Another part of the government’s revamped food labelling regulations received the tick of approval from the Senate last night, with those championing the bill believing the removal of a “50% production cost test” for country of origin claims will make it easier for Australian businesses to comply with the law.
The Abbott government promised to tighten food labelling laws after a Hepatitis A outbreak linked to imported frozen fruit in 2016. Revamped food labels were unveiled in July 2016, which allow consumers to see the percentage of a product’s ingredients grown, produced or packed in Australia expressed in a bar chart format.
The latest round of changes, contained in the the Competition and Consumer Act (Country of Origin) Bill 2016, sit alongside the revamped labels and address the requirements placed on businesses when making claims about the origin of their food products.
Both consumers and business owners have previously expressed concerns about the complexity of food labelling guidelines, and debate in the Senate last night raised other worries around imported products that have not been covered by the government’s changes.
What’s the issue with the “50% production cost test” and why is it being removed?
In order for a product to be labeled “Made In” Australia, businesses previously had to satisfy tests around the product being “substantially’ transformed in Australia, and incurring at least 50% of the costs of production here.
The amendments passed last night remove the 50% production cost test, which businesses labelled as confusing during consultation on the bill. Businesses said the test was difficult to meet because of the number of variables involved in determining product costs, and there was the possibility that changes to cost bases could cause a business to unintentionally fall foul of this test and breach the law.
On the consumer front, the cost test has been criticised because of the potential for companies to import ingredients and then “transform” and package them in Australia, with more than 50% of the costs of production incurred here, which could send a false signal to shoppers about the origin of the product.
According to the legislation, the government expects the removal of the test to save businesses $48.5 million in regulatory costs annually, or $550 million over the next 20 years. The savings will offset the additional costs associated with the implementation of the new food labelling system.
As Senator Kim Carr observed in a speech on the legislation last night, the 50% rule “is redundant now that food labels show the proportion of Australian ingredients”.
“These are sensible changes that complement the new labelling system,” he said.
The bill also changes safe harbour provisions for businesses and gives clarification around what “substantial transformation” means in the context of country of origin claims.
A product is considered to be substantially changed if “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”.
The safe harbour provisions show what minimum standards need to be met to use a particular label.
What does this mean for businesses and consumers?
The new food labels were introduced from July 2016 but there is a two-year transition period for businesses to adopt the labels, which will become compulsory in July 2018.
Greens senator Janet Rice says the amendments passed last night aim to simplify things for businesses, and that the whole suite of food labelling changes could encourage shoppers to buy Australian made produce with more confidence.
“This legislation is putting in place a system so that if a business makes a country-of-origin claim for a product and it is alleged to be misleading, deceptive or false, that business has an automatic defence to the allegation if it can show that the product meets the safe harbour defence for that claim,” she said in the senate yesterday.
Senator Nick Xenophon agreed the changes would help local producers by highlighting when something was truly produced in Australia. He cited the example of the citrus industry, which has been affected by concentrates that have been imported from Brazil.
“I also think it is important to put into perspective that the 50 percent production cost test, the substantial transformation test, has inherently been a failure,” Xenophon said in a speech on the bill.
“You could have a fruit juice with 70 percent Brazilian concentrate and a minority of Australian juice and you add the water and do the packaging, and that easily passes the 50 percent substantial transformation test—and that is a disgrace.”
What other regulatory concerns did senators raised?
Discussion in the Senate last night also covered a number of other issues around food importation that are not covered in the government’s labelling reform package.
One suggestion was around greater transparency around “imported ingredients” that are listed on packaging.
“There ought to be a mechanism for manufacturers to regularly disclose the percentage and country of origin of specific ingredients to the department of industry, for publication on its website,” Senator Xenophon suggested.
One Nation senator Malcolm Roberts called for prohibition of blending of local and imported ingredients prior to food safety testing.
Nick Xenophon also reflected on the importance of the Food Standards Amendment (Fish Labelling) Bill, for which Senator Jacqui Lambie kissed a barramundi to raise awareness. The bill looked at extending origin labelling to seafood sold in restaurants and takeaway shops, but was blocked by the upper house in 2015.
“It was very sweet,” Lambie said of the barramundi, saying that given labelling of fish was necessary in supermarkets, “maybe we can now get to the fish and chip shops and the restaurants so people know exactly where the seafood is coming from”.
You can help us (and help yourself)
Small and medium businesses and startups have never needed credible, independent journalism and information more than now.
That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.
Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.
Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.