Summary: Dr Michael Schaper, the Deputy Chairman of the Australian Competition and Consumer Commission, Chris Preston from Australia's Food and Grocery Council and Tania Chapman from the Voice of Horticulture share their key tips and traps for transitioning to the new labelling requirements.
Published: 21 August 2017
Introduction to Australia's new food labelling laws.
Dr Michael Schaper: Hi and thanks for joining us, today. I'm Dr Michael Schaper, Deputy Chairman of the Australian Competition and Consumer Commission or ACCC. Now, many of you would know about the ACCC as the national fair trading and competition regulator, one of our main roles is enforcing what's known as the Australian Consumer Law or ACL. Now, we're here today to talk about a new law made under the ACL and it's called the Country of Origin Food Labelling Information Standard of 2016. It's a long name, so we're simply going to refer to it as the new Standard. I'm joined by representatives from the Australian Food and Grocery Council and from the Voice of Horticulture to talk about a few key tips and potential traps in this new labelling system. First of all, let me introduce our panellists for today. First, we have Mr Chris Preston from AFGC.
Chris Preston: Thanks, Michael. I'm the Director of the AFGC's legal and regulatory division. The AFGC is a peak industry body representing the manufacturers and suppliers behind Australia's food, beverage and grocery brands. I'm here today to address some of the questions our members have raised about the new Standard.
Dr Michael Schaper: And we also have Miss Tania Chapman from the Voice of Horticulture.
Tania Chapman: Thanks, Michael. I've been a citrus grower in Sunraysia for the past fourteen years and I'm also Chair of both Voice of Horticulture and Citrus Australia. Voice of Horticulture is a member-based organisation representing horticultural growers and businesses across fruit, vegetables, nuts, mushrooms, turf, nursery plants and cut flowers. And today, I'd really like to get a clearer picture of how these new standards apply to growers.
Dr Michael Schaper: Our focus for the next fifty minutes then is going to be about giving you practical advice about this new Standard. Our aim is simple; to help you work out when you have to label your products and which type of label you have to use.
Today, we're going to cover five topics. First of all, who has to comply with the new Standard? Secondly, what are the four basic country of origin claims? Thirdly, when you can say a food was made in a particular country. Then, we're going to look at how to calculate the percentage of Australian ingredients in a food and finally, we're going to look at some of the potential consequences from breaching the new law.
Now, if you're looking for more information on a particular subject or want to review these ideas later on, I'd recommend that you check out the ACCC's Country of Origin Food Labelling guide and that's available on our website. I'm going to be referring to it throughout our presentation today, so well worth downloading a copy. As many of you know, country of origin labelling isn't new for food products, in fact, the Food Standards Code, or Food Code, has for many years required certain foods to identify their origin. But some things have changed. If you're involved in producing or selling food in a retail setting, you're going to need to understand the new labelling system, it doesn't matter whether you're a primary producer, a manufacturer, a wholesaler or a retailer, this is relevant for all of you. So, let's get started. Tania, can you give us a quick rundown on how the labelling requirements have changed?
Tania Chapman: Sure, Michael. Firstly, under the old system, there was a one size fits all approach with the same rules applying to all foods. However, labelling requirements under the new system vary depending on the type of food and its origin. The new Standard sets out three basic label types; the first type is the three-part kangaroo label, which has the distinctive kangaroo in a triangle symbol, a bar chart and a text statement. This kangaroo label is mandatory for priority foods grown, produced or made in Australia.
The second possible label is the two-part bar chart only label, which has a bar chart and a text statement. This bar chart only label is mandatory for most priority foods packed in Australia, it can also be used for imported foods to show that they do contain Australian ingredients. A key part of these new picture labels is that you have to identify the percentage of Australian grown or produced ingredients in that food. Now the actual text that must appear on these labels can vary and there are special rules around this. We have lots of labels on the slide at the moment to show you just how differently that text can appear.
The third and final labelling option is similar to the current label requirements under the old Food Code. When it comes to non-priority foods and imported priority foods, all that's required is a country of origin text statement indicating where that food was grown, produced, made or packed. For imported priority foods, this statement has to be in a box.
Dr Michael Schaper: So, in fact, it's a priority to figure out whether a food is a priority? Now, Chris, can you explain the difference between that, between a priority and a non-priority food?
Chris Preston: Sure, Michael. The Standard lists seven non-priority food categories, everything else is a priority food. The non-priority food categories; seasonings, confectionary, biscuits and snack foods, soft drinks and sports drinks, alcoholic drinks, tea and coffee and lastly, bottled water.
My first tip for businesses is that you need to look at the dictionary at the back of the Standard, it breaks down these terms, so will give you a better idea of what's included in each category. Some may be broader or narrower than you think, for example, confectionary includes ice cream. As Tania explained, the new picture labels are only mandatory for priority foods, if you have a non-priority food you just have to do basically what you were doing before. Provide a text statement indicating where the food was grown, produced, made or in some cases, packed.
Let's take an example, a bag of potato chips would be a non-priority snack food. If you took potatoes, slice and cook them to produce chips in Australia, you can just say, "Made in Australia" on the packet. Food not covered by a non-priority category will be a priority item, these include things like meats, fruit and vegetables, milk, yogurt, bread, nuts, all of these are priority foods.
Tania Chapman: For a lot of Australian farmers, the things they produce will be priority foods or will go into manufacturing those priority foods, for example, a carrot growers produce could be either sold loose or could go into making canned soup or a frozen ready meal or even, pasta sauce. These would all be priority foods.
