Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697635402761.pdf (Australia)
Furniture Cabinets Joinery Alliance Ltd (ABN: 79 165 281 425) Submission Senate Inquiry into Non-conforming Building Products Senate Economics References Committee January 2017 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP Introduction This submission has been prepared by the Furniture Cabinets Joinery Alliance Ltd (FCJA) in response to the Senate Economics Reference Committee Inquiry into Non-Conforming Building Product (NCP).
The FCJA is the peak national body for the collective furniture, cabinets and joinery industry in Australia, with its membership comprising the major associations representing the various FCJ sub-sectors around the country, including the Australian Woodworking Industry Suppliers Association, Furnishings Industry Association of Australia, Australian Window Association, Cabinet Makers & Designers Australia, Engineered Wood Products Association of Australasia and Western Australia Furniture Manufacturers Association (as well as major individual company members from the sector).
The total membership of the FCJA and its member associations exceeds 2000 companies nationwide, which are involved in a wide range of activities including residential and commercial, free standing and built in furniture (including kitchen and bathroom cabinetry); wooden doors; roof trusses and wall frames; aluminium, timber and uPVC framed glazed windows and doors; other wooden builders’ joinery and carpentry, parquetry strips; wooden industrial products and on-site installation, as well as suppliers to this sector – including timber and timber/board products Overall the Australian furniture, cabinet and joinery (FCJ) industry is a very significant sector of the Australian economy, employing more than 130,000 persons throughout Australia and contributing almost $33 billion per annum to the domestic economy.
The FCJA did not make a submission to the Senate Inquiry during the course of the 44th Parliament, as a number of FCJA member associations had already highlighted the key issues of concern – either through their own direct submissions or as part of their involvement in umbrella groups such as the Building Products Innovation Council (BPIC).
However, given the seriousness of this issue to all businesses within the broader FCJ industries, the FCJA believes it is important to reinforce the concerns already raised by its members now that this Inquiry has been “re-adopted” in the 45th Parliament.

We would stress though that the Australian FCJ industry recognises that it must be competitive with imported products, and the issues raised in this submission must not be interpreted as reflecting a push for some form of increased protectionism.
To the contrary they are a call for 2 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP genuinely equitable treatment for all producers, suppliers and distributors of building (and indeed other) products, no matter where they are originally sourced.
The focus here is purely to help ensure that the health and safety of all Australians engaged in the supply, processing/finishing and installation/construction of building products, as well as those working/living in the resultant buildings, is fully, effectively and consistently safeguarded.

This can only be ensured if mechanisms are in place to police and enforce full compliance with all Australian regulations and Standards.
The Current Situation Current Regulatory Framework Australia has extremely good product standards via either Australian or joint Australian/New Zealand standards systems.

These reflect the product characteristics necessary to provide safe and reliable performance.

The National Building Code (NBC) references many of these.

The Competition and Consumer Act (2010) adequately addresses misleading product information, such as a brand not truly representing the properties of a product.
However, the FCJA and its member associations remain frustrated by the failure to police existing regulations to prevent the use of non-compliant building products.

The problems that we see are:  There are no truly effective monitoring / surveillance mechanisms to systematically and readily identify non-compliant product.

Without surveillance, compliance breaches are simply not being identified;  There are a large number of small importers of building products.
Many of these are small companies with very limited paid up capital or assets and disappear if significant product quality issues arise.

This makes prosecution difficult and not cost effective;  Reliance on product failure (eg like the Docklands Cladding Fire) is not a good indicator of the extent of the problem of non-compliant product, since the frequency of severe events (fire, storm, and cyclone) is relatively low.
There is no data on the less obvious compliance issues, such as air quality in caravans, temporary buildings and cabinetry;  The combination of lack of surveillance, difficulty and speed of legal process avenues and lack of meaningful penalties for selling non-compliant product mean that potential profit 3 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP from importing non-compliant product outweighs the risk of penalties for selling misrepresented product.
In summary, the lack of product surveillance (irrespective of source) together with the lack of financial disincentives for importing/selling non-compliant product generate an environment where non-compliance levels are significant and the public is put at risk.

Clearly, a more effective way to address product non-compliance is to have an organisation that undertakes surveillance in response to non-spurious complaints and applies significant penalties in the case of non-compliance.
Contributors to the Situation As highlighted in virtually all submissions already presented to the Senate Inquiry into Non- Conforming Product (NCP), the prevalence of building products not meeting relevant Australian standards and codes has increased significantly in recent years, commensurately with increased global sourcing and purchasing practices.
Over the last decade there has been a shift in the building products supply chain to an increased use of offshore sources along with a decreased level of local manufacturing of these products.

