Plastics and Chemicals Industries Association (PACIA)

Public submissions to the review of the National Industrial Chemicals Notification and Assessment Scheme.

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PACIA & International Year of Chemistry 2011 logo

NICNAS Review
Department of Health and Ageing
MDP 88
GPO Box 9848
CANBERRA ACT 2601 NICNAS.review@health.gov.au

Dear Review Team

2011 Review of the National Industrial Chemicals Notification and Assessment Scheme (NICNAS)

The Plastics and Chemicals Industries Association (PACIA) is the peak national body representing the Australian Chemistry Industry. PACIA members include chemicals manufacturers, importers and distributors, logistics and supply chain partners, raw material suppliers, plastics fabricators and compounders, recyclers, and service providers to the sector.

For industrial chemicals, the challenge for small economies such as Australia is maintaining first world regulatory standards at a cost to governments, industry, and the community that facilitates:

  • access to chemicals for not only current needs but also to deliver solutions to the many challenges facing humanity, including climate change, water shortage, population increases, and resource constraints
  • innovation and competition
  • trade – both imports and exports of chemicals and products
  • a skilled workforce and technology transfer to other sectors
  • reduced sovereign risk through an active, integrated chemicals manufacturing sector
  • positive contribution to the economy and wellbeing of its inhabitants
The chemistry industry continues to face a range of efficiency and effectiveness impediments with the National Industrial Chemicals Notification and Assessment Scheme. Significant progress will only be made though strong commitment to improving Australia’s regulatory approaches for industrial chemicals.

PACIA is pleased to provide the attached submission to the 2011 Review of NICNAS. A PACIA document titled Chemicals and Plastics Industries Australian and Global Key Data also accompanies this submission as a separate file.

If I can provide additional information at this stage please do not hesitate to contact me directly on (02)4392 7643, 0409 111 179 or by email gmacalpine@pacia.org.au.

Yours sincerely

Geoff MacAlpine

Director Industry Development

14 December 2011

PLASTICS AND CHEMICALS INDUSTRIES ASSOCIATION
Level 10, 10 Queen Street, Melbourne, Victoria, 3000 Phone: 03 9611 5400 Fax: 03 9611 5499
PO Box 422 Flinders Lane, VIC 8009 Email: info@pacia.org.au Web: www.pacia.org.au
Sydney Office: 02 9438 2273 Canberra Office: 02 6230 6985


PACIA logo
PACIA Submission:
2011 Review of the National Industrial Chemicals Notification and
Assessment Scheme
14 December 2011


Contents

Executive summary
Recommendations
1. Overview of PACIA and the Chemistry Industry
2. Regulatory Principles
3. Chemicals and plastics regulatory reform
4. Productivity Commission Report, COAG responses, and progress
5. International Regulatory Schemes
6. Production and trade in chemicals
7. The roles and functions of NICNAS
7.1 Non-compliance with Regulatory Impact Assessment requirements
7.2 NICNAS Recommendations
8. The governance and consultation arrangements of NICNAS
8.1 Governance
8.2 Consultation arrangements
9. Efficiency and effectiveness
9.1 Regulatory science
9.2 Focus
9.3 Costs and administration
9.4 To introduce or not introduce
9.5 Three actions to make a substantive difference
10. Super Regulator
Attachment 1: Productivity Commission Recommendations and COAG Responses related to NICNAS
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Executive summary

The Plastics and Chemicals Industries Association (PACIA) is the peak national body representing the chemistry industry in Australia and is a key stakeholder with regard to NICNAS and this consultation

For industrial chemicals, the challenge for small economies such as Australia is maintaining first world regulatory standards at a cost to governments, industry, and the community that facilitates:
  • access to chemicals for not only current needs but also to deliver solutions to the many challenges facing humanity, including climate change, water shortage, population increases, and resource constraints
  • innovation and competition
  • trade – both imports and exports of chemicals and products
  • a skilled workforce and technology transfer to other sectors, and
  • reduced sovereign risk through an active, integrated chemicals manufacturing sector
  • positive contribution to the economy and wellbeing of its inhabitants
Developed small economy countries like New Zealand have needed to face this challenge and their approaches have been pragmatic. For instance, under Group Standards, New Zealand regulation has ‘deemed to comply’ provisions for chemical and product labelling that is consistent with the requirements of Europe, Canada, United States or Australia. This approach reduces costs and promotes effective and efficient risk-resource allocation. Equally, there is increased efficiency of New Zealand processes for introduction of new chemicals, particularly when they are subject to a Group Standard.

Trade in chemicals and plastics is truly global, with over 80 countries reporting an industry with a turnover of more than $US1bn. Commodity polymers are now traded on the London Metals Exchange.

As a consequence of the structure and size of the Australian market for chemicals, and freight costs from Australia, the chemicals sector in Australia is typically import replacement focused. Local producers lack the scale and economies of plants in other producer countries, but to date, reliable, low-cost energy, comparatively lower capital costs (on depreciated plant) and production flexibilities that meet demands from local customers for low-volume, specialised products enable Australian companies to remain competitive in their own market. However, a range of significant economic and structural challenges face the chemistry industry and currently accepted paradigms may change.

Most of the growth in world chemicals productive capacity in recent years has occurred in Asia. In the past 15 years, Asia (other than Japan) has doubled its share of global chemicals production to one quarter of the total. As a consequence, Australian producers are particularly exposed to low-cost competition and the fluctuations of world markets, including extended periods of depressed prices.

On a global scale Australia is a small chemistry industry participant. Australia represents about 0.6% of global sales of chemicals and about 0.85% of global trade in chemicals.

Regulation of chemicals and the chemistry industry is complex with regulatory interventions at the National, State/Territory, and Local Government levels. The Productivity Commission Research Report: Chemicals and Plastics Regulation, 2008 identified the following broad areas of regulation:
  • National policy formulation and system governance
  • National hazard and risk assessment
  • Public health
  • Occupational health and safety
  • Transport Safety
  • Agricultural and veterinary chemical products
  • Environment protection
  • National security
In 1998 it was estimated by Environment Australia that there were 144 pieces of Commonwealth, State and Territory legislation governing the sector. In recent times the Standing Committee on Chemicals has attempted to map the chemicals and plastics regulatory framework but has not produced a report of these findings. It is reasonable to expect that the number of pieces of legislation will have increased significantly.