Dr Michael Schaper: Thanks, now that makes sense, but as I mentioned earlier further information, including the Country of Origin Food Labelling guide, is available from the ACCC website. That's at accc.gov.au/CoOL and I really suggest that you do download it and have a look at it. Now, before we get into the nitty gritty of the new Standard I'd like to thank those who have submitted questions for us tonight, hopefully we'll be able to answer a lot of these as we go along. Now, I know both of you, Chris and Tania, have burning questions that you've raised and you want to discuss.
Chris Preston: That's right, Michael. Most of our members are coming to grips with what they have to do, but they're worried about the penalties available for incorrect labelling. What's going to happen if the ACCC comes along and they've got their labels wrong?
Dr Michael Schaper: Well, hopefully we can give businesses some clarity on that, but let's come back to that one a little bit later on.
Do I need to make a country of origin claim?
Dr Michael Schaper: Now, let's say he has to make a country of origin claim, Tania, I know your burning question was about this.
Tania Chapman: That's right. From the growers I've spoken to and as one myself, one of the fundamental issues that we face is when does this new Standard apply to me? There are many different ways farmers can sell their produce, so I'm looking for some clarity around that.
Dr Michael Schaper: Now, in terms of who has to display or attach the label, it's worth noting that the new Standard imposes the labelling requirements on the foods, not on the trader. This means that, depending on the circumstances, the obligation to provide labelling can apply to growers or to distributers or importers or manufacturers or retailers.
A good starting point is if you're previously had to provide country of origin labelling under the old Food Code, then the new Standard is going to apply to you. Put simply, food must have country of origin labelling if it fits into one of the following categories: firstly, if it's in a package. It doesn't matter whether it's for wholesale or retail sale in this case. Secondly, if it's certain unpackaged seafood, meats, fruits, vegetables, nuts, seed and fungi and it's being offered for retail sale or thirdly, if it's fresh fruit or vegetables in transparent packaging and it's being offered for retail sale.
Tania Chapman: Okay, so we'll need to label fruit and veges for retail sale, but what about wholesale? If I sell my produce to the central markets, do I have to provide country of origin labelling?
Dr Michael Schaper: No, the Standard doesn't require labelling at the wholesale level for fresh fruit and vegetables, although some buyers may still ask you to provide this information in some form. A manufacturer or retailer who needs origin information to do their labelling can also require their suppliers to provide this information, so that's worth bearing in mind.
Chris Preston: Yeah, but this doesn't mean that all retail sales of food are covered. Like, under the old Food Code, there's a number of exceptions where food wouldn't require country of origin labelling. These include food that's sold at a restaurant, canteen or by a catering business, for immediate consumption or delivered at the customer's request, packaged and ready to eat. For example, a takeaway pizza. Or food that's made and packaged on the same premises where it's sold, like cake made from scratch in a bakery.
Tania Chapman: Another example of this one, the last one, could be a dairy processor who makes, packages and sells cheese from the farm shop on their property.
Chris Preston: Yep, that's absolutely right, Tania. In that instance, a country of origin label would only be required if the cheese was sold at another location off the property.
Dr Michael Schaper: So, we know which food has to be labelled, but who's responsible for actually doing the labelling? Tania, we've got a few different scenarios, so why don't you run us through these?
Tania Chapman: Sure. First, let's look at when a grower has to label their produce. We've already said that the new Standard applies to the retail sale of loose fruit and veg, and fresh fruit and veg in transparent packaging. So, if you're a grower and you're selling your produce directly to consumers, such as at a market, you'll need to comply with the Standard, otherwise you'll just have to provide the origin information upon request if a wholesale buyer needs it to do their labelling.
Next, if you're a manufacturer or processor of packaged food products, it's generally safe to assume you have to provide labelling unless an exemption applies. Finally, if you're a retailer, you'll need to make sure that the packaged food you supply is labelled. You'll also need to make sure that those labels are displayed on or near fresh fruit and veg in transparent packaging, as well as the required unpackaged foods.
Chris Preston: What happens if I import products from an overseas manufacturer who doesn't want to add the new labels to their packaging just for the Australian market?
Dr Michael Schaper: Well, Chris, if the food's going to be sold in Australia, it must be labelled according to the Standard as from the 1 of July 2018. If not, it simply won't be allowed into the country, this is because customs regulations will require imported foods to be labelled according to the Standard at the border.
Chris Preston: Michael, can a business that's exempt from the Standard choose to use the new picture labels on their products? For example, a fast food delivery business that wants to use the "Made in Australia" kangaroo in triangle on their packaging?
Dr Michael Schaper: Yes, but there's a "but". If your business isn't required to use the picture labels, but you choose to do so, then you must comply to the rules in the Standard that apply around the use of those labels. Now, this principle also applies to businesses that choose to label non-priority foods as if they were priority items. And for those who do have to comply with the Standard, there are some key dates you need to be aware of.
From now until the 30 of June 2018, you have two options, you can either, one, continue to comply with the country of origin requirements of the old Food Code or two, you can adopt the new labelling requirements under the Standard. If you have to use the new picture labels, you have until the 1 of July 2018 to make the transition, the existing requirements for country of origin labelling in the Food Code are going to remain in place up until the day before then. Chris, I bet manufacturers and processors want to know what happens to stock that's already been labelled under the old Food Code?
Chris Preston: Absolutely, manufacturers have asked me things like, "What happens if I make a product that has a ten-year shelf life and it's on shelves after the 1 of July 2018, still with the old labelling?" Well, that's okay under the new Standard. Basically, if you attach the code compliant label to the food on or before the 30 of June 2018, that food can see out its shelf life. You won't have to relabel it in order to comply with the new Standard.
