August 2002
Prepared by:

National Motor Vehicle Theft Reduction Council

Report Prepared by
ISBN 1 876704 16 0

REPORT OUTLINE
Date: August 2002
ISBN: 1 876704 16 0
Title:

Address: National Motor Vehicle Theft Reduction Council
Level 2/464 St Kilda Road
MELBOURNE Vic 3004
E-mail: info@carsafe.com.au
Type of report: Discussion Paper
Objectives: Motor Vehicle and Component Identification
TRC Program: Reducing Professional Theft
Key Milestones: Discussion paper completed
Abstract: One of the National Motor Vehicle Theft Reduction Council’s (NMVTRC) key goals is to reduce the level of professional vehicle theft through reducing the economic incentives of dealing in stolen vehicles and parts; and improving deterrence through an increased likelihood of detection. Minimising the likelihood of stolen parts being unwittingly traded by legitimate recyclers is an important element of the NMVTRC’s strategy.

This report examines existing regulatory and industry arrangements in Australia to determine whether it would be feasible to address the problem via a Code of Practice (COP) for parts recyclers.

The report concludes that a COP is the only viable approach to managing the problem in the short term and makes recommendations on options for the development, design and implementation of a Code.

Purpose: To provide the basis for an informed decision as to whether the development of a code of practice is feasible and determine the level of support for the concept within key stakeholders groups.

Key words: Code of practice, dismantlers, auto parts recyclers, wreckers, stolen parts, car parts, auto parts, vehicle theft.
foreword

The National Motor Vehicle Theft Reduction Council (NMVTRC) was formed in 1999, as a joint initiative of all Australian governments and the insurance industry. Its mission is to bring about a sustainable reduction in the nation’s unacceptable rate of motor vehicle theft.
One of the NMVTRC’s key goals is to reduce the level of professional vehicle theft by:
reducing the economic incentives of dealing in stolen vehicles and parts; and
improving deterrence by increasing the likelihood of detection.
The NMVTRC estimates that more than 15,000 vehicles are stolen each year for dismantling and re-distribution as parts. Minimising the likelihood of stolen parts being unwittingly traded by legitimate recyclers must be an important element of any strategy to combat the problem.
A study of trade in stolen parts undertaken for the NMVTRC by the Australian Institute of Criminology (2001) was unable to fully quantify the economic dimensions of the problem but did observe that the business practices of various stakeholders, including parts recyclers, were potentially facilitating the illicit trade.
Over time, some states and territories have responded to the problem by subjecting recyclers to the record keeping requirements of motor car trader or second-hand dealer legislation. Some commentators have suggested that there is a need for nationally consistent laws in these areas, but there are also concerns about the lack of rigour with which existing laws are enforced.
The NMVTRC is of the view that under Australia’s federal system of government, where the states and territories maintain responsibility for such laws, a national system of government licensing or accreditation is unlikely to be achievable in the medium term. The NMVTRC therefore engaged A D Edwards Consulting to report on the feasibility of achieving the desired outcomes via an industry-based Code of Practice (COP).
This report provides a comprehensive guide to the elements that would make an effective COP and explores the issues that need to be addressed in order to facilitate its development.
However, the NMVTRC recognises that the recommendations contained in the report will require considerable commitment from the recycling industry, insurers and others if the proposals are to flow through to implementation. As an initial step, the NMVTRC is seeking the comment of key stakeholders on their support for the report’s recommendations and possible mechanisms to co-operatively move the key proposals forward.
summary
Background
Sixty per cent of auto dismantling and parts recycling businesses already encounter suspicious parts or vehicles at least once or twice a year. More than one in 20 businesses encounters suspect parts, vehicles or sellers every week.
The forthcoming introduction of nationally consistent “written-off” vehicle registers (WOVRs) is likely to substantially increase the frequency with which the industry encounters stolen parts as the “re-birthing” market becomes restricted.
There are few existing regulatory arrangements for the industry and, where they do exist, they appear to have little affect on the stolen parts trade (with the exception of WOVRs).
Against this background, the imperative for introducing more stringent controls to verify and record the source of used parts is apparent. A Code appears the only viable approach to progressing this agenda in the short term, although later regulatory backing should not be ruled out.
Conclusions
A Code is concluded to be a feasible and effective approach to reducing the unwitting (and deliberate or negligent) trade in stolen parts by the recycling industry.
While an industry Code, by definition, will not have a significant impact on the private trade in stolen parts, it can address the entry of stolen parts into the legitimate industry, and further marginalise “unsound” and “backyard” operators.
A key feasibility determinant is the ability of a Code to ultimately cover a significant proportion of the industry. Related to this is the potential availability of significant incentives for businesses to become accredited, or conversely, the availability of disincentives for non-compliance or non-accreditation.
It is concluded that by tying even a relatively small proportion of the market for used parts to an accreditation requirement, significant economic incentives for becoming and remaining accredited will be created. There are strong indications that insurance companies will support a Code by requiring “approved crash repairers” to only source parts from accredited parts recyclers. Insurance company-related demand for used parts accounts for up to 20% of the market, which, on its own, would be likely to impact on most businesses in the industry.
In total, “trade” buyers account for more than half of the total market. Trade associations, particularly the Motor Trades Association of Australia (MTAA), have indicated support in influencing demand towards accredited suppliers. Several other practical and effective options exist for influencing both trade and private demand towards accredited recyclers. There is thus a strong likelihood that a Code will gain significant initial support, and that the market will be increasingly directed towards accredited recyclers as awareness and marketing of the “brand” expands. The National Motor Vehicle Theft Reduction Council (NMVTRC) has notionally suggested the brand name of “PartSafe” for the Code.
The economic impact on the industry of increasingly directing the market towards “PartSafe” accredited recyclers will be a powerful incentive to become accredited, and should produce high levels of voluntary compliance to avoid the financial impact of a business having its accreditation revoked. This is the key to the feasibility and success of the Code.
Another important feasibility determinant is the attitude of stakeholders, particularly businesses in the industry, and the extent of any compliance costs.
Amongst the major requirements of a Code (which are discussed in detail in Chapter 7 and Chapter 8) will be instituting appropriate verification checks on parts obtained by businesses, and maintaining adequate audit trails.
It is proposed that the NSW Prescribed Parts Register, the only significant attempt to regulate the industry at present, should form the basis for further discussion about record keeping requirements in the development and implementation phase of the Code. It is likely that a Code can readily co-exist with any existing regulatory requirements.
It is concluded that the requirements are not likely to be especially onerous, as the vast majority (90%) of parts enter the industry as whole vehicles. The legitimacy of whole vehicles should be relatively easy to establish.
Only about 5% of the industry’s supply of parts is sourced from private sellers of already-separated spares. These private sellers are likely to be the main means by which stolen parts enter the industry, and with the “displacement” effect of the WOVRs, this is likely to become an even greater area of concern. The onus should be on businesses to verify the legality of any parts obtained, with a presumption of dis-accreditation if found to have accepted stolen parts (even unwittingly) or failing to maintain the stringent checks and record keeping for parts sourced from private buyers or non-accredited recyclers. As private sellers of spare parts account for a very small proportion of the supply to the industry, the requirements should not be onerous.
Business support for a Code, and any increased administrative requirements, is directly related to their perceptions of the benefits and likely effectiveness of the Code. The two industry associations, the Auto Parts Recycling Association of Australia (APRAA) and the MTAA, are strongly supportive of a Code as proposed in this report. Their involvement in “selling” the Code to the industry will be vital.
The final major feasibility determinant relates to the ability for a Code to be effectively administered, raising resourcing and governance issues that are discussed in detail in Chapter 8. Compliance monitoring is perhaps the single most significant issue in this regard, but is probably not as prohibitive a cost as might be first thought.
Both APRAA and MTAA have indicated a willingness to consider assisting with the implementation and administration of a Code, and contributing either existing infrastructure and/or resources. APRAA has less flexibility in this regard than the MTAA, but has a closer relationship with the industry. While it is anticipated that accreditation fees will ultimately cover on-going administration costs, finding a source of start-up capital would be desirable (given the lead times in obtaining fees). A co-operative agreement between the two industry bodies might provide the best basis for the on-going management of the Code and should be pursued further. However, it is likely that, as a fallback, an embryonic administrative structure could be established with the assistance of one or other (or both) industry bodies, which could be expanded later as the revenue stream increased.
Recommendations
It is recommended that:
the NMVTRC proceed with the development of a Code of Practice;
further discussions be held with APRAA and the MTAA (and the NMVTRC) to determine the nature and extent of their involvement with the on-going administration of a Code of Practice;
the availability of any funding, particularly for start-up costs, be further investigated;
key buyers of used parts, such as the insurance industry and motor trades associations, continue to be involved in the further development of the Code to ensure a high level of commitment and support;
the proposed content of a Code outlined in this report form the basis for further discussions with stakeholders and other investigations;
the possible governance and administration arrangements outlined in this report form the basis for further discussions with stakeholders and other investigations;
the general framework for a Code should place the onus on businesses in the industry to verify and document the legality of any part or vehicle in stock or sold, with minimal tolerance of any breaches, rather than placing the onus on the administrative body to establish negligence or meet similar evidentiary tests; and
further discussions be pursued in relation to the possibility of obtaining national regulatory backing for a Code. A Code should be prepared in such a way as to readily lend itself to later regulatory backing.

ACKNOWLEDGMENTS
A D Edwards Consulting Pty Ltd and the National Motor Vehicle Theft Reduction Council gratefully acknowledge the assistance of all those who contributed their time and knowledge to this project.
Particular thanks is extended to Bill Bartlett, National Spokesperson for the Auto Parts Recycling Association of Australia (APRAA) for giving up his time, often daily, to discuss the issues. Thanks also to Linda Nicastri for once again providing so much assistance, particularly in relation to the industry surveys.
The help of Gerard Culhane at A C Nielsen (Surveys Australia) is also appreciated for completing a national phone poll within such a short timeframe.
Most of all, a debt of gratitude is owed to each of the 350 auto dismantling and parts recycling businesses (almost one quarter of the total industry) that contributed to this study either in person or through one or other of the national industry surveys which were undertaken.


CONTENTS
1 INTRODUCTION 1
1.1 Background 1
1.2 Definitions 1
1.3 Objectives 2
1.4 Methodology and Approach 2
1.5 Feasibility Determinants 3
2 OVERVIEW OF THE AUTO-DISMANTLING AND PARTS RECYCLING INDUSTRY 4
2.1 Introduction 4
2.2 Size of the Industry 4
2.3 “Typical Business” Profile 4
2.4 Industry Association Representation 5
2.5 Nature of the Market 6
2.6 Conclusions 7
3 THE TRADE IN STOLEN AUTO PARTS 8
3.1 Overview 8
3.2 Demand for Stolen Parts 9
3.2.1 Uses for Stolen Parts 9
3.2.2 Views of the industry 9
3.2.3 Whole vehicles vs Parts 9
3.2.4 Probability of Detection 10
3.3 Entry of Stolen Auto Parts into the Legitimate Industry 10
3.3.1 Knowingly Trading in Stolen Parts 10
3.3.2 The “Unwitting” Trading in Stolen Parts 11
3.4 The Private Trade in Stolen Parts 12
3.5 Impact of Written of Vehicle Registers (WOVRs) on the Trade 13
3.5.1 Overview 13
3.5.2 Changed Market for Stolen Parts 13
3.5.3 Implications of WOVRs for a Code 14
4 EXISTING REGULATORY AND VOLUNTARY ARRANGEMENTS, AND POTENTIAL FOR A CODE TO BE GIVEN REGULATORY BACKING 15
4.1 Existing Regulation of the Industry 15
4.1.1 Overview 15
4.1.2 Motor Trader Regulations 15
4.1.3 Second-Hand Dealer Regulations 16
4.1.4 New South Wales – Industry Specific Regulations 16
4.1.5 Conclusions 17
4.2 Existing Voluntary Industry Arrangements 17
4.3 Potential Regulatory Backing for a Code 17
4.3.1 Section 51 Trade Practices Act 1974 17
4.3.2 Regulating a Code through State/Territory Fair Trading Legislation 18
4.3.3 Stand-alone Legislation 18
5 STAKEHOLDER FEEDBACK – ADDRESSING THE POTENTIAL LIMITATIONS OF A VOLUNTARY CODE 20
5.1 Overview 20
5.2 Stakeholder Views 20
5.2.1 Summary 20
5.2.2 Offices of Fair Trading 20
5.2.3 Industry Peak Bodies 21
5.2.4 Individual Businesses in the Industry 21
5.2.5 Police Services 22
5.2.6 Insurance Companies 22
5.2.7 Conclusions 23
5.3 Responding to Stakeholders’ Reservations 23
5.3.1 Introduction 23
5.3.2 Creating the Incentives and Penalties 24
5.3.3 The Private Trade in Stolen Parts 24
5.3.4 Desirability of Regulatory Backing 24
5.4 Ways in which a Code can be Effective 25
6 CREATING INCENTIVES TO BECOME ACCREDITED UNDER, AND TO ABIDE BY, A CODE 26
6.1 Introduction 26
6.2 Benefits of Purchasing from Accredited Recyclers 26
6.3 The Market for Auto Parts 26
6.3.1 Nature of Demand in the Market 26
6.3.2 Conclusions 27
6.4 Insurance Companies 28
6.4.1 Introduction 28
6.4.2 Options 28
6.4.3 Consultation with the Insurance Industry 28
6.4.4 Views of the Dismantling/Recycling Industry 29
6.4.5 Potential Further Support from the Insurance Industry 30
6.5 Mechanical and Panel Repairers – the “Trade” 30
6.6 Regulated “Crash Codes” 30
6.7 Private Buyers 31
6.8 Value of the “Brand” as an Incentive 32
6.9 Conclusions 32
7 KEY ELEMENTS OF A CODE 34
7.1 Introduction 34
7.2 The General Approach – Onus on Recyclers 34
7.3 Key Elements of a Code 34
7.4 Audit Trails and Record Keeping 36
7.5 Supply of Parts to the Industry 36
7.6 Conclusion 38
7.7 Implementation Issues 39
7.8 Compliance Costs for Recyclers 39
8 GOVERNANCE, ADMINISTRATION AND RESOURCING OF A CODE 41
8.1 Overview 41
8.2 Possible Roles of Industry Peak Bodies 41
8.3 Governance 42
8.4 Monitoring and Enforcement 43
8.5 Other Administration Functions 44
8.6 Disciplinary Arrangements 45
8.7 Privacy and Competition Issues 46
8.8 Resourcing 46
8.9 Conclusion 47
REFERENCES 49