PACIA recognises the role that the National Industrial Chemicals Notification and Assessment Scheme plays in providing regulatory access to new chemicals. PACIA also supports an appropriate existing chemicals review program. Notwithstanding, there are endemic issues with the Scheme that frustrate execution of its policy intent. Such issues include:
  • the Australian Inventory of Chemical Substances contains significantly fewer chemicals than equivalent schemes operating in Europe and the United States resulting in less chemicals being available to Australian manufacturers or importers than their overseas counterparts. Some companies have reported that their efforts to produce formulated products for local sale and export have been hampered as they are at a competitive disadvantage in export markets
  • duplication of assessment effort where chemicals have been subject to contemporary evaluations in jurisdictions such as Europe or North America
  • lack of recognition of the "outcomes" of assessments from recognised European or North American regulatory agencies
  • the costs for introduction of chemicals, in a range of situations, are regarded by industry as not economic for the local market
  • of the approximately 4790 companies that are subject to NICNAS company registration NICNAS has indicated that only about 2% of these companies introduce new chemicals
  • need for improved risk-resource allocation that appropriately addresses chemicals at the lower end of the risk-spectrum
  • cumbersome legislative processes that lead to inefficiencies – e.g. under current cost-recovery proposals SAPLC and LVRC are to increase by 37% and 171% respectively on activity based costing. There is important need for review of the legislation if the policy intent is not being achieved. This principle applies to a number of categories
  • compliance with Regulatory Impact Statement requirements, noting that NICNAS remains non-compliant with Office of Best Practice Regulation requirements for certain annotations of the Australian Inventory of Chemical Substance in 2008. A further situation of the need for regulatory impact analysis is presented as a case study in this submission
Many of these issues are not new. The 1996 Report of the Small Business Deregulation Task Force Time for Business proposed that the Productivity Commission inquire into and report on the most efficient and effective way to regulate industrial, agricultural and veterinary chemicals. The Report noted:

"Small business is concerned about the assessment procedures for chemicals, the dissemination of information about the chemicals, costs of assessment and registration, labelling and lack of consistency and coordination between chemical assessment schemes.
The cost of assessment and registration of both schemes restricts the entry of small innovative manufacturers who wish to market chemicals less hazardous than those currently available."

"Where such disincentives exist the effectiveness of the regulation should be questioned."

"Regulation that aids the protection of the community through assessment of the risks to occupational health and safety, public health and the environment are legitimate and have a significant public benefit. However, where the regulations impede firms from participating in the industry or prevent the development of low risk products, the legislative arrangements should be re-focused to ensure that such benefits to the community can be achieved."

The 2001 Chemicals and Plastics Action Agenda recommended that:

"the relevant regulatory bodies be required to alter their assessment procedures to ensure recognition of chemical approvals from approved countries ….."

In 2005, the Taskforce on Reducing Regulatory Burden on Business in its Rethinking Regulation report to the Prime Minister and Treasurer found that:

"Underpinning a country’s competitive success internationally is the effectiveness of its domestic regulatory structures. Good regulation can enhance Australia’s ability to compete and prosper economically; inappropriate or costly regulation will handicap our performance. Like many other developed countries, Australia has undergone a relatively rapid rise in regulation over the past couple of decades, in response to a succession of social, environmental and economic needs and pressures. In our view, business is justified in protesting at the compliance and other burdens that this regulatory inflation has entailed." (underlining added)

The report also noted:

"A major area of concern for industry is the apparent increase in the time and cost involved in obtaining approvals or renewals. Submissions contained a range of examples, many concerning NICNAS accreditation processes."

In 2008 the Ministerial Taskforce on Chemicals and Plastics Regulation developed an "early harvest" reform package that was agreed by the Council of Australian Governments at their July 2008 meeting. The reforms included:

"Reform 14. National Industrial Chemicals Notification and Assessment Scheme to evaluate the effectiveness of the low regulatory concern chemical (LRCC) reforms introduced in 2004."

The 2008 Productivity Commission Research Report: Chemicals and Plastics Regulation identified a suite of reforms directed at improving the governance and efficiency and effectiveness of chemicals and plastics regulation. Eight recommendations were specifically directed to NICNAS reforms. These reforms were welcomed or noted by the Council of Australian Governments at their November 2008 meeting.

To date little progress towards securing outcomes for the majority of the reforms has been achieved.

The chemistry industry continues to face a range of efficiency and effectiveness impediments with the National Industrial Chemicals Notification and Assessment Scheme. Significant progress will only be made though strong commitment to improving Australia’s regulatory approaches for industrial chemicals.

PACIA welcomes the 1 November 2011 announcement by Senator The Hon Nick Sherry and Senator The Hon Catherine King on the establishment of a Better Regulation Ministerial Partnership to evaluate and make recommendations on the regulatory settings for the notification, assessment and regulation of industrial chemicals.

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Recommendations

PACIA believes that there are 3 major recommendations that make substantial improvements to the efficiency and effectiveness of the National Industrial Chemicals Notification and Assessment Scheme
  1. Accept the outcomes of assessments from recognised overseas regulators

    The industrial chemical regulatory systems of Europe, United States and Canada service combined populations of about 850 million people

    There is need for Australia to move away from arguing whether or not there are differences in methodologies or approaches and accept the outcomes of assessments from the major recognised regulatory systems
  2. Fix the system for consideration of chemicals of low regulatory concern

    There are a range of known issues with the efficiency and effectiveness of the chemicals of low regulatory system. At present it is not serving to meet the original policy intention, including to optimally balance risk-resource allocation
  3. Implement the NICNAS focused Productivity Commission recommendations

    The Productivity Commission considered the chemicals and plastics regulatory framework. The process was extensive, inclusive and consultative.

    It is not productive to continue delaying or second-guessing the detailed consideration that was given to the recommendations. The recommendations need to be implemented as a suite of reforms
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1. Overview of PACIA and the Chemistry Industry

The Plastics and Chemicals Industries Association (PACIA) is the peak national body representing the chemistry industry in Australia.

