Compliance

COMPLIANCE

	Innovation In delivering its goal of chemical safety and maintaining the integrity of the scheme through partnership with industry, NICNAS needs an effective compliance program coupled with an enhanced strategic alliance with stakeholders. During 2003-04, NICNAS reviewed its compliance and enforcement style and introduced new systems and standardised procedures aimed at providing a compliance function that is, and is seen to be, firm, fair and consistent. NICNAS’s compliance strategic focus provides a proactive and responsive enforcement strategy through the adoption of best practice compliance models and engagement with industry, the community and Government agencies. Top of Page Enforcement Tools In 2003-04, guidelines were developed for compliance officers on the most appropriate action to take when enforcement is necessary. NICNAS enforcement tools are divided in to two categories: Administrative (informal) enforcement action and Formal (court based) enforcement action. NICNAS believes that the most effective method of resolving inadvertent breaches is by the use of informal enforcement tools.
	Administrative procedures and decision-making processes were reviewed and mechanisms put in place to ensure that compliance case records and all decisions are documented in a transparent and consistent manner, and in accordance with procedural fairness principles. The NICNAS database (D@N) is relied upon as the compliance tracking system for all cases and audit management work. In 2003-04, almost all NICNAS staff received training in the new administrative and record keeping procedures and external accredited training in compliance auditing. Top of Page Inspectors’ Manual The NICNAS Inspectors’ Manual was developed for NICNAS Inspectors to guide them through the auditing and inspection techniques used to monitor compliance with the Act. The manual is based on best practice models adopted by other Australian Government regulators and relevant Australian Standards. Inspectors’ audit techniques were tested at a pilot site visit aimed at gaining an understanding of industry practices and record keeping systems. The manual was also reviewed by IGCC and States and Territories MOU Members. Top of Page Industry Guidance In line with NICNAS’s commitment to establish clear industry guidance on the regulatory requirements of the Act, the document ‘Understanding the Act’ was developed as plain language guidance on how to comply with the roles and duties of the inspectorate. IGCC Members were consulted and provided comments on the document. This publication will be available on the NICNAS website during early 2004-05 and will continually be updated to capture new and revised NICNAS regulatory requirements. Top of Page Strategic Alliance
	In response to the growing concerns about children’s cosmetics, NICNAS held discussions with the ACCC about conducting random surveys of retail outlets. Consequently, the ACCC withdrew 32 children’s products from sale during 2003-04. NICNAS continues to liaise with ACCC on matters concerning cosmetic product safety. The States and Territories are seen as key stakeholders for NICNAS compliance operations. While matters relating to the control of industrial chemicals are the responsibility of the States and Territories, it is through the MOU that NICNAS works closely to help ensure that there is an effective interface of these responsibilities. During 2003-04, the MOU Members were consulted on the development of NICNAS inspection tools.
	The effectiveness and efficiency of the MOU agreement was reviewed, in particular with respect to exchange of information on certain matters. As such, arrangements will be put in place to facilitate disclosure of certain exempt information under agreed national guidelines with the States and Territories. Improved barrier control of imports is achieved through strategic alliance with the Australian Customs Service. During 2003-04, NICNAS continued to strengthen its ties with the Australian Customs Service. Annual import data for 2002-03 were provided to NICNAS for the purposes of enforcement and monitoring compliance with registration requirements. Also, mechanisms to disseminate targeted information to Customs Brokers and importers through Australian Customs Notices and new alert messages mounted on import entries are being discussed to be in place for 2004-05. Top of Page Compliance Case Management NICNAS manages compliance cases from instigation to resolution or prosecution, and undertakes audits and inspections to ascertain compliance with the Act. Top of Page Quantity
	A summary of all compliance cases involving breaches related to industrial chemicals (referred to as chemical cases) for 2003-04 is shown in Table 13.

	A total of 32 cases involving breaches related to new and existing industrial chemicals were resolved for the year 2003-04, compared with 26 cases for 2002-03. Only three cases were active as at the end of 2003-04: of these, two cases related to the introduction of two new industrial chemicals by the same company, while the remaining case was about secondary notification of an existing assessed chemical. In 2003-04, three existing chemicals cases were received. One case involved a priority existing chemical and the other was about lack of response to a Section 48 call for information. Completed cases were resolved using informal enforcement actions through working with industry to achieve compliance. NICNAS’s conciliatory style and approach to enforcement is effective in resolving most of the generated casework. Top of Page Industry profiles The 32 cases investigated in 2003-04 were from a broad range of industries, as indicated in Figure 14. Of the 13 industries represented by companies investigated, the chemical supply and distribution industry provided the greatest number of cases (25 per cent).
	Top of Page Sources of cases NICNAS generates casework from self-reported breaches, in-house through audits, from inspections or internal checks, and from third party allegations from the public, industry or government agencies. Figure 15 shows four-year trend data for sources of case types. All third party allegations are examined to determine whether a breach has occurred. This year, NICNAS received eight third party allegations: two from industry associations and the rest from industry. Only four out of the eight allegations were found to be potentially in breach of the legislation, with no further action taken on the remaining four because of lack of adequate information on the alleged offence.
