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Economics References Committee
02/08/2018
Non-conforming building products

DALE, Ms Erin, Assistant Commissioner, Strategic Border Command, Australian Border Force

GIBBON, Mr John, Acting First Assistant Secretary, Trade and Customs Division, Department of Home Affairs

HUTTON, Mr Joshua, Acting Assistant Secretary, Customs and Border Revenue Branch, Department of Home Affairs

[15:31]

CHAIR: Welcome. I remind officials that the Senate has resolved that an officer of a department of the Commonwealth or of a state or territory shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Thank you for appearing before the committee this afternoon. I invite you to make a brief opening statement should you wish to do so, and then we'll open it up for questions.

Mr Gibbon : Thank you, we do have a brief opening statement. Thank you for the invitation to appear today at this hearing to provide the committee with an update on the asbestos issue. As the committee would be well aware, the Department of Home Affairs and the Australian Border Force are responsible for managing the flow of goods across the border. This includes detecting, deterring and disrupting the prohibited and illicit trade in a very diverse range of goods, including asbestos and goods containing asbestos.

Since providing evidence to this committee in January 2017, the ABF has continued to address the risk of asbestos entering Australia through further refinement of its border targeting processes for goods at risk of containing asbestos. This is a constantly evolving process as the ABF gains new insights and targets at-risk goods not previously identified. These goods are stopped and inspected by the ABF at the border, which can then lead to testing for asbestos content.

Communication and engagement with importers also supports our efforts to prevent the unlawful importation of asbestos into Australia. In the last 18 months, the Department of Home Affairs and the ABF have developed new and improved guidance material for importers and the general public. This has included direct engagement with relevant stakeholders, such as customs brokers, industry associations and business owners, to increase awareness of the risk of asbestos in certain imported goods.

The Department of Home Affairs and the Department of Jobs and Small Business have also co-chaired several meetings of the Commonwealth Asbestos Interdepartmental Committee since first providing evidence to this committee. The Asbestos IDC collaborates to identify risks, gaps and improvements in the policy and regulatory frameworks to give effect to the asbestos ban. All relevant Commonwealth organisations that have a stake in the asbestos space are represented on this IDC to provide them with a direct opportunity for input and visibility of asbestos related issues that occur within the supply chain of goods coming to Australia. We welcome the opportunity to answer any questions the committee may have. Thank you.

CHAIR: Thank you very much for that. In relation to the asbestos issue, we've heard about some of the breaches that Yuanda Australia was responsible for, and some fairly significant building projects are involved. We had information from Mr Wayne Buchhorn, who's the Assistant Commissioner, Investigations Division, from the department, who said:

In terms of prosecutions, there are a number of thresholds that need to be got over in relation to proving to the criminal level as to what the company knew and what due diligence they took in relation to trying to ascertain whether the goods contained asbestos or not. And that is what takes up a lot of our time in terms of the priorities for the investigation.

Senator Pratt, at the May estimates, asked questions, and we were informed that Yuanda Australia has paid three infringement notices. Are you aware of what I'm talking about?

Ms Dale : That's correct, yes.

CHAIR: On 24 May 2017—you'll have to correct me, if I'm wrong here, but it sounds like the brief of evidence provided to the Australian Government Solicitor didn't get over the thresholds in relation to proving the criminal element as to what the company knew and what due diligence they had taken. Firstly, are you able to provide a copy of the brief that was provided to the Australian Government Solicitor?

Ms Dale : We'll take that on notice and get back to you.

CHAIR: In our interim report, recommendation 13 was that:

The committee recommends that the Australian Government review the Customs Act 1901 (and other relevant legislation) to address the challenges of enforcing the existing importation of asbestos offence, with the aim to close loopholes and improve the capacity of prosecutors to obtain convictions …

You may not be able to comment on this, but I take it this review should include consideration of increasing the threshold required to use the mistake of fact as a legal defence. Do you have a comment on that?

