The new safe harbour provisions for country of origin claims

In brief 6 min read

With the new Country of Origin Food Labelling Information Standard's two‑year transition period ticking down manufacturers will no doubt be busy aligning their food packaging with its requirements. In the meantime, the Federal Parliament is preparing to amend the safe harbour provisions in the Australian Consumer Law to align with the Information Standard.

How does it affect you?

• The Competition and Consumer Amendment (Country of Origin) Bill 2016 (Cth) (the Bill) is designed to complement the Country of Origin Food Labelling Information Standard 2016 (the Information Standard) by introducing changes to the safe harbour provisions in the Australian Consumer Law (ACL), which apply to country of origin claims.
• The Bill will repeal the existing safe harbour provisions and introduce four safe harbour defences for goods whose labels contain a representation that the goods were 'made in', 'grown in' or 'produce of' Australia, or which takes the form of a mark prescribed by the Information Standard.
• The safe harbour defences apply to any country of origin claims, not only those claims mandated by the Information Standard.
• In particular, manufacturers should take notice of the new 'substantial transformation' test which must be satisfied in order to benefit from the safe harbour defence for 'made in' claims.

The new safe harbour provisions

As we reported previously, the Bill, which is designed to complement the CoOL changes introduced by the Information Standard, will amend the safe harbour provisions of the ACL, which apply to country of origin claims. Part 5‑3 of the ACL provides 'safe harbour' defences for country of origin claims where goods meet certain criteria. If goods satisfy the relevant criteria, the business is deemed by section 255 of the ACL to not have engaged in misleading or deceptive conduct or made a false or misleading representation.

The Bill originally lapsed – a victim of the last election cycle – and is yet to be enacted. When the Bill is enacted, which we expect will occur before compliance with the Information Standard becomes mandatory, it will come into force immediately. The Bill passed the House of Representatives on 28 November 2016 without amendments, and the Senate Economics Legislation Committee has recommended that the Senate pass the Bill.

The Bill proposes to repeal the current safe harbour provisions in s255 of the ACL and to introduce four safe harbour defences, which will apply to:

• a representation that goods were grown in a particular country (the 'grown in' defence);
• a representation that goods are the produce of a particular country (the 'produce of' defence);
• a representation that goods were made or manufactured in, or otherwise originate in, a particular country (the 'made in' defence); and
• a representation in the form of a mark specified in an information standard relating to country of origin labelling of goods (the 'information standard' defence).

The 'information standard' defence ensures that statements which comply with the requirements of the Information Standard will not be actionable for misleading or deceptive conduct or making a false or misleading representation under the ACL. The Bill also changes the 'substantially transformed' test for the 'made in' defence. That is, for a good to have been 'substantially transformed' in a country, the good must be 'fundamentally different in identity, nature or essential character' from all of the good's ingredients or components that were imported into that country.

The safe harbour provisions in the ACL do not only apply to claims that are regulated by the Information Standard – they also apply to any country of origin claims which are 'grown in', 'produce of' or 'made in' claims, provided the requirements for those defences are satisfied.

CoOL claims made on products 'transitioning' to comply with the Information Standard

Compliance with the Information Standard is not mandatory during the two‑year transition period which ends on 30 June 2018. The Information Standard contains transitional deeming provisions which provide that food to which section 15 (packaged food, other than fresh fruit and vegetables in transparent packaging), section 16 (fresh fruit and vegetables in transparent packaging) or section 17 (unpackaged meat, fish, fruit and vegetables) of the Information Standard applies, if its labelling complies with the CoOL requirements in the Food Standards Code, is taken to comply with the labelling requirements of the Information Standard, provided the label was attached before 1 July 2016 or on or after 1 July 2016 but before 1 July 2018.¹

The transitional deeming provisions do not guarantee that manufacturers transitioning their packaging are entitled to rely on the new 'information standard' safe harbour defence. The Food Standards Code does not require that the label include any specified standard mark or logo (unlike the Information Standard). While the Bill proposes the introduction of the 'information standard' defence, that defence will only apply where the relevant representation on the product label takes the form of 'a mark specified in an information standard'. It will not apply to representations that comply with the Food Standards Code (and by virtue of the deeming provisions, the Information Standard) but which do not take the form of a mark specified in the Information Standard.

Therefore, while manufacturers can choose to take advantage of the two‑year transition period before adopting the labelling requirements prescribed by the Information Standard, they would be unwise to turn a blind eye to the requirements of the new safe harbour provisions, and in particular, the new 'substantial transformation' requirements that apply under the 'made in' defence, so that they may take advantage of the protection afforded by the safe harbour.

'Additional' CoOL claims made on products regulated by Information Standard

The Information Standard does not prevent the inclusion of further country of origin claims on labels in addition to the prescribed marks required by the current Information Standard. Consider canned peaches grown in Australia and packed in syrup from Indonesia, where the syrup accounts for 50 per cent of the weight of the product. The Information Standard requires that such a product include a prescribed mark which states 'MADE IN AUSTRALIA FROM AT LEAST 50% AUSTRALIAN INGREDIENTS'.

When buying such a product, a consumer may be thought to focus on the country of origin of the peaches rather than the syrup. It may therefore be valuable to clarify the mandatory country of origin statement, which could otherwise be taken to imply that only some of the peaches were grown in Australia. The optional specified wording – here 'with syrup from Indonesia' – will not always be informative or commercially attractive. In such a case, the manufacturer may include an additional separate claim on the label, for example, 'AUSTRALIAN GROWN PEACHES'. Such an additional country of origin claim, if not otherwise misleading, is not prevented or regulated by the Information Standard. A manufacturer is also entitled to the protection of the general safe harbour for such a claim, provided the requirements are satisfied.

Food products which fall outside the scope of the Information Standard

The requirements of the Information Standard are not mandatory for 'non‑priority foods', which include confectionary, biscuits and snack food, and soft drinks and sports drinks.² The safe harbour defences, including the ‘information standard’ defence, may apply to any country of origin claims included on the labels of non‑priority foods, provided the requirements of those defences are satisfied.

Conclusion

It is important for manufacturers to consider their product labelling to ensure that they can take advantage of any of the new safe harbour defence(s) (as applicable), particularly in the case of 'made in' claims, as the requirements to satisfy the ‘made in’ defence are set to change as part of the amendments to the safe harbour provisions.