	Of the 23 compliance cases received in 2003-04, nine per cent (two cases) were detected in-house through audits and internal checks, 74 per cent (17 cases) were self-reported and 17 per cent were reported through third party allegations (four cases). The percentage of internally generated, third party allegations, and selfreported compliance cases were similar to those of the previous year, reflecting the ongoing cooperative approach used when dealing with selfreported cases. The high proportion of self-reported cases in 2003-04 (74 per cent) and the year before (71 per cent) indicates the success of NICNAS’ approach to compliance enforcement. Figure 16 shows the trend in compliance cases by category since the introduction of the compliance program in 1998-99. Top of Page
	Timeliness
	Of the 35 cases investigated during 2003-04 (ie, those cases opened during the year and those carried over from the previous year), 32 (91.5 per cent) were resolved. Thirty new chemicals cases were finalised out of a total of 32 (94 per cent). Thirty out of the 32 resolved cases were completed within 100 days (94 per cent). The integration of the compliance function with New Chemicals assessments and NICNAS’s approach of timely follow-up and prompt assistance to industry yielded good outcomes with 20 notifications submitted within agreed time frames. Two of the notifications (Standard and LVC Category) were generated as a result of NICNAS inspections during 2003-04. Figure 17 shows the percentage of cases resolved within the target timeframe of 100 days, plus those which took longer than 100 days to resolve.
	Effectiveness
	The 23 cases generated during this year involved 20 companies contravening the Act. The outcomes of the investigations involving industrial chemicals are shown in Table 14. In the majority of cases (62 per cent), the investigation resulted in the lodgement of a new chemicals notification by the offending company. In 19 per cent of cases, companies were able to demonstrate compliance by providing requested documentation to NICNAS. A small percentage of cases were either found through the course of the investigation to be compliant (three per cent), or the case was written-off due to lack of substantiation of claimed breaches of the Act. The distribution of new chemicals assessments between the notification categories arising from compliance actions is shown in Figure 18. During 2003-04, the NICNAS approach for managing self-reported breaches and applying discretion when permitting introduction of a new chemical, was strengthened by requiring the importer and/or manufacturer to undertake an agreement to meet the notification timeframes. Importantly, while undertaking compliance agreements with NICNAS, these companies did not encounter disruption to their import or manufacturing schedules and hence maintained their supply commitments. This was possible as each case is evaluated for health, safety, and environmental risks posed by the breach. In all 20 cases, the risk was judged to be low provided full compliance with NICNAS compliance agreements was met. Non-compliance with a NICNAS agreement is considered a serious breach and can lead to an escalation of enforcement actions to prosecution. Top of Page NICNAS Regisrations
	NICNAS Registration audits are a routine function of NICNAS’s cost recovery mechanism using import data based on the previous registration year (1 August 2002 to 31 September 2003) supplied by the Australian Customs Service under a MOU. A summary of NICNAS registration casework is provided in Table 15.
	Quantity
	In total, 107 cases were resolved involving companies identified as potential new registrants based on 2002-03 Customs data (New Registration Cases) and companies failing to renew their 2003-04 NICNAS registration (Registration Renewal Cases). New Registrations
	In 2003-04, a review of import data for 2002-03 produced a total of 525 companies identified for pre-screening; in turn, this produced a list of 228 companies which might be liable for company registration requirements. Further investigation showed that 105 of these companies were highly likely to be registrable. When these companies were informed of their possible NICNAS registration obligations, 65 new introducers were added to the register and 24 were found to be non-registrable. The industry profile of the 65 new introducers is shown in Figure 19. Eleven identified companies were written-off due to lack of adequate information to proceed with the investigation. Five potential new registrations were outstanding at the end of 2003-04, with four of those cases near completion as they were granted a deadline extension for payment of registration fees.
	The number of new registration cases continued to increase, as demonstrated by Figure 20, with the number of cases received during the year 11 per cent greater than in the previous year. Figure 20 shows trends in the number of new company registration cases. Top of Page
	Renewals Nineteen registrants were referred to compliance for failing to renew their 2003-04 registration by 31August 2003. Some of these companies paid their registration fees and charges but not the late penalty fees. Most cases were resolved via administration letters and follow up. The remaining two cases were near completion at the end of the reporting period. One registration case involved a repeated offender who showed lack of willingness to comply. This case involved a company which had failed to register for the past three registration years. In establishing evidence for the case, NICNAS liaised with Customs and the Australian Government Solicitor. A range of enforcement actions included warning letters, site visits and use of the Director’s powers to require information. Before 30 June the company registered retrospectively for each outstanding year, as well as for 2003-04.
	Timeliness
	One hundred and seven registration cases were finalised out of 114 (94 per cent) during the year. Six of the seven remaining cases were nearly resolved by the end of the year with potential registrants committed to compliance and their outstanding fees. Except for one case (carried over from 2003-04), all resolved cases involving NICNAS registrations were finalised within 100 days and met the internal target of 95 per cent.
