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>>Dr Schaper: Now, we're going to look more closely

at when you can say a food with imported ingredients

was made in a country.

Not surprisingly, we've received a lot of

enquiries about this topic.

>>Mr Preston: While the concept of substantial

transformation has been around for quite a while,

I think the change to the test earlier this year has

a lot of businesses wondering whether they can

still make that 'made in' claim.

Most products will still satisfy the test,

some won't. Because there's no transition period for

this change,

it is important that you understand the new test

and apply it correctly now.

The changes to the test were meant to align the

Consumer Law more closely with the approach taken by

the Australian courts, as well as overseas.

>>Dr Schaper: Because this is a new law,

it hasn't been tested in the courts yet,

so the things we're going to discuss in this segment

are our views.

If you're unsure about whether or not you meet

the new test, please seek legal advice.

And just to recap, a food is quote, unquote,

"substantially transformed" in a country

if it was either, one, grown or produced there

or, two, processing in that country has created a

product that's fundamentally different in

identity, nature or essential character from

all of its imported ingredients.

A simple example would be if you made apple pie

using imported flour.

Now the pie is clearly completely different from

the imported flour.

>>Mr Preston: As we've said,

foods that are grown or produced in a country will

automatically satisfy this test, however,

many businesses now rely on sophisticated supply

chains and source ingredients from all over

the world.

If this is the case for your business,

the starting point is not what processing you've

done, instead you're going to have to compare the

imported parts with what you ended up after

processing and ask yourself,

"To what extent is the end product different?"

For example, if you packed imported and local frozen

raspberries together, this wouldn't be substantial

transformation, obviously they're still just

raspberries.

But if you took imported meat and mixed it with

sauces, spices and vegetables to produce a

ready-to-bake meatloaf, this probably would

satisfy the test.

This is because the meatloaf is fundamentally

different from the imported meat.

It's the change to the imported ingredients that

is the key, not the process and especially not

a process that only changes the form or

appearance of imported goods.

Changes to the appearance or form alone won't be

enough to create a product that's fundamentally

different in identity, nature or essential

character.

>>Ms Chapman: I've got an example in mind.

Suppose I make a chutney using wholly imported

ingredients, for example, tomatoes, onion,

vinegar and spices.

I would like to think I'd be able to say I made that

product.

A chutney is fundamentally different in identity,

nature or essential character from those

individually imported ingredients.

>>Dr Schaper: Yes, I'd agree with that, Tania.

With a chutney, you can obviously see that an

overall transformation has occurred from the imported

ingredients.

We really are getting into a chutney-based discussion

here, so let's broaden it out a bit more.

When businesses are trying to work out whether they

can use the 'made in' claim or if they have to

use another claim instead, such as 'packed in' or

'imported from', they really have to step back

and try to be objective.

Look, there may be a tendency to go there's

some change happening to the food,

I'm not just putting it in a package,

therefore I should be fine to say, 'made in',

but it's not enough to produce a food that's

somewhat different from its imported ingredients.

Look, it may be helpful to ask yourself whether you'd

be happy with a competitor making a similar claim or

whether you'd be satisfied as a customer who bought

this sort of product.

This could be a good litmus test, in fact,

so let's walk through some more examples.

>>Mr Preston: How about chopping imported cherries

versus adding them to a cake?

Chopping imported cherries wouldn't substantially

transform them, they are still cherries,

they are just in smaller pieces.

They might be somewhat different in form,

but that's not enough.

But if you put the chopped cherries in a cake mix and

baked a cherry sponge from this,

then that would be substantial

transformation.

The end product, the sponge cake,

is clearly fundamentally different to the imported

cherries.

>>Dr Schaper: I'd definitely agree with that

and I'd definitely agree I'm getting a little bit

hungry here as well, Chris.

Now, something that has come up with us a few

times is dry blending.

That's where you take ingredients and you mix

them together.

Suppose you blended imported raw rice with

imported spices and dried mushrooms and then you

packaged this mix.

The product is intended to be cooked at home by the

customer.

While this may create a product that's somewhat

different from its individual imported parts,

I really don't think this satisfies the substantial

transformation test.

After all, it's still a raw rice product,

the flavour will just be slightly different.

>>Mr Preston: Yeah, this goes to a point that

manufacturers have been asking me to clarify,

is it the number of ingredients that are blend

together relevant to whether a substantial

transformation has occurred?

If so, what's the magic number?

>>Dr Schaper: Firstly, I'd say it's not relevant how

many ingredients go into the food,

there is no magic number.

The question is which ingredients are imported

and how they've been changed in the final

product.

>>Mr Preston: So, even if a product has a huge list

of ingredients, you'll need to question whether

the product is more than just the sum of its parts?

>>Dr Schaper: Yes, that's absolutely right, Chris.

Let's consider that question, though,

in relation to a product that typically has quite a

few ingredients, like muesli.

Before we go through this example,

I will note that this is a tricky one.

The decision whether you can make a 'made in' claim

will depend on the individual product,

what's in it and what happened to the imported

ingredients.

In this case, if the muesli ingredients were

all or primarily imported, I'd say that the

manufacturer couldn't use a 'made in' claim.

In my view blending the imported ingredients just

hasn't created a fundamental,

overall transformation.

>>Ms Chapman: What if only some of the ingredients

were imported?

Let's say you imported dried sultanas to add to

the Australian grown oats and other ingredients.

In this case, you started with sultanas and ended up

with muesli.

Arguably, you substantially transformed

the imported ingredient and could say the food was

'Made in Australia'.

It goes without saying that dried sultanas don't

resemble and can't generally be substituted

for an oat-based breakfast cereal.

On the other hand, it'd probably be harder to make

this argument if the imported ingredients

resembled a cereal.

If you imported oat flakes and mixed them with some

Australian sultanas, I don't think the end

product is fundamentally different from the

imported oat flakes that you started with.

You imported oats or cereal products and what

you end up with is still, essentially, oats.

>>Dr Schaper: Yes, so the answer to this one is that

it really does depend.

Tania, Chris, what are the key points for this

segment?

>>Ms Chapman: Don't overinflate what's

actually happening to the food in the country

claimed.

Remember that a minor change just won't cut it

when it comes to making a 'made in' claim.

>>Mr Preston: Yes, and make sure you've got

really good record keeping procedures in place.

You'll want to be able to back up your claims if the

ACCC or a state consumer regulator comes knocking.

Appropriate records to keep include supplier

contact information, batch information,

batch numbers and your production records.

>>Dr Schaper: Great.

I'd recommend also that you check out page eight

of our Food Labelling guide,

as it has a list of examples of when we think

imported ingredients have or haven't been

substantially transformed.

And if you still aren't sure if you can make a

'made in' claim, we recommend that you seek

independent legal advice.

Don't make a claim unless you're certain that you

can satisfy the substantial transformation test.

Important point.