As Western Australian taxpayers forked out $1.2 billion to build a new hospital for their children in the Perth suburb of Nedlands to replace the Princes Margaret Hospital, they were expecting a new facility with 298 beds and specialist paediatric care for children and adolescents.

They were not expecting roof panels to arrive at the site which contained asbestos. This is especially the case since a complete ban on the importation of all products which contain the deadly material has been in full effect since 2003.

Nevertheless, ‘white asbestos’ or chrysotile was found on the site in July 2016 after a worker cut into a sealed roof panel supplied by fabricated materials and components supplier Yuanda. The incident sparked health fears for around two dozen workers who were said at the time to have been potentially exposed.

This was not a one-off incident. That same month, asbestos also turned up in gaskets supplied (also by Yuanda) on the 1 William Street project in Brisbane. In recent years, the material has been discovered in Chinese cement sheeting in portable structures hired out by modular hire company Australian Portable Camps in South Australia, in flooring installed in prefabricated switch rooms in South Australia and in heat exchanger tubes imported from China which are used in the acid plant section of a Nyrstar lead smelter located in South Australia’s Port Pirie.

Outside of buildings, the material has been discovered in children’s crayons, brake pads and component parts of a vessel and acetylene cylinders. At a Senate Budget Estimates Hearing on October 23, the Department of Immigration and Border Protection advised that out of 8,500 shipments which it had checked over the past 12 months, 63 were found to contain asbestos.

Nor is China the only source. Indeed, the Department has detected shipments containing asbestos from Germany, Indonesia, Italy, Japan, New Zealand, Singapore, South Africa, Taiwan, The Netherlands, United Kingdom, the US and Vietnam (albeit with this list representing the country of shipment, not necessarily the country of manufacture).

Obviously, this is exposing Australians to unacceptable health risk. It is also exposing several parties within the construction chain to legal liability.

Why is this happening? As outlined in an interim report on asbestos published on November 23, evidence presented before the Senate Economics Reference Committee into Non-Conforming Building Products has exposed several reasons.

First, the rampant manufacturing of materials containing asbestos on the world stage makes dealing with this problem hard. In 2013, for example, almost a million metric tons of asbestos was exported from China, Russia, Kazakhstan, Brazil and India. As asbestos containing materials are increasingly being banned in other parts of the world, these manufacturers have flooded markets in Asia (where it is banned only in Australia and seven other countries) with the stuff. Add in the growing number of cheap goods coming in through online purchasing over platforms such as China’s Alibaba and it is clear that global market forces are working against us in this area.

That said, there are also challenges on the domestic front.

Start with the regulatory system, where responsibility in respect of asbestos cuts across multiple agencies including the Department of Immigration and Border Protection, the Department of Employment, Comcare, Safe Work Australia, the Australian Competition and Consumer Commission, the Asbestos Safety and Eradication Agency and a Heads of Workplace Safety Authorities Imported Materials with Asbestos Working Group. Whilst asbestos as a policy area is naturally complex, this maze of different bodies involved has created confusion across industry about who to approach in relation to asbestos related matters.

In addition, there are sentiments that this breadth of agencies involved is creating silos, overlapping responsibilities and no one central authority which ‘owns’ the problem. Participants even complain of receiving conflicting information from different agencies.

Beyond that, courtesy of a presumption that asbestos simply would not turn up in building products following its banning in 2003, a number of especially younger workers in the construction industry are less aware about the dangers of working with materials containing asbestos, how to identify the material and how to protect themselves. There is also a lack of awareness in some parts of the design community which specifies products to be used.

Finally, enforcement and penalties are lacking. Only three cases of illegal asbestos importation have been prosecuted yielding penalties including fines and costs worth a total of $168,500 – not a great deterrent to those who do the wrong thing.

In response, the Committee wants a mandatory requirement that those who import goods which are deemed to have a high risk of asbestos to first have these tested by a NATA accredited authority. It also wants consideration of requirements for those importing high-risk products to have a due diligence system in place for the prevention of asbestos material importation.

Other recommendations include compulsory recalls where asbestos is found in consumer products, consideration of a specialist unit within the Australian Border Force to manage asbestos importation, requiring mandatory training for a wide range of occupations across the construction industry, and a call for the government beef up prosecution and enforcement action against illegal asbestos importation and consider tougher penalties.