APPENDIX A: ORGANISATIONS CONSULTED
APPENDIX B: INITIAL ISSUES PAPER FOR STAKEHOLDERS
APPENDIX C: AUTO DISMANTLING/RECYCLING INDUSTRY DATA
APPENDIX D: NSW REGULATORY REQUIREMENTS
LIST OF FIGURES
Figure 1: Number of Employees 5
Figure 2: Industry Association Membership 5
Figure 3: Buyers of Used Auto Parts (Percentage of Businesses’ Turnover in $ Value) 27
Figure 4: Industry Opinions - Parts for Insurance Related Work 29
Figure 5: Source of Spare Parts - Whole Vehicles vs Separated Parts 37
Figure 6: Source of Already Separated Spares 37
Figure 7: Source of Whole Vehicles 38
LIST OF TABLES
Table 1: Frequency with which businesses encounter suspicious parts 11
Table 2: Summary of Existing Regulations Covering the Trade in Used Auto Parts 15
1 INTRODUCTION
1.1 Background
The National Motor Vehicle Theft Reduction Council (NMVTRC) is a joint initiative of all governments and the Insurance Council of Australia. It was established pursuant to the recommendations of the National Motor Vehicle Task Force to put in place theft reduction strategies over a 5-year period.
As a result of one of those strategies, the NMVTRC has commissioned this examination of the feasibility of developing and implementing an industry-based Code of Practice for dealers in second hand auto parts – ie. the auto dismantling and auto parts recycling industry. The objective of the code would be a reduction in the trade in stolen vehicle parts, particularly the unwitting involvement of legitimate businesses.
The code of practice option is being considered as a substitute for a co-ordinated national regulatory regime, which the NMVTRC considers unlikely to eventuate in the short to medium term:
however, it should be borne in mind that a “Code of Practice” could provide the basis for later regulatory backing (as seems imminent in the UK, for instance)1.
1.2 Definitions
The focus of this report is on businesses that participate in the trade in used parts for motor vehicles. Those businesses fall within what are generally referred to as the “auto dismantling” (or “wrecking”) and/or “auto parts recycling” industries.
It is recognised that there is some overlap with other motor trades, such as mechanical repair shops, which may also dismantle vehicles or trade in used parts as an adjunct to their repair business. Those businesses are equally subject to the coverage of this report.
The use of the expression “the industry” throughout this report refers to all of these businesses.
In discussing the trade in stolen, used vehicle parts a distinction is often drawn between “regular” or “legitimate” businesses and those that are variously referred to as “backyard”, “illegitimate” or “dodgy” operators. The distinction is not clear cut, as some apparently “legitimate” businesses may in fact be dealing in stolen parts and, conversely, many “backyard” operators may obtain parts from legitimate and legal sources.
For the purposes of this report, two distinctions are made. The first relates to the type of auto dismantler or parts recycler. Those in the industry which trade with a business name from business-specific premises are referred to in this report as a “business” within the “regular industry”. In the absence of a better definition, the expression “backyard operator” is used to describe those that do not.
The second distinction differentiates the “sound” operators from the “dodgy”, or “unsound”, operators in the industry. Again in the absence of a better definition, the latter refers to those that trade in stolen parts either intentionally, or by turning a blind eye to clearly suspicious parts and parts traders.
(It should be noted that this definitional distinction is also used in relation to environmental considerations. Reference to “unsound” operators in that context in the report should be taken to mean those operators that do not give adequate consideration to even basic environmental safeguards such as the proper disposal of vehicle operating fluids.)
The expression “the Code” should be taken to mean the Code of Practice that is being assessed by this report.
1.3 Objectives
The terms of reference for the project required the following objectives to be addressed:
Identify those jurisdictions where second-hand dealer legislation applies to parts recyclers and the effectiveness of such legislation in controlling the trade in stolen parts;
Identify any industry-based voluntary compliance regimes that currently apply;
Determine the feasibility of implementing a COP to minimise the incidence of parts recyclers unwittingly trading in stolen parts;
If considered feasible, outline key elements that the COP would need to comprise; and
Develop options for the development and implementation of the COP.
1.4 Methodology and Approach
A.D.Edwards Consulting Pty Ltd (ADEC) undertook a three-part approach to the project:
Research of published articles and the Internet on the trade in stolen auto parts, including those relating to existing Australian regulations and overseas experience;
Consultation with a wide range of stakeholders including industry peak bodies, individual businesses within the industry, police services, all State and Territory Offices of Fair Trading, the Insurance Council of Australia (Motor Committee), individual insurance companies, and others (see Appendix A). Consultation was undertaken both through face-to-face meetings and phone interviews. Consultation was based on an Issues Paper (at Appendix B) which was distributed to stakeholders as a focus for discussion and feedback; and
Two national surveys of the industry. One was a phone poll undertaken by A C Nielsen (Surveys Australia) that gathered data and views from 300 businesses (or approximately one in every five businesses in the industry) in accordance with recognised national and international standards. The second survey, undertaken by ADEC, sought information and opinions from the 300 or so members of the industry association, Auto Parts Recycling Association of Australia (APRAA). There were approximately 50 responses.
In commissioning the project, the NMVTRC and ADEC agreed that, given cost and time constraints, the consultation process would be limited to initial discussions (one consultation round) with key stakeholders. As it transpired, there was more extensive discussion about many of the issues with some key stakeholders (particularly APRAA).
However, both the NMVTRC and ADEC recognise that further consultation with stakeholders will be needed in developing and implementing a Code.
Accordingly, the analysis and conclusions within this report are based on initial feedback from stakeholders (as well as the research and industry surveys mentioned above). While the findings of the report are considered sound and the views of contributors properly recorded, the limitations of the approach should be recognised, particularly in terms of forecasts made about the likely final attitudes of stakeholders.
1.5 Feasibility Determinants
In summary, the factors identified as being the key determinants of feasibility included:
stakeholder attitudes;
likely extent of any impact on the stolen auto parts market;
incentives for compliance (or dis-incentives for non-compliance) with a Code;
compatibility of a Code with existing regulations/voluntary regimes;
benefits versus compliance and other costs (eg. administrative workload);
practicality of any record keeping/other requirements for recyclers under such a code;
viability of potential governance arrangements, including availability of resources and involvement of industry peak bodies; and
implementation and coverage issues, particularly given the fragmented nature of the industry.
A Code is found to be feasible against all of these considerations.
2 OVERVIEW OF THE AUTO-DISMANTLING AND PARTS RECYCLING INDUSTRY
2.1 Introduction
The feasibility of introducing an industry-based Code requires an understanding of the nature of the industry. It is often argued, for instance, that the industry is too fragmented to readily introduce a co-ordinated approach to improved industry practices, or that the industry consists of small businesses with limited financial and staffing flexibility to adapt to new requirements.
In the past there has been a paucity of information available about the auto dismantling and used parts recycling industry. This has largely been due to its fragmented nature, the number of backyard operators, and the difficulty in separating the industry from other motor trades such as mechanical repair shops which may also deal in used spares.
As part of this project, ADEC commissioned A C Nielsen to undertaken a national phone survey which has provided, apparently for the first time, data specifically relating to the auto dismantling and parts recycling industry.
A summary paper prepared by ADEC, Statistical Data Relating to the Auto Dismantling and Auto Parts Recycling Industry, is at Appendix C and provides further information on the industry based on the A C Nielsen survey.
2.2 Size of the Industry
ADEC estimates that the regular industry roughly comprises between 1350 and 1600 “regular” businesses. The estimate is based on a number of factors, including information from a supplier to the industry, discussions with industry peak bodies etc.
Other common sources of information, such as the Yellow Pages, have been found by ADEC to be too unreliable due both to overlapping entries in different business categories, and the inadequate differentiation of auto dismantlers and parts recyclers from other motor trades.
The Motor Trades Association of Australia (MTAA) indicated that the figure of 3,250 auto dismantlers contained in their publication, Motorfacts, A Yearbook of Economic, Industry and Statistical Data on the Motor Trades in Australia, 1998, (based on Yellow Pages entries) probably double or triple counted many businesses.
The ADEC estimate includes businesses which operate solely as dismantlers or parts recyclers, and those others for which the supply of used parts is a significant element of their business. By way of example, Volksparts in the ACT is included in the industry because it is not only a specialist repairer of Volkswagens, but is also a dismantler and retailer of used Volkswagen spare parts.
No reliable basis on which to estimate the number of backyard operators has been found.
2.3 “Typical Business” Profile
The majority of businesses in the industry employ 3 or more people (71%, see Figure 1) and turnover more than $100,000 per annum (74%).
Most businesses (58%) have more than 50 vehicles for parts stripping on their premises at any one time.
For most of them (73%), the average amount of time a vehicle or stripped shell remains on the premises is less than a year before being removed, usually by metal recyclers. 15% of businesses strip and remove vehicles from their premises within weeks.
Most businesses (60%) are within 50 kilometres of a capital city.
Figure 1: Number of Employees


2.4 Industry Association Representation
The feasibility of implementing an industry-based Code raises questions about the current nature and extent of industry representation by peak bodies. As discussed in following chapters, a key feasibility issue is the potential for industry associations (amongst others) to contribute to the development, implementation and administration of a Code.
Just over half of the businesses in the industry are currently members of an industry association (see Figure 2).
Figure 2: Industry Association Membership


