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Chain of Responsibility laws – AU$3 million corporate governance and risk agenda item for 2020

11 November 2019

#Transport, Shipping & Logistics

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Chain of Responsibility laws – AU$3 million corporate governance and risk agenda item for 2020

When considering safety, most businesses in the supply chain focus on the safety of their product, their people and their premises.

Many such businesses don’t focus on the safety of their supply chains, assuming that supply chain safety is the responsibility of their suppliers and/or independent transport contractors.

But with changes to the law in October 2018, the Chain of Responsibility (CoR) laws under the Heavy Vehicle National Law make every business in the supply chain responsible for their role in supply chain safety. All businesses in the supply chain can be held liable for on-road breaches of mass, dimension, load restraint, speed, fatigue and vehicle roadworthiness, to the extent that they perform any task or part of a task relating to those matters – and regardless of whether they own or operate a heavy vehicle. In addition, businesses can be in breach of the laws simply for failing to have in place business practices aimed at addressing CoR risks as part of their transport activities – without any need for an on-road incident to have occurred.

The CoR laws require a new way of thinking about supply chain safety. 

Businesses need to consider their role in a shared safety duty aimed at ensuring safe loads, safe drivers and safe vehicles. Likewise, executives of supply chain businesses have an independent duty to exercise due diligence to ensure that their business is doing the right thing.

Those businesses that do not take all reasonably practicable steps to ensure the safety of their transport activities, or who require or put undue pressure on other parties within the supply chain that requires, results in or encourages them to breach a relevant safety standard are routinely prosecuted and fined. Maximum penalties are $3 million for corporations and $300,000 and up to five years in jail for executives.

Some examples of businesses up and down the supply chain being prosecuted (albeit under the CoR laws pre-amendment) include:

  • the operator of a green waste loading facility was prosecuted and ordered to pay $982,206 when a transport subcontractor consistently drove out overloaded, despite obtaining weighbridge receipts which indicated that the truck was overloaded and disregarding them
  • an importer of manufactured products made and packed into shipping containers in China and its directors were prosecuted and ordered to pay $204,000 when the goods were found to have been improperly restrained within the container
  • the operator of scrap steel loading premises was prosecuted and ordered to pay $115,093 when scrap steel that it loaded onto a third party’s truck sprung up during transport and caused the truck to become lodged in the Sydney M5 tunnel
  • a receiver of grain was prosecuted for receiving overloaded trucks, with potential penalties potentially exceeding $18 million.

In each instance, the relevant business was prosecuted for its failure to have in place business practices aimed at managing CoR risks relating to transport activities that it was performing (either solely or in in conjunction with another supply chain party).

Under the amended CoR laws, businesses can also be investigated and prosecuted for failing to develop and implement business practices aimed at ensuring COR compliance, without any need for an on-road incident to first occur as a catalyst.

Prosecutions and investigations have been brought in, among others, the construction, primary production, consumer products, landscaping, retail, waste and local government sectors.

Chain of Responsibility compliance is an essential corporate governance and risk item that will be in the regulator’s cross-hairs in 2020 and beyond. Every supply chain business or business in which supply chains play a major part should ensure that it is up to speed.

Author: Nathan Cecil 

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

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