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

SMITH, Mr Zachary, ACT Branch Organiser, Construction and General Division, Construction, Forestry, Mining and Energy Union

WACEY, Mr Travis Kent, National Policy Research Officer, Forestry, Furnishing, Building Product and Manufacturing Division, Construction, Forestry, Mining and Energy Union

[11:16]

CHAIR: Welcome. Thank you for appearing before the committee today. I invite you to make a brief opening statement should you wish to do so.

Mr Wacey : Thank you very much for having us. The Construction, Forestry, Mining and Energy Union—the CFMEU—welcomes this inquiry. It really covers two important elements of the union's core business: protecting the jobs and safety of our members and protecting the jobs and safety of the community as well. Non-conforming products are an issue which the union has growing concerns about. A little bit of background: in 2012 the union was involved in the Prime Minister's Taskforce on Manufacturing when Gillard was Prime Minister. The non-government members in their report Smarter manufacturing for a smarter Australia recognised that it was a level playing field issue for Australian industry and Australian manufacturers. The recommendation of the report essentially outlines that Australia had a strong system of standards and regulations but it was a system that was at risk of being undermined by non-conformance and non-compliance with that system. It was putting conforming businesses—Australian manufacturers—at a cost and competitive disadvantage. That report was made by the non-government members of the Prime Minister's manufacturing task force in October 2012, by recollection. Since that report was tabled, unfortunately, there has not been a lot of action to address the level playing field issue.

I will see if Zach wants to talk specifically about some of the occupational health and safety ramifications of non-conforming building products. Obviously the committee is aware of certain high-profile examples lately. We had the issue of non-compliance with the cladding, which Ms Brookfield just mentioned, but there is an array of non-conforming building products and, frankly, other products as well, which is a real concern for our members and for the broader community as well. Zach might be able to give some insight from the construction workers.

Mr Smith : The issue of non-conforming imported products, from the perspective of our members in the construction industry, is ultimately an issue of safety not only for our members and those people who go to work each day in the construction industry but also for the broader community and the end consumer of building products and buildings.

I intend to briefly point to three real-life case studies that highlight the safety risk posed not only to our members but also to the broader community. Hopefully, that imparts the gravity of our concerns around safety and the risk that non-conforming products pose to the safety of the whole community. The first case study is that which has captured most of the community's attention and this committee's attention to date. I do not propose to go over all the details, but in the Lacrosse apartments cladding fire the Alucabest aluminium product that was used has since been found by CSIRO to be non-conforming and, in their words, 'not meeting the combustibility requirements for a high-rise building'. I will add a couple of points in addition to that to highlight our growing concern about this. We submit that this is not just a one-off, isolated example. There were reports later in the Herald Sun that the building regulator said there are at least 170 buildings in Melbourne's CBD alone that they believe may be at risk of a similar sort of incident through a non-conforming cladding product. Just recently you may have seen in The Age in Melbourne that Harvest Apartments on Clarendon Street in South Melbourne has been identified as having combustible cladding material, and that has forced the evacuation of the apartment block's residents. The council is saying that more than 50 per cent—the majority—of the cladding material used on that apartment project is similar to the cladding that was used on the Lacrosse building and which has been blamed for the fire at that building. So that is the first case study that highlights the magnitude of the problem in that sector.

CHAIR: Before you move off that one: I think you said it was non-conforming product. Could you have meant that it was non-compliant, given our clarification of that definition earlier?

Mr Wacey : Yes. This sort of cladding with the majority-polyethylene core—non-fire-resistant—is inappropriate for a high-rise building and could potentially be appropriate for a low-rise building. That is an issue for the building code. For us the verdict is still out on that in terms of its suitability.

CHAIR: Thank you for that. Sorry to interrupt.

Mr Smith : The second case study is a little bit closer to home and involves an $80 million project using Australian taxpayer money that has occurred very close to here in Russell. To date we have had reports that 18 panes of glass have fallen from that building.

