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Allens Arthur Robinson

Focus: Food – July 2006

In this issue: We look at changes to country-of-origin food labelling that could cost the Australian food industry $60 million, the mandatory introduction of iodine and folic acid fortified foods and an industry report on the fatty acid content in infant formula products.

Country-of-origin labelling

In brief: Food Standards Australia New Zealand is currently implementing changes to the country-of-origin labelling requirements in the Australia New Zealand Food Standards Code (AAR Focus: Food – November 2005). Partner Peter O'Donahoo and Lawyer Michelle Bennett review the amendments and discuss additional proposed changes.

Introduction

Food labelling falls under the jurisdiction of Food Standards Australia New Zealand (FSANZ). FSANZ is a bi-national independent statutory authority under the Australian Food Standards Australia New Zealand Act 1991 (Cth) (the Act) and is subject to policy guidelines set by the Australia and New Zealand Food Regulation Ministerial Council (Ministerial Council).

FSANZ is responsible for the Australia New Zealand Food Standards Code (the Code), which regulates food labelling in Australia and New Zealand. When approved by the FSANZ Board and subject to a review by the Ministerial Council, standards become law in Australia by being adopted by reference under the food laws of the states and territories. In New Zealand, the Health Minister must gazette the food standard under the Food Act 1981 (NZ). However New Zealand to date has preferred a voluntary approach to country-of-origin labelling and has never legislated to make it mandatory (except for wine products).

FSANZ has recently reviewed the standards in the Code concerning country-of-origin labelling. The principal objective of the review is to enable consumers to make informed choices by ensuring adequate information is provided about the origin of food products. There is also an acknowledgement that the benefit to consumers must be balanced with the cost to industry.

The new Standard 1.2.11 Country-of-Origin Requirements [Standard 1.2.11] was gazetted on 8 December 2005. This Standard will completely replace the transitional Country-of-Origin Standard 1.1A.3 by 8 December 2007, and some provisions have already come into effect. New Zealand has decided not to introduce a mandatory country-of-origin labelling regime at this time.

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What is the current law?

In Australia, the current Standard in the Code requires labels to contain a statement identifying the country or countries where the food was produced. This can often be satisfied by identifying the country where the food was packed for retail sale. Also, if any of the goods do not originate in Australia, it is often acceptable to provide a statement saying the food is made from imported ingredients or indicate that the foods are a mix of local and/or imported foods as the case may be.

This applies to all packaged food. It also applies to the following unpackaged foods that do not originate in Australia or New Zealand:

  • fresh fish and fish that has undergone certain processing;
  • fresh and preserved pork;
  • fresh and preserved fruit and vegetables; and
  • nuts.

Amendments to the Code which came into effect in June apply similar labelling requirements to food displayed for retail sale in a package that does not obscure the nature or quality of the food.

Fruit juice containing one or more imported fruit ingredients must also comply, and there are specific requirements for spirits produced in countries other than Australia.

However, the Code is not the only source of law on country-of-origin labelling. In Australia, the Trade Practices Act 1974 (the TPA) prohibits misleading or deceptive conduct, and prohibits making false or misleading representations about the origin of goods. Division 1AA of Part V of the TPA, which contains sections 65AB and 65AC, explains how to make country-of-origin representations that do not contravene the prohibitions on engaging in misleading or deceptive conduct (s52), falsely representing that the goods have had a particular history (s53(a) and s75AZC(1)(a)), and making false or misleading representations concerning the place of origin of the goods (s53(eb)).

Section 65AB provides that where country-of-origin representations are made (such as where a label states that a product is 'made in' a particular country), a corporation does not contravene the prohibitions if:

  • the goods have been substantially transformed in that country;
  • 50 per cent or more of the cost of producing or manufacturing the goods (as the case may be) is attributable to production or manufacturing processes that occurred in that country; and
  • the representation is not a 'product of' or 'produce of' representation (to which s65AC applies), or a prescribed logo representation (to which s65AD applies).

Section 65AC provides that a corporation does not contravene the prohibitions if it makes a representation that goods are the produce of a particular country (whether the representation uses the words 'produce of', 'product of', or any other grammatical version of the word 'produce') if:

  • the country was the country of origin of each significant ingredient or significant component of the goods; and
  • all, or virtually all, processes involved in the production or manufacture happened in that country.

The TPA is administered by the Australian Competition and Consumer Commission (the ACCC). On 30 June 2005, the ACCC published a guide for businesses about country-of-origin labelling, Food and beverage industry: country of origin guidelines to the Trade Practices Act .

In New Zealand, there are no mandatory country-of-origin labelling requirements (except for wine products). However, where the country-of-origin is voluntarily indicated, the Fair Trading Act 1987 (NZ) (the FTA) prevents businesses from misleading consumers about the origin of goods. The FTA is administered by the Commerce Commission, which has published a guide for businesses, Food Labelling, Promotion and Marketing – a guide for manufacturers, importers and retailers. 

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What are the changes?

The revised standards have not led to any radical changes – the goal is to extend and strengthen the current regime through the following changes.