Our members include chemicals manufacturers, raw material suppliers, plastics fabricators and compounders, importers and distributors, logistics and supply chain partners, chemicals and plastics recyclers, and service providers to the sector. These businesses range from small family-owned companies and medium-sized enterprises, to leading national and multinational enterprises.

The chemistry industry is the third largest manufacturing industry in Australia. The local chemistry industry is not only important in its own right, it has a multiplier effect on productivity and cost saving benefits to the broader economy - every chemical manufacturing job created inside a plant creates about 5 jobs outside the plant.

Australia also relies on a strong chemistry sector to deliver solutions for a more sustainable future. The chemistry industry is critical in delivering solutions for the many challenges facing humanity, including climate change, water shortage, population increases and resource constraints.

The industry is arguably the most diverse and broad in its reach across Australian society, environment and industry. It can be broadly categorised as follows:
  • Basic Chemicals (organic and inorganic industrial chemicals, fertilisers, industrial gases, and synthetic resins)
  • Specialty Chemicals (explosives, paints, rubber products, plastics, other polymers and inks)
  • Consumer Chemicals (pesticides, soaps and detergents, cosmetics, personal care, medicinal and pharmaceutical)

Industry snapshot

  • Turnover in the sector is approximately $33.6 billion
  • Industry value-added is $11.5 billion
  • Wages and salaries are $4.9 billion
  • The sector directly employs approximately 83,000 people
  • The sector represents between 9% and 10% of total Australian manufacturing activity
  • Australia represents about 0.6% of global sales of chemicals and 0.85% of global trade in chemicals
(Note: a separate Trade Analysis accompanies this submission)

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2. Regulatory Principles

The PACIA Board has endorsed the following Regulatory Principles as the basis for PACIA’s approach to regulatory proposals:

Regulatory outcomes that conform to the following regulatory principles:
  • be science-based
  • the minimum required to achieve the stated objectives;
  • be efficient and effective;
  • adopt a risk management approach to forming and administering regulation;
  • minimise the impact on competition;
  • be nationally consistent in content, implementation, interpretation and timeframes;
  • be compatible with international standards and practices, where appropriate;
  • not unnecessarily restrict trade;
  • be developed in consultation with the groups most affected and be subject to regular review;
  • be flexible, not prescriptive and be compatible with the business operating environment;
  • standardise the exercise of bureaucratic discretion;
  • have a clear delineation of regulatory responsibilities and effective and transparent accountability mechanisms; and
  • apply Regulatory Impact Analysis including clear identification of costs and benefits
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3. Chemicals and plastics regulatory reform


Key policy changes sought by the chemistry industry relate to Regulatory Reform. This ongoing work has a long history including:
1996: Bell Report - Time for Business
2001: Chemicals & Plastics Action Agenda
2002: Government response to Action Agenda
2003: Alternate models (industry commissioned)
2004: CPLG response to Government
2006: Banks Regulation Taskforce
2006: Government response on Banks
2006/8: Ministerial Taskforce on C&P Regulation Reform
2007/8: Productivity Commission Study and Report
2008: Productivity Commission Supplementary Report
2008: COAG direction and commitment
2009: COAG commitment reconfirmed
2009/10: COAG Agreed Governance
2010: Standing Committee on Chemicals
2011: Better Regulation Ministerial Partnership

Whilst the policy intent of regulatory reform at the political level (e.g. "Seamless National Economy", COAG responses on major reforms, including Productivity Commission recommendations etc.) may be commendable, meaningful reform at the Departmental and Agency level is being frustrated.

Since the 29 November 2008 Council of Australian Governments’ commitments to chemicals and plastics regulatory reform little progress has been made on key NICNAS reforms which would reduce regulatory burden.

As industry has continued to press with the Standing Committee on Chemicals and others, the cumulative regulatory burden on the chemistry industry has been increasing, including under the guise of regulatory reform.

The sentiment of the following statement from an industry participant reflects growing significant negativity with lack of progress on reform agendas and increasing regulatory burdens:

"Please don’t give us any more red-tape reduction – we can’t afford it"

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4. Productivity Commission Report, COAG responses, and progress

Following from the Report of the Taskforce on Reducing the Regulatory Burden on Business Rethinking Regulation in 2006, COAG identified chemicals and plastics as a ‘regulatory hotspot’. A Ministerial Taskforce was established to develop a streamlined and harmonised national system of chemicals and plastics regulation and the Productivity Commission assigned a brief:
  • "In summary, the key tasks the Commission had been asked to undertake are to:
  • assess Australia's current system of chemicals and plastics regulation, including its effectiveness in achieving public health, occupational health and safety, and environmental outcomes, and its impacts on productivity, competitiveness and efficiency;
  • recommend reforms to the current system of regulation, including options to enhance national uniformity and consistency, streamline data requirements and assessment processes, and use alternatives to regulation.
In doing so the Commission had been asked to:
  • investigate the degree to which Australian regulations diverge from overseas standards
  • examine the existing regulatory arrangements for security sensitive ammonium nitrate
  • examine the interrelationships between the different tiers of government in Australia - Australian, state and territory and local - and identify any inconsistencies and duplication
  • make recommendations for reforms to regulations and regulatory arrangements to enhance national uniformity and consistency, streamline data requirements and assessment processes
  • consider alternatives to regulation."
http://www.pc.gov.au/projects/study/chemicalsandplastics

The Productivity Commission made 8 key recommendations with regard to NICNAS. The recommendations and COAG’s 29 November 2008 responses are provided at Attachment 1 to this submission. These recommendations included key principles and outcomes directed at regulatory efficiency and effectiveness; including:
  • the costs of chemical assessments are commensurate with the risks posed by the chemicals concerned
  • assessment priorities are directed to the most efficient management of the aggregate risk of all industrial chemicals
  • establishment of a technical advisory committee as a statutory requirement
  • limiting the role of NICNAS to the scientific assistant of the hazards and risks of industrial chemicals
  • the power to annotate the Australian Inventory of Chemical Substances to ban or phase out chemicals, and the responsibilities for administering the Cosmetic Standard 2007, and for implementing the Rotterdam Convention, should be removed from NICNAS
  • national standard setting bodies should be required to respond to NICNAS recommendations within defined time limits; and NICNAS should maintain a public schedule of all responses
  • a statutory timeframe for the technical screening of applications should be introduced
  • implementation of a program to greatly accelerate the assessment of existing chemicals including reviewing the scope for recognition of chemical assessment schemes with priority to those operated by the European Union, Canada and the United States. The costs of screening should be met by the Australian Government
  • ACCC and NICNAS should negotiate formal arrangements for cooperation on issues of chemicals in articles
  • transfer of the administration and enforcement of the Cosmetics Standard 2007 from NICNAS to the ACCC.
Additionally, "early harvest reforms" agreed through the Ministerial Taskforce on Chemicals and Plastics Regulation have not led to "outcomes". Such a reform recommendation included:

Reform 14. National Industrial Chemicals Notification and Assessment Scheme to evaluate the effectiveness of the low regulatory concern chemical (LRCC) reforms introduced in 2004.

