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© Commonwealth of Australia 2014ISBN 978-1-925216-00-4August 2014

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This report was prepared as part of the 1999 review of the Motor Vehicle Standards Act 1989 (the Act). It is being released as part of the consultation process for the 2014 review of the Act.

i

MOTOR VEHICLE STANDARDS ACT REVIEW

The report was prepared in 1999 by the Independent Reference Committee for the (then) Department of Transport and Regional Services; the contact details provided in the report are no longer current. The document excludes matters considered in-confidence by the Department.

REVIEW

of the

MOTOR VEHICLE STANDARDS ACT 1989


REVIEW TASK FORCE

August 1999

ACKNOWLEDGEMENTS

This report is the culmination of work carried out with the cooperation and assistance of government, industry and business. The Task Force would like to extend its thanks to the members of the Independent Reference Committee:

Dr Roger Mauldon (Chairman);

Mr Don Dunoon; and

Mr Lauchlan McIntosh

for their participation and guidance in driving the process forward.

The following organisations are gratefully acknowledged for providing significant staff and resources to the review:

Australian Customs Service;

Department of Industry Science and Resources;

Department of Transport and Regional Services;

Environment Australia; and

National Road Transport Commission

Particular mention is also made of the many stakeholders who submitted comments both initially to the review and subsequently on the draft report and were involved in the extensive consultation.

To all of you, our sincere thanks.


CONTACT DETAILS

Task Force Chairman

Department of Transport and Regional Services

15 Mort St

BRADDON ACT 2601

Tel: 02 6274 7504

Fax: 02 6274 7714

Email:mvsarevw @dotrs.gov.au

Since the completion of the draft report, the Department of Transport and Regional Services has undergone a restructure which has culminated in the establishment of the new Australian Transport Safety Bureau which aims to further enhance the focus on safety. The safety investigations and recall elements of the Federal Office of Road Safety come under the umbrella of this bureau and with it, the name.

The certification, audit and standards development activities will be maintained under the branch title of Vehicle Safety Standards. However, in order to ensure continuity for stakeholders, reference in the report to the Federal Office of Road Safety has been maintained.

mailto:[email protected]

CONTENTS

PREAMBLE............................................................................................................................IX

ESTABLISHMENT AND CONDUCT OF THE REVIEW.............................................................................................. IX

TERMS OF REFERENCE................................................................................................................................XI

ABBREVIATIONS......................................................................................................................................XVII

GLOSSARY XIX

OVERVIEW AND RECOMMENDATIONS................................................................................XXI

THE REFERENCE.......................................................................................................................................XXI

THE MOTOR VEHICLES STANDARDS ACT 1989..............................................................................................XXI

OBJECTIVES OF THE MVSA.......................................................................................................................XXII

RESTRICTIONS ON COMPETITION................................................................................................................XXIII

EFFECTS AND BENEFITS AND COSTS OF THE MVSA.......................................................................................XXIV

ALTERNATIVE ARRANGEMENTS..................................................................................................................XXVI

REPEAL THE MVSA................................................................................................................................XXVI

SELF CERTIFICATION................................................................................................................................XXVI

REGULATORY/ADMINISTRATIVE ARRANGEMENTS.........................................................................................XXVII

RECOMMENDATIONS...............................................................................................................................XXIX

Part A – Report on Key Issues.....................................................xxxiii

1 INTRODUCTION................................................................................................................1

1.1 ABOUT THE REVIEW........................................................................................................................1

1.1.1 Structure............................................................................................................1

1.1.2 The Consultation Process...................................................................................1

1.1.3 Timing................................................................................................................3

1.1.4 Reporting...........................................................................................................3

1.2 BACKGROUND TO THE MOTOR VEHICLE STANDARDS ACT 1989..............................................................3

1.2.1 Arrangements Prior to 1989..............................................................................3

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1.2.2 Reasons for the Motor Vehicle Standards Act 1989...........................................3

1.2.3 Object of the Motor Vehicle Standards Act 1989...............................................5

1.2.4 Amendments to the Act in 1995 and 1999........................................................5

2 CURRENT REGULATORY AND ADMINISTRATIVE ARRANGEMENTS......................................7

2.1 THE REGULATORY FRAMEWORK.........................................................................................................7

2.1.1 The Motor Vehicle Standards Act 1989..............................................................7

2.1.2 Regulations........................................................................................................7

2.1.3 Determinations..................................................................................................7

2.1.4 Administrative Circulars.....................................................................................7

2.2 RELATED COMMONWEALTH LEGISLATION............................................................................................8

2.3 STATE AND TERRITORY REGULATION...................................................................................................8

2.4 INTERNATIONAL FRAMEWORK AND INTERNATIONAL HARMONISATION.......................................................9

2.5 TRANS-TASMAN MUTUAL RECOGNITION ARRANGEMENT AND THE REVIEW OF THE ADRS..........................11

2.6 ADMINISTRATIVE ARRANGEMENTS....................................................................................................12

2.6.1 Federal Office of Road Safety..........................................................................12

2.6.2 ADR Development Process...............................................................................13

2.6.3 The Australian Type Approval System..............................................................15

2.6.4 Single Uniform Type Inspection.......................................................................16

2.6.5 Provisional Approval........................................................................................17

2.6.6 Nonstandard Approval....................................................................................17

2.6.7 Full Volume Scheme.........................................................................................18

2.6.8 Low Volume Scheme........................................................................................19

2.6.9 FORS Audits.....................................................................................................19

2.6.10 Conformity of Production................................................................................20

2.6.11 Test Facility Inspection.....................................................................................21

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CONTENTS

2.6.12 Investigating Safety Defects and Monitoring Recalls.......................................21

2.6.13 Vehicle Import Arrangements..........................................................................23

2.6.14 Road Vehicle Certification System...................................................................23

2.7 KEY ISSUES...................................................................................................................................24

3 LEGISLATIVE ARRANGEMENTS.........................................................................................27

3.1 OBJECTIVES OF THE LEGISLATION......................................................................................................27

3.2 EFFECTIVENESS OF THE LEGISLATION.................................................................................................30

3.2.1 Access to Road Safety Information..................................................................32

3.2.2 Findings...........................................................................................................33

3.3 COSTS AND BENEFITS TO THE COMMUNITY AND INDUSTRY...................................................................34

3.3.1 Benefits and Costs...........................................................................................35

3.3.2 Alternative.......................................................................................................39

3.3.3 Findings...........................................................................................................41

3.4 RESTRICTIONS ON COMPETITION......................................................................................................42

3.4.1 Prohibition of nonstandard vehicles................................................................44

3.4.2 ADR Concessions..............................................................................................45

3.4.3 Other Commercial Restrictions on Full Volume Suppliers................................46

3.5 IMPACTS OF THE LEGISLATION..........................................................................................................47

3.5.1 Safety..............................................................................................................47

3.5.2 The Environment.............................................................................................52

3.5.3 Findings...........................................................................................................56

3.5.4 Anti -Theft........................................................................................................57

3.5.5 Findings...........................................................................................................59

3.5.6 Consumer Information.....................................................................................59

3.5.7 Information Needs...........................................................................................60

3.5.8 Findings...........................................................................................................62

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3.5.9 Options............................................................................................................62

3.5.10 Interaction of the Legislation...........................................................................63

3.5.11 Trade Practices Act 1974 (TPA)........................................................................65

3.5.12 Customs Act 1901............................................................................................66

3.5.13 Legislation Relating to the Development of ADRs............................................66

3.5.14 Vehicle categories............................................................................................69

4 ADMINISTRATIVE ARRANGEMENTS.................................................................................71

4.1 CURRENT ADMINISTRATIVE ARRANGEMENTS......................................................................................71

4.2 STAFFING AND WORKLOAD ISSUES...................................................................................................74

4.3 INFORMATION MANAGEMENT.........................................................................................................75

4.4 TEST FACILITY INSPECTIONS AND CONFORMITY OF PRODUCTION AUDITS.................................................76

4.5 SYSTEMS.....................................................................................................................................77

4.6 IMPROVEMENT TO PERFORMANCE....................................................................................................78

4.7 FUNDING.....................................................................................................................................79

4.8 TYPE APPROVAL............................................................................................................................79

4.9 SELF CERTIFICATION.......................................................................................................................81

5 LOW VOLUME SCHEME...................................................................................................83

5.1 ROLE OF THE LOW VOLUME SCHEME................................................................................................84

5.2 CONCESSIONS...............................................................................................................................85

5.2.1 Alternative Certification Procedures................................................................85

5.2.2 Applicability of the ADRs.................................................................................86

5.2.3 Special Duty.....................................................................................................87

5.3 BASIS OF THE SCHEME...................................................................................................................87

5.4 ADMINISTRATIVE ARRANGEMENTS....................................................................................................87

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CONTENTS

5.4.1 Eligibility Criteria.............................................................................................88

5.4.2 Limits on Vehicle Numbers...............................................................................88

5.5 CURRENT STATE OF THE LOW VOLUME SCHEME.................................................................................89

5.6 INDUSTRY POLICY..........................................................................................................................93

5.7 COMPETITION POLICY....................................................................................................................95

5.8 FINDINGS.....................................................................................................................................96

5.8.1 Administrative Arrangements..........................................................................96

5.8.2 Limits on Vehicle Numbers...............................................................................97

5.8.3 Eligibility Criteria.............................................................................................97

5.9 PARTICIPATION IN THE SCHEME........................................................................................................98

5.10 EFFECTIVENESS AND EFFICIENCY.......................................................................................................99

5.10.1 Safety and Emissions.......................................................................................99

5.10.2 Consumer Protection.....................................................................................100

5.10.3 Compliance Costs...........................................................................................101

5.10.4 Net Community Benefit.................................................................................103

5.11 ADMINISTRATIVE ARRANGEMENTS..................................................................................................103

5.11.1 Type Approval................................................................................................103

5.11.2 Administrative Procedures.............................................................................103

5.11.3 Acceptance of Overseas Standards................................................................107

5.12 LEGISLATIVE ARRANGEMENTS OVERSEAS.........................................................................................108

5.13 OPTIONS...................................................................................................................................110

5.13.1 The Form of the Scheme (New Vehicles)........................................................111

5.13.2 Eligibility Criteria (Used Vehicles)..................................................................111

5.13.3 The Approval Process.....................................................................................114

5.13.4 Limit on Vehicle Numbers..............................................................................118

5.13.5 Transition Arrangements...............................................................................119

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6 VEHICLE IMPORT ARRANGEMENTS...............................................................................121

6.1 FIFTEEN OR MORE YEARS OLD VEHICLES.........................................................................................122

6.2 VEHICLES FOR DISMANTLING.........................................................................................................124

6.3 PERSONALLY IMPORTED VEHICLES..................................................................................................129

6.4 OTHER ISSUES SURROUNDING VEHICLE IMPORT ARRANGEMENTS.........................................................131

6.4.1 Enforcement of MVSA Provisions...................................................................131

6.4.2 Other Concession Arrangements...................................................................132

6.4.3 Payment of the $12,000 Special Duty............................................................133

7 INTERNATIONAL ISSUES................................................................................................135

7.1.1 Stakeholder Views.........................................................................................137

7.2 COSTS AND BENEFITS OF INTERNATIONAL HARMONISATION................................................................140

7.2.1 Options..........................................................................................................140

7.2.2 Findings.........................................................................................................141

8 IN-SERVICE MATTERS....................................................................................................143

8.1 THE NATIONAL ROAD TRANSPORT COMMISSION...............................................................................144

8.1.1 FORS relationship with NRTC and NEPC.........................................................146

8.2 MANAGEMENT OF IN-SERVICE VEHICLES.........................................................................................148

8.2.1 In-Service Vehicles Standards Enforcement...................................................148

8.2.2 Legislative Arrangements Overseas...............................................................148

8.2.3 Options..........................................................................................................149

9 INDUSTRY CHARGING / REGULATORY COSTS.................................................................151

9.1 INDUSTRY CHARGING...................................................................................................................152

9.2 CURRENT ARRANGEMENTS............................................................................................................152

9.3 IMPACT OF CHARGES...................................................................................................................152

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CONTENTS

9.4 CHARGING RATIONALE.................................................................................................................153

9.5 LEVEL OF INDUSTRY CHARGING......................................................................................................154

9.6 RELATIVE CHARGES BETWEEN AND WITHIN SECTORS..........................................................................155

9.7 PRINCIPLES OF COST RECOVERY.....................................................................................................157

9.8 BENEFICIARIES............................................................................................................................158

9.9 POTENTIAL ARRANGEMENTS FOR COST RECOVERY............................................................................159

9.9.1 Options for future arrangements for cost recovery.......................................159

9.9.2 Options for administrative arrangements.....................................................160

Part B – Terms of Reference –Findings.........................................163

TERMS OF REFERENCE – FINDINGS............................................................................................................165

Part C – Stakeholders’ Comments on the Draft Report.................195

INTRODUCTION......................................................................................................................................197

INDEPENDENCE OF THE TASK FORCE...........................................................................................................198

LEGISLATIVE ARRANGEMENTS...................................................................................................................198

Anti-Theft ......................................................................................................................199

Vehicle Categories.............................................................................................................200

ADMINISTRATIVE ARRANGEMENTS.............................................................................................................200

Type Approval ..................................................................................................................200

LOW VOLUME SCHEME ..........................................................................................................................201

Special Duty......................................................................................................................207

Current State of the Low Volume Scheme ........................................................................208

Industry Policy...................................................................................................................210

Eligibility Criteria (Used Vehicles) .....................................................................................210

Limit on Vehicle Numbers .................................................................................................211

VEHICLE IMPORT ARRANGEMENTS ............................................................................................................212

INTERNATIONAL ISSUES ...........................................................................................................................214

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IN-SERVICE MATTERS .............................................................................................................................214

INDUSTRY CHARGING/REGULATORY COSTS .................................................................................................215

APPENDICES......................................................................................................................217

A - SUBMISSIONS

B - MINISTER’S PRESS RELEASE

C - LIST OF ADRS

D - MAJOR VEHICLE CATEGORIES

E - TYPE APPROVAL PROCESS

F - COMPARISON OF FULL VOLUME AND LOW VOLUME ARRANGEMENTS

G - SOME DEFICIENCIES IN THE ADMINISTRATION OF THE ACT

H - LEVEL OF EVIDENCE OF COMPLIANCE

I - CURRENT PROCEDURES FOR SUBMITTING AND PROCESSING CPA UNDER THE LOW VOLUME SCHEME

J - LOW VOLUME SCHEME – ELIGIBILITY CRITERIA

K - NUMBER OF USED VEHICLES COMPARED TO NEW MOTOR VEHICLE REGISTRATIONS

L - COMPLIANCE COSTS

M - LOW VOLUME VEHICLES – LEGISLATIVE ARRANGEMENTS OVERSEAS

N - REGISTERED WORKSHOP SCHEME

O - CURRENT REGULATORY CHARGES

P - MINISTER’S MAY 1999 MEDIA RELEASE

Q - LIST OF STAKEHOLDERS WHO PROVIDED COMMENT ON THE DRAFT REPORT

viii

PREAMBLE

PREAMBLE

Establishment and Conduct of the ReviewThe Motor Vehicle Standards Act 1989 was included in the Commonwealth Legislative Review Schedule announced by the Treasurer in June 1996, for commencement in 1997–98. The Terms of Reference for the review, as approved by The Hon John Sharp, then Minister for Transport and Regional Development, are at page (ix).

The review was conducted by a Task Force, chaired by the Federal Office of Road Safety (FORS) which included representation from the following stakeholder agencies: the Australian Customs Service, Environment Australia, the Department of Industry, Science and Resources, and the National Road Transport Commission (NRTC).

Under the Terms of Reference, the Task Force’s role was to “…review and report on the appropriateness of the legislation and its effectiveness and efficiency in improving vehicle safety, emissions and anti-theft standards and recommend to Government any changes that should occur”. In addition, the Task Force was to take account, as far as possible, of matters arising from the concurrent review of Australian Design Rules conducted under the auspices of the Trans Tasman Mutual Recognition Arrangement.

The Task Force advertised nationally in December 1997 for input to the review and received 55 submissions from stakeholders. Additionally, the Task Force held meetings around Australia with stakeholders (including those who did not lodge a submission) to ensure that the widest possible spread of stakeholder views were garnered. The work of the Task Force was overseen by an Independent Reference Committee (IRC) comprising a former Industry Commissioner (Roger Mauldon), a former Chief Engineer of Nissan Australia Ltd (Don Dunoon) and the Executive Director of the Australian Automobile Association (Lauchlan McIntosh).

The IRC’s role was to assist the Review process by ensuring that the Task Force’s work maintained an independent focus, was strategic and broadly reflected the views of stakeholders. The IRC also considered and commented on drafts of the report prepared during the review, including the final draft as submitted to the Minister for Transport and Regional Services prior to its wider circulation.

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The draft report and its associated recommendations was released by the Minister for Transport and Regional Services, Mr John Anderson, on 12 May 1999 for consideration and comment by stakeholders before the report was finalised. (see Appendix P) The purpose of releasing the report was to provide an opportunity for all interested parties to put their views to the Task Force prior to the Task Force finalising its report for consideration by the Government. The comment period closed on 23 June 1999 and the Task Force has considered comments on the draft report from more than 100 stakeholders.

The Review was undertaken in accordance with the Council of Australian Governments (COAG) Principles and Guidelines for National Standard Setting and Regulatory Action, and the requirements of the Competition Principles Agreement signed by the Commonwealth and all State and Territory Governments in April 1995.

x

TERMS OF REFERENCE

Terms of Reference

The Motor Vehicle Standards Act 1989, with its associated regulations, determinations and administrative arrangements (the Legislation), except for the technical aspects of the Australian Design Rules which are subject to a separate review, is referred to the Task Force of inter-governmental Officials (the Task Force).

The Task Force, under the guidance of an Independent Reference Committee, is to review and report on the appropriateness of the legislation and its effectiveness and efficiency in improving vehicle safety, emissions and anti-theft standards and recommend to Government any changes that should occur.

The Task Force is to ensure, to the extent possible, that any matters arising from the Review of the Australian Design Rules are taken into account in the review of the legislation.

A. The Task Force is to assess the appropriateness, effectiveness and efficiency of the Legislation and, in particular, is to assess and report on:

the objectives of the Legislation and the extent to which those objectives remain appropriate, including the nature and magnitude of the problem which the Legislation seeks to address;

the costs and benefits to the community and industry of the Legislation in achieving its objectives;

any restrictions on competition that the Legislation imposes, including the costs and benefits of those restrictions on the economy generally;

the impact the Legislation has on safety, the environment, equity, health, regional development, consumer interests or business competitiveness;

the degree to which the Legislation, operating in conjunction with the National Road Transport Commission Act 1991 and other Commonwealth, State and Territory legislation, has been effective in preventing non-compliant or unsafe road vehicles entering the market;

the effectiveness and efficiency of the Low Volume Manufacture Scheme, in terms of ensuring vehicle safety, emissions compliance and reducing compliance costs for imports of enthusiasts’ or specialist vehicles supplied to the Australian market in small numbers;

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the current administrative arrangements, including the effectiveness and efficiency of these arrangements in relation to vehicle standards and client service;

the level of compliance costs for industry and regulatory costs for governments, the impact on small business and ways to reduce the compliance and paperwork burden; and

the current cost recovery arrangements and the extent, if any, of cross subsidy between and within industry sectors and the relevance of charging practices to the services carried out for each sector.

B. The report of the Task Force is to cover the matters referred to in paragraph A and in addition, is to identify, assess and report on:

the costs and benefits to the community and industry of alternative arrangements, including non-regulatory arrangements, for establishing and ensuring compliance with appropriate vehicle standards;

the costs and benefits to the community and industry, including impacts on trade, of harmonising Australian vehicle standards with international vehicle regulation and of maintaining some unique Australian vehicle standards; and

the preferred approach to meeting future vehicle standards requirements.

C. In assessing future options and preferred arrangements, the review is to have regard to the National Competition Principles Agreement and a range of relevant matters, including:

measures to improve the effectiveness of current arrangements, taking account of the proposed Road Vehicle Certification System, alternatives to that scheme and client service charters;

the role of the Low Volume Manufacture Scheme within the overall vehicle certification and compliance scheme;

the intention that arrangements minimise regulatory requirements, having regard to costs and benefits to the community as a whole; and

current and likely future developments in:

- international safety regulation, including approaches in place and under consideration in the United Nations - Economic Commission for Europe, Japan and other Asian markets, Europe, North America and New Zealand;

xii

TERMS OF REFERENCE

- emissions control and environment protection, both overseas and in Australian jurisdictions;

- anti-theft standards and measures being proposed by manufacturers, law enforcement agencies and consumer groups in Australia and overseas; and

- other future requirements.

D. The review is to consider:

changes in Government policies impinging on the industry;

current and emerging industry trends and practices, including standardisation of safety features and components;

the relationship between Commonwealth controls imposed on road vehicles first provided to the market and in-service vehicle standards principally controlled by the States;

the improving levels of vehicle safety, vehicle emissions and anti-theft controls in vehicles manufactured in Australia and overseas;

the findings of Australian and international reviews and expert reports on motor vehicle safety standards, emission controls and anti-theft devices; and

current and potential arrangements for cost recovery.

E. In undertaking the review, the Task Force is to:

advertise nationally for submissions;

consult with key stakeholders, interest groups and affected parties;

list individuals and groups consulted during the review and outline their views; and

publish a report of its findings at the time of the Government’s decision on its recommendations or earlier.

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Independent Reference Committee

Terms of Reference

The Review of the Motor Vehicle Standards Act 1989 is to be undertaken by a Task Force from the Commonwealth Departments with representatives related to vehicle standards headed by the Federal Office of Road Safety.

Independent Reference Committee

The Independent Reference Committee (IRC) is to ensure the work of the Task Force is independent, strategic and effective by reflecting as broadly as possible the views of the stakeholders. The IRC is to oversight the work of, and provide guidance and advice to, the Motor Vehicle Standards Act 1989 Review Task Force (Task Force). It will do this taking into account the need to ensure that:

1. All relevant data sources are accessed.

2. The analysis of issues complies with the Terms of Reference and is thorough, economically rigorous and takes into account all relevant issues.

3. All conclusions are supported by the analysis of material provided to or covered by the Review.

The Roles and Responsibilities of IRC members are to:

1. Familiarise themselves with the Terms of Reference for the review of the Motor Vehicle Standards Act 1989.

2. Read and provide comment on submissions to the review.3. Attend IRC, Task Force and public consultation meetings as required.4. Provide managerial advice and strategic input, either orally or in writing, to guide the

review.5. Read and provide comments to the Task Force on drafting of the review’s report.6. Provide written clearance of the final draft report prior to its dissemination.7. Provide written clearance of the final report (or comments on the report) for

submission to the Minister.

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TERMS OF REFERENCE

Note: Task Force members will be responsible for coordination with, and seeking advice where necessary from, their respective organisations.

xv

ABBREVIATIONS

Abbreviations

AAA Australian Automobile AssociationAAAA Australian Automotive Aftermarket Association LtdAAMI Australian Associated Motor Insurance LtdABS Australian Bureau of StatisticsACCC Australian Competition and Consumer CommissionADR Australian Design RuleAMVCB Australian Motor Vehicle Certification BoardAPEC Asia Pacific Economic Co-operation forumAPEC-TWG Asia Pacific Economic Co-operation Transportation Working GroupAPRAA Auto Parts Recyclers Association of AustraliaATC Australian Transport CouncilCOP Conformity of ProductionCPA Compliance Plate ApprovalCustoms Australian Customs ServiceDISR Department of Industry, Science and ResourcesDoTRS Department of Transport and Regional ServicesEA Environment AustraliaEU European UnionFCAI Federal Chamber of Automotive IndustriesFMVSS US Federal Motor Vehicle Safety StandardFORS Federal Office of Road SafetyGATT General Agreement on Tariffs and TradeMoU Memorandum of UnderstandingMRA Mutual Recognition ArrangementMTAA Motor Trades Association of AustraliaMUARC Monash University Accident Research CentreMVCS Motor Vehicle Certification SystemMVSA Motor Vehicle Standards Act 1989NCAP New Car Assessment ProgramNEPC National Environment Protection CouncilNEPM National Environment Protection MeasuresNHTSA National Highway Traffic Safety AdministrationNRMA National Road Motorist AssociationNRTC National Road Transport CommissionNVD New Vehicle DataNVS New Vehicle SpecificationsNZLTSA New Zealand Land Transport Safety AuthorityORR Office of Regulation ReviewRIS Regulatory Impact StatementRTF Road Transport ForumRVCS Road Vehicle Certification SystemSUTI Single Uniform Type InspectionTACE Transport Agency Chief Executives

xvii


TFI Test Facility InspectionTLG Technical Liaison GroupTPA Trade Practices Act 1974TTMRA Trans-Tasman Mutual Recognition ArrangementUN/ECE United Nations Economic Commission for EuropeUSA United States of AmericaUSEPA United States Environment Protection AuthorityVICAA Vehicle Importers and Converters Association of AustraliaVIN Vehicle Identification NumberWP29 UN/ECE Working Party 29

NOTE: A full list of abbreviations of those who made submissions is contained in Appendix A

xviii

GLOSSARY

Glossary

4WD A four wheel drive vehicle and defined in the ADRs as an off-road passenger vehicle ie. ‘a passenger vehicle having up to 9 seating positions, including that of the driver and being designed with special features for off-road operation’.

Category A class of vehicle such as passenger cars, motorcycles or omnibuses.

Compliance Plate A plate declaring the status of the road vehicle in relation to the national standards and approved to be placed on vehicles of the type or description under procedures and arrangements provided in the MVSA.

Compliance Plate Approval

An authority given by the Minister for Transport, or his delegate, to a vehicle manufacturer to place a Compliance Plate on a vehicle.

Gross Vehicle Mass (GVM)

The maximum laden mass of a motor vehicle as specified by the manufacturer.

Manufacturer The name of the person or company who accepts responsibility for compliance with the ADRs and to whom the Compliance Plate Approval certificate is issued. The manufacturer is normally the builder of a new vehicle or the converter of a used vehicle.

New vehicle1 A locally made vehicle, or an imported vehicle, that has neither being:supplied to the market; norused in transport in Australia.

Nonstandard vehicle A vehicle that does not comply with the national standards (ADRs).

Road vehicle A motor vehicle or trailer that is permitted to be used on public roads.

Standard vehicle A new vehicle that complies with the national standards (ADRs).

Vehicle MAKE This is the general name (marque) by which a range of vehicles made by a manufacturer is popularly known. This may or may not be the name of the manufacturer.

Vehicle MODEL This is the particular designation by which vehicles of the same 1 Imported used vehicles are treated as new vehicles because they fit into the ‘new vehicle” definition.

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4WD A four wheel drive vehicle and defined in the ADRs as an off-road passenger vehicle ie. ‘a passenger vehicle having up to 9 seating positions, including that of the driver and being designed with special features for off-road operation’.

general type or style are identified by the manufacturer.

Vehicle type A vehicle of a particular MAKE and MODEL.

xx

OVERVIEW AND RECOMMENDATIONS


The ReferenceIn December 1997, the Minister for Transport and Regional Development commissioned a review of the Motor Vehicle Standards Act (MVSA) 1989. A Task Force was appointed to assess:

the appropriateness, effectiveness and efficiency of the legislation;

the benefits and costs of alternative arrangements;

the costs and benefits including impacts on trade of rationalising the Australian Vehicle Standards; and

the approach to meeting future vehicle standards requirements.

In carrying out these tasks, the Task Force was required to have regard to National Competition Policy (NCP). It was also required to report on a range of regulatory and administration matters, including the Low Volume Scheme.

The Motor Vehicles Standards Act 1989The MVSA provides the mechanism for setting national safety, emissions and anti-theft standards for road vehicles supplied to the Australian market for the first time. It supplanted a system of road vehicle standards administered by the States and Territories. The introduction of the MVSA meant that compliance could be judged against an agreed nationwide set of standards (ADRs) and by the one agency, the Federal Office of Road Safety (FORS). ADRs are developed through a transparent and collaborative process involving State and Territory Governments and key industry stakeholders. Manufacturers and importers must demonstrate compliance with these ADRs by testing different vehicle types. Under a Type Approval Scheme, once a particular make and model (type) demonstrates compliance, all vehicles of that type are accepted as complying.

For vehicles of a make and model not available in large numbers on the Australian market, a Low Volume Scheme applies. The Low Volume Scheme is a government policy which is implemented by the discretion of the Minister and approvals may be issued under both

xxi


Section 10A and Section 14 of the Act. Reference to the Low Volume Scheme is made in Regulation 5A of the Motor Vehicle Standards Regulations. The scheme operates under significant concessions compared with the regulation applied to full volume manufacturers, including allowing type approval for nonstandard vehicles, but limits are placed on numbers of vehicles any particular manufacturer supplies to the market.

Objectives of the MVSAPart of the process of an NCP review involves clarification and testing of objectives. The objective explicitly referred to in the Act is about achieving uniform standards. This reflects the history of the Act in that it replaced an existing set of arrangements.

Objectives can also be inferred from the content of the Act and in this context three sets of aims emerge. These are:

safety;

emission controls; and

security against theft.

The question arises in a NCP review as to why these aims require the imposition of restrictions on vehicle design instead of, say, relying on manufacturers or importers on the one hand, and consumers on the other to come to some arrangement about vehicle configuration and design. Such arrangements might be expected to vary widely and reflect such things as personal taste, attitudes to risk and income.

The Task Force considers that there are powerful market pressures on manufacturers to improve safety, emission and anti-theft standards. These pressures come directly from consumers, and from other concerned parties such as governments, insurance companies, law enforcement agencies and the like. However, there is a broader community interest extending beyond an individual consumer interest:

The consequences of an unsafe vehicle are not restricted to the driver and passengers of that vehicle, but extend to other users of the road.

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Questions of safety and emissions performance are highly technical and the information available is changing so that for individual consumers, and even some small manufacturers and importers, appropriate standards and appropriate trade offs between standards and price are beyond competent individual assessment.

The indirect effects of vehicle emissions extend well beyond the individual motorist, to other motorists and to the public in general.

Stolen vehicles pose a risk to the motoring public at large and there is a strong community interest which extends beyond individual vehicle security interests.

Thus there are reasonable prima facie grounds for regulations to achieve the objective identified. The Task Force considers that the objective of the Act is in the broader community interest, and that legislation is required to ensure that it is achieved. However, the objective should be broadened in order to reflect its aims. Nevertheless, an NCP test requires that the legislation under review be shown to deliver on these aims, and moreover to do so more effectively than might be done by other less restrictive means.

Having clarified these objectives, the next steps of an NCP review are to identify any restriction on competition and then to assess the effects of existing regulations in meeting the objectives.

Restrictions on CompetitionAn NCP review identifies the nature of restrictions on competition in the legislation or regulations, and directions etc that operate under it. It could be considered that the requirement to meet vehicle standards is itself a restriction on competition. However, such standards apply to all vehicles entering the market, and do not discriminate between local manufacturers or importers. That said, standards are administered under the Act in two modes – via the Full Volume and Low Volume Schemes – and differences in the ways in which suppliers to the market under these two schemes could restrict competition.

Under the Full Volume Scheme, vehicle standards do not restrict entry to or exit from the market, or impose limits in numbers produced or imported. Increasingly ADRs are specified in terms of outcomes which enable suppliers to meet them in the least cost way. The Task Force considers that the operations of the Full Volume Scheme do not impose any restrictions on competition of a nature which favours one class of supplier over another or permits any market power to the disadvantage of consumers.

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The Low Volume Scheme is a more complex matter. From one viewpoint the whole Scheme could be considered anti-competitive since it imposes restrictions on numbers of vehicles any particular manufacturer supplies to the market. It also may favour suppliers who use it in the sense they avail themselves of concessions leading to lower levels of assurance that standards are met than are required for Full Volume suppliers. Furthermore, the fact that Full Volume Scheme suppliers cannot avail themselves of the Low Volume Scheme is a restriction on market entry.

Used vehicle importers under the Low Volume Scheme also are not required to pay the $12,000 special duty, which has to be paid if they are imported under the Full Volume Scheme.

From another viewpoint, the Low Volume Scheme can be considered pro-competitive since it gives small numbers of vehicles access to the market which would be excluded on grounds of cost if they had to meet all the tests required under the Full Volume Scheme. It therefore permits consumers a wider choice.

The Task Force has considered the costs and benefits of these anti– and pro-competitive features in making its recommendations about the Low Volume Scheme.

Effects and Benefits and Costs of the MVSAIn the last 30 years a great many changes have taken place in driving conditions in Australia. Roads have improved greatly, driver attitudes have changed, penalties for speeding and driving while intoxicated have increased, road law enforcement has improved and insurance incentives and penalties have sharpened considerably.

At the same time, there has been a significant fall in accident and death rates per 100,000 of population, particularly if the distance travelled per person is taken into account. Because so many factors come into play, it is not possible to measure just what portion of this improvement is due to ADRs and the MVSA. But the benefits in terms of lives saved, trauma reduced, and the economic savings from reduced hospital, medical and rehabilitation costs

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and avoidance of productivity losses are so large that even if the MVSA were to claim only a small component of this achievement the benefits would still be large.

The Task Force has identified several other sources of benefit including:

the convenience of having a single set of design rules across the country – and with that a convenient basis for harmonising into internationally accepted standards over the next few years; and

the information and assurance provided to consumers on a complicated and changing set of technical safety and emissions matters.

On the other hand the MVSA does involve costs including:

the direct administrative costs of FORS;

compliance costs incurred by manufacturers, importers and the motoring public; and

the risk that specifying standards might divert manufacturers and consumers from innovative ways of improving vehicles.

The Task Force has weighed up these benefits and costs. In considering compliance costs, it has recommended several measures which should lead to reductions. In considering the impact of the ADRs themselves on the rate of improvement in standards, the Task Force notes that the rules are subject to regular, transparent review involving a wide range of interested parties.

Further it notes that for the most part, ADRs are outcome based so that the imagination of manufacturers is not unduly curtailed in looking for new ways of cost effective design to achieve further improvements in safety and emissions. Indeed, many vehicles entering the market for the first time exceed standards set by the ADRs.

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Thus the Task Force assesses the costs of the MVSA to be small relative to the benefits. While these benefits are difficult to quantify they are potentially large with very little downside risk. Other approaches such as leaving standards to individual manufacturers carry considerable downside risk. In the Task Force’s view, the closeness and inevitability of harmonisation with international standards effectively locks in the continuation of the existing national system as a basis for merging into international standards.

Having come to that general conclusion, the Task Force addressed alternative arrangements for operating a national system of standards.

Alternative ArrangementsIn principle, less restrictive arrangements for achieving the safety, emissions and anti theft standards may fall into the following categories:

Repeal the MVSA and its supporting regulation and rely on:- manufacturers, importers and consumers;- State and Territory vehicle inspections;- recall procedures;- random tests against international and other countries’ standards.

Stay with a national system but substantially change from a vehicle type approval system to a self certification arrangement.

Repeal the MVSAFor reasons already outlined, the Task Force has rejected the approach of repealing the MVSA. Even the most conservative estimate would still see benefits exceeding costs, and in any event the merging with international standards precludes wholesale change at this time.

Self CertificationThe Task Force has considered proposals for moving to self certification, rather than a vehicle type approval system.

Such arrangements are considered to be inappropriate at this time as, although some benefits have been identified, they are outweighed by the following:

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effective assurance of compliance with mandatory requirements involves purchase of vehicles and testing by the regulator. This activity involves high costs. (In the USA, for example, a budget of approximately US$18 million is provided), and

in the event that vehicles are found not to comply with mandatory requirements action is taken by the regulatory authorities either in the courts or through mandatory recall. Resolution in the courts can be a lengthy process during which time potentially unsafe vehicles remain in the market.

Regulatory/Administrative ArrangementsMost of the Task Force’s recommendations relate to the administration of the Act. The Task Force found that there is too much reliance on discretionary powers (through Administrative Circulars), and this can be remedied by greater use of Regulations and Determinations by the Minister.

Full volume manufacturers and the industry association, FCAI, which represents 99% of vehicles entering the market are generally satisfied with the administration of the Act – but are looking for faster processes by the regulator.

Stakeholder comments affecting full volume suppliers concentrated mainly on the administrative arrangements surrounding the enforcement of the ADRs. There was very little comment about the technical efforts to develop the ADRs, the safety and technical research and testing to underpin the ADRs, the efforts to achieve harmonisation with international standards, or the recall functions once a safety defect has been found in vehicles released to the market. On this basis the Task Force can only conclude that those facets of FORS administration are seen as satisfactory.

More than half of the submissions and about two thirds of all recommendations by stakeholders related to the Low Volume Scheme. While much of the stakeholder comment, and most of the Task Force’s efforts and recommendations, relate to the “enforcement” of this “scheme”, the fundamental question is one of industry policy – how many vehicles is the Government prepared to see enter the market through regulatory concessions compared to regulation applied to full volume manufacturers? During 1998, 7,657 used motor vehicles were imported under the Low Volume Scheme.

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The Task Force notes that FORS is progressively commissioning a new Internet based approvals system and recommends that consideration also be given to FORS adopting a more commercially orientated regulatory charging regime.

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Recommendations3 Legislative Arrangements

The Task Force recommends that the MVSA be retained and the object clause expanded along the following lines:

The principal object of this Act is to establish and apply nationally uniform standards for motor vehicle safety, environmental quality and anti-theft with the aims of:

a) contributing to reductions in deaths and trauma from vehicle crashes;b) reducing the adverse impacts of vehicle use on human health and the environment;c) improving the security of vehicles; and d) providing information relating to safety, environmental quality and anti-theft to the

Australian community. (p.25)

The Task Force recommends that:

the Act be amended to provide FORS with the power to seek information relating to road crashes in Australia; (p.27)

the legislation be retained in its current form, but broadened in its objective (in accordance with the preceding recommendation) and that the Motor Vehicle Certification System continues to be administered by the Commonwealth; (p.33)

Given the emerging adoption of harmonised standards by countries trading in motor vehicles with Australia, the Task Force recommends that:

the Commonwealth, in year 2005, review the costs and benefits of Australian jurisdictions and manufacturers moving to adopt one suite of acceptable international standards. (p.33)

4 Administrative Arrangements

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changes to administrative procedures be fully considered before implementation, be transparent, and that affected clients be fully informed; (p.59)

FORS develop an information management system which provides FORS staff with a comprehensive and readily accessible database which includes all current ADR interpretations to draw on when considering applications; (p.61)

the operation of RVCS be closely monitored and any feedback from clients and FORS staff on the operational efficiency and capacity of the system be recorded and addressed through upgrades and improvements to the system. (p.62)

5 The Low Volume Scheme


the content of the relevant Administrative Circulars be reviewed and placed within a legal framework; (p.78)

full volume manufacturers be eligible to participate in the Low Volume Scheme; (p.80)

the current type approval arrangements for standard new vehicles under the Low Volume Scheme be maintained (p.89);

consideration be given to revising the current eligibility criteria to make them less subjective; (p.91)

vehicles with diesel engines or turbocharged engines would not be considered a different model; (p.91)

a used vehicle certification scheme, based on vehicle by vehicle approval involving registered workshops, be developed in consultation with ‘industry’; (p.94) and

existing CPA holders should be able to continue fitting identification plates to their currently approved models up to an agreed date to provide a reasonable transition to the proposed new arrangements. (p.95)

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6 Vehicle Import Arrangements


the importation of complete vehicles for dismantling be discontinued (p.102); the Regulations of the Motor Vehicle Standards Act 1989 be amended to extend the period

of overseas ownership and use requirement under the personal import scheme from 90 days to 12 months and the discretionary power to accept a lesser period on compassionate grounds remain with the Administrator; (p.104)

the penalty provisions of the MVSA be amended to allow for a series of administrative penalties that the Administrator could impose for minor infringements; (p.105)

FORS re-examine other import arrangements with a view to limiting the circumstances under which conditional import requirements are placed on importers unless there are clear and efficient mechanisms in place to ensure compliance. (p.105)

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8 In-service Matters


the scope of the MVSA not be expanded to include in-service standards; and

the Memorandum of Understanding between the NRTC and FORS be revised to reflect current arrangements, including NEPC’s role. (p.118)

9 Industry Charging/Regulatory Costs

The Task Force recommends:

FORS establish, in consultation with stakeholders, the services that should be subject to cost recovery and set fees based on the attributable costs for the provision of these services;

services which should be subject to cost recovery should include direct processing costs, research and development costs associated with new standard, safety investigations and recall monitoring activities; and

consideration be given to adopting an activity based charging regime to recover actual costs associated with FORS services as they relate to administration of the MVSA. (p.126)

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PART B – DRAFT REPORT ON THE KEY ISSUES

Part A – Report on Key Issues

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CHAPTER 1 INTRODUCTION

1 INTRODUCTION

1.1 About the Review

1.1.1 StructureThe review of the Motor Vehicle Standards Act 1989 (MVSA) was undertaken in accordance with Terms of Reference approved by the Commonwealth Minister for Transport and Regional Development and the Office of Regulation Review (ORR)2.

