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Economics References Committee
13/11/2015
Non-conforming building products

CHANDLER, Mr Andrew, Assistant Secretary, Trade and Customs, Department of Immigration and Border Protection

DALE, Ms Erin, Commander, Customs Compliance, Australian Border Force

HATCHER, Ms Emma, Director, Regulated Goods Policy, Department of Immigration and Border Protection

[14:17]

CHAIR: I now welcome Mr Chandler, Ms Hatcher and Ms Dale, representing the Department of Immigration and Border Protection. Thank you for appearing before us today. I invite you to make a brief opening statement, should you wish to do so.

Mr Chandler : Thank you for inviting the Department of Immigration and Border Protection to appear before this hearing on non-conforming building products.

The Department of Immigration and Border Protection has responsibilities for the following functions: customs, immigration, border protection and maritime security. In relation to trade in goods, the department facilitates trade and prevents movement of restricted goods by implementing an effective border management policy.

Most of the department's operational priorities will not be a surprise. Some of our priorities include illicit drugs, illicit firearms, people smuggling, illicit tobacco, counterterrorism and serious and organised revenue evasion. The department enforces these priorities and other border controls through the Customs Act 1901 and the Customs (Prohibited Imports) Regulations 1956.

To give you a statistical snapshot of our activities, last financial year the Australian Border Force processed approximately three million sea cargo containers, 39 million air cargo consignments and 200 million international mail consignments. The department conducts a risk assessment on 100 per cent of all cargo and inspects cargo that is assessed as high risk. Our activities at the border are targeted, intelligence-led and risk based. Our submission to the inquiry explained that the department does not have the legislative powers to ensure that imported building materials conform with building standards or performance levels.

With reference to the inquiry's terms of reference, which cover the surveillance and screening of imported building products, the department does not consider the introduction of a border control to be an effective response to non-conforming building products. Border controls are an ineffective and impractical regulatory response for ensuring that imported building products comply with the standards and regulations.

A proposal for the Australian Border Force to check imported building products at the border for compliance with standards would not be effective for a number of reasons. Firstly, certain imported goods, including building materials, may undergo additional processing by Australian businesses in Australia to comply with standards, before being sold or installed. There are circumstances where building materials can be used inappropriately or installed incorrectly and, even with the border controls, would still present a safety risk to the community. An import control is rendered ineffective if non-conforming products may also be manufactured domestically within Australia.

Our submission outlined two hypothetical examples covering end-use and fit-for-purpose issues. In both examples, despite the imported products being certified as compliant with relevant standards, the installation and use of that product presents a safety risk to the community. Furthermore, introducing a border control could have a detrimental effect on the trade flows into the country of both building materials and other goods. This is because building products cover a vast range of materials, including wood, insulation, stone, plaster, cement, glass, aluminium and steel. It would not be possible to differentiate the goods used as building materials from those that would be used for other purposes under the tariff system. Nor could our officers do so on the border.

Monitoring imported building products would have a considerable impact on the resources of the department and would have the potential to divert resources away from other operational priorities. While the department considers a border control to be an ineffective and impractical means of ensuring building products compliance, we have proposed an information-sharing arrangement where import data collected by the department could be provided to relevant regulators and to state and territory authorities to facilitate their work in this area. For example, if a state regulator identified a safety or compliance risk of an imported building product and wanted to know more about the prevalence of the product in Australia, who had imported it and the amount that had been imported, the regulator could request that information from the department. The department has similar information-sharing arrangements through the Heads of Workplace Safety Authorities Imported Materials with Asbestos Working Group.

To conclude, we recognise that a number of submissions to the Senate inquiry call for increased border controls on non-conforming building products. Several submissions also recognised the impracticality and ineffectiveness of that approach. A number of submissions also highlighted the need for consistent regulation across jurisdictions and for solutions that target fit-for-purpose and end-use issues, which a border control management regime would not resolve. That concludes my statement. We are happy to take questions and further explain to the committee the department's information-sharing proposal.

Senator XENOPHON: Could we get a copy of that statement? It would be quite useful. It could be circulated to the members of the committee for questions arising out of the statement.