Further, the ease of purchasing online has brought into the market a plethora of less educated buyers (sourcing small quantities), who do not have the knowledge to ensure products are ‘fit for purpose’.

There are also numerous examples of local manufacturers cheating the system.
Once these products are in the supply chain, the provenance is often lost and seeking a remedy when a problem arises becomes extremely difficult.

The growth of this problem is clearly reflected in the level of public complaints now being raised with certifying bodies.

For example, in 2003 the Australian Window Association (AWA) received three requests a year to deal with product or installation issues.
By 2013 this had grown to three requests a week and by 2015, the AWA was receiving up to six request a week.

The issue is getting worse.

Compliance and its enforcement in Australia have not kept pace with the rapid changes to our economy, global supply chains, and how or where products are manufactured or sourced.
There are a growing number of fraudulent documents that are hard for surveyors to identify and many overseas laboratories are now testing to Australian Standards but their reports have identified major testing and reporting flaws in addition to misuse.
BPIC stated in its submission that it believes that the management of the building product supply chain must be achieved nationally as building products are not affected by state and 4 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP territory borders.

BPIC also acknowledges that the problem of Non-Conforming Products (NCPs) is not merely a case of accidental or poor production.
FCJA agrees with BPIC’s contention that, in most cases, offshore suppliers seek to use the data management weaknesses to deliberately substitute or provide substandard product.

This has a significantly negative and widespread impact on both the building industry and building owners alike.

Not only does a non-level playing field hurt complying businesses, but it creates downstream costs that are ultimately borne by building owners and taxpayers.
Virtually every submission already lodged with the senate Inquiry has identified that the main contributors to this situation are: • A flawed regulatory system that the ready supply of Non-Complying Building Product.

• Ineffective surveillance (ie policing/monitoring) of Building Product Compliance • A lack of, or lack of use of, existing third party certification systems.
• Voluntary industry compliance coupled with a lack of clear, consistent understanding of minimum requirements by all players • A lack of effective reporting and enforcement of existing standards requirements.

• An uneven playing field for importers compared with local producers on non-compliant product requirements that substantially disadvantage local supply • A lack of meaningful penalties for proven non-compliance.
• The increasing reliance on paperwork and decreasing reliance on site inspections, • The lack of a “receptacle” for documented issues that can and will be dealt with by a body with authority.

Impact of Non-compliant product BPIC in particular has highlighted the negative impact that NCPs are having on the Australian building industry such as loss of jobs, expensive and unproductive rework, and the construction of poor quality buildings.
This impact is not confined to the building industry itself, but is passed on to all suppliers of product and installation services to the building sector, including the Australian FCJ industries.

Consequently, compliant manufacturing companies are experiencing eroded margins and reduced revenues due to the increasing presence of non-conforming products.
5 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP Health and Safety The workplace safety risks are considerable in the case of non-conforming products.

Faulty building products represent a serious threat to the safety of both, the tradespeople who may come into contact with these items while working in homes and buildings and the home owner/ building worker themselves.
The reality is that when a building product is identified as being faulty and made subject to a recall, the existing notification methods will not reach all of the purchasers of the product.

This is particularly the case when the recall concerns products which are hidden from view in walls and ceiling spaces.

Unknowingly having dangerous products installed in a home not only risks the safety of the occupants themselves but also the safety of any tradespeople who enter high risk areas.
Inadequate properties of building products clearly pose a significant risk to construction workers during the construction phase and occupants of buildings are also exposed to risk of injury (or potentially, even death) if structures do not perform their function to designated standards.

Building codes have been developed to ensure certain performance levels are maintained under extreme and testing conditions, but these rely on the structural properties of the products used.
A more insidious issue is the risk of formaldehyde emission from engineered wood products and board/panelling materials.

Formaldehyde is a known carcinogen and accordingly NICNAS recommends maximum emission levels for exposure.

Because it is significantly cheaper to manufacture wood product/board from glues that emit higher levels of formaldehyde, there is an economic driver toward non-conformance of branded emission class.

This affects the safety during construction (e.g.


cabinetry manufacture where workers are exposed to fresh product for long periods of time) and occupants of buildings.

The ability for windows and doors to withstand site wind pressures and resist water penetration is crucial to their longevity and amenity.