Dr Michael Schaper: That's right. Now, bear in mind this principle will apply differently depending on the packaging scenario. The way we see it, there are two basic types of packaging. The first is where you attach the label to the package, for example, you stick it on and the second is where it's part of the packaging itself. Let's use tinned soup as an example. Here the country of origin label is going to appear somewhere on the paper wrapper that you actually stick to the tin. If the wrapper with a food code compliant label is stuck on or before the 30 of June 2018, well, it can still be sold after this date. However, from the next day on only the new labels can be attached and this could be done by either printing new paper wrappers or sticking over the old country of origin label on the wrapper with a new one.
On the other hand, a cereal box would be an example where the country of origin label is likely to already be part of the packaging, that is it's already part of the box. In this case, the cereal couldn't be added to the box on or after the 1 of July 2018 without either, one, printing new boxes or two, covering the old label with a new one. So, to sum up, one of our key takeaways, so to speak, from this segment. Our tips and traps.
Tania Chapman: Well, for me, I'd say you really need to figure out now whether you need to use the new labels and if you leave things too late, you may not be ready come the 1 of July next year. That could be a costly mistake for a business that has to stop production because they don't have their new packaging ready to go.
Chris Preston: Thanks, Tania. My tip's actually very, very similar. I think it's crucial that businesses manage their packaging stock, don't make the mistake of being caught out with heaps of costly packaging that you just can't use.
Dr Michael Schaper: Some excellent tips, there.
Grown, produced, made, packed.
Dr Michael Schaper: Once a business has worked out whether they have to provide country of origin information, they're going to have to figure out what type of claim they can make about their products. There are four basic claims; 'grown in', 'produced in', 'made in' and 'packed in'. Given we've got an expert here, I'm going to defer to Tania to talk about the first claim, 'grown in'. Tania, what does saying you grew something in a particular country really mean?
Tania Chapman: There's a fairly detailed definition, but I think practical examples are always helpful to cut through that legal jargon. Under the Standard, a single ingredient food is grown in a particular country if it meets one of three tests. These are set out on the current slide and also on page six in the ACCCs Food Labelling guide. Now, the first test covers things like a calf raised to an adult cow, the second test refers to foods like wheat or vegetables grown from a seed and the third test covers foods that are harvested, extracted or derive from things that satisfy the first test. For example, milk from a cow that was raised in that country. Generally, a food with more than one ingredient is also grown in a country if each of its significant ingredients was grown in that country and all, or virtually all, of its processing occurred there, too.
Dr Michael Schaper: Look, it's important here to note that this is only the general definition. If you're labelling a non-priority food or an imported food, you'll need to meet this definition to be able to use a 'grown in' claim, however, priority foods must meet a higher threshold to be able to use a "Grown in Australia" kangaroo label. In that case, the food's content must be exclusively Australian in origin, it's not enough that the significant ingredients are Australian.
Tania Chapman: That's true. An example of this difference could be candied fruit versus snack-sized fruit cup. Candied fruit is a non-priority food, because it's classed as confectionary. This food could be labelled "Grown in Australia" as long as its significant ingredients, for example, the fruit and the sugar, were Australian grown. By contrast, the fruit cup is a priority food, for that product to carry the "Grown in Australia" kangaroo label, all of the ingredients, however minor, would have to be totally Australian.
Dr Michael Schaper: Well, hopefully that's clear. Moving on to the second of the four possible options, we have the phrase, 'produced in'. The criteria for saying that something was produced in a country is very similar to saying it was grown there, each of the food's significant ingredients must have been grown or otherwise, wholly obtained in that country and all, or virtually all, of its processing must have occurred there, too. Sound familiar? Well, the main difference here between 'grown in' and 'produced in' is that 'produced in' is a little bit broader, because it includes food or ingredients that originate in a country, but aren't technically grown, like water or salt.
Tania Chapman: Try and think about it from a consumer's perspective, blueberries are grown, while the blueberry sauce is produced or made. The Standard is quite flexible for products that meet the criteria for a 'grown in' or 'produced in' claim, but it helps consumers if you use consistent wording.
Dr Michael Schaper: Now, like with "Grown in Australia", there's a higher threshold for priority foods that want to be able to claim to be a quote, unquote, "Product of Australia". For a food to carry a "Produced in Australia" kangaroo label it's content has got to be exclusively Australian, so let's be clear, even if your priority food contains 99% Australian ingredients it still can't be labelled as having been grown or produced in Australia. Under the new Standard, if the percentage of Australian content is anything less than 100%, you must make a 'made in' claim, instead. Well, for those of you thinking, "That's all well and good, but what are you talking about when it comes to ingredients?", we're going to be getting on to that subject later on. Chris, you've had a lot of experience dealing with Australian manufacturers, so I'm going to let you handle the third option, the 'made in' claim.
Chris Preston: Oh, gee, thanks, Michael. As you've indicated, 'made in' is going to be very important for a lot of Australian food manufacturers and producers. The rules around saying a priority food was produced in Australia are tighter now, so many foods that previously made a 'product of' claim are going to fall into the 'made in' category under the new Standard. Bread, for example, baked with an imported food additive, will now be "Made in Australia", not "Product of Australia".
First up, the important thing to recognise about a 'made in' claim, is that it places the emphasis squarely on the production of the food, this means that food can be made in a country using ingredients exclusively from that country, wholly imported ingredients or a mixture of both. Under the Standard, a food is made in a country if it underwent its last substantial transformation in that country.
The definition of substantial transformation is in the Australian Consumer Law. The ACL says, "A food is substantially transformed in a country if, one, it was grown or produced in that country or two, processing in that country has created a product that is fundamentally different in identity, nature or essential character from all of its imported ingredients." This means that a food that meets the definition of 'grown in' or 'produced in' could also claim to have been 'made in' that country.
