Why Australian tea tree oil could be banned in Europe

Australia's tea tree oil industry is facing a high-stakes threat from the European Union which could dismantle its $40 million export market.

The EU is considering legislation to reclassify the essential oil as a Category 1B reproductive toxin.

It suspects tea tree oil could interfere with fertility.

If the reclassification goes ahead industry leaders say it would effectively end the product's viability in the European market and potentially trigger a global collapse in demand for Australian tea tree oil.