The use of appropriate glass is crucial to human safety and vital for energy efficiency.
Failures can include glass breakage, excessive water damage, gross deflection, hot box effect – often leading to irreparable damage to the building envelope, people getting cut (even fatally) or running costs prohibitively high, Financial Impacts Reports indicate the costs associated with rework in the building/construction industry can be a significant portion of the profit margin of a project (examples that industry has encountered include concrete pour structural failure, concrete repairs required because of poor finish, replacement of cabinetry in hotel development due to excessive formaldehyde emission, etc).
6 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP One major builder estimated the average cost of rework due to non-conforming products was between 0.25% and 2.5% of the overall contract value.

The industry is characterised by profit margins between 3% and 12%, and company insurance does not cover product failure and rework costs.
Companies testing to standards and undergoing audits realise much higher costs to comply than those that don’t, with non-compliant products not being picked up until an event occurs.

For example, a standard window or glazed door system can cost between $2000 - $10,000 to type test to the Standard for structural integrity and water penetration resistance to meet NCC.
Energy efficiency performance simulating to meet state and territory provisions can cost between $2,000 - $12,000 for a complete product range.

When a decision is based on price only and fitness for purpose and whole of life costs are not adequately taken into account when procuring building products, the impact can be negative on safety of the fabricators, installers, certifiers, consumers and the public and the long term asset value.
Moreover, there are sure to be some homeowners who are aware that a building product installed in their home does not comply with the Australian standard and yet choose not to remove it.

This could be a consequence of not having the time to engage a contractor, not understanding the danger associated with a faulty product.

The consequences for this inaction could be serious not only from a safety perspective but also a financial one.
Insurers will insure buildings based on an expectation that all installations and equipment in a building comply with the relevant standards.

Considering that the majority of contractors/installers are small businesses with tight profit margins, many cannot absorb the added costs involved and are themselves forced to go into liquidation.

It is clear that the impact of non-conforming building products can be widespread and highly damaging to the contracting “installer” industry.
Evidence of the extent of non-compliant product Testing of product purported to meet Australian/New Zealand Standards has shown alarming levels of non-compliance of mostly imported product when compared to companies producing to a credible product certification program.

Details of non-compliance rates from laboratory testing have already been detailed in other submissions to the Inquiry (eg Note the EWPAA Submission – No.

12).
12).

The amount of non-conforming imported windows, doors and other glass and aluminium based products including curtain walls, balustrades and balconies products on the Australian 7 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP market has reached significant proportions.
Non-conforming product is most prevalent in the high rise residential and office market as windows and doors for those buildings tend to be consistent dimensions, lending this market to high volume importation on a per project basis by builders and importers.
The industry has found it difficult to find any available figures for the total annualised cost of rectification to buildings in each state and territory and would recommend an audit be done to ascertain such information to underpin the severity of this issue.

Estimates by building authorities in a diverse range of meetings would indicate it is in the billions of dollars.
Furthermore, as highlighted in the Master Electricians Australia submission (No: 4), the Infinity cable recall revealed significant inadequacies in the way the recall of non-conforming products are handled in Australia.

Apart from the unduly lengthy delay in issuing a national safety recall electrical contractors were left in a difficult position with consumers wanting the cable removed and the contractor having no recompense for the time and expense involved in performing the work.
Contractors had the choice to either absorb the costs involved to perform the work or refuse to do so and risk losing customer goodwill.

Fortunately, most electrical contractors took their responsibility to the safety of their customers very seriously and could not in good conscience fail to act on the recall notices issued by the ACCC and state regulators.

But, this is an ongoing issue for all contractors and installers of building/construction related products.
The Avanco isolator recall is a further example of the impact that non-conforming products can have on the financial viability of contractors (see MEA Submission No: 4 for further details).

Infinity is just one of many examples where non-compliant electrical product has entered into Australia as is and sold without any checks and balances.

In the absence of a national system, the Australian public is being exposed to the dangers of faulty imported building products.
Independent verification and assessment systems The identification of non-compliant product must be non-discriminatory and apply to all building (and ideally all) products, both domestically produced and imported.
The EWPAA has identified, through its own NATA accredited laboratory to test structural and physical properties and formaldehyde emissions of EWP’s, that subjecting manufacturing product to an independent, rigorous certification scheme markedly reduces the incidence of non-compliance substantially (see the summary of the number of tests and the results of the tests are detailed in the EWPAA Submission).
8 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP The existing situation where industry (eg as evidenced by the EWPAA in its Submission) undertakes market surveillance could be strengthened to formalise some testing of all product.

This would be sufficient to document a complaint to an independent compliance body.

The cost of extended marketplace surveillance by established industry testing/assessing/certifying bodies would need to be addressed though, eg.
by ensuring that a portion of penalties of non-confirming product sale are repatriated back to those bodies by the independent compliance body.

