Managing integrity of used vehicle certification inspection and inspection organisations

Submissions for this consultation have now closed.

All vehicles entering New Zealand must be checked, certified, registered and licensed before they can be used on the road. This process is called entry certification. The NZ Transport Agency’s approach to assessing any potential conflicts of interest with regard to this process is set out in an operational policy.

The Transport Agency has made the decision to improve the existing policy instead of proceeding with the changes proposed in November 2018.

Original policy change proposal

In November 2018, the NZ Transport Agency consulted on proposed changes to the conflict of interest policy for vehicle entry organisations.

The proposed policy changes included:

clarification of the definition of ‘conflict of interest’;
strengthened controls for appointing used vehicle entry certification inspectors and organisations to avoid these conflicts of interest; and
making sure that all vehicle inspectors and organisations have an ongoing duty to tell us about any conflicts of interest that arise.

The proposed policy changes would have meant that, for any new appointment or renewal, the Transport Agency would have no longer permitted an inspection organisation to carry out entry certification activities for a vehicle if that inspection organisation (or a related party, such as their parent company or subsidiary):

has an ownership interest in the vehicle; or
has conducted border inspections for the vehicle.

Consultation documents

Questions and answers

View the questions and answers about the policy consultation

The consultation process

The Transport Agency initiated a two-week consultation on the proposed changes in November 2018. Due to industry demand for more time to consider the proposal and provide feedback, we extended the consultation. Consultation closed on 22 March 2019.

There was a high level of industry engagement during the consultation process, with the proposal prompting a major inflow of information which has greatly enhanced our understanding of the sector and any issues that could compromise entry certification integrity.

We received 20 written submissions. The submitters represented a cross-section of the vehicle industry, including entry certification organisations, border inspection organisations, logistics companies, importers/dealerships, and compliance centres.

We also offered to hear oral presentations of the submissions. Fourteen of the 20 submitters took the opportunity to present. Presentations were held in Auckland on 8 and 17 April 2019, and in Wellington on 10 April 2019.

The Transport Agency also undertook a secondary targeted consultation with the current entry certification inspecting organisations to clarify the impacts of the options under consideration. We received six submissions, which reinforced matters raised in the initial consultation.

Feedback from industry and the public

Consultation confirmed that the Transport Agency needs to take action to protect the integrity of entry certification decisions, but the proposal consulted on was unsuitable.

Key themes arising from the submissions and presentations:

There are significant economic pressures on the used vehicle importation and inspection market, in part influenced by vertically-integrated companies. Because vertically-integrated companies can shift costs up and down the supply chain and offer fixed prices, non-integrated inspection organisations submitted that they feel pressured to cut corners in order to remain competitive in the market.
The vehicle ‘ownership interest’ concept will not work as it is too broad, ambiguous and complex. Any party involved in the importation of a vehicle may have legal or beneficial ownership of the vehicle at any time (or not at all) as it moves through the supply chain.
Third party compliance centres and importers/dealers are putting pressure on vehicle inspectors at point of certification (ownership of the vehicle is not the major issue). This is because an importer’s/dealer’s profit is dependent on the vehicle passing the inspection without repairs, and the compliance centre’s profit is dependent on maintaining the importers/dealers as customers.
The proposal will have significant unintended impacts on the industry because of potentially putting one of the key inspection service delivery partners out of business. This could create temporary inspector shortages, longer wait times for customers, and higher inspection costs.
Submitters stated that the draft policy was not written in plain enough English and needed clearer definitions and explanations.
There are a range of other tools available to the Transport Agency that could enhance the integrity of certification decisions. Submitters in support and in opposition to the policy considered that the Agency’s auditing of inspecting organisations and vehicle inspectors should be more effective.
The proposed change prohibiting an entry certifier from inspecting a vehicle that was border inspected by a related party is not commensurate with the minimal risk that the conflict presents. This is because border inspection does not involve certification of the vehicle and the border inspection organisation does not have ownership interest in the vehicle.
There were mixed views on whether ‘ownership’ conflicts of interest should be managed or eliminated. Some submitters thought that certain conflicts cannot be effectively managed and therefore must be avoided, whilst other submitters endorsed a management or risk-based approach because this has worked to date.

Copies of submissions are available on request. Contact official.correspondence@nzta.govt.nz to request a copy of submissions.

The Transport Agency’s decision

After careful consideration of the feedback, we have decided not to proceed with the policy consulted on, but instead implement a more effective assurance programme to ensure the integrity of entry certification decisions.

This will involve:

Improving the Agency’s regulatory oversight of vehicle inspections by implementing a more effective regulatory assurance and audit programme
Adopting a risk-based approach to addressing conflicts of interest, including issuing guidance under the existing operational policy outlining conflicts that the Agency may consider as sufficient grounds for declining certain activities
Introducing direct Agency support for vehicle inspectors
Maintaining the principles of the Rule which is to reduce harm or potential harm, ensure functional separation between critical inspection activities, and require the applicant to have robust and transparent systems to negate any conflicts of interest
Providing clearer guidance, in plain English, on how the Agency will assess applications and apply its discretions under the Rule
Strengthening the Notices of Appointments for inspecting organisations, including making it clear that inspecting organisations are responsible for maintaining an environment in which their vehicle inspectors feel safe to do their jobs and can abide by the Vehicle Inspector Code of Conduct
Adopting a variable approach to the duration of appointment for entry certification and border inspection organisations.

What happens next?

We’ll be engaging further with industry over the next few months to make sure we get all the detail right.

We’ll also be taking the time to visit all entry certification organisations to better understand the information systems they have in place and to look at whether these systems could impact on the integrity of inspection decisions.

What we learn from this process will help us to develop an audit programme, and initially the trial will be on the basis of voluntary audits.

Extension of Notices of Appointments

We recognise we’ll need to make changes to the date for new Notices of Appointments to accommodate the programme of work happening over the next few months. This means we will soon be extending the current Notices out to mid-2020.

We hope that providing this information now will give industry the certainty they need to plan ahead.

Updates

We’ll share more information about dates and our continued engagement plan soon.

Keep checking back on this page, or email us if you have specific questions: info@nzta.govt.nz

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