Mr Hutton : We have reviewed, or are in the process of reviewing, the guidelines and the thresholds. What we've actually received approval for from government is to list asbestos as a tier 1 good under the Customs Regulations. That means that, in a prosecutorial sense, in a legal sense, imprisonment of up to five years is now on the cards as a penalty for illegal importation of asbestos. As part of that process, we looked at things like the mistake of fact offence and absolute liability versus strict liability. For these types of offences, the strict liability and the presence of the mistake of fact defence is quite a core legal principle and so was going to be a hard threshold to get over. However, changing it to a tier 1 good, as listed under the Customs regs, does take away a small aspect of the strict liability and changes it to an absolute liability offence. However, the mistake of fact defence is still present and able to be used.

CHAIR: So what legislative changes do we need to ensure that we can get maximum penalties, maximum liability, imposed on regular offenders here?

Mr Hutton : We have to abide by the Commonwealth prosecutorial guidelines, as set out by Attorney-General's. We work hand in hand with them to look at the brief of evidence and to meet that particular threshold. It's quite a high bar, but it's there for a reason.

CHAIR: Can I just go back to what you said about changing it to a tier 1 good. What's the benefit of that?

Mr Hutton : The fact that it puts imprisonment, a term of up to five years, on the table for the penalty. In terms of the more egregious offenders and repeat offenders, we felt that that was an appropriate penalty to be used as a deterrent.

CHAIR: Has that occurred?

Mr Hutton : No. It is in the process. We have received approval for it and now we go through the process of changing the actual regulations.

CHAIR: So the minister has a responsibility now to amend the regulations?

Mr Hutton : Yes. He's given approval, and we'll now go through the process of doing so.

CHAIR: Back in May my colleague Senator Pratt asked a question to you about whether the Department of Industry, Innovation and Science consulted with you separately about recommendation 13 or any other matter prior to coming up with the government's assessment in their dissenting report. I understand the answer was yes, there was consultation. Are you able to expand on that and tell us what consultations the department has had with the government about policy matters in relation to recommendation 13 since the release of our interim report?

Mr Hutton : The department of industry sits within the interdepartmental committee that we and the Department of Jobs and Small Business co-chair, so we have regular conversations with Industry and the department of jobs and a number of other government stakeholders within that forum. We took the change to asbestos and the tier 1 listing of the good to the IDC and so engaged with all our stakeholders on that issue through the process. We talked with DIIS in that forum along those lines. The interim report was also discussed at the IDC. There was, I think, a little bit of confusion about whether the question was about the interim report or the dissenting report in the interim report. I certainly know, because I was there when it happened, that there were discussions at the IDC regarding recommendation 13 out of the interim report, but only in the broad, I would say, about the dissenting report. We didn't have direct discussions about the dissenting report. It was afterwards, when we had the recommendations, and we discussed them then. But DIIS is a regular stakeholder of ours, and we engage with them all the time on a range of issues about this.

CHAIR: I understand the maximum penalty at the moment, under the infringement notice scheme, is 25 per cent of the penalty that can be imposed by a court. Coming back to Yuanda's case, they weren't required to pay the maximum penalty available under the infringement notice system.

Ms Dale : In Yuanda's case, three infringements were issued. They were issued under section 233, which is importing prohibited imports. At the time, the penalty for Yuanda was 45 penalty units based on $180 per unit.

CHAIR: So the total of the three infringement notices was $24,300?

Ms Dale : That's correct.

CHAIR: For substantial companies, that's not really much of an impediment. Is there anything being done about increasing the penalties under the infringement notice scheme?

Mr Hutton : We might have to take that one on notice.

CHAIR: Coming back to this issue of the defences available in relation to prosecutions—and I guess this comes back to the prosecution policy of the Commonwealth that you were talking about earlier—as I understand it, on 20 July last year, the Department of Immigration and Border Protection released guidance on assurances that imported goods do not contain asbestos. If that document had existed prior to Yuanda's importation of asbestos, is it the case that the mistake of fact defence would not have been so easy to use?