In this instance a report titled LRCC Reforms: An Evaluation of the Impact on Industry Final Report produced 12 key options for reform. The report cost was approximately $120,000 of industry cost recovered funds (plus the costs of industry input to the consultation). There is currently no process for implementation. – task completed without outcomes.

In their engagement with industry stakeholders, the consultants noted in the LRCC Reforms Report:

"The degree of industry wariness regarding NICNAS in general existed as a backdrop to the industry response to the LRCC provisions. It was not just the experience of using the provisions but the perception of the difficulty and costs that might be entailed, which caused many industry stakeholders to avoid using the regulations. For some in industry the avoidance related to a belief that the legislative and regulatory framework itself posed too great a hindrance regardless of NICNAS attempts to be helpful, for others there was a belief that NICNAS as an organisation was not disposed to be helpful to industry which compounded perceived difficulties. Consequently, rather than attempting to use the LRCC provisions, many would simply try not to introduce new chemicals, so driven were they to avoid having any dealings with the regulator. As such, general perceptions of NICNAS as an organisation, some of which were substantially outdated, presented a barrier to uptake of the LRCC reforms for a proportion of industry.

NICNAS processes associated with the LRCC provisions were still widely perceived as unnecessarily burdensome for industry. Industry stakeholders were concerned that NICNAS resources were focused too heavily on LRCC chemicals at the expense of regulatory resources being spent on higher risk chemicals. The full cost recovery basis on which NICNAS is funded made the importance of getting a return for investment in compliance important for industry."

A range of the options presented in the LRCC Reforms: An Evaluation of the Impact on Industry Final Report remain worthy of consideration for progressing to implementation.

Lack of progress on a range of the Productivity Commission reforms, noted or welcomed by COAG, and "early harvest reforms" remain as inefficient costs and inefficient resource utilisation by the industry cost-recovered NICNAS.

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5. International Regulatory Schemes

The Draft NICNAS Cost Recovery Impact Statement provides some comparisons for NICNAS and industrial chemical regulatory systems in the European Union, Canada and United States.

What is missing from the comparisons is any indication of the population sizes or markets of these jurisdictions, for instance: For Canada, the Draft NICNAS CRIS identifies:

"The Canadian assessment scheme is very similar to NICNAS except that cosmetics are not within the scope of the Canadian scheme and an occupational health and safety risk assessment is not conducted. Cost recovery arrangements, however, are quite different in Canada with only approximately 14 per cent of costs recovered from industry for new substances. Accordingly the fees in Canada for a new chemicals assessment are lower than NICNAS fees (C$50 to C$3,500 (2010-12) versus A$2,841 to A$16,782 (2011-12).

The existing chemicals program is funded by government in Canada whereas under NICNAS, the existing chemicals assessment program is 100 per cent cost recovered through NICNAS registration fees.

Similar to NICNAS, Canada can reassess chemicals under their Significant New Activity (SNAc) provisions. However, no fee is charged in Canada. In NICNAS there is an assessment fee for the secondary notification of a chemical not on the inventory but no fee for the secondary notification assessment of an existing chemical.

Canada charges a fee for confidential searches of their inventory whereas NICNAS does not charge for bona fide searches of confidential AICS."

Additionally, the Government of Canada is providing more than $506 million in funding over five years for the next phase of Chemicals Management Plan. Activities identified in the next phase include:
  • Improving product safety in Canada
  • Completing assessments of 500 substances across nine categories including phthalates, primarily used in plastics; and
  • Investing in additional research for chemicals like Bisphenol A, flame retardants, chemicals that affect hormone function and chemicals that affect the environment
NICNAS should substantially increase its efficiency through acceptance of the outcomes of assessments, evaluations from recognised overseas regulatory agencies such as those from Europe, United States and Canada. This principle applies to both existing and new chemicals.

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6. Production and trade in chemicals

A PACIA document titled Chemicals and Plastics Industries Australian and Global Key Data accompanies this submission as a separate file.

The data identifies:
  • a long term trend of decline in Australia’s trade balance for chemicals and plastics
  • relative proportions for imports verses exports
  • Australian imports by type
  • Australian exports by type
  • World turnover by region
  • Australia’s declining place in global shipments
  • global trade by Region 2009
  • global trade by type 2009
Australia’s Trade Balance for Chemicals 1995-2010
Australia’s Trade Balance for Chemicals 1995-2010

Source: Global Trade Information Services Inc, Global Trade Atlas


On a global scale Australia is a small chemistry industry participant. Australia represents about 0.6% of global sales of chemicals and about 0.85% of global trade in chemicals.

Most of the growth in world chemicals productive capacity in recent years has occurred in Asia. In the past 15 years, Asia (other than Japan) has doubled its share of global chemicals production to one quarter of the total. As a consequence, Australian producers are particularly exposed to low-cost competition and the fluctuations of world markets, including extended periods of depressed prices.

In terms of data generation for regulatory purposes the Australian market is insufficient to support unique Australian requirements or phased reviews that do not align with those of the major markets. It is also unlikely that unique chemicals will be introduced into Australia that are not introduced into other international markets.

