COMPLIANCE

 

  A range of innovations was introduced to NICNAS's Compliance area
in 2004-05, designed to maintain the integrity of the Scheme and provide
a firm, fair and consistent compliance function.

The reporting method on compliance cases was reviewed during the year,
and the following definitions now apply. In this report, ’compliance case‘
refers to a business entity which has one or more potential contraventions
of the Act. A ’new chemical case‘ refers to a business entity which
is introducing one or more new industrial chemicals, including potential
contraventions of section 21 of the Act by introducing new chemicals
without a valid assessment certificate, permit or grounds for exemption.
For a new chemical case, the case is closed when an assessment
certificate or permit is issued or the company is otherwise found to
be compliant.

Quantity

 

Australian Inventory of Chemical Substances
(AICS)

As in previous years, most searches in 2004-05 were for less than ten
chemicals per enquiry (96.9 per cent, representing 158 out of 163).
The remainder included four enquiries for between 11 and 20 chemicals,
and one for between 21 and 50 chemicals.

Since the non-confidential AICS was made publicly available on the NICNAS
website, the number of non-confidential search requests has dramatically
decreased and only one request was received in 2004-05. The three-year
trend data for enquiries and searches are shown in Table 14, with three-year
trend data for searches per enquiry shown in Table 15.

This drop in search requests indicates industry is using the free online
search facility offered on the NICNAS website.

  Table 14 Three-year trend data for AICS enquiries and searches

 

2002-03

2003-04

2004-05  
  Enquiries 666 507 163  
Searches 2683 2314 413  

 

  Table 15 Four-year trend in number of searchers per AICS enquiry

  2001-02
NO. (% TOTAL)
 
2002-03
NO. (% TOTAL)
 

2003-04
NO. (% TOTAL)
 

2004-05
NO. (% TOTAL)

 
 
  1-10 529 (89) 616 (92.5) 462 (91.2) 158 (96.9)  
  11-20 41 (7) 27 (4.1) 24 (4.7) 4 (2.4)  
  21-50 15 (3) 20 (3.0) 19 (3.8) 1 (0.7)  
  >50 10 (2) 3 (0.1) 2 (0.4) -  

Case management

NICNAS manages compliance cases from instigation to resolution or
prosecution, and undertakes audits and inspections to ascertain compliance
with the Act. During the year, the main activities of the compliance program
included management of chemical cases, company audits and inspections
and monitoring compliance with the Rotterdam Convention.

A summary of all compliance cases involving potential or actual breaches
related to industrial chemicals for 2004-05 is shown in Table 16.

  Table 16 Summary of the number of compliance cases in 2004-05

  ACTIVE CASES AS
AT END OF 2003-04
NEW CASES REPORTED
IN 2004-05

CASES
CLOSED
DURING
2004-05*

ACTIVE
CASES AS
AT END OF
2004-05

 
 
  New Chemicals
cases
17 25 21 21  
  Existing Chemicals 1 0 1 0  
  Total Cases 18 25 22 21  
* These are fully resolved cases, no further action required.  

At the end of 2003-04, there were 18 active compliance cases including 17
new chemical cases and one existing chemical. The 17 new chemical cases
included eight cases in which notifications were received during 2003-04
but assessments had not been finalised due to data deficiencies. In 2004-
05, 25 cases, each relating to new industrial chemicals, were received.

Of the 25 new chemical cases received during 2004-05, 22 cases related
to industrial chemicals not covered by a certificate, permit or exemption,
and three cases related to contravention of secondary notification or permit
conditions.

Figure 13 presents the trend in case categories over the last five years.

A total of 22 cases relating to new and existing industrial chemicals were
closed during 2004-05. The majority of these cases were resolved through
informal compliance processes. There were 21 chemical cases active at
the end of 2004-05, with 12 cases currently undergoing new chemical
assessment.

Recognising the importance of working with industry to develop agreed
timetables to remedy breaches, the case management process was
streamlined during the year. NICNAS's policy on negotiated timelines and
outcomes with respect to self-reported chemical cases has been
successful, resulting in 22 new chemical cases being closed.

Industry profiles

In 2004-05, 43 compliance cases from a wide range of industry sectors
were investigated (see Table 17).