As a National Competition Policy review, the Task Force was guided by the Council of Australian Governments’ Principles and Guidelines for National Standard Setting and Regulatory Action, and the requirements of the Competition Principles Agreement3. The Competition Principles Agreement requires the review and, where appropriate, reform of all laws that restrict competition by the year 2000. The Motor Vehicle Standards Act 1989 was listed in the Commonwealth Legislative Review Schedule announced by the Treasurer in June 1996.

The guiding principle of National Competition Policy is that legislation (including, for example, regulations and rules) should not restrict competition unless it can be demonstrated that the:

benefits of the restriction to the community as a whole outweigh the cost; and

objectives of the legislation can only be achieved by restricting competition.

Significantly, both criteria must be met if restrictions are to be retained.

1.1.2 The Consultation ProcessConsultation started with the establishment of a Task Force of officials from Commonwealth agencies with a stake in the review. The Task Force worked to consultation plans endorsed by the Independent Reference Committee established to guide the review. The Reference

2 The Office of Regulation Review, situated within the Productivity Commission, oversees the process of all reviews listed on the Commonwealth Legislative Review Schedule.

3 Signed by the Commonwealth and all State and Territory Governments in April 1995.

1


Committee, which represented the broad community, industry and consumer views, was chaired by Dr Roger Mauldon (a former Industry Commissioner) and had as other members Mr Don Dunoon (a former Chief Engineer of Nissan Australia Ltd) and Mr Lauchlan McIntosh (Executive Director of the Australian Automobile Association). The Reference Committee’s role was to ensure that the review process was strategic and effective to reflect as widely as possible the views of all stakeholders. Among other responsibilities, it was required to formally clear the final report for submission to the Minister.A call for public submissions was nationally advertised in the Australian newspaper on 20 December 1997. All known stakeholders (some 3,000) were invited to make submissions. Invited stakeholders were also sent an issues paper to elicit comment on the issues raised by the Terms of Reference. A copy of the Public Comment Document is available from the review team by email [email protected]. Fifty-five submissions were received (Appendix A). The interests of government agencies, manufacturers, importers, motoring organisations, consumers and private individuals were represented among the submissions.

Throughout the review, the Task Force maintained a web page on the Department of Transport and Regional Services’ Internet home page (http://www.dot.gov.au.programs.mvsa/mvsarev/). Parties accessing the page were invited to download the submissions listing, Terms of Reference and issues paper. The Task Force considers that the final report should also be made available via the Internet.

The Review members met with a number of key stakeholders (Appendix A) representing the broad range of interests. The purpose of these meetings was to exchange information generally and more specifically, to discuss the review process, issues raised in submissions and options being considered.

For contentious issues, such as the Low Volume Scheme and the importation of complete vehicles for dismantling, the discussions proved critical in assisting the Task Force’s identification and consideration of options. Meetings were also held with stakeholders not represented among the submissions, to gather information and viewpoints.

The Task Force also sought authoritative information on the current legislative and administrative arrangements in place overseas, principally among Australia’s key trading partners.

2

mailto:[email protected]


Apart from the legislation itself, the Task Force consulted the Prime Minister’s Statement on Climate Change (1997), the National Competition Principles Agreement(1995), the second Reading Speech on the Act’s introduction (1989), the former Industry Commission’s report entitled The Automotive Industry (1996), stakeholder submissions and the National Motor Vehicle Theft Task Force report (1997). The Task Force also referred to the Internet’s large holdings to seek information on overseas legislative arrangements.

1.1.3 TimingThe Commonwealth’s Legislative Review Schedule listed the MVSA review to commence in 1997-98. The review was announced by the Minister for Transport and Regional Development on 18 December 1997 (Appendix B).

1.1.4 ReportingThis report is to be submitted to the Minister for Transport and Regional Services, the Treasurer, the Prime Minister and other interested Ministers.

1.2 Background to the Motor Vehicle Standards Act 1989

1.2.1 Arrangements Prior to 1989Before the introduction of the MVSA, road vehicle standards were developed through a cooperative arrangement involving State and Territory governments. These standards were and continue to be known as the Australian Design Rules (ADRs). The ADRs were retained with the introduction of the Act and are still developed through a cooperative arrangement.

Introduced in 1969, the ADRs set the design and performance requirements for the safety and emissions of road vehicles first supplied to the Australian market. The Commonwealth, through FORS, has traditionally prepared the ADRs. However, it had no legal basis for enforcing them prior to the introduction of the MVSA. The States and Territories used their vehicle regulation laws to apply the ADRs.

1.2.2 Reasons for the Motor Vehicle Standards Act 1989The cooperative arrangement for determining road vehicle standards did not prevent an individual State or Territory government from applying road vehicle standards peculiar to their jurisdictions. Road vehicle suppliers were required to produce evidence of compliance separately to each jurisdiction. In many instances, vehicle compliance requirements varied from jurisdiction to jurisdiction4. These diverse requirements detracted from road transport

4 For example, unlike other jurisdictions, New South Wales, Victoria and Tasmania required commercial vehicles to have a

3


efficiency. They also imposed high compliance costs on vehicle manufacturers; costs that were passed on to consumers.

In 1988, the Inter-State Commission prepared a report on the need for harmonisation of road safety regulations in Australia5. The Commission’s first recommendation was that a single set of Federal legislation be introduced to ensure uniform vehicle design and construction standards on a national basis. The Motor Vehicle Standards Bill 1989 was introduced to put that recommendation into effect. The legislation was consistent with the Commonwealth Government’s micro-economic reforms, in that regulatory costs to industry were reduced. Eight sets of regulations were replaced by one.

The introduction of the MVSA allowed suppliers to provide evidence of road vehicle compliance against one set of criteria (the ADRs) to one jurisdiction (the Commonwealth Government). When a vehicle has been certified by FORS as meeting the ADRs it can be fitted with an identification plate. It is mandatory under the Act to fit an identification plate which indicates to the registering authority that the vehicle complies with the ADRs. Registration authorities will normally register a vehicle on the basis of the presence of the identification plate. Section 14B of the Act seeks to ensure State and Territory governments do not impose requirements that conflict with the national standards (the ADRs). Notwithstanding these cooperative arrangements, the States and Territories have from time to time introduced requirements for motor vehicle registration which are additional to the ADRs For example, WA recently legislated to require vehicles to be fitted with engine immobilisers as a condition for registration.

The MVSA reduced unnecessary burdens on manufacturers to comply with various State and Territory regulatory requirements. This was achieved by the goodwill agreement between FORS and the registering authorities and this goodwill has been maintained by the Australian Motor Vehicle Certification Board and the associated Working Party. It also eliminated inefficiencies arising from duplicated effort in administering those requirements. Once road vehicles have demonstrated compliance with standards, the vehicles can be sold anywhere in Australia, however it should be noted that these vehicles can only be registered with the

vertical exhaust system. Lighting requirements also differed, eg only Victoria required that headlamps be extinguished when the fog lamps are on.

5 The Efficiency of Interstate Transport Arrangements – Second report, Harmonisation of Road Vehicle Regulation in Australia. Reports 1 and 2 of June 1988.

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cooperation of the State and Territory registration authorities. The Act also provides a common ground for international harmonisation to enhance Australia’s trading capacity.

1.2.3 Object of the Motor Vehicle Standards Act 1989The stated object of the Act is “to achieve uniform vehicle standards to apply to road vehicles when they begin to be used in transport in Australia” with particular emphasis on vehicle safety, emissions and anti-theft. The Act is supported by the Motor Vehicle Standards Regulations. The Act and its Regulations also provide for the monitoring of activities of all vehicle and component suppliers to the Australian market to ensure that vehicles conform, and continue to conform, with the ADRs once a particular type of vehicle has been approved.

Key provisions of the Act include:

formal determinations of the national standards which are to be applied, ie the Act allows the Minister to determine vehicle standards for road vehicles or components (Section 7);

formal determination of procedures for ensuring that manufacturers comply with the national standards, that is, the Act allows the Minister to determine procedures and arrangements for determining whether road vehicles or vehicle components comply with the Act (Section 9);

placing identification plates on vehicles which comply with the national standards (Section 10);

supply and importation of both standard and nonstandard vehicles (Sections 14-20);

appointment of an Administrator of Vehicle Standards who is responsible for the day to day operation of the system (Section 22);

appointment of inspectors to monitor compliance with the national standards (Sections 25-33); and

court proceedings associated with the national standards system (Sections 34-37).

1.2.4 Amendments to the Act in 1995 and 1999Since the Act came into force, the substantive contents, the format and presentation of the national standards have been kept under review. Improvements have been effected on several occasions. The Act was amended in 1995 and now specifies circumstances when it is mandatory or discretionary for the Minister to give approvals for identification plates to be placed on vehicles (or vehicle components). These circumstances were previously dealt with by regulations.

5


The 1995 amendments allow for a more flexible approach to specifying requirements for plates, which reflect the status of a vehicle. The Minister may now make Determinations articulating the requirements for plates, rather than prescribing such requirements in the Regulations. This is a more flexible approach. While both are subject to Parliamentary scrutiny and disallowance, Determinations can be prepared quickly and easily.

The Act was amended in 1999 to improve its administration and to implement the Government’s international commitments to reduce greenhouse gas emissions. The amendments include:

extending the definition of “vehicle standard” to enable the introduction of a new ADR for model specific fuel consumption labelling;

a provision to appoint Associate Administrators to whom some of the Minister’s powers under the Act can be delegated; and

minor changes to correct errors and to clarify the Minister’s responsibilities in relation to motor vehicle standards.

These amendments were considered too urgent to await the outcomes of this review.

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CHAPTER 2 CURRENT REGULATORY AND ADMINISTRATIVE ARRANGEMENTS

2 CURRENT REGULATORY AND ADMINISTRATIVE ARRANGEMENTS

To provide an operational context, this chapter describes the current regulatory and administrative arrangements. An assessment of those arrangements is included in Chapters 3 and 4.

2.1 The Regulatory FrameworkThe regulatory framework is intended to ensure that all road vehicles first supplied to the Australian market comply with the national safety, emissions and anti-theft standards, as provided in the MVSA.

2.1.1 The Motor Vehicle Standards Act 1989Section 7 of the MVSA empowers the Commonwealth Minister for Transport and Regional Services to make standards for all road vehicles or components prior to first supply to the Australian market, be they manufactured in Australia or new and used vehicle imports. The Act is intended to underpin national uniformity, thereby providing a more certain environment for manufacturers, importers and consumers. The Act also ensures that the benefits of improved vehicle safety, emissions and anti-theft performance accrue to all Australians6.

2.1.2 RegulationsThe Motor Vehicle Standards Act 1989 enables the development of Regulations. These Regulations give detailed effect to the MVSA.

2.1.3 DeterminationsVarious sections of the MVSA provide for the Minister to make determinations, that is, decisions that are empowered by legislation. For example, Section 10 of the MVSA provides for the Minister to determine procedures and arrangements for placing plates on vehicles where approval has been given under section 10A for identification plates to be placed on vehicles. At present under this section no determinations under the legislation are in force. FORS instead has used the Administrative Circulars to advise stakeholders of the arrangements for fitting identification plates on vehicles.

2.1.4 Administrative CircularsThe Administrative Circulars date from about 1970. Their purpose is to explain the policy and processes applied by the Administrator in dealing with applications for compliance plate approval (CPA). The Circulars are intended to inform manufacturers (or their agents) making

6 Hansard HR 23 May 1989.

7


CPA applications, test facilities conducting tests to ADR requirements, FORS processing staff and State and Territory registering authorities.

Certain Circulars, for example, those dealing with ADR test procedures7, have been determined by the Minister, thus giving them the force of law. The remainder have no formal legal basis and hence are advisory only.

2.2 Related Commonwealth LegislationThe National Road Transport Commission (NRTC) has a key role in national road transport regulation. The NRTC was established by inter-governmental agreements and the National Road Transport Commission Act 1991 to achieve uniform road and vehicle regulations in agreed areas for new and ‘in-service’ vehicles. Legislation such as the Road Transport Reform (Vehicles and Traffic) Act 1993 and the Road Transport Reform (Heavy Vehicles Standards) Regulations are authorised to apply in the Australian Capital Territory, but then depend on the passage of State and Territory legislation to gain national effect. This legislation covers vehicle standards in general.

The work of the NRTC is principally focused on heavy vehicles and in-service vehicle regulation.

Other legislation also relates to the MVSA, including the Trade Practices Act 1974 (TPA) and the Customs Act 1901. The National Environment Protection Council (NEPC) Act 1994 and the National Road Transport Commission (NRTC) Act 1991 also have links with the MVSA in relation to the development of vehicle standards. The nature and effectiveness of these links are considered in Chapter 3.

2.3 State and Territory RegulationThe ADRs were introduced in 1969 to set the design and performance requirements for the safety and emissions of road vehicles and trailers first supplied to the market. At that time, the ADRs had legislative effect through the State and Territory motor vehicle and traffic regulations. In 1989, the MVSA gave federal legislative effect to the ADRs.

Regulations governing vehicles once used in transport remain the responsibility of State and Territory governments. Commonwealth administrative arrangements are closely integrated with the States and Territories who have agreed to use ADR compliance as the basis for their registration and in-service performance management regimes.

7 Determination 1 of 1990.

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2.4 International Framework and International HarmonisationThe Commonwealth Government and the automotive industry have identified vehicle standards harmonisation with international norms as an essential element in trade facilitation. Different standards alone add 5 to 10 per cent to the costs faced by the world’s exporters entering the market for the first time8. The total costs to the automotive industry due to the lack of internationally harmonised standards and conformity assessment arrangements, are significant.

The Commonwealth through FORS is engaged in a number of activities intended to provide an environment where Australian manufacturers of automotive products have access to international markets through:

adoption of international standards; and

establishment of bilateral or multilateral recognition agreements.

FORS pursues international harmonisation in the Asia Pacific Economic Co-operation (APEC) forum, at the United Nations and bilaterally with New Zealand. FORS is also pursuing a bilateral agreement with the European Union (EU) concerning Conformity Assessment arrangements. These activities are expected to deliver substantial benefits to the Australian automotive industry and consumers.

APEC Road Transport Harmonisation Project

Standards reform is an essential part of the APEC agenda. Gains across all industry sectors from standards reform within APEC are estimated at between $US200-450 billion9.

8 Charles D Uthus, Senior International Analyst, American Automobile Manufacturers Association, speech to APEC Early Voluntary Sector Liberalization Automotive Initiative Seminar, Kuala Lumpur, Malaysia, 20 April 1998.

9 Presentation on ‘Automotive Sector Liberalization Initiative’ by Mr Stephen Collins, Director, Economics and International Affairs, American Automobile Manufacturers Association, at the April 1998 TPTWG meeting in Mexico City.

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APEC economies are committed to alignment with international standards. Australia is leading the Road Transport Harmonisation Project that aims to reduce the region’s regulatory barriers to trade in automotive product.

The project, undertaken through the APEC Transportation Working Group, seeks to establish a regime to encourage mutual recognition of automotive product. Mutual recognition is being sought through bilateral or multilateral agreements in the short to medium term with the recognition of internationally harmonised standards and conformity assessment arrangements as the ultimate aim. A mutual recognition agreement between Australia and Thailand covering some specified design rules was signed recently.

Contribution to the UN/ECE Working Party 29

Working Party 29 (WP29) of the United Nations/Economic Commission for Europe (UN/ECE) administers the 1958 Agreement10 under which automotive safety and emissions regulations are developed for adoption by the Contracting Parties. The Contracting Parties to the Agreement are predominantly member states of the EU and eastern European states. Japan became a Contracting Party to the Agreement on 24 November 1998.

WP29 provides an international forum for development of vehicle standards and its membership includes not only contracting parties to the 1958 Agreement but also countries such as the US, Canada, Australia, Korea, South Africa, Thailand and Argentina. Participation in WP29 has grown significantly in recent years.

Australia currently is considering the implications of acceding to the 1958 Agreement. Korea announced its intention to accede to the 1958 Agreement in 1999 or early 2000.

Australia recognises WP29 as the forum for the development of international automotive standards. Sixty per cent of current ADRs are aligned fully or partially with UN/ECE Regulations.

10 Full title is “Agreement concerning the adoption of uniform technical prescriptions for wheeled vehicles, equipment and parts which can be fitted and/or be used on wheeled vehicles and the conditions for reciprocal recognition of approvals granted on the basis of these prescriptions.”

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The current review of the ADRs is expected to result in greater alignment. This review is separate from, but aligns with, the review of the MVSA. It has been initiated under the Trans Tasman Mutual Recognition Arrangement (TTMRA). (see 2.5).

Australian/European Union Mutual Recognition Agreement

Australia and the EU have negotiated the terms of a Mutual Recognition Agreement (MRA) on Conformity Assessment covering various industry sectors. Agreement on the scope of an automotive annex has been reached and came into effect on 1 January 1999.

The agreement includes supervision of testing in Australia to European requirements, conformity of production arrangements for individual regulations and whole vehicle type approval. Under this agreement, each party’s products will be accepted as conforming to the other party’s standards without further need for testing or assessment of Conformity of Production by the receiving party.

2.5 Trans-Tasman Mutual Recognition Arrangement and the Review of the ADRs

Australian and New Zealand Heads of Government agreed in June 1996 to establish a harmonised regime in Australia and New Zealand under a Trans-Tasman Mutual Recognition Arrangement (TTMRA)11.

Special provisions have been included in the TTMRA covering automotive products to allow a transition period to resolve the differences in both the standards and the conformity assessment arrangements between the two nations.

An Advisory Committee comprising representatives from Commonwealth, New Zealand, State and Territory governments, industry and consumer groups has been established to review the Vehicle Design Standards. The prime objective of the Vehicle Regulation review is to align Trans Tasman vehicle safety and emissions standards with international standards and to

11 Arrangement Relating to Trans-Tasman Mutual Recognition, June 1996

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develop a common certification and conformity assessment regime. Single Issue Working Groups are currently addressing the requirements of the Vehicle Regulation review. It is expected that the review process will be completed during the year 2000.

2.6 Administrative Arrangements

2.6.1 Federal Office of Road SafetyThe MVSA is administered by FORS12, which is part of the Commonwealth Department of Transport and Regional Services (DoTRS). FORS is responsible for guiding the development of measures to promote road safety, minimise the environmental impact of vehicles and reduce the incidence and severity of road crashes.

FORS comprises two branches, Road User and Motor Transport. Road User focuses on the human aspect of road crashes and covers areas of road safety behaviour, road transport reform and the Black Spot program. Motor Transport’s principal function is to administer the MVSA. In so doing, it plays the dual role of managing the development of standards for motor vehicles and regulating compliance with those standards. Motor Transport also undertakes safety investigations and monitors recalls of vehicles and vehicle components under the provisions of the Commonwealth Trade Practices Act 1974, through arrangements with the Minister for Financial Services and Regulation. (The Trade Practices Act 1974 is administered by the Treasury portfolio).

In addition to the above, Motor Transport also has a role in trade facilitation in developing bilateral and multilateral agreements covering harmonisation of vehicle standards and conformity assessment procedures.

The Assistant Secretary of Motor Transport is the Administrator of Vehicle Standards (Administrator). The Administrator together with the First Assistant Secretary of FORS have delegated powers under section 23 of the Act to ensure effective operation of the MVSA.

2.6.2 ADR Development ProcessFORS develops the ADRs in conjunction with the NRTC within a consultative process involving State and Territory governments and key industry stakeholders including the Technical Liaison Group (TLG). Consumer groups are represented by the AAA, RTF and the Motorcycle Riders

12 FORS is entirely funded by the Commonwealth Budget.

12


Association. In accordance with the Trans-Tasman Mutual Recognition Act 199713 and complementary legislation in New Zealand, the New Zealand Government is also included in the consultative process.

As a result of the involvement of these organisations and State and Territory jurisdictions, the development of the ADRs is able to draw on major government, professional and other groups who have established credentials in road safety.

FORS also works with agencies in the United States, Japan and Europe to ensure that Australia accesses the latest best international practices. This is consistent with the Commonwealth Government's policy to harmonise, wherever possible, with international standards. Unique standards for Australia would only be considered in areas where no international standards were available or the available international standards would not offer solutions to address environmental or operating conditions prevalent in Australia.

A Regulatory Impact Statement (RIS) is developed during the consultative process and may accompany the draft ADR proposal when circulated for public comment. Feedback from public comment plays a significant role in finalising the RIS, which needs to be settled before consulting the Australian Transport Council as outlined below. Generally a period of 90 days is allowed for public comment but, in special circumstances, this comment period may be abbreviated, though usually to not less than 60 days which is in line with Australia’s obligations under the World Trade Organisation Agreement on Tariffs to Trade.

Following the close of the public comment period, a decision is taken as to whether the ADR needs to be changed. Depending on comments received, this may require further discussions with stakeholders. The finalised package is then forwarded to all Transport Agency Chief Executives (TACE) for consideration. TACE consists of the chief executives of national and State and Territory departments of transport and road vehicle administrations. TACE members are required to respond within one month.

Following the close of TACE comment, the NRTC prepares the package for Australian Transport Council (ATC) to vote on approval or disapproval. The ATC consists of the national and State and Territory ministers with responsibility for road vehicle issues. ATC has two months in which to respond.

13 The Trans-Tasman Mutual Recognition Act 1997 which became effective on 1 May 1998.

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If there are no objections, the NRTC advises FORS and a package is sent to the Commonwealth Minister to determine the ADRs as national standards. Once signed, the ADR is gazetted in the Commonwealth Gazette and then becomes law.

Where the ADR deals with environmental impact an additional step is taken to refer it to the National Environment Protection Council.

In accordance with the terms of the TTMRA, the New Zealand Government is represented at all levels in the consultative process including TACE and ATC. Under TTMRA an extra step needs to be taken following ATC consultation. The package is sent to the Council of Australian Governments (COAG) for voting which has three months within which to approve or disapprove the package. For the purposes of TTMRA, New Zealand is also included in COAG.

Developing a new ADR can thus be a lengthy process. It requires at least six months from when a draft proposal is passed to TACE until determination action under the MVSA can proceed. However, in practice extra time has to be allowed to turn around comments received following each consultation phase. The time taken by the Single Issue Working Groups to develop drafts (which cannot be accurately predicted) also needs to be taken into account.

In addition to the time taken to determine an ADR, industry requires sufficient lead time to change design and production to adjust to new ADR requirements. Lead times vary depending on the nature of the change and can be as much as three years from the date of gazettal for significant changes or new ADRs. Lead times are negotiated with industry during development of proposals, on a case by case basis.

The ADRs are subject to regular, transparent review involving stakeholders such as the TLG and the NRTC. Except for minor amendments, all changes to the ADRs need to go through the same process as developing a new ADR.

The 73 ADRs are listed at Appendix C. Of these, five are not currently in use.

2.6.3 The Australian Type Approval SystemWhen a vehicle has been certified as meeting the ADRs, it is fitted with an identification plate. Fitting an identification plate is mandatory under the MVSA. It indicates to the registering authority and the consumer that the vehicle complies with the ADRs.

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The process of obtaining approval to fit an identification plate is called vehicle certification. The Australian vehicle certification system is a “type approval” system. This means that a vehicle representing the design of that make-model (the "type" of vehicle) is tested to demonstrate compliance with all the ADRs applicable to that vehicle category (see Appendix D). If the vehicle tested complies, then all others of the same design (that is, the same "type") and manufacture are accepted as complying.

FORS does not physically test vehicles for certification purposes. The manufacturer is responsible for ensuring compliance with the ADRs and even after certification, it always remains the manufacturer’s responsibility to ensure that vehicles supplied to the market comply with all the applicable ADRs. The Australian certification process requires the vehicle manufacturer to conduct the tests specified by the various ADRs. Manufacturers can conduct those tests at their convenience providing the tests are conducted according to ADR requirements. The tests can be done in test facilities associated with the manufacturer or in independent facilities located in Australia or overseas.

In order to demonstrate compliance with all the applicable ADRs, several test vehicles are usually required, especially for passenger cars and light commercials. This is because a number of ADRs (such as ADR 29 and 69) require destructive testing.

Having conducted all the appropriate tests, the manufacturer must then submit an application for approval to fit compliance plates to the particular make and model of vehicle that has been tested. The application must include details about the vehicle model, together with evidence of compliance for each ADR applicable to that vehicle type. ‘New’ manufacturers (first time CPA applicants) must also submit a written description of their quality assurance arrangements for ADR related activities.

The nature of the evidence required for demonstrating compliance with the ADRs varies. For those ADRs that specify engineering tests and/or calculations, manufacturers provide to FORS a summary of evidence detailing the significant results. Manufacturers are required to retain detailed test reports and other material to substantiate the summary information. For ADRs not requiring specific tests, appropriate information is collected in order to assess compliance.

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Test results are not required where a vehicle model already complies with acceptable UN/ECE Regulations (that is, those listed in the ADRs). The manufacturer is only required to provide the ECE approval number.

When the Administrator of Vehicle Standards is satisfied with evidence provided that the vehicle complies with all applicable ADRs, FORS issues a CPA certificate. This is the authority to fit compliance plates to vehicles of the specified make and model. The CPA certificate lists the accepted evidence and ADRs with which the vehicle model complies and the conditions under which the CPA is granted.

A diagrammatic representation of the Australian Type Approval System is at Appendix E.

During 1997-98, FORS received 768 new applications for CPAs and 12,512 submissions of evidence to demonstrate compliance with the ADRs. In the same period FORS issued 1280 new and amending CPAs.

2.6.4 Single Uniform Type InspectionFor some vehicle categories (that is, vehicles with a gross vehicle mass of up to 4.5 tonnes) a sample vehicle of each of the model variants (such as sedan versus convertible, petrol versus diesel) must also be made available for inspection. This inspection is usually carried out jointly by a FORS official and an inspector from a relevant State or Territory registering authority.

The inspectors check compliance of the ADR features that can be visually inspected, such as seat belts and lighting installation. Non-compliances are recorded and the manufacturer is required to resolve them before vehicles can be bulk registered. This inspection also satisfies the registration inspection requirements of the States and Territory registries (hence its name, Single Uniform Type Inspection or SUTI). Administrative Circular 0-14-4 – SUTI Manual, guides administration of the SUTI process.

For Low Volume Scheme vehicles (see 2.6.8), the inspectors also assess the vehicle’s compliance by inspecting the vehicle’s components. For example, for assessing compliance with ADR 10 (Steering Column), inspectors check if the vehicle has a collapsible steering system.

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2.6.5 Provisional ApprovalOn rare occasions, the Administrator may issue CPAs prior to the manufacturer completing its submission of evidence of compliance. Provisional approvals are issued on the basis that if at a later date, as a result of final testing, the vehicles are found not to comply then all vehicles supplied to the market under the provisional approval must be recalled and the non-compliances rectified.

A time limit is specified after which a provisional approval lapses if full compliance has not been demonstrated and vehicles supplied to the market must be recalled. The time limit is generally six months.

2.6.6 Nonstandard ApprovalThe Administrator may also issue an authority to supply "nonstandard" vehicles, that is, vehicles that, due to their design and application, do not comply with all the requirements of a particular ADR. This applies to special purpose or emergency community vehicles that are fitted with role equipment or subject to tender specifications which conflict with ADR requirements and also to imported used vehicles. For example, fire engine vehicle specifications frequently call for a maximum speed which exceeds the heavy vehicle speed limiting (100 km/h maximum speed) requirements of ADR 65. Such vehicles cannot be certified as complying or ‘standard’ vehicles.

(Under the Act a ‘standard’ vehicle means a new vehicle that complies with the national standards, or which is taken to comply with the national standards by virtue of an approval given under subsection 10A(2), but does not include an export vehicle.”)

The same certification procedures are applied to nonstandard vehicles, except that the manufacturer must state clearly in the CPA application, the particular non-compliance and the reasons for it. The manufacturer must also supply a letter from a State or Territory registration authority, stating that the vehicles will be accepted for use and registered in that particular role. Certification and registration of the vehicles are usually conditional upon the undertaking that, if or when the operator disposes of the vehicles, they will first be modified to comply with all ADR requirements. The particular non-compliance is specified on the CPA certificate.

Individually constructed vehicles are not required to be certified. They are administered directly by the States and Territories, which generally require the applicant to provide an

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engineer’s assessment report to show that the vehicle complies with the applicable ADR and limit the number of such vehicles that can be registered in a given time period.

Trailers less than 4.5 tonnes laden weight are also not required to be certified through the type approval process. However, they are still required to meet all applicable ADRs. The State and Territory registering authorities have arrangements in place to ensure that at the time of registration the trailers comply with the ADRs. FORS publishes Vehicle Standards Bulletin No.1 – Building Small Trailers, which provides a summary of trailer construction requirements to assist manufacturers in ensuring their trailers comply.

Other vehicles not requiring certification include vehicles imported under the personal import concession scheme, imported vehicles 15 or more years old and vehicles not intended for use on public roads. These arrangements are considered in Chapter 6.

The current certification arrangements provide for the operation of two approval schemes, namely the Full Volume and the Low Volume Schemes. A comparison of the two schemes is provided at Appendix F. The certification system is equally applicable to imported and locally manufactured vehicles as well as either new or used vehicles.

2.6.7 Full Volume SchemeThis scheme is used by the major manufacturers and allows the supply of unlimited numbers of vehicles. The vehicles are required to meet all currently applicable ADRs and full evidence must be provided for each applicable ADR.

Full Volume vehicles are granted approval as standard vehicles under section 10A of the Act.

2.6.8 Low Volume SchemeEntry to the Low Volume Scheme is limited to vehicle makes/models that are not, or have not, been made available to the Australian market in full volume and, in the case of passenger cars, vehicles are assessed against “enthusiast vehicle” definition. Manufacturers holding full volume compliance cannot hold low volume compliance in the same vehicle category.

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The Scheme allows for the supply to the market in either of two arrangements, up to 25 or up to 100 vehicles of a particular vehicle category per year. The 100 vehicles per year arrangement requires full testing to a larger number of ADRs than the 25 vehicles per year arrangement. The 100 vehicles per year arrangement is not available to imported used passenger cars.

The Scheme provides three major concessions. It allows for alternative forms of evidence for some ADRs. In the main, this applies to ADRs where destructive or expensive testing is required. The second concession for some used vehicle categories is that the vehicles are required to comply with the ADRs that were in force at the date when the vehicle was originally manufactured, rather than currently applicable ADRs. The Scheme also allows exemption from the $12,000 special duty on used passenger motor vehicles imported under the Full Volume Scheme.

The Low Volume Scheme is discussed in more detail in Chapter 5.

2.6.9 FORS AuditsManufacturers demonstrate compliance with the ADRs by testing pre-production or early production samples of a vehicle or its components. To be assured that production vehicles also comply, Conformity of Production (COP) visits are made to manufacturers and their suppliers to review their quality assurance systems and implementation in areas which could affect ADR compliance.

Under the provisions of the MVSA, facilities conducting tests for compliance with the ADRs are inspected to assess their ‘fitness to test’ to the ADR requirements. The inspection is called Test Facility Inspection (TFI).

FORS adopts a risk-based approach to scheduling the audits of testing and production facilities of major vehicle suppliers to the Australian market. Decisions are based on time elapsed since the previous audit, the level of compliance achieved at that audit and, in the case of production facilities, the size of the vehicle manufacturer. The risk-based approach extends to ADRs, where new standards and major safety and emissions standards are audited more frequently.

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In 1998, a total of 18 TFIs and 42 COP audits were conducted in Australia and overseas.

FORS has agency agreements with regulatory authorities or national testing agencies in six countries (Japan, UK, Sweden, Italy, Germany and France) exporting vehicles to Australia to conduct COP audits and TFIs on FORS behalf. These audits are conducted in accordance with instructions from the Administrator. Any deficiency identified at these audits are pursued until the deficiency is rectified.

FORS conducts all audits and inspections in Australia and in countries where FORS does not have agency agreements.

2.6.10 Conformity of Production COP audits are intended to provide the Administrator with reasonable assurance that manufacturers have adequate controls in place to ensure that production vehicles continue to conform with applicable ADRs and are built to approved specifications. They involve detailed examination of procedures followed through design, purchasing and manufacturing processes. FORS audits are conducted in accordance with the Administrative Circular 0-13-2 – COP Procedures Manual which is based on the ISO9001 quality systems standard.

There are no programmed audits of low volume vehicle manufacturers. Under the low volume arrangements, each vehicle is required to be individually inspected and an inspection certificate, endorsed by a chartered professional engineer and certified by the CPA holder as complying with the applicable ADRs, provided to the owner of the vehicle. The inspection certificate lists the modifications undertaken on the vehicle to ensure compliance with applicable ADRs.

However, an audit may be conducted if a non-complying vehicle is found or a complaint is received from the user or the State and Territory registering authorities.

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2.6.11 Test Facility InspectionThe basic requirement for test facilities carrying out testing to the ADRs is that the Administrator must be satisfied that test evidence submitted for certification demonstrates compliance with the technical requirements of the ADRs.

The inspection covers such areas as the correctness of the test documentation, the competency of the staff carrying out the tests, the suitability and calibration status of the test equipment and instrumentation and correct recording of the components tested, test calculations and analysis of results. In addition, original test reports from which summary reports have been prepared are selected for detailed examination and used as an audit trail.

Inspections are generally conducted on all test facilities that conduct testing to ADR requirements. However, test facilities accredited by the National Association of Testing Authorities Australia for a particular ADR, and test facilities that test to the requirements of ADR equivalent ECE Regulations, are not normally subject to TFI. This is because FORS accepts NATA test facility accreditations and UN/ECE approvals as meeting FORS requirements.

Administrative Circulars 0-12-1 to 0-12-7, together with specific ADR test procedure circulars, are used as guides by test facilities and inspectors to assist with the orderly inspection of test facilities.

2.6.12 Investigating Safety Defects and Monitoring RecallsDespite the regulations and the supporting administrative controls, at times vehicles with safety defects are supplied to the market. FORS undertakes investigations into reported vehicle safety defects and monitors suppliers vehicle safety recall campaigns on behalf of the Minister for Financial Services and Regulation14. Suppliers are requested to provide a range of data to FORS on each recall campaign, including monthly reports.

Under the Trade Practices Act 1974 (TPA) manufacturers and importers are required to recall and rectify products that are deemed to contain defects that “will or may cause injury” or which do not comply with a prescribed consumer product safety standard. The TPA provides for both voluntary recall (Section 65R) and compulsory recall (Section 65F) in appropriate circumstances.

14 Under a 1986 Ministerial arrangement.

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Voluntary recalls are conducted in accordance with the procedures in the FCAI’s Voluntary Code of Practice or Australian Transport Council’s Code (which is based on FCAI’s Code of Practice).

In the event that a safety related defect in vehicles is found, FORS pursues the need for recall with suppliers in Australia, whether they are full volume or low volume in accordance with the relevant legislative provisions and industry codes. FORS exchanges recall information regularly with its counterparts overseas. If a recall in another country is thought to affect vehicles imported into Australia, FORS contacts affected suppliers to ascertain if a recall is necessary here. Should a recall be necessary, FORS monitors the suppliers performance in accordance with the requirements of the appropriate Recall Code.

All recalls are processed in a similar manner, whether the vehicles were supplied under low volume or full volume arrangements. The recall arrangements apply to all safety defects including those which do not relate to the ADRs.

It is expected that suppliers will conduct a voluntary recall to avoid the need for compulsory recall action under the provisions of the TPA. There has not been a compulsory recall to date. However, FORS has on occasions encountered difficulties where a new vehicle manufacturer prefers not to conduct a voluntary recall, rather choosing to conduct a “service campaign” which aims to restrict the rectification work to vehicles marketed in Australia. With a safety recall, it appears the parent company feels obliged to conduct similar recalls in other markets.

Suppliers’ procedures and FORS monitoring actions for a service campaign are basically the same as that for a recall campaign.

In 1997-98 there were 51 recalls initiated by vehicle manufacturers and seven by FORS following consumer complaints.

FORS provides a summary of safety related recalls by manufacturers and suppliers of vehicles, parts and accessories via the Internet (http://www.dot.gov.au/programs/fors/recalls/recall2.htm). This information is updated each month. Prior to November 1997, FORS published this information in Vehicle Standards Bulletin No. 3 – Vehicle Safety Recalls Update.

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2.6.13 Vehicle Import ArrangementsAn importer wishing to import a vehicle or vehicles must apply to the Administrator who will issue a "Vehicle Import Approval" document providing the vehicle meets the applicable requirements. This document allows the importer to clear the vehicle at its point of entry into Australia. Customs enforces this requirement and vehicles arriving without a valid import approval are held in bond until a permit is issued. (See Chapter 6.)

The majority of vehicles imported into Australia are new standard vehicles, imported by full volume manufacturers such as BMW, Hyundai and Honda. These manufacturers are issued with a blanket import approval which allows unrestricted importation of new vehicles. Blanket import approvals are also issued to full volume used motorcycles manufacturers.

Individual import approvals are issued for all other vehicles. These import approvals detail the make, model and vehicle identification number (VIN) of the vehicles approved for import.

Information about Australia’s vehicle import arrangements is published in Vehicle Standards Bulletin No. 10 – Importing Vehicles to Australia.

In 1998, FORS issued individual import approvals for 21,751 vehicles to individuals or organisations as personal imports, vehicles to be dismantled, 15 or more years old vehicles or vehicles imported under the Low Volume Scheme. (See Chapter 6.)

2.6.14 Road Vehicle Certification System

The certification process has been supported by a computer system called the Motor Vehicle Certification System (MVCS). FORS staff have used this system to register receipt of all the certification and vehicle import documentation and to print approval certificates.