Senator XENOPHON: The ASIO building.

Mr Smith : Correct. To date we are aware that 18 panes of glass have fallen. From our perspective, it is through good luck rather than good management that members of the community have not been hit, but there is no guarantee that it could not have occurred. Moreover, we would like to speak a little bit to the window and glass side of the construction industry. We recently had a meeting with a contractor who is engaged to install window units on major multistorey apartment projects, and he gave some pretty damning insights into the industry and the culture there. He used an example of a multistorey apartment project not too far from where we are sitting now where he was engaged to install the windows. He was given a set of bolts—similar to the Australian product DynaBolt—to use, because they were a cheaper product that came with the window units, which were also imported. He had concerns based on his own experience and intuition in the industry, and got them independently tested. He found that they could not meet the torque tests that were required by the Australian standards—so that is a load-bearing test. I do not propose to go through and give the committee a DIY lesson on DynaBolts but, suffice to say—

Senator XENOPHON: You could—I might learn something; my other colleagues may not.

Mr Smith : You might be better off, Senator, getting someone other than me to give you advice on construction and how to build something.

Senator XENOPHON: Senator Madigan was an agent for AMFP, so he knows something about DynaBolts.

Mr Smith : Okay. He would be familiar with the product that I am about to talk about. This is a standard DynaBolt. As you can see, as force is applied, the expansion sleeve expands and that grips into the material and holds it in place—feel free to interject, Senator, if I am getting this wrong. This is the equivalent product of the one the contractor got tested. It failed to meet the same load-bearing tests and it did not expand under force.

I know it is a pretty innocuous sort of piece of construction material—something like a bolt—but it just highlights that we are talking about a multistorey 200-unit apartment complex. We are talking about window units that can lay a couple of hundred kilos. They are six-storey tall buildings, and the product that was given was not fit for duty.

Senator MADIGAN: Thank you, Mr Smith and Mr Wacey. I think, for the benefit of the committee, in the fasteners space—in this case what is commonly referred to as DynaBolts—because they look the same, many people assume that they have the same characteristics. Is that a fair comment?

Mr Smith : Yes, that is a fair comment.

Senator MADIGAN: So whether you are a builder in a domestic sense, a worker working for a builder on a house or in a commercial sense—like your members, predominantly—on a larger project, the product looks the same but it is not the same.

Mr Smith : Correct. As I said, it was only because this contractor had been in the industry for upwards of 15 years that he was able to identify and recognise some differences. You are correct: for the overwhelming majority of the industry and the layperson, you would not be able to identify the differences.

Senator MADIGAN: So we do have reputable suppliers in the market whose product is tested, but there is an enormous number of products coming into the country—which I commonly referred to as landfill—that looks the same and, supposedly, does the same. People buy these products thinking they are the same but they are exposing the consumer, the worker and the company business they work for to enormous risks, aren't they?

Mr Smith : Correct.

Mr Wacey : It is definitely fair to say that in our experience. We have the bolts today as one example. Another example that I know you are familiar with, because of your previous work, is the issue of engineered wood products, particularly your formplys, plywood and that sort of thing. By the time it gets onto the construction site, it is very difficult for even our very highly-skilled occupational health and safety officers to be able to tell the difference between a conforming and a non-conforming product, especially in cases where it is marked as conforming with the relevant Australian standard. It is a real issue, because there is a cost advantage of using a non-conforming product. For the reasons I explained earlier, making a product which is up to standard and up to scratch and then getting it independently tested and verified, which Australian manufacturers generally do, has a cost associated with it. It is a cost that Australian manufacturers are bearing and it is a cost which is constantly being avoided by overseas manufacturers and unscrupulous importers.

