Industrial Chemicals (Notification and Assessment) Amendment Bill 1997 (Bills Digest, no. 141, 1996-97)

Numerical Index | Alphabetical Index

Bills Digest 141 1996-97
Industrial Chemicals (Notification and Assessment) Amendment Bill 1997

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Industrial Chemicals (Notification and Assessment) Amendment Bill 1997

Date Introduced: 26 March 1997
House: House of Representatives
Portfolio: Industrial Relations
Commencement: As specified in the 'Main Provisions' section of this Digest

Purpose

The major amendment proposed by the Bill introduces a two tiered charging regime for funding the assessment of industrial chemicals. Under the proposed regime a maximum charge of $1 200 per registration year will be imposed on persons importing and/or manufacturing, or proposing to import and/or manufacture, relevant industrial chemicals with a value greater than $500 000 but less than $5 000 000. A maximum registration charge of $7 000 per registration year will be payable in respect of industrial chemicals with a value greater than $5 000 000.

Background

National Industrial Chemicals Notification and Assessment Scheme

The National Industrial Chemicals (Notification and Assessment) Scheme Act 1989 (the Principal Act) established a national scheme, the National Industrial Chemicals Notification and Assessment Scheme (NICNAS), which assesses all new chemicals imported or manufactured in Australia.

The establishment of NICNAS gave effect to recommendations of the 1982 Report of the House of Representatives Standing Committee on the Environment and Conservation (Hazardous Chemicals: Second Report on the Inquiry into Hazardous Chemicals) and the 1988 Report of the Interim National Occupational Health and Safety Commission (Interim National Occupation Health and Safety Commission Report)

The objectives of NICNAS are defined in section 3 of the Principal Act and include:

aiding in the protection of the Australian people and the environment by finding out the risks to occupational health and safety, to public health and to the environment that could be associated with the importation, manufacture or use of the chemicals; and
providing information, and making recommendations, about the chemicals to Commonwealth, State and Territory bodies with responsibilities for the regulation of industrial chemicals; and
giving effect to Australia's obligations under international agreements relating to the regulation of chemicals; and
collecting statistics in relation to the chemicals.

Section 7 of the Principal Act defines an industrial chemical to mean a chemical that has an industrial use, whether or not it also has an excluded use. Chemicals classified as agricultural and veterinary, for therapeutic use, or for use as food additives are excluded from the definition.

New industrial chemicals which are manufactured or imported are required to be notified and assessed. Assessments are based on information on the use and properties of the industrial chemical which must be supplied by the manufacturer or importer.

Under the notification and assessment regime proscribed by the Principal Act, once an industrial chemical satisfies the notification and assessment pre-requisites, the supplier is given a certificate which authorises manufacture or importation. The Principal Act provides for the assessment of a new industrial chemical to be waived where it has been assessed and approved by an overseas agency whose procedures are recognised by NICNAS.

A limited notification regime applies for certain categories of industrial chemicals, such as industrial chemicals introduced in small quantities for the purpose of commercial evaluation.

The Principal Act sets a maximum time limit for assessments of new industrial chemicals of 90 days.

NICNAS assessments are required to be made public and summaries of assessments are published in the Commonwealth Chemical Gazette.

While NICNAS is administered by Worksafe Australia, responsibility for administration of the scheme lies with the Director of NICNAS. The Director of NICNAS is a statutory office holder who reports to the Chief Executive of Worksafe Australia.

The Gwynne Review

On 9 October 1994, the then Assistant Minister for Industrial Relations, the Hon. Garry Johns M.P., announced a review of NICNAS. The review was conducted by independent consultant Dr Howard Gwynne. The terms of reference of the review included:

anticipated impact on industry of the projected 100% cost recovery in terms of both new and existing chemicals;
which aspects of the scheme should be funded by industry and which by government;
how NICNAS compares with similar schemes in other countries; and
how the government can best recover the cost of services.(1)

The main recommendations of the Gwynne Review included:

As far as possible, NICNAS should be an independent unit that is able to respond to the needs of occupational health and safety, the environment and public health with respect to industrial chemicals.
Companies should pay a nominal fee for preliminary screening of all new industrial chemical notifications.
Companies that are unable to provide suitable evidence of overseas assessment or that the chemical is not hazardous in the new industrial chemicals preliminary screening process should go through a full assessment and bear the full costs involved.
Where companies introducing a new industrial chemical classified as hazardous provide their own assessment or an overseas assessment, or can specifically identify a more hazardous chemical that is being replaced by them, then the assessment fee should be substantially reduced.
Existing industrial chemical assessments should be funded from revised cost recovery arrangements strongly linking hazard and risk and spreading costs among all manufacturers and importers of existing industrial chemicals.
NICNAS should establish a project team to develop a preliminary screening procedure capable of determining the level of assessment needed for any given chemical within five days.(2)

Industry Commission

On 23 May 1994 the then Assistant Treasurer, the Hon. George Gear MP., directed the Industry Commission to inquire into Australia's approach to occupational health and safety.

In relation to NICNAS, the Industry Commission recommended that NICNAS be separated from Worksafe.(3) The Industry Commission's rationale for separating NICNAS from Worksafe were that it would:

make clear the Commonwealth's sole responsibility for administering NICNAS and assessing the workplace health and safety, environmental and public health risks of industrial chemicals;
differentiate chemical assessments, which are determined largely by the application of technical skills, from other functions such as standards development; and
facilitate the integration of assessments conducted for OHS reasons, with similar assessment activities conducted by other Commonwealth agencies for environmental and public health reasons.(4)

Full Cost Recovery

The major amendments proposed by the Bill relate to the cost-recovery arrangements for industrial chemical notifications and assessments. The amendments are intended to enable NICNAS to move to an equitable full cost recovery regime. As was the previous government, the current government supports the move of NICNAS to full cost recovery arrangements for industrial chemical notifications and assessments.

Under current cost recovery arrangements applicants for new industrial chemicals and priority existing chemicals are required to pay an application fee for notification assessment. While the current cost recovery arrangements have been acknowledged to work well for new industrial chemicals, the arrangements for existing industrial chemicals has been described as encouraging 'fee-riders' and 'virtually unworkable'(5)

The Gwynne Review states:

For existing chemicals, the cost of an assessment falls to those companies in the market for the year of the assessment, an arrangement which fails to recognise the contribution of past importers and manufacturers to the costs of adverse health and environmental effects. Current arrangement encourage 'free-riders' who introduce the chemical after the assessment is complete.(6)

The Gwynne Review concluded that:

The current cost recovery strategy of raising fees solely by charging for assessments can act to discourage the introduction of safer chemicals and has made the assessment of existing chemicals virtually unworkable. Simply extending these charges in order to achieve 100% cost recovery would undermine the intentions of the scheme and unnecessarily hamper the operations of the Australian chemical industry.(7)

The Gwynne Review examined a number of alternate revenue models to increasing application fees. For example, under the Swedish system responsibility for the assessment of chemicals, providing information to users, and replacing hazardous chemicals by less hazardous ones rests with manufacturers and importers. Chemical products that are in the course of business activities manufactured in or imported into Sweden must be registered. An annual charge applies for registration in addition to a per product charge. Revenue raised by the two charges is used to fund chemical assessments.(8)

The Gwynne Review also examined the Australian Agricultural and Veterinary Chemicals Scheme revenue model. Under that scheme a levy is imposed on sales of agricultural and veterinary chemicals in addition to a registration charge and application charge for individual chemicals. Approximately 85% to 90% of the scheme's costs are recovered.(9)

Funding arrangements mooted by the Gwynne Review included:

New chemicals assessments

New chemical assessments should be subject to new fee arrangements in conjunction with a variety of management strategies designed to make assessments more user-friendly, streamlined and cheaper. In order to keep assessment fees low and to actively support the replacement of more hazardous chemicals, charges may need to be subsidised from a levy on hazardous chemicals. Charges should only include actual costs of assessments and not program overheads or other program costs.

Assessments of existing chemicals

These should be funded by a levy on hazardous chemicals.

Administrative costs of the scheme

These should be funded by industry through the levy.(10)

Proposed Scheme

The charging regime proposed by the Bill replaces the current charging regime for industrial chemicals. Under the proposed two tiered charging regime a maximum registration charge of $1 200 per registration year will be imposed on persons importing and/or manufacturing, or proposing to import and/or manufacture relevant industrial chemicals with a value of greater than $500 000 but less than $5 000 000. A maximum registration charge of $7 000 per registration year will be payable in respect of industrial chemicals with a value greater than $5 000 000.