A new system called the Road Vehicle Certification System (RVCS) is currently being implemented. This makes extensive use of electronic lodgement of forms using the Internet and is intended to streamline processes, update the technology and reduce the time taken to handle applications.

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A pilot phase involving manufacturers of heavy trailers and automotive lamps was implemented in May 1998 and full scale implementation for full volume manufacturers commenced in March 1999.

2.7 Key IssuesDrawing on submissions to the review, research and discussions with stakeholders, the following Chapters 3 to 9, identify, assess and report on the key issues raised by the Terms of Reference. The assessment includes an examination of the costs and benefits to the community and industry of existing and alternative arrangements. Also covered is the Task Force’s preferred approach for meeting future vehicle standards requirements.

In assessing future options and preferred arrangements, the Task Force considered a range of relevant matters, including:

current and likely future developments in:

- international safety regulation;

- emissions control and environment protection, both overseas and in Australian jurisdictions;

- anti-theft standards and measures being proposed; and

- other future requirements;

changes in Government policies affecting the industry;

current and emerging industry trends and practices;

the relationship between Commonwealth controls on road vehicles first provided to the market and in-service vehicle standards;

the improving levels of vehicle safety, vehicle emissions and anti-theft controls in vehicles manufactured in Australia and overseas; and

current and potential arrangements for cost recovery.

As a National Competition Policy review, issues in the National Competition Principles Agreement are addressed.

The Low Volume Scheme, elements of the vehicle import arrangements, the legal/administrative arrangements and industry charging emerged as key issues for the review.

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CHAPTER 3 LEGISLATIVE ARRANGEMENTS

3 LEGISLATIVE ARRANGEMENTSTerm of Reference

Assess and report on the objectives of the Legislation and the extent to which those objectives remain appropriate, including the nature and magnitude of the problem which the Legislation seeks to address.

3.1 Objectives of the LegislationOverview

The legislation has met the objective of promoting uniform national standards for safety, emissions and anti-theft performance. Stakeholder submissions identified a number of areas where the scope of the Act could be broadened. The Task Force supports a number of these suggestions, particularly as they apply to environment and consumer information.

Submissions to the review generally supported the objectives of the legislation. The principal objective of achieving uniform standards in respect of safety, emissions and anti-theft was universally supported. However, some stakeholders contended that, given current community expectations and requirements, the MVSA’s objectives should be broadened and more outcome oriented. No submission suggested that the MVSA should not be retained.

Some specific comments included:

the current objectives will not necessarily meet future community needs. Consideration should be given to broadening the objective of the Act in terms of environmental effects of the use of motor vehicles, including the manufacturing and disposal of vehicles (DoT, QLD, p.2);

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the MVSA was rushed to exclude used imports and therefore should be broadened (Kim Dier, p.2);

the stated objective focuses the Act very narrowly, limiting its scope to the application of standards, and limiting application of standards to the time of first registration. It gives no indication of the broader objectives of the vehicle control program, and no base for the broader activities in support (NSW EPA, p.7);

the Act is not sufficiently broad to meet future requirements as its flexibility to accommodate new technologies is restricted (AAA, p.6); and

the primary focus of the Act should be on community outcomes. The objective of the Act should include reference to safety, environment and security against theft (NRMA, p.8).

Other stakeholders (eg FCAI, AAAA and Victoria Police) expressed contrary views on the broadening of the objectives, contending that the current objectives remained suitable.

The Task Force considers it is good practice to include an objects clause explaining why the legislation has been enacted. The current object clause of the MVSA 15 is solely about achieving uniform standards. While appropriate, the provision of safe vehicles with a good environmental performance is essentially the purpose for which the Commonwealth, through FORS, applies the Act. This is both understood and accepted by stakeholders. Although the current objective of national uniformity is clearly important, it should not be the sole objective of the Act.

According to the Minister’s second reading speech introducing the MVSA:

The principal objective of this Bill, then, is to establish and apply nationally uniform standards for motor vehicle safety and environmental quality expected by the community16.

15 Section 3 of the MVSA – “The object of this Act is to achieve uniform vehicle standards to apply to road vehicles when they begin to be used in transport in Australia.”

16 Hansard HR 23 May 1989, p.2688.

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The Task Force considers that the legislation is still, with the passage of time, serving that principal objective and that this intent should be articulated within the Act. By definition, the MVSA relates to vehicle standards, so its objects clause must revolve around actions which are based on vehicle standards (as opposed to vehicle use, for example). The objects clause should be used to inform stakeholders, including regulators and the wider community, as to what this Act is setting out to achieve in relation to vehicle standards and what factors, policies, principles, etc will be considered in meeting those objectives.

A number of stakeholders commented that the objectives of the MVSA should include in-service regulation and standards for motor vehicles. This issue is addressed in Chapter 8. The Task Force has concluded that it is inappropriate for this to be an objective of the MVSA.

Other stakeholders suggested that the objectives should include the provision of consumer information to the Australian community on matters relating to vehicle standards. This issue is discussed further in sections 3.5.6 to 3.5.9. The Task Force has concluded that this is an appropriate objective for the MVSA, but acknowledges that it would require expansion and redefinition of FORS role.

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The Task Force recommends that the MVSA be retained and the object clause expanded along the following lines:


a) contributing to reductions in deaths and trauma from vehicle crashes ;

b) reducing the adverse impacts of vehicle use on human health and the environment;

c) improving the security of vehicles; and

d) providing information relating to safety, environmental quality and anti-theft to the Australian community.

3.2 Effectiveness of the LegislationOverview

The legislation has been effective in ensuring the uniform standards of vehicles supplied to the Australian market. The Task Force notes that there is currently too much reliance on discretionary powers. This can be remedied by greater use of Regulations and Determinations as already provided for in the legislation. Of particular concern is the status and legal basis of the Administrative Circulars and the Low Volume Scheme.

The legal area of the Department provided comment on a number of deficiencies that have come to notice with the administration of the Act (see Appendix G). The Task Force considers some of these are major concerns which should be addressed in an amending Act.

Primary concerns, going to industry regulation processes are:

review the Administrative Circulars and place them within the legal framework by Ministerial determinations; and

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prescribe the form of undertaking, and the sanctions for breaching such an undertaking, for importers of vehicles that are subject to specific conditions.

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3.2.1 Access to Road Safety Information

Overview

The collection of road safety and crash information was ceased by Australian Bureau of Statistics (ABS) in 1989. The Task Force notes that difficulties are being experienced gaining access to this data as a result of the operation of privacy legislation in the States and Territories. FORS lacks the legislative power to compel the release of information.

The Task Force considers the ability to collect road trauma data to be a key element in achieving the recommended objective for the Act of “contributing to reductions in deaths and trauma from vehicle crashes”. The Task Force notes that such data contributes to the development of ADRs, research and public information.

A reduction in the extent and quality of road crash data obtained by FORS would negatively impact on FORS’ ability to develop and maintain ADRs and provide information that promoted a reduction in road trauma in line with the objectives of the Act.

FORS collects details of fatal road crashes from coroners documents. This information is coded into the FORS Fatality File which is a major reference point for ADR development and evaluation. FORS also collects unit record data stripped of personal identifiers from State and Territory authorities.

In 1989, the ABS ceased the collection of road trauma statistics. These statistics were subsequently collected by FORS. The Commonwealth Statistician has the right under the Census and Statistics Act 1905 to collect information relevant to the ABS’s function. Although the Statistician has the authority to delegate this power, this was not done at that time. The ABS has advised that it would not be willing to make such a delegation.

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FORS has no power to require the provision of road trauma data, but relies on the goodwill of other authorities to provide the information. The introduction of privacy legislation in various jurisdictions has restricted access to information containing personal identifiers.

Options

Remain dependent on voluntary disclosure. In the long term, the extent and detail of data collection will diminish; or

Amend the MVSA to provide FORS with the power to seek information relating to road crashes in Australia. The provision of the proposed data collection power to FORS is consistent with similar powers exercised by the ABS and the Australian Institute of Health and Welfare. This is FORS preferred option.

3.2.2 FindingsIt is important that FORS has the capacity to collect and maintain data relating to road crashes. Such data forms a vital ingredient to the process of developing and evaluating ADRs and contributes to the capacity of the State and Territory jurisdictions to understand trends and develop road safety measures and programs at the operational levels. The Task Force considers that a continuation of the current situation will diminish FORS capacity to meet the objectives of the Act and will hamper the Commonwealth’s capacity to deliver the community’s desired road safety outcomes.


the Act be amended to provide FORS with the power to seek information relating to road crashes in Australia.

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3.3 Costs and Benefits to the Community and IndustryTerm of Reference

Assess and report on the costs and benefits to the community and industry of the Legislation in achieving its objectives.

Overview

The Task Force concludes that the benefits derived from the operation of the legislation in meeting its objective of achieving national uniform vehicle standards, outweighs any associated costs.

Benefits of the Act include the provision of a certain and stable regulatory environment for manufacturers including a single point of reference for vehicle certification. Other broader benefits include a greater level of assurance for the community that vehicles comply to a minimum level of safety when first entering the Australian market, and enhanced safety and social amenity through uniform safety and emissions standards.

Costs include compliance fees and charges incurred by the vehicle manufacturing and importing industry, the cost of design and manufacturing requirements to meet specific vehicle standards, and the cost of demonstrating compliance. Such costs may result in higher vehicle prices in the Australian market.

Due to a number of factors interacting to reduce the level of road trauma in Australia, before and since the commencement of the MVSA, it would prove problematic to attempt to single out, quantify and compare costs and benefits of the Act in this regard in a formal cost-benefit analysis exercise.

Background

Prior to the commencement of the MVSA in 1989, Australian vehicle standards were essentially set by States and Territories with little uniformity between jurisdictions in terms of

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the nature of standards and the timing of their introduction. The MVSA was introduced to provide a base level, across all jurisdictions, of vehicle safety and environmental performance, for vehicles first entering the Australian market, with the Commonwealth as the national regulator administering all vehicle certification requests.

3.3.1 Benefits and CostsIndustry

The MVSA has provided vehicle manufacturers and importers with greater certainty and a more stable regulatory environment. Additionally, with the Commonwealth as the single regulator, industry has been relieved of the administrative burden of having to interact with multiple administrative bodies when seeking the certification of vehicles.

The FCAI noted in its submission that “the legislation avoids conflicts, contradiction, duplications and consequent costs”17.

The direct costs to industry include the fees paid to the certification regulator and the costs associated with meeting and demonstrating compliance (including destructive testing and supplying necessary evidence). The time taken to achieve compliance is also a cost to industry.

In a presentation on Automotive Sector Liberalization Initiative, Mr Stephen Collins noted “The costs incurred to develop different versions of a particular model – simply to meet different standards and conformity requirements – are estimated to add as much as 10 per cent to the vehicle’s design and development18.”

Community

17 FCAI submission, p.17.

18 Presentation on ‘Automotive Sector Liberalization Initiative’ by Mr Stephen Collins, Director, Economics and International Affairs, American Automobile Manufacturers Association, at the April 1998 TPTWG meeting in Mexico City.

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The main benefits that accrue to the community from the MVSA are an assurance that vehicles on the Australian market meet a minimum and uniform level of safety when they first enter the market and enhanced safety and emissions standards with the resulting potential for a reduction in road trauma and air pollution.

Since the introduction of the legislation, the number of road fatalities has fallen from 2,887 or 16.7 per 100,000 population in 1989 to 1,764 or 9.7 per 100,000 in 199719.

These improvements have resulted from a number of factors including significant improvements in both vehicle and road construction and design, as well as road user behaviour campaigns addressing speeding and drink driving.

However, the Task Force considers that the setting and enforcement of uniform vehicle standards has provided impetus for the turnaround in road trauma.

The work of the Monash University Accident Research Centre (MUARC) has considered improvements to vehicle design in isolation from other road safety activities by examining “crashworthiness” (the risk of injury multiplied by injury severity). MUARC found significant improvements in the crashworthiness of vehicles manufactured each year since 1964 20. The probability of severe injury for drivers involved in a crash of the average vehicle manufactured between 1967 and 1996 has declined steadily. Crashworthiness ratings improved significantly after the introduction of major developments in occupant protection in particular years.

Since the introduction of the legislation crashworthiness of vehicles has also improved. There is a connection between improvements in vehicle design to enhance occupant protection and reductions in the road toll, but the Task Force found this difficult to quantify. (See Figure 3.1)

19 The History of Road Fatalities in Australia, FORS Monograph 23, 1998.

20 MUARC’s publication, Vehicle Crashworthiness Ratings and Crashworthiness by year of vehicle manufacture: Victoria and NSW Crashes during 1987-96. P.19.

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Note: Reproduced from page 25 of Monash University Accident Research Centre’s Vehicle Crashworthiness ratings and crashworthiness by year of manufacture: Victoria and NSW crashes during 1987-97 and Queensland crashes during 1991-96 report. Note that the range represents 95 per cent confidence limits.

Figure 3.1 – Crashworthiness by year of manufacture

While there have been improvements in the crashworthiness of motor vehicles over the life of the legislation, it is difficult to attribute these to the existence of the legislation alone as they are also consistent with international experience21.

After the legislation was introduced, the ADRs were introduced nationally, simultaneously, and probably more quickly overall than if States and Territories introduced them individually at different times.

The major costs to the community arise from increased prices for vehicles as industry attempts to recover costs associated with meeting compliance standards.

21 FORS Monograph 19, 1997.

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The impact of the Act appears to be neutral in terms of regional development issues.

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Emissions

Air quality in Australia’s major population centres has improved over the life of the legislation. This is particularly so in the case of carbon monoxide and oxides of nitrogen, where cars are the major source of emissions. The improvement has occurred in spite of the increased numbers of vehicles travelling further distances22. However, the Task Force notes that the majority of these improvements flow from the implementation in 1984 of ADR 37 on emission control for light vehicles which was introduced before the legislation. Air quality has continuously improved since then.

The major environmental benefit of the legislation comes from the uniformity of vehicle standards including emissions standards for new vehicles. Manufacturers also have certainty about the requirements and have indicated that this facilitates the rapid penetration of improvements to the Australian vehicle fleet. The Task Force notes, however, that improved emissions performance of Australia’s vehicle fleet has provided benefits to urban Australia where air quality is a health and environmental concern. Rural and regional Australia have benefited indirectly through the availability of more advanced vehicle technology and improved fuel consumption.

Anti-theft

The legislation provides a base level of protection against theft. The design rule regarding anti-theft has recently been amended to reflect the more stringent ECE regulations. A number of the vehicle models currently entering the Australian market already exceed anti-theft requirements under the Act.

3.3.2 AlternativeThe Task Force considers that reverting to the situation which prevailed before the introduction of the MVSA would not be realistic. The alternative to the present compliance arrangements would be to adopt a system similar to that in New Zealand where compliance is based on acceptable international, national or regional standards as well as a domestic regime.

22 Review of Australia’s Vehicle Emission Standards, Motor Vehicle Environment Committee, October 1998.

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In this scenario, vehicles would be accepted by States and Territories for registration if they demonstrate compliance with acceptable national or regional standards (eg UN/ECE Regulations, the United States Federal Motor Vehicle Safety Standards and Japanese Industrial Standards). Although some unique Australian standards would remain, the current consideration of accession to the 1958 Agreement makes complete harmonisation of standards a more plausible option. Under this scenario, vehicles built to harmonised standards would be able to be used in transport in Australia. Australian manufacturers and importers would be able to choose which set of standards to apply to their products.

Analysis of Alternative Approach

The Task Force considers that this alternative approach would generate consumer confusion and lead to vehicle standards in some areas that are inferior to those provided for under existing arrangements. While administrative savings would be associated with such a system, there would still be a need to have a regulatory body to determine what constitutes acceptable international standards and to verify compliance with such standards.

Additionally, the Task Force considers that such a system would tend to preclude the development of requirements designed to deal with unique Australian conditions. Australian manufacturers may be disadvantaged by needing to change the focus of their compliance with standards. While the majority of ADRs are based on international standards, a number of them are unique or have additional requirements - of the 68 ADRs currently operating, 13 have additional requirements and 22 are unique (see Appendix C).

As Australian emissions standards are relatively low by international standards, (a point made in a number of submissions) the alternative approach could lead to improvements in air quality. However this would require the acceptance of international emission standards which are more stringent than current Australian standards and which tend to address environmental problems relatively more severe than those typically experienced in Australia.

3.3.3 FindingsThe Task Force considers that the benefits of the existing compliance arrangements operating under the MVSA outweigh the costs to industry and the community.

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The Task Force was unable to conduct a cost/benefit analysis in dollar comparisons of these two options. It is noted that there is a general industry and community expectation of certain standards in motor vehicles available to the Australian market. Intuitively, one central, shared regulator is likely to be more cost effective than multiple regulators in State and Territory jurisdictions.

The Task Force considers that, when complete harmonisation is a practical reality, it may be timely for the Government to again re-assess the costs and benefits of Australian jurisdictions and Australian vehicle manufacturers simply adopting one suite of acceptable international standards.

Presumably other mature economies that trade vehicles with Australia would also be considering such a course for future action. The Task Force recommends such a review be undertaken in year 2005, by which time FORS would have a better idea of how far Australia has progressed with harmonisation with international regulations.

The Task Force recommends that the legislation be retained in its current form, but broadened in its objective (in accordance with the recommendation at the end of section 3.1), and that the Motor Vehicle Certification System continue to be administered by the Commonwealth.

Given the emerging adoption of harmonised standards by countries trading in motor vehicles with Australia, the Task Force recommends that the Commonwealth, in year 2005, review the costs and benefits of Australian jurisdictions and manufacturers moving to adopt one suite of acceptable international standards.

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3.4 Restrictions on CompetitionTerm of Reference

Assess and report on any restrictions on competition that the Legislation imposes, including the costs and benefits of those restrictions on the economy generally.

Overview

The objective of the legislation is to ensure that motor vehicles, first offered for sale on the Australian market, comply with a “minimum” standard of safety, emissions and anti-theft performance. To this extent, the legislation is designed to prevent competition from inferior, non-complying vehicles.

However, the Task Force has found that the legislation does not restrict competition between complying vehicle designs and its operation facilitates the entry of small numbers of specialised vehicles to the Australian market under the Low Volume Scheme allowing for greater consumer choice. It has identified, however, a number of features of the Low Volume Scheme which favour low volume suppliers commercially compared with their full volume counterparts.

The Task Force considers that the benefits to the community of this restriction to competition outweigh the costs. Furthermore the Task Force considers that the objectives of the Act can only be achieved by such a restriction.

The Task Force has considered the MVSA in the context of the National Competition Policy (NCP). In reviewing legislation under the NCP, the guiding principle is that legislation (including regulations, rules etc) should not restrict competition unless the following conditions are met:

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the benefits of the restriction to the community as a whole outweigh the costs; and

the objectives of the legislation can only be achieved by restricting competition.

The Task Force noted that both criteria must be met if restrictions are to be retained.

The Task Force has identified two major issues under the MVSA which could restrict competition:

firstly, the obvious and direct restriction that the MVSA imposes by prohibiting the supply of nonstandard vehicles to the Australian market; and

secondly, the effects on competition of the differing administrative treatments afforded to vehicles certified under full volume arrangements as compared with those certified under low volume or other import arrangements. There may also be some restrictions on competition due to different administration criteria used within the Low Volume Scheme.

These issues are addressed here at a conceptual rather than a practical level, as the Task Force has chosen to address the restrictions on competition separately, where appropriate elsewhere in the report, under the various key issues identified. This is particularly the case for the Low Volume Scheme at Chapter 5.

Stakeholder Views

Stakeholders' comments on restrictions to competition concentrated on the two major issues identified above. Some comments included:

at the present time, the community is denied the opportunity to purchase a number of vehicles that are excluded from the market because of the restrictions to competition that are presently in place (VICAA, p.63);

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the current regulatory regime does not appear to restrict competition within the market (AAAA, p.8);

to maintain a high standard of motor vehicle safety and compliance in Australia would require a degree of restriction on competition and some constraints on the economy. The cost of no restrictions in a very short time would far exceed the cost of the restrictions (H&S Support Services, p.9);

we believe that the current regulatory framework lowers competition and makes it difficult for people to obtain competitively priced imported vehicles (DoT, TAS, p.9);

the AAA does not hold the view that the provisions of the MVSA have affected competition as corporate decisions to trade in this market will dictate the presence or withdrawal of manufacturers and this has occurred from time to time as the market evolves (AAA, p.12); and

to the extent that low volume imports are allowed to unfairly compete with new vehicles and to compete on the basis of ADR concessions, competition is unfair (MTAA, p.19).

3.4.1 Prohibition of nonstandard vehiclesThe MVSA seeks to prevent entry of non-complying vehicles to the Australian market. This is an intentional restriction on the supply of vehicles to the market to deliver safety and environmental objectives to the community. This remains the cornerstone of the operation of the MVSA and the ADRs. Australia’s road safety strategies, of which the MVSA is an integral element, have resulted in significant decreases in road fatalities despite large increases in the numbers of vehicles on Australia’s roads and the kilometres travelled.

The Task Force considers that although these standards restrict supplies of non-compliant vehicles coming onto the market, they are not a restriction on competition since they apply to all market participants. They do not restrict market entry or exit or permit any market power to be appropriated by any supplier which would disadvantage consumers.

Most submissions considered that the benefits of such a general restriction on nonstandard vehicles far exceed the costs. The restriction on non-complying vehicles under the Act is the only way to ensure the Act’s objective of minimum uniform national vehicle standards can be achieved. However, the following concessions available under the Act are of concern to some stakeholders.

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3.4.2 ADR ConcessionsWhereas standards apply to all vehicles entering the market, the degree of assurance that standards are met differs between the Full Volume and Low Volume Schemes. Low volume suppliers are permitted to provide vehicles to the market with a lower degree of assurance that standards are met, since the costs of meeting the full costs of demonstrating ADR compliance could keep some types of vehicles off the market. To the extent that the Low Volume Scheme allows vehicles of a make and model not available in large numbers to satisfy consumer demand, it can be considered pro-competitive.

However, a number of stakeholders focused on the “ADR concessions” afforded certain vehicles entering the Australian market under the Low Volume Scheme and other vehicle import arrangements. Comparing these with vehicles entering the Australian market under full volume arrangements, they highlighted the disparities as competitive restrictions on full volume manufacturers.

The MVSA allows the importation of certain nonstandard vehicles such as vehicles over 15 years old and personal imports. The MVSA also allows for the discretionary supply of other types of nonstandard vehicles to the market. The majority of these vehicles are imported used vehicles supplied under the Low Volume Scheme. There are two major concessions provided to users of this Scheme but are not available to users of the Full Volume Scheme.

They are:

vehicles are required to meet the ADRs applicable at the date of their physical manufacture, rather than the ADRs applicable at the time of supply to the market; and

alternative methods of demonstrating compliance are allowed.

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In 1998, 7708 low volume used vehicles were imported compared with new vehicle registrations of 829,151 vehicles23.

On balance, the Task Force conclude that the numbers of nonstandard vehicles supplied to the market must remain low and within the control of the MVSA. In this case the Task Force considers that the benefits accruing to the community are likely to be greater than the impact of the competitive restrictions placed upon Australia’s larger vehicle manufacturers and importers as a consequence.

Nevertheless, the Task Force considers that FORS should closely monitor the numbers of nonstandard vehicles supplied to the market and continually assess the procedures employed to ensure that road safety and emission performance objectives are met and that the integrity of the MVSA is maintained.

3.4.3 Other Commercial Restrictions on Full Volume SuppliersTwo other differences between the ways in which full volume and low volume suppliers are treated can also be considered as restrictions on competition. The first is that full volume suppliers do not have access to the Low Volume Scheme. The second is that low volume importers of used vehicles are not required to pay the $12,000 duty which is required of used imports by full volume suppliers. Both these features competitively favour low volume suppliers compared with their full volume counterparts.

23 Source: FORS Motor Vehicle Certification System and ABS data.

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3.5 Impacts of the LegislationTerm of Reference

Assess and report on the impact the Legislation has on safety, the environment, equity, health, consumer interests or business competitiveness.

Overview

The introduction of vehicle standards, notably seat belts and regulations requiring their use, provide dramatic evidence of the benefit of this type of legislation. National and international harmonisation of these (safety) standards provides significant benefits. Stakeholders expressed universal support for the current national approach.

The introduction of vehicle emissions standards has resulted in significant improvements in the measured air quality in all major Australian cities. However, the legislative basis for emission controls is narrow24 and does not address the environmental issues such as embodied energy, ability to recycle components and fuel efficiency which are emerging nationally and internationally.

There are anti-theft measures that may be brought forward, particularly in support of the recommendations made by the Anti-Theft Task Force. However, State and Territory jurisdictions have prime responsibility for implementing these recommendations.

Stakeholders identified a need for more effective consumer information to be provided by suppliers of motor vehicles. The Task Force has considered options for making this information available, the nature of the information and the mechanisms. Broadening the scope of the MVSA to include consumer information would provide the legal basis for assessing the need for providing consumer information during the development of the ADRs or other instruments under the Act.

3.5.1 SafetyThe increase in road fatalities in the 1950s and 1960s, as a result of greatly increased usage of motor vehicles, provided the catalyst for governments in Australia and elsewhere to introduce vehicle safety requirements.

24 The legislation covers only three gaseous emissions that is, hydrocarbons, carbon monoxide and oxides of nitrogen.

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Before any new vehicle standards regulations are introduced, they are subject to wide consultation and rigorous analysis, in accordance with Regulatory Impact Statement (RIS) requirements administered by the Federal Office of Regulation Review.

Australia’s policy is to align its existing vehicle standards as well as any proposed new standards with UN/ECE regulations, unless there are significant safety or other reasons for not doing so. This policy generally minimises the costs for manufacturers associated with unique ADRs and facilitates trade in automotive product.

There are 68 ADRs currently in use, of which over 40 relate specifically to passenger cars. More than one quarter of the ADRs relate directly to occupant protection.

Statistics reveal that the crash types which cause the majority of road trauma are:

frontal – full and partial overlap (offset);

side; and

pedestrians.

Initially, vehicle safety regulations specified the design requirements of individual components of the vehicle that may influence the likelihood of injuring the occupant in a crash. However, during the 1980’s, researchers developed instrumented dummies to measure surrogates for injury levels in frontal and side crash tests. The means by which the specified performance is achieved is left to the individual manufacturer.

This methodology attempts to reproduce a more realistic representation of situations. "Whole vehicle" performance assessment, rather than individual component performance assessment, is used when seeking the highest possible level of occupant protection in a crash.

By way of example, it is useful to consider ADR 73 – offset frontal crash protection. Australia aims to have a set of frontal crash standards which will result in vehicle designs that protect occupants both in high deceleration head-on crashes as well as “softer” offset crashes which

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usually result in intrusion based injuries. ADR 69 on full frontal impact occupant protection, covers some of the frontal crashes which occur. The remaining frontal crashes are of the offset type where only part of the car's front is impacted.

The new offset crash standard, ADR 73 which applies to passenger cars from January 2000, is based on the finalised European test procedure and, like ADR 69, it specifies maximum injury levels for the head, chest and legs measured by instrumented dummies in a crash test. It includes comprehensive neck and lower limb injury criteria for the first time.The development of the new ADR centred on determining a representative and repeatable test for the most common offset crash type (from crash data) and specifying an appropriate set of injury parameters.

In parallel with the development of the offset test procedure, MUARC extended its crashed vehicle study to offset crashes. This information, together with crash data and expert opinion from around the world, was used to conduct a Harm 25 analysis to determine the likely benefits of the offset crash ADR.

The cost benefit analysis estimated the annual Harm reduction that would accrue from the offset standard over and above that achieved from ADR 69, to be at least $297m (a 15 per cent reduction in frontal Harm) and at best, $460m (a 23 per cent reduction in frontal Harm). The difference between the two estimates results from different assumptions about airbag usage. The full benefits would apply if all vehicles in the fleet complied with both standards.

From 1 January 2000 all passenger cars supplied to the Australian market must comply with the offset crash standard ADR 73.

Stakeholder Views

Some stakeholders comments included:

25 Harm is the total cost of injury based on the cost of treatment to the community. MUARC publication, Feasibility of Occupant Protection Measures, p.xiii.

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the current framework adequately addresses the road safety issues for the Australian community by providing incentive to achieve world class safety. In our opinion similar outcomes would not be achieved with a non-regulatory system (Victoria Police, p.1);

the current regulatory framework, while adequate with regard to the road safety and air quality needs of the Australian community, provides too much scope for State based differences to be applied at registration (RTF, Attachment A, p.1); and

recommend that the national safety standards be reviewed with a view to removing the present inconsistencies that make compliance more difficult and costly than necessary for small business (VICAA, p.6).

Analysis

Since the introduction of the ADRs in 1969 to coincide with the mandatory fitment of seat belts, Australia's road toll has been steadily decreasing. This trend has been sustained by a combination of factors, including other initiatives such as drink driving campaigns and additional ADRs to improve vehicle safety.

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Figure 3.2 shows Australia's performance since 1960.

Note:

Compulsory wearing of seat belts, in vehicles equipped with seat belts, was progressively introduced from December 1970 in Victoria to January 1972 in the Northern Territory

Random breath testing was progressively introduced from June 1976 in Victoria to December 1988 in Queensland

Figure 3.2 – Trends and fatalities and number of vehicles26

26 The History of Road Fatalities in Australia, FORS Monograph 23, 1998

*Note: Compulsory wearing of seatbelts, in vehicles equipped with seatbelts, was progressively introduced from December 1970 in Victoria to January 1972 in the Northern Territory. Random breath testing was progressively introduced from June 1976 in Victoria to December 1988 in Queensland

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The safety ADRs set out a range of performance and design requirements for motor vehicle safety and are among the most stringent in the world. This reflects the level of community concern with road trauma.

The ADRs cover a wide variety of safety requirements, both in active safety in which vehicle performance requirements might prevent a crash from happening (such as braking, tyres and lighting) and passive safety in which vehicle performance requirements protect the occupant when a crash occurs (such as restraints and occupant protection). The ADRs apply to a variety of road vehicle categories, including passenger cars, off-road passenger cars, motorcycles, mopeds, goods-carrying vehicles, omnibuses and trailers.

Safety standards are being reviewed as part of the review which aims to align Australian and New Zealand vehicle safety and emission regulations with international standards and to develop a common certification and conformity assessment regime.

The Task Force is satisfied that the legislation and the ADRs which apply to vehicle safety have been effective in reducing road trauma. The MVSA and the procedures used for developing and implementing the design rules are effective and generally supported by stakeholders.

3.5.2 The EnvironmentAustralia is one of the most highly urbanised countries in the world, and atmospheric pollution in our cities is a significant issue for the community 27. Transport activities are the largest contributor to urban air pollution28. Air pollution control strategies are designed to achieve compliance with ambient air quality standards established nationally through the NEPC. These ambient air quality standards are designed to protect public health.

Although the ambient air quality standards in an area may be met, there may be areas in close proximity to point sources, for example roadways, which exceed the ambient standards. People living in these areas are subjected to higher levels of pollution than the general population and, as a consequence, are at greater health risk.

27 ABS publication, Environmental Issues: Peoples Views and Practices 4602.0 (1998).

28 Parameter projections for the reviews of ADR 37/01 and ADR 70/00 by ACVEN, Coffey Partners,1996. Report prepared for the Federal Office of Road Safety, Hawthorn, Victoria

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Because of their numbers and use, road vehicles are the dominant source of transport emissions and, in most Australian cities, of all air emissions. The pollutants of particular concern are hydrocarbons, oxides of nitrogen (which together form photochemical smog), particulates and carbon monoxide.

The control of emissions from motor vehicles is therefore a primary tool in the management of urban air quality. Management strategies are based on two approaches: those designed to clean up vehicles, (discussed below) and those based on vehicle use, for example traffic management, congestion pricing, road design and usage patterns. Use based strategies are not relevant for the MVSA.

Strategies designed to clean up vehicles fall into three categories:

ensuring that vehicles are intrinsically low polluters when they are first brought into service (managing new vehicles);

ensuring that vehicles remain low polluters throughout their use (managing in-service vehicles); and

ensuring that the fuels provided for vehicles are suitable and do not damage or reduce the efficiency of emission control equipment.

Stakeholder Views

Submissions on environmental issues were received from all States and Territories (except Tasmania), VICAA, professional and motoring associations, private companies and the Total Environment Centre (TEC). A range of issues were addressed, some of which were not relevant to the MVSA per se, being issues pertaining to ADR content. Significant comments made by stakeholders included:

retain vehicle related environmental issues within the scope of the MVSA (Various, including Schnittler; R&T; ACT; WS Trucks);

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broaden the scope of the MVSA to include reference to emerging environmental issues such as fuel consumption,(Schnittler, p.5) and other less obvious matters such as recyclability of component parts and life cycle energy (TEC, p.1) and pollution issues;

include in-service emissions performance within the MVSA (DoE,QLD; p.2, DoEP,WA, p.1);

include closer linkages between the MVSA and NEPC to require consultation in the development of vehicle emission and noise standards (EPA,NSW; p.4, NEPC, p.2);

include provision for adopting strategies to encourage the adoption of better emissions technology in advance of their being mandated in ADRs (TEC, p.1);

Australia should be looking to harmonise with international best practice in emission standards (recognising that costs and benefits need to be assessed) (TEC, p.1);

impacts on human health should also be a driving factor for setting emission standards (CDoH&FS, p.2);

the MVSA should promote ways to better inform consumers about the environmental performance of vehicles (DoP&C, Vic, p.2); and

broaden the scope of the MVSA to allow the introduction of standards aimed at preventing the use of vehicle exhaust as a means of committing suicide (CDoH&FS, p.4).

Analysis

The only reference to environmental issues in the MVSA is in the definition of vehicle standard under which standards may be established which are designed to:

control the emission of gas, particles or noise from road vehicles.

This definition has enabled the introduction of ADRs setting limits on:

noxious exhaust emissions of carbon monoxide, hydrocarbons, oxides of nitrogen, visible smoke and particulates (ADRs 30, 36, 37, 70);

evaporative hydrocarbon emissions (ADR 37); and

noise emissions (ADRs 28, 39, 56).

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The Broader Environmental Focus

The MVSA is silent on a number of broader emerging environmental issues. This may be a disadvantage in the future as the internationally harmonised standards Australia is adopting begin to address issues such as lifecycle energy intensity (embodied energy), the ability to recycle or safely dispose of hazardous wastes generated in manufacture, use and disposal, which are currently outside the scope of the MVSA.

It is clear that environmental impacts of motor vehicles extend far beyond the emissions of the gaseous pollutants and noise listed above. The Prime Minister’s Statement on 20 November 1998, “Safeguarding the Future: Australia’s Response to Climate Change” includes commitments to improve fuel efficiency of motor vehicles. Overseas responses include control of carbon dioxide emissions, which are proportional to fuel consumption. The objective of reducing fuel consumption may be better served by other means, such as consumer information and establishing fleet based fuel economy targets. Recycling strategies to conserve resources and reduce the waste streams are also emerging issues in some countries, such as Germany.

Motor vehicle exhaust gas (carbon monoxide) is a significant factor in a significant proportion of suicides in Australia29. Carbon monoxide poisoning, as a result of leaking exhaust systems, is also a factor in accidental death inside vehicles. It is arguable that measures to reduce the incidence of suicide through motor vehicle exhaust are already within the scope of the MVSA.

Stakeholders also identified a need to encourage industry to adopt international best practice in vehicle emission technology. There is arguably a role for the MVSA in ensuring that consumers are provided with enough information to enable the market to operate effectively. This is discussed in Section 3.5.6 Consumer Information.

29 According to a study undertaken by the Monash University Accident Research Centre, motor vehicle exhaust is the second most used method of suicide among Australian males and the third most used method for Australian females. MUARC, Motor Vehicle Exhaust Gassing Suicides in Australia: Epidemiology and Prevention, September 1998, p.12.

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In-Service Standards

Pressure from State and Territory environment authorities, to develop and implement in-service environmental standards, has been building over time. The NRTC legislation has only recently been amended to specifically include environmental objectives. The revised legislation, in conjunction with the memorandum of understanding between the NRTC and NEPC, establishes a mechanism for developing and implementing national in-service environmental performance standards for motor vehicles through the Motor Vehicle Environment Committee (MVEC)30. The processes for the development and implementation of in-service standards are being established and should be allowed time to take effect.

3.5.3 FindingsSubmissions were generally supportive of vehicle related environmental issues being included in the scope of the MVSA. It is the view of the Task Force that the objectives clause for the MVSA should clearly articulate environmental issues.

Emission standards for new vehicles have been demonstrated to be an effective method for reducing the impact of vehicle emission on air quality31.

The Task Force is satisfied that the MVSA has had a positive impact on the application of national uniform environmental vehicle standards. The MVSA and the procedures used for developing and implementing individual design rules are effective and generally supported by stakeholders.

3.5.4 Anti -TheftUnder the MVSA, the definition of vehicle standards includes a standard which is designed to secure road vehicles against theft. Current arrangements with regard to vehicle security are specified in ADR 25 (Anti-Theft Lock), which refers to electronic and/or mechanical steering, gearshift and transmission locks.

As part of the current TTMRA review of the ADRs, consideration is being given to mandating vehicle engine immobilisers. In particular, the TTMRA/ADR review team is examining UN/ECE Regulation 18 – Protection Against Unauthorised Use, and UN/ECE R 97 – Vehicle Alarm Systems, as appropriate standards for adoption.

30 MVEC replaces the former Advisory Committee on Vehicle Emissions and Noise.

31 Review of Australia’s Vehicle Emissions Standards, Public Comment Document, Motor Vehicle Environment Committee, October 1998.

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Stakeholder Views

Submissions by the Insurance Council of Australia, AAMI, the Victorian Government and MTAA addressed vehicle security issues, and gave support for the recommendations contained in the report of the National Motor Vehicle Theft Task Force (see below). The NRMA recommended that anti-theft be included in the Objective of the Act, to “encourage FORS to target its resources to cost effective achievement of community outcomes”. (p.9)

The recommendation of the National Vehicle Theft Task Force to develop an ADR for vehicle immobilisers based on international standards is consistent with the objectives of the TTMRA review of the ADRs32..

Analysis

The National Motor Vehicle Task Force was established as part of the National Anti-Crime Strategy initiated by the National Leaders’ Forum in December 1994 33. The Task Force comprised senior representatives from key national industry bodies, including the motor vehicle and insurance industries, as well as police. Its report contained a number of recommendations falling within the ambit of the MVSA:

develop a cost-effective and feasible ADR for component identification;

introduce an ADR to replace the existing aluminium compliance plate with self-voiding, counterfeit protected, adhesive labels that include the VIN in both a readable text and bar coded format, affixed in two specified locations;

develop an ADR which requires stamping of the VIN in a substantial structural location; and

32 Confirmed by the Minister for Transport and Regional Development in response to a letter dated 30 March 1998 from the Hon John Day MLA, WA Minister for Police.

33 National Leaders’ Forum consists of State Premiers and Territory Chief Ministers.

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develop an ADR, which requires engine immobilisers on all new vehicles.