CHAIR: I note your submission in respect of the impracticality of the department conducting much in the way of activities, particularly in relation to the issue of noncompliance. I understand that that issue is determined at the point of installation, if one understands the difference between non-conforming versus non-complying. You currently do some work in respect of trying to detect asbestos at the border, so you obviously have some detection infrastructure for that purpose. When we look at the definition of 'non-conforming', it is, 'products that purport to be something they are not and are marketed or supplied with the intent to deceive those who intend using it'. Is there any international certification that would facilitate a system whereby you could detect non-conforming products simply by virtue of a recognised certification system?

Mr Chandler : In terms of building products?

CHAIR: Non-conforming building products.

Mr Chandler : I am not aware of any such international system. Even within Australia there are not standard, uniform requirements across the various jurisdictions. I will just check whether Ms Hatcher has any more information.

Ms Hatcher : I have nothing to add.

CHAIR: Is any other jurisdiction that does this type of work trying to detect non-conforming building products at the border? Are you aware of any country that does this?

Mr Chandler : Not that I am aware of.

Ms Dale : Not that we are aware of.

CHAIR: Could I ask you to take that on notice?

Mr Chandler : We can do so.

CHAIR: In terms of detecting asbestos, what is the process there and what facilities do you have to do that?

Ms Dale : The process is the same as for any other illicit goods. We actually look to see if they contain asbestos. From a border force perspective we run an intelligence-led risk assessment process. Normally, goods are reported to us at certain time frames, and we use that information to perform risk assessment. In instances of asbestos we have a number of profiles in our systems—as of last month we have about 31 profiles—targeting certain high-risk origins, suppliers and various intelligence on products like children's toys and all the things we have known of previously. We target those and if they are suspected of containing asbestos we actually get the importer to get it tested through a NATA authorised laboratory. If asbestos is present we will get a removalist to handle the asbestos. That is the process.

CHAIR: So the risk based approach you talked about is an auditing or random—

Ms Dale : It is based on the information provided by the importer. Also, from a compliance perspective, we are doing a number of outreach activities working with overseas suppliers and getting that information out to them about knowing what the obligations are under Australian regulations so that they do not intentionally send asbestos containing products to Australia. We actually share information. So we are trying to undertake some education activities pre-border, before things actually get here. But from a risk assessment perspective we use the information provided to us through the normal declaration process.

CHAIR: You said you had 31 profiles on the database you have compiled.

Ms Dale : Currently. It goes up and down, depending on the information we get. It is reviewed very regularly. As of October we had about 31 profiles ranging from suppliers, to country of origin, to type of goods.

CHAIR: I am interested in the information-sharing proposal you have. Would you like to give us a little bit more information about that?

Ms Dale : This is under the new compliance approach. We are looking at how we actually educate the overseas importers and suppliers, because often not every other country has similar restrictions to Australia. Often the importation is unintentional, so we are getting information out to target the different suppliers on their obligations and what Australia's posture is. We are starting with suppliers we already know who have brought in asbestos—to different trade forums. We are using our overseas network to get that information out. As of 8 October we have 31 active profiles in our system.

Senator XENOPHON: You mentioned asbestos. You may be aware of a situation—it is not a building product—where kids crayons with asbestos got into the country. Was that the subject of an inquiry within Border Force? Are you familiar with the story? Crayons with asbestos in them, for use by kids, were counterfeit products using a well-known and well-respected children's brand, Disney. Obviously they had nothing to do with it. It worries me, because that is as serious if not more serious than, say, counterfeit tobacco, as concerns the potential health impacts.

Ms Dale : Would you like to comment on the current status?

Ms Hatcher : On the current status?

Ms Dale : Yes.

Ms Hatcher : I can certainly say how the matter came to us. It was reported through an external industry group. The Asbestos Council of Victoria raised the issue with Border Force and the commissioner. That information was then acted upon. I think some of the profiles that Commander Dale has talked about relate to those products. We have taken action at the border to require testing of those products.

Senator XENOPHON: You had to be told about it in the first place by an asbestos victims group before you could act on it. You had to get information externally, from the public.

