When an Australian grown product doesn’t count as an Australian ingredient

Charles Fisher |

When an Australian grown product doesn’t count as an Australian ingredient - Separating processing from origin of ingredients

Australia’s previous mandatory country of origin labelling system largely defined country of origin by where the majority of the product’s costs were incurred and where it was substantially transformed.

However, the system caused many Australians to feel concerned that products could be grown or processed in countries with less stringent food safety records and yet still claim to be ‘Made in Australia’.

A key regulatory innovation in the new Country of Origin Food Labelling Information Standard (the Information Standard) is therefore to separate the labelling requirements for processing of food (the kangaroo logo) and the origin of its ingredients (the bar chart).

While these changes were meant to address the consumer concerns, they also create a heavy burden of compliance on the food industry, especially companies with global supply chains or that use Australian ingredients but process them offshore.

In this article, let us consider the situation of 100 per cent grown Australian almonds that are ground and strained to create milk outside of Australia, then re-imported back into Australia and used as an ingredient in a yoghurt analogue product. FoodLegal believes that the new law creates an ironic yet disconcerting situation where the different potential country of origin logos that could apply to such a product might misrepresent the origins of the product.

Potentially overlapping definitions of “made in” and “grown in”

Both “made in” and “grown in” are defined in the Information Standard. A product can claim to be “made in” a country if “it underwent its last substantial transformation in that country”.

A food or ingredient can claim to be “grown in” a country if it:

(i) was materially increased in size or materially altered in substance in that country by natural development; or

(ii) germinated or otherwise arose in, or issued in, that country; or

(iii) was harvested, extracted or otherwise derived from an organism that has been materially increased in size, or materially altered in substance, in that country by natural development.

A food consisting of more than one ingredient can also claim to be “grown in” a country if: (i) each of its significant ingredients was grown in that country; and (ii) all, or virtually all, of the processing occurred in that country.

The difference in “grown in” definitions for single ingredient foods and multiple ingredient foods is intriguing. The definition of “grown in” as it applies to single ingredient products makes no reference whatsoever to the processing of the product.

Australian-grown almonds definitely meet the definition of being “grown in Australia”. However, if they are “milked” outside of Australia, do they then fall outside the definition of being “grown in Australia”? If any ingredients are added to the milk, the resulting milk could clearly no longer claim to be “grown in Australia” because it becomes a multi-ingredient product where not all of the processing occurred in Australia. The milk could claim to be “Made in” the country where it was ground because turning almonds into milk would clearly constitute substantial transformation.

However, if there are no other ingredients added and relying solely on the wording of the Information Standard, there is an argument that the milk could still claim to be “Australian grown” even if it had been substantially transformed overseas. It must be noted that this argument runs counter to the views of the government in its supporting documentation and in the online government online logo tool which both assume that overseas substantial transformation precludes the making of a “grown in Australia” claim. This view also runs counter to previous action taken by the ACCC for misleading or deceptive conduct.

Declaration of offshore processing

The Information Standard does acknowledge that some processing of food (short of “substantial transformation”) can happen overseas without compromising the “Australian grown” claim. Section 20 of the Information Standard requires any overseas processing of Australian grown product be described within the logo.

When is an ingredient “Australian” for bar chart purposes?

So far, it seems clear that ACCC and the government would hold that almonds milk derived overseas from Australian almonds cannot claim to be “grown in Australia”, despite the wording of the Information Standard being somewhat ambiguous in relation to single ingredient products.

While this may be appropriate on a broader scale, in this instance it has further ramifications, most particularly in relation to the bar chart. The bar chart is required to display the percentage proportion of “Australian ingredients” in the product. Whether an ingredient is “Australian” or not is defined as follows:

(a) an ingredient that was exclusively grown or produced in Australia is from Australia; Thus if anything is added to the milk, it cannot be described as having been “exclusively grown” in Australia. If nothing is added, the government and ACCC still believe that substantial transformation (i.e. the milking) precludes the milk from meeting “grown in Australia”.

So would such milk, if sold in the Australian market, have to display on its bar chart that it is 0% (zero per cent) Australian despite the fact that 100 per cent of it was grown in Australia?

Potential claims and logos

For the sake of example, we have chosen New Zealand to be the overseas country where the almonds are being ground and strained, due to the fact that most Australian consumers hold New Zealand produce in high regard.

If you were selling just almond milk, there is an argument that the milk has a single ingredient (namely almonds) and that the almonds were grown in Australia. Thus, it could have the following logo:

For milk vendors, while the kangaroo logo and “Grown in Australia” claim might be nice, the above logo is far from misleading when representing the nature of the product.

However, the issue becomes far more complicated when the almond milk is then used as an ingredient in another product, for example a fermented almond milk “yoghurt” that is made in Australia. If a tub of yoghurt is 75 per cent almond milk and that milk is from only Australian almonds but has been ground and strained in New Zealand, is the resulting product 100 per cent Australian ingredients or only 25 per cent Australian ingredients? While it can be strongly argued that the milk has 100 per cent Australian ingredients, the milk itself may not meet the definition of being “exclusively grown in Australia” and thus may not count towards the Australian ingredient proportion of the yoghurt.

Therefore, such a product would have to choose between either of the following logos based upon its view as to whether the milk was “exclusively grown in Australia” despite being ground and strained outside of Australia:

OR

While the latter logo would be safer from a regulatory perspective, would it not be misrepresenting a product where every single ingredient was grown in Australia and only one process was conducted overseas?

If the overseas milking is a cost-saving exercise that is necessary for the viability of the product, but then results in not being able to claim that the milk is Australian, what incentive is there for such a product to use Australian grown almonds in the first place?

Such confusion and ambiguity shows why the new Information Standard is still causing the Australian food industry a severe amount of grief, and even regret, even for products that desire to use only Australian ingredients.

This article by Charles Fisher, a principal of FOODLEGAL, a specialist firm in food compliance , first appeared in FoodLegal Bulletin - Feb 2017 issue, and is  republished here with permission of the author and the publisher Lawmedia Pty Ltd (ACN 127 791 968).

More info: https://www.foodlegal.com.au/foodlegal-online.html