	Effectiveness
	The outcomes of the NICNAS registration investigations for 2003-04 are shown in Figure 21. A total of 72 per cent of investigations resulted in either a new registration (57 per cent) or a renewed registration (15 per cent). Twenty-two percent of investigated companies did not require registration.
	Top of Page Prosecutions No prosecutions or penalties were applied by NICNAS in 2003-04. In accordance with prosecution guidelines developed by the Director of Public Prosecutions (DPP), an enforcement policy defining the circumstances in which NICNAS refers certain matters to the DPP was drafted and will be finalised during 2004-05 for publication on the NICNAS website. Top of Page Monitoring Compliance The 2003-04 compliance program focused on CEC and LVC permits, and LTD certificates. The purpose of the audit program is to monitor compliance with permit conditions and secondary notification requirements. Phase I of the audits involved identification of notifiers to be surveyed. Using a risk assessment approach, Phase II entailed screening and assessing the responses for selection of a targeted list of inspections.
	During the year, 69 LVC and CEC permits and 11 Limited Notification (LTD) certificates were audited, involving 38 different companies across a range of industries. Uses included cosmetics, fuel additives, paints, and printing ink cartridges and toners. Inspected companies were contacted before inspection and received concise guidance on how to comply with the permit and secondary notification requirements. Compliance Inspectors completed nine inspections in Sydney and Melbourne in accordance with the NICNAS Inspectors’ Manual. These inspections covered ten different permit/certificates and a number of different outcomes were recorded. These are detailed in Table 16. Five permit/certificate holders were found to be fully compliant with their obligations under the Act, while another two were found to have committed minor breaches which were considered oversights and were quickly rectified by the company. The inspections did, however, result in the lodgement of two notifications and one new company registration. Companies found to be in compliance with their obligations under the Act were issued with a final inspection report soon after inspection. Where a breach was identified, the company was issued a compliance notice outlining the actions required, and the timeframe to correct identified deficiencies. Once all issues were resolved, the final inspection report was issued. In general, all companies showed full cooperation with NICNAS Inspectors and in most cases demonstrated that they have adequate compliance systems to monitor introduction volumes and durations of permits/ certificates. The securing of an ongoing yearly registration from one company and the submission of a Standard Notification and LVC Permit notification, as well as the resolution of other minor breaches, demonstrates the importance of the audit program. Top of Page Education and raising awareness activities Industry Training The Compliance team took part in a range of training activities in 2003-04. A half-day seminar delivered to 20 companies in Perth in September enhanced understanding of the scheme.
	A one-day workshop, divided into two sessions, was delivered in Sydney in April and Melbourne in May. Session One focussed on raising awareness of the scheme and reform activities, while Session Two concentrated on using the New Chemicals Template. More training seminars are planned for 2004-05. In response to an increasing number of enquiries about the status of toners and inks in relation to the NICNAS registration program, a fact sheet on obligations and responsibilities was prepared for the toner and ink industry sector. Special notices were published in NICNAS Matters and the Customs Brokers and Forwarders Council of Australia Bulletin. In addition, a seminar was delivered to the Consumer Electronic Suppliers Associations targeting the toner and ink industry. Outreach Program As part of the Compliance Team’s Education and Promotion strategy, five outreach visits to first-time registrants took place during the year. Invitations were sent to 23 companies which had registered with NICNAS for the first time in 2003-04. These visits were well received by recipients. Among the issues discussed were: • Procedures for determining if a chemical is listed in AICS • Proposed changes to the current legislation • Notification requirements • Registration levels In summary, NICNAS site visits were associated with inspections (nine), outreach (five), compliance visits (four) and enforcement issues (two). NICNAS will undertake more outreach visits, as required, throughout 2004-05.
	Price
	Although it is difficult to quantify, the NICNAS compliance program should result in significant cost savings to industry. In general, compliance is an integral part of a company’s overall corporate goals and contributes to building and maintaining a company’s status as a good corporate citizen. The benefits of compliance are many and can include:
	• avoidance of personal liability relating to breaches of occupational health and safety requirements; • the potential benefits flowing from a good corporate image; • avoidance of damage to a corporate image or brand if the company is in breach of compliance obligations, particularly if the breach is related to a significant adverse event; and, • savings in legal and related costs flowing from failure to exercise due diligence and from avoidance of potential significant adverse events. NICNAS compliance cases have resulted in 65 new registrations and 17 registration renewals resulting in $103,515 as additional revenue to NICNAS, and 20 new chemicals notifications resulting in $156,000 in assessment fees paid by industry (as opposed to potential fines of $16.5 million). Top of Page Australian Inventory of Chemical Substances (AICS) As in previous years, most searches were for less than ten chemicals per inquiry, some 91 per cent in 2003-04 (462 out of 507). The remainder included 24 enquiries for 11-20 chemicals, 19 for 21-50 chemicals and two for more than 50 chemicals. Most of the larger inquiries related to cosmetic ingredients. The three-year trend data for searches per inquiry are shown in Table 17. The AICS CD-ROM 2003 was the last CD ROM to be released, with none planned for the future.
	Timeliness
	A summary of targets and performance for AICS searching is provided in Table 18. 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.

Strategic Alliance