Mr Chandler : We have to have intelligence indicating there is some risk, yes.

Senator XENOPHON: In this case the intelligence came from the public.

Mr Chandler : Yes.

Senator XENOPHON: Can I ask about whether your current verification system—and this relates to asbestos, because there is a real concern about it in terms of building products—will be impacted by the TPP? Will you have to accept certification of, or testing for, asbestos done in other countries? In other words, if a product is coming from another country and it gives you a certificate saying, 'This is asbestos free' or 'We have checked to make sure it does not have any nasties in it such as asbestos,' would you have to rely on that on the basis of the TPP or other free trade agreements we have been entering into? I guess the benchmark is: what is the current position in relation to this? If you have a certificate saying, 'These samples were tested at the point of manufacturing and are listed as asbestos free,' do you have to accept that, or are you still able to look behind that?

Ms Dale : The current process is that we will only accept any testing done by a NATA authorised testing authority.

Senator XENOPHON: That is the Australian testing authority?

Ms Dale : No, NATA—

Senator XENOPHON: The international one?

Ms Dale : Internationally, they have authorities that can get that testing done?

Senator XENOPHON: Will that change the TPP, for instance?

Ms Dale : Not at this stage.

Senator XENOPHON: Could you take it on notice, because I will be interested to know whether there will be any variation in the testing regime and whether you look behind that in respect of that. You are saying that it is impractical to enforce non-conforming building products. Perhaps that is a very broad statement that you made. I understand where you are coming from, Mr Chandler. But are there some products where, on the face of it, they could be dangerous, depending on the content of that product if there is asbestos in them or there are high levels of formaldehyde or whatever? Can you break it down to look at the type of building product? You are saying, 'We can't look at building products—full stop.' Are there some building products where it is pretty obvious, where you could tell on inspection, that there is something that would warrant further inspection or rejection at the border?

Mr Chandler : Just to be clear: I did not say that we could not look at building products—full stop. What we cannot do is control the building products that come into the country on the basis of whether or not they meet the various standards around the country. If a building product did contain a regulated element then absolutely we have the authority under the Customs Act to be able to control those products.

Senator XENOPHON: Sorry?

Mr Chandler : If a product had a regulated element within it—for example, asbestos or some such thing, some chemical or something that was a regulated item—then, yes, we have the authority, the legislative power, to control the import of that product.

Senator XENOPHON: But you said in your opening statement: 'The department does not have legislative powers to ensure that imported building materials conform to building standards or performance levels'—

Mr Chandler : That is correct.

Senator XENOPHON: 'but it does have the power to ensure that if a building material has a prohibited substance in it, you can act.'

Mr Chandler : Correct.

Senator XENOPHON: There is a subtle but clear difference between the two.

Mr Chandler : Yes. So the key distinction there is whether or not the element or the product is a regulated element or product. If it is just about the standards, the building product standards, that is not regulated under the authorities that we have.

Senator XENOPHON: This is what I do not understand. You say that if there is a regulation that says you cannot bring a product in with, say, asbestos, you can act in those cases?

Mr Chandler : Absolutely.

Senator XENOPHON: But in your statement—and this is what I do not understand—you said:

Border controls are an ineffective and impractical regulatory response for ensuring that imported building products comply with the standards and regulations.

Mr Chandler : Yes, I did.

Senator XENOPHON: There is no inconsistency there?

Mr Chandler : No, I don't believe so. In my statement, I am talking about the standards across the board for building products. When you are talking about the specific element of a regulated good then we do have both the responsibility and the relevant legislative authority to control that.

Senator XENOPHON: If a product has asbestos in it, that would not be complying with the standard or regulation? Correct?

Mr Chandler : I do not know whether or not it would comply with the specific building standard, but it would be forbidden from entering into the country because it contains asbestos—yes.

Senator XENOPHON: Looking at an ordinary person's test, the pub test, someone reading or listening to your statement would take the view that 'Border controls are an ineffective and impractical regulatory response to ensure imported building products comply with standards and regulations,' but you are saying that if there is a rule saying, 'No asbestos in a product', you can act in those cases? Or you are saying it is not practical to do so?