  • For whole foods, the actual country where the food was produced, made, manufactured, or packaged must be identified on the label. It is no longer adequate to note that ingredients are 'imported'. However, for mixed foods, the standard does not go as far as requiring information about the country-of-origin of each ingredient. For such foods, it is adequate to indicate where the food was made, manufactured or packaged for retail sale and that the food is constituted from ingredients imported into that country or from local or imported ingredients.
  • The requirements for unpackaged food extend to a wider range of foods, including semi-processed fish, fresh and preserved pork, and whole or cut fruit and vegetables that have been preserved, pickled, cooked, frozen, or dehydrated.
  • The new requirements clarify the legibility requirements, set out in Standard 1.2.9, for labelling and display signs to make sure that the statement of country-of-origin is clear and unambiguous.
  • Changes in the characterisation of certain products, for example, specific requirements relating to fruit juices, are removed because they are treated under the general banner of packaged food.
  • In Australia, the terms 'made in' and 'product of' must continue to comply with trade practices legislation, as discussed above.

The Ministerial Council met in October 2005 and decided that FSANZ should explore one more issue: where one or two whole pieces of fruit and/or vegetables are packaged together (even if there are other incidental ingredients), it was proposed that the label should identify the actual country of origin of each of the two pieces of fruit or vegetable. FSANZ is in the process of preparing a report on the labelling of whole, shelled, diced, peeled, chopped or diced fruit and vegetables. It also includes, at the request of ministers, juices and soy milks with two or less fruit and/or vegetable ingredients. A final report was recently prepared for the Ministerial Council, which will make a decision about whether this is developed further into a food standard.

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Stated benefits of the new requirements

The purported benefits of the recent changes are:

  • consumers will be provided with clear and unambiguous information on the source of a food product, both packaged and unpackaged;
  • unpackaged foods will be treated in a like manner, whether locally produced or imported, which would address a present inconsistency;
  • unpackaged foods will be brought into line with general labelling provisions in the Code;
  • the Code will become consistent with trade practices legislation; and
  • consumers will be able to identify locally produced fresh and semi-processed unpackaged foods, which research suggests consumers prefer.

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Transitional issues

There is a phase-in period with different time periods specified for different products. For example, unpackaged fruit, vegetables, nuts and seafood had to be labelled according to the new standard by June 2006.

Labelling requirements for unpackaged fresh pork and pork products, such as ham and bacon, will come into effect in December. Most packaged food will have until 8 December 2007 to comply with the new labelling standard. This period reflects the normal commercial labelling cycle. An additional grace period of one year has been granted for packaged stock to avoid stockpiles of obsolete labels.

 

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Compliance and costs of implementation

The costs to producers, processors and distributors are likely to be:

  • the one-off cost of changing the label design. This will primarily affect packaged food suppliers; and
  • the recurring cost of re-labelling products to comply with the Code. This will affect importers and some retailers who need to re-label packaged food that they import.

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Where will the changes mainly be felt?

FSANZ estimates the changes to cost a one-off $60 million. The principal costs will be borne in relation to packaged goods. For fresh and unpackaged foods, the major impact will be on the retail sector, which will be required to provide more specific information than is currently required. The main change will be the need to provide display materials indicating country of origin adjacent to food on display.

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Proposed amendments to print size requirements

FSANZ received an application from Food Liaison Pty Ltd in March seeking an amendment to Standard 1.2.11 to reduce the prescribed size of type from 9mm to at least 3mm for signs in connection with unpackaged fish, pork, and fruit and vegetables presented for sale in an enclosed display cabinet.

Enclosed display cabinets are refrigerated enclosed or semi-enclosed display cabinets, which require a person to serve food as requested by the purchaser, such as supermarket or delicatessen cabinets displaying fish, olives, antipastos and salads. The application did not seek to change the 9mm requirement for unpackaged food displayed for retail sale other than in an enclosed display cabinet (for example, fresh fruit and vegetables displayed in open bins).

An initial assessment report, published in May in accordance with the Act, identifies the following amendment options.

  1. To maintain the status quo by not changing the prescribed size of type of at least 9mm for unpackaged food.
  2. To amend the Code to approve a prescribed size of type of at least 3mm for unpackaged food when presented for sale in an enclosed display cabinet.
  3. To amend the Code to approve a prescribed size of type of at least 5mm for unpackaged food when presented for sale in an enclosed display cabinet.

FSANZ prepared a draft variation to amend subclause 2(3) of Standard 1.2.11 in relation to labels or signs for unpackaged food in enclosed display cabinets in the terms of the third option (mentioned above). This option was preferred by FSANZ for many reasons, including acknowledgement of:

  • the likely cost benefits to retailers, estimated at $34 million a year, to result from a reduced type size requirement for country-of-origin labelling;
  • the fact that reducing type size would allow space to display other product information regularly sought by consumers; and
  • the greater degree of certainty that a type size of at least 5 mm (as opposed to 3 mm) would be visible regardless of the font or type of sign and would therefore comply with the legibility requirements of Standard 1.2.9.

The deadline for submissions in relation to these proposals is 31 July 2006.