Tania Chapman: This is actually a really important point, it means that if you're food was grown or produced in Australia, it doesn't have to undergo processing to create something fundamentally different in order to make an Australian made claim. An example of this would be milk, say you have raw milk from Australian cows that's been pasteurised in Australia. Pasteurising the milk hasn't really created something fundamentally different, however you could use the "Made in Australia" kangaroo label, because the milk is Australian grown.
Chris Preston: That's a really good example, Tania. The question of whether a food with imported ingredients has been substantially transformed can be trickier. It requires a close assessment of the ingredients that went into the product and how they compare with the final product. For example, let's say you combine Australian ingredients with imported cocoa to manufacture biscuits in Australia, the question you have to ask is whether the chocolate biscuits are fundamentally different in identity, nature or essential character, from the cocoa. I think it's pretty obvious in this case that the biscuits were Australian made.
Dr Michael Schaper: Before we go further into this issue about substantial transformation, I just want to quickly note that the fourth and possible final statement that can be made about a food, which is 'packed in'. If a food can't claim to have been grown or produced or made in a single country, then it must be labelled instead with a 'packed in' claim, for example, let's say I import snap frozen mixed vegetables into Australia. The veges were grown in multiple countries and then sliced, frozen and packed in New Zealand. Now, this product would only be able to claim to have been packed in New Zealand, because the vegetables were grown in multiple countries and slicing and freezing imported vegetables really isn't enough to be able to make a 'made in' claim. In addition to the 'packed in' statement, the process would also have to indicate that the ingredients were from multiple origins.
Tania Chapman: In terms of tips and traps, I'd recommend you review the Standard carefully and also, check out the ACCC's Food Labelling guide for more information about the four claims. Doing this may help you to avoid obvious mistakes, like making the wrong claim or not getting the text right on those new labels.
Dr Michael Schaper: And I'd like to reiterate that the "Grown in Australia" and "Product of Australia" kangaroo labels can only be used if you have exclusively Australian content. We've seen businesses get this wrong, so be sure you don't make this mistake, as well.
Chris Preston: For my part, I'd stress that the test for making a 'made in' claim has changed and businesses need to consider how it applies to them.
Dr Michael Schaper: Okay, on that note, that's a broad overview of our four basic claims.
When can I make a 'made in' claim?
Dr Michael Schaper: Now, we're going to look more closely at when you can say a food with imported ingredients was made in a country. Not surprisingly, we've received a lot of enquiries about this topic.
Chris Preston: While the concept of substantial transformation has been around for quite a while, I think the change to the test earlier this year has a lot of businesses wondering whether they can still make that 'made in' claim. Most products will still satisfy the test, some won't, because there's no transition period for this change it is important that you understand the new test and apply it correctly, now. The changes to the test were meant to align the Consumer Law more closely with the approach taken by the Australian courts, as well as overseas.
Dr Michael Schaper: Because this is a new law, it hasn't been tested in the courts, yet, so the things we're going to discuss in this segment are our views. If you're unsure about whether or not you meet the new test, please seek legal advice and just to recap, a food is quote, unquote, "substantially transformed" in a country if it was either, one, grown or produced there or two, processing in that country has created a product that's fundamentally different in identity, nature or essential character from all of its imported ingredients. A simple example would be if you made apple pie using imported flour, now the pie is clearly completely different from the imported flour.
Chris Preston: As we've said, foods that are grown or produced in a country will automatically satisfy this test, however many businesses now rely on sophisticated supply chains and source ingredients from all over the world. If this is the case for your business, the starting point is not what processing you've done, instead you're going to have to compare the imported parts with what you ended up after processing and ask yourself, "To what extent is the end product different?"
For example, if you packed imported and local frozen raspberries together, this wouldn't be substantial transformation, obviously they're still just raspberries. But if you took imported meat and mixed it with sauces, spices and vegetables to produce a ready-to-bake meatloaf, this probably would satisfy the test. This is because the meatloaf is fundamentally different from the imported meat, it's the change to the imported ingredients that is the key, not the process and especially, not a process that only changes the form or appearance of imported goods. Changes to the appearance or form alone won't be enough to create a product that's fundamentally different in identity, nature or essential character.
Tania Chapman: I've got an example in mind, suppose I make a chutney using wholly imported ingredients, for example, tomatoes, onion, vinegar and spices. I would like to think I'd be able to say I made that product. A chutney is fundamental different in identity, nature or essential character from those individually imported ingredients.
Dr Michael Schaper: Yes, I'd agree with that, Tania. With a chutney, you can obviously see that an overall transformation has occurred from the imported ingredients, we really are getting into a chutney-based discussion here, so let's broaden it out a bit more. When businesses are trying to work out whether they can use the 'made in' claim or if they have to use another claim instead, such as 'packed in' or 'imported from', they really have to step back and try to be objective. Look, there may be a tendency to go, "There's some change happening to the food, I'm not just putting it in a package, therefore I should be fine to say, 'made in', but it's not enough to produce a food that's somewhat different from its imported ingredients. Look, it may be helpful to ask yourself whether you'd be happy with a competitor making a similar claim or whether you'd be satisfied as a customer who bought this sort of product. This could be a good litmus test, in fact, so let's walk through some more examples.
Chris Preston: How about chopping imported cherries versus adding them to a cake? Chopping imported cherries wouldn't substantially transform them, they're still cherries, they're just in smaller pieces. They might be somewhat different in form, but that's not enough. But if you put the chopped cherries in a cake mix and baked a cherry sponge from this, then that would be substantial transformation. The end product, the sponge cake, is clearly fundamentally different to the imported cherries.
