A US exporter's labelling error of a few kilograms of Mexican feather grass seed has cost Australian taxpayers hundreds of thousands of dollars in trace-back costs.

The Victorian Department of Primary Industries says a US company and its Victorian subsidiary are the suspected source of the seed, which was labelled as innocuous Stipa lessingiana.

The Victorian subsidiary distributed seed to nurseries earlier this year. Since then, it has been propagated and sold on to NSW, South Australia, Queensland and the ACT.

The primary industry departments in each state are now desperately trying to clean up the mess, but are struggling to recover plants already sold to thousands of households.

Victorian DPI landscape protection manager Brendan Roughead said his team had recovered less than 3000 of about 7000 suspect plants still at large in Victoria, after combing 180 nurseries and inspecting more than 40,000 homes.

"It's cost us a significant amount," Mr Roughead said. "We've been working on it for 26 weeks with up to 60 staff in Victoria.

"Unfortunately we have already found flowering plants.

"We're now plan to doorknock houses in Sunbury and Melton."

DPI estimates that another 4100 suspect plants have been sold interstate.

Mr Roughead said the task of tracking down the plants had been made more difficult by the failure of many nurseries and retailers to label plants.

"We found one nursery had three different species of grass and labelled them all the same," Mr Roughead said.

"Others had them mixed with other species in the same pot."

Mr Roughead refused to name the suspected company.

However nursery industry sources directed The Weekly Times to a company, which simply released a statement saying that it was assisting DPI with its investigations.

A spokesman for the company said he understood the imported seed was not mislabelled, but contaminated with mexican feather grass.

However Victorian DPI examination of the samples showed it was almost 100 per cent pure Mexican feather grass.

Mexican feather grass is an unpalatable, highly invasive state prohibited weed, which is similar to serrated tussock.

Meat & Livestock Australia estimates the grass would cost Australian agriculture more than $39 million a year if it has escaped and covers up to 14 million ha.

DPI Frankston agricultural weed section leader David McLaren said he had seen paddocks in the plant's native Argentina where cattle had lightly grazed serrated tussock, but had left the feather grass untouched.

It is a low-protein, high-fibre grass that has no grazing value.

Pure stands of feather grass can render a paddock useless.