OCBA - Country of origin claims

What is a ‘country of origin' representation?

You must not make false or misleading representations about the country of origin of goods.

A representation about country of origin can include words, a picture or both, indicating that goods were made, produced or grown in a particular country.

The representation can be either:

attached to the goods - for instance, on a label
in promotional material linked to the goods.

Words or pictures that are an essential part of the goods are not necessarily a representation about country of origin.

For example:
A t-shirt with a ‘Made in Australia' label makes a representation about country of origin. A t-shirt emblazoned with the word ‘Australia' as part of its design, does not.

When there is no country of origin representation, you must be careful not to imply one by other statements or signs associated with the goods.

For example, a person may buy a ‘genuine Turkish rug' believing it is made in Turkey, when it is actually made in China.

Representations about country of origin include:

‘made in' a specified country
‘produce of', ‘product of' or ‘produced in' a country
use of a prescribed logo
claims that goods, or ingredients or components, were ‘grown in' a specified country.

You are protected by the law when you make country of origin representations, provided you meet certain criteria.

Criteria for country of origin claims

When making certain claims about the country of origin of goods, you must meet specific criteria.

The criteria apply to claims about country, not region - for example, they do not apply to ‘made in Tasmania' or ‘made in California'.

If your business is accused of making a false or misleading claim about country of origin, you will have to give evidence that your claim meets the relevant criteria.

‘Made in' claims

For your business to claim goods are ‘made in' a particular country:

the goods must be substantially transformed in that country - For more information, see Substantial transformation - and
50 per cent or more of the total cost of producing or manufacturing the
goods must be incurred in that country - for more information see Cost of
producing or manufacturing goods.

‘Product of' claims

For your business to claim goods are ‘produced in', ‘produce of' or ‘product of' a particular country:

all or virtually all of the production or manufacturing processes must happen in that country (see Cost of producing or manufacturing goods above), and
all of the significant ingredients or components must come from that country. An ingredient or component does not have to be a certain percentage to be ‘significant'.

For example:
An apple and cranberry juice bottle can carry a ‘produce of Australia' label only if both juices are from Australia.
Even though the cranberry juice is about five per cent of the total volume, it is ‘significant' to the product and the label would be misleading if the cranberry juice was imported.
The final product may contain an imported preservative and still be ‘produce of Australia'; the cranberry juice is ‘significant', the preservative is not.

Claims of origin based on use of a prescribed logo

If you label a product with a prescribed logo (for example, the ‘Made in Australia' brand), the goods must:

pass the substantial transformation test – For more information, see
Substantial transformation
meet the prescribed percentage of production or manufacturing costs that
apply for that logo. For more information see Cost of producing or
manufacturing goods.

‘Grown in' claims

You can lawfully claim goods are ‘grown in' a particular country when:

at least 50 per cent of the total weight comprises ingredients or
components grown and processed in that country
virtually all production or manufacturing processes happened in that
country, and
each significant ingredient or significant component was grown and
processed only in that country. An ingredient or component does not have to
be a certain percentage to be ‘significant' – see the apple and cranberry
juice example given above in ‘product of claims'.

Penalties

Making false or misleading representations is an offence.

The maximum criminal penalty is $220,000 for an individual and $1.1 million for a body corporate. Civil penalties for the same amount apply.

Before prosecution, consumer protection agencies can:

require a business to provide information that will support claims or representations made about goods or services
accept court-enforceable undertakings
issue public warning notices.

Substantial transformation

This means the product undergoes a fundamental change in the country represented. The changes can be to the product's appearance, operation or purpose.

Processes that lead to substantial transformation include:

processing imported and Australian ingredients into a finished food product, such as the production of a cake from imported spices, fruit and flour and Australian sugar
production of a newspaper using imported ink
moulding sheet metal into a car panel
manufacturing flour from wheat.

It does not include:

reconstituting imported fruit juice concentrate into fruit juice for sale - whether or not Australian water, sugar, preservatives and packaging were used
assembling imported components into household or other items - for example: white goods, furniture or electronic goods.

Costs of producing or manufacturing goods

The total cost of producing and manufacturing goods includes the producer or manufacturer's expenditure on:

materials to produce or manufacture the goods. This includes:
- purchase price
- overseas freight and insurance
- port and clearance charges
- inward transport to store.
It does not include:
- customs and excise duty
- sales tax
- goods and services tax
labour related to and reasonably allocated to the production or manufacture of the goods. This includes:
- manufacturing wages and employee benefits
- supervision and training
- quality control
- packing goods into inner containers
overheads related to and reasonably allocated to the production or manufacture of the goods. This includes:
- inspection and testing of goods and materials
- insurance and leasing of equipment
- vehicle expenses
- storage of goods at the factory.
For example:

To use the Made in Australia label, more than half of the total cost of making the product must be incurred in Australia.

A manufacturer wants a product, which has a total production cost of $85, to carry this label. The product has material costs of $45, labour costs of $25 and overheads of $15. The labour and overhead costs were incurred in Australia. Of the material costs, $40 were imported and $5 were Australian materials.

The total Australian component is $45 ($25 labour, $15 overheads, $5 materials) and the imported component is $40. As the total Australian production costs are greater than 50 per cent, the product could be labelled ‘Made in Australia'.

However, if all the materials were imported, the product could not carry the ‘Made in Australia' label. The total imported components cost $45 - more than 50 per cent of the total production costs.

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