Dr Michael Schaper: I'd definitely agree with that and I'd definitely agree I'm getting a little bit hungry here, as well, Chris. Now, something that has come up with us a few times is dry blending, that's where you take ingredients and you mix them together. Suppose you blended imported raw rice with imported spices and dried mushrooms and then, you packaged this mix. The product is intended to be cooked at home by the customer. While this may create a product that's somewhat different from its individual imported parts, I really don't think this satisfies the substantial transformation test. After all, it's still a raw rice product, the flavour will just be slightly different.
Chris Preston: Yeah, this goes to a point that manufacturers have been asking me to clarify, is it the number of ingredients that are blend together relevant to whether a substantial transformation has occurred? If so, what's the magic number?
Dr Michael Schaper: Firstly, I'd say it's not relevant how many ingredients go into the food, there is no magic number. The question is which ingredients are imported and how they've been changed in the final product.
Chris Preston: So, even if a product has a huge list of ingredients, you'll need to question whether the product is more than just the sum of its parts?
Dr Michael Schaper: Yes, that's absolutely right, Chris. Let's consider that question, though, in relation to a product that typically has quite a few ingredients, like muesli. Before we go through this example, I will note that this is a tricky one. The decision whether you can make a 'made in' claim will depend on the individual product, what's in it and what happened to the imported ingredients. In this case, if the muesli ingredients were all or primarily imported, I'd say that the manufacturer couldn't use a 'made in' claim, in my view blending the imported ingredients just hasn't created a fundamental, overall transformation.
Tania Chapman: What if only some of the ingredients were imported? Let's say you imported dried sultanas to add to the Australian grown oats and other ingredients, in this case, you started with sultanas and ended up with muesli. Arguably, you substantially transformed the imported ingredient and could say the food was "Made in Australia". It goes without saying that dried sultanas don't resemble and can't generally be substituted for an oat-based breakfast cereal. On the other hand, it'd probably be harder to make this argument if the imported ingredients resembled a cereal. If you imported oat flakes and mixed them with some Australian sultanas, I don't think the end product is fundamentally different from the imported oat flakes that you started with. You imported oats or cereal products and what you end up with is still, essentially, oats.
Dr Michael Schaper: Yes, so the answer to this one is that it really does depend. Tania, Chris, what are the key points for this segment?
Tania Chapman: Don't overinflate what's actually happening to the food in the country claimed, remember that a minor change just won't cut it when it comes to making a 'made in' claim.
Chris Preston: Yes and make sure you've got really good record keeping procedures in place, you'll want to be able to back up your claims if the ACCC or a state consumer regulator comes knocking. Appropriate records to keep include supplier contact information, batch information, batch numbers and your production records.
Dr Michael Schaper: Great, I'd recommend also that you check out page eight of our Food Labelling guide, as it has a list of examples of when we think imported ingredients have or haven't been substantially transformed. And if you still aren't sure if you can make a 'made in' claim, we recommend that you seek independent legal advice, don't make a claim unless you're certain that you can satisfy the substantial transformation test. Important point.
How do I calculate the proportion of Australian ingredients?
Dr Michael Schaper: Now, we're going to take a look at how to calculate the percentage of Australian grown or produced content in a food. This is shown on the new picture labels via the bar chart. This new requirement to provide a clear information about the percentage of Australian content is actually quite a big change for businesses. In some ways though, this task is simple because it's a numbers game, at least in part. You add these figures, you divide them by another, multiply it and there you go, you have your answer.
However, there are some things that can make this more complicated like compound ingredients, working out whether something is a processing aid or a food additive and accounting for the vexed issue of water. In this section, we're going to run through some practical examples about how to correctly calculate these percentages and we're going to give you the answers to some of these tricky questions. I'd like to stress here though, that you simply can't get around having to do these calculations.
The Standard is very clear about how the proportion of Australian ingredients must be calculated and businesses are clearly going to have to follow these steps. If you don't, you risk breaching the new Standard, as well as the laws against false or misleading claims. Chris, when will producers need to work out the percentage of Australian ingredients?
Chris Preston: Well, if you're responsible for labelling a priority food that was grown, produced, made or packed in Australia, chances are you'll be required to state the percentage of Australian ingredients in that food. Now, the two key questions people face here are, one, how do I work out that percentage? And two, what counts as an ingredient?
The calculation is based on the ingoing weight of ingredients prior to processing, it's the recipe, not the finished product. For instance, if you were making a loaf of bread, you'd work out the weight of the ingredients that you added into the mix, not what comes out of the oven at the other end. Claims must always be rounded down to the nearest whole number and the important thing to bear in mind is that you're generally claiming the minimum proportion of Australian content in the food.
This will be framed as an 'at least' statement, for example, "Packed in Australia from 'at least' 35% Australian ingredients". In the event this percentage changes over time, it's possible for businesses to instead use an average percentage claim. There are lots of reasons why the proportion of Aussie content could vary like seasonality changes, changes in supplier, availability of ingredients or environmental issues like drought or cyclone.
Tania Chapman: A tip for businesses here could be that if your suppliers change regularly or you're reliant on a steady supply that could be compromised easily, it's worth considering whether to use an average content claim. This would mean that for a set period of time you wouldn't have to change your labels if the percentage of Australian content went down or up.
Dr Michael Schaper: So, working out the minimum percentage of Australian grown or produced content in a food is actually pretty straightforward. The first thing you do is add up the total ingoing weight of the Australian ingredients. You then divide this number by the total weight of all the ingredients and this will give you a fraction, multiply this number by a hundred and it will give you the percentage of Australian ingredients in the food.
Chris Preston: Yeah, we have an example up on the slides for a pasta sauce. It contains a bunch of Australian ingredients, including tomatoes. The weight of the Australian ingredients is 1350 grams. There's also imported onion, garlic and the food additive. The total weight of the ingredients is 1500 grams, dividing this number by the total weight of the ingredients gives me 0.9. I then multiply it by a hundred to end up with 90%. Now, if your food has compound ingredients in it, you still do these same steps, you just also have to work out the percentage of Australian content in the compound ingredient. Tania, do you want to take us through the compound ingredient example?