There are two main industry associations covering the industry. The first is the Auto Parts Recyclers Association of Australia (APRAA) which is a peak national body specifically representing the auto dismantling and parts recycling industry.
The second group comprises the Motor Trades Associations (MTAs2) which exist in each State and Territory. The umbrella, national organisation is the Motor Trades Association of Australia (MTAA). The MTAA and MTAs represent all motor trades, including the auto dismantlers and parts recyclers.
About 23% of businesses in the industry are members of APRAA, and about 21% are members of an MTA. About a further 5% or so are members of both.
APRAA was formed in 1983 due to a perceived need for an organisation specifically servicing the auto dismantling and parts recycling industry. APRAA has a membership of about 300, and operates an accreditation system (covering business and environmental practices, customer relations, etc). APRAA has a very direct relationship to and involvement with businesses in the industry, and a genuine agenda to improve industry practices.
APRAA has a reasonably well-established infrastructure in place based around State Secretaries and State Accreditation Committees. As such, it is a valuable source of feedback on policy issues and was the primary point of contact with the industry during this review (and those undertaken in the past).
It should be noted, however, that most of APRAA’s work is undertaken on a voluntary basis, although APRAA does fund a full time Executive Officer and part time assistant. APRAA plans to expand its administrative base in the future. While APRAA provides valuable assistance to policy makers, produces a regular newsletter and other advice to members, and operates the accreditation scheme, APRAA’s current resource base limits its ability to directly fund major projects and research without external financial contributions.
The MTAA and MTAs, on the other hand, have considerable financial resources, staff and infrastructure but have a less direct interest than APRAA in the auto dismantling and parts recycling industry to date (although those businesses are covered by measures undertaken for the motor trades industry as a whole).
The implications of the current industry association arrangements for a Code are discussed at Chapter 8 (8.2). In summary, it is ADEC’s view that greater co-operation between APRAA and the MTAA would greatly facilitate the introduction of measures to improve the industry such as a Code of Practice. This is also discussed further below.
2.5 Nature of the Market
The vast majority (90%) of used parts enter the industry as whole vehicles. Only about 5% of parts which enter the industry are sourced from private sellers of separated spares. These figures are significant for two reasons: whole vehicles are likely to be far easier to establish as having clear title; and parts from private sellers are likely to be the main way in which stolen parts enter the industry. These issues are discussed in more detail at Chapter 7 (7.5 and 7.6).
The nature of demand for used parts is discussed in detail at Chapter 6 (6.3). In summary, just over half of parts sold are to buyers from “the trade” (crash repairers, mechanics etc). This fact is significant in determining the extent to which, and ways in which, demand can be influenced towards accredited recyclers.
2.6 Conclusions
The industry is reasonably well represented by peak bodies, and businesses are able to be adequately identified and defined, suggesting that the marketing of the Code to the industry should be feasible. The continued involvement of APRAA in particular is likely to be central in this regard.
Businesses in the industry are generally of sufficient size for new requirements to be adopted so long as they are not overly onerous and are justifiable.
3 THE TRADE IN STOLEN AUTO PARTS
3.1 Overview
The trade in stolen vehicle parts is mostly associated with “professional” theft (rather than “opportunistic” theft – “joy riders” etc). Although professional theft accounts for the minority (about 25%) of all stolen vehicles3, it imposes the greater financial burden on the community. In 1997, professional theft accounted for 55% of the cost of car theft to NRMA based on insurance claims4.
Vehicles stolen by professional thieves are generally used for resale either as whole vehicles, often with fraudulent identification (“re-birthing”), or as separated spare parts.
As there were approximately 139,000 cars stolen in Australia in 20015, it may be surmised that approximately 35,000 were stolen by professionals and that some portion of these are feeding the trade in stolen auto parts. No substantiated data were found estimating the proportion of professionally stolen vehicles that are stripped for parts.
The economic dynamics of the market in illegal parts has not been well modelled, but is a product of the numerous variables which affect supply and demand including: probability of detection; cost of substitutes (ie. legal parts); existence of regulation; monitoring and enforcement of regulation; ease of identification; consumer awareness and behaviour; and so on.6
A number of reports have canvassed factors contributing to the current trade in stolen parts. In summary, these include the:
ease of interaction between the legal and illegal trade in parts;
difficulty in establishing and monitoring “paper trails”;
disparate nature of the industry, including “backyard” operators;
difficulty in identifying parts;
lack of enforcement of existing regulations;
staff insufficiently skilled in detection amongst registration, police personnel etc;
limited auditing of repairs by insurance companies; and
lack of a national “write-offs register” and limited follow-up monitoring of insurance “write-offs”.
3.2 Demand for Stolen Parts
3.2.1 Uses for Stolen Parts
Stolen parts are generally used for the same purposes as legitimate parts7:
Parts may be stolen for resale for financial gain, or to barter for other goods including drugs and firearms.
They may be used to replace damaged, worn or missing parts, with demand often attributable to the scarcity of supply of legitimate parts for older vehicles, or the high cost of legitimate parts relative to the value of older vehicles.
Stolen parts are frequently used to rebuild wrecked vehicles, using the identity of the damaged vehicle to allow re-registration. The practice takes many forms, including the mix of stolen and legitimate parts, and combining two halves of different vehicles (“cut and shut”). The expected implementation of Written-off Vehicle Registers (WOVRs) in all States during 2002 is likely to significantly affect the demand for stolen parts for use in “re-birthing” total loss vehicles (discussed further at 3.5 below).
Stolen parts may be used to modify or upgrade a vehicle. The most common example cited during this project was the upgrading of base model Holdens to the appearance and/or mechanical specification of Holden Special Vehicle (HSV) Commodores. Other high performance models are popular amongst professional thieves, including Subaru WRXs and Honda CRXs.8
3.2.2 Views of the industry
The relative contribution of the demand factors in 3.2.1 above to the overall trade in stolen parts has not been able to be accurately determined in this or other studies.
However, published reports, as well as anecdotal evidence from police and businesses consulted, suggest that a large part of the trade is related to the rebuilding of wrecked vehicles.
The vast majority of auto dismantling and recycling businesses consulted during this study nominated the key driver of the trade in stolen parts as being the ease with which damaged vehicles (and hence legitimate vehicle identities) can be purchased at auctions.
This view was reinforced by police services.
It was argued strongly by APRAA and individual businesses in the legitimate industry that participation at damaged vehicle auctions should be limited to those in the industry accredited under the proposed Code. This is discussed further at Chapter 5.
3.2.3 Whole vehicles vs Parts
While the evidence of those consulted during this study suggests the trade in stolen parts is largely driven by the profits from “rebirthed” vehicles, research from the United States indicates that stripped parts are often worth more to thieves than complete vehicles.9
The forthcoming national integration of WOVRs is likely to cause a substantial displacement of the trade away from whole vehicles to separated parts (see 3.5 below). The need for enhanced controls on the purchase of parts from private sellers is discussed at Chapter 7.
3.2.4 Probability of Detection
It is likely that the low probability of arrest contributes significantly to the extent of the trade in Australia. In 1998, no arrest was made for 84% of car thefts. Of those that were arrested, only 16% of adult offenders were convicted, and of those, 35% received a custodial sentence:
The odds of being jailed for car theft are therefore about 115 to one.10
It is unclear whether the difficulty of achieving arrests for vehicle and auto parts theft has caused a low level of police resources being allocated to this area of crime, or whether under-resourced police forces are unable to achieve greater arrest rates.
Discussions with police in one state suggested that the pursuit of those trading in stolen auto parts did not produce high levels of arrest, and accordingly had to be weighed against other priorities for police resources. Consultations with the trade during this review suggested that the closure of police “stolen vehicle squads” in recent years has exacerbated the situation. According to many businesses, the frequency of police visits, and hence the likelihood of being detected for buying or selling stolen auto parts, has decreased significantly.
3.3 Entry of Stolen Auto Parts into the Legitimate Industry
3.3.1 Knowingly Trading in Stolen Parts
The drivers for illegal parts entering the legitimate market are primarily competitive pricing and the low probability of detection.
The NMVTRC commissioned the Australian Institute of Criminology (AIC) to undertake empirical research into the trade, interviewing thieves, parts recyclers and others to gather anecdotal evidence - “in addition to the illicit backyard operators, some recyclers and repairers were identified as the primary users of stolen parts” 11. A number of those interviewed indicated they would not knock back stolen parts, particularly given the perception that if they did not buy them, others would, thereby providing their competitors with a commercial advantage.
A frequent comment made by businesses consulted during this project echoed the same sentiment. Many businesses identified competitors that were able to sell used parts at prices that suggested they could not have been obtained from legitimate sources.
It should be noted that businesses consulted during the study often nominated the pressure from insurance companies to minimise repair costs as a demand driver for stolen parts (ie. from panel and mechanical repairers that undertake insurance work). This factor is one element of the argument for insurance companies to only obtain used parts from recyclers accredited under the proposed Code (discussed at 6.4 below).
Table 1: Frequency with which businesses encounter suspicious parts
Frequency of Encounters
% of Businesses
Never
40
Once or twice a year
38
Every few months
5
Every couple of months
5
Once a month
5
Every couple of weeks
1
Every week
6
TOTAL
100
Source: A.D.Edwards Consulting P/L

Research was undertaken to ascertain the frequency with which auto dismantling and recycling businesses encounter suspicious parts (Table 1). Interviews with recyclers suggested that those that did not accept suspicious parts tended not to be approached repeatedly, as they became known amongst thieves as not being viable targets. This factor probably accounts for a significant percentage of those recyclers that reported never being approached to purchase suspicious parts.
Even despite this:
60% of businesses in the industry report being approached with suspicious parts or vehicles at least once or twice a year.
More than one in 20 businesses are approached at least weekly.
It is not possible to quantify the number of legitimate businesses which knowingly purchase stolen parts, nor the proportion of the total volume of stolen parts which is transferred to the legitimate industry. However, as the AIC found, “it is fair to conclude that some legitimate traders are interested in bargains”.12 It is also concerning that about 20% of legitimate businesses are approached quite regularly with suspicious parts.
3.3.2 The “Unwitting” Trading in Stolen Parts
It is likely that the transfer of stolen parts into the legitimate market often occurs unknowingly. Most States do not have direct regulations governing the trade in used auto parts and hence few, if any, requirements exist to verify the source of parts or the bona fides of those from whom they are obtained.
The key difficulty, even in jurisdictions where regulations do exist, is the lack of parts labelling by vehicle and component manufacturers. The lack of identification contributes to the limited effectiveness of current policing of existing regulations addressing the trade in stolen parts. It also makes it difficult for businesses (and consumers) to differentiate between legitimate and stolen parts.
However, consultations during this project confirmed the view of the AIC that the business practices of recyclers may be (often unwittingly) facilitating the trade in illegal parts.13
The limited requirements for paperwork and sellers’ identity and, when they are sought, the readiness with which false names, identification and invoices are “passed off”, were found to be key contributors to the unwitting transference of stolen parts to legitimate trade.
The fact that so many businesses already encounter suspicious parts and sellers, with 10% encountering them monthly or weekly, indicates the probability that at least some businesses unwittingly (or negligently) receive stolen parts. The pressure will be further increased with the “displacement” of the trade as the result of WOVRs.
3.4 The Private Trade in Stolen Parts
An industry-based Code is unlikely to fully stem the trade in stolen parts. Even in the most optimistic scenario, whereby all businesses signed up and adhered to a Code, and the Code was fully effective in stopping the entry of stolen parts into the regular industry, sellers of stolen parts would be likely to continue to find markets for stolen parts through private buyers.
Anecdotal evidence during this project indicated the likelihood that a significant, although unquantifiable, proportion of the trade in stolen parts never enters the mainstream industry – ie. it is comprised of thieves selling to private buyers:
“Need controls on flea markets, swap meets, private to private sales, trading post etc” (Qld regional auto parts recycler)14.
The difficulties in stemming the private trade in stolen auto parts are no different from the black market for any other stolen goods. Regulations on pawnbrokers, for example, may make it difficult to dispose of stolen electrical items via those businesses, but do not affect thieves’ ability to sell stolen video-cassette recorders at flea markets or the local pub.
It is likely that there will always be a private market for suspicious goods if the risks of detection are low and the financial benefits high. Generic measures, such as increasing the identification requirements for private advertisers of goods in newspapers/magazines and “flea market” traders etc might help address the private sale of stolen goods, but are outside the scope of this project.
It might be reasonably concluded that the proportion of the community willing to purchase suspicious goods ultimately limits the market, but that the private purchasing of stolen goods is unlikely to ever be completely eliminated.
There appear to be only two means by which an industry Code might reduce the private trade in stolen parts:
Introducing regulations requiring that, for any repairs or modifications to vehicles, documentation verifying the source of the parts be presented to registration authorities (or even requiring that, for registration purposes, parts must be obtained from suppliers accredited under the proposed Code); or
Influencing consumer behaviour by marketing the advantages of purchasing parts from accredited parts recyclers.
The first option is not considered feasible, at least in the short term, due to the additional workload and expense for registration authorities, the difficulty in identifying that a repair or modification has occurred, and the problems in verifying the documentation.
It should be noted, however, that some States already require receipts for repairs or modifications to be produced in some circumstances. Furthermore, the WOVR vehicle identification inspection arrangements for repairable write-offs include a review of receipts or other documents as an attempt to verify the source of parts/legitimacy to possession of the vehicle.
While a blanket requirement along the lines of the first option above is problematic, it is recommended that the feasibility of introducing standardised requirements for registration authorities to verify the source of auto parts be reviewed at a later stage. If a Code is introduced and is seen to be effective, it may provide the basis for a stronger argument to be put to registration authorities.
The second option above is feasible, although unlikely to provide as great an impact as the first option. As discussed further in Chapter 6, one important factor determining the effectiveness of a Code is the degree to which it is branded and marketed in order to influence consumer behaviour. As private buyers account for about 46% of total demand for used auto parts from the industry (Figure 3), it is recommended that the implementation and administration of a Code encompasses an ongoing marketing element to progressively increase awareness and, consequently, a shift in demand away from private sellers and non-accredited businesses.
3.5 Impact of Written of Vehicle Registers (WOVRs) on the Trade
3.5.1 Overview
WOVRs are expected to be introduced in all States and Territories during 2002. Assuming the implementation issues are properly managed, eg. to allow the electronic linking of databases, there will be a substantial impact on the current nature of the trade in stolen auto parts.
3.5.2 Changed Market for Stolen Parts
It is anticipated that the WOVR arrangements will virtually eliminate the practice of re-birthing of “statutory” or “irreparable” write-offs with a corresponding, substantial displacement of the trade into the used spare parts market:
“The near elimination of the ‘re-birthing’ problems where ‘statutory write-offs’ are involved will see, based on evidence in NSW and the USA, the ‘displacement’ of criminal activities into stolen parts …”.15
Consultations during this review also indicated that the NSW WOVR had made a substantial impact on the “re-birthing” trade, although anecdotal evidence suggested the trade had to some degree been transferred to other states.
The national approach is therefore likely to force thieves to pursue other outlets for stolen parts:
Repairable write-offs – a market which can be addressed either by restricting access to purchase of these vehicles at auction (see 6.4) or by increasing requirements for parts verification by registration authorities (see 3.4 above);
Selling parts directly to the mechanical or panel repair trades - providing a further imperative for insurance companies and motor trades associations to pre-empt this likely outcome by supporting recyclers accredited under the proposed Code (see Chapter 6); or
By selling stolen parts directly to dismantlers and parts recyclers.
3.5.3 Implications of WOVRs for a Code
There is likely to be a significant shift away from using the identifiers of written-off vehicles to re-birth whole vehicles towards their disposal as separated parts.
This anticipated pressure to dispose of stolen parts through the auto dismantling and parts recycling industry greatly increases the imperative to increase safeguards at the individual business level, a central facet of the proposed Code.
It also increases the imperatives for other motor trades’ businesses to be increasingly cautious about the source of parts – providing a substantial opportunity to encourage mechanical and crash repair businesses to support recyclers accredited under a Code.

