact that the rules for Australian origin would be quite
strict under legislation of the kind in the bill would mean that it would
become quite costly for Australian industry to comply with those rules. You
will have probably quite a number of producers who will not know what sort of
origin they will be able to attribute to their goods, and you would possibly
encourage some producers to go offshore, particularly those where there is no
way that they will be close to a 90 per cent content—I am thinking of those
where there is no real commercial availability of ingredients in Australia,
such as for producers of chocolate or cranberry [sauce] They might be
encouraged to go offshore.[37]
2.56
Food South Australia (Food SA) submitted that:
The only manufacturer [the changes proposed in the bill] could
feasibly benefit would be a niche producer, who differentiates on the basis of
local, high-end production; and, whilst they are vital contributors to the
diversity, culture and flair of the industry, represent a minority employer of
the 226,750 Australians employed in the food and beverage sector in 2009-10.
Over the longer term, as they grow, it is probable that this amendment would
also represent a long-term disservice to them.[38]
2.57
Although Coles supported current food labelling laws being strengthened,
it suggested that:
...the Bill in its current form could add further consumer and
industry confusion and disadvantage the Australian manufacturing sector.[39]
2.58
The Australian Food and Grocery Council (AFGC) felt the proposed
amendment would inhibit Australian producers and manufacturers in overseas
markets. It stated in a reply to a question on notice:
By seeking to prohibit the use of the terms ‘Product of’ and
‘Made in’ in relation to food – this Bill will penalise food manufacturers from
trading on the premium of brand Australia – a highly sought after brand
particularly in Asian markets.[40]
Cost of adaptation
2.59
A common theme of the submissions was the concerns about the increased
compliance costs on business and the manufacturing sector that could flow from
the amended CoOL regulations.
2.60
The Brewers Association suggested that the current terms "Product
of Australia" and "Made in Australia" should be maintained. This
would 'mean substantial cost savings to the consumer as those products already
meeting the requirements would not need to change labels'.[41]
2.61
Mr Talbot, Director of Corporate Affairs Australia and New Zealand,
Kraft Foods Australia, also stated that the proposed amendments would have a
negative influence on the performance of Kraft's brand Cadbury, especially its
Australian-made chocolate: This was drawn out in the public hearing in Hobart:
...if we have to name the top 3 ingredients, sugar,
dairy and cocoa. The cocoa can be sourced from a variety of origins—Africa,
Indonesia, the Solomon Islands, et cetera. We would not want to have our
production processes held back by the fact that we had to relabel on a regular
basis, because labelling is actually quite expensive.
I will give you a broader example around food labelling which
relates to what we are talking about today. It has taken us 15 years to get the
one Cadbury dairy milk label accepted by 17 export countries, many of which are
in Asia. If we have to change the label, even if it is as simple as stating
'Tasmanian dairy', it has to go through a regulatory process in probably half
of those countries. At the moment I can switch the machine on at Claremont and
run it flat out at about 85 per cent asset efficiency. I do not want to do label
changes for different markets, which could mean diverse outcomes.[42]
2.62
Moreover, the submission made by the AFGC argued that some leeway should
be given to manufacturers subject to fluctuations in price or seasonal variation
of their primary goods:
Industry requires flexibility in the way that legislation is
applied to a particular batch or package, taking into account that sourcing of
ingredients may be subject to variations in price and seasonal fluctuations in
supply, while also ensuring that consumers are not misled about the origin of
the food and its ingredients used by the manufacturer.
The current test for "Made in Australia" focuses on
substantial transformation – or where the jobs are. This is important and
meaningful information for consumers that should not be lost.[43]
2.63
In its submission, Coles stated that, should the bill be implemented, a
lead time of at least 24 months be given to business for compliance so as to
avoid imposing extra costs on suppliers, manufacturers and retailers:
Many food supply contracts operate across significant
durations and product packaging is often printed well in advance of use.
