AUSVEG spokesman Hugh Gurney says produce can leave China as a frozen product, then be packaged or modified in New Zealand, and then sent on to Australia under the labelling 'Made in New Zealand from local and imported ingredients'.
"Often this produce from China is actually grown in conditions which would not be permitted here [in Australia], so we feel this is quite a deceptive practice," he told AM.
"This would be mainly frozen products like broccoli, cauliflower, cabbage and carrots. The product would come in a large frozen block that would then be broken down into smaller sections, bagged up into plastic bags, frozen again, and then sent here to Australia.
"It is very confusing for consumers, who feel that they're getting product from New Zealand which actually may have originated in the fields of China."
Mr Gurney says the high Australian dollar makes it easier for Australian retailers to bring in produce from overseas, and consumers deserve clearer labelling laws.
"We'd like to see the country of origin labelling laws increased and improved so that it's much easier for consumers to choose locally grown Australian product, as we have concluded with research that many Australians want to do," he said.
"We want people to be able to make the choice and have the right to choose Australian-grown product whenever they can as easily as possible."
Push for new laws
Greens leader Christine Milne says the party has legislation before a Senate inquiry that would force companies to clearly state where food is grown, processed or manufactured.
"We've had situations, for example, where a packet of frozen vegetables in Australia with a big picture of the north-west coast of Tasmania had six of the seven vegetables in it imported from overseas," she told AM.
"And people would have had no idea about that because of the way labelling currently is."
The Australian Food and Grocery Council says the bill could drive up compliance costs for Australian food manufacturers, which would then make some food products more expensive.
But Senator Milne says that is an exaggeration.
"What we heard in evidence is that companies are very quick to put on all kinds of promotion on their labelling if it suits them," she said.
"I think what we've got here is a range of costs to industry, but labelling is not going to be the straw that breaks the camel's back. By far and away, the high Australian dollar is their biggest challenge."