Chinese manufacturers were repeatedly told there should be no asbestos in trains they were manufacturing for KiwiRail, new information confirms.

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Despite that, 40 of the 48 locomotives made for KiwiRail were contaminated and have still not been completely cleaned up more than five years later.

This has emerged at a hearing before the Employment Relations Authority.

The trains were made for New Zealand by the China National Rail company, (CNR) which is a huge state-owned conglomerate in China.

When the asbestos was discovered, KiwiRail invoked a warranty and the Chinese sent workers to New Zealand to repair the trains.

The Rail and Maritime Transport Union argued that work should have been done by New Zealand staff and took KiwiRail to the Employment Relations Authority, accusing it of contracting out employees' jobs by stealth.

But the lawfulness of that issue was overshadowed by intense cross examination of a senior KiwiRail executive, Scott Murray.

This revealed huge holes in the process used to complete the purchase of the locomotives.

Mr Murray said during six trips to China, he and two colleagues, one based long term in the country, repeatedly made it clear that there should be no asbestos in the trains.

"Our expectation was that they would comply fully with this," he said.

Mr Murray said when the asbestos was discovered in 2014, the Chinese company would not believe it, saying it could not be true.

KiwiRail then invoked a warranty, and Chinese workers have been in New Zealand ever since, fixing up the trains.

The original problem stemmed from asbestos being sprayed on metal sheeting in the engine room.

But under cross examination, Mr Murray agreed there was still asbestos in gaskets connected with the braking systems, and as a result, the deal with the Chinese company had still not been signed off.

But he said the trains were currently being used, despite this problem.

Union worried about 25-year warranty

During the hearing, a second issue arose which angered the union: the manufacturers' warranty can run for as long as 25 years.

The union fears that could bring fly-in-fly-out Chinese repair crews to New Zealand, who would displace New Zealand workers for a quarter century.

In response, Mr Murray said the issue was more complicated. The warranty for the design of the train, and for its body, would last that long. But other parts of the contract would involve shorter warranties, such as four years for the brakes and eight years for the bogies.

In many cases, he said, repairs would not be liable under warranties, but would be normal maintenance, doable by New Zealand staff.

Despite that, the union is worried about lengthy warranties, saying they could undermine its members' jobs.

The deficiencies regarding the purchase of the trains came to light in the course of a specific complaint by the union.

It argued the use of the Chinese workers was a breach of KiwiRail's collective agreement with the union, it was a breach of good faith requirements and was even in violation of the company's social responsibilities under the State Owned Enterprises Act.

The union said even the Chinese workers might have been exploited, as KiwiRail decided to use them without finding out how much they would be paid and without even caring about the matter one way or another.

The union said hiring foreign workers was a breach of KiwiRail's responsibility to be a good citizen, and ditching local workers in favour of foreign ones was a misuse of taxpayers' money.

"If a company funded by the taxpayer will not create jobs for New Zealanders, who will?" the general secretary of the union, Wayne Butson asked.

In response, counsel for KiwiRail Peter Chemis said KiwiRail was actually saving taxpayers' money.

He argued there would have been a real cost to the taxpayer if New Zealand staff had been paid to do the job instead of getting it done under a warranty.