Tania Chapman: Certainly. As background, compound ingredient is just the fancy name used to describe the ingredient in a food that's, itself, made up of two or more things. For example, the tomato sauce we just discussed would be a compound ingredient if it was used to make another food. When it comes to doing the calculation, the important thing to remember is that only the Australian proportion of the compound ingredient counts.
So, if you're making a lasagne using the sauce that we worked out contained 90% Australian grown or produced ingredients, you could only count 90% of the sauce as being Australian. We have a lasagne example up on the slide. Let's imagine you're making the lasagne with the sauce, Aussie beef and veges and pasta that has 36% Australian content, how do you do the calculation here? First, you figure out the weight of the Aussie ingredients in the compound ingredients; the sauce and the pasta. For example, the sauce has a total weight of 80 grams in the lasagne, we worked out that 90% of the sauce is Australian, so that equals 72 out of the 80 grams of sauce, you'd then do the same calculation for the pasta. The next step would be to add to these weights to the weight of the other Aussie ingredients and follow the same steps we did before, you'd end up with a final figure of 66% Australian content.
Dr Michael Schaper: Now, these same principles will apply if you're trying to calculate the average percentage of Australian content in your food, as well. The only added step is that you have to do these calculations over a 12, a 24 or a 36-month period, in order to work out an average. Our Food Labelling Guide has some detailed examples on pages 15 and 16 that'll run you through how to do this. The other things that we said can make doing the calculations harder relate to the basic question of; what counts as an ingredient?
Before we get into processing aides, food additives and water, let's lay out some basic principles, first. In general, everything that goes into a food, including water, usually counts as an ingredient, but there are two exceptions to this. First, processing aides don't count as ingredients and secondly, while water will generally be regarded as an ingredient, you don't count water that's being used as the liquid packing medium if it isn't usually consumed as part of the food. Think of the brine in a package of feta cheese or in a tin of tuna. Food additives, though, will count as ingredients.
Chris Preston: So, even if a food is 99.9% Australian and the other 0.1% is an imported food additive that can't be sourced in Australia, that food additive would still need to be counted?
Dr Michael Schaper: That's right, Chris. And remember, as we said before, if the food is a priority item and it has to use the new labels, then the kangaroo picture label couldn't say, "Grown in Australia" or "Produced in Australia", as the food isn't exclusively Australian.
Chris Preston: For businesses that are unsure whether something is being used as a processing aide or a food additive, you should look at the Food Standards Code. Your supplier or the product manufacturer may also be able to help you work out how to classify the item.
Tania Chapman: Michael, just on liquid packing mediums, what if the liquid is sometimes used and sometimes discarded? For instance, tinned apricots in syrup don't necessarily come with usage instructions, sometimes the syrup is consumed and sometimes it's discarded. Would the water here count as an ingredient or a liquid packing medium?
Dr Michael Schaper: Look, I think people are going to need to take a common-sense approach here and ask themselves, "Is this normally consumed?" In the case of apricot syrup, in the Schaper household it is always consumed, I can tell you that. But let's use the example of water in a tin of legumes and that'd usually be drained, so we'd regard that as a liquid packing medium. But the syrup in those tinned apricots would usually be consumed, like I said before, so this wouldn't be regarded as just a liquid packing medium. Now, what are some of the other instances where water gets a bit complicated?
Tania Chapman: Reconstituted imported juice concentrates might be a really good place to start. If an Australian processor imports a Brazilian orange juice concentrate, adds water to it and puts it in a bottle, can they claim that it contains 80, 90%, whatever, Australian ingredients, because the water is Australian?
Dr Michael Schaper: The short answer's no. While water's generally taken to have as its origin the country where it was collected or where it was harvested, this isn't the case when it's being used to reconstitute imported dehydrated or concentrated ingredients. In the case you've mentioned, because the concentrate came from the Brazil, the water would be effectively regarded as having come from there, too. However, if you add more water than what's needed for reconstitution, then that extra water would count towards the percentage of Australian ingredients.
Chris Preston: Michael, one issue that we've come across is cooking water. Let's say I'm cooking dried pasta, some of the water is absorbed during the cooking process, but most of it's discarded at the end.
Dr Michael Schaper: In that case, you would count the water that's absorbed into the pasta, but you definitely couldn't count the additional water that's discarded. Okay, so some takeaways, let's recap. What are our key takeaways in this case for calculating the weight of Australian ingredients in their food products?
Tania Chapman: There are a couple of things, firstly, make sure you know where your ingredients come from and get your weights right. Don't forget, the calculation is based on what goes into the food before processing and if your product has water, have a real think before you do that calculation. Is the water an ingredient? Is it reconstituting or is it part of the packing medium?
Chris Preston: Manufacturers and processors who make food where the percentage of Australian content changes also need to think seriously about which method of calculation to use. If you're going to use an average percentage claim, I just remind businesses that this doesn't mean you get to avoid doing the calculations. The Standard requires that you make this information available in another way for your customers, either through an app, a website or a hotline. Page 19 of the ACCC Guide has an example of how this information should be included on a label.
What are the penalties if my label is wrong?
Dr Michael Schaper: In this section, we're going to be discussing the ACCC's stance on enforcing the law. While the ACCC has a new role in terms of ensuring compliance with the Standard, we've actually been responsible for enforcing the Australian Consumer Law for many years, now. It'll be a breach of that Consumer Law to supply food products that don't comply with the new Standard. Businesses that have non-compliant labelling actually risk the ACCC taking action against them and this could include us issuing an infringement notice, which is like a fine, or taking you to court. You could face a penalty of up to $1.1 million dollars for a corporation or $220000 dollars for a person, if we're successful in court.