FORS submitted comments on the final report and met with an officer of Attorney-General’s to discuss the draft comments in March 1997. In responding to the report, FORS made the following points:

the recommendation concerning component labelling has wide ranging implications including the need to set up and service an infrastructure to identify and track stolen parts nationwide, and to develop a strategy to deal with aftermarket parts and the existing fleet. It may also not be compliant with Australia’s GATT obligations, as there is no equivalent international standard for component identification and a case would have to be made that the measure was not a trade barrier;

FORS has promulgated rules for the use of self-voiding, counterfeit protected adhesive labels as an alternative to the existing aluminium compliance plates; and

FORS supports an ADR for security systems provided it is based on the UN/ECE Regulation, and favours similar performance characteristics for aftermarket systems. A working group comprising representatives from Government, industry and consumer bodies is currently progressing this proposal.

3.5.5 FindingsMany of the issues raised in submissions and in the Report of the National Motor Vehicle Theft Task Force are essentially matters for State and Territory Governments and the insurance industry to consider and support if major gains are to be made in effectively combating motor vehicle theft.

With regard to the Commonwealth’s area of responsibility – the development and implementation of ADRs – work is currently being undertaken to address anti-theft issues. As a precursor to international harmonisation, the FORS review of ADRs is considering recommending the adoption of regulations covering engine immobilisers. In line with Office of Regulation Review Guidelines, the alternatives to regulation and the costs and benefits of the options will be considers before any new standard (Australian or international) is introduced. Consideration of the findings of both Australian and international reviews and expert reports on anti-theft devices will be undertaken as part of that process.

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3.5.6 Consumer InformationAn applicant for CPA submits a considerable volume of supporting information to FORS. This data is used to assess the application. All data submitted is classified as “commercial-in-confidence". The CPA document is made available for public information once approval has been granted by the Administrator.

FORS routinely makes the vehicle specifications available to the transport agencies responsible for registration of the vehicles by way of Road Vehicle Data sheets (formerly New Vehicle Data sheets). This information includes vehicle mass, major dimensions, height, width, length, engine details, tyres and vehicle options. They are also made available to the public.

FORS does not provide consumers with information about a vehicle’s safety, emissions or anti-theft performance other than through certification that it meets all applicable ADRs. Information provided to the public by FORS is limited to a listing of vehicles and components that are subject to a safety recall34 and the listing of low volume CPA holders and their low volume vehicle models35.

Stakeholder Views

Consumers currently have a good range of information available regarding vehicle safety through the State motoring organisations such as the RACV and NRMA. Consumers could be informed in a similar way on a vehicle’s emission efficiency (CARCON, p.3);

a further enhancement would be to provide easy access of information relating to safety and emissions requirements (AAAA, p.8);

government departments concerned with the issues addressed by the review should raise the levels of consumer awareness of vehicle safety and emission issues. It should do this directly, by developing wider areas of consultation and through increased funding to research institutes and by widening the spheres of dialogue (AAMI, p.12);

it is currently extremely difficult for consumers to assess which vehicle has the best safety, emissions or security features. Consumer decisions can be improved if more information is provided about these features, including recyclability of vehicles. The

34 Published in Vehicle Standards Bulletin (VSB) 3.

35 Published in VSB 8.

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review of the MVSA would be the appropriate forum for finding a uniform way of presenting information to consumers so that they are able to make an informed choice (DoP&C, Vic, p.2);

there should be greater access to consumer information regarding the safety and emissions performance of road vehicles through programs such as NCAP (DoTW, NT, p.4);

there should be greater access to consumer information regarding the safety and emissions performance of road vehicles (DoT, QLD, p.5); and

remove the “confidentiality” of certification from the compliance process and publish results for safety, emissions and anti-theft measures (AAA, p.5).

3.5.7 Information NeedsFuel Consumption

The fuel efficiency of a vehicle is a valuable piece of information for consumers. It assists prospective buyers to make an informed choice on the make and model of vehicle they wish to purchase.

The interest in this type of information has long been recognised by the production, until 1997, of the “Fuel Consumption Guide” by the then Department of Primary Industries and Energy. The guide was prepared from information provided on a voluntary basis by the FCAI. Fuel consumption data was derived from information collected during vehicle certification testing.

The Commonwealth is seeking to improve fuel efficiency of the vehicle fleet by 15 per cent (over business as usual) by 2010. Strategies to achieve this target include affixing model-specific fuel efficiency labels to all vehicles sold. This approach is consistent with that taken in the United States of America, and more recently, in Japan, South Korea, Canada, UK and Sweden.

Vehicle Safety Information

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Under the current administrative arrangements FORS receives limited (summary) test results from manufacturers to confirm compliance with safety and emissions ADRs. If the vehicle complies with the acceptable UN/ECE Regulation, test results are not required to be supplied. With further alignment of the ADRs with ECE Regulations, FORS will be provided with less rather than more information in the future.

Given the limited information provided by manufacturers, FORS is not in a position to provide meaningful information to consumers apart from the primary safety “hurdle” as to whether the vehicles meet or do not meet an ADR. Current legislation is adequate in this respect as a compliance plate can only be fitted to vehicles that comply with the ADRs.

Consumers are provided information on the relative crashworthiness of new passenger cars through the Australian New Car Assessment Program (ANCAP). Results of full frontal and offset crash tests on passenger cars and four wheel drive vehicles obtained in the ANCAP are published in "Buyer’s Guide to" booklets which are made available to consumers through automobile clubs such as the NRMA and State and Territory vehicle registration offices.

The ANCAP was introduced to provide new car buyers with information about the relative occupant protection of popular vehicles supplied to the Australian market. The purpose is to influence consumer demand and to encourage manufactures to design safer vehicles. ANCAP results can be used to compare the crash protection provided by vehicles of a similar mass in the event of a severe frontal crash.

The Australian motor vehicle industry supports the intention of ANCAP in providing information on vehicle safety, however some reservations have been expressed within the industry about the testing process36. These include allegations that there is a lack of repeatability and that the speeds are too high (ADR requirement for full frontal test is 48km/h, ANCAP tests were conducted at 56km/h).

Vehicle Emissions Performance

Durability data from FORS 1996 National In-Service Emissions Study37, together with the new vehicle emissions standards, are used by State Environment Agencies to develop emission inventories for vehicle emissions and air pollution models used for managing air quality within each managed air shed.

36 M. Case, M. Griffiths, J. Haley and M. Paine, Evolution of Australian NCAP Results. Presentation, the Sixteenth International Technical Conference on the Enhanced Safety of Vehicles, Windsor, June1998.

37 Motor Vehicle Pollution in Australia – Report on the National In-Service Vehicle Emissions Study, FORS,

May 1996.

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The data available shows that, on average, actual emissions for new vehicles are significantly lower than the “standard”. The durability of emission control equipment is currently specified as 80,000km or five years. The actual deterioration rate of emission control equipment can be determined more accurately if actual performance of new equipment is known. These data have been provided by industry, on a limited basis, in response to specific requests by State and Territory authorities.

3.5.8 FindingsThe Task Force considers that stakeholder comments on information issues show a public demand and Government need for this type of information. They also show that attempts have been made to provide the information needed. The lack of adequate product information has the potential to disadvantage customers. While a considerable volume of data is provided to FORS, in support of CPA, the data is not suitable for public release as it is not in a form to encourage or allow comparative analysis by consumers of motor vehicles.

3.5.9 OptionsProvision of Consumer Information by Government

Stakeholders have suggested the collection, analysis and publication of consumer information by FORS or another agency. A new aim proposed for the MVSA requires new procedures and functions to establish and fulfil that aim. Current suggestions that this information is already available to FORS are based on a misunderstanding of the nature of material provided by vehicle manufacturers in support of CPA. The Task Force notes that developing and publishing consumer information would require expansion and redefinition of FORS role.

The introduction of a new ADR or a revised ADR considers a particular vehicle design feature and does not provide information on the improved safety of the whole vehicle. The Task Force considers that the need for consumer information and the costs/benefits associated with its provision can be assessed as part of the Regulatory Impact Statement prepared for the ADR.

The Task Force notes that the 1999 amendments to the MVSA to enable the introduction of a new ADR to provide fuel consumption labelling is a positive step in that direction.

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3.5.10 Interaction of the Legislation

Term of Reference

Assess and report on the degree to which the Legislation, operating in conjunction with the National Road Transport Commission Act 1991 and other Commonwealth, State and Territory legislation, has been effective in preventing non-compliant or unsafe road vehicles entering the market.

Overview

A number of pieces of legislation interact with the MVSA. This requires consultation and joint action between Commonwealth portfolios, with the States and Territories and with national bodies such as the National Road Transport Commission and Ministerial Councils such as NEPC and ATC.

The interaction of the Customs Act with provisions of the MVSA have provided an effective mechanism for ensuring non-compliant or unsafe road vehicles are not supplied to the market.

Stakeholders identified a need for the inter-relationships between the legislation and administering bodies to be clearly enunciated in the legislation.

As indicated in Chapter 2, various legislation relates to the MVSA, including the Trade Practices Act 1974 (TPA) and the Customs Act 1901. The National Environment Protection Council (NEPC) Act 1994 and the National Road Transport Commission (NRTC) Act 1998 also have links with the MVSA in relation to the development of vehicle standards.

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The MVSA gives federal legislative effect to the ADRs for road vehicles when first supplied to the market, whereas regulations governing in-service vehicles are the responsibility of State and Territory governments.

The Task Force concludes that legislation has been effective in preventing non-compliant or unsafe road vehicles entering the market, with the exception of vehicles imported for dismantling and personal imports. (see Chapter 6).

Stakeholder Views

A number of stakeholders stated that they should be consulted in the development of the ADRs and that the MVSA should clearly define the ADR development process. The EPA SA suggested that the MVSA should articulate the arrangements to make future ADRs and make explicit the need for both the NRTC and NEPC to approve a standard prior to it being made by the Federal Minister for Transport.

A number of stakeholders argued that the MVSA should explicitly require the Minister for Transport to consult with the NEPC, because of the Council’s role in motor vehicle noise and emissions standards development.

Submissions also highlighted frustration with inconsistencies at the state registration level and requested that the MVSA incorporate the requirements for in-service vehicles as well as first supply vehicles. For example, the RTF contended that ‘‘the current regulatory environment provides too much scope for State based differences to be applied at registration. The Commonwealth through the MVSA should play a far greater role in ensuring States meet a national and consistent standard for ‘in-service’ vehicles”.

3.5.11 Trade Practices Act 1974 (TPA)Section 41 of the MVSA provides a link with the TPA. It states:

"For the purposes of sections 65C (other than subsection 65C(8)) and 65F of the TPA, a national standard (including a standard designed for a purpose referred to in paragraph (b) or (c) of the definition “vehicle standard” in Section 5 of this Act) is to be taken to be a prescribed consumer product safety standard".

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The Minister for Financial Services and Regulation administers the TPA, not the Minister for Transport and Regional Services. A written arrangement38 between the Attorney General and Minister for Transport and Regional Services requires the TPA Minister to consult with, and take advice from, the Minister for Transport where the latter considers that a compulsory recall is justified.

There is a current proposal by the Treasury to provide relevant Ministers with the power to instigate recall procedures directly. With regard to the MVSA, the proposal is that a Minister responsible for the administration of the Trade Practices Act 1974 would authorise or delegate his or her power in relation to sections 65F and 65L of the TPA to another person, such as the Minister responsible for Transport, so as to facilitate the more efficient conduct of compulsory recalls.

This would allow the Commonwealth Minister responsible for Transport and his Department to act quickly if a compulsory recall was required, and then notify the Minister for Financial Services and Regulation. The Task Force considers it would be more efficient if the authority were so delegated.

3.5.12 Customs Act 1901A large number of vehicles entering the Australian market do so via importation rather than from Australian manufacture. The MVSA then has to interact with the Customs Act 1901 and the Customs Tariff Act 1995 to ensure nonstandard vehicles do not enter the market.

Customs thus plays a key role in the practical administration of the MVSA. As the principal border regulator, Custom’s role is to ensure that motor vehicles entering Australia do so only when the necessary vehicle import approvals have been obtained. Importers without the necessary approvals cannot then obtain the necessary delivery orders from their shipping company or freight forwarder.

Customs is committed to ensuring that the commercial entry requirements and processes impose as minor an impediment as possible to the free flow of legitimate international trade.

38 Letter from Hon Lionel Bowen (Deputy Prime Minister and Attorney General) to Hon Peter Morris (Minister for Transport and Minister for Aviation) dated July 1986.

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Paper requirements such as the MVSA’s import approvals remain an inhibiting process in an otherwise largely electronic process.

The MVSA also interacts with the Customs Tariff Act 1995 in that the special duty of $12,000 that applies to imported used motor vehicles is exempted when the importer has a valid import approval under the Low Volume Scheme.

3.5.13 Legislation Relating to the Development of ADRsLegislation covering responsibility for the development of standards for motor vehicles, includes the NEPC Act and the NRTC Act as well as the MVSA.

Subsection 14(1)(g) of the NEPC Act provides that the NEPC may make a national environmental protection measure that relates to motor vehicle noise and emissions. However, subsection 14(2) of the NEPC Act provides that the noise and emission standard relating to the design, construction and technical characteristics of new and in-service motor vehicles may only be:

(a) developed and agreed in conjunction with the National Road Transport Commission; and(b) determined in accordance with the National Road Transport Commission Act 1991 and,

where appropriate, the Motor Vehicle Standards Act 1989.

The NRTC Act establishes a framework for a national cooperative approach to the development of road transport legislation consistent across all jurisdictions. The Act does not have the power to make regulations for vehicles when first used in transport. It is intended to establish uniform regulatory arrangements for vehicles in service.

The NRTC is also responsible for recommending to the Australian Transport Council adoption of vehicle standards for first use in transport (the ADRs). FORS and the NRTC work cooperatively in ADR development and FORS is responsible for their implementation and administration through the MVSA.

A number of stakeholders proposed that the MVSA should explicitly require the Minister to consult with the NEPC, because of the latter’s role in motor vehicle noise and emissions standards development. A similar argument could be made for consultation with the NRTC.

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The Task Force notes that neither the NRTC nor the NEPC existed at the time the MVSA was enacted.

There are already cross linkages between the NEPC and NRTC Acts regarding the need for each organisation to consult with the other on the development of standards. Indeed, the NEPC legislation references the MVSA as the sole mechanism for the determination of new vehicle standards. A Memorandum of Understanding has also been signed by the NRTC and NEPC that establishes consultative mechanisms on the development of emission and noise standards. This ensures that the support of environment and transport Ministers is required to introduce a new ADR. A Memorandum of Understanding between FORS and the NRTC also states that vehicle noise and emission standards will be developed in conjunction with NEPC. Given that mechanisms are already in place to ensure that both the NRTC and NEPC are fully consulted, it could be argued that there is no need to amend the MVSA to require the Commonwealth Minister responsible for Transport to undertake further consultation.

However, there are sensitivities on the issue of consultation with NEPC in particular39. EA considers that the MVSA should require the Minister to ensure that adequate consultation has taken place. EA argues that as emission standards are regulations for the benefit of the environment, it is inconceivable that the Minister "may" choose not to consult the appropriate (environment) Ministers.

On balance it would seem reasonable that the Minister not be required to consult (as adequate consultation would have occurred already), but it is reasonable to include a statement to the effect that the Minister should be satisfied that adequate consultation has occurred prior to him/her making a determination.

39 As evidenced by the inter-governmental debate about the words that appear in the new NRTC Act in relation to consultation with NEPC

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3.5.14 Vehicle categoriesVehicle categories (see Appendix D) are referenced in the ADRs to specify the minimum level of safety and emissions appropriate to the specific use of the vehicle. Vehicles are broadly categorised into:

two-wheeled and three wheeled vehicles;

passenger vehicles;

omnibuses;

goods vehicles; and

trailers.

The Act applies to road vehicles that are intended for use on public roads. Vehicles that are not designed primarily for road operation (such as agricultural vehicles, forklift trucks and mining vehicles) are not subject to the Act.

Stakeholder Views

Most stakeholders were supportive of Australia harmonising with UN/ECE classifications. Some specific comments included:

if Australia is to adopt UN/ECE standards, it is essential that the Australian classification system match the UN/ECE classifications (DE, H&AA p.3);

reclassify vehicles to align with UN/ECE and remove the anomalies particularly in respect of “off road” passenger vehicles (AAA p.8); and

the MVSA vehicle classification system should be consistent with that used in any international standards with which Australia harmonises (DoE, QLD p.2).

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Other stakeholder comments included:

the classification of vehicles should be reviewed to ensure that vehicles, which are typically used as passenger cars, cannot bypass the occupant protection requirements intended for passenger cars (AAMI p.9);

leakage of non road vehicles into road use is a concern. Better control on “special purpose” vehicles needs to be developed (R&T, ACT, p.2); and

while harmonising with UN/ECE vehicle classifications is desirable, the effect of including some of the ‘unusual” vehicles under the Act needs to be established (DoT, WA p.3).

Analysis

The vehicle categories in the ADRs are a consequence of the compromise found necessary to incorporate the various vehicle categories that were used in the consolidated draft regulations and State and Territory registration and licensing breakpoints. FORS recognises the need for the review of these categories to move towards alignment with the UN/ECE vehicle categories and is pursuing this as part of the TTMRA/ADR review project.

FORS have advised that it has difficulty in assessing if vehicles such as four wheel agricultural motorcycles and motorised scooters are covered by the Act, as the Act does not clearly indicate which vehicles are intended to be covered or exempt.

The Task Force has concluded that a clearer, more workable definition of a “road vehicle” may help to resolve current problems.

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CHAPTER 4 ADMINISTRATIVE ARRANGEMENTS

4 ADMINISTRATIVE ARRANGEMENTSTerm of Reference

Assess and report on the current administrative arrangements, including the effectiveness and efficiency of these arrangements in relation to vehicle standards and client service.

Overview

Favourable comments from FCAI which represents manufacturers and importers of 99 per cent of new vehicle registrations indicated that there was general satisfaction with the administration of the Act.

Some stakeholders have criticised the efficiency of the administration of the MVSA. These criticisms centre on perceived excessive information requirements and associated delays and inconsistencies in processing applications. The Task Force has noted anecdotal evidence that resource constraints and insufficient training within FORS are a significant contributing factor leading to client dissatisfaction.

The Task Force considers that greater emphasis on information management and dissemination within FORS would enhance administrative efficiency and notes that the introduction of the electronic RVCS is significantly improving application processing time and information management.

4.1 Current Administrative ArrangementsThe administrative arrangements in relation to vehicle standards and client service were outlined in Chapter 2 and encompass both the Full and Low Volume certification schemes. The Low Volume Scheme, a key issue for the review, is considered in Chapter 5.

This chapter considers the effectiveness and efficiency of processes and controls administered within FORS in relation to vehicle standards and client service.

Stakeholder Views

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Stakeholder comments on the effectiveness and efficiency of MVSA administrative arrangements were mixed. Favourable comments included:

the service delivered by FORS has been generally satisfactory (FCAI, p.49);

administration of the MVSA is considered satisfactory (Brentwood Trailers, p.2); and

the AAA believes that the administrative systems before and after the MVSA of 1989 and the revision of 1995 serve the motoring community well (AAA, p.11).

Other comments included:

the ninety day turnaround for new or amending application or running changes is costly in real terms and is no longer appropriate in today’s climate (FCAI, p.49);

VICAA noted that inconsistencies in the interpretation of the administrative procedures make compliance by industry participants in the global market place difficult and time consuming (VICAA, p.25);

the current certification process is unsatisfactory, imposing unnecessary additional costs and time constraints in granting certification to new equipment (RTF, p.2);

type approval administration is far from efficient. Unacceptable delays are built into the process of issuing compliance approval which prevent new products reaching the consumer in the shortest possible time. Compliance approval should be issued immediately upon receipt of summary of evidence and audit used to ensure continued compliance (Kenworth Trucks, p.6);

the current Australian type approval system does not work as effectively as it could for our particular organisation that produces heavy vehicles. The compliance documentation is not suitable for heavy vehicles and the information contained in them gives no guarantee compliance has been achieved and only absorbs unnecessary time for both parties. More support should be given to help manufacturers achieve better compliance procedures, methods and documentation (Western Star Trucks, p.3);

the delay in responding to manufacturers’ queries is not always commercially appropriate. Better support for quick response on ADR queries, better worded rules, more effort in

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developing rule interpretations/Administrative Circulars and distribution of copies of individual interpretations are necessary (Western Star Trucks, p.4); and

the main scope of improvement of the administration relates to the assessment time for documents provided. The present 90 day assessment period is excessive as very few organisations can afford to wait 90 days before amendments or changes to vehicle design are notified (Applied Engineering Analysis P/L, p.10).

Analysis

As noted in Chapter 2, FORS manages both the development of the technical regulations (ADRs) for road vehicles and the enforcement of compliance with these regulations.

Stakeholder comments concentrated mainly on the administrative arrangements surrounding the enforcement of the ADRs. There was very little comment about the technical efforts to develop the ADRs, the safety and technical research and testing to underpin the ADRs, the efforts to achieve harmonisation with international standards, or the recall functions once a safety defect has been found in vehicles released to the market. On this basis the Task Force can only conclude that those facets of FORS administration are seen as satisfactory.

Stakeholders commented, particularly in relation to the administration of the Low Volume Scheme, on backlogs which had developed in the processing of CPAs. There was also criticism regarding changes to administrative procedures which were perceived to be implemented by FORS without full consultation with affected parties and without full notification of details of the changes.

As described in Chapter 2, the certification arrangements are documented in Administrative Circulars and provided to stakeholders. However, the Task Force understands that ad-hoc changes to procedures may not always be formally conveyed to stakeholders. Hence some stakeholders are not aware of changes to procedures until they affect them.

The Task Force sees merit in FORS implementing a quality system based on ISO9002 to manage its business processes. In the interim,

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the Task Force recommends that changes to administrative procedures be fully considered before implementation, be transparent and that affected clients be fully informed.

4.2 Staffing and Workload issuesStakeholders raised concerns that FORS processing of applications for approval introduced unnecessary and lengthy delays.

FORS advises that over the past two years the workload in processing full volume, low volume and vehicle imports applications had increased by 44 per cent, 113 per cent and 55 per cent respectively, with a five-fold increase in low volume applications received over the past four years. The growth in workload, particularly in low volume applications resulted in a processing backlog which has contributed to the recent situation of applications taking on average 40 to 50 weeks to finalise. FORS identified concerns with both operational procedures and inadequate resources. Resources are controlled by factors outside of the certification process.

FORS solution was to embark on a comprehensive business re-engineering process, which has led to the introduction of a new electronic lodgment system, known as RVCS. This system is further discussed in section 4.5 on Systems.

Whilst RVCS was being developed FORS reorganised its staff with a view to create a team working environment and to foster a climate of continuous learning and development. This resulted in more resources being allocated to certification and a drop in audit activity to the point where FORS only conducted 24 audits in 1998 (overseas agents employed by FORS also conduct audits in their own countries). Previously FORS had been conducting upwards of 40 audits per year.

The Task Force notes that recent improvements have been made in training FORS staff and progress is being made to implement documented procedures.

4.3 Information ManagementStakeholders raised concerns that FORS does not adequately record and disseminate information relating to ADR interpretation and decisions on minor and inconsequential ADR non-compliance. This results in criticism from clients that they may be asked to provide

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information which has been previously submitted, leading to frustration and unnecessary delays.

In some instances there are tensions between clients expectations and FORS capacity to process information to meet regulatory decisions. At a Task Force meeting with VICAA members in November 1998, one VICAA member, who is also a certification consultant, pointed to examples where his applications were delayed as a result of FORS queries. These queries related to matters where FORS sought information on matters which were not the subject of query in the past, or where information provided previously was accepted by FORS but sought again, and where FORS requested information in excess of that required on the summary of evidence form. The VICAA member claims that a number of his clients’ applications were lodged with FORS up to two and a half years ago but were yet to be granted a CPA.

FORS recognises that it is performing regulatory functions in an environment where commercial demands (as shown by the increasing number of applications) are not matched by the charges paid by industry or resource flexibility in response to client demands.

FORS has advised that complaints from full volume manufacturers are negligible. Complaints from low volume manufacturers are recognised as important – and a significant imperative to improve FORS administrative arrangements.

FORS advises they are now monitoring the processing time of all applications and this has revealed that there were 48 applications that had not been finalised within two years from initial application, 24 of which exceed two and a half years. The average processing time for low volume applications was 40 to 50 weeks. FORS processing queues and a backlog contribute partially to this excessive delay. Delay in responses from manufacturers is also a contributing factor.

Revised methodologies are now being applied to monitor the progress of applications and the ability to expedite complete and correct applications. This can deliver a processing time of as little as 10 weeks.

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Typically, however, where applications are deficient, or where the applicant delays their responses to FORS processing inquiries, the overall processing time expands to an extent within the applicant’s control. For example, within the first registration processing stage, there is only a two week FORS queue delay, however some 120 applications have been awaiting resolution of registration inquiries for on average 16 weeks. Following FORS clearance of an application, a vehicle inspection is scheduled in, typically, four weeks. This scheduling is delayed because some 120 applicants have failed to submit the required vehicle inspection certificate with over 80 of these being outstanding for in excess of 12 weeks. There are similar delays in applicants’ responses at all major processing stages. FORS is actively pursuing outstanding responses to ascertain if the application is still active. If they are not, management of the inactive applications is ceased.

The Task Force notes the improvements in processing time and notes that the implementation of RVCS for low volume applications is expected in July 1999 which should allow further improvements. The Task Force understands that FORS management recognises that tasks to improve efficiency, such as documenting procedures and previous decisions, need to be undertaken.


FORS develop an information management system which provides FORS staff with a comprehensive and readily accessible database which includes all current ADR interpretations to draw on when considering applications.

4.4 Test Facility Inspections and Conformity of Production AuditsAs described in Chapter 2, FORS currently adopts a risk-based approach to scheduling TFIs and COP audits. When the system of audits was first implemented in 1985, the procedure (documented and published in Determination No.1 of 1990) specified that all facilities be audited or inspected every 18 to 24 months. The Task Force understands that due to subsequent resource restrictions, and in line with good management practice, FORS now adopts a risk management approach to the management of its audit role.

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This exposes the regulator to criticism that it is not fulfilling its responsibility to ensure that vehicle manufacturers continue to produce vehicles meeting compliance requirements. FORS has advised that it has improved its audit reporting and follow-up procedures to ensure that facilities respond to audit reports within the specified timeframe.

4.5 Systems

The certification process has been supported by a computer system called the Motor Vehicle Certification System (MVCS). FORS staff use this system to register receipt of vehicle import and certification documentation and to print the CPA certificates and certain vehicle data. The MVCS process relies heavily on submissions of evidence submitted on paper forms. The Task Force found that, while there had been improvements over the years, FORS staff still spend an excessive proportion of their time handling paper forms rather than focusing on compliance issues.

In response to the inherent inefficiencies associated with MVCS, FORS introduced the new electronic certification system called the RVCS, for full volume manufacturers from March 1999. Full implementation is expected by mid 1999. This electronic/Internet based system is designed to improve consistency in evidence examination and to automate much of the repetitive work, thus relieving pressure on existing resources. RVCS reduces paperwork and the time taken to process applications.

The electronic lodgment process provides immediate feedback to the applicant of many of the common errors detected in submitted evidence. The applicant will therefore be able to take corrective action before even submitting the evidence, and hence reduce the overall time taken to obtain an approval. FORS eventually expects to issue an approval within 32 days of receipt of the last piece of satisfactory evidence from the manufacturer.

RVCS provides easily accessible and current information on certification requirements. It also includes a provision to create a database of Administrator’s advice that had been issued to industry. The database can be easily accessed for research and consultation by stakeholders, including certification consultants.

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The Task Force is of the view that implementation of RVCS will resolve many of the issues outlined above.

The Task Force recommends that the operation of RVCS be closely monitored and any feedback from clients and FORS staff on the operational efficiency and capacity of the system be recorded and addressed through upgrades and improvements to the system.

4.6 Improvement to PerformanceFORS has implemented measures to improve its administrative performance.

They include:

a Process Tracking System to monitor the progress of CPA applications for low volume vehicles;

monitoring and reporting its CPA performance in the Department’s Client Service Charter 40 Quarterly Reports;

informing prospective low volume applicants about its service standards regarding the status of low volume applications;41 and

implementing the RVCS for trailers in May 1998, and full volume vehicles commencing operations in March 1999.

The Task Force notes that FORS monitors and maintains records of its performance to ensure that service standards are met.

FORS has advised that the above initiatives have improved its client service performance. FORS performance information is available to stakeholders.

4.7 FundingAs a division of the Department of Transport and Regional Services, FORS is funded through the Commonwealth Budget process. Revenue derived from services provided by FORS flows to consolidated revenue. There is no direct connection between the cost of the certification

40 Department of Transport and Regional Services Client Service Charter, June 1998.

41 Low Volume Information Package. May 1996.

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services FORS provides and the revenue collected from those services. Consequently this revenue does not necessarily generate the resources necessary for the regulatory agency to rapidly respond to the needs of the delegated legislation.

Funding arrangements are considered in Chapter 9.

4.8 Type approvalThe Australian Type Approval system is widely recognised as a cost effective and efficient process to provide a high degree of assurance of the compliance of new vehicles supplied to the market. Type approval, including Conformity of Production audits and Test Facility Inspections, draws on the quality assurance systems of the vehicle manufacturer and the current Australian arrangements serve as a model for other countries 42. Currently, both the Full Volume and Low Volume Schemes operate under the type approval system.

The majority of full volume vehicle manufacturers are generally supportive of the type approval system for new vehicles. The criticisms of the system, addressed earlier in the chapter, are mainly on the administration of the system.

In the case of type approval for used vehicles however, the FCAI (p.20), VICAA (p.6) and the Department of Premier and Cabinet of Victoria (p.3) stated in their submissions that type approval is inappropriate for used vehicles as their use history is unknown and the specifications may vary over the life of the model.

The FCAI (p.23) has proposed that imports of used vehicles not be allowed under the full volume arrangements. The FCAI believes that type approval is not a suitable way of dealing with used vehicles, as used vehicle importers cannot meet the fundamental requirements of the type approval system, as there is no control over the production process.

FORS conducts COP audits on new vehicle manufacturers’ production processes to check if there are sufficient controls to ensure their vehicles continue to comply with the ADRs. For used vehicles however, FORS does not conduct a COP audit on the manufacturers but relies 42 FCAI submission, p.20.

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instead on the COP requirements described in Administrative Circular 0-4-543. The intent of this circular is to provide some assurance that all used vehicles fitted with compliance plates do comply. However, the system is open to abuse, as FORS does not routinely monitor if the CPA holders are meeting these requirements.

Currently, except for used motorcycles, no stakeholder has a valid approval for full volume used vehicles. At 30 June 1998, there were 32 Full Volume CPA holders of imported used motorcycles, 18 of whom were importers of used motorcycles from Japan. FORS is not able to provide accurate data on imports of full volume used motorcycles. Industry sources advise that their best estimate is that around 5,000 used motorcycles were imported in 1997 44.

There are differing views whether type approval for used vehicles is appropriate. One view is that manufacturers of these vehicles do not have control over design changes made to the original vehicles and therefore type approval is not appropriate. Another view is that there are no significant safety issues to address, since demonstration of compliance with all the applicable ADRs must be submitted prior to approval being granted and there are established procedures, set out in the Administrative Circulars for dealing with conformity of production arrangements for used vehicles.

Given the present problems with administering the current low volume type approval scheme, the Task Force is of the view that this type approval is not appropriate for used vehicles. It then follows that a system of approvals on a vehicle by vehicle basis is necessary. It would be impossible and undesirable that FORS be obliged to inspect each individual used vehicle to ensure compliance. The Task Force takes the view that the only practical solution is to shift the responsibility for approving each individual vehicle from FORS to a third party. In this case, the engineering premises that performs work on imported used vehicles to bring them to compliance in either full volume or low volume schemes would issue individual vehicle approvals. The registered workshop concept is described in Chapter 5.

In the case of full volume used vehicles such as motorcycles, the Task Force considers that a system based on some elements of the type approval system together with the inspection elements of the registered workshop concept may be appropriate. Full volume used manufacturers continue to supply FORS with an application together with the required 43 Administrative Circular 0-4-5, Issue 5, February 1994.

44 FCAI submission, p.14.

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evidence of compliance for each applicable ADR. The rationale is that full volume used vehicles need to comply with the ADRs applicable at the date of importation and that demonstration of compliance with the ADRs is through the normal procedures. Given these conditions, the Task Force does not see a need to limit the number of used vehicles such as motorcycles for each CPA holder.

4.9 Self CertificationSelf certification is a system whereby vehicle manufacturers give an undertaking that the vehicles supplied to the market comply with all applicable regulations. Currently the USA operates this arrangement for safety regulations and a type approval system for environmental protection requirements. Manufacturers affix a sticker to the vehicle as an assurance of compliance with the regulations.

Government conduct post market testing of vehicles purchased in the market and take action against manufacturers of vehicles failing to comply. This activity has a number of costs and benefits.

Reduced costs to industry compared with type approval at the time of supply to the market

The vehicle manufacturer is not required to submit information to the regulator or await approval thus reducing costs and allows early supply to the market.

Cost of government post market activity

Effective assurance of compliance with mandatory requirements involves purchase of vehicles and testing by the regulator. This activity involves high costs and in the US for example a budget of approximately US$18million is provided.

In the event that vehicles are found not to comply with mandatory requirements action is taken by the regulatory authorities either in the courts or through mandatory recall. Resolution in the courts can be a lengthy process during which time potentially unsafe vehicles remain in the market.

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Disadvantages to international trade

Where sovereign governments issue an approval, assurance can be provided to trading partners that automotive product complies with agreed technical regulations. Type approval provides the basis for the United Nations ECE “1958 Agreement” which has over 30 signatories where approved product is traded without further inspection and testing.

The Task Force considers that the current system is working well and should be retained.

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CHAPTER 5 LOW VOLUME SCHEME

5 Low Volume Scheme

Terms of Reference

Assess and report on:

the effectiveness and efficiency of the Low Volume Manufacture Scheme, in terms of ensuring vehicle safety, emissions compliance and reducing compliance costs for imports of enthusiasts’ or specialist vehicles supplied to the Australian market in small numbers;

the level of compliance costs for industry and regulatory costs for governments, the impact on small business and ways to reduce the compliance and paperwork burden;

the costs and benefits to the community and industry of alternative arrangements, including non-regulatory arrangements, for establishing and ensuring compliance with appropriate vehicle standards;

the costs and benefits to the community and industry, including impacts on trade, of harmonising Australian vehicle standards with international vehicle regulation and of maintaining some unique Australian vehicle standards; and

the preferred approach for meeting future vehicle standards requirements.

In assessing future options and preferred arrangements, the review is to have regard to the National Competition Principles Agreement and a range of relevant matters, including:

the role of the Low Volume Manufacture Scheme within the overall vehicle certification and compliance scheme.

Overview

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The Low Volume Scheme was identified as a key issue for the review. It raises a complex range of issues including the relative importance of consumer choice and consumer protection, industry policy, equity and administrative efficiency. The Scheme attracted comment in more than half of the submissions and about two thirds of all recommendations by stakeholders related to the Scheme. This chapter discusses the policies behind the Scheme, the effectiveness and efficiency of the Scheme’s operation and options for improvement.

5.1 Role of the Low Volume SchemeThe Low Volume Scheme was introduced in 1970 to facilitate the issue of certificates of compliance to manufacturers (in Australia or overseas) producing less than 50 vehicles each year of a particular model45. This was in recognition of the difficulty and costs incurred in testing vehicles to ADR requirements for low volume manufacturers. In 1972, the Scheme was extended to include vehicles produced in volumes of up to 100 vehicles each year 46. Currently there are two low volume vehicle categories, up to 25 vehicles per annum and up to 100 vehicles per annum.

The Scheme was originally designed to assist low volume manufacturers of new vehicles. These were imported vehicles such as Ferrari and De Tomaso, USA cars converted to right hand drive such as Buick and Cadillac and Australian built sports cars such as Bolwell. The Scheme was progressively extended to include low volume second stage manufacturers of limousines, ambulances and bus bodies and, from 1985, to used vehicles which were not covered by a Full Volume approval47 .

The Low Volume Scheme provides an avenue for the supply of small numbers of vehicles that may otherwise not be available to the market in Australia due to the need to amortise the high costs associated with certification of vehicles produced in small numbers. The Low Volume Scheme thus provides consumers with a greater choice of vehicles.

45 Administrative Circular No. 9, 17 April 1970.

46 Administrative Circular No. 31, April 1972.

47 Administrator’s Circular 0-2-1, Issue 10, June 1985.

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The Low Volume Scheme today predominantly involves imported used vehicles. As a consequence, most of the participants in today’s Scheme are vehicle importers and converters, not prime manufacturers.

The Low Volume Scheme is a government policy which is implemented by the discretion of the Minister under Sections 10A and 14 of the Act.

5.2 ConcessionsThe Low Volume Scheme provides three major concessions compared with the Full Volume Scheme. These are:

alternative certification procedures which allow for lower levels of assurance of compliance with some ADRs;

applicability of ADRs for used vehicles which were current when the vehicle was originally manufactured; and

exemption from the $12,000 special duty on used passenger motor vehicles imported under the Full Volume Scheme.

5.2.1 Alternative Certification ProceduresThis concession applies to both new and imported used vehicles.

The alternative certification procedures allow for a lower level of assurance of compliance with some ADRs, in particular those which require destructive testing, such as crashing a vehicle head-on onto a solid concrete barrier. Basically, the alternative certification procedures do not require the manufacturer to conduct expensive testing to show compliance with the ADRs. Instead, the low volume manufacturer48 can show compliance based on any relevant information to demonstrate that the ADR requirements are met. This information can include a description of the components, drawings, technical justification as to how the vehicle or component complies or evidence of compliance with an acceptable overseas standard, such as FMVSS. The alternative procedures also include a visual inspection of the vehicle by FORS officers to assess compliance with the ADRs.

48 The "Manufacturer" is defined in the ADRs as “the name of the person or company who accepts responsibility for compliance with the ADRs and to whom the Compliance Plate Approval certificate is issued".

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The level of assurance of compliance required differs between the up to 25 and up to 100 vehicle categories. Manufacturers of up to 100 vehicles per annum are required to provide evidence through normal certification procedures for some ADRs which require destructive testing, for example ADR 3 for seats and seat anchorages. The rationale is that a higher level of assurance of compliance should be required with the larger number of vehicles. A comparison of the relative requirements is at Appendix H.

The Task Force understands that the rationale for the alternative procedures was that low volume vehicles would be forced out of the Australian market unless alternative certification arrangements were established. In addition, the revised procedures facilitated the entry of Australian second stage manufacturers, the majority of whom were low volume manufacturers, into the certification system.

5.2.2 Applicability of the ADRsAll new vehicles must comply with currently applicable ADRs. Imported used vehicles are only required to comply with ADRs that were in force at the date the vehicle was originally manufactured.

Prior to December 1985, all vehicles, including imported used vehicles, had to comply with the current ADRs. However, this was not consistently applied across all the States and Territories as some vehicles were being registered despite them not having an identification plate. Consequently in December 1985, the Australian Transport Advisory Council agreed to grant a concession to imported used vehicles49. The concession is that imported used vehicles are only required to comply with the ADRs that were in force at the date the vehicle was originally manufactured.

This ADR concession does not apply to used trucks with a Gross Vehicle Mass exceeding 12 tonnes and buses with more than 12 seating positions. Used heavy trucks and buses, must comply with the ADRs applicable at the date of importation.