Without sufficient time to implement these changes, retailers and manufacturers
would incur unnecessary regulatory costs and burden.[44]
2.64
The AFGC stated that the adoption of more complex systems of CoOL also
had attendant problems, including increasing fiscal burdens on businesses:
...the Centre of International Economics...found that [an
approach where all the major ingredients in a product were listed on packaging]
would significantly increase costs due to the complexity of the food system,
and adding a significant burden due to additional labelling costs, particularly
small businesses. Companies may source the same type of material from more than
one country due to seasonal variability or other factors affecting supply. It
is costly and impractical to have to keep changing the labels on foods to
inform customers of the exact origin of the imported food.[45]
2.65
However, alternative views on this matter emerged over the course of the
hearing. Ms Dowell from the AMWU recalled how one manufacturer changed its
labelling quickly and easily, and in a way that appealed to consumers:
Ms Dowell: ...There are always issues raised about the
cost to manufacturers, but we have a view that it is not necessarily a huge
impost to manufacturers and if they really want to do these things they can.
To give an example of that, which is an example I have given
previously in discussions, we have a fruit juice factory that makes a particular
brand of mixed fruit juices. When they could not source raspberries in
Australia at one stage they sourced local plums and put a sticker on the juice
that simply said they could not source raspberries and rather than import them
they had decided to use local plums. Every consumer that I spoke to thought it
was a fabulous thing for them to do.
Senator COLBECK: Because they could not import them or
they did not want to?
Ms Dowell: They did not want to. Wherever possible
they source locally. When they could not get the raspberries locally, they
decided that rather than import them they would put local plums in. [46]
2.66
This proposition was supported by representatives from CHOICE. One of
them, Ms McDougall, stated:
It was really interesting to hear from Cadbury. I have also
been to the Arnott's factory, for instance, and seen how they do their
labelling for the different regions that they sell into. At their Sydney based
factory they provide a number of product lines to a number of markets, and they
have the rolls of packaging there ready to go. There might even be a small
change in the ingredients, and if that is the case, depending on what the
requirements are in an export market, then they will do that on a separate day.
If there is no change in their ingredients, it is simply a matter of changing
the rolls over, and their packaging literally rolls off and is sliced at each
point. So my understanding from Arnott's—and it is only one example and I am
sure that they could provide you with more information, as could other
manufacturers—is that it is relatively simple for them to change their
packaging.[47]
2.67
Ms McDougall expanded upon this later in the hearing:
We certainly hear transition as the main argument against
reform in a range of labelling areas. It is always interesting to hear how a
company expresses that difficulty. From what we see there seems to be no
difficulty in getting a Smurfs promotion onto a number of labels because
a [movie] is out, but when it comes to getting out information that consumers
want they seem to invoke the 18-month estimation. So we do take a healthy
scepticism towards those claims. At the same time, as I understand it, the
rolls of labels are ordered in advance, and they are ordered in bulk. The
argument there is that you would be wasting those labels if you had to
basically bin them overnight and come up with a new set. So we do recognise the
need for a transition period. We are by no means the best people to say how
long that transition period should be, but I think we would want to see some
evidence behind claims of 18 months to two years, and I think we have heard
today some varying estimates from different industry representatives. So
perhaps some more views on that would be helpful.[48]
Lack of information about the place of processing and manufacture
2.68
The AFGC stated that it would like to see consumers being given the
option to choose to support Australian jobs in the processing and manufacturing
sectors. It argued:
...the AFGC is opposed to the proposed [amendment as it] fails
to provide clear and unambiguous information about the origin of processed
value added food products and where these products are made, and in doing so,
fails to provide consumers with the option to support employment in Australia,
particularly in rural and regional employment.[49]
2.69
Furthermore, the AFGC favoured keeping the status quo and maintaining
the current test for "Made in Australia" as it:
...focuses on substantial transformation – or where the jobs
are. This is important and meaningful information that should not be lost.[50]
2.70
Coles took a similar position in its submission:
...it is important to recognise the place of manufacture and/or
transformation in order to support Australian manufacturers. In our view,
criteria should be maintained in order to ensure sufficient incentive to the
Australian manufacturing sector.[51]
2.71
Additionally, criticisms were levelled at the bill's suggestion that
"Made of Australian Ingredients" is a readily understandable term. The
Australian Industry Group (Ai Group) suggested in its submission:
"Made of Australian Ingredients" doesn't mean that
the product is Made in Australia. It is feasible that Australian glucose syrup,
sugar and gelatine could be sent to China for the manufacture of sugar
confectionary at much lower packaging, labour and overhead costs yet as long as
there is more than 90% ingredients from an Australian source the country of
origin declaration would read as "Made of Australian Ingredients" and
consumers will be none the wiser as to where the product was actually made.[52]
Committee view
2.72
The committee can see that the amendments currently being examined may
have some negative effects upon Australian industry and manufacturers. Again,
the committee sees that there are opportunities for the current legislation to
be improved to meet the needs of consumers, producers and manufacturers.