Chris Preston: Wow, $1.1 million, are they the only sort of penalties? Are fines the only thing that the court could order for breaches of the Standard?
Dr Michael Schaper: It's a big amount of money, but no, they're not the only things, we can also ask courts to do a variety of different things. For example, issuing an injunction, which is basically an order to do or to stop doing something. Requiring a business to pay compensation or to undertake corrective advertising.
Tania Chapman: About now, we're about 12 months out from that deadline for transitioning to the new requirements. What happens if growers or manufacturers are unable to comply with the Standard by the deadline, because graphic designers or printers are fully booked?
Dr Michael Schaper: Now, conceivably, this can be a real issue for some businesses, but as far as we're concerned, it's not an acceptable excuse. As we've said, businesses have been given two years to organise their new labels and we're halfway through that process, now. This is why we're urging people not to leave it until the last minute.
Tania Chapman: Okay, but what about businesses that transition to the new labels and inadvertently, get it wrong.
Dr Michael Schaper: Well, we've actually already seen some examples of labels which, really, they're just not quite right. At the moment, our focus is on education around these new labelling laws and whilst we can't tell businesses what to put on their labels, you have to get your own advice, where issues have been identified we've either written to them, we've explained what they're doing wrong and we've recommended that they have another go to get it right. If you identify problems with your labels, you really should take some appropriate steps to fix these issues straightaway.
Chris Preston: Would this be the case, if a manufacturer used a country of origin labelling tool that's on the government's business.gov website? The tool prompts businesses to answer a range of multiple choice questions and then it generates a label based on the information provided. What happens if they get one of those opening questions wrong? It's an honest mistake, but the resulting label is now wrong.
Dr Michael Schaper: Well, look, ultimately, Chris, that would still need to be corrected, clearly. But as a general rule, though, I'd say that we do make it an attempt to distinguish between honest attempts to comply with the law and situations where businesses have completely flouted or disregarded the new rules. For example, of complete disregard for the law would be making a 'made in' claim when you knew you couldn't or, in fact, you just didn't bother to check whether the percentage of Australian content on the label was accurate or not. I'd also point out that while the labelling tool on the business.gov website is very useful, ultimately, it's not a substitute for your own legal advice. Speaking to a lawyer who's familiar with the food labelling framework obviously involves an upfront cost, but it might avoid costly mistakes down the track or remove the risk of the ACCC or another consumer law regulator taking action against you.
Tania Chapman: Is there anything else that businesses really need to be aware of as they do go about updating their packaging or their advertising?
Dr Michael Schaper: Definitely, while there's obviously this new Standard that you need to be across, businesses have still got to bear in mind their broader obligations under the general Australian Consumer Law and the law in this area hasn't changed. The key thing for businesses is to make sure that the things they say or that which they imply about their products are accurate and truthful and this includes country of origin claims. Now, if you comply with the Standard when you're creating and using the new picture labels, then you'll have an automatic defence under the Consumer Law against a claim that the label is false or misleading or deceptive. We call this a "safe harbour" and it's explained in more detail on page 32 of our Food Labelling guide.
However, you'll also need to make sure that you aren't making false or misleading representations elsewhere on your packaging or in your general advertising. A representation is essentially words or images or a combination of them that suggests something about a product to a consumer, sometimes they're explicit, like a country of origin label, other times they might subtly create an impression. For example, that a food's come from a particular country.
Tania Chapman: So, what you're saying is that pictures can count as claims or representations?
Dr Michael Schaper: Oh, absolutely. Examples can include animals, flags, famous icons closely associated with a particular country, like the Taj Mahal in India or the Eiffel Tower will connote an image with France.
Tania Chapman: So, where do you draw the line? If I import nuts and package them in Australia and the bag has a koala on it, is this a misleading representation?
Dr Michael Schaper: Look, it depends on what the ordinary consumer would take away from it or the impression they'd form in their mind. The question is whether or not the overall impression is misleading, if it's a reasonable conclusion from these symbols that the goods originated in that country, when in fact that's really not the case, there certainly is a risk that you're breaching the Australian Consumer Law. And there are significant penalties, as we mentioned before, if a representation is false, misleading or deceptive or is likely to mislead or deceive. Like with a breach of the new Standard, a firm can face up to $1.1 million-dollar penalty for non-compliance.
Chris Preston: Another situation I've come across is when businesses try to rely on small print. They use a disclaimer on the back of pack, for example, to explain that a picture they've used on their package isn't an indication of where the package or the product is actually from. To take an example, a processor imports prawns from Thailand, crumbs and packs them in Australia, the packaging might have the correct country of origin labelling on it, but the front of the pack says, "Proudly Australian" and the designer wants to add an Australian logo image. You know, a koala or a flag to the front of the pack. Is that acceptable?
Dr Michael Schaper: The short answer is no. Businesses can't make big claims like that and then try to walk them back elsewhere. Small print and fine disclaimers or even country of origin labels aren't going to excuse an overall misleading image. They're not get out of jail free cards. So, with that in mind, let's wrap this up by coming to our final tips and traps, our final sort of takeaways. Chris, Tania, what do you think?
Chris Preston: Well, I think many small and medium-sized businesses out there, they don't have a lawyer on tap. If you're worried about the impression created by your packaging, or advertising for that matter, why not show your designs to a family member, friends or people you know aren't involved in your business? Ask them what they think the package is implying, if they think it means something other than what's actually true, go back to the drawing board.
Tania Chapman: The key thing for me, here, is that you have to be certain about the claims you're making and have a firm basis for them. Otherwise, you could find yourself in a lot of trouble.