Mr Chandler : Certainly we can act in the cases where there is asbestos in the product.

Senator XENOPHON: But you have said it is ineffective and impractical.

Mr Chandler : That is with regard to building products writ large and the standards across the board. As you heard with the previous testimony and as we put in our submission, whether or not building products meet standards at the point of importation or manufacture does not necessarily mean that they meet the standards at the point of installation both in terms of how they are installed or mitigation measures that may be applied when they are installed.

Senator XENOPHON: I am sorry. I am just trying to understand this. You conclude in the third to last paragraph of your statement:

To conclude, we recognise that a number of submissions—

and then you footnote the Asbestos Safety and Eradication Agency, Australian Glass and Glazing Association et cetera; so it mentions asbestos—

to the Senate inquiry called for increased border controls on non-conforming building products.

Correct?

Mr Chandler : Correct.

Senator XENOPHON: You went on to say:

Several submissions also recognised the impracticality and ineffectiveness of that approach.

Are you saying that it is not a practical approach for border controls to be used to stop some of these products coming into the country?

Mr Chandler : I am saying that it is not a practical approach for all building products in terms of ensuring that they meet all of the relevant building standards.

Senator XENOPHON: I understand that. If there is a product that is fit for purpose for a certain thing—and we are talking about that cladding that caught fire in Docklands; apparently it is allowed if it is on buildings of three storeys or less; and it should not have been put there. What prohibited substances in building products or materials can Border Force have a positive role to stop coming into this country? Is it asbestos? Where do you have a role, or is it all too hard?

Mr Chandler : We can certainly do so in terms of asbestos. Possibly Ms Hatcher could give you some other examples.

Senator XENOPHON: It is well established that asbestos is a no-no. I should disclose that I have been a patron for a number of years of the Asbestos Victims Association. I have been to too many funerals of asbestos victims, including those who had mesothelioma. What do you do to ensure that we do not get products coming in with asbestos, given that presumably there will be a risk assessment? There will be some countries where there will be a much higher chance of asbestos being in those products than others. Some countries still manufacture asbestos and would use it in their products. How do you assess the risk? And how often do you inspect containers? Or how do you work it out that we do not have asbestos in our building products? The cost of remediation, the cost to the housing industry, the building industry, let alone the most important cost of all to the workers that are exposed to it can be catastrophic.

Ms Dale : At the border, as I said previously, we use the information provided to risk assess, and a number of our profiles are actually geared towards building products. Obviously, we rely on the testing authorities to do those testings, to tell us whether that product actually contains asbestos or not.

Senator XENOPHON: Sure. I am running out of time. Can you tell me: has there been an increase in recent years in the number of building products found to contain asbestos?

Ms Dale : I do not have the stats with me.

Senator XENOPHON: If you could take that on notice, I would be grateful. Is there a protocol, given the dangers of asbestos, to inspect products that may contain asbestos? In other words, how does the Australian Border Force conduct its response to goods arriving in Australia if they are suspecting asbestos?

Ms Dale : Again, we understand that a lot of other countries do not have the same requirements as we do. That is why we are putting an emphasis on working with overseas countries with the outreach education program. That needs to complement our actions at the border, as well as educating suppliers and importers. We take that seriously and we are working very heavily. Given this is Asbestos Awareness Month as well, we are doing a number of these activities.

Senator XENOPHON: My final question you may want to take on notice. I think there is implied criticism or concern by the Asbestos Safety and Eradication Agency in their submission which noted there are penalties for breaches under the prohibited import regulations which have not been commonly used as a deterrent. Can you tell us of your view and the proposal to use the penalties as a deterrent? How many penalties have actually been imposed in recent years, say since these penalties have been in place? And would such an approach of a very significant penalty, given the consequence of asbestos exposure, reduce the incidence of non-conforming building products coming into Australia? The agency says there should be increased screening and surveillance of imported products.

Ms Dale : We will take that on notice, to come back with the numbers of those and how many penalties.

Senator XENOPHON: Yes, because the ones that copped it in the neck are the consumers or, more particularly, the building workers who have to cut up these products and, if they have asbestos in them, there is no minimum level of exposure.

