No fishy business: first case on substantially transformed complementary medicine tests meaning of "Australian Made"

Country of origin claims have been under the spotlight this year since the release in March of the ACCC's non-binding "Country of origin labelling for complementary healthcare products – a guide for business".

For many sponsors whose products contain imported ingredients which are assembled in Australia, the key issue will be whether the ingredients were "substantially transformed". In what's believed to be the first case to consider substantial transformation, the Federal Court has found that the encapsulation in Australia of imported fish oil and vitamin D did not meet the test, and could not attract the operation of the relevant Australian Consumer Law (ACL) "safe harbour" defences for country of origin claims.

Although country of origin claims turn on their facts, the decision in Nature's Care Manufacture Pty Ltd v Australian Made Campaign Limited [2018] FCA 1936 shows how a court will approach them, and backs up the approach of the ACCC's guidelines.

Nature's Care Fish Oil + Vitamin D

Nature's Care Manufacture Pty Ltd manufactures "Fish Oil + Vitamin D" capsules in Australia. The vitamin D is imported from China and dissolved in fish oil imported from Chile; this mix is then put into a soft-gel capsule made from glycerol imported from Indonesia and water and gelatine powder sourced from Australia.

Since 2012, the packaging of the products has included the well-known certification trade mark:

together with the words "Australian made and owned". That certification mark was used pursuant to a licence granted by the owners of that logo, Australian Made Campaign Limited (AMCL).

AMCL subsequently proposed not to license Nature's Care beyond 31 December 2018 on the basis that the relevant Nature's Care product was not in fact made in Australia for the purposes of the application of the certification mark.

Nature's Care maintained that its products were made in Australia and commenced proceedings in the Federal Court of Australia seeking declaratory relief to vindicate its position. 

Country of origin labelling for complementary medicines

Complementary medicines don't have to include mandated origin labelling requirements similar to those required on foods. Any claims sponsors choose to make as regards country of origin cannot however be false, misleading or deceptive in contravention of the ACL.

The ACL sets out several "safe harbour" defences which may afford sponsors of complementary medicines the benefit of a statutory defence against an allegation that a representation as to a product's country of origin is false, misleading or deceptive. Ultimately any defence will depend upon the nature of the product and the country of origin claim, but broadly any "made in" or "manufactured in" claim will require a product to have undergone its last "substantial transformation" in the named country.

Goods will be "substantially transformed" in a country if, as a result of one or more process undertaken, the goods are "fundamentally different in identity, nature or essential character" from all of their ingredients that were imported into the country. This involves an overall assessment comparing the manufactured goods with the imported ingredients collectively.

Was the product "made in Australia?"

Having conducted an overall assessment of the Nature's Care product and its constituent ingredients, the Court concluded that there was no fundamental change in the essential characteristics of the imported ingredients when compared to the manufactured goods. The mix of fish oil and vitamin D in the capsules was identical to the fish oil imported from Chile and the vitamin D imported from China. It did not materially matter that:

• the two active ingredients were mixed together; 
• encapsulation generally helped conceal an unpleasant fishy flavour and smell; 
• encapsulation provided an easy and convenient means of delivering small doses of vitamin D which could not practically be achieved using the substance in its raw form; 
• encapsulation slowed the oxidation and degradation process of the fish oil; and 
• the capsules are made from gelatine products sourced from Australia.

Lessons for manufacturers and sponsors of complementary medicines

While this decision might seem straightforward, it underscores the complexity of country of origin claims, and ensuring that you do not make representations in this area that are not liable to mislead or deceive in contravention of the ACL

Sponsors are encouraged to review the ACCC's guidance in this area carefully and consider whether their manufacturing processes allow a "made in" or "manufactured in" claim to be made in respect of their products. As the ACCC notes, it is up to sponsors to seek independent legal advice when deciding how to label their products.

If you have any questions about the ACCC's guidance or would like advice on the labelling of complementary medicines, please contact Clayton Utz.

Related Insights

• ACCC sets its sights on country of origin labelling for complementary medicines