5.2.3 Special DutyUsed passenger motor vehicles imported under the Low Volume Scheme are not subject to the $12,000 special duty which applies to full volume used imports. This concession is afforded on the basis that low volume vehicles do not pose a threat to locally produced vehicles because of the types of vehicles which enter the market and the relatively small total numbers. However, as with all imported vehicles, they are subject to the applicable ad valorem duty, currently 17.5

49 ATAC Minutes DA85/34, Issued March 1986, p.9.

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per cent in the case of passenger motor vehicles and a 22 per cent wholesale sales tax. (see also 6.4.3).

5.3 Basis of the SchemeThe Low Volume Scheme is an administrative scheme, applied by means of a number of Administrative Circulars50. The Circulars provide the policy and the administrative arrangements for applicants to follow in order to gain the approval to fit compliance plates to vehicles supplied in low volumes.

Compliance Plate Approvals are granted to standard vehicles (new or used) under section 10A of the Act. Approvals are granted to nonstandard vehicles (either new or used) under Section 14 of the Act. These vehicles are deemed nonstandard as they only comply with the ADRs applicable at their date of manufacture.

5.4 Administrative ArrangementsFORS’ current administrative arrangements have been described in Chapter 4. This section specifically addresses the issues peculiar to the Low Volume Scheme.

Making applications for CPA requires a knowledge of ADR requirements and the associated administrative procedures. Full volume manufacturers generally have personnel dedicated to handle their CPA applications. Importers of used vehicles usually employ external certification consultants to carry out the work on their behalf.

A description of the current procedures for submitting and processing applications for CPA under the Low Volume Scheme is at Appendix I.

50 Circular 0-2-1, Certification of Low Volume Motor Vehicles.

Circular 0-2-9, Quality System Documentation – Low Volume Manufacturers.

Circular 0-4-1, Procedure for the Certification of Motor Vehicles Produced in Low Volume.

Circular 0-4-5, Certification of Commercially Imported Used Vehicles.

Circular 0-4-15, Low Volume Certification – Revised Procedures.

Circular 0-4-16, Issue of Motor Vehicle Standards Compliance Plates to Low Volume Manufacturers.

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5.4.1 Eligibility CriteriaTo be eligible for certification under the Low Volume Scheme, vehicles must meet certain eligibility criteria. The intent of the eligibility criteria is to preclude vehicles that are already being marketed in Australia in full volume. The underlying rationale is that the low volume concessions, with their consequent reduced assurance of compliance, should not be extended to the same vehicle which is already available in Australia and which has full volume CPA.

Since the inception of the Low Volume Scheme in 1970, the eligibility criteria have been gradually changed over the years to accommodate the increasing range of vehicles brought into Australia under the Low Volume Scheme. In 1995, the eligibility criteria were changed to restrict the import of passenger cars to enthusiast vehicles. Only passenger cars meeting five out of seven ‘enthusiast vehicle’ criteria are eligible for certification under the Low Volume Scheme. The eligibility criteria are published in Administrative Circular 0-2-1 (Issue 14 December 1995). (see Appendix J).

5.4.2 Limits on Vehicle NumbersThe Low Volume Scheme limits the number of vehicles that can be certified annually under the Scheme by one manufacturer. The rationale is that the Scheme offers a lower level of assurance of compliance than the full volume certification arrangements and hence the numbers must be limited.

In 1970, the limit was 50 vehicles per model per annum. Between 1972 and 1977, the limit was up to 100 vehicles per model per annum. From December 1977 until August 1993, the limit was 100 vehicles per annum for each CPA holder for all vehicle categories and applied to both new and imported used vehicles. This number limit was the outcome of two separate reviews conducted in 1976.

The first review was conducted by a sub-committee of the AMVCB which looked at proposals for including second stage manufacturers (mainly low volume manufacturers such as body builders) into the certification system and implementing alternative certification arrangements for low volume manufacturers51. The second review was of the Australian Design Rule System. It was conducted by the Office of Road Safety of the Federal Department of Transport 52.51 Report of the sub-committee of the AMVCB concerning low volume vehicles, Document CB76/916 Rev. 1, Issued

July 1976.

52 The Australian Design Rules for Motor Vehicle Safety and Emission Control – a Review of the Development and

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In August 1993, in response to a significant increase in the number of used passenger cars imported from Japan, the maximum number for used passenger cars was limited to 25 vehicles per annum for each CPA holder53. The “100 vehicles” limit was retained for all other categories of vehicles.

Although the numbers of vehicles are restricted for each CPA holder, there is no limit on the number of participants in the Scheme. An individual can, in effect, have approvals in more than one vehicle category and therefore deal in multiples of the “25 vehicles” or “100 vehicles” limits.

5.5 Current State of the Low Volume SchemeThe Low Volume Scheme today caters predominantly for imported used vehicles. New vehicles only represented 4.5 per cent and 1.9 per cent of the total vehicles imported under the Low Volume Scheme in 1997 and 1998 respectively.

In 1997 and 1998, 18 models of new vehicles were imported - all (except one motorcycle model) were passenger cars. Of these Ferrari and Lotus models accounted for more than 86 per cent of the new vehicles imported under the Scheme. Four new motorcycles were imported in 1997 and only two were imported in 1998.

Currently, 82 models of used vehicles are eligible to be imported and certified under the Low Volume Scheme. Of these, 51 are passenger vehicle models, 20 are commercial vehicle models, nine are four wheel drive vehicle models and two are moped models.

There are currently three (two passenger cars and one motorcycle) low volume manufacturers of new vehicles in Australia. They fitted compliance plates to 21 and 17 vehicles in 1997 and 1998 respectively. Of these, 17 and 14 compliance plates respectively, were fitted by one passenger car manufacturer.

Administration of the System. October 1976.

53 Hon Neil O’Keefe, MP, Parliamentary Secretary for Transport and Communications, Media release 17/93,

23 August 1993.

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As numbers of imported and locally manufactured new vehicles certified under the Low Volume Scheme are insignificant, the following discussion relates only to imported used vehicles certified under the Scheme.

The number of imported used vehicles supplied to the Australian market under the Low Volume Scheme is comparatively small. They represent 35.4 per cent (7708) of the total vehicles issued with import approvals in 1998 (21751), and 0.9 per cent of total new vehicle registrations for that year54. A breakdown of the type and number of used motor vehicles imported under the Low Volume Scheme since 1993, compared with new motor vehicle registrations, is at Appendix K. For 1998, used passenger vehicles and off road vehicles represented 1 per cent of the total new passenger and off road vehicle registrations. For trucks and light commercial vehicles, the figures are 0.3 per cent and 0.7 per cent respectively.

Since the early 1990s (Tables 5.1, 5.2 and 5.3), there has been significant growth in the number of imported used vehicles, in particular four wheel drives55. There has been a significant increase, especially over the last three years, in the proportion of used vehicles imported under the Low Volume Scheme. However, the numbers are still small (1 per cent) compared with the total new vehicle registrations.

54 In comparison, imported new vehicles make up some 60 per cent of the total new vehicles (722,642) sold in Australian in 1997.

55 Source: FORS Motor Vehicle Certification System.

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Table 5.1 Number of used vehicles (except motorcycles) imported under the Low Volume Scheme

Year 1993 1994 1995 1996 1997 1998

Number of Vehicles 1037 1318 1709 2873 5030 7708

Index 1.00 1.27 1.65 2.77 4.85 7.43

Table 5.2 Number of used vehicles (except motorcycles) imported under the Low Volume Scheme compared with total number of imported used vehicles

Year 1993 1994 1995 1996 1997 1998

Low Volume Used Vehicles

1037 1318 1709 2873 5030 7708

Total Used Vehicles 4780 6866 8862 12527 14348 16634

% Low Volume 21.7 19.2 19.3 22.9 35.3 46.3

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Table 5.3 Number of used motor vehicles (except motorcycles) imported under the Low Volume Scheme by Vehicle Category

Year 1993 1994 1995 1996 1997 1998Passenger Cars

Number of Vehicles 992 1250 1556 2535 3181 4551Index 1.00 1.26 1.57 2.56 3.21 4.59

Four Wheel Drives

Number of Vehicles 3 3 22 88 1435 2368Index

Light commercials

1.00 1.00 7.33 29.33 478.33 789.33

Number of Vehicles 35 55 91 203 302 727Index

Heavy Commercials

1.00 1.57 2.60 5.80 8.63 20.77

Number of Vehicles 7 10 36 47 131 62Index 1.00 1.43 5.14 6.71 18.71 8.86

TOTAL 1037 1318 1705 2873 5049 7708Index 1.00 1.27 1.64 2.77 4.87 7.43

Low Volume CPA holders for imported vehicles are predominantly locally owned businesses. As at 30 June 1998, there were 527 Low Volume CPA holders, of which some 330 were involved in converting used vehicles imported from Japan56.

VICAA has claimed that the low volume imported used vehicles sector employs 1,800 people directly and 2,500 indirectly and contributes $350 million annually to the Australian economy 57. The Task Force was unable to substantiate these figures. VICAA represents 34 per cent of the total low volume CPA holders.

56 Vehicle Standards Bulletin number 8, FORS, July 1998.

57 VICAA, p.35.

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5.6 Industry PolicyThe Task Force recognises that the Low Volume Scheme has important considerations from an industry policy view point. To assist the Task Force, the Department of Industry, Science and Resources has provided the following industry policy analysis58.

Australia has an automotive manufacturing industry which directly employs around 55,000 people, has a gross turnover of more than $13 billion, and exports goods and services worth nearly $3 billion. Current industry plans anticipate $4 billion in new investment and 5,000 new jobs by 2005, and a doubling in annual exports by that year.

The automotive industry requires stability in policy if it is to maintain current investment levels and realise its planned future investments. The Government reiterated its commitment to a viable automotive manufacturing industry in Australia when announcing the framework for post-2000 automotive policy on 5 June 1997. That framework, elaborated in subsequent announcements of the Government, put in place substantial measures to secure the industry's future on a competitive, self-sustaining basis.

Current arrangements include:

phased tariff reductions of 2.5 per cent per year until the passenger motor vehicle tariff reaches 15 per cent on 1 January 2000;

the Export Facilitation Scheme (expiring on 31 December 2000) and Duty Free Allowance, which provide assistance for eligible production through duty relief; and

an Automotive Market Access and Development Strategy.

Arrangements from 2001 will include:

58 DISR paper, Industry Policy Aspects of the Low Volume Scheme, dated 19 February 1999.

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a continuing tariff of 15 per cent until 2004, dropping to 10 per cent in 2005; and

a new Automotive Competitiveness and Investment Scheme (ACIS),operating from 2001 to 2005, to provide incentives for production, investment and research and development, through duty relief.

Imports of used vehicles could threaten the viability of automotive manufacturing in Australia if they enter in volumes and as models which could generate significant substitution for locally manufactured vehicles, whether sold as new or used. This risk is particularly acute if the imported used vehicles have been depreciated in their country of export at a more rapid rate than have vehicles sold new for the first time in Australia. Such a difference in depreciation rates can occur because of the particularly stringent periodic inspection regimes applied in an exporting country.

It is for this reason that the $12,000 special duty applies to full volume imports of used vehicles. It is important in terms of industry policy criteria that the concession allowing exemption from that duty not be used to expand imports of used vehicles to a level that threatens local manufacturing. In 1998, some 7,657 used vehicles were imported under the Low Volume Scheme. While this represents around 1 per cent of the total new vehicle market, since 1995 the number of these vehicles has been growing annually at an average of 65 per cent. This growth rate could pose such a threat.

The nexus between the regulatory concession and exemption from the $12,000 special duty was based on the view that specialist and enthusiast vehicles would be imported for a small niche market which offered no competition to the passenger motor vehicle segment and which could be expected never to grow at significant rates.

Importers of used vehicles argue this threat is overstated. They note that New Zealand, which allowed general entry of used vehicle imports and subsequently abandoned local manufacturing of vehicles, permitted parallel imports of vehicles then being manufactured in New Zealand. Importers also argue that the price of entry of imported

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new vehicles in Australia is now so low that these, rather than imported used vehicles, pose the more serious threat to local manufacturing.

Used vehicle imports, however, can act as substitutes within specific market segments, regardless of price trends within other market segments. The more rapid depreciation of highly specified, little travelled, right hand drive vehicles in an exporting country, relative to the depreciation rate of similar vehicles manufactured in Australia, can produce considerable incentive to import these vehicles as direct substitutes for the Australian vehicles sold new or second hand. The effect is to devalue the locally produced vehicles sold into the domestic market. This potential substitution, moreover, can occur between classes of vehicles, and most notably between four wheel drives and upper medium passenger vehicles.

On balance, therefore, it may not be possible to continue the concessional treatment currently afforded imports of used vehicles under the LVS without compromising the Government’s commitment to a local automotive manufacturing industry. Senator the Hon Nick Minchin, Minister for Industry, Science and Resources, has stated in relation to the current MVSA review that the Government would consider whether any measures needed to be taken to ensure the integrity of existing automotive policy was maintained59. The Government will consider the industry policy implications of the Low Volume Scheme concurrently with the recommendations of the review.

5.7 Competition PolicyThe MVSA and its attendant administrative arrangements set basic safety and other standards with which vehicles must comply if they are to be supplied to the Australian market.

The Low Volume Scheme addresses a need for the provision of certain vehicles to the market, while maintaining appropriate vehicle safety and emission standards. It allows consumers a wider choice of vehicle models and provides an incentive for small businesses to enter the market. However, the Scheme with its concessions and restrictions on the type and number of vehicles has an impact on competition. (Section 3.4)

All participants in the Scheme are treated the same. However, Full Volume CPA holders are not permitted to participate in the Low Volume Scheme for the same vehicle category. This is discriminatory as it can limit full volume manufacturers’ entry into the specialist and unique vehicle market. The removal of such a restriction would free up the market for more

59 Senate Economics Legislation Committee, 10 February 1999

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participants and a broader range of vehicles being supplied to the market, especially for full volume CPA holders wishing to test vehicles with advanced technologies or introduce more exotic models into the market.

On balance, the Task Force considers that the benefits of the Scheme in terms of permitting the supply of certain vehicles to the Australian market outweigh the costs of administering the Scheme and the impact that it has on limiting competition. Without the concessions, it may not be economically viable for businesses to provide such vehicles because of the increased costs associated with their certification.

5.8 FindingsThe Low Volume Scheme provides an avenue for small numbers of vehicles that would otherwise not be available to be imported into Australia, thus providing consumers with a greater choice of vehicles. The Task Force notes that there are a number of problems with the current Scheme. This section discusses three major issues namely, the limits placed on vehicle numbers for each CPA holder, the eligibility criteria and the low volume administrative arrangements.

However, the Task Force is of the view that the Low Volume Scheme should be retained, albeit in a different form. An alternative arrangement is discussed in the options section of this Chapter.

5.8.1 Administrative ArrangementsSince their introduction in 1970, the Administrative Circulars on the Low Volume Scheme have been incrementally revised to deal with situations as they arise. VICAA (p.5) submitted that the changes to the Administrative Circulars have, in effect, introduced inconsistencies in FORS procedures and vehicle inspections.

As discussed previously, there is a need to revise the Administrative Circulars and establish a head of power under the Act for the Scheme. The Administrative Circulars could be placed within the legal framework via Ministerial Determinations. The Task Force considers that this approach would have the merits of codifying existing practices and giving FORS the power to enforce compliance with the provisions of the circulars.

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The Task Force recommends that the content of the relevant Administrative Circulars be reviewed and placed within a legal framework.

5.8.2 Limits on Vehicle NumbersVICAA (pp.6 and 38) submitted that the present limits placed on vehicle numbers restrict the growth and financial viability of low volume CPA holders and advocated lifting the volume to 200 vehicles per annum in conjunction with their proposed approved vehicle compliance centre scheme.

In its submission, the FCAI (p.29) claimed that some segments of the used vehicle industry have submitted multiple applications for approval to increase the volume of vehicles.

The Task Force is aware of claims that some low volume importers circumvent the limit by setting up several companies to increase their numbers. The Task Force is of the view that there is a need to set a limit on the number of vehicles that can be certified under the Low Volume Scheme, to a level that does not compromise the safety and environmental objectives of the MVSA, given that it is a concessional scheme.

The Task Force notes that the lack of a limit on the number of CPA holders under the Scheme has led to increasing numbers of low volume vehicles being supplied to the market. Figures in Table 5.1 show that seven times as many vehicles certified under the Low Volume Scheme were provided to the market in 1998 than in 1993. Limiting the number of vehicles per CPA holder is an ineffective mechanism for limiting the total number of these vehicles.

This issue is further discussed in section 5.13.4 on options for the Low Volume Scheme.

5.8.3 Eligibility CriteriaA number of stakeholders commented that the Scheme should return to its "original intent". However, depending on their individual industry vantage point, stakeholders had many conceptions of the Scheme’s "original intent". For example, VICCA (p. 44) suggested that the "original intent" was that adopted in 1989, which allowed all models of vehicles not already marketed in full volume to be eligible for certification under the Low Volume Scheme 60. VICAA

60 Administrative Circular 0-2-1, Issue 12, October 1989

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(p.42) further submitted that the eligibility criteria are restrictive and anti-competitive given the Government’s policy of encouraging small business. The eligibility criteria were said to be far too complex and onerous.

The FCAI (p. 29), on the other hand, suggested that the intent was to allow the import of a small number of specialist vehicles and that the eligibility criteria should be reviewed to ensure that only eligible "specialist" vehicles are imported.

The ACT Department of Urban Services (p.2) commented that restricting the low volume arrangements to specialist vehicles may have a detrimental effect on safety and emission standards by precluding the supply of late model second hand vehicles to the market. For these vehicles, the issues of safety and emissions, rather than industry protection, should be the overriding consideration.

FORS note that the current criteria are complex and require subjective judgements by FORS staff who must determine whether a vehicle is rare or unusual and otherwise unavailable in Australia under full volume arrangements. In processing applications for CPAs, FORS staff spend considerable time and effort determining whether vehicles are eligible for the Scheme, at the expense of pursuing and promoting nationally uniform standards in relation to vehicle safety, emissions and anti-theft which should be their core activities.

The Task Force is concerned that administration of the eligibility criteria is detracting from the Government’s stated commitment to minimise the regulatory burden on small business 61. The Task Force considers that the eligibility of particular vehicles should be transparent and easy to determine so that applicants are not unnecessarily delayed or surprised by FORS decisions. This issue is discussed further in section 5.13 on options.

5.9 Participation in the SchemeIt has been FORS long standing policy that full volume manufacturers are not allowed access to the Low Volume Scheme for the same category of vehicle. This means that a manufacturer with a full volume CPA for a passenger car model cannot apply for a low volume CPA for any other model of passenger cars. This clearly restricts the entry of organisations into the specialist and unique vehicle market.

61 “More Time for Business” the Hon John W Howard MP, 1997.

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In its submission, the FCAI (p.32) recommended that the Low Volume Scheme for new vehicles be retained and modified to allow full volume manufacturers of new vehicles access to the Scheme.

The Task Force considers that removing the restriction would ensure free competition. The subsequent ability for more manufacturers to participate in the Scheme may increase the range and number of specialist and enthusiast vehicles available to the market.

Participation in the Scheme by full volume manufacturers would be a commercial decision and depend on the costs involved, including the supply of after sales service. The impact of removing this restriction on existing low volume manufacturers is considered to be negligible, as it is expected that many full volume manufacturers will utilise the Scheme to provide vehicles not traditionally provided under the Low Volume Scheme. For example, a full volume manufacturer may utilise the Scheme to trial new models which use alternative fuel and associated technology.

The Task Force recommends that full volume manufacturers be eligible to participate in the Low Volume Scheme.

5.10 Effectiveness and EfficiencyThe following section discusses the effectiveness and efficiency of the Scheme in terms of ensuring vehicle safety, emissions compliance and reducing compliance costs for imports of enthusiasts or specialist vehicles supplied to the Australian market in small numbers. The effectiveness and efficiency of administering the Scheme is also discussed.

5.10.1 Safety and EmissionsThe concessions provided within the Low Volume Scheme lower the level of assurance that these vehicles comply with the ADRs compared with vehicles produced in full volume. The Task Force does not have evidence which shows that the performance of these vehicles is unsatisfactory from a safety perspective. This is because it is not possible to separate vehicles certified under the Low Volume Scheme from other vehicles in statistical analysis of vehicle crashes.

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In regard to emissions, imported used vehicles which are older than six years or which have travelled more than 80,000 kilometres must have a new catalytic converter fitted. These vehicles are likely to have a better performance in exhaust emissions than vehicles of a similar age already in the fleet.

It is difficult for the Task Force to comment on the overall performance of low volume vehicles without a more critical assessment of the performance of such vehicles in relation to crashes and emissions. Accordingly, FORS may wish to consider undertaking research in this area. The Task Force acknowledges that it is difficult to separate the vehicle performance elements from other crash contributory factors such as driver behaviour. FORS could monitor and adjust its approach as necessary.

5.10.2 Consumer ProtectionThis section deals mainly with imported used vehicles.

The FCAI (p. 24) raised three main issues in relation to consumer protection and the Low Volume Scheme; namely, the lack of after sales service, availability of replacement parts and inability to perform vehicle recalls. The FCAI cited an example where a recall action apparently did not take place as the used vehicle importer was not able to obtain spare parts and repair information from the local representative of a similar new model. The FCAI submitted that the above issues would not be a problem if the Low Volume Scheme was limited to specialist or enthusiast vehicles where the potential purchasers are likely to belong to vehicle clubs and have access to service expertise and parts.

The current low volume arrangements for used vehicles require the CPA holder to provide a copy of the inspection certificate to the owner of the vehicle. This inspection certificate contains information about the modifications done to the vehicle and provides further evidence to the State and Territory registration authorities that the vehicle complies with the ADRs. This inspection certificate also provides the owner with an indication that the vehicle is certified under the Low Volume Scheme. However, FORS does not monitor if CPA holders are meeting this arrangement.

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The Task Force sees merit in FORS enforcing its inspection certificate arrangements. FORS may, if it wishes, require CPA holders of authorities to fit identification plates for nonstandard vehicles, to include statements in the inspection certificate, or the compliance plate, to the effect that the vehicle has a lower assurance of compliance with the ADRs.

Under the current administrative arrangements, the Low Volume CPA holder is responsible for any recall campaign. However, FORS does not necessarily follow up recalls by used vehicle importers owing to competing higher priorities for resources. The consumers are at greater risk if there is a potential safety defect in their vehicles and the CPA holder does not institute comprehensive recall action. It should be noted that this issue is not a matter for the MVSA but is a FORS responsibility under the provisions of the TPA.

The Task Force considers that FORS should review its recall arrangements to ensure that low volume CPA holders of imported used vehicles effectively carry out their recall responsibilities should one be necessary.

In the USA, the requirement for vehicle importers and converters (Registered Importers) to conduct a recall, if one is necessary, is embedded in the National Traffic and Motor Vehicle Safety Act of 196662. The comparable provision in Australia is contained in Section 65 of the TPA.

5.10.3 Compliance CostsThe costs of demonstrating compliance with ADR requirements, especially those that require crash testing, are significant for manufacturers. The operation of the Act requires business to meet these costs.

As is shown in Appendix H, heavy vehicles and buses must be tested to demonstrate compliance with more ADRs than other low volume vehicles, because of significant public concerns about the safety performance of these vehicles. This leads to higher compliance costs for this segment of the Low Volume Scheme which meet ADRs current at the time of supply to the market. In fact, only 33 used vehicles of more than 12 tonnes Gross Vehicle Mass and two used buses with more than 12 seats were imported in 1997.

62 National Traffic and Motor Vehicle Safety Act of 1966, p.12.

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While this approach leads to higher costs for the road transport industry, the safety benefits to the public are likely to outweigh these costs to industry, particularly in light of recent improvements in the safety performance of heavy vehicles 63.

The following summary discussion of the relative compliance costs for Full Volume and the Low Volume Schemes is based on figures given in Appendix L. Based on the requirements described in Administrative Circulars 0-2-1 and 0-4-5 as well as discussion with industry and FORS, it is estimated that the cost of complying with the MVSA is several orders of magnitude greater per approval for full volume than for low volume CPA holders.

Full volume manufacturers are required to perform crash testing of at least four vehicles to demonstrate compliance with frontal and side impact ADRs (69 and 72) for passenger cars. Full volume bus manufacturers may conduct crash testing on a bus structure (or a section of the bus structure) to demonstrate compliance with the roll over strength requirements of ADR 59. Bus manufacturers that build buses to FORS bus design specifications 64 (the design was proven to meet ADR59 requirements) need not conduct crash testing. No ADRs require crash testing of heavy trucks.

There are many caveats on such a comparison, for instance it is hard to quantify the additional design task for complying with ADRs. Market prices for certification consultants vary as do the nature of the conversion costs and the costs of vehicles that are to be crash tested.

The Low Volume Scheme provides a balance between providing consumers with a wider choice of vehicles at a reasonable price without requiring the destructive tests to be repeated for the Australian market. It is apparent that the Low Volume Scheme is an effective means of reducing the compliance costs for manufacturers.

63 FORS Monograph 18, 1997.

64 FORS publication, Vehicle Standards Bulletin number 7 – Design Parameters Necessary for Compliance with ADR59/00 Parts A and B.

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The cost of administering the Low Volume Scheme is higher than the fees received from the industry. This issue is discussed in Chapter 9.

5.10.4 Net Community BenefitIt is the view of the Task Force that the Low Volume Scheme serves the community’s need well. Although concessions are granted on the eligibility of vehicles certified under this Scheme, it has provided consumers with a greater degree of choice. While vehicles certified under the Scheme have a reduced assurance of compliance with the ADRs, the Task Force has not sighted any evidence of any safety or emission problems with these vehicles.

The concessions in the existing Scheme have enabled the existence of a number of viable small businesses that bring imported specialist cars and four-wheel drive vehicles to acceptable standards, which increases the range of vehicles available to the market. The Low Volume Scheme allows small businesses to gain certification for vehicles that would otherwise be beyond their capacity due to the inability to amortise the costs of demonstrating compliance with all the ADRs over a large number of vehicles.

5.11 Administrative Arrangements

5.11.1 Type ApprovalThe Australian Type Approval certification system which applies to both Full Volume and Low Volume Schemes has been discussed in Chapter 4.

5.11.2 Administrative ProceduresA number of stakeholders were critical of FORS administrative arrangements surrounding the current Low Volume Scheme. These criticisms were more direct and colourful during the Task Force's industry consultation stage. The Task Force formed the view that the majority of users of the system believe that the processes are far too time consuming and bureaucratic.

Specific comments included:

the administrative arrangements by FORS (and the State and Territory Registering Authorities) have posed numerous problems for the industry, resulting in numerous approval delays and unnecessary costs. Time delays of up to two years have been experienced (VICAA p.40);

the paperwork for vehicle compliance is excessive (Carcon P/L p.3);

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if there are to be imports why should used imports have the obstructive and restrictive regulations formulated by FORS to contend with (Dier p.3); and

the process of gaining approvals is extremely inefficient and in my opinion doesn’t ensure compliance with other than the SUTI car (Martin Simms p.3).

At least two stakeholders told the Task Force that it was their belief that a true criticism of FORS policies in respect of the Low Volume Scheme had been suppressed as there was a perception of possible intimidation if matters were pursued. The Task Force was not able to identify any current FORS practices which would support these oral comments.

The Task Force spent a great deal of time on issues surrounding the Low Volume Scheme. It focused on the eligibility criteria as the principal cause of the problems the Scheme has engendered. It became clear to the Task Force that the intent of the criteria and the administrative arrangements surrounding them is to limit the number of used vehicles, especially passenger vehicles, imported into Australia and not about improving the safety and emissions performance of vehicles first supplied to the Australian market.

Moreover the Task Force found themselves agreeing with many of the stakeholders concerning the time delays and other inefficiencies in the current system and formed the view that the intermingling of industry policy and the objectives of the MVSA have failed and that some re-alignment of policies was required.

FORS has advised the Task Force that most of the delays were a result of a five-fold increase in low volume applications over the past four years. This increase was not resourced nor managed adequately, resulting in a significant back-log. However, over the last six months this workload is being addressed through a number of controlled initiatives and re-focusing of work practices. FORS continues to encounter delays in processing low volume applications because of information deficiencies with the submissions and time taken by the applicant to respond to FORS queries.

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FORS also advised that it may take a longer time to process low volume applications owing to the nature of the applications. This can lead to delays in issuing approvals and impose subsequent costs on low volume manufacturers. No attempt to quantify the cost of such delays for small business has been made although it is expected that the full implementation of RVCS will speed up processing CPA applications.

There are a number of reasons for FORS spending a longer time in processing low volume applications than full volume applications. The major reasons are the content of the evidence supplied, the competence of the consultant engineers, the "state of compliance" of the vehicle presented for inspection and FORS prior experience with the vehicle model.

As discussed earlier, the Low Volume Scheme allows alternative forms of evidence for some ADRs. However, FORS does not advise applicants (or publish) what information is acceptable evidence to demonstrate compliance to the ADRs. FORS takes the view that the manufacturer is responsible for providing acceptable evidence. Consequently, considerable resources and time are spent negotiating the standard of evidence. Inexperienced consultants also add to delays in processing the applications, as their evidence is often found inadequate.

In theory, FORS inspections of vehicles during a SUTI should be a formality. This is because the vehicles presented by the manufacturer for inspection should be representative of the vehicles that would be supplied to the market. However, with low volume vehicles, this is not generally the case. In many instances a number of non-compliances are found which sometimes result in another inspection of the vehicle. This causes further delays in processing the applications.

Owing to the subjectivity of the present eligibility criteria for passenger cars, FORS staff can spend considerable time assessing if a used vehicle model is eligible for low volume especially when the used vehicle model appears to be a variant of the model already sold in full volume in Australia. Consequently, FORS staff will spend more time processing an application for a ‘new’ model than one for a model previously deemed eligible.

FORS maintains a list of certification consultants who offer their services to assist with applications for CPA. This list, with a caveat65, is included in the package of low volume 65 Inclusion of a person or organisation on the list of consultants does not imply that the person or organisation is in any

way qualified or recommended by the Department, and no warranty, express or implied, is given as to the standard of service or expertise offered by that person or organisation. Non-inclusion of a person or organisation does not imply

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documentation sent to prospective low volume manufacturers. FORS does not undertake any checks on whether or not the consultants have the requisite knowledge, nor whether they are technically qualified to perform the work. Any individual wishing to be included on the list need only advise FORS.

FORS considers, on the basis of its experience, that some consultants on the list have limited competency in handling vehicle certification for their clients. In some cases, despite repeated advice and assistance from FORS, the consultants continue to provide incorrect or insufficient information to support their client’s CPA application. This has resulted in significant delays for their clients. FORS is aware that some CPA applicants have kept engaging new consultants in an effort to find one who is competent. FORS considers the competence of these consultants is a real issue for the administration of the scheme. There is no regulatory means of responding to consultants acting dishonestly or incompetently.

One stakeholder questioned if there was a conflict of interest when the certification consultants were also low volume compliance plate holders or importers and may be looking after their own interests rather than those of their clients. FORS advises that it does not have any particular views about consultants becoming CPA holders. Most consultants are CPA holders in their own right. FORS also advised that one consultant is said to be responsible for 23 per cent (based on applications received in the four months from November 1998 to February 1999) of the applications processed by FORS.

The Task Force considers that delays caused by inefficient processes and procedures or incompetent consultants place unnecessary burdens on industry and ultimately these may be reflected in vehicle costs. It will be in the interest of the Australian community for FORS to review its Low Volume certification arrangements with the consultants. FORS could make consultants more aware of its requirements for evidence through better published instructions, seminars or training courses.

The Task Force also considers that the inefficiencies in the administrative scheme have their genesis in the blurring of FORS responsibilities in this regard and that industry policy should be

that the work or service offered by that person or organisation is in any way unsatisfactory.

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addressed more explicitly elsewhere. This approach is reflected in the articulation of the objectives of the Act above and the consideration of alternative arrangements.

5.11.3 Acceptance of Overseas StandardsVICAA (p.27) submitted that compliance with the standards of the vehicle’s country of origin (USA or Japan) which meets the functions of the ADRs, should be sufficient to demonstrate compliance with the ADRs.

A number of the overseas standards are deemed to be equivalent to the technical requirements of the ADRs and hence compliance with these overseas standards is acceptable evidence for compliance with the ADRs. These overseas standards are referenced in the text of the ADRs.

Under the current Low Volume Scheme, for some ADRs compliance with overseas standards (not referenced in the ADR) is also deemed acceptable. For example, for ADR5 (Anchorages for Seatbelts), used cars imported from the USA or Japan are accepted without any test evidence, if they comply with those countries’ seat belt anchorage standards.

The Task Force considers that this issue will sort itself over time. The issue of the level of evidence of compliance with the ADRs of imported cars is expected to diminish, as the industry standards continue to harmonise globally. Vehicles produced in the major manufacturing countries are more likely to meet the international standards (UN/ECE Regulations) that Australia is moving towards. Where they do not (such as in occupant protection ADRs), acceptance by way of "functional equivalence" of standards may be explored, in cases where there is reciprocal acceptance in other countries of ADRs.

For new vehicles that meet the ADR harmonised UN/ECE Regulations, it will make no difference if these vehicles are provided under the Low Volume Scheme or Full Volume Scheme. For other new vehicles (for example, from the USA), there would be need to be an Australian safety check or certification (for example, for left hand drive (LHD) to right hand drive (RHD) conversion).

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With regard to LHD to RHD conversion, ADR 42/03 – General Safety Requirements, requires that the steering control must not be located to the left of the centreline of the vehicle. This means that all LHD vehicles first supplied to the Australian market must be converted to RHD. There were suggestions that converting vehicles to RHD, especially vehicles with the latest occupant protection features, is an unnecessary expense but more importantly, may compromise the integrity and original compliance of the vehicles. There were also suggestions that the Administrator should be given the discretion to allow some ultra low volume vehicles, never manufactured in the RHD configuration, to be certified in that configuration. This has benefits in regard to safety and savings to the consumer.

The Task Force’s view is that, given the background to the NRTC’s recent announcement 66 to allow only LHD vehicles over 30 years for use on public roads, the State and Territories are unlikely to support any moves to extend this concession. (The initial proposal to allow LHD vehicles over 15 years old for use on public roads, failed as a result of opposition from some States). Even if the Commonwealth moved unilaterally to allow the supply of non-converted vehicles, the States and Territories are not legally obligated to register such vehicles.

5.12 Legislative Arrangements OverseasThe Task Force examined the arrangements for low volume vehicles in New Zealand, Japan, the United Kingdom and the USA. In each country, arrangements are in place for certification of vehicles imported in small volumes. These are described in Appendix M.

Many of the low volume schemes examined were comparable relating to the type approval of new motor vehicles. However, with the exception of the USA and the UK, the low volume schemes of the countries examined did not appear to include used motor vehicles.

In the USA some 10,000 new locally manufactured vehicles are permitted to have temporary exemption from demonstrating compliance with safety standards. The operation of such a scheme requires the ability to effectively undertake vehicle recalls if required.

In relation to used vehicles, in the USA all motor vehicles less than 25 years old and imported into the USA must comply with all applicable standards, or be brought into compliance by a

66 Road Transport Reform (Vehicle Standards) Regulations and Australian Vehicle Standards Rules.

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Registered Importer. A vehicle may be imported as a non-conforming vehicle, if the importer has a contract with a Registered Importer and posts a bond for one and half times the vehicle’s dutiable value. Under the contract, the Registered Importer will modify and certify that the vehicle conforms with all applicable safety standards.

In Japan, special treatment is given to imported new motor vehicles of 2,000 units or less per year. As with Australia, the special treatment is in the provision of evidence to demonstrate compliance. For these vehicles, Japan recognises test results conducted by foreign governments and tests conducted under the Uniform Technical Regulations of Economic Commission of Europe and the European Economic Community Commands directives.

In Europe, the low volume scheme is for new vehicles only. The EU Whole Vehicle Type Approval scheme allows for any Member State to give any exemption it sees fit for a small series (not more than 500 per annum per type) vehicles.

The United Kingdom implements a Single Vehicle Approval (SVA) Scheme for vehicles produced or imported in very low volume, that have not been type approved to British or European standards. The Scheme applies to three classes of vehicles namely:

personally imported vehicles, up to three years old, not type approved in Britain or the EU;

amateur built vehicles constructed or assembled for personal use; and

very low volume vehicles limited to a cumulative maximum total of fifty examples of any one model in any one year.

5.13 Options

Stakeholder views

The Task Force notes the rapid increase in the numbers of imported used motor vehicles over the last three years, but considers that they are small compared with new vehicle sales. It has not been possible to quantify the impact of these vehicles on safety or the environment, however, the Task Force appreciates that at some number there would necessarily be a shift in

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the balance and safety/environment risks would increase. If the Scheme is to continue, FORS should closely monitor the numbers of vehicles and continually assess whether the Scheme is compromising the objectives of the Act. Other areas of government (such as DISR) have the responsibility of ensuring that industry policy is not suffering as a consequence of the numbers of used vehicles being imported into Australia.

VICAA and FCAI included the following options for improvements in their submissions:

implement their Accredited Vehicle Compliance Centre (AVCC) scheme that would enable each AVCC to comply up to 200 motor vehicles per annum (VICAA p.38);

the Government support the concept of AVCC which incorporates principles of co-regulation, improved consumer protection, uniform used vehicle standards and industry codes of practice (VICAA p.39); and,

a system of licensed, approved workshops be established under FORS supervision to carry out the necessary work to bring imported used vehicles into compliance (FCAI p.27).

These options are considered along with those identified by the Task Force. Issues considered in the various options are:

the form of the Scheme;

the eligibility criteria;

the approval process; and

the restriction on vehicle numbers.

5.13.1 The Form of the Scheme (New Vehicles)Stakeholders were generally of the view that type approval is appropriate for new vehicles under the Low Volume Scheme. The Task Force sees no reason why alternative arrangements should be considered. In this regard, the Task Force notes that the Low Volume Scheme may provide an avenue to encourage the introduction to the Australian market of new vehicles using alternative fuel and innovative environmental friendly technology.

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The Task Force recommends that the current type approval arrangements for standard new vehicles under the Low Volume Scheme be maintained.

5.13.2 Eligibility Criteria (Used Vehicles)Three eligibility options are available for consideration:

Option 1 – limit the number of models by tightening up current eligibility criteria to ensure only “specialist and enthusiast” vehicles are eligible;

Option 2 – retain criteria similar to the current Administrative Circular 0-2-1 but with clearer working criteria; or

Option 3 – expand the scope of the scheme through having the single criterion that the vehicle models not be already in the Australian market in full volume.

The interpretation of “specialist and enthusiast vehicles” has been a major stumbling block for FORS because these terms are very subjective. The FCAI provided the Task Force with a copy of their proposed criteria for specialist used vehicles67. The Task Force considers the proposed criteria remain very subjective as they are based on the existing criteria for specialist passenger cars described in Administrative Circular 0-2-1. Eligibility would still be based on the vehicle model meeting five of the seven criteria. Two major changes to the existing criteria proposed by the FCAI are that diesel engines would no longer be eligible and the specialist criteria for passenger cars would be extended to light commercial and four wheel drive vehicles.