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7. The roles and functions of NICNAS

Regulation of chemicals and the chemistry industry is complex with regulatory interventions at the National, State/Territory, and Local Government levels. The Productivity Commission Research Report: Chemicals and Plastics Regulation, July 2008 identified the following broad areas of regulation:
  • National policy formulation and system governance
  • National hazard and risk assessment
  • Public health
  • Occupational health and safety
  • Transport Safety
  • Agricultural and veterinary chemical products
  • Environment protection
  • National security
In 1998 it was estimated by Environment Australia that there were 144 pieces of Commonwealth, State and11 Territory legislation governing the sector. In recent times the Standing Committee on Chemicals has attempted to map the chemicals and plastics regulatory framework but has not produced a report of these findings. It is reasonable to expect that the number of pieces of legislation will have increased significantly.

In 2007 the Productivity Commission was tasked to:
  • assess Australia's current system of chemicals and plastics regulation, including its effectiveness in achieving public health, occupational health and safety, and environmental outcomes, and its impacts on productivity, competitiveness and efficiency; and
  • recommend reforms to the current system of regulation, including options to enhance national uniformity and consistency, streamline data requirements and assessment processes, and use alternatives to regulation
The Productivity Commission’s processes were extensive, inclusive and consultative. The Productivity Commission delivered recommendations for a suite of reforms in its 2008 Final Report. PACIA supports those recommendations - as a suite of reforms (i.e. not to be cherry-picked).
A key recommendation related to the roles and functions of NICNAS is:

Recommendation 4.3

The Australian Government should generally limit the role of NICNAS to the scientific assessment of the hazards and risks of industrial chemicals. The power to annotate the Australian Inventory of Chemical Substances to ban or phase out chemicals, and the responsibilities for administering the Cosmetics Standard 2007, and for implementing the Rotterdam Convention, should be removed from NICNAS.

NICNAS has dabbled in areas of risk management in recent years but these have resulted in specific issues and ongoing problems. In this regard PACIA notes:
  • issues with non-compliance with requirements for Regulatory Impact Statements
  • NICNAS recommendations on the fire retardant HBCD provides a useful case study
  • a separate submission to the NICNAS Review provided by the FluoroCouncil
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7.1 Non-compliance with Regulatory Impact Assessment requirements

During 2007 PACIA, and others, raised the need for NICNAS to reconsider proposals for annotation of the Australian Inventory of Chemical Substances to ban or restrict allowable uses of certain lead compounds. In its 2007-08 Annual Report, the Office of Best Practice Regulation identified that NICNAS had a non-compliant proposal which required a post-implementation review.

"The National Industrial Chemicals Notification and Assessment Scheme (NICNAS) did not comply with the Government’s best practice regulation requirements in 2007 08. A RIS was required but was not prepared for a proposal to change the Australian Inventory of Chemical Substances to restrict the allowable uses for certain lead compounds.

The Australian Inventory of Chemical Substances (AICS) – Annotation of the AICS (gazetted 5 February 2008) will require a post-implementation review within one to two years."

Office of Best Practice Regulation 2008, Best Practice Regulation Report 2007-08, Department of Finance and Deregulation, Canberra.


The Office of Best Practice Regulation’s Annual Report 2010-11 was published on 13 December 2011 and contains the following entry at page 62:

5.1.11 Health and Ageing
Title of regulatory proposal
Description of regulatory proposalReason for PIRDate of implementationDate PIR to commencePIR StatusPIR compliance
Australian Inventory of Chemical Substances restriction on the use of certain lead compounds
Restriction on the use of certain lead compounds in industrial surface coatings and linksNon-compliant5 February 2008February 2010Not startedNon-compliant

Office of Best Practice Regulation 2011, Best Practice Regulation Report 2010-11, Department of Finance and Deregulation, Canberra


PACIA notes that NICNAS is not a risk-management regulator. NICNAS provides information and makes recommendations about chemicals to Commonwealth, State and Territory bodies with responsibilities for the regulation of industrial chemicals (e.g. with regard to Poisons Scheduling, jurisdictional Poisons Control, Work Health and Safety, and the Environment).

From a policy perspective this matter remains problematic and it set an unfortunate precedent. Had there been proper referral to appropriate agencies then a chain of actions would have commenced for established processes of consideration (including regulatory impact analysis) and regulatory underpinning of decisions. This has not occurred.

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7.2 NICNAS Recommendations

A Priority Existing Chemical Draft Assessment Report for Hexabromocyclododecane (HBCD) was issued on 24 November 2011 for public comment. PACIA is still assessing the Draft Report and its recommendations for detailed comment to NICNAS by 22 December 2011, however, elements of the Draft Report are worthy of consideration in this submission.

NICNAS has identified:
  • HBCD is one of a number of polybrominated flame retardants (PBFRs). It was declared a Priority Existing Chemical for full assessment in June 2005
  • HBCD is used in the EPS resin form in domestic and industrial building insulation, packaging of industrial products and beanbag fills. HBCD is also used in XPS boards in domestic and industrial insulation and in automotive. Other uses are as a polypropylene resin in housing for domestic electrical appliances and as a textile coating additive in blinds, public seating and garments. A small amount of raw HBCD is used in the manufacture of flame retarded polystyrene masterbatch, which is used in an injection moulding process in the manufacture of ceiling fan covers.
  • There is no manufacture of the substance in Australia
  • Alternative fire retardants are available to replace HBCD in high impact polystyrenes (HIPS) but they are all required to be used at considerably higher loadings. Similarly, there are a wide range of different flame retardant formulations in textile coatings, although it is uncertain whether the human health and environmental impacts of these alternatives are any less than those associated with HBCD products.
  • HBCD will be referred to the Conference of the Parties of the Stockholm Convention in 2013 (PACIA Note: this establishes a formal process for consideration at both the international and Australian levels)
  • Public Health Risk
    • Low risk of acute toxicity
    • Risk of chronic effects not expected due to low exposure
    • Treated upholstery and plastic articles do not present a risk
    • Toddlers likely to have highest exposure to HBCD in indoor dust, however, risk of adverse effects low
    • Risk to infants through exposure to HBCD in breast milk estimated to be low
  • Occupational Risk
    • Low risk of acute toxicity
    • Risk to the fertility of workers is of concern in the worst-case exposure scenario for all tasks.
    • Risk to workers handling semi-finished and end-use products is low.
  • Environmental Risk Characterisation
    • No local unacceptable aquatic risks resulting from HBCD based on risk quotient method;
    • Unacceptable sediment organism risk for some industries based on risk quotient methods (for example, plastics processing);
    • No local unacceptable risk to soil organisms based on irrigation with effluent, but potential risk where soil is amended with biosolids
    • Uncertainties in methodologies are identified.
The Draft Report makes certain recommendations to Safe Work Australia (classification), Industry (hazard communication and engineering/personal protective equipment controls) and to the Standing Council for Environment and Water (development of an action plan).