Senator MADIGAN: Mr Chandler, as in your opening statement, the department's focus on a scale of one to 10 you have said is like illicit firearms, people smuggling, illicit tobacco, counterterrorism and serious revenue evasion and I accept that. So really on a scale of one to 10, this is not a top priority for the department, is it?

Mr Chandler : In terms of the process at the border, we screen against all of those items and Commander Dale has talked about the profiles we have in place. Obviously, the screening that happens is done against all of the products that come in, against all of the goods that are imported into the country and the risk assessment is done there. If something is assessed as being a high-risk importation, under any of those categories it will be inspected.

Senator MADIGAN: So the department would operate under a risk matrix for product coming into the country?

Ms Dale : We 100 per cent risk assess all of the information that comes in through the electronic mechanism and anything identified as high risk we will 100 per cent x-ray and examine and follow through.

Senator MADIGAN: But the department's focus on product coming into the country would be, as Senator Xenophon has said when questioning you, more like where a product has a banned substance in it. That is where your focus would be, not on whether or not the product meets the standard, an engineered standard, for instance. That is not the department's role.

Mr Chandler : Absolutely not and, frankly, we would not focus on whether or not a product meets an engineering standard. That is not our role and we would not focus on it.

CHAIR: I noted you had indicated that asbestos is not the only building product that you are interested in. I think you indicated there are other building products—industrial chemicals is another area you are interested in. Could you tell us one of the building products you are seeking to detect or examine?

Mr Chandler : In terms of building products per se, it would not necessarily be building products per se; it would be the elements that constitute the building products. If it were an industrial chemical, for example, which was part of the building product and that chemical was regulated, that is what we would be focused on in terms of the controls. That is the authority we have, to be able to focus on those.

CHAIR: If it is a chemical inside some other—

Mr Chandler : In some other type of component, yes.

Senator MADIGAN: It could be an imported ingredient that goes into some other formulation that you may be looking at, where it has been identified there is a risk.

Mr Chandler : Absolutely.

Senator MADIGAN: And that is where you look but you only look where there is an identified risk?

Mr Chandler : Yes and to use the asbestos example again, obviously as most people will be aware, asbestos is the most prevalent in imports of things like brake pads or gaskets.

Senator MADIGAN: Clutches.

Mr Chandler : Those types of things and that is where we have the profiles and that is how we do our assessments when we are targeting. So if we see brake pads coming from a particular supplier that we know in the past has included asbestos, that would obviously raise a red flag and therefore we would investigate that appropriately.

Senator MADIGAN: So on the department's risk matrix, it would be more to-order made parts, as you said, brake pads and clutches, where you would be looking for asbestos contamination or whatever? It would not particularly be in building products.

Mr Chandler : Not necessarily. The profiles are run across everything. Everything that has an import declaration, the entire profile set is run across that.

Senator MADIGAN: I realise that. Your risk matrix would say that the chances of asbestos being contained in automotive related products is higher than in building products and your focus would be skewed more that way because you would say the risk is greater in that area, would it not?

Ms Dale : Our risk profiling is based on the country of origin, where the product is coming from, known suppliers, if we had found asbestos in any of those suppliers' products before, those types of goods. We have a number of profiles which are geared towards building products at the moment. Out of those 31 profiles there are a number of them towards building products. Brake pads is an example, or crayons, building products, there are a number of them off the top of my head that we concentrate on. If we have more intelligence come through the authorities or through our border watch or different areas, we will actually enhance our profiling to capture those risk areas as well.

Mr Chandler : I think it would be misleading to suggest that we focus more on automotive areas compared to building products. Our targeting is far more specific than that. We may focus specifically on auto gaskets and brake pads but then we would focus on cement sheeting, as an example in the building product area. So to suggest it is one over the other is wrong. It is far more specific in terms of the particular products and items.

Senator MADIGAN: For the benefit of the committee, Mr Chandler, would the department be able to give us examples of your risk matrix on building materials, where you have managed to identify there is a risk or products coming from countries with a heightened risk of them containing banned substances in the building products you have identified, so we can get some idea of what the department has done and is doing to give us a better background?