It is estimated in the Explanatory Memorandum to the Bill that approximately 790 corporations will be affected by the proposed charging regime. The Second Reading Speech to the Bill states that the 'Government will review the new cost recovery arrangement in 3 years time.'

The author of this Digest has been unable to find any current adverse industry reaction to the proposed regime.

Main Provisions

New Definitions

A new definition of 'factory cost' is inserted in the Industrial Chemicals (Notification and Assessment) Act 1989 (the Principal Act) by item 8 of Schedule 1 of the Bill. The definition is important because 'factory cost' is used in proposed Part 3A to calculate the value of manufactured industrial chemicals. In relation to the industrial chemicals manufactured by a person, the term 'factory cost' is defined to mean the total of:

labour costs involved in the manufacture;
materials costs involved in the manufacture other than the cost of any relevant industrial chemical used as an ingredient in the manufacturing and in respect of which an amount of registration charge has been paid; and
factory overhead expenses.

Commencement: On a day to be fixed by Proclamation. However, if it has not been proclaimed to commence within six months after the date of Royal Assent, it commences on the first day after that period.

A new definition of 'registrable person' is inserted in the Principal Act by item 18 of Schedule 1 of the Bill. The definition is important because is defines who must register under proposed Part 3A as an introducer of an industrial chemical. The term 'registrable person' is defined to mean:

a person who proposes to introduce relevant industrial chemicals in a registration year (ie. a period of 12 months commencing on 1 September 1997 or any subsequent year) the value of which equals or exceeds the threshold value (ie. $500 000) and the relevant industrial chemicals were not introduced in the previous financial year or the value of those industrial chemicals was below the threshold value; or
a person who proposes to introduce relevant industrial chemicals in a registration year of any value if they introduced relevant industrial chemicals in the previous financial year which where of a value that equalled or exceeded the threshold value.

A new section 7A, which defines the terms 'biological material' and 'relevant industrial chemical', is inserted in the Principal Act by item 33 of Schedule 1 of the Bill. The definitions are integral to the operation of the proposed charging regime. The proposed charge only applies to 'relevant industrial chemicals'. The term 'biological material' is defined not to include a whole plant or a whole animal.

The term 'industrial chemical' is defined to mean an industrial chemical that:

is not intended for an excluded use (eg. as an agricultural chemical or constituent of an agricultural chemical); and
is not a naturally-occurring chemical, biological material, incidentally-produced chemical, or reaction intermediate.

Proposed subsection 7A(2) sets out the formula by which a person who introduces a relevant industrial chemicals must calculate the value of those chemicals. The formula is integral in determining whether the threshold has been exceeded. Value under the formula is the customs value of the relevant industrial chemicals plus the cost of insurance and freight plus the customs duty payable. The amount is to be worked out to the nearest dollar.

Australian Inventory of Chemical Substances

Sections 11-20 of the Principal Act deal with the Australian Inventory of Chemical Substances (the Inventory). As noted in the Annual Report 1995-96 of The Operation of the Industrial Chemicals (Notification and Assessment Act 1989) it is an offence under the Principal Act to import or manufacture an industrial chemical which is not listed in the Inventory where an assessment or permit is not in force for the chemical. The Inventory is used to distinguish new from existing chemicals. At 30 June 1996 there were over 38 000 chemicals listed in the Inventory.(11)

The major amendments proposed by the Bill relating to the Inventory concern the inclusion of new industrial chemicals in the confidential section of the Inventory and the transfer of industrial chemicals from the non-confidential section to the confidential section and visa-versa. Under the Principal Act, where an assessment certificate has been in force for five years in respect of an industrial chemical it must be included in the Inventory. An industrial chemical is held in the confidential section where the Director is satisfied publication of particulars of a chemical could reasonably be expected to prejudice substantially the commercial interests of an applicant or holder of a confidence about the chemical.

The major amendments proposed by the Bill relating to the Inventory, which are contained in items 37 and 41 of Schedule 1 of the Bill, change the test which the Director must apply in determining inclusion in the confidential section of the Inventory and the transfer of industrial chemicals from the non-confidential section to the confidential section and visa-versa. In addition to considering substantial prejudice to commercial interests, the Director must be satisfied that the prejudice outweighs the public interest in the publication.

