KHQ Lawyers’ Chrystie Siapkas discusses the Federal Court ruling that the encapsulation of imported supplements in Australia fails to justify a “Made in Australia” label under the Australian Consumer Law’s (ACL) Country of Origin Labelling (CoOL) provisions. The Court clarified that the process of encapsulation failed to constitute a “substantial transformation” of a good and, therefore, this defence was unavailable to Nature’s Care, she writes.
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Background
Complementary medicine products (which include vitamins and other supplements) are not required by law to include CoOL. Despite this, any country of origin claims which are made will still be subject to the ACL.
The ACL contains general prohibitions relating to misleading and deceptive conduct and specific prohibitions on making false or misleading representations relating to the place of origin of goods. The ACL contains three “safe harbour” defences to the place of origin prohibitions when claims relate to the country of origin of a product. It is an automatic defence if the goods:
- were grown in the country; or
- are the product of the country; or
- were made in (or manufactured in), or otherwise originated in, the country.
Last year, vitamin manufacturer Nature’s Care applied to renew its licence from Australian Made Campaign Limited (AMCL), the organisation responsible for licensing the “Made in Australia” logo, so that it could continue to use the logo in connection with its Fish Oil 1000 + Vitamin D3 soft gel capsule product. AMCL rejected the application and Nature’s Care proceeded to institute proceedings in the Federal Court.
Judgement
Nature’s Care argued the third safe harbour defence and sought a declaration that the capsules were “made in” Australia. To fall within the third defence and be able to make a “made in” claim, the capsules must have been found to be “last substantially transformed” in Australia.
What constitutes “substantially transformed” differs depending on each case and the product in question, however the ACL provides that, to be substantially transformed in a country, this means that the goods are, as a result of processes undertaken in that country, fundamentally different in identity, nature or essential character from all of their ingredients or components that were imported into that country.
The Federal Court in its decision clarified that the process of encapsulation does not constitute a substantial transformation of a good and therefore the defence was not available to Nature’s Care.
Implications
This decision is a significant one as the Federal Court accepted the ACCC’s approach to CoOL and in doing so, also gave credence to the ACCC Guide published in March 2018 regarding CoOL laws.
Given customer behaviours and preference for locally made products, CoOL and representations relating to country of origin can be powerful marketing tools for food manufacturers. Food manufacturers need to take care when labelling their products and independent legal advice is always recommended. This case makes it clear that the ACCC can, and will, take action to ensure that customer confidence is maintained when it comes to CoOL.
Please contact the author if you have any questions in relation to this case or compliance with CoOL generally.
Lawyer Chrystie Siapkas works across KHQ’s Corporate & Commercial and Workplace Relations & OHS groups. Chrystie was admitted to practice in 2016 and holds a Bachelor of Laws and Bachelor of Commerce (Finance) from Monash University. Chrystie has developed broad commercial experience, having worked in the corporate & commercial team at a Melbourne mid-tier firm prior to joining KHQ. Her experience spans mergers and acquisitions, corporate governance, compliance, commercial contracts and general commercial advisory. She has worked across a range of industries including financial services, energy & resources, agriculture, entertainment and not-for-profit. Chrystie has a strong commitment to access to justice and has volunteered at various community legal centres throughout her legal education and career. She is passionate about community and is a current Operations Committee Member of the Hellenic Australian Chamber of Commerce and Industry. Contact Chrystie at csiapkas@khq.com.au or connect via LinkedIn.
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