  Table 17 Break-down of compliance cases in 2004-05 by industry sector

  Chemicals – supply 10  
  Plastics and resins 7  
  Chemicals – manufacture 7  
  Cosmetics 4  
  Transport – cars and automotive components 2  
  Specialty chemicals 2  
  Pharmaceutical 2  
  Paints and surface coatings 2  
  Office products – business machines and supplies 2  
  Adhesives and sealants 2  
  Petroleum/mineral products 1  
  Paints/lacquers/varnishes 1  
  Building and construction 1  

The majority of cases came from chemical supply (23 per cent) followed
by chemical manufacturing (16 per cent) and plastic and resins (16 per cent).

Sources of cases

Compliance cases are generated through self-reporting, third party
allegations from the public, industry or government agencies, and in-house
investigations including desk auditing and on-site inspections or audits.
Figure 14 presents four-year trend data for sources of compliance cases.

Figure 14 Trends in the sources of compliance cases (Click to enlarge)

All third party allegations are examined to determine whether a breach
has occurred. This year NICNAS received seven third party allegations from
industry participants. Three cases were found to be already compliant,
one case was referred to a state government agency because it did not
come under NICNAS's jurisdiction, and the remaining three are still under
investigation.


Quality

Independent review of internal systems

NICNAS engaged the services of an independent consultant in October
2004 to review the Scheme's compliance program and procedures,
and assess their appropriateness for the organisation's current and future
requirements. In particular, the consultant was asked to consider whether:
•  the current risk approach to compliance was appropriate and soundly
    based
•  there were adequate resources to undertake the work necessary
•  the program was appropriate to cover the expected increase in the
    number of registered companies from 800 to between 6000 and 8000,
    and
•  adequate industry guidance material was in place.

  Through staff interviews and by reviewing files, documents and procedures,
the consultant benchmarked the operations of NICNAS against the
Australian Standard on Compliance: AS 3806. While the consultant
noted 'the organisation is well run, efficient, and providing cost effective
regulation', the report suggested action items to be implemented to
improve compliance performance over forthcoming years. The report and
its recommendations have been accepted in full and are under active
implementation.
 

Industry guidance

NICNAS is committed to establishing clear industry guidance on the
regulatory requirements of the Act and so a number of guidance materials
were developed and published during the year:
•  guidance notes on NICNAS Registration, to assist industry sectors
    in understanding NICNAS Registration requirements
•  other guidance material relating to NICNAS Registration including the
    NICNAS Registration brochure, Your simple guide to NICNAS, Which
    industrial chemicals are within the scope of NICNAS Registration?
    and Frequently Asked Questions
•  specific guidance notes for the cement, paint, ink and toner, plastics,
    and cosmetics and toiletries industries, designed to assist industry
    estimate the total value of introduction (ie import and/or manufacture)
    of industrial chemicals, and
•  several compliance guidance notes including Your obligations under
    the Act, Enforcement policy, Summary of enforcement provisions,
    Offences and penalties, Compliance Frequently Asked Questions,
    A compliance guide for introducers of industrial chemicals: a checklist
    approach and How to submit third party allegations.

These publicly available materials are also accessible on the NICNAS
website. Further guidance material will be developed and updated to assist
industry in complying with their obligations under NICNAS.

Monitoring compliance

During 2004-05, compliance monitoring activities included delivering training
to industry on compliance, auditing self-assessed assessment certificates,
outreach visits and on-site audits, as well as planning a comprehensive audit
program for 2005-06 based on a risk assessment approach.

The audit program for the year included self-assessed assessment
certificate audits, which were primarily aimed at checking the data holding
of notifiers and then verifying the authenticity of data. This program audited
32 self-assessed assessment certificates, which included 28 issued during
the first quarter through to the third quarter of 2004-05, and four issued
during the interim arrangement in the last quarter of 2003-04.

Notifiers are not required to provide supporting data to NICNAS for PLC
self-assessment. However, of the first 32 self-assessment notifications,
16 also included supporting data with the self-assessment submission.
These data were checked to ensure correct transfer of information onto
the PLC submission. The remaining 16 notifiers were offered two options:
to submit the data for desk auditing or allow NICNAS inspectors to conduct
on-site data verification audits. Two companies invited inspectors to conduct
on-site audits while the rest provided data for desk auditing.

The audit program successfully concluded all 32 self-assessments.
The notifiers of self-assessments either hold relevant data on-site or third
parties hold them on their behalf. Industry provided ready access to data
and held, in the most part, comprehensive data sets as appropriate.
Almost all notifiers cooperated to accomplish this task.