Senator MADIGAN: You would acknowledge, Mr Wacey, that there is reputable product that is imported into the country. We are not here today to cast aspersions on the reputable imported product. Would you agree there are multiple effects here—so we affect the reputable suppliers, the reputable manufacturers, whether they be Australian or foreign? There are other risks, would you agree, in the space of, say, construction plywood? If you are putting up a suspended slab, Acrow Propping it in an underground car park, for instance, you get a pack of construction plywood, formply, and people assume it is rated to the weight of so many hundreds of kilograms per square metre. The job is Acrow Propped by the workers and then there is the potential that, if it is not compliant, if it is not properly rated, we could have it collapse onto workers. Then they do not go home to their families, the builder is exposed to all the litigation et cetera and it has a broad effect across the community.

Mr Wacey : Absolutely.

Senator MADIGAN: And jobs too, for the reputable manufacturers.

Mr Wacey : Just on your first point, non-conforming product, whether it is imported product or locally manufactured project, undercuts everyone doing the right thing—importers doing the right thing and importing conforming products, and Australian manufacturers, who by and large manufacture conforming products. On the products that you are talking about, for example, all of the Australian manufacturers who are involved in a third-party certification scheme for the product that they produce—that involves an in-factory test of one of every 500 sheets of plywood that is produced, and that is a test to breakage, so you see how much strength it takes for it to break. At the same time, a sample is taken each day and shipped to their NATA-accredited laboratory in Brisbane for independent testing. Again, it is strength testing. It is also other elements which are related to that product—formaldehyde levels, for example. Subsequently, the Engineered Wood Products Association of Australasia also undertakes unannounced factory tests of all the testing which happens in the factory and also market surveillance, so you can be assured that the product that is manufactured in Australia under this scheme is in fact fit for purpose. It is very important, as you pointed out, that it is fit for purpose, because of the life, health and safety risk associated with this product if it does not conform. Concrete can break and it can kill form workers.

Mr Smith : Can I just make a point on that? Quite recently the New South Wales WorkCover authority closed a site prior to a concrete pour in Sydney, in Sutherland. The reason they did that was on the basis of the formply that was being used. It was already showing signs of bowing and twisting and delaminating, so signs that the product was not conforming. Once that product was taken away to be tested, it could not meet any of the tests associated with the relevant Australian standards.

Senator MADIGAN: With this before or after the concrete was poured?

Mr Smith : Before. It was lucky that New South Wales WorkCover was able to intercept the issue prior to the concrete being poured. Our issue is very simple and our concern is very simple. Formwork and falsework is an integral part of the structure of any building. It is the skeleton, so to speak, for the structure. It has to support hundreds of tonnes worth of concrete and reinforcement steel. Product that does not meet the standard, product that is not fit to be used, poses a very real risk. It is being used. It is being used in the Sydney metropolitan area, as we have seen. So it is not a theoretical risk; it is a real-life risk. The potential consequence—without putting too fine a point on it—is catastrophic, when you think about how many workers are involved in a construction site, especially around the time of a pour. So I just wanted to make that point: there are real-world examples where that is currently occurring.

Mr Wacey : Anecdotally, this is not an isolated account, either. My understanding is that we are looking at in excess of $120 million of this stuff, per year, currently on construction sites—imported products with suspect properties, in this event. The Australian Industry Group, who I believe are involved this afternoon, released a report in November 2013, which had an interview with the Engineered Wood Products Association of Australasia. They took samples of some of the imported products purchased from the marketplace and found, I think it was, by recollection, 60 to 80 per cent failure with the Australian standards after that testing.

Since November 2013, anecdotally, I have heard that the product is even more widespread than previously. As you alluded to as well, there is a nice little synergy between our two divisions of the union in this: our members produce this in Tasmania, Myrtleford, Grafton, Mount Gambier and around the country. I understand that, because of the associated extra work that you have to put into a product to make sure that it complies, a non-conforming product would be 50 to 80 per cent cheaper than a conforming product. So this situation is not only risking lives; it is costing jobs.

Senator MADIGAN: Are either of you gentlemen aware of concerns around Australian standards for some materials used in building construction where the standard is not fit for the product that is supplied and the circumstances in which it is used?