Mr Hutton : I'm not a lawyer. I really couldn't say what was in the minds of the DPP at the time when they got the brief of evidence to decide whether or not to prosecute.

CHAIR: Okay. Is that something you can take on notice for me as to whether there is a view about it? Now that you've got that document out there—the guidance on assurances that imported goods do not contain asbestos—does that have an impact on the mistake of fact defence?

Mr Hutton : We're updating our guidance all the time, and through the IDC we're working on a number of products at the moment. In fact, we've only just updated our website, which is one of our main forms of getting information out to the public. We just updated that yesterday with a fact sheet specifically on motor vehicles. So we do that constantly. It's an evolving process. Again, I'm not a lawyer, but I guess that the more information is out there the better informed companies can be. They can voluntarily comply with the border prohibition. Our ultimate goal is to have everyone doing that rather than having to run through a compliance process, an INS or a judicial process. But I'll have to take that on notice. I think it's a technical legal question that I'm not able to answer.

CHAIR: Okay, thank you. The number of infringement notices for importing asbestos has increased dramatically just recently. I think In March there were 53, as opposed to five years ago, when there were none. In 2014-15 there were two, so we've seen a fairly significant increase. What's the reason behind that significant growth and the use of this penalty over the last two years in particular?

Ms Dale : I can give you the number for 2017-18. We have issued 60 infringement notices. At the border we apply a risk based approach and risk-assess all goods coming through the border. As we collect more evidence, as well as refining our intel gathering and working with other agencies across the Commonwealth and the states, our information picture and our intelligence have become richer, and we're able to better target and identify the goods coming through.

CHAIR: Okay but can you attribute part of the reason for this to that assurance document that I mentioned or the guidance document that was issued on 20 July last year? Is that part of the picture in making it clearer what people's obligations are?

Ms Dale : We have been doing a lot of industry engagement as well as guidance and working with other industry counterparts. The level of assurance and the awareness across industry is just not one single thing but can be attributed to multiple things.

CHAIR: My colleague Senator Pratt in May asked for the publicising of enforcement actions and whether there were any limitations to publicising enforcement actions undertaken in the form of these improvement notices. That was taken on notice. We got a response, a one-word answer, 'yes'. There would be some limitations. Can you provide more detail about that?

Ms Dale : Yes, that's in the context of: can we publicise the importer or manufacture details? Often the trace of asbestos can be actually found in one product line but not in the other because of the different fibres and the different particles. So one importer might bring in 50 imports and two or three of those imports might contain asbestos, not the others, so we can't actually categorically say everything coming from importer A is laden with asbestos so that's a difficulty that we are facing.

Senator PATRICK: I have a couple of questions that flow from not only your opening statement—they are slightly off track—but also in relation to what Mr Hunt said. You might recall there was an Ombudsman process about the processing of shipping containers and it dealt with an asbestos example—a motor vehicle importer who had brought a product in on a recurring basis. The motor vehicles were dismantled and the testing that was carried out on them, unfortunately, was destructive. The Ombudsman made a recommendation in his review that you 'work with industry to improve methodologies for asbestos risk assessment', noting this person had been subject to over 250 individual asbestos tests with no positive detections. Now, don't get me wrong, I'm very supportive of the work that you're doing in the asbestos world. But if you are testing someone on 250 occasions and not turning up with a result, maybe those resources can be better directed somewhere else in the problem space? Have you looked at that recommendation from the Ombudsman, and are you doing anything in respect of that?

Ms Dale : Yes, we are aware of that recommendation and we are continuously refining our targeting approach. As I said previously, all our imports are risk assessed. We use profiles and alerts and those profiles and alerts can be based on previous detection, country of origin, products. They're continuously changing. And sometimes we suspect, especially in motor vehicles, that one gasket or brake pad might contain asbestos but not the other. So that's why we've been working very closely with the association, to make sure that appropriate assurance is done pre-border, before we actually get to the border, so we can have the appropriate documentation before we need to get into a scenario of having to test them at the border.