During 2004-05, two on-site audits were undertaken in Melbourne for
general compliance and educational purposes. Both companies were found
to be compliant with regulatory requirements and were issued with
Inspection Reports. Both companies were cooperative with NICNAS
inspectors and demonstrated that they have adequate regulatory
compliance systems to monitor introduction in accordance with permits/
certificates. NICNAS will prepare a comprehensive audit plan for 2005-06.

NICNAS Registration audits

NICNAS conducts registration audits as a routine function of its compliance
program using import data based on the previous registration year
(1 September 2003 to 31 August 2004) supplied by the Australian Customs
Service.

   
Registration audits that are not resolved become formal registration
cases, which can also be generated from day-to-day compliance activities.
A summary of NICNAS Registration compliance activities (ie registration
audits and cases) is provided in Table 18. All activities reported for 2004-05
relate to Tier 2 and Tier 3 registrations.

A review of the Customs data for 2003-04 identified 642 companies for prescreening,
which in turn produced a list of 247 companies to be investigated
through routine registration audit. These companies were informed of their
potential registration liabilities for 2003-04 and/or 2004-05. Of the 247 audits,
204 were resolved at the audit stage. Of the remaining 43 audits, 33 were
escalated to registration cases (of which 22 were resolved), and 21
remained active investigations (10 audits, 11 registration cases) at the
end of the reporting year.

A further 18 registration cases were initiated through day-to-day compliance
activities. These companies were investigated, and all were resolved.
Seven registration cases were carried over from 2003-04 and resolved.
Overall, registration compliance activities resulted in 183 additional
registrations. Industry profiles for the new registrants are shown in Table 19
while Figure 15 shows the trend in the number of resolved registration
investigations over 5 years.

  Table 18 Summary of NICNAS registration investigations 2004-05

  ACTIVE
INVESTIGATIONS
AT END OF
2003-04
NEW INVESTIGATIONS REPORTED
IN 2004-05

CASES
INVESTIGATIONS
DURING
2004-05*

ACTIVE
INVESTIGATIONS AT END OF
2004-05
 
 
  Registration Audits - 247 226 10  
  Registration Cases 7 51 47 11  
  Total 7 265* 251* 21  
* Audits that were escalated to registration cases have only been counted as a single
investigation (33) and resolution (22).
 


 

  Table 19 Industry profiles of 2004-05 investigations by registration level

  Tier 1 Tier 2 Tier 3 Total  
  adhesives and sealants 0 2 0 2  
  chemicals - manufacture 0 8 0 8  
  chemicals - supply 0 5 0 5  
  cleaning/household products 4 1 0 1  
  cosmetics and toiletries 0 24 3 31  
  machinery and equipment 0 4 0 4  
  mining and mineral processing 3 5 0 5  
  paints and coatings 1 15 1 19  
  petroleum and mineral products 0 3 3 7  
  plastics and resins 1 11 0 11  
  printing and inks 0 11 0 12  
  speciality chemicals 0 1 0 1  
  unclassified 11 62 4 77  
  Total 20 152 11 183  

Figure 15 Resolved Registration investigations by year

In 2004-05, 226 (91 per cent) of registration audits involving companies
identified as potential registrants were resolved, based on audits of 2003-04
Customs data. In total, 47 (81 per cent) of 58 registration cases were
resolved within the target, and a total of 251 registration compliance
activities were resolved, resulting in 183 new registrations. At the end
of the year, 21 investigations were outstanding.

Nine registrants were referred to compliance for failing to renew their 2004-
05 registration by 31 August 2004, and 10 for not paying the penalty fee for
late renewal. Six non-renewals (which also attracted late penalty fees) and
six late penalties were resolved; the remaining seven are outstanding.

Prosecutions

No prosecutions or penalties were applied by NICNAS in 2004-05.
In accordance with prosecution guidelines developed by the Director
of Public Prosecutions (DPP), an enforcement policy was finalised and
published on the NICNAS website.

Industry training

In order to increase industry understanding of general obligations under the
Act, NICNAS provided free information sessions for new registrants in 2004-
05, and will continue to do so in future years. The first training, which
covered registration, notification and record keeping requirements, took
place in Perth (30 attendees), Adelaide (32 attendees), and Melbourne (69
attendees) in December 2004. The training was well received, gaining
excellent feedback.