The Task Force considers Option 1 would have an adverse impact on the viability of small business and would reduce consumer choice. The Task Force does not see any positive benefits for restricting the vehicles to enthusiast vehicles. For these reasons Option 1 is not considered appropriate.

67 Facsimile dated 11 November 1998, from Chief Engineer of FCAI to the MVSA Review Task Force Chairman.

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The Task Force heard arguments that diesel variants of popular makes (such as Toyota Surf and Nissan Pathfinder) should not be regarded as eligible but also heard contrary arguments from VICAA that primary producers or owners in remote locations would refute the suggestion that these vehicles should not be so categorised.

The Task Force has examined the list of used vehicle models with diesel engines that are deemed to be eligible for certification under the Low Volume Scheme. The Task Force’s view is that many of these vehicles, except for the diesel engines, are similar to those vehicles already marketed in full volume in Australia. FORS data show that, in 1998, four wheel drive vehicles with diesel engines account for more than 31 per cent of the total used vehicles imported under the Low Volume Scheme. These four wheel drive vehicles are the same as the petrol engined vehicles already marketed in full volume in Australia.

The Task Force considers that it is not appropriate for a vehicle with a diesel engine be regarded a different model if the vehicle is the same in every other respect. The Task Force considers that this criterion should be rescinded.

The Task Force also considers that a model with a higher engine performance option (such as turbocharging) should not be regarded a different model if the basic vehicle is the same as the model marketed in full volume in Australia. Consequently this criterion should also be rescinded.

The Task Force considers that, for the sake of transparency, it would be important that the subjectivity of interpretation be remedied. In practice the community and industry often have different interpretative positions than the Administrator of Vehicle Standards but this cannot be ascertained until an application has been received. An applicant may already have incurred significant costs by that stage.

The Task Force is of the view that criteria established through a Ministerial Determination rather than administratively would, by itself, go some way to overcoming these difficulties. Having the criteria in legislation would introduce extra rigour and discipline in the decision making process and offer the opportunity for those affected by the decisions to take recourse to administrative law remedies that are not currently available to them.

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The subjectivity inherent in the decision making might be alleviated if FORS was to publish a list of models (similar to what is done in the USA68) that, at a point in time, have met the eligibility interpretation.

The Task Force sees merit in FORS developing a list of acceptable models in close consultation with industry and technical experts. The contents of the list would be generated from information supplied by applicants seeking model eligibility. The Task Force considers that the publication of such a list would provide transparency and certainty for the industry. The provision of market advice in this way would make the current criteria workable and provide greater certainty to all.

Option 3 effectively expands the scope of the Scheme as it would allow a range of vehicles such as family sedans, similar to those already marketed in full volume, to be imported. Under this option the criteria would simply be all vehicle models that are not, or have not been for an acceptable period of time, marketed in Australia in full volume.

FORS advised the Task Force that the solution Option 3 offered was little different from the subjective decisions currently being made against the criteria of Administrative Circular 0-2-1. The Task Force agrees with FORS that such criteria would impose their own particular difficulties but is of the view that they would be easier to administer than the current arrangements. It should be stressed that this option is merely a subset of the existing criteria which are currently being administered.

The Task Force believes that option 3 provides the simplest solution for the administration of the Low Volume Scheme but, without an adequate mechanism for limiting the numbers of vehicles imported under this option, the potential for increasing vehicle numbers could compromise the safety and emissions aims of the objective of the MVSA. It could also impinge upon industry policy as detailed at 5.6 above. Therefore, the Task Force considers that option 2 could be the preferred option if FORS re-examines the criteria and make them less subjective.

68 NHTSA’s Vehicle Eligibility List.

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consideration be given to revising the current eligibility criteria to make them less subjective; and

vehicles with diesel engines or turbocharged engines would not be considered a different model.

5.13.3 The Approval ProcessThe Task Force has recommended that the current approval process for new vehicles under the Low Volume Scheme be retained. The remaining discussion of options therefore deal specifically with imported used vehicles.

There are two options for considering the approval of imported used vehicles:

Option 1 - retain the current type approval system; or

Option 2 – registered workshop scheme for used vehicles.

FORS advised the Task Force that the existing type approval system for low volume used vehicles could be improved by fully implementing the following changes:

the eligibility criteria be reviewed in light of FORS experience to remove sources of ambiguities, and inconsistent interpretations. FORS is already maintaining a definitive listing of eligible models;

a comprehensive audit regime be developed to ensure ADR compliance. VICAA has advised FORS that it supports this initiative;

a quality system based on ISO9002 be implemented within FORS;

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guidelines be developed to ensure independence of CPA holders to eliminate CPA holders forming multiple companies to retain integrity of the limit on numbers for each CPA holder;

simple, legally enforceable penalty provisions be developed; and

CPA holders be required to have ISO 9001 Quality System certification, with an appropriate scope as approved by FORS. This is an element that will help restrict the Low Volume Scheme to the genuine vehicle converters and will also facilitate managing independence of CPA holders.

FORS believes that it could make the Low Volume Scheme work better within the existing framework, supplemented by the above-mentioned changes. The Task Force understands that FORS is already starting to implement some of the changes.

The Task Force has however taken the view that type approval is not appropriate for used vehicles. It considers that the only practical solution is to register the workshop that performs the work. Vehicle by vehicle based approval and the registered workshop concept has the support of both the FCAI and VICAA in their respective submissions.

The requirements for a registered workshop could include:

appropriate quality system accreditation; and

adequate equipment and facilities to ensure FORS Conformity of Production requirements are met.

FORS would periodically audit the registered workshops. It would be necessary for this audit regime to be supported by amendments to the MVSA that specify appropriate penalties for non-conformance with provisions. This penalty regime should clearly extend to FORS being able to withdraw approval for workshops to conduct this work on the basis of audit results.

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FORS would expect that the registered workshop would at the time of the audit make available to inspectors information and evidence to a standard no less than that which is currently provided under type approval. Procedures could be put in place for registered workshops to ask FORS to approve this evidence of compliance with the applicable ADR’s in advance of an application to ensure that the results of any later audits are not compromised due to inadequate test and design data.

FORS raised concerns that the registered workshop scheme could be construed as tantamount to private certification and there may be no current legal basis for the operation of such a scheme. There would also be serious concerns for the Government in administering a scheme controlled by external agencies. The lack of government control may then open the scheme to abuse.

The Task Force considers that a self-assessment regime, coupled with appropriate risk management responses and supported by adequate administrative penalties, is not in any way a diminution of responsibilities or control. Rather, it could/would provide higher levels of assurance while allowing better allocation outcomes.

The elements of the administrative arrangements for a “Used Vehicle Scheme” based on registered workshops are in Appendix N.

There are a number of advantages with the registered workshop concept which include:

the potential for development of co-regulation with industry;

the workshop will provide a higher level of assurance that the vehicles comply with the ADRs;

the workshops can provide a network of service and spare parts;

the workshops may be held responsible to conduct vehicle safety recalls;

it would restrict the Scheme to legitimate vehicle converters;

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the costs would be borne directly by the workshops;

the scope of the workshops could be extended to include after-market modifications (fitting extra seats and additional axles fitted to trucks) and modifying vehicles 15 years or more and personally imported vehicles to meet State and Territory registration requirements; and

FORS resources could be better aligned to core functions and towards enhancing its audit function to maintain industry standards.

There are a number of disadvantages with the registered workshops concept which include:

the potential for industry “lock-in” to a few workshops owned and operated by a limited number of people/organisations; and

the possible geographical distribution of such workshops (for example, would demand result in workshops being only located in Sydney, Melbourne and Gold Coast).

The Task Force acknowledges that the cost of some imported used vehicles may increase as a result, but considers that a higher level of compliance and consumer issues would be better served by the registered workshops concept. The Task Force further acknowledges that FORS must introduce legislative requirements and also develop and apply conditions on the registered workshops to ensure their correct and proper operation.

The Task Force recommends that a used vehicle certification scheme, based on vehicle by vehicle approval involving registered workshops, be developed in consultation with ‘industry’.

5.13.4 Limit on Vehicle NumbersContinual increases in vehicle numbers under the Low Volume Scheme must at some level impact on the objectives of the MVSA. As discussed above there are difficulties in setting arbitrary numerical limits on this basis due to the paucity of information available to make informed decisions.

FORS has advised that, based on the number of CPAs issued, the current Low Volume Scheme allows for up to about 30,000 used vehicles to be supplied per year. The actual number supplied in 1998 was over 7600.

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FORS believes that the main reason for the fact that only about 30% of the potential number of vehicles are supplied is that market demand is setting the number. It is also noted that a number of the CPA holders may now be inactive and that some are very small businesses supplying just a few vehicles per year.

VICAA’s proposal (p.38) is to limit each workshop to 200 vehicles per year. However VICAA does not propose a limit on the number of workshops. The question still remains as to what sort of instrument is to be used to limit the number of workshops. If there are no controls on the ownership or separation of premises then effectively the numbers are not limited. It may ultimately be up to the Government to decide on the limit of vehicles per workshop and/or the number of workshops.

FORS has advised that, as the industry regulator, it can develop arrangements through industry consultations to implement whatever limit on “the numbers” that is decided by the Government. What the Task Force seeks is some definition of the scope of the concessions available to used vehicle importers and some practical interpretations of eligibility criteria. FORS advised that it expects difficulties should the decision be taken to limit total numbers through limits on the number of workshops – rather than for example through each CPA holder.

It is clear to the Task Force that industry policy is more sensitive to increasing numbers of imported used vehicles rather than the safety and emissions aims of the MVSA. Early in the review the Task Force formed the view that the intertwining of industry policy and uniform vehicle standards in the operation of the Low Volume Scheme under the MVSA was the major cause for the administrative problems engendered by the Scheme. The Task Force would like to see industry policy addressed elsewhere and the legislation return to its safety, emissions and anti-theft objectives.

The Task Force believes that the Government should re-visit the concessional duty treatment afforded to imported used vehicles under the Low Volume Scheme. The scrapping of the $12,000 special duty concession for the Low Volume Scheme or its replacement with a

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protective/concessionary treatment which reflects the Government’s industry policy by containing numbers at appropriate levels should be contemplated.

5.13.5 Transition Arrangements

To provide a reasonable transition to any proposed new arrangements, the Task Force recommends that existing CPA holders be able to continue fitting identification plates to their currently registered models up to an agreed date.

This should allow sufficient time for industry to adjust to any new Scheme and time for Commonwealth to put appropriate, legislative and administrative arrangements in place (including other agreed recommendations of the review).

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CHAPTER 6 VEHICLE IMPORT ARRANGEMENTS

6 Vehicle Import ArrangementsOverview

Under the MVSA a vehicle imported into Australia must obtain an import approval to gain clearance at its point of entry.

The Task Force and stakeholders identified a number of deficiencies in the MVSA with specific regard to importation arrangements of vehicles for dismantling, 15 or more years old vehicles and personal imports. The Task Force considers tightening of current arrangements and the introduction and enforcement of penalty provisions would inhibit circumvention of the schemes.

The Australian vehicle import arrangements were established when the MVSA came into force on 1 August 1989. Prior to this there were no federal standards, requirements or limitations on imported vehicles and registration was administered on a State by State basis. Anyone intending to import vehicles into Australia must currently obtain an import approval to gain clearance at the point of entry. This chapter deals with issues surrounding those import arrangements apart from imports under the Full and Low Volume Schemes.

Table 6.1 shows the number of vehicles69 issued with import approvals under the individual vehicle import arrangements.

69 Includes new and used vehicles.

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Table 6.1 Number of vehicles issued with import approvals and total number of new vehicle registrations

Year 1993 1994 1995 1996 1997 1998

A 1037 1318 1709 2873 5030 7657

B 7164 9459 11381 16055 18846 21751

C 565,416 627,207 655,065 671,053 743,030 829,151Note: A Number of used vehicles (excluding motorcycles) imported under the Low Volume

SchemeB Number of vehicles issued with individual Import Approvals

(includes new and used vehicles)C Total number of new vehicle registrations

(all vehicles)

The Task Force and stakeholders identified a number of major issues arising from the current import approval arrangements for vehicles which are:

fifteen or more years old;

deemed to be part of personal effects of migrants and Australian residents returning from living overseas; and

intended for dismantling.

6.1 Fifteen or More Years Old VehiclesUnder Regulation 9F of the Motor Vehicle Standards Regulations, the Minister must approve an application to import a nonstandard road vehicle or a vehicle that does not have an identification plate if the vehicle is 15 or more years old. This category of vehicles is exempt from the requirement under the MVSA to fit an identification plate.

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The 15 years old restriction was introduced on the basis that older vehicles are generally imported for restoration and club use, and not for commercial purposes. It was considered inappropriate to approve such vehicles under the type approval arrangements. The issue of applicable vehicle standards and roadworthiness for these vehicles is dealt with by the State and Territory registration authorities on a vehicle by vehicle basis.

The FCAI recommended that the 15 year rule be tightened to make the criteria 25 years as in the USA. Contending that some 15 year old models are still viable to import on a commercial basis, the FCAI stressed that such vehicles do not meet contemporary safety and emission standards and are not subject to any eligibility criteria. No other stakeholder submissions raised the issue as a concern.

The Task Force particularly noted that the State registration authorities did not raise the issue as one which was causing them an administrative difficulty, nor were VICAA concerned that this category of vehicles was placing their members at a competitive disadvantage. Assuming these vehicles compete at all, they are more likely to do so with other used vehicles, including those supplied under the low volume arrangements.

Table 6.2 shows import approvals issued for vehicles 15 or more years old from 1993 to 1998. Such imports represented 16 per cent (3474) of the total vehicles for which individual import approvals were issued in 1998 (21,751) - 0.4 per cent of total new70 vehicle registrations.

Table 6.2

Import approvals issued for vehicles 15 or more years old71

Year 1993 1994 1995 1996 1997 1998


Index 1.00 1.44 1.81 2.09 2.00 1.69

70 In this context, "new" vehicles are those supplied to the market for the first time. This includes imported used vehicles.


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The number of import approvals issued for vehicles 15 or more years old peaked in 1996. Unaware of any other factors at work, such as administrative or legal changes, the Task Force has concluded that the reversal in trend was a product of market forces, that is, reduced demand.

The average age of Australia’s vehicle fleet is increasing, but at this stage the average age (10.7 years in 1997) seems unlikely ever to reach 15 years. The appropriateness of the 15 year rule could emerge as an issue if the age gap between imported used vehicles and Australia’s vehicle fleet were to close. Such vehicles could become a commercial proposition rather than meeting a niche in consumer demand for restoration vehicles.

The Task Force has taken a view that changes to the current arrangements are not necessary. However, FORS should closely monitor on an ongoing basis, the number of vehicles imported under these arrangements to ensure that there are no adverse impacts on road safety and emissions performance.

6.2 Vehicles for DismantlingUnder Regulation 9H when a vehicle is imported for the purpose of dismantling, a conditional import approval is provided on application. The approval specifies that the vehicle:

(a) will be dismantled and sold as vehicle components; and

(b) will not be used in transport in Australia.

Significantly, there are no eligibility criteria, no time limit for dismantling the vehicles, no actual dismantling requirements, no requirements for record keeping and no follow up action is taken by FORS to check that a vehicle has in fact been dismantled.

Stakeholders such as the State and Federal police, Customs, the insurance organisations, FCAI and various State and Territory registering authorities expressed serious reservations about the administration of vehicles imported for dismantling. They pointed to evidence that some of these vehicles are used for re-birthing (an imported wrecking vehicle assuming the identity

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of a similar wrecked Australian vehicle), a practice which is perceived as becoming endemic in the motor vehicle wrecking industry. Another major cause of concern is that unsuspecting buyers are left with vehicles they are unable to register and therefore use, due to non-compliance with safety and emissions standards.

The Task Force received numerous reports that many of these vehicles are illegally diverted to road use. Even if the figure were say 10 per cent, the loss of customs duty and sales tax revenue would be considerable – about $4m per annum.

The Task Force has noted the AMVCB view that the current provisions allowing importation of complete vehicles for dismantling should be rescinded 72. As well, the Task Force has noted the concerns expressed by police in respect of the administration of the current arrangements, the widespread nature of the malpractices detected under the scheme and the potential for not only re-birthing illegally imported vehicles, but also for the re-birthing of vehicles stolen in Australia.

Options

The Task Force has considered the options proposed by the stakeholders including those of the Auto Parts Recyclers Association of Australia (APRAA). Given the strength of criticism of the current arrangements from a variety of interested parties, maintaining the status quo is not an acceptable option.

Two other options were considered:

rescind the current provisions allowing the importation of complete vehicles for dismantling; or

tighten the current arrangements under which approvals to import vehicles for dismantling are provided.

72 Chairman of the AMVCB, dated 22 October 1998.

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The Task Force considered other options, including a requirement that such vehicles be rendered incapable of road use, for example, by having them cut in half, or a segment of the body shell removed. However, given the significant administrative costs involved, and the potential for adverse safety impacts arising from attempts by unscrupulous operators to circumvent these requirements, such as by welding the vehicle back together, these options were not pursued.

The number of vehicles imported for dismantling represented 14.5 per cent (3148) of the total vehicles for which individual import approvals were issued in 1998 (21,751) – 0.4 per cent of total new motor vehicle registrations.

Table 6.3

Import approvals issued for vehicles for dismantling73

Year 1993 1994 1995 1996 1997 1998


Index 1.00 1.22 1.43 3.06 4.24 4.87

The Task Force notes there has been significant growth, especially over the past three years, in the number of import approvals issued for such vehicles.

The Task Force met with APRAA on two occasions to explore options addressing the concerns with the current arrangements. APRAA proposed a model which would centre on providing import approvals to dismantle to licensed vehicle traders or APRAA members only, promoting uniform national registration procedures and vehicle authenticity checks. APRAA contends that uniform national registration procedures combined with the introduction of the National Wrecks Register74 would substantially reduce the numbers of vehicles imported for dismantling.


74 As proposed by the National Motor Vehicle Theft Task Force in their report Motor Vehicle Theft Reduction Plan 1997.

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According to APRAA, permits should only be issued to legitimate dismantlers. The Association regards the current arrangements where “Aunt Agatha” can obtain an approval to import a vehicle for dismantling, as the principal source of the problems being experienced. In APRAA’s view, if permits were only issued to motor car traders, then the responsibilities and controls placed on them by State governments would be a major deterrent to fraud and would ensure compliance.

The Task Force raised other legislative and administrative issues with APRAA. One issue was the lack of an enforceable definition of what constitutes dismantling. It is unacceptable that the conditions included in these permits are unable to be clearly understood by those affected. For example, would the removal of the doors constitute dismantling and provide a defence that the conditions of the permit had been complied with, leaving the doorless vehicle able to be prepared for road use in circumvention of the MVSA? The related definitional problem of what constitutes a re-birthed vehicle and what constitutes a re-built one makes the ability to ensure compliance with this provision highly problematical.

A second issue surrounds the omission of a time limit with which to comply with the conditions of the permit. This is seen as a major problem for a successful prosecution under the MVSA, as again it provides a reasonable defence to intentionally non-compliant permit holders. APRAA argued that the nature of the dismantling business means that a time limit for dismantling is inappropriate as the timing is largely customer driven.

The Task Force formed the view that these two issues would remain as serious concerns even if appropriate eligibility criteria could be developed. The Task Force was also not convinced that efficiencies are to be gained by transferring responsibilities under the scheme to the State and Territory regulatory authorities. Nor could there be any guarantee that the enforcement difficulties would be overcome.

The Task Force sought from APRAA figures relating to the adverse impact that discontinuing the permit would have upon the legitimate auto parts recyclers. APRAA advised the Task Force that it has a membership of about 330 businesses out of some 1,200 auto parts recyclers currently operating Australia-wide. Of APRAA’s membership about 70 per cent are involved in the importation of vehicles and parts from Japan. According to APRAA about 20 per cent of its

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industry relies on the direct importation of parts and whole vehicles as a major portion of their business.

APRAA advised the Task Force that Japanese suppliers prefer to sell whole vehicles, rather than dismantle them and sell individual parts. This arrangement suits its members as it results in less panel damage than containerised individual components and provides a wider range of mechanical and electrical items. Another reason for dismantling the vehicles in Australia is the high cost of labour in Japan. If the scheme was rescinded, legitimate importers would not be able to import these complete vehicles and the dismantling would necessarily be moved off shore. APRAA estimates that some 2,000 employees would be directly affected and the effects would flow on to a further 1,500 employees. The Task Force was unable to substantiate these figures.

The Task Force’s assessment of this administrative arrangement is fully cognisant of the concerns of APRAA and its members, but is made on the assessment that this scheme has failed the community in its operation. Rescinding the scheme will not mean that complete vehicles cannot subsequently be re-built from legitimately imported “parts”. However, the Task Force is convinced that this action will deter illegal operators and the impact on the legitimate operator, on balance, is warranted.

The Task Force appreciates that the rescinding of these permits will disadvantage legitimate auto recyclers but, given the significant costs it would take to tighten current administrative arrangements and the marginal benefits to the community as a whole, the Task Force concluded that it was preferable that the issuing of import approvals for vehicles for dismantling not be retained.

The Task Force recommends that the importation of complete vehicles for dismantling be discontinued.

6.3 Personally Imported VehiclesUnder Regulation 9D, the Personally Imported Vehicle Scheme enables migrants and Australian residents returning from living overseas to treat their vehicle as part of their personal effects.

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The Import Approval is granted on condition that the vehicles are modified to meet minimum safety standards, including State and Territory registering authorities requirements and that if necessary the vehicles are converted to right hand drive.

Analysis

The number of such vehicles is small, that is, 10.0 per cent (2163) of the total vehicles for which individual import approvals were issued in 1998 (21,751), 0.3 per cent of total new motor vehicles registrations.

Table 6.4

Import approvals issued under the Personal Import Scheme75

Year 1993 1994 1995 1996 1997 1998


Index 1.00 1.29 1.57 1.68 1.88 2.41

Two stakeholders raised concerns with the personal import arrangements. Both Carcon P/L and the FCAI recommended that the period of residence to be eligible for a personal import be extended from 90 days to 12 months to more properly reflect a period of residence as distinct from a holiday or long service leave.

The Minister’s second reading speech introducing the MVSA reinforces this view76.


76 The Second Reading Speech said that the regulations should allow for the import of nonstandard vehicles that were the bona-fide personal possessions of migrants and Australian residents returning from long periods overseas. Hansard HR 23 May 1989, p.2690.

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Although no evidence was found of any safety and emission problems with these vehicles, the scheme’s effectiveness arose as an issue. The Task Force was informed that the scheme was being abused as import approvals were being issued to persons who had no intention of setting foot in Australia. It was alleged that New Zealand and Australian citizens residing overseas were used as agents to import Japanese and US vehicles to Australia.

Despite further investigations, the evidence remains anecdotal. However, while some of the claims are no doubt dictated more by commercial interests than any other concern, they are too numerous to be rejected out of hand. Therefore the Task Force is inclined to accept that the scheme is being abused.

The Task Force considers that extending the period of residency from 90 days to 12 months would be the most effective measure, short of abolishing the scheme, to curb the type of abuse outlined above.

Other Customs concessions relating to personal possessions afforded to migrants and returning Australian residents have, as a requirement, the ownership and use of the particular goods for a 12 month period. Given that the issue of import approval not only affords safety and emissions concessions but also exempts importers of used vehicles from paying the $12,000 special duty, the Task Force formed the view that the alignment of these concessions would be appropriate.

Whether or not the period of residency is extended, consideration should be given to requiring importers to provide evidence of their return to Australia. Presently no such evidence is required and an Import Approval can be granted while the importer is still residing overseas. The completion of Customs formalities relating to the clearance of goods does not require the importer to be currently domiciled in Australia. Such a weakness in the administrative arrangement would facilitate the misuse of the scheme as described above. According to FORS, genuine migrants and returnees will not suffer any inconvenience with the change, as they generally arrive in Australia before their vehicles.

The Task Force recommends that: the Regulations under the Motor Vehicle Standards Act 1989 be amended to extend the period of overseas ownership and use requirement under the

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personal import scheme from 90 days to 12 months; and the discretionary power to accept a lesser period on compassionate grounds remain with the Administrator.

6.4 Other Issues surrounding Vehicle Import ArrangementsThe review also brought to light some other issues surrounding the current arrangements relating to vehicle imports.

6.4.1 Enforcement of MVSA ProvisionsThe Task Force notes the number of penalty provisions in the MVSA and the practice of issuing conditional permits to importers. While prosecution for breaches of the Act have not taken place, there have been instances where administrative action has been taken against an importer. The view has been generally held that in the main, administrative actions are more cost effective compared with legal actions through the courts. Court actions are costly (the community must bear the cost), take a long time to reach a decision and the end result is often only a punitive fine. On the other hand administrative actions are low cost, swift and have an immediate impact on the vehicle importer. Administrative actions include for example; refusing entry of a vehicle, changing the import category (from say over 15 years to dismantling) and requiring a certified practising engineer to validate that a vehicle has been dismantled. The lack of prosecution appears to have generated a perception among some sectors of industry that infringements of the MVSA will not be pursued.

The Task Force appreciates that smaller MVSA infringements would not receive the rigorous enforcement attention that large scale frauds, such as those allegedly occurring under the vehicles for dismantling scheme, would receive with enforceable legislation.

The Task Force recommends that the penalty provisions of the MVSA be amended to allow for a series of administrative penalties that the Administrator could impose for minor infringements.

6.4.2 Other Concession ArrangementsA number of other arrangements exist to allow the importation of vehicles in particular circumstances. The Task Force recognises the necessity for these arrangements but believes that FORS should re-examine their operation. Most of these arrangements involve certain post-importation conditions being imposed on the importer. The Task Force is aware that little

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or no post-importation compliance checks are conducted by FORS. Particular arrangements relate to vehicles imported for rally or racing purposes and for testing and evaluation.

Consideration should be given to applying requirements on importers so that these vehicles do not find their way into the market. Advice could be sought as to whether taking a security or bond to encourage compliance with conditions of importation for example, could be enforced.

If other administrative arrangements are tightened, it is possible that unscrupulous operators would turn to weaknesses in these arrangements in order to avoid paying the $12,000 special duty.

Other import categories which could be used as a substitute for dismantled vehicles need to be examined to prevent a recurrence of the present situation with vehicles for dismantling. If importation of vehicles for dismantling is discontinued, there may be a sharp increase in the number of vehicles imported for rallying. Additional requirements or administrative arrangements will need to be put into place to avoid unintended use of any of the other vehicle import categories.

The Task Force recommends that FORS re-examine other import arrangements with a view to limiting the circumstances under which conditional import requirements are placed on importers unless clear and efficient mechanisms are in place to ensure compliance.

6.4.3 Payment of the $12,000 Special DutyAt present there is no provision for an import approval to be issued for a used motor vehicle subject to the payment of the $12,000 special customs duty. Customs would not let the vehicle enter Australia without a valid import approval. Customs requested in their submission to the review that consideration be given to the issuing of such import approvals subject to the mitigation of any safety concerns.

FORS view is that the introduction of an arrangement of this sort would evoke safety concerns in allowing nonstandard vehicles into Australia. There would be no control of either the numbers of vehicles or the compliance which is contrary to the objectives of the MVSA. It is also possible that a flood of these vehicles into Australia could impinge on industry competition.

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The Task Force takes the view that the $12,000 special duty is expressly provided for the purpose of limiting the numbers of used vehicles imported into Australia in full volume to give effect to industry policy. This would superficially appear to have been successful, for Customs has only rarely, if ever, collected the $12,000 special duty since its introduction in December 1991.

The Task Force is also of the view that while the payment of the $12,000 would be perhaps of sufficient disincentive to limit the numbers of used vehicles to levels at which safety concerns could not eventuate, it nevertheless could not be guaranteed. The Task Force therefore agree with FORS that it should not be mandatory to issue an approval if the importer elects to pay the $12,000 as the safety concerns could not be assuaged.

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CHAPTER 7 INTERNATIONAL ISSUES

7 International IssuesTerm of Reference

Assess and report on the costs and benefits to the community and industry, including impacts on trade, of harmonising Australian Vehicle standards with international vehicle regulation and of maintaining some unique Australian vehicle standards.

Overview

The international harmonisation of vehicle standards has the potential to provide significant cost and time savings for manufacturers, regulators and the community. The adoption of harmonised standards would also provide greater scope for domestic manufacturers to access new export markets.

However, some concern has been expressed, particularly by the heavy vehicle manufacturing industry, that harmonisation with UN/ECE Regulations has the potential to exclude Australia from adopting specific United States standards – scope should exist to adopt US standards as appropriate.

A number of stakeholders considered that allowance for unique Australian vehicle standards should be provided.

These matters are being addressed in detail under the review of the Australian Design Rules.

Background

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Almost every country has its own vehicle regulations which have evolved over the years with regard to vehicle performance, traffic conditions and road safety, often with little regard for

legislation in other countries. The ensuing variety of design and performance requirements

has been a significant obstacle for trade. This situation has improved considerably during the last decade through moves towards international harmonisation of vehicle standards.

Australia has supported a policy of international harmonisation activities through the United Nations, the Trans Tasman Mutual Recognition Arrangement and the Asia Pacific Economic Cooperation (APEC) forum. Bilateral arrangements have been established with respect to mutual recognition of conformity assessment with the European Union and Thailand. Discussions for similar arrangements have been held with other countries in the region.

In November 1995, US and European manufacturers made a commitment to adopt the UN/ECE as the forum for the development of internationally harmonised vehicle safety and emission standards. To this end, a new agreement was made in 1998 entitled Agreement on Global Technical Regulations intended to provide the mechanism for harmonised regulations acceptable to the international community. This agreement together with the “1958 Agreement” is administered by the United Nations Inland Transport Committee Working Party 29. In 1998 the United States of America signed the Global Agreement and Japan and the European Union also acceded to the 1958 Agreement last year. Australia is an active participant in the forum of international vehicle standards harmonisation and many of the Australian Design Rules already align with the Regulations adopted by the UN/ECE.

Agreement has also been reached in APEC to adopt the UN/ECE as the forum for the development of internationally harmonised safety and emission standards.

Furthermore, Australia reached agreement in 1996 with New Zealand on a Trans-Tasman Mutual Recognition Arrangement. The purpose of the TTMRA is to provide a common market between Australia and New Zealand so those goods which meet TTMRA requirements can be sold in both countries.

TTMRA commits Australia and New Zealand to develop a harmonised vehicle regulatory system, based on UN/ECE regulations, or other national or regional standards as agreed by the parties, and to develop a consistent vehicle certification system.

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A number of current activities aim at enabling manufacturers to gain access to wider markets. These include international harmonisation of automotive standards, ongoing moves to recognise equivalence of standards which differ in detail but deliver comparable safety outcomes and mutual recognition of arrangements conformity assessment.

Australian manufacturers and the component parts industry consequently have gained easier access to international markets as a result of these initiatives.

7.1 Stakeholder ViewsMost stakeholders, including the FCAI and VICAA, were supportive in their submission of Australia harmonising with international vehicle standards. However, there was some concern about adopting international standards to the exclusion of all others, even to the extent of preventing Australia from developing cost effective regulations to address particular safety issues in areas not addressed by international regulations. Also, manufacturers of heavy vehicles of US origin claimed they would be disadvantaged because they would have to carry out costly modifications.

The examination of appropriate standards for adoption in regulations for Australia, whether international, national, regional or even hybrid standards, is being addressed in the TTMRA/ADR review. The terms of reference for this review provide for the adoption of other than international standards where they can be justified. Unique Australian regulations to address particular safety concerns can be adopted where they can be justified. The concerns of heavy vehicle manufacturers are discussed below.

Some specific comments contained in submissions to the review included:

the direct insertion of international standards into ADRs may be harming good local products that are unique to Australia (Bartlett, p.1);

increased harmonisation with international standards should result in reduced ADR compliance costs. However, there should be allowance for unique Australian standards but only where it is essential, such as seat belt "sun degradation" and "dust" requirements (Simms, p.2);

it is crucial that Australia supports the international harmonisation of vehicle standards to ensure that Australian vehicle and component manufacturers can readily access export

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markets. However, the Victorian Government believes that there should be flexibility to reflect local conditions and requirements (DoP&C, Vic, p.3);

allowances should also be made for "unique" Australian standards which have been shown to be clearly beneficial in terms of road safety and trauma reduction, for example, child restraint systems (DoT, WA, p.3);

harmonisation with the UN/ECE Regulations has the effect of favouring those who import or assemble European vehicles. The majority of vehicles manufactured in Australia are originally of US design or are done so by companies with US senior partners. The majority of vehicles of European origin are fully imported or imported as kits and only assembled in Australia. By harmonising with UN/ECE Regulations, European importers are given a commercial advantage over local manufacturers (Kenworth, p.3);

harmonisation has the potential to exclude Australia from adopting US standards which may be superior to ECE standards. There should always be provision to either include US standards in the ADRs or accept them as substitutes for ECE standards. Unique Australian standards can also be justified (RTA, NSW, p.4);

allowance should be given to applicable US standards in Australia as a large proportion of heavy vehicles operating in Australia are of US manufacture. This allowance should be retained while alignment of international vehicle standards is taking place. This could be equally said to apply to Japanese vehicles operated in Australia (RTF, Attachment A, p.3); and

FORS should ensure that future developments under the TTMRA and CER do not provide an avenue for the import of used vehicles through New Zealand to Australia (FCAI, p.9).

Analysis

Harmonising Australia’s vehicle safety standards with the UN/ECE Regulations will lead to considerable savings in that products manufactured for world markets can be sold in Australia without the need for costly re-testing to unique Australian requirements. There would be savings to industry from economies of scale given that Australia represents a small volume of world production. The community would have access to cheaper, safer vehicles

without delay.

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It is important to note that UN/ECE Regulations are made under the international “1958 Agreement” and should not be considered European standards. Admittedly the European Union has acceded to the Agreement and has adopted a number of UN/ECE Regulations, however, the Agreement is open to all countries and the recently announced accession by Japan demonstrates its use outside Europe.

Harmonisation with the UN/ECE Regulations also provides for the ready acceptance and traceability of certificates of compliance issued by recognised authorities. This will lead to savings (cost and time) by avoiding duplication of administrative effort.

Adopting international vehicle regulations will relieve Australia from committing resources to the development of national vehicle safety standards. Available resources could be better utilised by participating in the development of international regulations and recently Australia has become more active in this area.

Most of the full volume manufacturing industry is fully supportive of international harmonisation as it can use products manufactured for world markets and take advantage of compliance certification issued by international authorities. International harmonisation also opens up potential new export markets.

The Task Force considers that the concern expressed by the heavy vehicle manufacturing industry that they would be disadvantaged because of their heavy reliance on imports from the US can be addressed by allowing appropriate variation to the international regulations for application in Australia. FORS has, in the past, actively pursued this avenue and, during the TTMRA/ADR review, due consideration will be given to the impact of proposed regulations on the heavy vehicle industry. International harmonisation of vehicle standards also opens up potential new export markets for the domestic automotive manufacturers.

The question of unique Australian requirements is one of the matters for consideration as part of the review of TTMRA/ADRs which is currently underway. The review is examining the cost and benefits of retaining or introducing unique Australian requirements.

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In assessing future options and preferred arrangements, the TTMRA/ADR review is to have regard to a range of relevant matters, including current and likely future developments in international safety regulations in the UN/ECE and APEC.

7.2 Costs and Benefits of International Harmonisation

7.2.1 OptionsConsideration was given to withdraw from participation in international harmonisation activities. This was not considered to be a viable option as it has the disadvantage that Australian vehicle manufacturers and the component manufacturers are cut off from other markets without going overseas for certification. Further, such a decision would result in increased costs for importers. Australian regulators would need to “reinvent the wheel” to develop their own standards at considerable cost because they would not have access to the huge pool of international expertise. There would be uncertainty for manufacturers which could cause them to be reluctant to market certain vehicles in Australia, leading to limitations in consumer choice.

With a view to participating in international harmonisation, the Task Force has considered two options.

Option 1 – Maintain the Status Quo

The current system is a mixture of internationally harmonised standards, regional and national standards and unique Australian standards which have been developed over a number of years. Also, Australia recently signed a Mutual Recognition Agreement (treaty level) with the European Union and a Mutual Recognition Arrangement with New Zealand. While there are differences between these two, both will lead to improved access to overseas markets for Australian manufacturers.

However, in the case of the European Union Agreement, on conformity assessment only those ADRs that are currently harmonised with the UN/ECE regulations are included. In the case of the New Zealand Arrangement both countries are currently working on developing harmonised standards. However the Arrangement provides further options in the event that harmonisation does not eventuate. These include mutual recognition of different standards and permanent exemption which will put vehicle safety standards outside of the arrangement. While these other options are available, harmonisation of standards will deliver the most

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benefits from such agreements/arrangements and rather than bilateral harmonisation, international harmonisation is preferable.

Option 2 – Australia to Accede to the UN/ECE Agreement

Option 2 would see accession to the UN/ECE 1958 Agreement and acceptance of regulations on a case by case basis. Australia would have a voice in developing standards but have the ability to maintain local standards to suit the unique, Australian conditions. The costs and benefits of specific unique motor vehicle standards are being reviewed systematically as part of the TTMRA/ADR Review.

The second option would see a more rapid progression towards international harmonisation.

7.2.2 FindingsFormal consultation has begun in acceding to the 1958 Agreement which would enable Australia to have voting rights and a greater say in setting the agenda for the development of international standards. The Task Force supports this course of action for the long term benefit of the community and industry. Thus Option 2 is the preferred option. The suitability of international regulations could be assessed before application and the Task Force considers that this option would provide the highest level of net benefits to the Australian community and industry. This is the best course for participation in a global industry and cooperative development of enhanced safety for vehicles while preserving flexibility.

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CHAPTER 8 IN-SERVICE MATTERS

8 In-service MATTERS Term of Reference

Consider the relationship between Commonwealth controls imposed on road vehicles first supplied to the market and in-service vehicle standards principally controlled by States and Territories.

Overview

The constitutional relationship between the Commonwealth and the States/Territories dictates that new vehicle standards are determined by the former, whereas in-service vehicle standards are determined by the NRTC under the referred powers in that Act.

Due to concerns that in-service standards, particularly those related to environmental performance, are not applied consistently between jurisdictions once new vehicles enter the national fleet, some stakeholders have suggested that national in-service regulations be included in the ADRs or that the scope of the MVSA be expanded. However, the Task Force considered that a greater focus on, and a strengthening of, the existing arrangements to be the best option to address concerns relating to inconsistency.

The existing arrangements provide for the NRTC and FORS to jointly develop in-service standards, and for the NRTC and the National Environment Protection Council to jointly develop noise and emissions standards.

The Task Force noted that recently approved Australian Vehicle Standards Rules developed by the NRTC will better link ADRs with in-service considerations, and that the creation of the Motor Vehicle Environment Committee (by NRTC and NEPC) ensures a coordinated approach to motor vehicle emission standards. In addition, the NRTC has developed an administrative guideline on the assessment of defective vehicles to aid enforcement.

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The Task Force considers that the current regulatory and administrative framework provides sufficient scope to address concerns relating to perceived inconsistencies between jurisdictions in implementing in-service vehicle standards.