However, it also considers that the proposed amendments need to be reworked and
recalibrated to meet these ambitions (see Recommendation 1).
The need for an education campaign
2.73
A common theme in the submissions was a preference for more effective public
campaigns to increase awareness of the terminology and provisions of current
CoOL arrangements, rather than amendments being made to the current legislative
framework.
2.74
Coles submitted that:
Coles supports the recent comments on food labelling made by
Mr Rod Sims, Chairman of the ACCC, at a speech to the Australian Food and
Grocery Council in October 2012. 'The ACCC does not believe there is an
essential problem with the current classifications. The problem is people's
understanding of what they mean' Mr Sims further stated 'We need a
classification system that deals with where a product is made. The problem is
that they should be looking for a 'Product of Australia' label'. [53]
2.75
The Australian National Retailers Association (ANRA) also cited Mr Sims'
comments as representative of their views on the proposed amendments.[54]
2.76
The Brewers Association shared this perspective. It said in its
submission that:
...the current labelling is perceived as not meeting consumer
needs primarily because of a lack of understanding of [terminology's] meanings,
rather than the terms being misleading.[55]
2.77
Food SA took a similar position, opposing the amendments and
recommending that the government should seek:
To leave regulatory provisions for CoOL within existing Food
Standards Code and invest resources in making it easy for consumers to
understand.[56]
2.78
The AFGC also argued that the problem in Australia's CoOL framework is
not in the current legislation, but in public awareness of terminology. The
AFGC suggested that there should be more attention given to educating the
public that the label 'Product of Australia' is the premium claim for
Australian food – both for product origin and place of manufacture:
...Fundamentally, 'Product of Australia' is unknown by
consumers, so we would say that the first port of call is to promote that
properly as the premium brand and promote better consumer understanding of what
'Product of Australia' means. That is the gold standard, if you like. That does
signal clearly that pretty much everything in the product was grown here, or,
if it is a processed product, that the transformation took place in Australia
and the jobs are here. We see that as the key priority, and I think that we
would be in agreement with CHOICE on that. If you could manage that or deliver
greater consumer understanding of what 'Product of Australia' means, we would
go a long way to improving consumer understanding or bringing clarity into this
system.
...
I come back to my key point. The key to that is proper
promotion of what 'Product of Australia' means, and that has not occurred
recently. I am not sure that it has ever occurred. I fully accept that
consumers do not understand that, and there is a responsibility, I guess, to
work out how we properly promote that. [57]
Committee view
2.79
The committee is of the opinion that it is important for the Australian
public to understand the terminology of our CoOL arrangements. It suggests that
the development of any new CoOL legislation be accompanied by a comprehensive
public education campaign about the meaning of the claims provided by that legislation,
so as to encourage greater consumer awareness and knowledge on this issue.
Recommendation 4
2.80
Upon the development and implementation of a new CoOL labelling system as
per Recommendation 2, the committee recommends that the government should
develop an effective public education campaign for the new CoOL guidelines.
Senator Glenn Sterle
Chair
Navigation: Previous Page | Contents | Next Page