4 EXISTING REGULATORY AND VOLUNTARY ARRANGEMENTS, AND POTENTIAL FOR A CODE TO BE GIVEN REGULATORY BACKING
4.1 Existing Regulation of the Industry
4.1.1 Overview
While the terms of reference for the project required an overview of the application of any second-hand dealer regulations to the industry, a broader examination of all potentially applicable regulations was undertaken.
Table 2 below presents the existing arrangements that apply in different jurisdictions.
Table 2: Summary of Existing Regulations Covering the Trade in Used Auto Parts
Type of Regulation
NSW
QLD
VIC
SA
ACT
TAS
WA
NT
Motor Dealer regulations - specific provisions for wreckers








Vehicle repair industry regulations – specific provisions for wreckers (b)






(a)

Generic second hand dealer regulations apply to used auto parts sellers








Motor Dealer regulations – general (b)









Source: ADEC (discussions with State/Territory Offices of Fair Trading and APRAA)

Notes:
(a) Currently under consideration in WA.
(b) Generally don’t specifically address dismantlers/recyclers but apply in so far as they trade in whole vehicles. May be specific legislation, or a Code of Practice linked to fair trading legislation (eg. Tas.). In QLD, includes general “fair conduct” provisions that would apply to dismantlers.

Only in NSW are there regulations specifically capturing the auto-dismantling and/or parts recycling industries.
4.1.2 Motor Trader Regulations
Regulations governing the motor vehicle sales industry exist in all jurisdictions, either as stand-alone legislation, or as a Code of Practice within the provisions of overarching fair trading legislation (eg. Tasmania). In most jurisdictions, the regulations do not specifically address auto dismantlers, but they may be captured if a business is deemed to be trading in vehicles. Information about the application or policing of these regulations in relation to auto dismantlers was hazy.
In Victoria for instance, the legislation would appear to apply to any commercial buyers of vehicles, however in practice, it appears that only businesses with 20 or more cars are scrutinised. Even then, the application of the legislation to the auto dismantling industry appears to be rarely policed. The main intention in the practical application of motor trader regulations appears to be the protection of consumers to whom vehicles are sold rather than regulating the purchase of vehicles for parts.
From the feedback received, it appears that only in Western Australia (WA) does the legislation specifically capture auto-dismantling businesses. The WA Motor Vehicle Dealer Act 1973 (the MVDA) licences persons involved in the business of buying or selling vehicles and those persons whose “business consists of, or includes buying vehicles for wrecking (auto dismantlers)”.
As in other States and Territories, the WA MVDA requires applicants for a licence to be a fit and proper person and of good character and repute. Licensees can be disqualified if they have done something that, in the opinion of the administering Board, no longer makes them fit and proper.
Other than WA, no office of fair trading nominated motor trader legislation as a form of regulation of the auto dismantling or parts recycling industry.
4.1.3 Second-Hand Dealer Regulations
Victoria and Tasmania were the only States to indicate that there are generic regulations for dealers in second-hand goods that would apply to used auto parts traders. This question was put to all State and Territory fair trading offices.
In both those States, businesses are required to maintain a register or “book”, recording dates and descriptions of items bought and sold, identification details of those from whom goods are bought, etc. The Victorian Department of Justice officials indicated that the Second Hand Dealers Act was rarely enforced, although a recent increase in inspectors’ powers may assist.
In Tasmania, the comment was made that anyone can become a second hand dealer unless there was a positive action on the part of police to object to a trader being licensed, which rarely occurred.
4.1.4 New South Wales – Industry Specific Regulations
New South Wales (NSW) has legislation specifically targeting the parts recycling and auto dismantling industry, namely, the Motor Dealers Act 1974 (and the Motor Dealers Regulation 1999) and the Motor Vehicle Repairs Act 1980 (and the Motor Vehicle Repairs Regulation 1999).
The NSW requirements are by far the most extensive regulations currently applying to the industry, and are recommended as the starting point for developing record keeping requirements under the Code (see Chapter 7).
Details of the NSW requirements are at Appendix D.
Key points to note are the requirement for auto dismantlers to mark certain mechanical and body components, and to maintain records in relation to those parts.
The regulations also impose requirements upon “motor vehicle parts reconstructors” to ensure that any parts obtained have the appropriate identification marks.
While doubts were raised by the industry about the effectiveness of the legislation, due to lack of resourcing, policing and other difficulties, the regulations appear to be a valuable starting point in relation to the content of a Code.
4.1.5 Conclusions
Where there are regulations, they do not appear to provide a significant impediment to the entry of stolen parts into regular businesses. Furthermore, there do not appear to be any significant concerns regarding the ability of a Code to operate in conjunction with existing regulations. Indeed, a Code may help improve the dissemination of information about suspicious parts or sellers to relevant regulatory authorities.
The Code should, however, be prepared in such a way as to ensure that there is no conflict with existing regulations and no unnecessary duplication of record keeping. To achieve this, it is anticipated that the NSW regulations would form the basis for further discussions regarding the record keeping and other requirements of a Code.
The likely content of a Code detailed in Chapter 7 would be consistent with this goal.
4.2 Existing Voluntary Industry Arrangements
The only voluntary industry “good practice” arrangements are those promulgated by APRAA as part of its accreditation scheme. The system allows for general membership of APRAA, as well as a 1 to 5 star accreditation ranking system. Only about 50 businesses currently participate in the accreditation program, although APRAA has some 300 members in total.
The APRAA system does not currently specifically address the trade in stolen auto parts, although some of the good business practices contained may assist to some extent. The Code contains certain environmental requirements which increase proportionally with the level of accreditation sought.
The APRAA arrangements would not conflict with a Code, and may well be leveraged to assist in its further development and implementation (see Chapter 8).
4.3 Potential Regulatory Backing for a Code
Although not part of the brief for the project, a number of stakeholders (including offices of fair trading and industry associations) raised the issue of providing a Code with regulatory backing.
Three options appear to be available.
4.3.1 Section 51 Trade Practices Act 1974
The Act makes provision to “declare” industry Codes as either as voluntary or mandatory codes, so as to bind all in the industry to a Code’s provisions.
By way of example, the MTAA is currently pursuing the implementation of a “Crash Code” (for the crash repair industry) under the Act with the Australian Competition and Consumer Commission (ACCC).
While the possibility of gaining recognition of a Code under the Act should be pursued further, it should be noted that the Act only applies to “corporations” (hence ruling out sole traders, partnerships etc) and that only one Code has previously been “declared” under section 51 of the Act.
It is also recommended that, in developing a Code, guidelines issued by the Commonwealth government for industry codes of conduct be followed to minimise any variations should later regulatory backing be pursued (and to ensure best practice is adopted).
4.3.2 Regulating a Code through State/Territory Fair Trading Legislation
The suggestion was made by one office of fair trading that State and Territory fair trading legislation generally allows for industry codes of practice to be “declared” and hence given regulatory force. ACT officials indicated that the proposed Code would be likely to fall within the scope of its fair trading legislation, and pointed to the ACT Motor Vehicle Service and Repair Industry Code of Practice as a similar example.
The code would need to fall within the overall purpose of the respective State and Territory legislation, ie. address misleading and deceptive conduct. There was disagreement over the extent to which the proposed Code would fall within the scope of fair trading legislation in the various jurisdictions. However, it is recommended that the possibility be more fully explored in the further development of a Code.
It should also be noted that the monitoring and enforcement of Codes that are mandated under fair trading legislation generally become the responsibility of governments.
4.3.3 Stand-alone Legislation
Some States indicated that stand-alone legislation would be preferable to the approach at 4.3.2 above, and should be pursued in order to give the Code maximum “teeth”.
One option used in the past is for one State to enact the full legislation, with other States and Territories simply referring to it rather than replicating the full legislation (known as “template” legislation).
Template legislation is not favoured by some States as a matter of principle. Tasmania, for instance, indicated that separate but consistent legislation in each State would be preferable.
There already exists a well organised framework for pursuing national fair trading requirements in relation to the various issues that arise. The officials’ committee comprising representatives of all States and Territories, that would first be approached, is known as the Fair Trading Offices’ Advisory Committee (FTOAC). They report through a Standing Committee to the Ministerial Committee of Consumer Affairs.
The approach would be to obtain a “uniformity agreement” at Ministerial level (that would indicate an intent to enact uniform or consistent legislation).
It is recommended that the possibility of gaining regulatory support be further pursued with offices of fair trading, with a view to putting the issue to FTOAC for feedback and advice.

Recommendations

That:
further discussions be pursued in relation to the possibility of obtaining national regulatory backing for a Code

a Code should be prepared in such a way as to readily lend itself to later regulatory backing.


