Country of origin labelling for seafood in hospitality settings: regulation impact statement

Our ref: D23/6085

Department of Industry, Science and Resources
Industry House
10 Binara St
CANBERRA ACT 2601 originlabelling@industry.gov.au

To whom it may concern

COUNTRY OF ORIGIN LABELLING FOR SEAFOOD IN HOSPITALITY SETTINGS
– CONSULTATION REGULATION IMPACT STATEMENT

As Western Australia’s (WA) peak Government body for small business, the Small
Business Development Corporation (SBDC) welcomes this opportunity to provide a submission in response to the consultation Regulation Impact Statement (RIS)
Country of Origin Labelling (CoOL) for Seafood in Hospitality Settings1.

The Department of Industry, Science and Resources (the Department) should be commended for preparing a consultation RIS, as recommended in the SBDC’s submission dated 9 March 2023, to further explore the canvassed policy options, seek views on other options, and determine their impacts including costs and benefits. The consultation RIS does a good job of assessing whether any changes to the law would improve outcomes in practice and whether mandatory CoOL should be implemented.

As a general statement, the SBDC remains of the firm view that mandatory CoOL for seafood in hospitality settings should not be implemented due to the costs outweighing the benefits.

It is noted that the objective of the consultation RIS is to assess options for providing increased information to consumers without resulting in disproportionate or undue costs to small and medium-sized enterprises (SMEs). This approach is strongly supported by the SBDC as it is essential that SMEs are not overburdened by the cost of providing this additional information to consumers.

The SBDC also welcomes the acknowledgement that any policy option will need to complement existing regulatory frameworks including the Country of Origin Food
Labelling Information Standard 2016 (CoOL Standard), as raised in the SBDC’s previous submission, as well as the broader Australian Consumer Law (ACL).

1This submission outlines the views of the SBDC and does not necessarily represent the views of the
Western Australian Government
It is noted that any binding options require further assessment by Consumer Affairs
Ministers of the costs and benefits before a decision is made on whether mandatory seafood CoOL is implemented, which is a process supported by the SBDC.

The SBDC has considered the three options canvassed in the consultation RIS:
• Option 1: retain the status quo
• Option 2: introduce the ACL Information Standard – Australian (A)/Imported
(I)/Mixed (M) (AIM) model (AIM model)
• Option 3: introduce the ACL Information Standard – country model (country
model), and strongly supports retaining the status quo (Option 1).

Option 1: Retain the status quo

As mentioned in our earlier submission, it is already not uncommon practice for hospitality businesses to label the origin of seafood if it is considered a selling point or perceived as a premium product, and/or if the information is valued by the consumer.
Examples include Exmouth tiger prawns, Fremantle octopus, Albany Rock Oysters, locally caught Fish of the Day and Tasmanian salmon. In these cases, the labels provided are usually more detailed than the proposals in the other two mandatory options in the consultation RIS, often providing a specific location or region instead of, or as well as, the country of origin.

As referenced in the consultation RIS, all food sold in foodservice has been historically exempt from the CoOL Standard and any country of origin information provided by such businesses is voluntary. However, in line with ACL protections, the information must not be false, misleading or deceptive. Consequently, any voluntary labelling by businesses must be factual.

The fact that the origin of seafood is already labelled in a number of hospitality settings suggests that it is advantageous for those businesses to do so. The SBDC is of the view that the status quo should be retained, allowing businesses that believe it is beneficial to provide labelling information to do so in a manner of their choice, without mandating the requirement for those businesses that do not share that view.

The retention of the current status allows businesses to focus on improving their bottom line, rather than having to spend time and money making changes to comply with additional (unnecessary) regulatory requirements. It also removes the need for more government investment in undertaking (potentially problematic) enforcement activity to ensure businesses are complying with the mandatory requirements.

The SBDC strongly supports this option.

Option 2: Introduce ACL Information Standard – AIM model

Question 6 in the consultation RIS asks how hospitality businesses will benefit from the introduction of the AIM model in the short and long term. As discussed in our earlier submission, the SBDC contends that the AIM model is potentially damaging for

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businesses and of limited value to consumers, as it creates imposts on small operators without providing the country of origin for consumers.

It is likely that consumers when seeing ‘Imported’ or ‘Mixed’ origin will want to know what country the seafood originated from and if not provided with that level of detail may be unhappy or choose not to purchase the seafood/dish. Providing the level of detail as proposed invites consumers to ask for the specific country of origin, leaving the business open to criticism if unable (or unwilling) to provide this information. The proposed AIM model could therefore potentially impact sales of seafood labelled this way and actually be detrimental to hospitality businesses.

The consultation RIS provides scenarios detailing issues with the current situation.
The second scenario, Case Study Alice, describes a situation where a patron asks about the origin of seafood on the menu, which the server does not know, and subsequently asks the chef, who also does not know, so wasting time and delaying food orders and service. This scenario is likely to be replicated with the introduction of the AIM model, as patrons are likely to ask for the country of origin if the seafood is labelled as ‘Imported’ or ‘Mixed’.