Dr Michael Schaper: Good record keeping is important here, as well, don't forget that. The ACCC or a state consumer law regulator can call upon a business to substantiate the claims that they're making about their products. Accurate and complete records, as we mentioned earlier, will allow you to quickly and easily back up your claims, so do bear that in mind. We've had a few extra questions come in, so let's have a look at these now, 'cause I think they're actually quite useful for the audience as a whole. The first one is picture labels, do picture labels have to be green and gold?
Chris Preston: Oh, I'll handle that one. Short answer, no. The labels have to be prominent, they have to be legible, they have to be in colour contrast, but they don't have to be in green and gold. There is actually a style guide on the government's website to help you, if you like, but they can be monochrome, they can just use your existing colour palette, they don't have to be green and gold.
Dr Michael Schaper: Another question, are there options for startups to indicate that their products contain varying content when they don't actually have the data, yet?
Tania Chapman: Quick answer, no, there isn't an option. With the current laws or the new laws as they come in, they must at least go with the 'at least in' label, so until they get the data, which could take them at least twelve months, they need to go with the 'at least in' label.
Dr Michael Schaper: Okay, another question, do I have to label each individual, loose piece of produce? This might be for you, Tania, again.
Tania Chapman: Yeah, I think it might be. No, we certainly don't have to do that, but what we do have to make sure, you know, at a retail level, is that there is a very clear label quite close to that produce. So, if we sit there and look at a bin of oranges, you know, somewhere close to that bin of oranges we should have that label.
Dr Michael Schaper: Right. Now, what if I'm exporting foods and I don't want to use the Australian label, I just want to use the kangaroo logo, is that possible?
Chris Preston: Yes, Michael, it is, if you're using your domestic label, you can just export that. However, if your label was changed in any way, then to use the kangaroo in triangle logo, you need to get a licence from the Australian Made, Australian Grown corporation.
Dr Michael Schaper: Right. Now, what about small packages? I don't know if either of you can answer this one, do I have to use the new labels for small packages?
Chris Preston: Yes, you do, but you're given some allowance for them. So, a label that is less than a hundred square centimetres or a package that is less than a hundred square centimetres, that's roughly the size of a smartphone to give an idea. If your package is under a hundred square centimetres, then you have to have a statement, but you don't have to have the logo or the bar chart. You just have the text statement.
Dr Michael Schaper: Okay and another one, does calling an ingredient out on the country of origin label make it a characterising ingredient?
Chris Preston: Oh, that's another one for me, I think.
Dr Michael Schaper: I think so, bit more specialist?
Chris Preston: Yeah, yeah, it does, the Food Standards Code has laws around characterising ingredients and the short answer is, if you call out a specific ingredient, which you're allowed to do under the Information Standard in some cases, yes, that would make it a characterising ingredient.
Tania Chapman: So, just a quick example of that, like, would be tomato sauce. So, the tomato in the sauce?
Chris Preston: Absolutely.
Dr Michael Schaper: That's the element that's called out?
Chris Preston: Yes.
Dr Michael Schaper: Okay, that's probably as many questions as we can take, now, 'cause we've almost come to the end of our webinar on these new food labelling standards. I hope that we've been able to answer some of the questions and that you've got a clearer understanding of the overall new labelling requirements.
Summary of key tips & traps
Dr Michael Schaper: As you will have seen, we've put up some tips and traps on the slides, but Tania, Chris, do you think we could manage a quick one-minute recap on what we've covered?
Tania Chapman: Well, let's give it a try. First off, remember, there are three basic labelling options. These are the kangaroo label, the bar chart only label and a country of origin text statement. You really need to work out which label you have to use, for some businesses, you won't need to change much. But for others, you are going to have to redo your packaging and don't forget, there are special rules for each label, how they look and what you can say. In terms of what you can say on your label, country of origin claims can fall into four broad categories. These are 'grown in', 'produced in', 'made in' and 'packed in'.
Now, let's consider some key questions you need to ask yourself. The first is an obvious one, "Does the new Standard apply to the food I sell or I supply?" The answer is yes, unless a specific exemption applies. And the next question would be, "Is my food priority or a non-priority item?" Related to this would be, "Is my product grown, produced, made or packed in Australia or another country?" These questions will determine whether you need to use the new picture labels. If you have to use the kangaroo label or the bar chart only label, you'll need to be ready by the 1st of July 2018.
Chris Preston: On that note, I'd add the question, "Has my product been substantially transformed?" This is going to be a crucial question for many businesses. The answer is the difference between saying your product was made in a country or having to make another claim. If you're using the picture labels, make sure you have all the information you need to work out the percentage of Australian content in the food. Remember, processing aides don't count, food additives do. If there's water involved, ask yourself how is it being used? It is an ingredient or is it being used in a different way? For businesses just starting to wrap their minds around the new system, there are resources out there to help you in this transition period. Check out the ACCC's website and their Food Labelling guide. There's also info on the business.gov website, as well as an online tool to help you create the new labels.
Dr Michael Schaper: I'm going to finish up with one final question to the audience, ask yourself, "Is my packaging or my advertising, for that matter, clear, accurate and truthful about my food's origin?" If not, you're going to run the risk of breaching the Australian Consumer Law. Don't get caught out, reveal your materials and do it now. Now, that brings us to the end of our webinar on the new Country of Origin Labelling Standard. I'd like to extend a warm thanks to our two guest presenters, Chris Preston from the Australian Food and Grocery Council and Tania Chapman, from the Voice of Horticulture. We hope we've given you a few good takeaways and as for that, I think it's time for us to leave and get some takeaway.
Tania Chapman: Thanks for having us, Michael.
Chris Preston: Pleasure to be here.