5 STAKEHOLDER FEEDBACK – ADDRESSING THE POTENTIAL LIMITATIONS OF A VOLUNTARY CODE
5.1 Overview
This Chapter considers the views of stakeholders, from which is derived a summary of the broad difficulties that a voluntary, industry-based Code may face in effectively addressing the trade in stolen auto parts. It summarises the ways in which these potential limitations can be overcome. Later chapters explore these options in more detail.
5.2 Stakeholder Views
5.2.1 Summary
In summary, all stakeholders consulted supported the concept of a Code but most raised reservations about the likely effectiveness of a voluntary, industry administered Code in stemming the trade in stolen parts.
5.2.2 Offices of Fair Trading
The Western Australian Ministry of Fair Trading comments are a useful summary of the general feedback from Offices of Fair Trading:
“Overall while we consider the Code of Conduct to be a good idea, any Code that is voluntary is one that would be monitored by the industry…This means that only those who are members of the Industry Group will feel the need to adhere to it. A similar arrangement existed in the WA real estate industry through the Real Estate Institute of WA and was enforceable only to the extent of its membership.
“Although a voluntary code of practice is a very worthwhile approach for providing certainty and consistency regarding standards of behaviour for good operators, by its nature, it will not generally capture or bring into line the "dodgy" operators because they will either opt out as soon as errant behaviour is brought to their attention or will not participate in the first place.
“To end on a positive and realistic note, it is not uncommon for a voluntary code of practice to lead to a mandatory one as it enables poor behaviour and practices to be specifically and comparatively highlighted.”
Representatives of the NSW Office of Fair Trading, the NSW Motor Vehicle Repair Industry Council and the Victorian Department of Justice pointed out that their States already have regulations which cover the auto dismantling and parts recycling industry (including specific regulation of the industry in NSW – see Chapter 4). If so directed, and adequate resources were available, NSW (and, to a lesser extent, Victorian) officials would have the regulatory backing to undertaken a major crackdown on theft in the industry.
Discussions with the industry, however, suggested that it was rare for the regulations to be enforced and, when inspectors did arrive, there was often only a cursory attempt to reconcile parts with administrative records.
There was acknowledgment that a Code might be able to “fill in any gaps” in existing regulations, and that a Code might improve communication and intelligence dissemination between the industry and enforcement agencies. The Victorian official agreed that there was minimal enforcement of existing regulations, and inadequate penalties. There was interest in the potential for creating greater economic penalties for unsound operators (as discussed below).
A number of the State and Territory Offices of Fair Trading (eg. ACT) indicated that the possibility of pursuing regulatory backing should not be dismissed, and indicated options for taking such a proposal forward (see Chapter 4).
As discussed in Chapter 7, it is recommended that the NSW regulations, in particular the Prescribed Parts Register, form the basis of further discussions with the industry and other stakeholders about the content of a national Code.
5.2.3 Industry Peak Bodies
APRAA
APRAA strongly supports a national licensing system for the industry to weed out the unscrupulous and polluting operators. APRAA has a genuine interest in improving the reputation and performance of the industry, both in terms of theft reduction and improved environmental performance. The lack of national standards for the industry in these areas creates commercial advantages for unsound operators – whether by trading in suspicious parts, or not investing in safeguards to minimise environmental pollution. In the absence of a national licensing system, APRAA supports a national Code of Practice for the industry.
APRAA has an expectation of a continuing close involvement in the development and implementation of a Code (see also Chapter 7 and Chapter 8).
MTAA
Although not previously having a close and specific interest in this aspect of the motor trades industry, the MTAA indicated a strong desire to “get the thugs out of the business”. The MTAA indicated a number of ways in which it might consider contributing to a Code, including the possibility of direct support in implementation and administration (see Chapter 7 and Chapter 8), and by influencing demand within the broader motor trades industry towards parts suppliers that are accredited under a Code (see Chapter 6).
The MTAA supports a Code, and is currently involved in developing a Code of Practice for the crash repair industry.
5.2.4 Individual Businesses in the Industry
As with other stakeholders, many individual businesses in the industry were concerned that a Code would only capture the already sound operators and not affect the minority that deal in stolen parts. Typical of the comments received on this issue in the ADEC survey of APRAA members were:
“Be careful not to over regulate the genuine industry while not policing the unscrupulous” (business from metropolitan Victoria);
“If a person is prepared to break the law and sell stolen parts why would a ‘Code of Practice’ deter them” (Qld metropolitan);
LMCT traders are more and more controlled, policed and governed, while backyarders with NO responsibilities are running rampant” (Vic regional); and
“How does a Code of Practice stop a thief selling parts to a disreputable repairer? I am concerned that we will be saddled with a compliance burden without any benefits to either ourselves or the community” (WA metropolitan).
However, the overwhelming majority of comments criticised insurance companies for the lack of restrictions on those who can buy written-off vehicles at auction (or tender). Businesses in the industry (and APRAA) nominated this as the key problem in the trade in stolen parts and vehicles. It was also seen as a major source of environmental damage, as the sale of vehicles that were suitable only for dismantling to the general public was likely to be resulting in substantial environmental degradation, ie. by backyard operators and apparently legitimate operators.
Virtually all businesses consulted argued for restrictions on the sale of damaged vehicles, particularly the unrepairable total losses. A Code was seen as a way defining those businesses that should be allowed to participate:
“Only those who are accredited by adopting the code of practice should be allowed to buy statutory write offs. This would be the main incentive for adopting the code” (Vic metropolitan);
“Only registered recyclers to buy written-off vehicles” (WA regional); and
“Recyclers signing to a Code of Practice to have written or computerised stock records … to be audited regularly and to be comparable to APRAA 4 or 5 star rating. In return, code of practice recyclers only to be sold total losses by insurance companies, auctions etc” (Vic metropolitan).
The strength of concern about access by unscrupulous operators to written-off vehicle auctions (and tenders) needs to be tempered by an awareness of the likely impact of national WOVRs in reducing the trade related to vehicle “re-birthing” (albeit with a likely displacement of the trade away from whole vehicles and into the separated parts market).
However, the concern remains valid in so far as un-restricted participation at auctions provides a key source of parts for unethical or polluting traders.
5.2.5 Police Services
As a Code would not operate within a criminal legislative framework, police involvement would necessarily be limited. However, there was general in-principle support from those consulted so long as there was no expectation that a Code would lead to greater allocation of police resources or changes in the approach to auto parts theft.
There was support for any measures that would increase the level of communication and intelligence dissemination between the industry and the police services, as well as any effective economic measures that would reduce the incidence of the trade in stolen parts. The WOVRs were seen as likely to have a major impact on the trade.
5.2.6 Insurance Companies
Discussions both with individual insurance companies and the Insurance Council of Australia (ICA) Motor Committee suggested there would be strong in-principle support for a Code and, specifically, amendments to approved repairer arrangements to require used parts to be sourced from suppliers accredited under a Code. This finding is consistent with those of the Tozer Corporation consultancy for the NMVTRC16. The issue of restricting participation at the auction or tender of written-off vehicles to accredited recyclers was also raised and, although not ruled out, could be pursued further with the ICA.
It should be noted that the ICA Motor Committee indicated considerable interest in, and support for, including environmental requirements in a Code. Supporting improved environmental outcomes may be at least as important as supporting theft reduction outcomes as the insurance industry pursues “good corporate citizen” objectives.
5.2.7 Conclusions
The main reservations raised in relation to the proposed (or any other) voluntary industry-administered Code include that:
unsound operators would either not participate or would opt out, and hence it would only capture the already sound operators;
it would not capture the private trade in stolen used parts;
it would not have the force or coverage of mandated, regulatory requirements on the industry;
there would be insufficient penalties for non-compliance (or rewards for compliance); and
monitoring and enforcement would be too difficult or expensive and hence inadequate.
However, a Code was nevertheless seen by most stakeholders as worth pursuing if:
sufficient incentives can be created for adherence to a code;
backyard or unsound operators are further marginalised from regular motor trades; and
there is scope for a code to form the basis for regulatory backing at a later stage.
5.3 Responding to Stakeholders’ Reservations
5.3.1 Introduction
The main perceived limitations of a voluntary, industry administered Code are:
the lack of incentives to become (and remain) accredited, and hence the flow on difficulty of limited coverage of the industry (particularly unsound operators); and
low levels of compliance due to perceived lack of penalties and/or a low risk of detection.
5.3.2 Creating the Incentives and Penalties
In the absence of regulatory backing, which could require all operators to be licensed for instance, financial or economic options represent the best means of addressing these issues.
Chapter 6 indicates ways in which the demand for used parts should be able to be significantly influenced to favour accredited businesses.
With the anticipated support of major buyer groups, there will be substantial financial implications for businesses which do not become accredited. Similarly, the potential economic impact for businesses which lose accreditation should create a powerful incentive for compliance. Putting at risk even a relatively small percentage of a businesses’ turnover is likely to provide a strong incentive.
The greater the effectiveness with which a code is marketed to buyers, the greater the benefits to businesses of becoming and remaining accredited. There are already very positive indications of in-principle support from major buyers (particularly insurance companies and the MTAA):
providing strong grounds for anticipating a Code will quickly achieve substantial industry coverage; and
creating the economic incentives for businesses to avoid dis-accreditation.
5.3.3 The Private Trade in Stolen Parts
It is accepted that an industry-based Code will, by definition, not capture thieves that operate outside the industry.
Where a Code can potentially impact on the extent of the trade in stolen parts is by reducing the opportunities for those parts to enter the regular industry. 60% of businesses already encounter suspicious parts, suggesting this is already a significant market for stolen parts.
Furthermore, as discussed at Chapter 3, it is probable that national written-off vehicle registers will lead to a substantial transference of the trade in stolen parts away from whole vehicles to separated parts, as the availability of vehicle identities is restricted. It is likely that the incidence of thieves attempting to dispose of stolen spare parts through regular businesses will greatly increase.
Accordingly, the concerns raised about the trade in stolen parts which occurs outside the industry is valid, and should continue to be examined through means other than an industry Code.
However, the entry of stolen parts into the regular industry already appears to be a significant market and, importantly, is likely to become a major target for thieves in the near future.
5.3.4 Desirability of Regulatory Backing
It is recognised that, in theory at least, a regulatory regime has the potential for greater industry coverage and more substantial sanctions for unsound operators than a voluntary code of practice. It should be noted, however, that even where there are regulations in place, their effectiveness was found to be limited by the availability of resources for monitoring and enforcement, the skill of enforcement personnel, and the ease with which the regulatory requirements could be circumvented.
The brief for this project indicated the presumption that nationally consistent regulatory backing was unlikely to be achieved in the short to medium term given the nature of Australia’s federal system of government.
However, discussions with stakeholders during this review indicated that there might be a greater degree of support for such an approach than is assumed, and that there are a number of options that could be pursued to obtain such regulatory backing. These matters are discussed above at Chapter 4.
5.4 Ways in which a Code can be Effective
A code of practice has the potential to be effective in reducing the trade in stolen auto parts in the following ways:
Restricting the transfer of stolen parts into the legitimate industry by requiring accredited businesses to ensure, and vouch for, the legitimacy of parts and parts sellers (formalised, robust identity requirements etc);
Marginalising unsound operators by creating a visible distinction between accredited and non-accredited traders;
Reducing business opportunities for non-accredited traders by influencing the purchasing decisions of parts buyers.
Improving the dissemination of information and intelligence to police or other regulatory authorities, including by establishing records of businesses where there are repeated complaints or concerns; and
Forming the basis for possible regulatory backing at a later stage, drawing on the experience and awareness of the trade in stolen parts established by a Code. A Code may still be worthwhile simply by better highlighting the need for national regulatory backing.

Recommendation
That:
the NMVTRC proceed with the development of a Code of Practice.


6 CREATING INCENTIVES TO BECOME ACCREDITED UNDER, AND TO ABIDE BY, A CODE
6.1 Introduction
In the absence of regulatory force for a Code, at least initially, a key issue is the availability of other incentives for businesses to: (a) become accredited; and (b) remain compliant with a Code’s provisions.
In the absence of regulations, the only feasible source of incentives appears to be the establishment of economic advantages for those recyclers that adhere to a Code—specifically, by skewing demand for used parts towards accredited recyclers.
The strength of incentives will have a direct bearing on the feasibility and effectiveness of a Code—affecting the extent of industry coverage and the level of compliance.
Furthermore, the economic value to a business of compliance (or, conversely, the financial impact of non-compliance) to a Code will in large part determine the extent of voluntary adherence, which in turn will affect the extent of monitoring and enforcement which will be required.
6.2 Benefits of Purchasing from Accredited Recyclers
In summary, the basis for influencing buyers to favour accredited recyclers will relate to the increased certainty for the purchaser that they are not inadvertently receiving stolen goods, and the support they would be providing to help “clean up” the industry.
By supporting accredited recyclers, purchasers will help reduce the trade in stolen goods and create a “level playing field” in the industry. A key problem for the industry currently is that the unsound operators gain a commercial advantage by either knowingly or negligently dealing in stolen parts that can be sold cheaper than those from legitimate sources. The poor operators in the industry also gain a commercial advantage by not implementing sound environmental practices when dismantling vehicles and managing used parts.
From consultations during this study, there would be likely to be a significant marketing advantage for the Code if environmental, as well as theft reduction, benefits could be promoted. The insurance industry strongly supported this approach, for example.
6.3 The Market for Auto Parts
6.3.1 Nature of Demand in the Market
Creating economic incentives for recyclers to become accredited by influencing buyer behaviour requires an understanding of the nature of demand in the industry.
No data appeared to exist previously on the relative value of the various consumer segments in the market for used auto parts - the A C Nielsen survey of the industry commissioned by ADEC gathered this data for the first time. The results are summarised in the chart at Figure 3.
More than half of turnover in the industry relates to demand from “trade” (54%) as opposed to “private” buyers (46%).
Figure 3: Buyers of Used Auto Parts (Percentage of Businesses’ Turnover in $ Value)