Introduction of New Industrial Chemicals

Section 21 of the Principal Act makes it an offence, punishable by a maximum fine of $30 000 for a person to knowingly or recklessly introduce a new industrial chemical which does not have an assessment certificate. Subsections 21(2) and 21(3) provide exceptions to the above law, such as a new industrial chemical introduced solely for the purpose of research, development or analysis. Items 45 and 46 of Schedule 1 of the Bill insert additional exceptions. The exception proposed by item 45 applies to industrial chemicals manufactured in Australia:

in an apparatus designed for producing one or more chemicals;
in the course of a research, development or analysis program; and
by a person who prior to the manufacture gave the Director information about the type and location of the apparatus, a general description of the program and type of chemical to be manufactured in the apparatus, and description of all procedures for the safe disposal of the chemical and any hazardous degradation products derived from the chemical.

Commencement: Royal Assent.

The exception proposed by item 46 applies to the introduction of not more than 10 kilograms of a new industrial chemical in a twelve month period unless the person introducing the chemical knows that the chemical poses an unreasonable risk to occupational health and safety, public health or the environment, and if the chemical is introduced in a cosmetic, the prescribed requirements relating to its introduction are met.

Nature of Assessment Report

Where an assessment of an industrial chemical is being made the officer preparing the report is required under section 32 of the Principal Act to determine the risk, if any, of adverse health effects, safety effects or adverse environmental effects that could be caused by the importation, manufacture, or use, storage or disposal of the chemical. For the purpose of making such a determination, the officer is to take account of certain matters, including any risk to the health or safety of likely consumers handling or using the chemical or any product containing the chemical. Item 54 of Schedule 1 of the Bill adds to the list of matters which are to be considered in making a determination the following maters:

any adverse effects on the environment or persons that the chemical has the intrinsic capacity to cause; and
the extent to which the environment, persons in a particular occupation or the public will be exposed to the chemical.

Commencement: Royal Assent

Priority Existing Chemicals

Declaration of an industrial chemical as a priority existing chemical (PEC) is important because once a PEC is declared persons who wish to import or manufacture the chemical must apply for an assessment certificate in relation to the chemical.

Item 65 of Schedule 1 of the Bill repeals sections 48 and 49 of the Principal Act. These sections set out the grounds on which the Director may make a recommendation that an industrial chemical be declared a PEC and provide power to require information about a particular industrial chemical which he/she is considering declaring a PEC.

A new section 48 dealing with Director's power to require information about a particular industrial chemical which he/she is consider declaring a PEC is inserted in the Principal Act by item 65 of Schedule 1. The major differences between proposed section 48 and existing section 49 are that the Director may require information whether or not he/she has identified the industrial chemical to be declared, the response period for required information is increased from 14 days to 28 days, and where the Director knows the identity and address of a person who is required to provide information they must be notified personally of the requirement.

New sections 50B and 51, dealing with the power of the Director to make a recommendation to the Minister for an industrial chemical to be declared a PEC and the Minister to make a declaration, are inserted in the Principal Act by item 67 of Schedule 1 of the Bill.

In respect of the power of the Director to make a recommendation, the major differences between proposed section 50B and existing section 48 is that a recommendation for a declaration must specify whether or not the declaration should apply to the chemical generally or only when it is used for more specified purposes. In addition, the recommendation must also identify matters that should be taken into account in the assessment report about the chemical and the information which accompany an application for an assessment.

In respect of the power of the Minister to declare a PEC, the major differences between proposed section 51 and existing section 52 lies in the matters which the Chemical Gazette notice giving notice of a declaration must contain. Under proposed section 51 the notice of a declaration must specify matters including whether the declaration applies to the industrial chemical generally or only when it is used for specified purposes or manufactured, handled, stored or used in a specified geographical area or in specified circumstances. In addition, the notice may require that certain matters be taken into account in preparing the assessment of the industrial chemical, including:

any use to which the industrial chemical is intended to be, or is reasonably likely to be put;
any adverse effects on the environment or persons which the industrial chemical has the intrinsic capacity to cause; or
any risk to the health or safety of likely consumers handling or using the industrial chemical or any product containing the industrial chemical.

