My company makes dangerous equipment like lawn mowers. Because of this, I have to go through training on how to design equipment to be safe.

And the rule is very clear. If there is any possibility of an issue, you need to redesign it so the problem can't happen, you need to put gaurds in place so the problem can't happen, or only if those two fail, are you allowed to put up a warning sign. That is an ordered list so if anything is possible in the previous step you cannot go to the next.

In this case a chain that can take twisting is obvious and so the sign won't protect them from liability should someone get hurt from twisting the chains.

You're both right. What you're describing is liability. A warning does not guarantee safety from liability suits, that's why the other options are preferable (only being a Chinese or outside-of-the-west manufacturer guarantees safety from liability suit).

But the problem with twisting chains is that it needs a warning.

And so both putting in the law, and arresting the kid, are a way to protect the borough, a government organization, from liability when something goes wrong.