The high proportion of demand from within the trade is significant. It is likely to be easier and more cost effective to market a Code to specific, targeted industry groups (through peak bodies etc) than the general public.
The “trade” buyers fall into three groups: mechanical repair businesses (21% of total demand), crash repair businesses (24%), and other parts recyclers (9%).
It should be noted that many respondents were unable to distinguish between insurance and non-insurance related crash repair demand. However, only 4% of total demand was indicated to be definitely not insurance related. Accordingly, approximately 20% of total demand is definitely or possibly insurance related.
Obviously it needs to be recognised that these data are aggregates for the industry as a whole, and that the nature of demand will vary considerably from business to business. Accordingly, creating economic drivers for the uptake of a Code by targeting, for example, the mechanical trade would have a limited impact on businesses that deal solely with the public.
However, analysis of the results by ADEC indicates that, for virtually all recyclers, demand comes from a number of buyer groups and the potential loss of business from any one of those buyer groups would have a significant financial impact for the vast majority of businesses.
This finding was reinforced by consultation directly with businesses—virtually all agreed that the loss of even 5% or 10% of turnover would create a strong incentive to adopt and comply with a Code.
6.3.2 Conclusions
Strong incentives to become accredited would result from linking even a relatively small percentage of businesses’ turnover to the adoption of a Code of Practice.
It is therefore concluded that a Code can be given force by influencing the purchasing decisions of one or more of the main buyer segments. It is recommended that a mix of approaches be adopted to target the different groups, but that initially the focus should be on attracting the support of trade buyers.
Influencing the bulk of either crash or mechanical repair demand towards recyclers accredited under a Code would have a major impact. The impact would arise both from the direct financial benefit to accredited recyclers (and the financial loss to those that were not accredited), and also from the catalytic effect that support from one major buyer group would have in creating broader recognition and adoption of the Code.
6.4 Insurance Companies
6.4.1 Introduction
Support from insurance companies would be a key driver in the success of a Code. While new parts are favoured for most crash repairs (particularly for relatively new vehicles), used auto parts for insurance related work accounts for up to 20% of total turnover in the industry. As such, and notwithstanding variations in the significance of insurance work from business to business, restricting access to this market would be likely to create a powerful economic incentive for becoming (and remaining) accredited under a Code.
6.4.2 Options
The potential importance of insurance company support for a Code was recognised in the recommendations of the Tozer Corporation report for the NMVTRC17. There are two main ways in which insurance companies’ own practices could support a Code:
(a)By varying the existing “approved repairer” contracts between insurance companies and authorised repairers to include a requirement that any used auto parts only be sourced from recycling/dismantling businesses accredited under the Code; and
(b)By restricting participation at written-off vehicle auctions and tenders to accredited recyclers/dismantlers.
6.4.3 Consultation with the Insurance Industry
These options were discussed with the ICA Motor Committee and directly with a number of individual insurance companies. There was strong support for any measures that would help reduce the trade in stolen parts and general agreement in principle to Option above (as there was when the issue was put to the ICA Motor Committee by the Tozer Corporation).
The suggestion was raised in the Motor Committee meeting that environmental considerations should also form part of the Code of Practice. The point was made that members of the insurance industry were concerned to be “good corporate citizens” and would be attracted to a proposal that helped “clean up” the industry generally.
On the basis of feedback from the meeting, discussions directly with a number of insurance companies, and feedback from Tozer Corporation, it is concluded that there is a strong likelihood of attracting insurance company support for a Code along the lines of Option . It is recommended that the insurance industry, through the ICA Motor Committee, be consulted in the further development and implementation of a Code. In particular, the industry will need to be satisfied that the requirements of a Code are sufficiently robust to reduce the likelihood of stolen parts being passed through accredited recyclers.
The Tozer Corporation’s report indicated that insurance companies were less likely to support proposals along the lines of Option . As noted in Chapter 5, there was strong and consistent feedback from parts recycling and auto dismantling businesses that the lack of restrictions on those who can purchase written-off vehicles was a prime contributor to the trade in stolen parts and vehicles. Option was not ruled out in the discussions with the insurance industry and should continue to be pursued.
However, as mentioned earlier, the forthcoming written-off vehicle registers should impact substantially on the attractiveness to thieves of written-off vehicles for the purposes of re-birthing. It should also be noted that only about a third of the industry’s supply of whole vehicles for used parts comes from written-off vehicle auctions.(Figure 7) However, there do appear to be other strong arguments for restricting access to vehicles assessed to be statutory write-offs, including to ensure vehicles are dismantled in an environmentally responsible manner by accredited recyclers.
However, on its own Option would provide a Code with substantial economic force, and while it should be pursued further over time, insurance company support for Option is not considered imperative to the feasibility of a Code.
6.4.4 Views of the Dismantling/Recycling Industry
The majority of businesses in the industry agree that there would be an impact on the trade in stolen parts if insurance companies were more stringent about the source of used spare parts (see Figure 4). (It should be borne in mind that the number of respondents who answered “no” or “unsure” was in many cases related to the fact that 40% of businesses indicated they never encountered suspicious parts or vehicles).
Figure 4: Industry Opinions - Parts for Insurance Related Work


6.4.5 Potential Further Support from the Insurance Industry
As well as the options discussed above to create economic incentives for a Code, there may be scope for additional insurance company support in a number of other ways:
(a)Helping market the benefits of a Code to the public through, for example, flyers included with insurance renewal notices, coverage in newsletters and magazines (eg. NRMA’s “The Open Road);
(b)Assistance in the compliance monitoring requirements by having insurance company assessors verify that used spares have been sourced from accredited recyclers; and
(c)Direct contributions from the insurance industry towards the administration of a Code.
There is likely to be support for measures such as , and possibly . However, although no response has yet been received, is considered highly unlikely.
6.5 Mechanical and Panel Repairers – the “Trade”
Influencing the non-insurance related mechanical and panel repair trade towards dismantlers and parts recyclers accredited under a Code is more problematic due to the lack of direct economic force such as that available to insurance companies. The financial importance of insurance related work to approved crash repairers is likely to result in a high level of compliance with the proposed requirement for used parts to be sourced only from recyclers accredited under a Code.
No other single, major purchaser from the mechanical and panel repair trades, which might be similarly persuaded to favour accredited parts recyclers, was identified during this study. Accordingly, influencing the motor trades in general to support accredited recyclers will largely need to be the result of marketing and promotion. (The one main exception to this is discussed below at 6.6).
There was strong support from the MTAA to the suggestion that it assist promote the Code (and accredited parts recyclers) to MTA members. Options include providing information through existing newsletters and magazines and/or through flyers included with mailouts to members. Initial discussions indicated that the MTAA would be very willing to investigate these and other measures for promoting the Code to its members.
6.6 Regulated “Crash Codes”
The MTAA is currently pursuing the implementation of a national Crash Code with the ACCC (a copy was provided to ADEC).
A similar body repair industry code of practice, with regulatory backing, already exists in Victoria. In the ACT, a Motor Vehicle Service and Repair Industry Code of Practice has regulatory force under the ACT Fair Trading Act 1992.
The MTAA is pursuing the development of a national Code under the provisions of the Trade Practices Act 1974 that allow industry codes of practice to be declared by regulations as “mandatory” or “voluntary” under section 51 AE of the Act. (See Chapter 4 regarding the possibility of an auto dismantling and parts recycling industry Code being regulated under this or State/Territory legislation).
The MTAA suggested that the Crash Code could include a clause requiring the crash repair industry to only purchase used parts from suppliers accredited under the proposed “PartSafe” Code.
Such a requirement would provide an extremely powerful incentive for the auto parts recycling industry to become, and remain, accredited under a Code. Accreditation would be the only means by which businesses could access the crash repair trade that accounts for nearly a quarter of total turnover in the industry.
A couple of caveats need to be noted. The Trade Practices Act 1974 only applies to “corporations”, and thus would not directly impact on sole traders and partnerships which might account for a significant part of the crash repair industry (no data on this were found). It also needs to be noted that the Code has yet to be recognised under the Act, although the MTAA was optimistic that discussions with the ACCC would be successful. Consultation with the ACCC indicated that only one other Code has been declared under the Act’s regulations (the Franchisee Code).
Nevertheless, the support of the MTAA in this regard is welcomed and the inclusion of the clause favouring accredited parts recyclers should be pursued.
Likewise, the possibility of including similar provisions in existing State and Territory Codes (such as those in Victoria and the ACT mentioned above) should be pursued further in the development and implementation phase.
6.7 Private Buyers
The strongest driver of private (and other) demand would result from a requirement by all vehicle registration authorities that any repairs or modifications involving used parts had to be accompanied by documentation from accredited recyclers. The extent of the workload that would be involved, and the other issues discussed earlier (3.4), suggests that this approach is unlikely to be considered practicable in the foreseeable future.
It is therefore likely that directing private demand towards accredited recyclers will need to be via marketing and promotion rather than regulation. Marketing the code to private buyers of used auto parts may take a range of forms depending on the availability of resources for the administration of a Code and the co-operation of third parties in providing in-kind support.
At a minimum, it is anticipated that the operation of a Code would include:
“shopfront” marketing material informing purchasers of the advantages of buying from accredited businesses – perhaps including signage and information leaflets.
In addition, the following options for disseminating information about the Code, and the benefits of purchasing from accredited recyclers, appear likely to be viable ways of marketing to the general public at minimal cost:
through newsletters and magazines distributed by insurance companies to car insurance policy holders;
including information in registration renewal and other notices distributed by State and Territory registration authorities; and
making leaflets and other material available through registration authorities, offices of fair trading and other government shopfronts, and at the counters of mechanics and panel repairers (again with the assistance of the MTAA/MTAs).
Other potential avenues for marketing the Code include approaching news, radio and television media outlets for free or subsidised promotion as a community service. This possibility was not pursued during this feasibility study and hence the likelihood of this form of assistance is unknown.
It is assumed that, initially at least, there will be limited resources available for the administration of a Code. However, in the longer term, as greater numbers of businesses in the industry become accredited and the financial base is expanded, the Code administration body might be able to consider directly funding public marketing campaigns.
It should be recognised that the increasing existence of accredited recyclers is, of itself, likely to create increased awareness.
6.8 Value of the “Brand” as an Incentive
Finally, the marketing value of accreditation to individual recyclers is, intrinsically, an economic incentive.
A key issue in the ongoing promotion and extension of the Code’s coverage will be marketing the “brand name” (for example, Accredited PartSafe Retailer). A competitive advantage is likely to accrue to businesses which can market themselves as an accredited retailer. As awareness of the brand is expanded, so to will be the commercial advantage to accredited recyclers.
By way of example, discussions with the MTAA and MTAs indicated that most motor trades businesses already attach significant value to being, for instance, a “MTA accredited repairer”.
6.9 Conclusions
The feasibility of a Code is dependent upon:
(a)influencing buyers to purchase from businesses accredited under a Code; and, as a result,
(b)creating economic incentives for businesses to become accredited (or conversely, disincentives for not becoming accredited).
The effectiveness of a Code is entirely related to the proportion of supply in the market that is captured by the provisions of a Code. This, in turn, is dependent upon the extent to which demand can be influenced to favour accredited suppliers.
In this regard, two critical points affecting feasibility need to be recognised:
The test of feasibility does not require all demand to be influenced towards suppliers accredited under a Code:
in fact, tying even a relatively small percentage of businesses’ turnover to a requirement for accreditation will create a significant economic incentive for suppliers to sign up to, and abide by, a Code.
The economic incentives for suppliers of used auto parts to become (and remain) accredited to a Code will increase over time as recognition by buyers of the Code and the “brand” increases:
The likelihood of attracting support from at least some buyers fairly quickly is a key factor, given the importance of establishing a “core” number of accredited operators as a basis for further expansion;
However, there is a “chicken and egg issue” – a Code to some extent will be easier to market to major buyer groups and the general public once it is in place;
Accordingly, feasibility should be judged on the potential of a Code to attract demand over time, as well as the likely sources of initial buyer support.
Against this background, it is concluded that a Code is feasible and likely to be effective - there are strong signs of early support from trade buyers of used parts, and a likelihood that a Code will continue to attract further support from other buyers over time:
The support of insurance companies (which appears likely) would, on its own, affect the turnover of the great majority of businesses (albeit to varying degrees). Capturing all businesses in the industry which wished to continue to do insurance related work would provide a substantial basis from which to further expand the coverage of the Code.
In addition, the likely support of the MTAA in influencing the mechanical and panel repair trades towards accredited recyclers (including, possibly, through requirements with regulatory backing) would, potentially, impact on virtually all businesses.
There appears likely to be support from many organisations in marketing the Code and accredited recyclers to the public more broadly.
Given the likelihood of such a strong, initial establishment of the Code “brand”, even those few businesses whose turnover was not directly affected by the measures above could face a competitive disadvantage as a result of the visible differentiation in the market between the sound and potentially unsound operators.