Registration of Introducers of Industrial Chemicals

A new Part 3A (proposed sections 80A-80Y), which proposes a new charging regime for industrial chemicals, is inserted in the Principal Act by item 81 of Schedule 1 of the Bill.

The proposed regime will apply to persons who:

import, or propose to import, relevant industrial chemicals into Australia;
manufacture, or propose to manufacture, relevant industrial chemicals in Australia; or
undertake, or propose to undertake, both of the above activities (proposed section 80A).

It will be an offence, punishable by a maximum fine of $30 000, for a person to knowingly or recklessly introduce any relevant industrial chemicals in a registration year or the previous financial year if the value of those chemicals equalled or exceeded the threshold value (ie. $500 000) and they were not registered (proposed section 80B). It can thus be seen that there are two key elements to the proposed regime, namely, value of the chemicals and registration.

Proposed sections 80C and 80D deal with the establishment and content of the Register. For a person to whom proposed Part 3A applies not to breach proposed section 80B they must apply to be registered. Proposed sections 80E and 80F deal with who may apply and what the application must contain. The Register must contain the following details of each registered person:

name and address;
registration number; and
such information, other than confidential information, as is prescribed.

In addition to a prescribed application fee, an application for registration must be accompanied by a registration charge (a maximum of $7 000 per registration year in respect of industrial chemicals introduced with a value greater than $5 000 000, or $1 200 per registration year for industrial chemicals with a value of greater than $500 000 but less than $5 000 000) (proposed section 80F).

Under proposed section 80G the Director must register an applicant if satisfied that proposed section 80F is satisfied, if not so satisfied, registration may be refused. Where a refusal occurs, the applicant is to be notified of the refusal, given reasons for the refusal, and the registration charge refunded.

Registration lasts for the whole of the year to which the registration certificate relates, or where a person becomes registered after the start of a registration year, the day on which their name is entered in the Register until the end of that year (proposed section 80J).

Provision is made in the proposed regime for the renewal of a persons registration. An application for a renewal must be accompanied by the prescribed application fee and registration charge (proposed section 80K).

Proposed section 80S makes a person whom is granted registration liable to pay a charge on the registration in accordance with:

the Industrial Chemicals (Registration Charge - Customs) Bill 1997;
the Industrial Chemicals (Registration Charge - Excise) Act 1997;
the Industrial Chemicals (Registration Charge - General) Bill 1997.

The three types of charge are necessitated by section 55 of the Constitution which provides:

Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.

Laws imposing taxation, except laws imposing duties of customs or of excise shall deal with one subject of taxation only; but laws imposing duties of customs shall deal with duties of customs only, and laws imposing duties of excise shall deal with duties of excise only.

Proposed section 80T sets out the rates of charge payable by a registrable person. A maximum charge of:

$1 200 will be payable by persons introducing industrial chemicals with a value of greater than $500 000 but less than $5 000 000;
$7 000 will be payable in respect of industrial chemicals introduced with a value greater than $5 000 000; and
in any other case (ie. where an amount is paid on account of a registration charge), a maximum of $7 000.

A lesser amount than the above maximums may be prescribed.

Fees

Item 97 of Schedule 1 of the Bill allows the making of regulations prescribing fees for:

an application for registration;
an application for renewal of registration; and
an application for the urgent handling of an application for renewal of registration.

Endnotes

Moving To Full Cost Recovery: Improving The Effectiveness Of NICNAS, Report for the Assistant Minister for Industrial Relations, May 1995, p. 49.
Ibid., at pp. 1-3.
Industry Commission, Work, Health and Safety, Report No. 47, Vol. 1, September 1995, p. 256.
Ibid., at p. 249.
Moving To Full Cost Recovery: Improving The Effectiveness Of NICNAS, Report for the Assistant Minister for Industrial Relations, May 1995, pp. 23 and 26.
Ibid.
Ibid., at p. 26.
Ibid.
Ibid.
Ibid., at p. 30.
Annual Report 1995-96 - The Operation of the Industrial Chemicals (Notification and Assessment Act 1989), p. 9.

Contact Officer and Copyright Details

Ian Ireland
2 June 1997
Bills Digest Service
Information and Research Services

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1997.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 6 June 1997