Ms Dale : My view is that currently a number of countries have been identified as high risk, like China, Thailand and Singapore. We are scrutinising closely those from the different suppliers and where we identify those suppliers we are getting importers or the brokers to send them to an authorised testing agency. This is where we need to take a careful balance as well. It is costly so we need to make sure that our profiling and our risk assessments are spot on, so that we are not impeding the trade inappropriately.

Senator MADIGAN: I would appreciate it if you would take that on notice to give us a bit of background and empirical evidence.

Mr Chandler : I can give you a couple of examples.

Senator MADIGAN: For the benefit the committee, I would like to know what is being done, the countries where you have identified there are problems, so that the committee gets a bit of an idea of what your department is doing and has done for our benefit. We are not doubting you are doing things; we are trying to get a picture of what you have identified, what you have been doing, how many cases there have been over the last five years, if that is possible, so the committee gets a bit of an idea. We are not doubting that you are doing things; we are just trying to ascertain what is being done to help us in our deliberations so that when we make recommendations we are as informed us we can be.

Mr Chandler : I am very happy to do that but perhaps I could respond in the broad to start with. Obviously, if something is identified, we would put it into the profile to make sure we pick it up in future. We would also follow that up in terms of providing appropriate advice to relevant authorities domestically, so that they can follow up for compliance purposes through mechanisms we have in place, particularly in the case of asbestos. In terms of products in particular countries, we would work with importers through our outreach programs to assist them to understand what the issues are with their products and also to assist them with the process that might be needed to be undertaken in terms of testing those particular products. Commander Dale talked about how we do use overseas testing as long as the testing authority is appropriately accredited. We would work with importers to do that. Frankly, we have been doing that for some time now.

We are seeing a change in the market place in terms of what importers are doing, particularly with regard to asbestos, going out and looking at their supply chain security and doing that pre-testing to ensure they are not inadvertently breaking the law with the imports they are bringing in.

Senator MADIGAN: You referred to when you send things to a laboratory to get them tested when you are suspicious that they are not compliant with the law. Who bears the cost of that? Say you have a 20-foot shipping container full of a building product which you suspect may contain asbestos, for instance. You refer that product for testing. Who bears the cost of that? Does the department bear the cost or do you pass that cost on to the importer?

Ms Dale : The importer bears the cost, unless the goods are abandoned. Then we will need to look at other—

Senator XENOPHON: If it is abandoned, who pays for it?

Ms Dale : Obviously we need to chase down the importer. If we cannot find them, then the cost will come to us.

Mr Chandler : It is the responsibility of importer to ensure the products they are importing are in compliance with relevant Australian rules and regulations. So they would bear the cost for that, yes.

Senator MADIGAN: If you have the figures available, could you furnish the committee with figures of abandoned product? What are the numbers of abandoned product? If you would take that on notice, we would appreciate it.

Mr Chandler : We can seek to do so.

Senator MADIGAN: Thank you.

CHAIR: Do you have the capacity to identify, say, Infinity cable, which we know is non-conforming? Do you have the capacity to identify whether it is coming in? Are you provided with enough information to identify that?

Mr Chandler : The supplier of the product would be on the import declaration.

CHAIR: You could identify which particular container had this type of product in it?

Mr Chandler : Not by specific brand, no, but for a genetic product we could do that under the tariff system. If it is just electrical cable by specific brand no, but if for example we had identified a supplier as a supplier of concern and that was in the profile, we might pick that up but that would not necessarily be on the tariff list that we would have.

CHAIR: The supplier of concern may be the manufacturer of this non-conforming product. If you have a database and state authorities notify you of a non-conforming product, you can identify that and theoretically—I understand the practicalities, I understand you have three million sea cargo containers to monitor—there is the basic infrastructure there which could look at that issue.

Mr Chandler : If we had enough specific information about the product, we would be able to provide import details to the relevant state authority in terms of who the importer was, when the item had been imported, where the product had come from and that type of thing, yes. That is a key part of that information sharing proposal that we have put forward.

CHAIR: Thank you very much for your evidence today.

Proceedings suspended from 14:54 to 13:04