Recommendations
That:
key buyers of used parts, such as the insurance industry and motor trades associations, continue to be involved in the further development of the Code to ensure a high level of commitment and support.
environmental requirements be considered for inclusion to improve the “marketability” of a Code.
7 KEY ELEMENTS OF A CODE
7.1 Introduction
The following Chapter summarises suggested requirements for a Code to be effective in reducing the likelihood of businesses either knowingly or unwittingly dealing in stolen parts.
It should be noted that more detailed investigation and refinement of these elements, in conjunction with stakeholders, will form the basis of the development and implementation phase of the Code.
The key issue will be to balance the effectiveness of a Code (and hence the continued support of the insurance industry and others) with the workload implications for businesses.
The following proposals are therefore presented as the basis for further discussion rather than as a final view.
7.2 The General Approach – Onus on Recyclers
It is suggested that the general framework for a Code should place the onus on accredited recyclers to verify the legitimacy of the source of all parts sold and in stock. It should be noted that some 90% of parts are sourced from whole vehicles (either directly or through the use of another recycler) suggesting the verification requirements should be reasonably straightforward for the vast majority of parts.
The business would be held responsible for having accepted any part or vehicle which was later found to be stolen, or for any part in stock which could not be attributed to a bona fide source. There would be a presumption that any business found to have handled a stolen part, or to have not properly verified and recorded the source of a part, would be dis-accredited. The onus would not be on the Code administrators to establish negligence (or any other test) on the part of the business, although an appeals arrangement would allow exceptional cases to be considered.
It is acknowledged that this may seem an overly stringent approach to some in the industry, but is presented as the basis for further discussion and is supported by APRAA. Clearly, support from the good operators will be essential in implementing the Code and a co-operative approach with the industry should continue to be adopted.
However, ADEC’s assessment is that only by establishing a strong presumption of dis-accreditation in all circumstances would high levels of compliance be achieved, and appropriate decisions be made, at the individual business level when sourcing parts. The aim would be to ensure businesses never “take the chance” on parts of uncertain origin. Importantly, this approach would also minimise the administrative burden for the Code administration body.
7.3 Key Elements of a Code
In addition to the general incentive framework discussed above, most of the following suggested elements of a Code have been widely disseminated and discussed with stakeholders during the project (see the Issues Paper at Appendix B which formed the basis for stakeholder consultations). There was general support for these elements from the majority of those consulted. However, it is recognised that further discussion will be needed with stakeholders to refine the details.
The following are the suggested main elements of a Code:
Blanket undertaking to not knowingly or negligently deal in stolen auto parts;
Institution of prescribed minimum “audit trails” to substantiate and differentiate the origin of all major auto parts (and vehicles) held and sold by businesses (see 7.4);
Onus on recyclers to verify that parts and vehicles are from legitimate sources. At a minimum, records to be maintained verifying the clear title on all whole vehicles obtained;
Where parts are obtained from other businesses, the use of accredited recyclers as far as possible. This will ensure the “upstream” safeguards are in place and, in these cases, the onus for verifying the legitimacy of the source of the parts would rest with the supplying, accredited recycler;
Strict requirements on businesses to verify (and maintain records of) the identity of those from whom parts or vehicles are obtained – such as the “100 points” of ID used by banks, including at least one form of photo identification;
A general presumption against the purchase of used parts from private sellers unless strong evidence of legitimacy is provided;
No cash payments to sellers of parts or vehicles (to avoid the loss of an audit trail, and to avoid providing immediate reward to thieves);
Establishment of a “fit and proper” character test that would, for example, prohibit accreditation for those with a criminal record (at least to the extent the record related to dealing in stolen goods) in, say, the last 10 years;
Compliance with any relevant regulations in the jurisdiction in which the business is located;
Agreement to fully co-operate with, and make records available to, Code compliance inspectors, police, offices of fair trading, registration authorities or other regulatory enforcement bodies as is reasonably required;
Reporting of any instances in which suspicious parts or vehicles are encountered to the code administrator, and/or relevant authorities;
Provision to report any businesses suspected of dealing in suspicious parts or vehicles to the code administrator and/or relevant authorities;
Certification to customers that all used parts sold have been verified as coming from legitimate sources, possibly with financial recompense to the customer in the event of a breach;
Acceptance of the administration arrangements for the Code, including the disciplinary and appeals arrangements; and
(Perhaps) assistance on a voluntary basis with the operation of a Code – such as contributing to industry cross checks – ie. monitoring the compliance of other businesses with the Code.
The majority of businesses in the industry agreed that stricter identification requirements on those from whom parts are obtained, and requiring police checks as a precondition to becoming accredited, would reduce the trade in stolen parts.
7.4 Audit Trails and Record Keeping
Instituting record keeping and other procedures to establish audit trails sufficient to verify the source of parts entering a business is a key requirement for a Code to be effective (along with ID checks etc).
It is proposed that, as a starting point for further discussion, the record keeping system be modelled on the NSW Prescribed Parts Register scheme (see Chapter 4). In summary, key aspects of the system might include that:
A register be maintained which adequately identifies each donor vehicle which enters the premises for disassembly, including a record of any registration authority, encumbrance register or other checks taken to establish clear title on the vehicle, (as well as details such as when, from whom, and how the vehicle was purchased);
When a vehicle is disassembled, the separated parts should be labelled in a manner which allows them to be readily identified as being from a particular donor vehicle;
When selling a part, the invoice is to include reference to the aforementioned part number, so that, in the event of any dispute, the part can be traced to the original donor vehicle;
Where already-separated parts are obtained from other accredited recyclers, a record of when and from whom it was obtained should be kept. When sold, the invoice should contain sufficient information to allow the part to be attributed to the originating recycler; and
Separated parts from other sources (particularly private sellers) will be subject to stringent checks (see below).
The aim would be for a Code inspector to be able to readily trace any part in stock, or sold, back to its source – the source being either the donor vehicle, an accredited recycler, or properly checked and documented identification for other sellers.
7.5 Supply of Parts to the Industry
In this context, an understanding of the supply of used parts to the industry is important in understanding the implications for businesses in verifying the legitimacy of parts. For instance, it can be expected that the source of parts posing the greatest verification difficulties would be already separated parts obtained from private sellers. In contrast, the legal status of whole vehicles, whether from private or other sources, should be relatively easy to check through registration authorities, encumbrance checks etc.
Figure 5 shows that the vast bulk (76%) of the parts supply for the industry comes in the form of whole vehicles, with just 24% coming into businesses in the form of already separated spares.

Figure 5: Source of Spare Parts - Whole Vehicles vs Separated Parts


Of those already separated spares, the great majority (65%) are sourced from other auto dismantlers and recyclers (see Figure 6). By deduction, therefore, it can be surmised that nearly 90% of the supply of parts to the industry is in the form of whole vehicles18 either directly or through another auto parts dismantler/recycler.
Figure 7 shows that the main source of whole vehicles are private sellers (49%) followed by auctions of written-off vehicles (31%).

Figure 6: Source of Already Separated Spares



Figure 6 shows that only 19% of already separated spares are obtained from private sellers. Private sellers of already separated parts therefore account for less than 5%19 of total industry parts supply.
Figure 7: Source of Whole Vehicles


7.6 Conclusion
The vast majority of parts in the industry are sourced from whole vehicles. As the parts are therefore derived from known, whole vehicles, the record keeping requirements ought to be relatively straightforward in most cases. Furthermore, it should be relatively easy to verify the legitimacy of whole vehicles.
In so far as parts are sourced from other, accredited recyclers, the great majority will also have been derived from whole vehicles. It is proposed that the onus for ensuring the legitimacy of the part in this case would fall on the first accredited recycler that receives (or separates) the part. For parts sourced from other accredited recyclers, then, the only requirement would be to maintain records to show which accredited recycler had supplied the part (and when etc).
Already separated parts, particularly those from private sellers, are the most difficult to verify as having been legitimately obtained as they cannot be readily attributed to a particular vehicle. Presently, separate parts from private sellers only account for about 5% of the parts entering the industry, and the workload under a Code for these parts would probably not be a significant burden for most businesses.
However these parts will need to be the focus of more stringent requirements as:
they probably already account for the bulk of the stolen parts which enter the industry; and
as discussed at Chapter 3, the introduction of WOVRs are likely to lead to a substantial increase in the number of thieves that attempt to dispose of stolen parts through legitimate businesses.
It is recommended, as a basis for further discussion, that accredited recyclers institute far more stringent requirements on private sellers of parts. The suggested incentive framework for this requirement is the proposal that the recycler would be held accountable under the Code (and face dis-accreditation) if the part was found to be stolen. The general presumption should be that parts are not to be bought from private sellers unless clear evidence of legitimacy is provided:
At a minimum, it is proposed that recyclers would be required to obtain (and keep records of) a number of forms of ID from private sellers, including photo ID—perhaps akin to the “100 points” requirements for opening bank accounts;
In addition, it is proposed that accredited recyclers should not provide cash payments to private sellers of parts or vehicles. Even cheque payments are likely to be a disincentive to thieves seeking quick and anonymous payment. (Although probably unrealistic in the short term, payments directly to a seller’s bank account would be likely to be a significant disincentive to thieves and should be reconsidered at a later stage).
It should be noted that, ultimately, the only fully effective basis for tracking used parts will be the introduction of effective parts marking (such as vehicle identification number based “microdots”) in the vehicle manufacturing process. This is a long-term solution, given the time between when a vehicle is manufactured and when it reaches dismantlers/recyclers. Nevertheless, parts marking should continue to be pursued with manufacturers and importers.
7.7 Implementation Issues
A number of concerns were raised about possible ways in which the Code requirements could be circumvented, whether by businesses or parts sellers. Some of the issues to be addressed, to the extent possible, in the development and implementation phase include:
forged invoices;
false ID; and
dis-accredited recyclers starting up again in another name (eg. another family member).
Other factors to be considered include transitional issues such as:
treatment of parts already in stock; and
lead times in instituting new record keeping and other requirements.
The details of record keeping requirements, and circumstances in which a business may have a case against dis-accreditation, would need to be pursued further in consultation with the both the dismantling and parts recycling industry, and key stakeholders such as the insurance industry.
7.8 Compliance Costs for Recyclers
As discussed above, for the vast majority of used parts, linking parts to legitimate whole vehicles and maintaining associated records ought not be a substantial burden given the nature of supply in the industry.
The compliance costs will depend on the nature of the requirements that are ultimately agreed as the result of further consultation, both with the industry and major buyers of used parts (particularly the insurance industry). A balance will need to be found between ensuring the requirements are not unduly onerous while still being effective.
Consultation indicated that compliance costs related to any additional “paperwork” is a significant concern for many in the industry. However, the majority of those businesses consulted, as well as APRAA, indicated that the importance of cleaning up the industry and getting rid of the “shonks” would greatly mitigate against any increased requirements.
Overwhelmingly the concerns about compliance costs were found to be linked to perceptions of the likely benefits and effectiveness of a Code (for accredited recyclers and the industry as a whole).
Effectively marketing the Code to the industry will clearly be critical in achieving support – in particular, effectively communicating the manner in which the Code would be given economic “teeth” as discussed in Chapter 6. The vision for the Code, whereby it will ultimately be virtually impossible for businesses to attract customers if they are not accredited, will need to be well conveyed:
The continued close involvement of APRAA, which is well respected within the industry, will be a major factor in achieving support from the recyclers and dismantlers.
Other factors in relation to compliance costs include that:
further development of the record keeping and other requirements under a Code should aim to ensure that they are no more time consuming than the current regulatory requirements in NSW (which, prima facie, do not appear to have caused significant detriment to the industry relative to other States and Territories);
The arrangements should be developed in such a manner as to ensure that any requirements are consistent with existing regulatory requirements (such as those under NSW’s prescribed Parts Register and Victoria’s Second Hand Dealer “book”) to avoid record-keeping duplication;
Properly verifying the legality of parts and vehicles, and maintaining associated records, is arguably consistent with what might be regarded as diligent business practice. The intention should be to minimise the marginal additional cost above what most would consider to be normal good practice.
The implication would be that a business would not source parts (or whole vehicles) except where there was clear evidence that the goods were from a bona fide, and traceable, source.
Recommendations:
That:
the general framework for a Code should place the onus on businesses in the industry to verify and document the legality of any part or vehicle in stock or sold, with minimal tolerance of any breaches, rather than placing the onus on the administrative body to establish negligence or meet similar evidentiary tests.
the proposed content of a Code outlined in this report form the basis for further discussions with stakeholders and other investigations.

