Encapsulation is not “Made in Australia”


Posted By on 7/01/19 at 5:41 PM

The Federal Court recently ruled that encapsulation of imported supplements in Australia does not justify a “Made in Australia” label

The Federal Court has ruled in favour of the Australian Competition and Consumer Commission (ACCC), holding that the encapsulation in Australia of imported fish oil and vitamin D is not sufficient to permit the capsules to be labelled “Made in Australia” under the Australian Consumer Law’s (ACL) Country of Origin Labelling (CoOL) provisions.

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.

Earlier this 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 (as reported in our previous post on the case).

Encapsulation not "Made in Australia"

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.

Our expertise

If you have any questions in relation to this case, or compliance with CoOL generally, please do not hesitate to contact us.

Lawyer

Chrystie is a lawyer working across our Corporate & Commercial and Workplace Relations & OHS groups.

Chrystie was admitted to practice in 2016 and holds a Bachelor of Laws and Bachelor... Read More