So what’s going wrong on the ground? Where do we go from here?

Andrew Mantle, managing director at asbestos auditing, reporting and management firm AARMS, says a number of issues are at play.

First, rules about what is considered to be ‘asbestos free’ vary across different countries. In China, for instance, Mantle says a material is legally considered to be asbestos free if it contains six per cent asbestos or less. Thus whilst products in Australia cannot contain any asbestos at all, a supplier or manufacturer from China might believe they were meeting ‘asbestos-free’ requirements with products which contain asbestos concentrations of three, four or even five per cent.

Second, Mantle says there is a lack of understanding of the Australian standard for asbestos testing (AS 4964) amongst overseas testing laboratories. This means that even where products arrive in Australia having been genuinely tested and certified by a third-party laboratory, that testing authority is unlikely to have adequately understood the standard under which the product was to be tested.

The extent of the problem in this area was borne out by the testimony National Association of Testing Authorities (NATA) government relations manager John Mitchell in a hearing conducted as part of the Inquiry on October 3. In that testimony, Mitchell described how the Australian national testing body undertook research though which assessment teams were sent to China to talk to testing laboratories over a two-year period between 2013 and 2015.

Even though there are more than 5,000 testing authorities in China, Mitchell testified that NATA was aware of only one which was accredited to test for compliance with AS4964. Not one Chinese testing laboratory, as far as NATA is aware, is accredited to test for the roughly equivalent international standard in ISO 22262-1.

Given this, Mantle says, expecting importers and customs agents to undertake reliable testing in the country of origin was not a realistic proposition.

At any rate, Mantle says, written guidance provided to importers and customs agents about their obligations by Australian Border Force (ABF) is complex and difficult to interpret.

As a result, he says much reliance for evidence of compliance was placed upon documentation provided by the manufacturer – a problematic situation considering the prevalence of fraudulent compliance certificates across many Asian countries.

“What we are relying on is a company in Asia to provide all this evidentiary proof (of compliance),” Mantle said.

“That is like asking the fox to guard the henhouse. In the vast majority of cases, what the ABF is getting from a supplier is a simple self-certification saying, ‘in the manufacturing of this product, no asbestos was used.’”

Finally, there is the volume of containers coming into Australian ports. All up, Mantle says, 4.749 million containers are expected to come into Australia’s ports over the 2017/18 financial year, or 91,327 per month. Of these, he says Australian Border Force with its current resources cannot reasonably be expected to check even one per cent. Asking them to review documentation relating to 91,327 containers per month and route out anything that has asbestos coming in is not realistic. Nor is expecting ABS and customs officials to understand what constituted the correct documentation or how to detect fraudulent certificates.

A final issue, Mantle says, is the aforementioned lack of penalties for those who bring in products and asbestos and a lack of people being punished and held accountable.

Going forward, Mantle would like an ABF list of products which are high risk from an asbestos perspective to be updated every six months. More important, any product which is listed should be required to be tested by a NATA accredited laboratory prior to importation into Australia (as per the aforementioned recommendation of the Committee). Where this is not done, he says fines of at least $3,000 and $1,000 should be applied to the importer and the customs agent or freight broker respectively.

This, Mantle says, creates a straightforward system which addresses the problem before goods reach our shores. Applying penalties at the customs broker/freight forwarder level is critical, Mantle says, as the low margin nature of that industry and the speed at which word spreads means fines levied on this part of the industry will cause people to take notice.

Katherine Morris, a work, health and safety lawyer and partner at commercial law firm Norton Rose Fulbright, says problems stem from several areas.

First, she observes that the phenomenon of asbestos turning up in new products has in fact taken many by surprise. Following the banning of asbestos containing materials, Morris describes an underlying assumption which she said took hold that because asbestos containing materials were not allowed, they would not be supplied. As a result, she said, insufficient attention has been afforded to testing and other requirements to ensure that the ban in fact had effect. The upshot, she says, is that a number of parties have unwittingly supplied and used asbestos containing materials.

In addition, Morris agrees with Mantle’s observations about problems arising out of the difference in definitions of ‘asbestos free’ in different countries. Substitution risk was a major issue, she said. Also problematic was ‘first-party certification’ involving a simple statement from the manufacturer that products are asbestos free without any independent third-party verification.