Further information

The Standard provides detailed information about the changes, which are summarised in general terms in this article. FSANZ has also created a comprehensive guide for interpreting and implementing the new standard.

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Food Standards Australia New Zealand update

In brief: Food Standards Australia New Zealand has been busy seeking community comment on several public health issues, including mandatory fortification of selected foods with folic acid and iodine, and a review of fatty acid content in infant formula products. Lawyers Laura Colavizza and Dominic Nguyen report.

Background

The role of Food Standards Australia New Zealand (FSANZ) is to protect the health and safety of people in Australia and New Zealand by maintaining a safe food supply. It is responsible for developing, varying and reviewing standards, and for developing codes of conduct within the food industry. From time-to-time, FSANZ proposes amendments to the Australia New Zealand Food Standards Code (the Code) in accordance with processes prescribed in the Food Standards Australia New Zealand Act 1991 (Cth). FSANZ has released several reports proposing to vary and/or amend the Code including:

  • a draft report on mandatory fortification with folic acid;
  • an initial assessment report on mandatory fortification with iodine; and
  • an initial assessment report on long-chain polyunsaturated fatty acids in infant formula products.

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Mandatory fortification with folic acid

In an attempt to combat the risk of neural tube defects (such as spina bifida) as a consequence of insufficient folic acid consumption, FSANZ has released a draft assessment report proposing to introduce mandatory fortification of all bread-making flour with folic acid.  Bread-making flour, and therefore bread, was chosen as an effective and technically feasible food vehicle for mandatory folic acid fortification because, in Australia, it is already subject to mandatory fortification with thiamine. Furthermore, bread is consumed by more than 80 per cent of the target population, namely, women of child-bearing age.

The proposed level of folic acid fortification is 230 to 280 micrograms of folic acid per 100 grams of bread-making flour to achieve an average residual level of approximately 200 micrograms folic acid in bread.

If the proposal is accepted, all flour millers will be required to add folic acid, in the prescribed levels, to bread-making flour. As a result, it is anticipated that flour millers will bear the brunt of costs associated with this initiative.  Additional costs will also be incurred by manufacturers of products containing bread-making flour, as product labels will need to be redesigned to include folic acid in the ingredient list.

The draft assessment report provides detailed information about the benefits and risks of increasing folic acid intake and the impact on industry of implementing the proposal. FSANZ is accepting public comments on the draft assessment report until 31 July 2006.

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Mandatory fortification with iodine

Last year, FSANZ released an initial assessment report which considered mandatory iodine fortification of appropriately selected foods. The initial assessment report attempted to find the most effective mechanism to address adverse health effects referred to as iodine deficiency disorders. Public submissions closed in February 2005, with FSANZ indicating that a draft assessment report would be out for public comment in August 2006. It is anticipated that the final assessment report will be finalised in October 2006.

Although the Code presently permits voluntary fortification of salt with iodine, recent studies indicate that uptake of the current regulations are not effective in ensuring adequate iodine status in either the Australian or New Zealand population. As a result, iodine deficiency can cause a range of health problems from mild intellectual impairment and subtle deficits in visual motor skills, hearing and intelligence, to severe mental retardation. The demographic identified most at risk include the foetus, neonates, young children, preadolescents and women of child-bearing age.

The initial assessment report addressed a range of issues including the status of international regulation of iodine in foods, an evaluation of current practices aimed at enhancing iodine uptake, appropriate selection of foods which may be fortified, potential health risks associated with an increase in iodine uptake, and the impact on interested parties.

In addition to mandatory iodine fortification, the initial assessment report outlined three other options, including maintenance of the status quo, extension of permissions for voluntary iodine fortification and promotion of voluntary options to increase industry uptake.

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Fatty acids in infant formula products

FSANZ has released an initial assessment report in relation to long-chain polyunsaturated fatty acids (LCPUFAs) in infant formula products. The application seeks to delete clause 23(d) of Standard 2.9.1 of the Code for infant formula and follow-on formula (and not formula for special dietary use). Clause 23(d) provides that where LCPUFAs are voluntarily added to infant formula, they must be present in a ratio of omega-6 to omega-3 LCPUFAs of approximately 2:1.

The 2:1 ratio was inserted into the Code to reconcile Australia and New Zealand's position with the European Commission and the United Kingdom. The basis for inserting a ratio requirement with respect to LCPUFAs was that scientific evidence had established that differences in ratio had the potential to impact on infant growth.

The initial assessment report provides that the applicants for the amendment assert that there is no need for the omega-6 and omega-3 ratio of 2:1 on a number of bases including:

  • that no potential infant formula ingredient provides a naturally occurring 2:1 ratio;
  • current scientific evidence suggesting that variations to LCPUFA levels do not have any affect on growth outcomes for infants; and
  • that no other international regulations provide for such a ratio.

FSANZ concludes there are two options available, namely, either to maintain the status quo, or deletion of clause 23(d). FSANZ has extended the deadline for public submissions until 11 August 2006.

A copy of all reports referred to above are available on the FSANZ website.

 

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