A further recommendation to industry is:

"Manufacturers and importers of flame retardant articles should voluntarily phase out the import and use of HBCD chemical, and articles containing the chemical, as an interim measure to support the objectives of the Action Plan in Recommendation 6" (matters referred to the Standing Council for Environment and Water).

The NICNAS evaluation and Draft Assessment Report for Hexabromocyclododecane does not give consideration to the consequences of removal of HBCD flame retardant from current uses, particularly in the absence of tested and approved acceptable alternatives. Such removal may have significant consequences for damage to human life, environment (through fires) and property.

There are a range of issues surrounding building specifications and codes, potential product de-selection in the absence of acceptable, tested and approved alternatives, and other issues. The potential impacts on businesses supplying the building industry could also be significant.

PACIA is concerned that the NICNAS recommendation is made in the absence of appropriate regulatory impact analysis. PACIA fully supports the Australian Government’s regulatory impact analysis (RIA) requirements, which are intended to achieve better regulation by supporting:
  • "Sound analysis. The case for acting in response to a perceived problem, including addressing the fundamental question of whether regulatory action is required, needs to be demonstrated. The analysis should also outline the desired objective of the response, a range of alternative options to achieve the objective, and an assessment of the impact of each option, and should be informed by effective consultation.
  • Informed decision making. To help decision makers understand the implications of options for achieving the government’s objectives, they should be informed about the likely impacts of their decision, at the time they are making that decision.
  • Transparency. The information on which government regulatory decisions are based should be publicly available"
http://www.finance.gov.au/obpr/proposal/gov-requirements.html

"A RIS is mandatory for all decisions made by the Australian Government and its agencies that are likely to have a regulatory impact on business or the not-for-profit sector, unless that impact is of a minor or machinery nature and does not substantially alter existing arrangements. This includes amendments to existing regulation and the rolling over of sunsetting regulation."

Australian Government 2010, Best Practice Regulation Handbook, Canberra, p.8

"Regulation is any rule" endorsed by government where there is an expectation of compliance. It includes primary legislation and legislative instruments (both disallowable and non-disallowable) and international treaties It also comprises other means by which governments influence businesses and the not-for-profit sector to comply but that do not form part of explicit government regulation (for example, industry codes of practice, guidance notes, industry-government agreements and accreditation schemes)."

Australian Government 2010, Best Practice Regulation Handbook, Canberra, p.9

"Minor" changes refer to those changes that do not substantially alter the existing regulatory arrangements for businesses or not-for-profit organisations, such as where there would be a very small initial one-off cost to business and no ongoing costs. "Machinery" changes refer to consequential changes in regulation that are required as a result of a substantive regulatory decision, and for which there is limited discretion available to the decision maker.

Australian Government 2010, Best Practice Regulation Handbook, Canberra, p.10

Implementation of the Productivity Commission’s Recommendation 4.3 should assist to focus NICNAS on core functions relating to the scientific assessment of the hazards and risks of industrial chemicals. It is critical to consider the broader context of chemicals regulation in Australia and how each Department or Agency contributes to the system of regulation.

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8. The governance and consultation arrangements of NICNAS

PACIA is supportive of review of the governance and consultation mechanisms of NICNAS.
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8.1 Governance

There is critical need for clarity of the roles for the Department of Health and Ageing (DoHA) and NICNAS, particularly with regard to policy roles between the policy department and the operational agency.

In the past PACIA and others have raised governance as an issue given roles appear to blurred blurred and there is a lack of clarity and transparency.

PACIA’s perception is that there is greater clarity between the Australian Pesticides and Veterinary Medicines Authority and the Department of Agriculture Fisheries and Forestry.

PACIA’s believes that this is an important area for development with clear delineation of roles and responsibilities between the DoHA and NICNAS

PACIA notes that the Department of Health and Ageing has Regulatory Policy and Governance Division. PACIA notes the role described for the Division:

"The Regulatory Policy and Governance Division (RPGD) was established in August 2006 to build the capacity for effective governance and the adoption of regulatory best practice across the Health portfolio. It achieves this by working collaboratively with other Portfolio Agencies and Divisions within the Department to respond to changes in governance and regulatory frameworks. It also ensures that eligible people with a hearing impairment receive safe, affordable hearing rehabilitation services and devices."

http://www.health.gov.au/internet/main/publishing.nsf/Content/regulatory-policy-governance-RPGD

Further
"To achieve this we will:
  • advise on the governance arrangements for health portfolio agencies;
  • provide policy advice to Government on matters associated with the regulation of food, radiation, gene technology and other emerging technologies, therapeutic goods, including in the context of international trade agreements;
  • provide policy advice and strategic direction with respect to the National Health & Medical Research Council (NHMRC), the Office of the Gene Technology Regulator (OGTR), the Therapeutic Goods Administration (TGA), the Australian Radiation Protection and Nuclear Safety Agency (ARPANSA), the National Blood Authority (NBA), the Food Standards Australia New Zealand (FSANZ), and the Australian Commission on Safety and Quality in Health Care (ACSQHC);
  • contribute to the development of policy advice on regulatory interfaces between therapeutic goods, food, cosmetics and chemicals;
  • provide policy advice and support for consideration of regulatory and ethical issues associated with emerging technologies;
  • identify possible responses to proposed changes in governance and regulatory frameworks that have implications for the health portfolio;
  • provide advice on safety and quality matters, particularly those relating to development of national accreditation of healthcare services;
  • provide policy advice and support for consideration of intellectual property issues associated with domestic and international regulations in relation to emerging technologies;
  • manage the relationship between the Department and Medicare Australia;
  • provide advice to program areas to facilitate the process that allows Medicare Australia to administer health and ageing programs;
  • manage the Research Capacity Appropriations;
  • develop policy advice for the achievement of effective outcomes in relation to negotiations with New Zealand on food and therapeutic goods regulatory reform; and
  • contribute to the wider government deregulation agenda, Council of Australian Governments (COAG) policy reforms, and relevant Productivity Commission reviews to reduce regulatory burdens on business.
  • administer the Australian Government Hearing Services Program"
NICNAS seems to be a notable omission from the list of agencies identified under bullet point 3 yet cosmetics and chemicals are identified under bullet point 4.