8 GOVERNANCE, ADMINISTRATION AND RESOURCING OF A CODE
8.1 Overview
The key points which arise in relation to the potential governance and administration arrangements include that:
Monitoring and enforcement are key effectiveness issues which should be given priority from the outset.
The nature of governance and administration of a Code will depend on the availability of resources and infrastructure, and the extent to which existing industry infrastructure can be leveraged.
While initial arrangements may be minimalist, feasibility should be judged on the potential expansion of the Code’s administrative structure. Recognition of the Code, the number of accredited recyclers, and awareness of the Code by buyers, will increase over time thereby expanding the resource base and capacity for administrative effort.
In short, a realistic expectation is that the governance and administration arrangements may necessarily start on a small scale, leveraging existing industry arrangements to the extent possible, but within the context of a more comprehensive administrative goal which can be progressively achieved over time.
8.2 Possible Roles of Industry Peak Bodies
A central implementation issue is to identify an organisation to which responsibility for administering the Code can be passed. Given the likely resource constraints, leveraging existing expertise and infrastructure (and possibly resources) presents the most realistic implementation option in the short term.
As discussed at 2.4, there are two industry representative bodies that between them, probably represent nearly 50% of businesses in the industry (see Figure 2). This appears likely to provide an excellent basis for the further development and administration of a Code:
Both APRAA and the MTAA indicated a preparedness to be involved with the implementation and administration of a Code.
APRAA has an expectation of close involvement and in fact sees it as their responsibility as the industry’s peak body.
APRAA has the advantage of a specific focus on the dismantling and recycling industry, whereas the MTAA and the MTAs/VACC have a broader representative role across all motor trades. From ADEC’s consultations with businesses in the industry, APRAA is also well regarded. There is an expectation on the part of many businesses that APRAA should, and will, have a central role in administering the Code:
APRAA’s strong credentials within the industry will be a considerable advantage in marketing the Code to businesses;
APRAA also has a reasonably well established infrastructure (albeit largely voluntary) including “accreditation committees” in each State for the administration of the existing APRAA accreditation system (see Chapter 4).
However, APRAA also indicated that it currently has limited resources to devote to a Code, although it has plans for future expansion.
The MTAA also indicated a strong interest in “cleaning up” the industry and a potential willingness to contribute to the administration of a Code. The MTAA (and the MTAs/VACC) have a far greater resource and infrastructure base than APRAA, but considerably less recognition than APRAA in the industry as representing the specific interests of recyclers and dismantlers. The MTAA acknowledged that a key incentive for recycling/dismantling businesses to become members related to the assistance provided in relation to industrial relations, occupational health and safety and other workplace regulations.
The MTAA indicated a potential willingness to contribute resources, expertise and infrastructure. Points raised in this regard included that:
The requirements on businesses should not be more onerous than necessary. The more onerous the requirements, the stronger the case for public rather than industry funding; and
If other organisations were involved, such as APRAA or governments, equitable contributions would be expected.
It was concluded that the optimal outcome would be to draw on the expertise and infrastructure of both organisations.
There has been little, if any, involvement between the two organisations at a national level in the past, although APRAA has worked with some State MTAs in recent times:
For instance, the VACC is providing APRAA with significant in-kind assistance (office accommodation etc).
It was suggested to both national organisations that some form of amalgamation of the organisations, in a way that allowed APRAA to retain some degree of independence, be considered. This possibility has not finally resolved, although the MTAA indicated that its structural arrangements meant it would be highly improbable that APRAA would be able to have representation at the Board level of the MTAA.
However, both organisations indicated that there was no in-principle objection to looking at ways of increasing co-operation, including in relation to a Code:
This is will be a significant part of further work in the development and implementation phase of a Code.
8.3 Governance
It is recommended that the administrative body should be structurally separated, and at “arms length”, from any other organisation (such as APRAA or MTAA) while still benefiting from the economies resulting from sharing and existing administrative infrastructure.
There are several other Codes which are likely to prove useful models during the development and implementation phase.
While the detail of governance and administration are issues for the development phase of the Code, the following suggestions are put forward as the basis for further discussion. It should be noted that the following should be viewed as a goal rather than a structure that might be feasible from the outset.
In summary, it might be expected that the key administrative and governance structure would ultimately comprise the following elements:
The code would be administered by a Code Administration Committee to which the administering body would be responsible;
The Committee might comprise:
the Director of the administrative body,
a representative of an industry peak body(ies),
the principal of a business in the industry,
and one or two representatives of organisations such as police services and/or offices of fair trading.
The Committee would meet at least annually;
Functions of the Committee might include:
Monitoring compliance with the Code
Monitoring the operation and administration of appeal procedures;
Reviewing and proposing policy and procedures in relation to the Code;
Advising on the promotion of the Code within the industry and the recognition of the Code by consumers.
Some form of system for appealing against dis-accreditation would be required, and might comprise an “Appeals Committee” consisting of an independent Chair, a representative of a business in the industry, and perhaps an industry peak body representative:
The appeals procedure hearing would be conducted with as little formality and technicality as possible.
The procedure would not be a legal process, and the Appeals Committee would not be bound by rules of evidence, but would observe principles of natural justice.
It is to be hoped that the governance structure could be administered very efficiently, with all efforts being made, for instance, to enlist voluntary participation on the committees, and to have secretariat services provided by other interested organisations.
8.4 Monitoring and Enforcement
A key issue acknowledged by all those consulted, is the extent of monitoring and enforcement. One important conclusion drawn during the review is that:
The greater the financial threat to businesses of dis-accreditation, the higher will be the level of voluntary compliance:
As discussed in Chapter 6, it is anticipated that substantial economic incentives to comply with a Code will result from attracting the support of major used parts buyers to accredited recyclers.
Monitoring of Codes generally takes two forms. Firstly, there is some form of random compliance auditing, and, secondly, a system whereby consumers or businesses can report possible breaches. The second would be one important function of the Code administrative body.
In terms of random audits, discussions with APRAA and others leads ADEC to recommend (as a basis for further discussion) that the target level of monitoring should be that:
at least one in 10 accredited businesses would be audited per annum.
As a guesstimate, approximately 500 businesses might become accredited in the 12 months after the establishment of a Code (assuming quick agreement and action from insurance companies to vary their approved repairer arrangements). On this basis, approximately 50 businesses would need to be audited annually;
The businesses to be audited would need to be from a broad and equitable geographical spread across the country.
If it is assumed that each audit takes, for argument’s sake, 2 hours (including documenting the results):
then approximately 100 hours work would be involved per annum.
The monitoring is therefore not likely to be as significant a cost as some stakeholders assumed. Given the need for audits in all States and Territories, and the relatively limited workload involved, it is recommended that those undertaking the compliance audits would not be employees of the administration body. To the extent possible, the function should be outsourced to inspectors already used by other organisations, for example:
In Victoria, APRAA currently engages inspectors whose main function is administering the LPG Board requirements (under the auspices of the VACC).
One or two State offices of fair trading indicated that there may be scope for fair trading inspectors to be engaged on a cost recovery basis.
Other possible options include inspectors from State MTA organisations.
A further option which should be considered in the further development of a Code is the potential for accredited businesses to cross-check each other’s compliance. Certain safeguards would need to be established to ensure no favouritism was possible through these arrangements.
As a final fallback, inspectors could be employed on a casual basis, in each State and Territory, for the two or three days work a year which might be required.
8.5 Other Administration Functions
As well as co-ordinating compliance audits of accredited recyclers, other functions of the administration body might be expected to include:
Handling accreditation requests and enquires from businesses, including co‑ordinating any accreditation checks, communicating accreditation requirements etc;
Responding to queries from accredited businesses regarding Code requirements;
Co‑ordinating signage, brochures and other marketing material for accredited businesses;
Receiving and co-ordinating information regarding suspicious parts, persons or businesses, and providing advice to businesses regarding relevant regulatory authorities to contact in each State or Territory;
Managing information (eg. to identify businesses about which there are repeated complaints) and disseminating to relevant authorities;
Marketing the Code to buyers (see Chapter 6);
Managing dis-accreditation procedures;
Pursuing options for regulatory backing (see Chapter 4) and government and industry assistance;
Monitoring and reporting on the effectiveness of the Code, and developing options for further improvements and enhancements;
Maintaining business accounts and other records etc.
8.6 Disciplinary Arrangements
As discussed in Chapter 7, it is recommended that there be minimal tolerance of breaches of the Code in order to elicit high levels of voluntary compliance. Together with the anticipated significant financial impacts which would result from dis-accreditation (as discussed in Chapter 6), this is likely to form the basis for an effective Code with high compliance levels.
Nevertheless, consideration will need to be given to exceptional cases where there are breaches which result from genuine misunderstandings or unforeseeable circumstances. The nature of these exceptional circumstances will need to be explored further with the industry and APRAA in the development phase.
A breach might arise if, for instance:
a compliance audit indicated a failure by a business to maintain the required records or properly verify the authenticity of vehicles, parts or sellers;
there was clear evidence of dealing in stolen parts;
there was refusal to allow records or premises to be inspected; or
repeated complaints which led to a reasonable presumption of dealing in suspicious parts.
There would be a presumption of immediate dis-accreditation in these cases. However, it may be that a “second chance” system could be considered for inadequately meeting the record keeping or other requirements. Further information about the expected standards could be relayed to the business, with a subsequent audit at a later stage.
As discussed under the governance arrangements above, an independent appeals system would probably be needed for all dis-accreditation decisions, particularly given the potential financial implications for businesses. Again, the details of the appeal arrangements will need to be determined through further consultations in the development phase.
8.7 Privacy and Competition Issues
Preliminary discussions with the ACCC indicated that there were unlikely to be significant if any competition issues. The preliminary advice was that parts buyers, including insurance companies and their approved repairers, could buy from any business they wished. While there appeared to be no competition issues which would arise under Commonwealth legislation, it was suggested that a formal request be sent. Given the likely timeframe for a response, this has not yet been pursued but is a matter for the further development of a Code.
Initial investigation of Commonwealth privacy legislation indicates that there may be requirements on recycling businesses which maintain records of personal details (eg. sellers’ ID etc) under a Code. The requirements do not appear to be particularly onerous. This is also a matter to be pursued further in the development and implementation phase.
8.8 Resourcing
As discussed in the sections above, the level of available resources is likely to determine the nature of the administrative structure which is put in place, recognising that the economic incentives discussed in Chapter 6 are likely to lead to considerable expansion in the number of accredited businesses over time.
The availability of resources, and the degree to which existing infrastructure can be leveraged, cannot be accurately estimated until the further development of the Code is undertaken – although, as mentioned above, there appears likely to be good support from either or both APRAA and the MTAA.
However, the assumption would be that accredited recyclers would largely fund the arrangements through an annual fee. This raises the issue of the possible level of the annual fee. While this also clearly is an issue for further discussion, as a starting point, a fee of around $500 per annum is suggested. In this regard it should be noted that:
75% of businesses turnover more than $100,000 per annum (see 2.3)
substantial financial benefits are likely to accrue to those businesses which become accredited (as per Chapter 6).
On this basis, and given discussions with APRAA, this amount is considered feasible, although is an issue for fuller examination in the development and implementation phase.
On the basis of 500 members, this would amount to an annual income of $250,000 which, prima facie, seems a feasible budget.
However, some additional funding for start-up costs, and additional on-going assistance (such as from the industry peak bodies, governments or others) would obviously be desirable:
In particular, there may be a need for assistance towards start-up costs, given the delay between establishing the administrative body and establishment of the full revenue stream.
It should be borne in mind that there are approximately 1350 – 1600 businesses in the industry, and if the economic incentives for becoming accredited eventuate as discussed in Chapter 6, it is to be hoped that a large proportion would ultimately sign up under the Code. One thousand members would translate to an annual budget of $500,000.
(As an aside, it should be noted that, if a Code was ultimately able to be established under regulatory arrangements, such as under State Fair Trading legislation or the Trade Practices Act, the administrative burden would fall to government instrumentalities).
A minimalist option might be to, initially at least, expand the existing APRAA accreditation arrangements (discussed in Chapter 4) to include at least the core stolen part avoidance requirements. In this instance a couple of issues would arise:
these requirements would clearly need to apply at the “entry level”, and not necessarily be tied to other APRAA requirements which apply at different accreditation levels
the issue of separating (or incorporating) Code accreditation fees with existing APRAA membership fees would need to be resolved.
APRAA has indicated a preparedness to consider arrangements along these lines as long as there was no significant financial impact, although it also favours a separate body and administrative arrangements in the longer term.
The MTAA has also indicated a willingness to consider contributing infrastructure and/or resources to the administration of a Code.
8.9 Conclusion
There is a range of administrative and resourcing options which will be central to the development and implementation phase of a Code. A key next step is to pursue further discussions with APRAA and the MTAA. At some point, the Code will need to be “handed over” to an administrative body (or its precursor).
However, on the basis of consultations and investigations so far, there appears a strong likelihood that a Code will be feasible in terms of attracting resources (at least from membership fees) and leveraging existing infrastructure. Even a minimalist option would be a feasible starting point, recognising the likely economic incentives for becoming accredited will expand the member and resource base over time.

Recommendations

That:
the possible governance and administration arrangements outlined in this report form the basis for further discussions with stakeholders and other investigations.
further discussions be held with APRAA and the MTAA (and the NMVTRC) to determine the nature and extent of their involvement with the on-going administration of a Code.
the availability of any funding, particularly for start-up costs, be further investigated.



REFERENCES

UK Home Office, Motor Salvage Industry: Consultation on the proposal to regulate the industry, April 2000.
F.Gant and P.Grabowski, (Australian Institute of Criminology), The Stolen Vehicle Parts Market, Report #215, October 2001
F.Gant and P.Grabowski, (Australian Institute of Criminology), The Nature and Extent of the Stolen Vehicle Parts Trade in Australia, (unreleased draft), April 2001.
Tozer Corporation Pty Ltd, Analysis of the Insurance Practices on Motor Vehicle Theft Related Insurance Fraud (Draft Report for NMVTRC), 2002.
C.Carcach, (Australian Institute of Criminology), An Econometric Model of Motor Vehicle Theft, 1999.






appendix 1
ORGANISATIONS CONSULTED
ORGANISATIONS CONSULTED DURING THIS REVIEW
Auto Parts Recycling Association of Australia (APRAA)
Motor Trades Association of Australia (MTAA)
Motor Trades Association of NSW
Insurance Council of Australia (ICA) – Motor Committee
Commonwealth Department of Environment and Heritage (Environment Australia)
Commonwealth Department of Industry, Science and Resources
Victorian Department of Justice
Western Australian Ministry of Fair Trading
West Australian Ministry of Transport
South Australian Office of Consumer and Business Affairs
ACT Office of Fair Trading
NSW Department of Fair Trading
NSW Motor Vehicle Repair Industry Council (MVRIC)
Queensland Office of Consumer Affairs
Tasmanian Office of Consumer Affairs and Fair Trading
Northern Territory Department of Industries and Business (Commissioner of Consumer Affairs)
NSW Police Service
Victoria Police (Organised Crime Squad)
NRMA Insurance Ltd
Lumley General Insurance Ltd
Zurich Financial Services
QBE/Mercantile Mutual
Royal and Sun Alliance Ltd
Allianz Australia Ltd
CGU Insurance Ltd
QBE Insurance Ltd
Tozer Corporation
Numerous individual auto dismantling and auto parts recycling businesses.

Labels: Auto Part