On 22 February 2017, the Competition and Consumer Amendment (Country of Origin) Bill
2016 received Royal Assent and has now commenced
operation. It contains new amendments to the Competition and
Consumer Act 2010 (Cth) (the Amendments) which are intended to
simplify the country of origin labelling regime and provide clarity
to businesses about their responsibilities under the Australian
Consumer Law (ACL).
The ACL specifically prohibits false or misleading
representations concerning the place of origin of goods (sections
29(1)(a) and (k) of the ACL), alongside the general prohibitions on
misleading and deceptive conduct (section 18 of the ACL).
Under the previous 'safe harbour' regime in section
255(1) of the ACL, a country of origin claim (e.g. a claim that
goods are "Made in...") is not misleading, if:
50% or more of the total costs of production have occurred in
the claimed country of origin; and
the goods were 'substantially transformed' in the
claimed country of origin.
TWO KEY CHANGES UNDER THE AMENDMENTS
The previous 'safe harbour' country of origin regime
continues to apply to any representation that goods were made or
manufactured or otherwise originate in a particular country, with
two key changes.
Removal of the 50% production cost test
The percentage of production costs incurred in the claimed
country of origin will no longer be used to assess whether a person
can avail themselves of the country of origin safe harbour when
making a representation that goods were made or manufactured in, or
otherwise originate in, a particular country.
This change recognises that businesses use increasingly
complicated global supply chains and that the 50% threshold
involved a complicated calculation of the cost of producing or
manufacturing goods, which in any event may not be meaningful to
'Substantial transformation' =
'Fundamentally different in identity'
With the removal of the first limb of the previous safe harbour
regime, the only test now is whether the goods were
'substantially transformed' in the claimed country of
origin. The Amendments clarify the definition of 'substantial
Under the Amendments, goods will be 'substantially
transformed' 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
its ingredients or components'.
Prior to the Amendments, goods were 'substantially
transformed' if they underwent a 'fundamental change in
form, appearance or nature such that the goods existing after the
change are new and different'.
The Amendments aim to clarify that minor processes such as
packaging and assembly, which simply alter form or appearance, will
not be sufficient to satisfy the test. Under the Amendments, the
Government has the power to pass regulations to declare that
specific processes do not involve a 'substantial
Relationship with the Country of Origin Food Labelling
The new Country
of Origin Food Labelling Standards require businesses making
country of origin claims in relation to food products to comply
with the fairly prescriptive requirements of the standards (which
amongst other things depend on the type of claim being made and the
type of food which is the subject of the claim).
The standards commenced on 1 July 2016 and are subject to a two
year transition period (requiring mandatory compliance by 30 June
The introduction of these standards made the 50% production cost
test redundant as it applies to food products. The Amendments,
which regulate consumer products more broadly, are intended to
complement the changes made to the Country of Origin Food Labelling
What do the Amendments mean for businesses?
Misleading and deceptive practices can attract serious financial
penalties. The ACCC has made it clear that it will continue to be
an active regulator in this space.
Although the Amendments clarify the ACL country of origin regime
to some extent, the 'substantial transformation' test may
remain difficult to apply in practice. Businesses should keep an
eye out for further regulations and guidance from the ACCC on
country of origin issues.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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