In the current situation, the business has made the choice not to provide this information. If the business feels that it would be beneficial to provide this detail it can choose to do so; with the AIM model, the business would be forced into the situation described in the scenario.

For these reasons in addition to those provided in our previous submission, the SBDC does not support this option.

Option 3: Introduce ACL Information Standard – country model

Question 8 in the consultation RIS asks how hospitality businesses will benefit from the introduction of the country model in the short and long term. The SBDC is of the view that hospitality businesses that see the benefit in labelling the origin of their seafood will choose to do so voluntarily in a manner of their choice that suits their business – be it labelling the country of origin, or more often as mentioned above, a particular area or region, in printed menus or on boards which can be more readily updated with any changes. Consequently, there would be no benefit for those businesses that already provide country of origin information in a manner of their choosing.

On the flipside, for businesses that believe there is no benefit in labelling the origin of their seafood – for example, in businesses where consumers preference lower cost over the origin of the seafood – the introduction of the country model could in fact be detrimental to their business. As referenced in the consultation RIS itself, the labelling of seafood as being from other countries may result in consumers choosing to purchase their seafood from other businesses, resulting in lost sales on top of the additional costs incurred in complying with the new mandatory requirements.

The SBDC therefore does not support this option.

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Introduce ACL Information Standard – impacts of introducing either model

The introduction of either mandated model would represent a significant impost in terms of cost and time for affected businesses, with little benefit to them. The consultation RIS refers to the current economic climate and the fact that many businesses and industries across Australia are still recovering from the impacts of the pandemic and other disruptions such as natural disasters.

In the current economic climate, when many businesses in the hospitality industry are already struggling, they do not need any more obstacles to deal with in the form of additional, burdensome regulation.

As stated in our earlier submission, the SBDC is concerned that the required time and costs of implementation and the ongoing costs associated with updating and maintaining compliant menus, displays and websites (with seafood ingredients potentially changing regularly), when combined with current labour shortages, rising interest rates, and increasing input costs, is an unreasonable ask of small business. It could well be the tipping point that pushes some small businesses over the edge into bankruptcy; an outcome that the SBDC is keen to avoid.

There is also the potential for added compliance burden for small businesses associated with linking supplier invoices or documents confirming country of origin information to the seafood being served to the customer as there is generally no barcode/sticker or packaging on a piece of seafood sold in a hospitality setting. From a practical perspective, it would be difficult to prove or disprove that a particular piece of seafood served at any point in the previous 12 months belonged to a certain invoice or supply document.

The SBDC can see no benefit for hospitality businesses from mandating a CoOL standard for seafood in either the short or long term. Therefore, the SBDC does not support the introduction of a mandatory standard for CoOL for seafood.

If a decision is made to introduce mandatory CoOL for seafood however, either through the AIM or country model, the SBDC considers it would be appropriate for the
Federal Government to provide grants to affected small businesses to recompense them for the additional costs of complying with the new impost.

A long lead in time of 24 months or more should also be considered to give small and medium businesses time to recover from the current economic challenges they are facing before having to transition to the new regulatory requirements.

Whilst consumers may welcome the introduction of CoOL for seafood, the SBDC believes the question should be asked as to whether consumers would be prepared to help pay for the implementation of a mandatory standard in the form of taxpayer- funded grants to assist hospitality businesses with the costs of implementation.

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Alternative ways to address the problem

The consultation RIS asks if there are any alternative ways to address the problem. In its consideration of a voluntary or industry-led standard, the consultation RIS states that the hospitality industry is unlikely to take action on this on its own “as it would be responsible for implementation costs and other business impacts. However, most of the benefits from increased origin information would be gained by consumers and seafood producers.”

As the consultation RIS itself states, the introduction of a standard would be costly for businesses in the hospitality industry, whilst providing little, if any, benefit for them.

Rather than introduce new costly and burdensome regulation for small businesses, the Federal Government could focus on providing consumers with more education and awareness about the providence of seafood. If consumers are made more aware, through a general education campaign, that the seafood they purchase in hospitality settings may or may not come from Australia, this may encourage those who care about country of origin to ask businesses for that information.

Businesses being asked repeatedly could result in a market-led change of this information being provided voluntarily and/or local produce being sourced in order to appeal to customers.

As such, the SBDC supports a voluntary approach to labelling to ensure no additional costly or onerous mandatory requirements are introduced for small businesses.

Cost-benefit analysis

The SBDC strongly supports the Department commissioning a cost-benefit analysis
(CBA) prior to the decision RIS to consider the impacts on hospitality businesses of the policy options, including the cost, burden, practicalities of implementation and impact on sales.

The SBDC would also welcome consideration in the CBA of the cost of providing grants to small businesses to cover the costs of complying with the mandate, as suggested above.

Thank you for the opportunity to make a submission in response to the consultation
RIS. If you would like to discuss any of this in more detail, please contact

Yours sincerely

9 August 2023

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