NICNAS officers also made site visits in Perth to meet with industry for
one-on-one discussions about the new registration requirements.

In March 2005 NICNAS commenced the second round of information
seminars to assist importers and manufacturers. At each seminar,
an overview of NICNAS was presented. The program started with seminars
in Melbourne (46 attendees), followed by Brisbane (30 attendees), then
Adelaide (four attendees).

Participant satisfaction with the sessions was high, based on the feedback
received, with the most satisfied participants attending the Brisbane and
Victorian sessions. Overall, most attendees requested more training
seminars and expressed satisfaction with the course material.

For the industry training program for small to medium enterprises
(associated with Tier 1), NICNAS conducted all the seminars in Perth,
but outsourced the sessions in other major capital cities and regional
centres to Neill Buck & Associates Pty Ltd.

Customs Broker training

Customs Broker training

NICNAS conducted training
for customs brokers.

NICNAS also held free seminars in Sydney and Perth for customs brokers
in November and December 2004. These seminars covered the new
registration requirements for importers, as well as new requirements for
exporters under the Rotterdam Convention.

The Seminars also explained how NICNAS Registration operates, including
the three Tier levels, and advised what customs brokers' clients need to
do to ensure compliance with their obligations under NICNAS. Customs
brokers commented that the sessions were very informative and more
sessions are planned in other states.

Outreach

The Compliance team's education and promotion strategy provides for
outreach visits where first-time registrants are provided the opportunity
to discuss their registration with NICNAS officers. Outreach participants
can use this forum to discuss various NICNAS related issues such as
determining if a chemical is listed on the AICS or calculating the registrable
value of their imports. They can also seek advice on record keeping and
compliance monitoring.

In 2004-05, five organisations accepted NICNAS's offer to meet and discuss
relevant issues and NICNAS will continue this initiative in forthcoming years.

Top of Page

 

Timeliness

  Forty-three compliance cases were investigated during 2004-05, which
included 25 cases received within the year and 18 cases carried forward
from the previous year. Twenty two cases (51 per cent) were closed during
the year. Twenty cases (91 per cent) were finalised within 100 days against
a target of 95 per cent. Timely follow-up yielded 17 new chemicals
notifications submitted within agreed timeframes.


AICS response

A summary of targets and performance for AICS searching is provided
in Table 20. The time required to complete an AICS search varies
considerably depending on the level of information provided for the search
and the complexity of the chemical structure. The improvement in
timeliness has also been achieved as a result of recent internal streamlining.

  Table 20 Summary of timeliness for searches of AICS for 2004-05

  1-10 11-20

21-50

>50  
  No. of enquiries by category 185 4 1 -  
  Target for completion of search (days) 2 7 14 28  
  Response time met (%) 92.4 100 100 -  

The response time improved to those in 2003-04 as shown in Table 21.

  Table 21 Trend in timeliness for searches of AICS for 2002-03 to
2004-05

  1-10 11-20

21-50

>50  
  2002-03 91 96 100 100  
  2003-04 88 84 100 100  
  2004-05 92 100 100 -  


Industry compliance with Registration renewal schedule

Industry compliance with the renewal deadline (31 August) stayed on par
with last year in percentage total, even though the number of registrants
increased. Figure 16 shows industry's timeliness pattern in relation to
renewals over the past seven years.

Figure 16 Registrants' timelines in NICNAS company registration renewals over the past seven years (Click to enlarge)

Industry's rate of compliance with the renewal date has been consistently
low. The renewal response rate for 2004-05 was similar to last year.
Approximately 11 per cent of companies had still failed to renew by one
month after renewal date. Regular debtors follow-up and compliance action
to 30 June 2005 saw 17 companies still being investigated, pending
renewal.

Even though initial renewal of registration was higher than the past average
rate, approximately 8 per cent of companies had still failed to renew by one
month after renewal date. Regular debtors follow-up, and compliance action
up to 30 June 2005 resulted in only three companies with pending renewal.

Overall, late renewal penalties raised $50,628 from 123 companies during
2004-05, $29,640 raised from 24 upper (now Tier 3) level registrants and
$20,988 from 99 lower (now Tier 2) level registrants.

Penalties for late registration in Tier 1 will apply in 2005-06.

Effectiveness

  The outcomes of the 22 compliance cases closed during the year are shown
in Table 22.
 