Mr Wacey : Just anecdotally. All standards are meant to be reviewed, according to Australian standards, every five years or so, I believe, to make sure that they are up to date and still fit for purpose for what they are trying to achieve as a standard. Through reading some of the submissions into this inquiry, and anecdotally, I am aware of other standards that have not been reviewed in a timely manner. Occasionally, there is dispute about the scientific or technical nature of what a standard should achieve and that sort of thing, but I do not really have my head around the specifics of it.

Senator MADIGAN: Are either of you gentlemen aware of concerns around formaldehyde being used in composite boards, in cabinetry, in commercial or residential buildings?

Mr Smith : Yes. There was another example, again, in Sydney, quite recently—I think that we point to in our submission at page 5—where formaldehyde was used in the kitchen cabinetry in a multistorey apartment complex. As a result, all had to be removed. As we understand from our members in the joinery sector and companies that we talk to in the joinery sector, that is an increasing problem with imported cabinetry. It is probably a problem that is largely understated until it has been tested.

Mr Wacey : A lot of engineered wood products, a lot of kitchens, use formaldehyde. Using formaldehyde at a safe, Australian-standard level it is not a carcinogen, and there are Australian standards around formaldehyde which, again, all local manufacturers adhere to. An issue is that that Australian standard is, I understand, voluntary—it is not caught up in any building codes or anything like that. It, basically, comes down to a situation where someone has decided to import a whole bunch of kitchen cabinets—I think the example that we were talking about was $1.3 million worth from China. That is in the submission, isn't it?

Mr Smith : That is right, yes.

Mr Wacey : Because it was a voluntary standard, they did not even need a stamp on it to say that it reached Australian standards. It was only when people started walking in there and could smell it that they realised it was not a safe situation.

Senator MADIGAN: We have mandatory standards and we have voluntary standards with some products.

Mr Smith : We have standards caught up in the building code, which enforces those standards, for lack of a better term.

Mr Wacey : It is an interesting one. For example, asbestos is prohibited from coming into the country. That is not so much a standard's issue; it is a quarantine and customs issue. I am sure you will have some discussions with them when they appear this afternoon, because I think I have read them nearly concede that they are powerless to stop the flow of not just building products, like particle board, but our submission talks about children's crayons and stuff coming in over the internet.

Senator XENOPHON: Are you talking about crayons with asbestos in them?

Mr Wacey : That is right. Recently, in the Latrobe Valley, there were some children's crayons—I think they were marked 'Disney' or something like that—which came in over the internet.

Senator XENOPHON: But, clearly, they were not related. Disney would have nothing to do with them.

Mr Wacey : No, that is correct. It is just the fact that whoever did produce these labelled them that way.

Senator XENOPHON: It was a counterfeit product.

Mr Wacey : Essentially, yes. There are many examples such as that. That is an example of a prohibited product. Then it comes down to the products that we were talking about before, like the formply, which has the standard associated with it caught up in the building code. Theoretically, you are allowed to bring stuff in which does not conform with a certain product standard, as long as you do not use it in a certain function. It becomes a conformance and compliance issue. Then you have the next level down, the voluntary standards, which I would like to see become a lot stronger—something like the formaldehyde emission standards, in terms of mandatory compliance.

Senator XENOPHON: I have a supplementary question on the formaldehyde emission standards. It is a carcinogen; why do they use it in timber products, anyway?

Mr Wacey : It is, essentially, a glue product.

Senator XENOPHON: It is a cheap bonding agent.

Mr Wacey : Yes, essentially it is for bonding. It is vital for use, for example, in medium-density fibreboard and those sorts of products to keep the products together. It is also used in plywood. A piece of ply board may have been made of how many sheets?

Mr Smith : It could be up to six, seven or eight sheets.

Mr Wacey : It is used to glue the sheets together.

Senator XENOPHON: But you can use alternative bonding agents, can't you?