It is emphasised that the decision by an appropriate independent compliance body to prosecute non-compliance should not be based on the initial surveillance by the established industry agencies.
Initial surveillance should be sufficient to document the basis for non- compliance in a manner detailed enough to ensure that the ICB can determine whether further action is warranted.

In all cases, complaints need investigation by the ICB with representative product testing by a NATA certified test facility of ICB’s choosing.

This will ensure independence and impartiality of investigation of a complaint.
However, the FCJA fully supports the views expressed by its members (notably the AWA and EWPAA) that mandatory certification is NOT the complete answer.

Not only is this difficult to achieve but it does not address fraudulent certification that is available.

A growing number of associations already under such schemes consider this a sizeable issue, including plumbing (WELS), electrical and engineered wood products.
However, Government endorsement and common labelling of existing third party product certification schemes that meet the following minimum requirements would offer a level of protection to purchasers and provide an industry driven mechanism: a) accredited through the JAS-ANZ or NATA; b) includes product conformity requirements for type or batch (ongoing) testing to Australian or International Standards as appropriate, as well as a process for ongoing, periodic auditing; and, c) undertakes market surveillance to identify and weed out fraudulent activity.
Equally though, mandatory product certification in itself is not an effective mechanism to reduce the incident of non-compliant product, as evidenced by the experiences of both the plumbing and electrical product sectors.

These sectors are currently dealing with fraudulent 9 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP certification and documentation, resulting in product in the market that has appropriate certification, but is still non-compliant.
Even where construction site managers undertake correct specification and inspection of building products as part of their due diligence in providing a safe working environment for employees and contractors are being misled by product misrepresentation and/or fraudulent certification claims.
The FCJA supports the EWPAA Recommendation that an Independent Compliance Body be set up within the ACCC to investigate documented non-trivial complaints and prosecute where appropriate (especially given that the legislative framework already exists for such action under the misleading information section of the Competition and Consumer Act 2010).

The ACCC is the appropriate organisation to fulfil this function, as the Competition and Consumer Act 2010 already provides the legislative framework.
However, it is essential that the ACCC has an Independent Compliance Body that provides the resources to: 1.

2.

3.

Assess all documented non-trivial complaints related to product non-compliance; Organise independent testing to prove complaint within a legal context; Prosecute breaches of non-compliant sale or first use.

It is suggested that an Independent Compliance Body be funded directly from non-compliance infringement penalties.
Possible Solutions / Recommendations The FCJA fully supports the recommendations presented by BPIC in its Submission, and mirrored in many other submissions, to the Senate Inquiry.

We agree that these Recommendations will significantly help to reduce the incidence of Non-Complying Products (NCPs) entering the Australian market and subsequently in Australian buildings, and thus mitigate the risk to the health and safety of all Australians associated with the construction and use of these buildings.
Improve policing and enforcement of existing regulations 1.

Extend the scope of the definition of consumer goods to include building products, which are used in residential building work giving the ACCC (or the new Australian Building and Construction Commission) authority to act.

10 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP 2.

Seek jurisdictions to mandate inspections of buildings by qualified building inspectors during construction.

3.
3.

Establish a National register that documents issues that can be dealt with by a body with authority to act on NCP issues.

4.

Map out and eliminate overlapping non-conformance responsibilities between the Commonwealth, State/Territory and Local Governments.

5.

State and territory consumer affairs agencies to collect non-conforming products information as part of their dispute resolution processes.
There is already an industry shared broad consensus of the urgent need to reform the current system to provide specifiers, purchasers, installers and certifiers with a clear mechanism to determine whether products are fit‐for‐purpose as defined under the National Construction Code.

Strengthen independent verification and assessment systems 6.
Establish an Independent Compliance Body within the ACCC (or the new Australian Building and Construction Commission) to investigate serious, well substantiated (ie evidence based) NCP complaints and prosecute where appropriate.

7.

Government endorsement and common labelling of existing third party product certification schemes that meet minimum Australasian Procurement and Construction Council (APCC) requirements.

8.
8.

Re-establish an independent, credible national testing and certification authority, such as the former CSIRO Building, Construction and Engineering Division, to evaluate suspect building products.

9.

Promote the ABCB to prepare guidance information on the types of evidence of suitability and the building products that should be aligned with each type of evidence based on their risk.

10.
10.

Commonwealth, State and Territory building regulators to revisit the benefits of national harmonisation of the administrative framework for building approvals.

Boost surveillance and screening of imported building products 11.