The Australian Constitution prescribes the areas in which the Commonwealth has power to legislate. In relation to road transport, the Commonwealth’s capacity to legislate is limited to corporations, interstate trade, import and export, and any issues subject to treaty as the Constitution does not specifically reference road transport as an area in which the Commonwealth may legislate. The Motor Vehicle Standards Act 1989, which provides for the Commonwealth Minister to make standards for the construction of vehicles on first supply to the Australian market, relies on section 51(xx), in relation to corporations, and section 51 (i), the trade and commerce power of the Constitution.

The ADRs have always been adopted by the State and Territories as the in-service standards for vehicles. This has been achieved by the cooperation and goodwill between the Commonwealth and State and Territory Registration Authorities with the AMVCB and its associated Working Party playing a leading role in this outcome.

The creation of the National Road Transport Commission further enhanced opportunities to have a consistent national regulatory regime.

8.1 The National Road Transport CommissionThe National Road Transport Commission (NRTC) Act 1998 establishes an institutional framework for a cooperative, national approach to the development of road transport legislation. The NRTC was established by inter-governmental agreements and the NRTC Act to achieve national uniform or consistent road and vehicle regulations in agreed areas for new and in-service vehicles. Although the NRTC Act does not contain provisions covering vehicles when first supplied to the market, the Commission and FORS work cooperatively under a Memorandum of Understanding to develop and maintain a consistent national regulatory regime covering both in-service regulations and regulations for new vehicles.

The Heavy Vehicle and Light Vehicle Agreements which are schedules to the National Road Transport Commission Act 1991 require the NRTC to develop in-service standards for all vehicles.

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Initial emphasis was placed on developing in-service standards for heavy vehicles (which were endorsed by Transport Ministers in November 1993 and subsequent amendments were endorsed in March 1998).

A comprehensive set of in-service standards for all vehicles, (largely based on the Heavy Vehicle Standards with some amendments to cater for older and other vehicle types) were approved by the Australian Transport Council in January 1999. The Road Transport Reform (Vehicle Standards) Regulations and the Australian Vehicle Standards Rules are expected to be implemented progressively by States and Territories.

These standards have been developed in consultation with FORS, state road transport authorities, environment protection agencies, industry, police, motoring organisations and other interested parties. All regulations are accompanied by a Regulatory Impact Statement.

A major function of the Vehicle Standards is to better extend the application of the ADRs to vehicles in-service.

The NRTC Act 1998 and the Heavy and Light Vehicle Agreements envisaged that legislation produced by the NRTC would be adopted by template, that is, made by Commonwealth Parliament for operation in the Australian Capital Territory and then by reference the States and Territories adopting the ACT law as State/Territory law. This would have resulted in the automatic flow-on of any amendments made through the NRTC process to the law of the ACT.

Following a review of the national road transport review processes in late 1996 and subsequent endorsement by Heads of Government to the resulting recommendations, relevant parties are now required only to progressively apply the substance of such legislation as amended from time to time, so as to provide a uniform or consistent national operating environment for road transport. In practice, it is expected that each State and Territory will adopt the Vehicle Standards by its own means and any amendments made through the NRTC process will need to be separately incorporated by each jurisdiction.

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8.1.1 FORS relationship with NRTC and NEPCA Memorandum of Understanding (MoU) between the NRTC and FORS signed in July 1992 provides the framework for joint working and business relationships. The work program lists proposals and investigations of changes to vehicle standards and other key road safety issues of mutual interest. In-service matters are included on a needs basis where special expertise is required or joint participation is otherwise advantageous. The development of in-service standards for both light and heavy vehicles is managed by NRTC. The NRTC’s role in progressing ADRs also ensures that there is cross fertilisation between the development of in-service standards and the ADRs.

The development of noise and emission standards relating to the design, construction, or technical characteristics of motor vehicles is carried out by the NRTC in conjunction with the National Environment Protection Council.

The National Road Transport Act 1991, and the Intergovernmental Agreements incorporated as Schedules to the Act, provides the NRTC with the responsibility to develop new and in-service noise and emission standards for motor vehicles. The NRTC Act specifies that these standards are to be developed in conjunction with the NEPC.

The National Environment Protection Council (NEPC) Act 1994 also gives the NEPC an important role in developing standards for emissions and noise from road vehicles. The NEPC Act requires NEPC to develop and agree to such standards in conjunction with the NRTC and determine them in accordance with the NRTC Act and, where appropriate, the MVSA.

The mechanisms available to the NRTC to control in-service motor vehicle standards in conjunction with FORS and the NEPC include:

the formulation of standards for in-service vehicles;

preparation of administrative guidelines for the enforcement of in-service standards; and

submitting recommendations for proposed standards to the Australian Transport Council.

A separate MoU between NRTC and NEPC signed in July 1997 sets out the administrative arrangements for joint development of emissions and noise measures. Transport and

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environment agencies, plus key stakeholder groups, provide input to standards development through a range of bodies. In addition, the NRTC and NEPC have formed a Motor Vehicle Environment Committee (MVEC) to ensure a coordinated approach to addressing motor vehicle emission issues. A three-year Strategic Plan for MVEC was approved by NEPC and ATC in December 1998.

Stakeholder Views

Some State regulatory authorities (including NSW) consider that it is desirable to include in-service requirements in the ADRs, as it gives them more confidence in applying those requirements to vehicles in-service because they know that the vehicle met that test as new. However, State and Territory authorities are able to introduce any suitable regulatory requirements on in-service vehicles, even if the vehicle type was not required to meet that particular test under the ADRs.

The concern of State and Territory regulatory authorities, with regard to in-service emission standards could be allayed if the ADR contained guidance on the application of in-service standards. The guidelines would provide a defensible basis for the adaptation of the new vehicle standards to an in-service enforcement regime.

The need to develop and implement in-service standards has been building over time. Delays in development of national in-service vehicle standards and the tendency for some regulatory authorities to diverge from aspects of national legislation when implementing reforms might be behind the desire to have nationally uniform in-service standards included in ADRs.

The FCAI called for the establishment of a national system of annual inspection and testing to ensure that in-service vehicles continue to meet the safety and emission standards and provide the community benefits that flow from improved maintenance.

The RTF and the Queensland Department of Environment agreed that the current regulatory framework adequately meets the safety and air quality needs of the Australian community. However, a number of stakeholders, such as the Institute of Automotive Mechanical Engineers, AAAA, US Eagle, ACT Roads and Transport, NSW EPA and Queensland Transport, raised concerns about the perceived divergence of vehicle standards between the States and

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Territories and called for the MVSA to include nationally consistent standards, testing facilities, emission controls and enforcement procedures for in-service vehicles.

Not all States and Territories have compulsory annual inspections and others have recently moved away from doing so. One reason for this change was to bring about a more cost-effective enforcement regime. A national mandatory in-service standards enforcement scheme would need to ensure that the benefits to the community outweigh the costs.

8.2 Management of In-Service Vehicles

8.2.1 In-Service Vehicles Standards EnforcementTo aid enforcement of in-service vehicles standards, NRTC has developed an administrative guideline on the assessment of defective vehicles which has been approved by Ministers. The guideline consists of principles to help enforcement officers determine the significance of vehicle defects relative to the safety risk they present. The guideline is to be used with the Heavy Vehicle Standards and the associated Roadworthiness Guidelines to form the basis for training documentation for enforcement officers.

To further address the issues associated with the enforcement of national uniform in-service standards, NRTC’s Strategic Plan includes the development of a policy approach for more effective and consistent on-road enforcement as part of its future work program.

8.2.2 Legislative Arrangements OverseasThe US Government has constitutional power to regulate new vehicle requirements and attaches conditions to federal funds to encourage States to adopt uniform in-service operating regulations in key requirements.

The Japanese Government has power to legislate new and in-service vehicle requirements. This legislation provides systems necessary for motor vehicle inspection and registration. The Act also prescribes the contents of the maintenance and repair business. The Japanese Government has established several local Land Transport Offices across the country to conduct vehicle registrations and inspections.

Generally, countries with a unitary system of government, such Japan and New Zealand, have national vehicle regulations to achieve national uniform standards. Countries with federal

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systems tend to have limited constitutional power to regulate uniform vehicle requirements for in-service vehicles.

Under the Australian federal system, the legislative power for the development and enforcement of road transport regulation resides within the States and Territories. However, these could be referred to the Commonwealth Government, and Australia has a history of developing cooperative uniform national arrangements under the aegis of federal conferences of ministers in the relevant portfolios.

8.2.3 OptionsThe Task Force considered the options of expanding the MVSA to include in-service standards or retaining the current legislation and administrative arrangements. In the current arrangements NRTC would continue as the key agency in conjunction with NEPC on emissions and noise issues developing national uniform in-service standards.

The Task Force notes that the purpose of the National Road Transport Commission Amendment Act 1998 is to continue the current process of cooperative national road transport reform in Australia. The Act also provides the necessary supporting amendments to the inter-governmental Agreements and implements a range of improvements to the NRTC and the national road transport reform process, including in-service vehicle and emission standards.

The need for formal consultation between the NRTC and NEPC is recognised in both the NRTC and NEPC Acts. While there are inconsistencies between jurisdictions in the application of in-service standards, the NRTC and NEPC administrative arrangements and associated legislation appear to offer the best mechanism for resolving those differences.

The Task Force sees no reason for expanding the scope of the MVSA to cover in-service standards or to amend the MVSA to provide an appropriate level of coverage for in-service vehicles.


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the Memorandum of Understanding between the NRTC and FORS be revised to reflect current arrangements, including NEPC’s role.

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CHAPTER 9 INDUSTRY CHARGING / REGULATORY COSTS

9 Industry Charging / Regulatory CostsTerm of Reference

Assess and report on the current cost recovery arrangements and the extent, if any, of cross subsidy between and within relevant industry sectors and the relevance of charging practices to the services carried out for each sector.

Consider current and potential arrangements for cost recovery.

Overview

The level of charges levied by the Commonwealth on industry are not significant in terms of the cost of marketing vehicles. However, the Task Force notes that the Low Volume Scheme does not recover even the direct costs of processing approval applications. Revenue raised from charges is paid into the Consolidated Revenue Fund and FORS receives an allocation through the Budget process.

The Task Force notes there is no direct and explicit connection between the level of administrative resources provided to FORS through the budget process and the level of work generated by the certification scheme.

In general, stakeholders were satisfied with the charging but commented on the need to link charges with services provided. The Task Force agrees that asymmetry in cost recovery between the low and full volume schemes be addressed and that there be a direct connection between service provision and charges.

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9.1 Industry ChargingThe Commonwealth charges industry to recover at least part of the costs of administering the MVSA. In general, the charges are not such as to discourage the marketing of vehicles. However, the Task Force considers there is room for improvement in the current industry charging arrangements. The following areas need attention:

the fees charged for the Low Volume Scheme do not cover the direct costs of processing approval applications;

charging arrangements are not transparent, nor are they subject to external scrutiny; and

there is no direct link between the services FORS provides and the level of revenue collected.

9.2 Current ArrangementsSection 24 of the MVSA provides that the dependent regulations may prescribe fees or a method of calculating fees for a variety of services related to the administration of the Act. The fees, which are scheduled to Regulation 14, have been amended from time to time, most recently in 1994. The current charges are set out in Appendix O.

Charges are levied for applications for approval to place compliance or identification plates on vehicles, for variations to such approvals, granting of authorities and for the actual compliance or identification plates.

The charges are designed to differentiate between arrangements for full volume approval, low volume approval, the import scheme and trailer certification. There are no direct user charges for activities associated with technical efforts to develop the ADRs, safety and technical research to underpin the ADRs, harmonisation efforts, audit/compliance efforts or safety/recall investigations. The costs of some of these activities are built into the compliance plate fee. Charges for publications containing the vehicle standards are set by FORS (outside the schedule) at a level to recover only those costs directly associated with publication and distribution.

9.3 Impact of ChargesThe charges levied by FORS impact on three different sectors, although only the first two of these could be described exclusively as part of the motor vehicle industry:

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large businesses, which tend to be Compliance Plate Approval (CPA) holders under the Full Volume Scheme, which manufacture or import vehicles, including trailers, in large numbers;

small businesses which are CPA holders under the Low Volume Scheme which manufacture or import vehicles, including trailers, in small numbers, or import vehicles for dismantling; and

users of the Personal Import Scheme who are generally individuals importing their own vehicles when migrating or returning from overseas.

Stakeholder Views

The general level of industry charges was not identified as a significant issue. However, a number of stakeholders expressed concern about the relative level of cost recovery between industry sectors. The FCAI in particular is concerned that the Low Volume Scheme is not meeting its costs and suggested alternative arrangements for administering the scheme.

Stakeholders’ main concerns in relation to industry charging are:

charges should reflect the actual costs of service (DoT, QLD, p.6, CARCON, p.3, Schnittler, p.4, DoT, NT, p.4);

while accepting that fees should, as a matter of principle, reflect the actual costs, this should not be used as a mechanism to exclude low volume and small suppliers from the market (R&T, ACT, p.3); and

the Full Volume Scheme is subsidising the costs of administering the Low Volume scheme and this should not occur (RTA, NSW, p.9).

9.4 Charging RationaleA 1992 Bureau of Transport and Communications Economics study into aviation safety fee charging found that safety regulations benefit both industry and the community. The study concluded that industry should pay part of the costs of developing the regulations.

In 1994, on the basis of this premise, the then Minister for Transport and Communications approved a vehicle compliance fee increase of $1 per motor vehicle to cover the attribution of

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50 per cent of FORS’ vehicle standards development running costs to the vehicle certification system77. Fees have not been increased since that time, but Budget funding to FORS has been increased to reflect the full running costs of vehicle standards development and to contribute to the research costs associated with administration of the MVSA. Over $2.3 million has been provided through the budget for the development of the RVCS.

9.5 Level of Industry ChargingThere is no direct link between the services FORS provides in administering the MVSA and the level of revenue collected. This revenue goes into the Commonwealth Government’s Consolidated Revenue Fund. FORS is part of the Department of Transport and Regional Services which is funded through the Budget process.

Most revenue is collected from the sale of vehicle compliance or identification plates (currently set at $7.50 for each motor vehicle, $3.75 for each motor cycle, and $58.00 for trailers over 4.5 tonnes GVM). As illustrated in Table 9.1, revenue has grown significantly in recent years, mostly as a result of the increased number of motor vehicles entering the Australian market78. From 1995-96 to 1997-98, the revenue from vehicle compliance plates exceeded estimated directly attributable annual running costs. The cumulative “surplus” to 30 June 1999 amounted to some $1.9m.

77 Bureau of Transport and Communications Economics, Recovering Safety Regulatory Costs in Aviation, 1992, cited in O. Randall, Alternative Cost Recovery Funding for the Federal Office of Road Safety, unpublished 1998, p.5.

78 In 1997, some 722,000 vehicles were registered after entering the Australian market for the first time.

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Financial Situation 1992-93 to 1998-99

Year 92-93 93-94 94-95 95-96 96-97 97-98 98-99

Charges 4,114 4,495 5,743 5,840 5,948 7,098 8,284

Costs (est) 3,885 4,326 4,844 5,241 5,022 6,137 9,648

Sub-section 24(4) of the MVSA states that the prescribed fees are not to amount to taxation. Accordingly, the fees are designed to recover costs associated with the administration of the vehicle certification, import scheme and vehicle standards development.

FORS, as part of the larger Department, is moving towards using accrual budgeting to analyse its functions and business needs. Operational costs will be more accurately identified during the next 12 months. The direct running cost figures in the above table understate the actual costs on a full accrual basis.

Table 9.2

Fees and estimated related administrative costs - 1998-99

Activity Administrative Costs$m

Charges$m

Full volume approval 7.02 6.67Low volume approval 1.33 0.37Trailers 0.52 0.55Imports 0.78 0.69Total 9.648 8.28

The estimated figures in Table 9.2 suggest that, at the current level of vehicle sales, there is over recovery of regulatory costs. However, the administrative costs in the table do not fully reflect standards development and research costs associated with the administration of the MVSA. In addition, accrual budgeting will also attribute significant additional overheads.

9.6 Relative Charges between and within SectorsThe majority of fees from the certification scheme come from the full volume compliance plate revenue.

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Using the compliance plate as the charging mechanism is administratively simple. Because it provides a clear, fixed per unit cost, it also has the support of the full volume manufacturers. However, as a charging mechanism, the compliance plate is not precise, or flexible.

Consideration should be given to the adoption of an alternative arrangement to recover from individual clients the actual costs incurred for the services provided. Such charges should include more precise components for safety investigation and recall, development of standards and international harmonisation activities.

A significant benefit afforded low volume applicants is a relaxation of the testing and audit requirements. The $500 application fee is apparently a relatively minor part of their costs. The scheme provokes widespread criticism because of perceived inequities (see Chapter 5) and the fact that it does not recover even the direct processing costs associated with the scheme.

Relative to the Full Volume Scheme, the Low Volume Scheme is administratively complex and resource intensive. This has been recognised for some time. In 1990, the Department considered increasing low volume application fees to better reflect actual costs. As a result, the $500 application fee was introduced. A 1997 study estimated the actual cost of processing low volume applications at about $3,000 per application. FORS anticipates that the introduction of the RVCS will produce a number of administrative efficiencies. It would be advisable to reconsider the FORS costs when RVCS is operational.

No stakeholders commented on the fees for trailer approvals. Current industry charging arrangements appear to recover sufficient funding to cover the cost of services provided. These should be more clearly defined and revised in light of administrative efficiencies potentially arising from the introduction of the RVCS.

All imported vehicles require an import approval from FORS. The application fee is $50 in all cases, that is, the fee remains $50 whether the application covers one or thousands of vehicles. Given that estimated costs and revenue are closely balanced, there does not appear to be a problem with the level of charging.

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No stakeholders commented on the fees charged in relation to the Personal Import Scheme. However, this may be because the scheme does not have a commercial focus. It is doubtful whether the Scheme would recover fully attributed costs for administrative effort. The current application fee ($50) includes the cost of the compliance plate. FORS currently pays the compliance plate manufacturer $20.25 for the production and dispatch of these plates. It appears that there is under recovery of costs in this area.

FORS produces and distributes a number of publications relating to the requirements of the vehicle certification system. These include the ADRs and various manuals advising on compliance. FORS also researches and develops new vehicle standards and is working on developing strategies for harmonising Australian standards with international standards. Since July 1998 administrative costs for FORS’ standards development activities have been notionally recovered from compliance plate revenue.

As part of its regulatory function, FORS undertakes safety investigations and monitors recalls of vehicles and vehicle components. Significant community benefits are associated with FORS safety investigation and recall, and auditing activities. However, as they fundamentally concern the enforcement of the standards, it is reasonable that the motor vehicle industry bears these costs.

9.7 Principles of Cost RecoverySeeking to develop a consistent approach to the costing of FORS activities, the Task Force considered advice from the Department of Finance and Administration and the charging arrangements of other public sector agencies, including Customs and the Australian Industrial Property Organisation.

The Commonwealth Government’s policy is that, as a general rule, charges should be made for goods and services provided by agencies to other agencies, members of the public or to one-off provision of goods or services involving non-trivial amounts. The Government advocates a transparent costing methodology and an annual review of the level of charges. If less than full costs are charged, then any reduction should be transparent to both the supplier and the consumer79.

79 As articulated in the model Chief Executive Instructions for the Financial Management Act 1997, 9.1, Federal Department of Finance and Administration.

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As the industry regulator, FORS is a monopoly supplier and as such an examination of the appropriate level of fees cannot be based on market rates for these services. An alternative approach is to establish, in consultation with stakeholders, the services that should be subject to cost recovery and calculate the actual attributable costs involved in the provision of those services.

The fees should be relevant to the services provided and, where a sector is not charged, this should be funded from other sources (that is, the Budget) and not from other sectors.

Any fundamental change to the way fees for service are defined should not impose a significant additional administrative overhead on the regulator.

9.8 BeneficiariesThe benefits of the vehicle certification system are spread among a number of groups. Vehicle manufacturers and importers are assured of a national uniform regulatory regime. Owners and passengers benefit from the improved safety performance of vehicles and the knowledge that vehicles supplied to the Australian market comply with the national standards. The general community benefits from reduced road trauma and improved air quality.

What proportion of the costs should be recovered, and from whom? Certification costs on industry are passed on to consumers through the sale price of vehicles. However, compliance costs for industry may be lower than they would be otherwise due to the certainty of requirements and the existence of a single regulator.

The Australian community expects that goods and services supplied to the market will not adversely impact their health and safety. While the MVSA is intended to give effect to that expectation as it relates to motor vehicles, it does not necessarily follow that the community should bear the associated administrative costs.

Not only do suppliers of motor vehicles have an obligation to ensure their vehicles comply with the national standards, there is an economic benefit in doing so. Safety is used as a selling point with potential buyers. The cost of certification is one small part of the overall costs associated with the production, distribution and sale of a motor vehicle. The Task Force

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considers that it is both reasonable and appropriate that industry bears the costs of administering and implementing the provisions of the MVSA.

9.9 Potential Arrangements For Cost Recovery

9.9.1 Options for future arrangements for cost recoveryBefore undertaking a new fee setting exercise, it is critical that the level of administrative resources required be clearly defined in the longer term and accurately costed. For instance, the Task Force notes that although the development of the RVCS is expected to deliver savings in administrative costs, FORS intends to reallocate resources to other functions associated with vehicle compliance.

An alternative to refining the current cost recovery process is to develop an activity based cost recovery scheme. The Task Force notes that the Australian Customs Service has a highly developed activity based charging model that differentiates between commercial users and private recipients of Customs Services. Only commercial users pay full costs while the subsidy to private recipients is explicitly stated and this funding is sourced from the Budget. This system is regularly reviewed.

If FORS were to adopt such a model, it would need to be flexible and able to be adapted to suit changing circumstances. Customs monitors its charging model biannually and sets its charges annually. It also consults with a peak industry body about the level of charges; however, the Minister retains control over the level of the charges. Such consultation would be advisable for FORS if it moved to these arrangements.

There is no legislative constraint to moving to a fee for service based cost recovery scheme for vehicle certification. The regulations are empowered under subsection 24(1)f of the MVSA to prescribe fees for the provision of other services, or the supply of other documents or goods by the Commonwealth under this Act or the regulations. However, the regulations would need to be amended to reflect a fee for service focus.

An activity based charging model would deliver more transparent charges with an assurance that charges are based on the actual costs of service delivery. However, the system would need to be reviewed regularly to ensure that it continued to accurately reflect the actual costs of services. The Task Force noted, however, that the administration of such a scheme

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should not impose an additional overhead on the certification scheme and impose more costs on industry.

9.9.2 Options for administrative arrangementsRecently, FORS officers investigated the options for moving to alternative mechanisms for cost recovery for vehicle certification activities80. Subsequent discussions with the Department of Finance and Administration indicated that the most feasible option in the short term was the development of a resource agreement to facilitate access to revenue recovered from commercial aspects of MVSA administration.

There are a number of inherent questions for such an approach. FORS could, for example, perform services not directly related to the administration of the MVSA in order to increase revenue. Alternatively, FORS may find itself without sufficient funding if expected levels of activity are not met. On balance, the Task Force considers a direct link between the level of resources required and the services provided is an effective way of improving management of the vehicle certification scheme. Such a change would enable FORS to manage the resources more effectively, provide clear performance targets and pass any administrative savings on to industry through reduced charges.

The Task Force recommends:


services which should be subject to cost recovery should include direct processing costs, research and development costs associated with new standard, safety investigations and recall monitoring activities; and

consideration be given to adopting an activity based charging regime to recover actual costs associated with FORS services as they relate to administration of the MVSA.

80 O. Randall, Alternative Cost Recovery Funding for the Federal Office of Road Safety, unpublished, 1997. The aim of the study was to consider options for direct funding based on revenue generated by FORS certification services, and to offer a direct link between services provided and the level of industry charging.

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TERMS OF REFERENCE - FINDINGS

Part B – Terms of Reference –Findings

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Terms of Reference – FindingsThe following overview addresses each Term of Reference specifically, providing a summary of the issues and findings presented in the body of the draft report, and includes the actions recommended by the Task Force. Greater detail is provided in Part A.

Objectives of the Legislation

Term of Reference

The Task Force is to assess the appropriateness, effectiveness and efficiency of the Legislation and, in particular, is to assess and report on:

the objectives of the Legislation and the extent to which those objectives remain appropriate, including the nature and magnitude of the problem which the Legislation seeks to address;

The Task Force considers that it is appropriate to regulate vehicle safety in Australia and concludes that the principal objective of the MVSA, that is, ensuring uniform standards for vehicle safety, is still appropriate and is being met effectively through the operation of the Act. The Task Force also concludes that FORS should continue to administer the vehicle certification process under the Act. However, the Task Force has identified a number of areas where the objectives of the Act could be broadened to cover environmental and anti-theft performance and consumer information.

The Task Force concludes that existing mechanisms between FORS, the NRTC and NEPC were adequate to address in-service issues and that specific inclusion under the MVSA was not appropriate. (In-service issues are considered in Chapter 8).

The Task Force concludes that the objectives of the Act should be broadened and recommends that:

the MVSA be retained and the object clause expanded along the following lines:

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The principal Object of this Act is to:

establish and apply nationally uniform standards for motor vehicle safety, environmental quality and anti-theft with the aims of:

(a) contributing to reductions in deaths and trauma from vehicle crashes;

(b) reducing the adverse impacts of vehicle use on human health and the environment;

(c) improving the security of vehicles; and

(d) providing information relating to safety, environmental quality and anti-theft to the Australian community.(p.25)

While the Task Force is generally satisfied with the appropriateness of the Act as an effective instrument to facilitate the objective of uniform vehicle standards, it has noted a number of legislative deficiencies which potentially reduce the efficiency of the Act. The deficiencies relate to certain provisions of the Act and associated regulations which are either vague or ambiguous in relation to intent and wording or, in the case of regulations, do not appear to sit within the legal framework of the Act. For example, the Administrative Circulars which form the guidelines of many decisions under the Act do not have legislative basis.


the legislation be retained in its current form, but broadened in its objective and that the Motor Vehicle Certification System continues to be administered by the Commonwealth. (p.33)

The Task Force also considers the ability to collect road trauma data to be a key element in achieving the recommended objective for the Act of “contributing to reductions in deaths and trauma from vehicle crashes”. The Task Force notes that such data contributes to the development of ADRs, research and public information.

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the Act be amended to provide FORS with the power to seek information relating to road crashes in Australia. (p.27)

Term of Reference

Costs and Benefits of the Act

Assess and report on the costs and benefits to the community and industry of the Legislation in achieving its objectives.

The Task Force concludes that the benefits derived from the operation of the MVSA outweigh any associated costs to industry and the wider community.

The major benefit to industry is that the Act provides certainty in relation to vehicle standards and manufacturing requirements, providing a stable regulatory environment for manufacturers, with the additional benefit that industry interacts with a single regulator, thus avoiding the potential for duplication and conflict and consequential costs.

The major benefit to the community is an assurance that vehicles meet minimum safety, emission and anti-theft requirements.

The costs of the Act to industry includes fees paid to the certification regulator and the costs associated with meeting design requirements under the Australian Design Rules and in demonstrating compliance. The major cost to the community includes higher prices for complying vehicles.

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Term of Reference

Restrictions on Competition from the Act

Assess and report on any restrictions on competition that the Legislation imposes, including the costs and benefits of those restrictions on the economy generally.

The Task Force is satisfied that the Act in itself does not restrict competition, however, it does restrict the entry of some vehicles to the Australian market unless they comply with Australian safety, emission and anti-theft standards. The Act facilitates competition between a range of complying vehicles but precludes competition from non-complying vehicles which do not meet prescribed safety and emission standards. The Task Force considers that the benefits to the community of this restriction to competition outweigh the costs.

Regulatory practice prevents Full Volume (see 2.6.7) manufacturers from taking part in the Low Volume Scheme (see 2.6.8) which offers concessions in the way compliance is demonstrated. Although the restriction is not significant in overall market terms, the Task Force considers, nevertheless, that this restriction should be removed. (The Low Volume Scheme is discussed in Chapter 5 of the report).

The main benefit of the Act for the economy is that it provides the means for a wide range of complying vehicles to be marketed in Australia. This facilitates competition and, potentially, increased market choice and activity. The operation of the Act can also potentially prevent the entry of some vehicles to the Australian market which would be unable, on cost or technical grounds, to meet Australian standards.


full volume manufacturers be eligible to participate in the Low Volume Scheme.(p.80)

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Term of Reference

Impact of the Act

Assess and report on the impact the Legislation has on safety, the environment, equity, health, regional development, consumer interests or business competitiveness.

There has been a considerable improvement in vehicle safety over the life of the Act. However, it is difficult to quantify the role the Act has directly played in this improvement. Nevertheless, the Task Force is satisfied that the Act, by ensuring an appropriate minimum standard of safety via the development and enforcement of ADRs, has made a significant contribution to safety and has led to a reduction in road trauma and the associated cost to the community. The Task Force notes that a review of the ADRs is currently being undertaken.

The Task Force considers that the Act has had a positive impact on the application of national uniform environmental vehicle standards and, as noted earlier, concludes that specific reference to environmental issues should be contained in the Act's objectives.

The Act has contributed to meeting on consumer interests through the facilitation of greater safety and assurance of safety compliance and though greater choice of complying vehicles. The Act provides for the transparent pursuit of its objective of achieving uniform national vehicle standards.

The Act provides regulatory certainty for major vehicle manufacturers, while also providing concessional arrangements via the Low Volume Scheme for small manufacturers. The market is open to all manufacturers who are able to meet the prescribed safety and environment standards.

The Task Force considers that, on the whole, participants seeking certification are treated equitably under the Act, however the restriction preventing Full Volume manufacturers from participating in the Low Volume Scheme should be removed on equity grounds. Once

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minimum safety and environmental standards have been met, the Act does not discriminate against potential manufacturers.

The impact of the Act appears to be neutral in terms of regional development issues.

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Term of Reference

Interaction of the Act with Other Legislation

Assess and report on the degree to which the Legislation, operating in conjunction with the National Road Transport Commission Act 1991 and other Commonwealth, State and Territory legislation, has been effective in preventing non-compliant or unsafe road vehicles entering the market.

The Task Force considers that, by setting minimum national standards for safety and the environment, the Act has been effective in achieving its objectives. However, the Act also interacts with a number of other pieces of legislation covering trade practices, customs, environment protection and road transport in pursuing its objectives.

The Task Force notes that the Customs Act 1901 plays a key role in supporting the administration of the MVSA, ensuring that only those vehicles with appropriate import approvals are permitted entry to Australia.

The Task Force also notes that both the National Environmental Protection Act 1994 and National Road Transport Commission Act 1991 require consultation in the context of the MVSA in the development of ADRs.

The Task Force considers that the work of the National Road Transport Commission and the National Environmental Protection Commission and the provision of relevant State and Territory legislation provides the basis for ensuring ongoing compliance once vehicles have entered the market.

Term of Reference

Effectiveness of the Low Volume Scheme

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Assess and report on the effectiveness and efficiency of the Low Volume Manufacture Scheme, in terms of ensuring vehicle safety, emissions compliance and reducing compliance costs for imports of enthusiasts' or specialist vehicles supplied to the Australian market in small numbers.

The Low Volume Scheme provides a concession whereby small manufactures and importers are able to supply the market with limited numbers of new and used vehicles without the need to demonstrate compliance to the same degree as full volume manufacturers and importers.

While the LVS could potentially be seen as compromising the underlying objectives of the MVSA of ensuring that uniform national standards apply to all vehicles in the Australian market, the limited number of vehicles supplied to the market under the LVS (around 1 per cent in market terms) and the lack of direct evidence of lower in-service safety and environmental standards means that any deleterious impact of the scheme is limited. The Task Force considers that the LVS should continue to operate.

The Task Force notes that compliance costs under the Low Volume Scheme were several orders of magnitude less than under the Full Volume Scheme, as a result of the less stringent compliance requirements. The LVS has enabled a number of small businesses specialising in marketing enthusiast vehicles to develop in Australia.

The Task Force considers that steps should be taken to provide consumers of vehicles first entering the market under the Low Volume Scheme with sufficient information on the vehicle's compliance status in relation to ADRs.

Term of Reference

Effectiveness and Efficiency of Administrative Arrangements

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Assess and report on the current administrative arrangements, including the effectiveness and efficiency of these arrangements in relation to vehicle standards and client service.

Stakeholder comments concentrated mainly on the administrative arrangements surrounding the enforcement of the ADRs. There was very little comment about the technical efforts to develop the ADRs, the safety and technical research and testing to underpin the ADRs, the efforts to achieve harmonisation with international standards, or the recall functions once a safety defect has been found in vehicles released to the market. On this basis the Task Force can only conclude that those facets of FORS administration are seen as satisfactory.

Stakeholders commented, particularly in relation to the administration of the Low Volume Scheme, on backlogs which had developed in the processing of CPAs.

The Task Force notes some stakeholder concerns relating to delays and inconsistencies in FORS administration of compliance applications. While the cause of delays have not always fallen within FORS control, the Task Force considers that greater attention needs to be given by FORS to information management and staff training.

The Task Force was also mindful of the significant increase in Low Volume Scheme activity in recent years and the limited FORS resources available for compliance processing over the same period.

The Task Force notes that the existing paper intensive certification system is being replaced by an electronic certification system (RVCS). The introduction of RVCS for full volume manufacturers in March 1999 and its extension to low volume manufacturers by mid 1999, will significantly reduce the paperwork burden on clients and speed up processing time within FORS.


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changes to administrative procedures be fully considered before implementation, be transparent, and that affected clients be fully informed (p. 59);

FORS develop an information management system which provides FORS staff with a comprehensive and readily accessible database which includes all current ADR interpretations and decisions to draw on when considering applications (p. 61);

that the operation of RVCS be closely monitored and any feedback from clients and FORS staff on the operational efficiency and capacity of the system be recorded and addressed through upgrades and improvements to the system (p.62); and

the content of the relevant Administrative Circulars be reviewed and placed within a legal framework (p.78).

Term of Reference

Compliance Costs

Assess and report on the level of compliance costs for industry and regulatory costs for governments, the impact on small business and ways to reduce the compliance and paperwork burden; and

assess and report on the current cost recovery arrangements and the extent, if any, of cross subsidy between and within industry sectors and the relevance of charging practices to the services carried out for each sector.

Compliance costs vary between industry sectors. However, stakeholders indicated general satisfaction with the level of charging levied under the Act. Major manufacturers were generally satisfied with the system of Government regulation and the associated costs of meeting specified standards, including administrative charges, but commented on the need to link charges with services provided.

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The majority of fees from the certification scheme come from the full volume compliance plate revenue. Relative to the Full Volume Scheme, the Low Volume Scheme is administratively complex and resource intensive.

The Task Force considers that the actual costs associated with providing certification, including all administrative costs, should be accurately determined, and an activity based fee-for-service charging regime be introduced to more accurately align actual administrative costs with revenue. The Task Force is conscious, nevertheless of stakeholder concerns that fees should not be used as a mechanism to exclude low volume and small suppliers from the market.

The Task Force notes that FORS does not have access to the revenue generated from compliance services and, furthermore, there was no link between compliance revenue and the level of work required to provide compliances services.



services which should be subject to cost recovery should include direct processing costs, research and development costs associated with new standard, safety investigations and recall monitoring activities;

consideration be given to adopting an activity based charging regime to recover actual costs associated with FORS services as they relate to administration of the MVSA. (p.126)

Term of Reference

Alternative Arrangements

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The report of the Task Force is to cover the matters referred to in paragraph A and in addition is to identify, assess and report on:

the costs and benefits to the community and industry of alternative arrangements, including non-regulatory arrangements, for establishing and ensuring compliance with appropriate vehicle standards.

The Task Force notes stakeholder views that the Type Approval system provides a cost effective and efficient mechanism which facilitates a high degree of assurance regarding compliance in the case of new vehicles entering the market.

However, stakeholders, for example FCAI and VICAA, consider that Type Approval was inappropriate in the case of used vehicles entering the market under the LVS as the vehicle’s history was unknown and vehicle specifications might vary over the life of a particular model. The Task Force also notes evidence that some CPA holders were not meeting compliance requirements and that FORS does not have the resources to facilitate enforcement.

In endeavouring to find the most effective method for certification, the Task Force considered the development of co-regulation between FORS and industry in the form of the registered workshop scheme.

The Task Force notes that further consideration needs to be given to the legislative basis for such a scheme and government control in its administration.

The Task Force also examined the concept of self-certification, where manufacturers would be responsible for ensuring that vehicles comply with applicable ADRs and the government's role would be to enforce legislation and randomly acquire and test vehicles, and issue vehicle recalls in the event vehicles failed the tests. The Task Force concludes that such a system would result in a reduced level of confidence to both industry and the community and significant cost to government in post market auditing and test activities.

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the current type approval arrangements for standard new vehicles under the Low Volume Scheme be maintained (p.89);

a used vehicle certification scheme, based on vehicle by vehicle approval involving registered workshops, be developed in consultation with ‘industry’ (p.94); and

existing CPA holders should be able to continue fitting identification plates to their currently approved models up to an agreed date to provide a reasonable transition to the proposed new arrangements (p.95).

Term of Reference

Harmonisation

Assess and report on the costs and benefits to the community and industry, including impacts on trade, of harmonising Australian vehicle standards with international vehicle regulation and of maintaining some unique Australian vehicle standards; and

assess and report on the preferred approach for meeting future vehicle standards requirements.

The Task Force notes that the international harmonisation of vehicle standards has the potential to provide significant resource and time savings for manufacturers, regulators and the community. The adoption of harmonised standards would also provide greater scope for domestic manufacturers to access new export markets.

Savings flow from the fact that products manufactured for the world market would be able to be sold in Australia without the need for costly re-testing to unique Australian requirements. Consumers would benefit from potentially cheaper and safer vehicles without delay and

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FORS, as regulator, would avoid costs associated with the development of new ADRs and avoid duplication of administrative effort.

However, some concern has been expressed, particularly by the heavy vehicle manufacturing industry, that harmonisation with UN ECE Regulations has the potential to exclude Australia from adopting specific United States standards. The Task Force notes that the adverse impact on this sector could be addressed by allowing appropriate variations to the international regulations for application in Australia.

Under harmonised arrangements, Australian regulators would have the scope for input in developing standards and also have the ability to maintain local standards to suit unique Australian conditions. The Task Force notes that the costs and benefits of maintaining specific unique motor vehicle standards are being considered in the context of the ADR review currently underway.

The Task Force agrees that harmonisation with UN/ECE Regulations is the preferred approach in meeting future vehicle standards.

Given the emerging adoption of harmonised standards by countries trading in motor vehicles with Australia, the Task Force recommends that:

the Commonwealth, in year 2005, review the costs and benefits of Australian jurisdictions and manufacturers moving to adopt one suite of acceptable international standards. (p.33)

Term of Reference

Effectiveness of Current Arrangements

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measures to improve the effectiveness of current arrangements, taking account of the proposed Road Vehicle Certification System, alternatives to that scheme and client service charters;

The Task Force considers that RVCS will greatly enhance the speed with which compliance applications are processed and will reduce the administrative burden currently carried by clients and FORS.

The Task Force notes that the client service charters currently in place are focussing attention on processing times and are providing an effective mechanism to monitor the efficiency and effectiveness of current arrangements.

Term of Reference

Role of Low Volume Scheme


the role of the Low Volume Manufacture Scheme within the overall vehicle certification and compliance scheme.