Senator PATRICK: So would you say that particular problem has been solved now or is still a work in progress?

Ms Dale : We're working through the recommendation but that's a refinement process. They're continuously worked through to see what we can actually do.

Mr Hutton : I think it's important to add here that the owners themselves are the ones responsible for employing the asbestos professional or competent person—whatever we call them—who then undertake the sampling and have the samples sent off to the lab.

We have had advice from importers and through ministerial correspondence and our industry engagement that they would like to see some more consistency out there in the advice about that process. So one of the materials that we're preparing at the moment is actually quite detailed guidance to importers and owners about how to work with their asbestos professionals and the people who are doing the sampling to understand the process and why it exists and to have a more of an informed conversation about what they need to do and what the requirements are. We can't go into specifics about each and every individual consignment. It's a case of, 'How long is a piece of string?' This car is different to that car, which is different to a consignment of building products. We don't go down to that granularity, but we trust the asbestos professional who is employed by the owner to know their business and know how to sample. Then it's just about informing the owner about that process and about the questions and the issues to raise with them to get the best result.

Senator PATRICK: But in that particular instance the importer was clearly articulating the requirements for entry into Australia to the person they were dealing with overseas. After 250 times without a detection, at some point you'd have to say: 'You know what? This person's got their act together.' That doesn't mean you might not randomly test them. Is that a general occurrence? Is that an aberration?

Ms Dale : Not to my knowledge, but we can certainly take that on notice and have a look at the exact scenario and come back to you.

Senator PATRICK: We also heard from Mr Gover on wood. I'm referring to wood that is illegal in the context that it's taken from a forest illegally and that can be detected—noting that that involves illegality, unlike a non-conforming building product. I understand asbestos is illegal and non-conforming building products are in a much, much greyer area and you can't necessarily stop something at the border. Is that the case with wood, if the wood is being illegally taken from a forest?

Mr Hutton : I guess for us the problem with the non-conforming building products is we don't know what the end use is.

Senator PATRICK: Sure.

Mr Hutton : If you're talking particularly about a species of wood that would be protected under CITES or something like that then, yes, that would have protections, just like what we've been doing recently on ivory. There is a prohibition on ivory coming into the country. That's not permitted. So, yes, if it was wood that was listed under CITES or an endangered species or something like that then that would be subject to a seizure or an inspection.

Senator PATRICK: That helps to clear that up in my mind. Thank you for the alternative example. Asbestos is unlawful under Australian law and you stop it. Is ivory unlawful or is there simply a convention or treaty or something and no specific act? Or is it actually included in a regulation somewhere as being illegal?

Mr Hutton : It's under the CITES convention. That's administered by the Department of the Environment and Energy. It's regarding the commercial quantities that are being imported into Australia.

Senator PATRICK: Okay, thanks.

CHAIR: We heard earlier that the Illegal Logging Prohibition Act was a useful model to be looked at. In particular it involves a due diligence process where the importer has to inform themselves about the provenance of a product. A non-conforming product is in that situation where it doesn't really matter what the end use is. If it's non-conforming, it's non-conforming. What's the feasibility of using the same type of due diligence process as for asbestos or something else that's been banned or doesn't meet certain standards for the non-conforming building product space?

Mr Hutton : I'll have my ABF colleague jump in if I'm going off track here, but I guess I'd separate the two out a little bit—a specific chemical or compound, or a naturally occurring substance, like asbestos is, in terms of detecting that at the border and having a specific prohibition on that substance, as we do for a number of them, versus provenance. Provenance, where it's coming from, is one thing, but then we have the end use of that particular product. Now, we're not a regulator of the building industry—that's not our job—and, so far, these products aren't prohibited. When a load of wood, whatever the wood, turns up at the border, we check the import documentation so we can say, 'Yes, that's wood. Okay, go through.' So, if it's a load of balsa wood, we don't know whether they're going to make model aeroplanes out of it or whether it's going to be used in a load-bearing wall in a high-rise building. We don't know and we don't have the authority to know or to try and investigate. That's why I'm saying I make a distinction between a specific chemical or compound, and provenance and end use.