PACIA has had no engagement with the Regulatory Policy and Governance Division since its establishment in 2006 and it is not clear whether this group has an interface with NICNAS.

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8.2 Consultation arrangements

PACIA believes that NICNAS works hard to service consultation at the Industry Government Consultative Committee level, technical committees/advisory groups, and public consultation forums.

PACIA strongly supports the operation of the Industry Government Consultative Committee whose terms of reference includes:

The IGCC will:
  1. review the utilisation of resources against NICNAS objectives;
  2. review the performance of NICNAS against agreed performance indicators (including those established in the NICNAS Service Charter and Corporate Plan), and in particular the impact on industry and the protection of human health and the environment;
  3. develop strategies for improving the efficiency and effectiveness of NICNAS operations within the context of (i) established goals and objectives and (ii) developing and emerging issues; and
  4. develop compliance strategies and monitor the effectiveness of these strategies in promoting compliance with the Scheme.
The Chair of the Committee will report as necessary (at least every six months) to the Minister for Health and Ageing.

NICNAS also provides for an annual joint interface between the Community Engagement Forum and Industry Government Consultative Committee, and a meeting with the Parliamentary Secretary.

At this stage this is not an area that PACIA would flag for detailed improvement or attention.

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9. Efficiency and effectiveness

9.1 Regulatory science

It is clearly beneficial for staff within a chemicals regulator to have a clear understanding of regulatory policy, regulatory governance, the larger regulatory framework, and the legislation being administered. This may seem self-evident but commonly staff are recruited from a range of backgrounds, including academia, where the regulatory role may not seem so clear.

Some agencies such as the Australian Pesticides and Veterinary Medicines Authority (APVMA) developed a APVMA Standard on Good Regulatory Science Practice. Whilst the role of NICNAS is different to the APVMA, NICNAS may wish to consider whether it would be helpful to develop such an approach tailored to its operations.

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9.2 Focus

A clear understanding of regulatory science assists with developing approaches that facilitate effective risk-resource allocation and approaches.

External perceptions of NICNAS include that optimal risk-resource allocation has not been achieved and that the processes and burdens for chemicals at the low end of the risk spectrum are not balanced against the actual risks. Such a realisation also comes with consideration of the cumulative controls and check and balances that exist throughout the chemicals and plastics regulatory framework.

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9.3 Costs and administration

For the past 15 years the clear message from industry stakeholders to any review that has involved comment on NICNAS has been serious concern with costs and administration

The 1996 Report of the Small Business Deregulation Task Force Time for Business noted:

"Small business is concerned about the assessment procedures for chemicals, the dissemination of information about the chemicals, costs of assessment and registration, labelling and lack of consistency and coordination between chemical assessment schemes.

The cost of assessment and registration of both schemes restricts the entry of small innovative manufacturers who wish to market chemicals less hazardous than those currently available."

"Where such disincentives exist the effectiveness of the regulation should be questioned."

"Regulation that aids the protection of the community through assessment of the risks to occupational health and safety, public health and the environment are legitimate and have a significant public benefit. However, where the regulations impede firms from participating in the industry or prevent the development of low risk products, the legislative arrangements should be re-focused to ensure that such benefits to the community can be achieved."

Similar concerns were expressed in the development of the 2001 Chemicals and Plastics Action Agenda, 2006 Banks Regulation Taskforce Report, 2006-08 Ministerial Taskforce on Chemical and Plastics Regulation Reform considerations, 2008 Productivity Commission report, 2009 LRCC Evaluation Report, and in various representations.

Promised reviews of processes such as annual reporting (the commitment was to a review 12 months after implementation) have not occurred. Options from the 2009 LRCC Evaluation Report have not been progressed.

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9.4 To introduce or not introduce

Of the approximately 4790 "introducer" companies that are subject to NICNAS company registration NICNAS has indicated that only about 2% of these companies introduce new chemicals. PACIA is not aware of benchmarking data that would assist in making comparisons between countries

Decisions on whether or not to introduce new chemicals are made based on a number of factors, including:
  • market size and value
  • fees and charges for the application
  • submission preparation costs and submission management through the process
  • data availability
  • generation of data specifically for Australia (even though the chemical may be freely available overseas)
  • time to market
  • post-market requirements such as annual reporting
  • post-market restrictions
  • lost opportunity costs – diversion of resources to servicing the NICNAS processes and requirements
  • differences between Australian and overseas regulatory approaches
At the international level, decisions on introduction of new chemicals in Australia (0.6% of global) sales) are sometimes made very easily. As identified in the 2009 LRCC Evaluation Report, some companies practice general avoidance of new chemical introductions based on concerns of the regulatory burdens. However commonly the introduction of new chemicals does not pass even modest expectations for return on investment – this also builds a barrier where Australia is just not considered for new introductions.

From an economic stand there will always be a market for chemicals in Australia (demand and supply) but from a government policy perspective there needs to be a clear realisation that this market may be a high cost one, lack innovation which also potentially reduces competition, reduced range/quality of products available compared with other markets, and lack access to world best technologies and products.

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9.5 Three actions to make a substantive difference

9.5.1 Accept the outcomes of assessments from recognised overseas regulators

The industrial chemical regulatory systems of Europe, United States and Canada service combined populations of about 850 million people

There is need for Australia to move away from arguing whether or not there are differences in methodologies or approaches and accept the outcomes of assessments from the major recognised regulatory systems

9.5.2 Fix the system for consideration of chemicals of low regulatory concern

There are a range of know issues with the efficiency and effectiveness of the chemicals of low regulatory system. At present it is not serving to meet the the original policy intention, including to optimally balance risk-resource allocation

9.5.3 Implement the Productivity Commission Recommendations

The Productivity Commission considered the chemicals and plastics regulatory framework. The process was extensive, inclusive and consultative.