In terms of legal exposure, Morris says at least three key areas of law are relevant.

First, all states and territories prohibit the supply of asbestos containing materials under general health and safety laws. These impose a direct obligation on a number of parties not to supply materials which contain asbestos unless being used for specific permissible purposes (such as research). This could include importers, retailers and contractors/subcontractors, developers, commercial building landlords and other parties.

According to Morris, liability under these Acts for breach of general duties (as opposed to breach of the direct prohibition on the supply or use of asbestos containing materials) depends upon a range of issues, including whether the materials containing asbestos were imported and used knowingly and what practical systems the party in question has in place to mitigate any risk of importing, supplying or otherwise using asbestos containing material.

In this regard, she says, the ground has shifted. Five years ago, there was less information about the risk of asbestos importation in the public domain and it may have been adequate for builders and contractors to have ‘usual’ processes in place. These would have included verification that the product complied with Australian laws, use of competent and reputable suppliers and use of a robust system to assess supplier quality.

Now, however, the problem has been highlighted through a number of the cases above and expectations about reasonable steps have evolved. Accordingly, builders, contractors and building owners should have contractual requirements in place to ensure that any products which are supplied or used are first tested to Australian standards. Parties who do not have these arrangements in place, Morris says, may well find themselves exposed.

Whilst other parties are exposed, Morris points out that arguably the party with the most significant exposure are commercial building owners. They are left ‘carrying the can’ in respect of responsibility for any ongoing risk over the life of the building during occupation or renovation, she said.

Beyond general health and safety, there is also building legislation and regulation throughout various states and territories which requires that buildings are constructed to meet the requirements of the National Construction Code and relevant standards (as products containing asbestos would not). Obviously, those supplying or selecting products have a responsibility under these Acts to observe the evidence of suitability requirements spelled out under the NCC and the relevant regulations.

Arguably more potently, parties in Queensland now face additional liability under the Building and Construction Legislation (Non-Conforming Building Products ‒ Chain of Responsibility and Other Matters) Amendment Act 2017.

Under this legislation, a ‘chain of responsibility’ now exists involving each participant within the building industry chain (importers, manufacturers, suppliers, designers, contractors, tradespeople, installers and so on) in respect of non-complying products and each participant is responsible for their effective contribution toward the final product.

The legislation involves two types of duties.

First, there is a broad duty imposed on all participants to take reasonable steps to ensure that they do not import, specify or use an unsafe product. Under the legislation, an unsafe product is a product which either does not comply with Australian law (the NCC) or poses a risk to safety which has not been mitigated as far as reasonably practicable.

Second, additional duties are bestowed upon importers, manufacturers, designers and installers in respect of information they supply to those who operate in later stages of the construction or operation phases of the building chain.

New offences involve maximum penalties of 1,000 penalty units (currently $126,150 for an individual and $630,750 for a corporation at the current penalty unit rate of $126.15) for breaching their duties above or for misrepresentations about the product’s intended use.

Unlike health and safety laws, this legislation applies to any building product which does not comply with NCC requirements. Along with asbestos containing materials, this could include cladding which contributes to the rapid spread of fire, exploding glass or other types of building product.

In terms of legal risk management, Morris says strategies should vary according to each party’s position within the supply chain.

An importer, for example, should require evidence of testing to the AS4964 standards by a NATA accredited certifier. Whilst she acknowledges issues associated with the lack of overseas laboratories which are accredited to test for AS4964, Morris says this does not mean that it can’t be done. Samples could be taken and tested in Australian NATA accredited labs, she says.

Importers also need to have systems in place which give them a robust and transparent understanding of the manufacturing process and the supply chain and should audit the supply chain for risk of product substitution.

At the other end of the spectrum, the commercial building owner should ensure that they have contractual clauses in place throughout the development and construction contracts to ensure that only materials which are tested to AS4964 standards are used. During their principal contractor selection processes, they should ensure that those selected are aware of the issue and have robust supply chain management strategies in place to deal with this issue.

Contractors and subcontractors, as well, should have contractual arrangements in place with their suppliers which require that any products supplied be tested to Australian standards.

Australia suffers from significant problems in respect of asbestos importation.

To address this, action is needed in several areas.