Mr Wacey : I am happy to take that on notice. My understanding is that it is the most effective one for bonding, from the strength point of view.

Senator XENOPHON: It is a question of the concentration of it and how it is used, isn't it?

Mr Wacey : That is correct, yes. At safe levels, which I would say Australian standards are, I think it is fine.

Senator XENOPHON: We have your submission, and it is very comprehensive, giving instances of where things have gone wrong, in terms of non-complying, non-conforming products. The Housing Industry Association and their very helpful submission talked about it being too late to have checks at the point of sale in the hardware store or the building supply store. It should be at point of manufacture. There is also the question of, if some of these importers go broke, there being no redress for consumers. What is the preferred approach of the CFMEU in the context of these products?

How do we have an effective enforcement regime? Should it be national? Do you think the state-by-state regime should be kept in place but made to operate a little better? You have been terrific in identifying the problems, but what solutions do you think would make a difference? Bear in mind there is also the issue of jobs, and the HIA will give us some details about the unlevel playing field.

Mr Wacey : The Victorian government has put a submission into this process, I believe, and they are also involved in the Building Ministers Forum that is looking at this issue. I think their submission is interesting; it talks about a mandatory certification scheme for products with life-safety considerations attached to them. They talk about a new system for making certain elements of CodeMark mandatory for certain products. That is an interesting approach, but—

Senator XENOPHON: Interesting in that it has your broad support or not?

Mr Wacey : If you were going to go down that path, you could do it but you would have to do some other things as well for it to be an effective system. Basically, a lot of the industry groups—like the Engineered Wood Products Association, the Australian Windows Association and the Australian Steel Institute—already run third-party certification schemes and so it is really about getting those schemes recognised and made mandatory for imports as well as local products, to which they are effectively applied already.

The other thing that the Victorian government has said is that, if you were going to have a mandatory scheme, you would have to have a marking system which essentially would make it an offence to import or on-sell those products which did not have that mandatory certification clearly labelled.

Senator XENOPHON: Another solution that I have support is Senator Madigan's private members Fair Trade (Australian Standards) Bill. You say it would provide an extra layer of protection for imported products having to comply with Australian standards.

Mr Wacey : We definitely think the Fair Trade (Australian Standards) Bill has merit. We also talk about and intelligence led risk based approach—

Senator XENOPHON: Would you mind saying that again?

Mr Wacey : In our submission we also talk about an intelligence led, risk based approach to standards conformity assurance on imports. Basically, if there was anecdotal evidence, there would be a proper approach to sampling, testing—

Senator XENOPHON: Run by Border Force or some other agency?

Mr Wacey : The key thing is that somebody takes responsibility for it, because at the moment no-one is taking responsibility for the issue.

Senator XENOPHON: It is not ASIO's remit, but they have firsthand experience of dodgy products.

Mr Wacey : For example, the Engineered Wood Products Association's calls for an independent compliance unit to be established.

Senator XENOPHON: Which association? You are going too quickly for us. I am still a bit deaf from that Elvis Costello concert I went to the 1977.

Mr Wacey : The Engineered Wood Products Association in their submission talk about an independent compliance unit being established within, for example, the ACCC on the grounds that the ACCC has the legislation to be able to take instances of false and misleading claims of adherence to a standard. They have the legislation, the Australian Competition and Consumer Act, to be able to prosecute that and make it an offence. We have had a meeting with the ACCC, after writing to the assistant minister Andrews, in the last few months. They basically indicated that, despite having that ability, they do not have the resources or expertise to do that. They also point to the fact state offices of fair trading are also able to use that legislation. But what we think is that a national approach is definitely required, given the changing nature of trade, particularly in these products, over the last 10 to 15 years. The HIA spoke a little bit about that earlier, which was really interesting, I thought. They said, I believe, that 50 per cent of the manufactured products came from imports.

Senator XENOPHON: Thank you.

CHAIR: Thank you very much, gentlemen.