CHAIR: Okay. But the department did offer to share information, when they do detect non-conforming building products, with the state and territory regulators so they can try and track down suppliers—the volumes imported, when they were imported, who else may have been supplied. Can you give us an update on this issue? Has the department pursued this offer to the Building Ministers' Forum?

Mr Hutton : It certainly has. That's a regular output of my branch, and we've now automated the process so it's even smoother and can happen I believe it's every month. The states and territories themselves have indicated five different product types, I think it was. I can't remember them off the top of my head, but they were concrete sheeting and prefab buildings. I think there might have been some type of cabling in there as well. So it ran the gamut of non-conforming building products and products we found asbestos in. Then, under an MOU that we have with the states and territories, and under the auspices of the BMF, we provide that import data to the regulators in those states and territories for them to follow up and take regulatory action on. That process is ongoing. We also have made it flexible enough that the states and territories can come to us at any time—and they have a couple of times—and request an ad hoc report on a particular product that has popped up in their territory and that they're concerned about, and we will run a report and share that information with them so they can go and take regulatory action.

CHAIR: Is there any more data or detail that the department can now offer that it couldn't back in 2015?

Mr Hutton : I might have to take that on notice, but I don't believe so. No. The same rules apply. It was just, I think, about whether or not the information we were gathering was going to be helpful. You could get down to weights and values and so on, but that may or may not be of any use to a regulator who actually wants to know addresses, supplier names and so on. I understand we have added fields to the data that we send out upon request by the states and territories, and we don't have a problem in doing so.

CHAIR: What does this information-sharing cover at the moment? What types of products and materials have you concentrated on?

Mr Hutton : I'll have to take that on notice.

CHAIR: Yes, if you could.

Mr Hutton : I can't remember off the top of my head, but I think there were five different types of products. I think that mainly they were building products. They were prefab, like demountable buildings and concrete sheeting. But I'll take that on notice.

CHAIR: I'd be interested in knowing whether external cladding was one of those as well.

Senator PATRICK: In relation to asbestos, I think it's probably fair to say that there was an increase in the tempo and focus starting a couple of years ago. I know that you did some raids. I'm just wondering whether that has had any effect on the amount of asbestos that you're now coming across in your role testing material as it comes in.

Ms Dale : Yes and no, but also we have actually been undertaking a lot of industry engagement programs—importers and exporters and manufacturer-aware—and also we have worked with, for example, in China the AQISQ, who are responsible for their export industry—we have published our guidance material in the language there. We are trying to educate so people are aware of our zero tolerance. Often some of these countries—the US, China and Taiwan—mine asbestos and don't have an export prohibition on it, so they are all high risk, so we keep in mind how we can educate those countries and, specifically, manufacturers and importers and exporters.

Senator PATRICK: But with cladding, for example, you did have a couple of investigations. I think there was some in some electrical equipment in South Australia. In those instances, I would have thought that the importers would now be a lot more careful and you would see a reduction in the empirical data that you're receiving.

Ms Dale : That's exactly right.

Senator PATRICK: Do you have data that shows that that is acting as a deterrent?

Ms Dale : I don't have the data specifically, but in addition to that we have introduced a question on the import declaration. There's a question that pops up asking: does the material contain asbestos and have you taken the appropriate due diligence? So it's in the forefront of their mind to have the appropriate assurance, and it's much cheaper for them to test it in the origin country than to bring it here and hold it at the wharf or terminal and get it tested here. So they are much more aware. We get more information from importers and exporters to Border Watch and our various hotlines, as well.

Senator PATRICK: Maybe you could take this notice: is there any measured data that shows that, as a percentage of the amount of product that is imported into Australia, we are starting to achieve our objective, which is not to have the stuff sent here in the first place?

Ms Dale : We can certainly take that on notice and come back.

Senator PATRICK: I'd be interested in that. Thank you.

CHAIR: Thanks very much for appearing before us this afternoon.