25 August 2015
Changes to Australian food labelling laws provide consumers with an increased understanding of the origin of their food, with the focus being on the percentage of Australian ingredients.
Recent food cases surrounding the origin of frozen berries highlighted consumer demand for information, and similarly concern from Australian producers to tighten control on offshore ingredients being hidden by current Australia food labelling laws.
However as Australia increasingly signs trade agreements to attract foreign investment, labelling laws contained in many of Australia’s foreign trade agreements and WTO provisions may prove problematic for the new labelling reform.
Country of Origin Labelling (COOL) laws were amended on 25 March 2015 by the Australia New Zealand Food Standards Code (Code) Standard 1.2.11 under operation of the Australia New Zealand Food Standards Act 1991 (Act). The Code will come into operation on 1 March 2016.
The new laws aim to remove ambiguity surrounding Australian ingredients in food. To date, food manufacturers have relied on the “substantially transformed” and “percentage of cost” tests under section 255 of the Competition and Consumer Act 2010 (CCA). Section 255 is a defence to misleading and deceptive conduct under the CCA. Whilst the CCA does not provide for country of origin labelling laws, the amended Code will provide regulations for COOL. The Code requires manufacturers to state if any of the ingredients are from Australia. The requirement is percentage based and the new labelling system introduced by the Australian Government on 21 July 2015 reflects this.
The new labelling system will see a mandatory roll-out in 2016 across Australia. The new labels focus on “Made in Australia”, “Grown in Australia” and “Packed in Australia” declarations and each will feature a coloured chart illustrating the percentage of Australian ingredients.
Consumers are provided with more information under the Australian COOL laws, enabling shoppers to make more informed decisions about the origin of the food they purchase. Whilst the percentage of Australian ingredients will be clear on food labels, the origin of the other ingredients may not be. It is at the manufacturer’s discretion to voluntarily declare the origin of other ingredients.
Trade agreements and labelling laws
Australia is party to numerous free trade agreements (FTA) and related negotiations to ensure continuing trade with other countries. Foreign investors seek protection against discrimination in Australia under Australian laws. The vehicle for redress is usually by way of Investor State Dispute Settlement (ISDS) clauses. Australia has signed 6 FTA’s which include ISDS clauses and have also agreed to ISDS clauses in a further 21 Investment Protection and Promotion Agreements (IPPA) with foreign countries.
The case under which Phillip Morris Asia Limited is taking action against the Australian Government for its tobacco plain packaging laws is currently being heard in accordance with the ISDS provision in the Australian-Hong Kong Promotion and Protection of Investments agreement. The arbitration is being conducted under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules 2010 and is being heard by three arbitrators in Singapore.
The World Trade Organisation (WTO) has also established dispute settlement panels at the request of the Ukraine, Honduras, Indonesia, Dominican Republic and Cuba against Australia’s tobacco plain packaging laws. Over 40 third parties have joined the disputes against Australia.
Whilst the COOL laws arguably do not have the same impact on marketing products as the tobacco plain packaging laws, the United States (US) have recently lost an appeal for COOL laws relating to meat products. Canada and Mexico brought an action in 2008 against the US to the WTO for discriminatory behaviour under US COOL laws. The US COOL laws required a label on all meat products to state the country where the animal was born, raised and slaughtered.
The latest appeal by the US was rejected by the WTO, who for the fourth time against the US, ruled the COOL measures as protectionist and discriminating against Canada and Mexico. The underlying concept of the WTO decision is to ensure fairness in international trade.
Australia is currently negotiating the Trans-Pacific Partnership Agreement (TPP) and within the agreement, is also negotiating ISDS provisions.
The amended Code and subsequent food labelling system announced by the Australian Government will provide Australian consumers with more information on the percentage of Australian ingredients in the food they buy. However consumers will not be able to make informed decisions about the origin of non-Australian ingredients if manufacturers choose not to list them.
The challenge Australia faces is to ensure compliance with foreign investment trade agreements, particularly in light of the WTO decision against the US for similar food labelling laws.
Author: Terrie Morgan
Ron Eames, Partner
T: +61 7 3135 0629
Howard Rapke, Managing Partner, Melbourne
T: +61 3 9321 9752
Geoff Farnsworth, Partner
T: +61 2 8083 0416
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