It is not productive to continue delaying or second-guessing the detailed consideration that was given to the recommendations. The recommendations need to be implemented as a suite of reforms

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10. Super Regulator

Over the past 20 years the concept of a "Super Regulator" has been canvassed on about a 7 year cycle. Whilst not stated as part of the considerations of the Better Regulation Ministerial Partnership process PACIA understands that the concept is again being aired.

At this time PACIA believes that it would be unfortunate for focus to be taken away from the immediate objective of securing an efficient and effective National Industrial Chemicals Notification and Assessment Scheme.

To be clear a proposal for a "Super Regulator" does not have PACIA’s support.

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Attachment 1

Recommendation 4.1COAG, 29 November 2008 welcomed the Commonwealth response including:
    "To assist in directing and clearly communicating the objective that assessment effort and priorities should be risk-based, the Commonwealth will explore the potential for embedding some guiding principles in legislation and guidance. Resource and legislative implications require further consideration in the development of an implementation plan and through the Commonwealth’s budget processes."
The Australian Government should impose a statutory obligation on NICNAS to ensure that:
  • the costs of chemical assessments are commensurate with the risks posed by the chemicals concerned
  • its assessment priorities are directed to the most efficient management of the aggregate risk of all industrial chemicals.
Recommendation 4.2COAG, 29 November 2008 welcomed the Commonwealth response including:
    "The impact on governance arrangements, resources and legislative implications require analysis as part of the development of an implementation plan and the Commonwealth's budget processes."
The Australian Government should establish a technical advisory committee within NICNAS, as a statutory requirement
Recommendation 4.3COAG, 29 November 2008 welcomed the Commonwealth response including:
    "The Commonwealth Government agrees with the intention that the primary role of the National Industrial Chemicals Notification and Assessment Scheme's (NICNAS) should be as a scientific risk assessment body for industrial chemicals, noting that any change to current arrangements should not introduce regulatory gaps that would weaken health and environmental protection.
    In light of the Productivity Commission’s preferred governance framework, the Commonwealth Government supports further efforts to clarify the role of NICNAS and ensure that the institutional location of standard setting and risk management powers provide a cohesive and integrated industrial chemicals framework across Commonwealth and state and territory regulatory authorities.
    In this regard, reducing the power of NICNAS to annotate the Australian Inventory of Chemical Substances requires further consideration to ensure that the existing levels of human health and environmental protection are maintained and that equivalent powers are established in another national body.
    The Commonwealth Government supports the transfer of responsibility for implementing the Rotterdam Convention from NICNAS to the Department of the Environment, Water, Heritage and the Arts (DEWHA)."
The Australian Government should generally limit the role of NICNAS to the scientific assessment of the hazards and risks of industrial chemicals. The power to annotate the Australian Inventory of Chemical Substances to ban or phase out chemicals, and the responsibilities for administering the Cosmetics Standard 2007, and for implementing the Rotterdam Convention, should be removed from NICNAS.
Recommendation 4.4COAG, 29 November 2008 welcomed the Commonwealth response including:
    "The Commonwealth Government agrees with the recommendation. Requirements for national standard setting bodies to consider and respond to National Industrial Chemicals Notification and Assessment Scheme recommendations should be underpinned by formal arrangements such as Memoranda of Understanding or legislation. Resource and legislative implications require further consideration in the development of an implementation plan and through the Commonwealth’s budget processes."
All relevant national standard setting bodies should be required to respond to NICNAS recommendations within defined time limits. NICNAS should maintain a public schedule of all responses.
Recommendation 4.5COAG, 29 November 2008 welcomed the Commonwealth response including:
    "The Commonwealth Government supports the establishment of statutory timeframes for screening of applications. Resource and legislative implications require further consideration in the development of an implementation plan and through the Commonwealth’s budget processes."
The Australian Government should introduce a statutory timeframe for the technical screening of applications by NICNAS.
Recommendation 4.6COAG, 29 November 2008 noted the Commonwealth response:
    "The Productivity Commission's recommendation envisages a resource intensive, Government-funded approach to assessment of existing chemicals.
    The extent and speed of implementation of this recommendation would be dependent on available funding. The recommendation for budget funding of this activity is not consistent with current cost-recovery policy as implemented in the National Industrial Chemicals Notification and Assessment Scheme.
    Resource implications require consideration in the development of an implementation plan."
NICNAS should implement a program to greatly accelerate the assessment of existing chemicals that:
  • screens all existing chemicals to develop a list of high-priority chemicals for assessment
  • makes greater use of simulation techniques based on the hazards of chemical analogues
  • reviews the scope for recognising the existing chemical assessment schemes of a range of other countries as ‘approved foreign schemes’. Priorities should be the schemes operated by Canada, the European Union and the United States.
The Australian Government should meet the cost of screening all existing chemicals from budget funding. NICNAS should continue to recover the costs of subsequent assessment of chemicals of concern.
Recommendation 5.4COAG, 29 November 2008 welcomed the Commonwealth response including:
    "The Commonwealth supports the recommendation. However, the establishment of a systematic research program to identify and deal with risks of chemicals in consumer articles has resource and legislative implications for both National Industrial Chemicals Notification and Assessment Scheme (NICNAS) and the Australian Competition and Consumer Commission (ACCC) that require further consideration through the Commonwealth's budget processes."
    The ACCC and NICNAS should negotiate formal arrangements for cooperation on issues regarding chemicals in consumer articles. These arrangements should include the establishment of a more systematic research program to identify and deal with the risks of chemicals in consumer articles.
Recommendation 5.5COAG, 29 November 2008 welcomed the Commonwealth response including:
"The Commonwealth supports the intent to separate the assessment and enforcement functions associated with the Cosmetics Standard. Resource and legislative implications require consideration in the development of an implementation plan and through the Commonwealth's budget processes. Consistent with the principles of the proposed new governance framework, the Commonwealth will explore a variation to the Productivity Commission’s recommendation that provides for separation between assessment, standard setting and enforcement."
The Australian Government should transfer responsibility for the administration and enforcement of the Cosmetics Standard 2007 (Cwlth) from NICNAS to the ACCC.