Federal agencies with responsibilities to manage the importation of building products must be required to closely monitor such imports and ensure sufficient, credible evidence is available to ensure that a building product meets relevant Australian technical standards.
11 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP 12.

Throughout the surveillance process introduce full confidentiality for those reporting NCP along with qualified review of the matter reported.

13.
13.

Empower industry organisations that already have market surveillance mechanisms in place, such that they can formalise a testing regime for all products within their sector with consideration given to providing funding as a portion of penalties imposed on NCP suppliers or from a small percentage levy on all construction (e.g.

along the lines of BRANZ in New Zealand).

14.

Introduce a reliable level of identification of the source of imported product inputs through compulsory labelling (traceability).
15.

Standardise recall powers across Jurisdictional regulators.

Impose severe restrictions and penalties on non-conforming building products 16.

Impose severe financial penalties where it is proved that an organisation is knowingly selling non-compliant product, installing it, or importing it directly for use in Australia.

This, together with enforcement, is VITAL.

17.


Consider state-run schemes where buildings are inspected for product conformity with those found deliberately procuring, installing or certifying offending products being subject to legal action and hefty penalties.
An effective method to reduce both non-compliant product and product with fraudulent certification is to have large pecuniary penalties for the deliberate sale or procurement of non- compliant products, or first use of non-compliant products where the products are imported by the user.
The Competition and Consumer Act exists and may be able to be extended to provide the legislative framework to enforce action against non-compliance based on misrepresentation of product in the building and construction sector.

If the ACCC is the appropriate body to enforce this, resources would need to be adequate for it to effectively act in response to numerous complaints.

Effective action against non-compliant product by the ACCC could be funded from penalties recovered from prosecutions.
Other related action 18.

Establish a National Register of Certified Construction Products (NRCCP) to inform the industry and building professionals.

12 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP 19.

Encourage Australian product manufacturers/suppliers to create detailed “or equivalent” performance specifications for their products and promote these to designers and specifiers encouraging them to use such products.

20.
20.

Consider introducing a program similar to the State run options in the United States where buildings are inspected for product conformity and those found deliberately procuring, installing and certifying offending products being charged with legal action.

There is no provision for a phoenix company under these rules and penalties can incur jail time.

This has reduced the problem significantly and improved the quality of building stock.
Monies retrieved are used to educate and test and maintain best practice.

Known examples are in New York and Ohio.

21.

Introduce a strategy to minimise the impact of a non-conforming product safety recall both on the general public and the industry generally, which would comprise: 1.
Product tracking It is imperative that manufacturers, importers and suppliers of all building products / equipment supplied in Australia have processes and procedures in place to enable the tracking and tracing of product which is found to be faulty and/or non-compliant to the relevant Australian Standards.

2.

The introduction of a register of building products Sellers of listed building products would be obliged to maintain a register of all products that require installation by a specialist installer.
The register would be used to contact purchasers in the event of a product safety recall Introducing a register would assist the regulator to identify the location of any equipment of this type that was later subject to a recall.

This would facilitate a ready means to contact those at risk to ensure they take the necessary steps to remove the product from their homes.
A mandatory system of this type would also provide more effective support to suppliers when they are required to withdraw unsafe or non-compliant product from the market.

Additionally, requiring purchasers to provide their details could act as a deterrent to those who are intending to perform unlicensed installation and/or using clearly non-compliant product.

13 Non-conforming building productsSubmission 121 FCJA – Senate Inquiry into NCP 3.
Mandatory recall insurance Ideally, the manufacturers, importers & suppliers of faulty building products would have a process in place to fund the removal and replacement of any faulty materials.

Unfortunately, this is not always the case with companies often going into liquidation after a product they have manufactured, imported or supplied is identified as being unsafe.
Mandatory recall insurance would give security to consumers that any faulty or non-compliant building products purchased are removed and replaced without delay.
Conclusion In summary, the FCJA believes that the necessary action to be taken comprises: - Effective policing of conformance to current regulated requirements, - Strict and prompt penalties for non-compliance (knowingly procuring, installing and certifying non-conforming products), - Responsibilities defined at point of sale and certification, - Fully equitable treatment across the whole supply chain, applied equally to imported products and services as it is to domestic product and installation - At a minimum, regulatory or government endorsement of existing third party accredited industry schemes.
The key fundamental though is for strict enforcement of all Australian regulations and standards and severe financial penalties to be imposed where it is proved that an organisation is either selling non-compliant product, or where they are importing it directly for use in Australia.

As such, an Independent Compliance body can be self-funded directly from the significant infringement penalties for convictions.

14 Non-conforming building productsSubmission 121