  Table 22 Outcomes of chemical case investigations in 2004-05

OUTCOME/RESULT NUMBER OF CASES (%)  
  Certificates/Permits issued 5 (23)  
  Already compliant 6 (27)  
  Written-off (no breach) 5 (23)  
  Not a NICNAS matter (referred to other agencies) 1 (4)  
  Resolved non compliance on interim basis 5 (14)  

Of the total number of cases closed during the year, 23 per cent were
issued with certificates/permits, 27 per cent were found to be already
compliant, 23 per cent of the cases were 'written off' as no breaches were
identified, four per cent were referred to other organisations because the
matters did not come under NICNAS jurisdiction and 14 per cent were
resolved on an interim basis. A number of cases with notifications
submitted remained under assessment at the end of 2004-05.

During 2004-05, 17 new chemical notifications were received as a result
of compliance action. Figure 17 presents the distribution of these across the
notification categories. NICNAS policy on self-reported cases was tightened
during 2004-05, requiring companies to enter into strictly monitored
agreements on timeframes for submission of complete notifications that
meet all assessment requirements.

Industry welcomed NICNAS policy on self-reported cases, which
allows them to continue trading while notifications and assessments are
in progress. Tightened timeframes yielded timely submission of complete
data for assessments. However this policy was implemented subject to
case-by-case judgement of risk with regard to public health, safety and
environmental impact. Non-compliance with a NICNAS agreement is
considered a serious breach and can lead to an escalation of enforcement
actions to prosecution.

Figure 17 New chemical cases by notification category generated by compliance action
(Click to enlarge)

Enforcement tools

NICNAS's Enforcement Policy has been documented and published on
the NICNAS website as part of our ongoing review of internal procedures
and processes. It provides guidance to industry about our principles and
approaches to enforcement and the tools available to NICNAS when
enforcement action is required, and aims to provide a consistent and
transparent framework to use when making decisions about noncompliance,
for investigation and/or prosecution or other enforcement
action.

Inspector training

Inspector training for all NICNAS compliance and assessment staff was
provided in November 2004 and February 2005 resulting in 27 officers
being appointed inspectors by the Director under section 84 of the Act.
The training outlined auditing and inspection techniques used to monitor
compliance with the Act based on best practice models adopted by other
Australian Government regulators and relevant Australian Standards.

Strategic alliances

States and Territories

In November 2004, NICNAS and the Victorian WorkCover Authority worked
collaboratively on an issue relating to a PEC. Officers from both agencies
jointly inspected an industrial chemical facility in Victoria to examine the
OHS controls in place, and to determine the necessity for Secondary
Notification for the chemical.

Another example of the cooperation between NICNAS and the states and
territories involved follow-up to a compliance investigation by NICNAS
in April 2005 regarding an imported product potentially containing new
industrial chemicals. In addition to the possibility of containing unlisted
chemicals, the product was found to be deficient with regard to Dangerous
Goods and Hazardous Substances labelling. The allegation, and related
information, was forwarded to the relevant WorkCover authority for further
action.

Australian Taxation Office

NICNAS via the DoHA has established an MOU with the Commissioner of
Taxation, in his capacity as the Registrar of the Australian Business Register.
The MOU has provided NICNAS with information not publicly available,
which allows verification of an organisation's details and identifies the
relevant industry category for industry profiling and targeted educational
or awareness raising purposes.

Australian Customs Service

The Australian Customs Service continues to be a major partner agency
involved in the monitoring of industrial chemical introduction into Australia.
A 2004-05 MOU drafted between the two agencies facilitates the ongoing
partnership. Data received from Australian Customs Service was
instrumental in identifying potential registrants for Tier 1 Registration and
this data continues to be an important tool in the detection of incorrectly
registered or unregistered organisations.

NICNAS also worked closely with Australian Customs Service leading up
to the ratification of the Rotterdam Convention, to establish systems for
the detection of PIC chemicals and consulted regularly to monitor the
import/export of potential PIC listed items. The training in Sydney and Perth
for customs brokers who manage imports/exports on behalf of other
organisations (see above) was an extension of our work with this important
sector as it raised awareness of NICNAS Registration and PIC requirements
with them.

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Price

  NICNAS Registration cases, including newly identified registrants,
registration compliance cases, renewals and upgrades have resulted in
$614,739 in additional revenue to NICNAS as well as future income from
ongoing registrations of these companies.
 
 

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