The Low Volume Scheme expands the range of vehicles available on the Australian market and provides for lower compliance costs (through less extensive compliance demonstration requirements) in respect of eligible vehicles. The extent to which the Low Volume Scheme reduces the effectiveness of the Act is limited by the small numbers of vehicles (1 per cent)

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supplied to the market under the Low Volume Scheme. The Task Force recommends continuation of the Low Volume Scheme provided it does not compromise the underlying objectives of the MVSA.

The Task Force considers that, while the LVS restricted the entry of non-complying vehicles to the Australian market, any restriction in competition as a result was outweighed by the benefit which accrues to the community via enhanced safety. Furthermore, the objectives of the Act to achieve uniform safety standards, could only be achieved by restricting the entry of non-complying vehicles.

The Low Volume Scheme was originally introduced to assist the entry of low volume new vehicles to the Australian market. However, its later extension to include the entry of used vehicles not available in Australia has led to operators within the scheme focusing heavily on the latter. The result has been a significant escalation in the amount of administrative effort directed to low volume certification which the Task Force considers to be out of proportion to the significance in market terms (around 1 per cent). The Task Force also notes that the operation of the LVS was a major issue in stakeholder submissions to the review.

The Task Force considers that the LVS plays an important role in the certification and compliance scheme, but concludes that the administrative arrangements for the scheme could be enhanced to reduce processing time and effort. The Task Force notes that factors contributing to excessive processing times for LVS applications included the nature of the evidence supplied, the competence of consultant engineers, the "state of compliance" of the vehicle to be inspected, and FORS' experience with the vehicle model. The full introduction of RVCS is expected to reduce processing times and reduce administrative effort for low volume clients.

On balance the Task Force considers that the scheme allows consumers greater access to vehicles that would otherwise not be available to the Australian market. The Task Force considered options for the operation of the LVS in relation to eligibility and the approval process.

The eligibility criteria was examined in the light of consumer choice and restrictions on competition.

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The Task Forces recommends that :

consideration be given to revising the current eligibility criteria to make them less subjective; (p.91) and

vehicles with diesel engines or turbocharged engines would not be considered a different model. (p.91)

The Task Forces recommends that the current approval process for new vehicles under the LVS be retained.

For used vehicles two options were considered:

retain the current type approval system; or

implement a registered workshop scheme.

The Task Force notes that there are strategies in place to improve administration of the current process.

As moving to the registered workshop scheme requires a change in business processes for both industry and FORS, the Task Force considers that extensive consultation with stakeholders would be necessary to facilitate such a change.

The Task Force recommends that a used vehicle certification scheme, based on vehicle by vehicle approval involving registered workshops, be developed in consultation with ‘industry’. (p.94)

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Term of Reference

Minimising Regulatory Requirements


the intention that arrangements minimise regulatory requirements, having regard to costs and benefits to the community as a whole.

The regulatory requirements under the MVSA are set out in the Australian Design Rules (ADRs). The ADRs are only introduced or changed after extensive public consultation and the completion of Regulatory Impact Statements which examine the costs and benefits of the regulation. This process ensures that regulation is minimised. The Task Force notes that the ADRs are currently being reviewed.

Term of Reference

In assessing future options and preferred arrangements, the review is to have regard to the National Competition Principles Agreement and a range of relevant matters, including current and likely future developments in:

international safety regulation, including approaches in place and under consideration in the United Nations - Economic Commission for Europe, Japan and other Asian markets, Europe, North America and New Zealand;

emissions control and environment protection, both overseas and in Australian jurisdictions;

anti-theft standards and measures being proposed by manufacturers, law enforcement agencies and consumer groups in Australia and overseas, and

other future requirements.

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The Task Force notes Australia’s commitment to the WTO Agreement on Technical Barriers to Trade which encourages adoption of international standards where possible. Consideration is being given to accession to the UN/ECE 1958 Agreement under which UN/ECE Regulations are developed.

It is anticipated that adoption of UN/ECE Regulations and acceptance of approvals issued to these Regulations will provide savings to industry, the community and administrative efforts by FORS. In addition, accession to the agreement will provide Australia with voting rights and a greater role in setting the agenda for the development of international vehicle standards.

The Task Force notes that air pollution is consistently identified as the most important environmental concern for most Australians. The Task Force notes that transport related activities are the largest contributor to urban air pollution.

While the Motor Vehicle Environment Committee provides the means to develop and implement national in-service environmental performance standards for motor vehicles, the Task Force considers that greater focus should be placed on broader emerging environmental issues which may gain greater focus as Australia adopts internationally harmonised standards.

The Task Force notes that FORS is considering adoption of international UN/ECE Regulations covering engine immobilisers as an anti theft standard.

9.9.2.1

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Term of Reference

The review is to consider changes in Government policies impinging on the industry.

The Task Force notes that a number of Government initiatives which will impact on the automotive industry post 2000, including: phased tariff reductions, export facilitation, market access and investment and incentive schemes.

The Task Force also notes that the government’s focus with these initiatives is on future industry competitiveness and self sustainability.

Senator the Hon Nick Minchin, Minister for Industry, Science and Resources, has stated in relation to the current MVSA review that the Government would consider whether any measures needed to be taken to ensure the integrity of existing automotive policy was maintained81. The Government will consider the industry policy implications of the Low Volume Scheme concurrently with the recommendations of the review.”

Other policies impinging on the industry include the recent amendment to the MVSA extending the definition of “vehicle standard” to enable the introduction of a new Australian Design Rule for model specific fuel consumption labelling. (This is in line with the Government’s Climate Change Statement of late 1997.)

Term of Reference

The review is to consider current and emerging industry trends and practices, including standardisation of safety features and components.

A number of current activities aim at enabling manufacturers to gain access to wider markets. These include international harmonisation of automotive standards, ongoing moves to 81 Senate Economics Legislation Committee, 10 February 1999

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recognise equivalence of standards and mutual recognition of arrangements for conformity assessment.

Most of the full volume manufacturing industry is fully supportive of international harmonisation as it can use products manufactured for world markets and take advantage of compliance certification issued by international authorities. International harmonisation also opens up potential new export markets.

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Term of Reference

The review is to consider the relationship between Commonwealth controls imposed on road vehicles first provided to the market and in-service vehicle standards principally controlled by the States.

The Task Force notes stakeholder concern that in-service standards were not applied consistently between jurisdictions, once new vehicles entered the national fleet. Some stakeholders suggested that national in-service regulations be included in the ADRs or that the scope of the MVSA be expanded to ensure that Commonwealth standards were maintained. However, the Task Force notes that the Commonwealth did not have the constitutional power to do this and considers that a greater focus on, and a strengthening of, the existing arrangements was the best option to address concerns relating to inconsistency.

The existing arrangements provide for the NRTC and FORS to jointly develop in-service standards and for the NRTC and the National Environment Protection Council to jointly develop noise and emissions standards.

The Task Force considers that recently approved Australian Vehicle Standards Rules developed by the NRTC would better link ADRs with in-service considerations, and that the creation of the Motor Vehicle Environment Committee (by NRTC and NEPC) ensured a coordinated approach to motor vehicle emission standards issues. In addition, the NRTC has developed an administrative guideline on the assessment of defective vehicles to aid enforcement.

The Task Force considers that the current regulatory and administrative framework provides sufficient scope to address concerns relating to perceived inconsistencies between jurisdictions in implementing in-service vehicle standards.



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the Memorandum of Understanding between the NRTC and FORS be revised to reflect current arrangements, including NEPC’s role (p.118).

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Term of Reference

The review is to consider the improving levels of vehicle safety, vehicle emissions and anti-theft controls in vehicles manufactured in Australia and overseas.

The ADRs set minimum cost effective levels for safety, emissions and anti-theft. Australia has also become more active in the development of international regulations. The Task Force considers this participation provides the highest level of net benefits to the Australian community and industry.

Term of Reference

The review is to consider the findings of Australian and international reviews and expert reports on motor vehicle safety standards, emission controls and anti-theft devices.

The Task Force notes that the 1996 report by the Industry Commission on the Automotive Industry supported the harmonisation of Australian and international vehicle standards where international standards are equivalent to Australian standards.

Term of Reference

The review is to consider current and potential arrangements for cost recovery.

The Task Force notes, as mentioned earlier, that cost recovery for compliance services was unevenly applied between components of the certification function, with the full volume scheme significantly over-recovering and the low volume scheme under-recovering.

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The Task Force considers that costs should be more closely aligned to services and notes that an activity based (fee-for-service) cost recovery scheme should be considered. This mechanism would provide for a more transparent charging regime. However, actual costs would need to be carefully determined initially, and then be regularly reviewed to ensure charging continued to accurately reflect actual costs for services.


consideration be given to adopting an activity based charging regime to recover actual costs associated with FORS services as they relate to the administration of the MVSA (p.126).

OTHER ISSUES

Vehicle Import Arrangements

The question of the efficiency of administrative arrangements covering vehicles imported to Australia which were either, 15 years or older, for dismantling, or were personal imports, was not addressed in the Terms of Reference. The Task Force considers that issues raised in the course of the review in relation to the vehicle import provisions of the Act posed serious questions which warranted consideration.

The Task Force notes that vehicles 15 years or older, are generally imported for restoration or club use and not imported on a commercial basis. Such vehicles are exempt from the MVSA requirement to fit an identification plate. The Task Force notes that such vehicles may become a commercial proposition rather than meeting a particular specialist demand.

Despite a gradual reduction in the numbers of such vehicles entering Australia in recent years, the Task Force concludes that FORS should closely monitor the number of vehicles imported under this provision to ensure consistency with the intention of the Act and to avoid any adverse impacts on road safety and the emissions performance.

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The importation of incomplete vehicles (ie without engines, transmissions and rear axles) is not subject to the provisions of the MVSA. Conditional approval may be granted where the importer undertakes that the vehicle will be either dismantled and sold as components, or will not be used in transport in Australia.

The Task Force notes that there are no eligibility criteria, no time limits for dismantling the vehicles, no actual dismantling requirements, no requirements for record keeping and that no follow up action is taken by FORS to check that a vehicle has in fact been dismantled.

The Task Force notes stakeholder concerns and evidence that, due to the administrative nature of the scheme, it was open to abuse including the re-birthing of vehicles resulting in non-compliant and unregisterable vehicles entering the market.

A proposal by the Auto Parts Recyclers Association (APRAA) of Australia suggests that the scheme could be tightened by issuing permits to import incomplete vehicles only to legitimate dismantlers. However, despite the concerns from APRAA that moves to close off the scheme would have an adverse effect on its members, the Task Force concludes that the scheme had failed the government and the community in operation and should be rescinded.

The Task Force notes that the regulation which allowed people returning to live in Australia after a period of 90 days resident overseas to import a vehicle as part of their personal effects, was also open to abuse. The Task Force notes allegations that import approvals were being issued to persons who did not intend returning to Australia.

The Task Force concludes that the integrity of the scheme could be enhanced by increasing the period that people are resident overseas from 90 days to 12 months.

The Task Force has notes that the penalty, and conditional approval provisions under the MVSA are not generally enforced, however there have been instances of administrative action being taken. The Task Force understands that FORS has never instigated a prosecution under the Act. The lack of prosecution appears to have generated a perception among some sectors of industry that infractions of the MVSA would not be pursued.

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the importation of complete vehicles for dismantling be discontinued (p.102); the Regulations under the Motor Vehicle Standards Act 1989 be amended to extend the

period of overseas ownership and use requirement under the personal import scheme from 90 days to 12 months and that the discretionary power to accept a lesser period on compassionate grounds remain with the Administrator (p.104);

the penalty provisions of the MVSA be amended to allow for a series of administrative penalties that the Administrator could impose for minor infringements (p.105); and

FORS re-examine other import arrangements with a view to limiting the circumstances under which conditional import requirements are placed on importers, unless there are clear and efficient mechanisms in place to ensure compliance. (p.105)

Term of Reference

In undertaking the review the Task Force is to:

advertise nationally for submissions;

A call for public submissions was nationally advertised on 20 December 1997 and 55 submissions were received. A list of submissions is at Appendix A.

Term of Reference

Consult with key stakeholders, interest groups and affected parties;

In addition to receiving and reviewing submissions, the Task Force met with a number of key stakeholders and interest groups representing a broad range of interests. The views expressed by stakeholders were taken into consideration when drafting the report.

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Term of Reference

List individuals and groups consulted during the review and outline their views; and

A list of those consulted is at Appendix A. Stakeholders views have been taken into account and are reflected in the draft report.

Term of Reference

Publish a report of its findings at the time of the Government’s decision on its recommendations or earlier.

This draft report is in response to the Terms of Reference.

Conclusions

The Act has public policy objectives that reflect community interests and continue to be relevant.

A range of industry interests may seek modifications to the coverage of the Act, or to the delegated regulatory processes, or look to clarify certain interpretations.

The Motor Vehicle Standards Act 1989 does not, of itself, inhibit entry or exit from the market which manufactures, imports and sells motor vehicles to Australian customers.

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The Act could benefit from some refinements but, by and large, it meets community and industry requirements.

The draft report and its associated recommendations were released on 12 May 1999, for consideration and comment by stakeholders before the report was finalised. The comment period closed on 23 June 1999 and the Task Force considered comments on the draft report from more than 100 stakeholders.

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STAKEHOLDERS’ COMMENTS ON THE DRAFT REPORT

Part C – Stakeholders’ Comments on the Draft Report

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Overview

Comments received were generally supportive of the majority of the recommendations made on the draft report. However, participants in the vehicle dismantling industry and participants in the Low Volume Scheme for used vehicles were highly critical of the recommendations, in particular those recommendations that directly affect their operations. Considerable criticisms were also levelled at the transition periods specified in Appendix N of the report.

Stakeholder comments did not contain any substantive new issues. The bulk of comments restated positions previously considered and the Task Force did not find any justification to warrant changes to the draft recommendations. Consequently, the content of the draft report is not changed except for minor clarification of some points in the report and updating vehicle statistics. The Task Force, however, acknowledges that the transition periods in Appendix N need to be withdrawn as they would be more appropriately dealt with during consultations with the industry.

IntroductionThe draft report was released for public comment in May 1999 to provide an opportunity for all interested parties to put their views to the Task Force prior to the Task Force finalising its report for consideration by Government. The Minister for Transport and Regional Services, Mr John Anderson, agreed to the release of the draft report and associated recommendations, via a Media Release82 on 12 May 1999 (Appendix P).

Although the closing date for comments was 23 June 1999, comments received after this date were also considered by the Task Force. More than 100 stakeholders provided comments (Appendix Q). Of these 77 per cent were participants in the Low Volume Scheme and 10 per cent from the automotive parts recycling industry.

This chapter focuses on stakeholders’ dissenting comments on each of the recommendations in the draft report and the Task Force’s response to the comments.

82 Media Release A65/99 Review of Motor Vehicle Standards Act 1989, 12 May 1999.

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Independence of the Task ForceSome stakeholders commented that the Task Force has not conducted the review in an impartial manner. The Task Force maintains that this report is reflective of an independent review by all members of the Task Force.

Legislative Arrangements (Chapter 3)

Task Force recommends that the MVSA be retained and the object clause expanded along the following lines:


(a) contributing to reductions in deaths and trauma from vehicle crashes;

(b) reducing the adverse impacts of vehicle use on human health and the environment;

(c) improving the security of vehicles; and

(d) providing information relating to safety, environmental quality and anti-theft to the Australian community (p.25)

Stakeholders were generally supportive of the recommendations. Some stakeholders particularly the State motoring organisations such as the RACV and NRMA commented that:

the RACV would like to see a greater commitment to the removal of confidentiality of certification results to assist in providing consumers in making informed mobility decisions (RACV p. 1); and

there is a lack of commitment to agglomerate certification data, to provide information to consumers (NRMA p.1).

While giving support to the recommendations, the FCAI claims that there would be major resource and confidentiality of data issues for both FORS and FCAI.

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The Task Force had proposed that the need for consumer information and the cost/benefits associated with this provision can be assessed as part of the Regulatory Impact Statement prepared for the ADR. The Task Force therefore considers it essential that FORS work closely with industry on these issues.

Given the emerging adoption of harmonised standards by countries trading in motor vehicles with Australia, the Task Force recommends that the Commonwealth, in year 2005, review the costs and benefits of Australian jurisdictions and manufacturers moving to adopt one suite of acceptable international standards (p.33).

The FCAI and Western Star Trucks Australia P/L offered the following comments:

the FCAI considers the proposed timeframe could be tightened in the light of the ADR Review, the TTMRA program and plans for the accession to the 1958 Agreement (FCAI p. 5); and

any review to international harmonisation must include consideration from all “international” regions (Western Star Trucks Australia P/L p. 2).

The Task Force considers that these issues were adequately considered in Chapter 7.

Anti-Theft (page 45)Issues raised by stakeholders included:

the issue of motor vehicle theft, the role played by imported used vehicles suitable for rebirthing and the impact of these matters on society is largely ignored (MTAA p.2); and

the questions of odometer fraud and the misleading representation of imported used vehicles when offered for sale to consumers are largely ignored (MTAA p.2).

The Task Force considers that discontinuing import of complete vehicles for dismantling and implementing the Registered Workshop scheme may address some of these issues.

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Vehicle Categories (page 54)Both the RACV and the NRMA expressed concerns that there is a lack of commitment for the early reclassification of four wheel drive vehicles and passenger vans to passenger vehicle categories. They claim that these vehicles do not meet passenger car safety and environmental standards but are being used as passenger cars.

The Task Force considers that this issue is rightly a matter for consideration by the TTMRA/ADR review project team. This review is expected to be completed during the year 2000 (section 3.5.14). Aftermarket conversions are a matter for in-service compliance.

Administrative Arrangements (Chapter 4)

Type Approval (page 63)Both the FCAI and Honda MPE expressed concerns about the Task Force’s views on type approval for imported used motorcycles. Specific comments included:

the draft report does not address the fact that used motorcycle importers cannot meet the full requirements for type approval. Used motorcycles should be treated in the same way as other used vehicles (FCAI p. 1 & 11); and

any future import approval of used motorcycles is on the basis of the same requirements for used motor vehicles and that all eligibility criteria is uniform for both motorcycles and used motor vehicles (Honda MPE).

The FCAI argues that as used motorcycle manufacturers do not have control over the production process, used motorcycles cannot meet FORS conformity of production requirements. The Task Force understands that FORS procedures are that used motorcycles imported in full volume must meet the same requirements as those for full volume new motorcycles. The Task Force therefore considers it essential that FORS give consideration to treating all Full Volume new and imported used motorcycle manufacturers equally, in particular, in the conduct of audits. Any non conformances found at the audits should be followed up to a satisfactory outcome.

It is also essential that FORS have procedures in place to ensure that full volume used motorcycle manufacturers are complying with Administrative Circular 0-4-5 requirements, in

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particular, the inspection certificate requirements for each motorcycle fitted with a compliance plate.

The Task Force considers the successful implementation of the above would be an effective way of ensuring compliance of imported used motorcycles.

Low Volume Scheme (Chapter 5)

The Task Force recommends that full volume manufacturers be eligible to participate in the Low Volume Scheme. (p. 80)

Both the FCAI and VICAA supported this recommendation but submitted that:

the determinations need to make it clear that new vehicle models certified under low volume arrangements would not be eligible for the used vehicles arrangements (FCAI p. 2 & 12); and

on grounds of equity, this recommendation must involve only new vehicles, must have the same eligibility rules and be administered in an identical manner for both Full and Low Volume participants (VICAA p. 16).

One stakeholder commented that:

there should be no distinction between the rules, regulations and eligibility criteria between Low Volume Manufacturers and Full Volume manufacturers getting into Low Volume manufacturing (Laranna P/L p. 3).

The Task Force considers that the above issues would be more appropriately dealt with during the implementation phase of the review.

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Honda Australia P/L recommended that there should be no differentiation between Full Volume manufacturers/importers and Low Volume importers on the requirement for compliance with the ADRs. Honda argued that motor vehicles imported by a Full Volume importer are required to meet unique ADRs whereas vehicles imported by a Low Volume importer may not have the same requirement. This scenario provides for inequity in terms of motor vehicle passenger safety and is a significant concern as far as consumer protection and awareness is concerned.

The Task Force’s understanding of the Low Volume Scheme is that Low Volume vehicles must meet all applicable ADRs albeit with a lower level of assurance of compliance as a result of the alternative certification procedures. As the Low Volume Scheme is a concessional scheme the numbers of low volume vehicles need to be limited. Where the vehicles need to comply with impact occupant protection rules such as ADR69/00, FORS accepts compliance with the USA or the Japanese full frontal impact occupant protection rules in lieu of testing to ADR69/00 requirements.

The Task Force considers that implementation of the Registered Workshop scheme would provide a basis for ensuring that Low Volume vehicles will provide higher levels of assurance of compliance.

The Task Force recommends that consideration be given to revising the current eligibility criteria to make them less subjective (p.91).

While there was general support for this recommendation, one stakeholder offered the following comment.

revising the eligibility criteria to make them less subjective does nothing to resolve the issue of eligibility. The Task Force should make specific suggestions on how the eligibility criteria can be made more objective (Laranna P/L p. 1&2).

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The Task Force considers that it is not appropriate to go down to this level of detail and that these issues again be dealt with during the implementation phase of the review which will include industry consultation.

The Task Force recommends that vehicles with diesel engines or turbocharged engines would not be considered a different model. (p.91)

This recommendation generated a lot of dissenting comments from Low Volume CPA holders and VICAA.

The dissenting comments addressed three main issues, namely:

the diesel engine or turbocharged engine market is an entirely different market from that associated with similar petrol and/or non turbocharged models (VICAA p. 16);

the imports of used vehicles are not a threat to the Australian vehicle manufacturing industry; and

the recommendation would leave at most about 1000 eligible Japanese used imports per annum thus reducing business opportunities and leading to mass business closures.

Stakeholders argued that the diesel engine or turbocharged engine market is an entirely different market from that associated with similar petrol and/or turbocharged models. Rural consumers tend to purchase vehicles with diesel engines. Turbocharged vehicles, in particular sports cars, are different in that they have upgraded suspension and brakes.

Stakeholders also argued that low volume used vehicle imports are not a threat as there are no four wheel drive vehicle manufacturers in Australia and 96,551 new four wheel drive vehicles were sold in 1998. Additionally the full volume manufacturers chose not to market these models in Australia.

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The Task Force has performed an analysis on the effects of this recommendation on Low Volume CPA holders. Based on the number of used vehicles imported under the Low Volume Scheme in 1998, and VICAA’s claim that there are 350 active Low Volume CPA holders, the Task Force estimates that:

34 per cent of the currently eligible used vehicle models will be excluded;

32 per cent of CPA holders (those dealing solely with vehicles with diesel engines and/or turbocharged diesel engines) may be affected with the proposed change; and

about 3300 or 43 per cent of the total Low Volume used vehicles imported in 1998 were vehicles with diesel engines and/or turbocharged diesel engines.

In arriving at the recommendation, the Task Force has taken the view that these vehicles are too similar to the vehicles already marketed in Full Volume in Australia to be regarded a different model for eligibility purposes.

The Task Force recommends that a used vehicle certification scheme, based on vehicle by vehicle approval involving registered workshops, be developed in consultation with ‘industry’ (p.94).

Stakeholders were generally supportive of this recommendation. However three stakeholders were highly critical of the proposal.

the report is deficient in that the report simply chose to propose rules to formalise and legitimatise an unwanted trade in lieu of introducing regulations to prohibit the entry of used vehicles (MTAA p.2);

the concept of Registered Workshops is not a panacea to all Low Volume Certification process problems. Any wholesale delegation of the certification process to Registered Workshops does not add to their ability to manage the process any better. Indeed such a move is likely to add costs to the process, restrict access to participation and would lead to some accumulation of commercial interests that could become unmanageable to the regulators. The regulators must retain effective control of the Low Volume

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certification process in order to perform their role as mandated in the MVSA (Saralax Anukita Engineering p. 13); and

discussion about the Registered Workshop scheme is premature because nothing in the review Task Force recommendations suggests that the function of non tariff barrier is to be separated from the function of safety. Without that separation, there can be no stability, trust or reasonable dialogue between those administering the Act and the community they control (Australian Technology P/L p. 6).

Other stakeholders commented that:

there should be a provision to continue to allow used and new enthusiast and specialist vehicles to be approved in low numbers (via a revised Low Volume Scheme) without the expense and complications of becoming a Registered Workshop (Presley and Associates P/L p. 4);

competent ‘one man businesses’, who rely on work from dealers or wholesalers would lose out as they can not afford the overheads (Gearing Consulting services p.2);

it is unrealistic to treat the Low Volume industry as being uniform. The Low Volume industry should focus on two levels, a Low Volume and an ultra Low Volume market. The Act should reflect that ultra low volume production, say 10 per year, should be the approval domain of state regulatory authorities (Australian Technology P/L p. 5&7); and

there needs to be safeguards to ensure no individual associations are favoured over others in becoming registered (QLD Transport p.1).

The Task Force considers that the issues identified by stakeholders demonstrate a need for FORS, in consultation with the industry, to develop the necessary processes and procedures to manage an appropriate certification system for used vehicles. The Task Force acknowledges that introducing change to the current arrangements for certification of imported used vehicles would disadvantage some businesses. The Task Force however, maintains that, on balance, the Registered Workshop scheme would provide higher levels of assurance while allowing better outcomes.

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The Task Force recommends that existing CPA holders should be able to continue fitting identification plates to their currently approved models up to an agreed date to provide a reasonable transition to the proposed new arrangements (p.95).

All the participants in the Low Volume Scheme were highly critical of this recommendation and the transition arrangements stipulated in Appendix N of the report, in particular:

existing approvals can be used to plate vehicles for two years after the Minister agrees to accept the report;

a new model is not eligible for import until 12 months after release to first market anywhere in the world; and

no new low volume approvals for used vehicles from three months after the Minister agrees to accept the report.

The stakeholders claim that the proposed transition periods are grossly unfair to the existing Low Volume manufacturers, particularly those who are in the process of obtaining their CPAs. All claim that they have invested considerable amounts of money into the low volume industry over the years to obtain the required approvals and to run their businesses. They employ staff and support other businesses that perform their work. They also supply parts and, in particular, customer service to many importers and end users of these vehicles. Adoption of these proposals would adversely affect the viability of their business and lead to business closures and loss of jobs.

Some specific comments included:

the two year transition period for existing CPAs is grossly unfair. It would be far more appropriate if the transition period be that when the availability of the models are phased out of the market in Japan (Creekroad P/L);

it is recommended that FORS stop accepting applications three months after the Minister announces the recommendations. Existing applications should be processed normally until approval is granted (Presley and Associates p.3);

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the date of release of a vehicle model must not be a criterion for eligibility. If a vehicle is eligible for low volume it should be eligible at any time after its release (Nippon Car Imports); and

the Task Force has ignored the fact that the CPA holder approval regime, currently in place, provides approval for the life of the model. To change this provision raises serious issues of compensation for adversely affected CPA holders and challenges under the Trades Practices Act (VICAA p. 17).

The intent of Appendix N was to provide stakeholders with an outline of the administrative arrangements for a used vehicle scheme based on registered workshops and not to specify the transition arrangements. On the basis of the above comments, the Task Force acknowledges that the transitional arrangements proposed in Appendix N may not be appropriate. The Task Force considers that they would be more appropriately be dealt with during FORS consultations with industry.

Special Duty (page 70)A number of stakeholders were critical of both the $12,000 special duty which applies to full volume used imports, and the report’s assertion that as Low Volume Scheme used imports are not subject to the duty, this constituted a concession.


the $12,000 special duty is an anti-competitive tariff against Full Volume imports of used passenger vehicles (Presley and Associates P/L p.2);

to imply that the $12,000 special duty is a concession is simply not correct. The duty was never an exemption as there was never an intention to impose it on Low Volume vehicles (VICAA p.22); and

a case in point is the $12,000 special duty. This duty [not applying to Low Volume used imports] can not be construed as a concession as it has been specifically targeted to restrict the importation of used passenger vehicles under Full Volume (Laranna P/L p.4).

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The Task Force recognises that the issue of whether the tariff arrangements applying to the Low Volume Scheme are a 'concession', is debatable. In relation to the introduction of the special tariff, the Hansard records indicate the following:

As previously announced, in relation to high volume imports of used or second-hand passenger vehicles, the Government has decided to impose a duty of $12,000 per vehicle in addition to the duty already in place. This action will protect the Australian motor vehicle industry from low cost imports of second-hand vehicles, particularly from Japan.

A new item 59 in Schedule 4 of the principal Act will ensure that the existing provisions for personal or low volume importations of used or second hand vehicles will remain unchanged.

The news release by Senator John Button, then Minister for Industry, Technology and Commerce in relation to the matter stated the following:

Senator Button said the decision would not affect the personal or low volume importation of second hand vehicles into Australia. Importers of these cars would not pay the $12,000 tariff.

Technically, the fact that used vehicles entering under the Low Volume Scheme arrangements do not attract the $12,000 special duty, does constitute a tariff concession. This is because the specific tariff of $12,000 is applied to all used passenger motor vehicles of the heading 8703, which falls under Section 17, Chapter 87, Schedule III of the Customs Tariff Act 1995. Then a concessional treatment (exemption from the $12,000) is provided for under Item 59 in Schedule IV of the Act. The vehicles which are eligible for the concession are listed in the associated by-law which includes vehicles entering under the Low Volume Scheme arrangements and certain other import arrangements.

Current State of the Low Volume Scheme (page 72)VICAA and Presley and Associates P/L commented that the statistics on the vehicles imported for the years 1993 to 1996 are not accurate. They contend that the statistics for these years

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relate to the number of application documents and not the number of vehicles imported, thus artificially exaggerating the growth in vehicle imports in 1997 and 1998.

The Task Force advises that all the figures relating to Low Volume used vehicles for years 1993 to 1998 were the total numbers of vehicles imported for those years.

To investigate VICAA and Presley’s claim, the Task Force obtained the number of applications received for ‘dismantling vehicles’, ‘vehicles 15 or more years old’ and ‘low volume vehicles’ for the years 1993 to 1998. The figures are tabulated below.

Year 1993 1994 1995 1996 1997 1998

Number of applications received for vehicles for dismantling

70 104 133 263 354 298

Number of applications received for vehicles 15 or more years old

306 489 556 589 623 526

Number of applications received for low volume vehicles

144 251 307 556 758 1043

VICAA suggested that it would be more appropriate to compare the number of Low Volume used vehicles with the number of used vehicles sold in Australia. VICAA advises that approximately 2.5 million used vehicles were sold in Australia in 1998 and low volume imports only represent 0.24 per cent of total sales of used vehicles.

The Task Force maintains that imported used vehicles are treated as new vehicles as they are supplied to the Australian market for the first time. Therefore comparing numbers of imported used vehicles with new vehicles is appropriate.

Western Star Trucks Australia P/L commented that commercial vehicles are used in transport earning financial income compared with enthusiast vehicles. Therefore, there may be some merit in segregating these vehicle categories.

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The Task Force considers that this issue would be more appropriately dealt with when the eligibility criteria are reviewed.

Industry Policy (page 75)DISR's "Industry Policy Analysis" generated a lot of comment and counter claims, particularly from VICAA.


VICAA notes that there has never been any statistical information provided by the Australian automotive manufacturing industry that the Low Volume Scheme has impacted negatively on that industry's employment, gross turnover, exports and/or services (VICAA p.30);

the existing policy associated with the Low Volume Scheme has not been demonstrated to harm the Full Volume automotive industry (VICAA p.30); and

there is no comparable evidence to support the statement made by DISR, or any that may have been made by the Full Volume industry, indicating that the Low Volume imports have had any impact on depreciation rates (VICAA p.33).

While these views and claims have been considered by the Task Force, it is again noted that the "Industry Policy Analysis" was provided by DISR.

Eligibility Criteria (Used Vehicles) (page 89)Both VICAA and the FCAI commented that the Task Force was wrong in considering option 2 as the preferred option. Their comments included:

FCAI strongly believes that the appropriate option is option 1. There is no basis under the MVSA to apply different criteria for eligibility to different vehicle categories. If there are industry policy reasons to differentiate between different categories of vehicles, then other mechanisms should be considered (FCAI p. 13); and

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VICAA does not accept Option 2 and strongly suggests the adoption of Option 3 with the inclusion of a cap of 30,000 units per annum, which is the current, approved, maximum potential number of Low Volume used imports (VICAA p. 56).

The Task Force considered these views but maintains that, on balance, option 2 is the Task Force’s preferred option. However, it notes the interrelationship of the criteria in this option and the limit on vehicle numbers. If an effective solution to limiting vehicle numbers could be achieved, then Option 3 clearly provides a simpler solution.

The FCAI also put forward some suggestions on developing the eligibility criteria. The Task Force considers that these would more appropriately be dealt with during the implementation phase.

A number of stakeholders did not support the publishing of a list of eligible vehicles from the moment they are determined eligible. They argued that it would be commercially unfair to the initial eligibility applicant for an eligible model to be made public knowledge immediately after a model is deemed eligible. The eligibility of a vehicle should only be published after that model has been approved and fitted with an identification plate.

Another stakeholder recommended that the vehicle models which have been considered and found not eligible also be listed. This would assist industry in not wasting time or effort making applications for models which have already been deemed not eligible.

The Task Force considers these to be fair propositions and ones for consideration during the implementation phase of the review.

Limit on Vehicle Numbers (page 94)VICAA proposed that the numbers of vehicles entered under the Low Volume Scheme be capped at 30,000 units per annum and that their initial proposal for up to 200 vehicles per Registered Workshop be considered.

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The Task Force considers that the issue of total numbers is a matter that Government should consider from both a safety and emissions perspective as well as industry policy consideration. The issue of numbers per workshop would be more appropriately dealt with during the implementation phase.

Vehicle Import Arrangements (Chapter 6)

The Task Force recommends that the importation of complete vehicles for dismantling be discontinued (p.102).

The majority of the stakeholders who commented on this issue were supportive of the Task Force recommendation that the importation of complete vehicles for dismantling be discontinued. The vehicle dismantlers including their industry association, APRAA, commented unfavourably on the recommendation.

Their comments addressed two key issues: the need for proper enforcement to prevent the abuse of the scheme and the cost to the industry and local employment, if vehicles are dismantled overseas instead of Australia.

Overcoming Abuse of the Scheme - Complete Vehicles for Dismantling (page 99)

APRAA and other stakeholders suggested that the problem of abuse could be dealt with by additional enforcement, and proposed that this could be funded by the introduction of a significant licence fee per vehicle.


one of our earlier suggestions were to increase the permit fee as a method of financing random audits of licensed importers. It has now been suggested that the revised fee should be up to $250.00 per vehicle (APRAA p.2); and

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legitimate businesses trading as dismantlers and with State Motor Dealer Licences should be allowed to import vehicles for dismantling. Has the Task Force considered licensing these businesses? (Jeepart Recyclers p.1).

The Task Force concluded that the difficulty in overcoming the re-birthing of vehicles lies in the definition of what constitutes dismantling and in determining whether a vehicle has in fact been dismantled. APRAA acknowledged these difficulties in their comments on the draft report.

The prohibition of whole vehicle imports does not restrict the importation of major assemblies and sub assemblies. In its crudest form this would permit the import of cars which, for example, have been cut into two separate parts.

Cost of Dismantling Overseas – Loss of Local Employment.

The stakeholders claim that the dismantling of vehicles overseas and the importation of parts only is not cost effective. Additionally, this would result in a loss of local employment. A typical comment is:

dismantling vehicles in Australia is carried out correctly and in an environmentally sound manner by a professionally trained workforce. If we have to dismantle the vehicle overseas and bring the parts in, this would prove costly and not viable (O’Brien 4WD Centre).

The Task Force considered these views during the review and acknowledges that additional costs will accrue to the industry in the form of overseas labour costs and additional shipping, handling and packaging.

The Task Force recommends that FORS re-examine other import arrangements with a view to limiting the circumstances under which conditional import requirements are placed on importers unless there are clear and efficient mechanisms in place to ensure compliance (p.105)

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Some stakeholders expressed concerns that the other vehicle import arrangements may be exploited with the tightening up of the arrangements for personal imports and vehicles for dismantling. Some comments are:

there are some concerns with the Task Force recommendation that importation of complete vehicles for dismantling be discontinued. This might lead to the exploitation of other import categories such as rallying and closed circuit racing unless there is consequent tightening up of the arrangements in these categories (FORS p.5); and

the issue of additional measures to control the number of used imported vehicles needs to be considered, and that FORS needs to monitor the number of used vehicles imported in the various categories, including vehicles for motor sport (FCAI p. 3 & 7).

The Task Force considered these views and concluded that they would be more appropriately be dealt with during the implementation phase.

International issues (Chapter 7)Stakeholders were generally supportive of the recommendation. Some stakeholders however, were concerned that other regulations such as those of the USA and unique ADRs could be ignored. For example:

US type regulations have been ignored in the discussion on international harmonisation (Western Star Trucks Australia P/L p.1); and

there is a lack of commitment to preserve unique Australian design standards which are superior to UN/ECE standards such as child restraints and stationary noise limits (NRMA p.1).

The Task Force considers that these issues are adequately considered in Chapter 7.

In-service Matters (Chapter 8)The NRMA raised the issue of including in-service standards in the ADRs. This is also a known position of several State and Territory governments. Queensland Transport has commented that it does not support the extension of the MVSA to in-service matters as State and Territory legislation is now consistent and compliance methods are well established.

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The Task Force examined the feasibility of managing in-service standards under the MVSA. This approach was considered inappropriate as in-service matters are managed under the National Road Transport Commission Act 1991. The Task Force agreed that guidance on in-service performance standards could be included in the ADRs. This would assist the NRTC in the development of in-service standards, by providing the technical guidance used for the development of the “new vehicle” standard. These data include the expected life of components and their anticipated rate of performance degradation.

Industry Charging/Regulatory Costs (Chapter 9)Stakeholders such as the FCAI, VICAA, Western Star Trucks and Queensland Transport were generally supportive of the recommendations. However they offered the following comments:

the issue of a trust account to hold revenues should be explored, as recommended by FCAI (FCAI p. 8);

VICAA’s only concern is that adequate and clear guidelines in regard to these charging procedures, following full consideration with the industry and proper costing, be developed and published after the RVCS is introduced (VICAA p. 65); and

the proposal to include costs associated with research and development of new standards is of concern as this may be considered a community service obligation (Queensland Transport p. 2)

The Task Force considered these views and concluded that they would be more appropriately be dealt with during the implementation phase.

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APPENDICES

APPENDICES

A - Submissions

B - Minister’s Press Release

C - List of ADRs

D - Major Vehicle Categories

E - Type Approval Process

F - Comparison of Full Volume and Low Volume Arrangements

G - Some Deficiencies in the Administration of the Act

H - Level of Evidence of Compliance

I - Current Procedures for Submitting and Processing CPA under the Low Volume Scheme

J - Low Volume Scheme – Eligibility Criteria

K - Number of Used Vehicles Compared to New Motor Vehicle Registrations

L - Compliance Costs

M - Low Volume Vehicles – Legislative Arrangements Overseas

N - Registered Workshop Scheme

O - Current Regulatory Charges

P - Minister’s May 1999 Media Release

APPENDICES

Q - List of Stakeholders who provided Comment on the Draft Report

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