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Australia’s defence export controls tightened by Defence Trade Controls Act 2012

Australia’s defence export controls tightened by Defence Trade Controls Act 2012Following its enactment in late 2012, certain substantive parts of the Defence Trade Controls Act 2011 (Act) commenced on 6 June 2013. The newly-commenced provisions give effect to the United States Defense Trade Cooperation Treaty (Treaty) which came into force on 16 May 2013.

Purpose of the Act

The Act has two purposes:

  • To implement the Treaty
  • To strengthen Australia’s defence export controls.

1. Treaty implementation – commenced 6 June 2013

As explained in the Explanatory Memorandum that accompanied the Defence Trade Controls Bill 2011, the Treaty gives Australia more flexible and ready access to U.S. defence technology by creating a framework that allows for the trade and transfer of such technology without requiring prior approval from the U.S. Department of State, while also requiring Australia to maintain an appropriately high level of security and protection for the U.S. Defence Articles that are accessed within the Treaty framework. The Treaty-implementing provisions of the Act provide the basis for establishing the ‘Australian Community’ (comprising approved government and private sector entities in Australia), members of which are entitled to participate in permit/licence-free trade in defence technology under the Treaty. The provisions also establish an assurance framework to enable determination of whether community members have complied with Treaty obligations. Substantial penalties are imposed under the Act in cases where an Australian community member fails to comply with conditions attached to its membership.

2. Strengthening of defence export controls – phased commencement

Australia is a signatory to several international counter-proliferation and export control regimes, including the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, and consequently has obligations to control the export of the items that are listed on the Defence and Strategic Goods List (DSGL). The DSGL covers:

  • Defence and related goods and technologies (including software) that are designed or adapted for use by the armed forces, and non-military goods that are inherently lethal (e.g. commercial explosives)
  • Dual-use goods and technologies (i.e. tangible and intangible items developed to meet legitimate commercial needs, but which could be used as military components or to develop or produce military systems or weapons of mass destruction). The ten categories of controlled dual use items in the DSGL are Nuclear Materials; Materials, Chemicals, Micro-organisms and Toxins; Materials Processing; Electronics; Computers; Telecommunications and Information Security; Sensors and Lasers; Navigation and Avionics; Marine; Aerospace and Propulsion.

The second purpose of the Act is to address gaps in Australia’s existing domestic export control regime, which focuses on exports of physical goods or technology in a physical form (i.e. by means of the Customs (Prohibited Exports) Regulations 1958). With the growth of technology, many technologies can be supplied in intangible form, such as via the Internet, or through brokers, and are not covered by the existing controls. For example, a CD containing information of a military benefit (e.g. an aircraft technical guide) is currently controlled and requires a permit or licence to be exported physically from Australia. The existing export control regime does not regulate the intangible transfer of the same information however (e.g. via the Internet, email, fax, phone, conference presentation, etc.), nor regulate brokers who could arrange the transfer of the same information to third parties.

Registration and permit regime for DSGL items

The Act regulates dealings in items listed in the DSGL by making it an offence to:

  • Supply DSGL technology without a permit
  • Broker arrangements for the supply between others of DSGL technology or goods listed on the DSGL without a permit
  • Publish or disseminate DSGL technology to the public, or a section of the public, without Ministerial approval.

Substantial penalties apply to these offences: imprisonment for 10 years or 2,500 penalty units (i.e. currently $425,000) or both.

Timing

Although a small number of the Act’s provisions came into operation upon its assent on 13 November 2012, the commencement of many of the substantive provisions depends on the proclamation of their commencement date.

The provisions implementing the Treaty commenced on 6 June 2013.

In relation to the strengthened export control provisions:

  • A two-year transition period applies. This is intended to allow affected entities to become familiar with the provisions and to develop the necessary systems and processes to deal with the controls once they come into force. The Government is using the transition to conduct several pilot/testing programs in relation to the implementation and permit arrangements
  • There is no current requirement to obtain a permit under the export control provisions ─ the commencement date of the permit provisions has yet to be proclaimed
  • The offence provisions will not commence until after the transition period, on 16 May 2015.

Expected impact

Entities that can expect to be affected by the strengthened export control provisions include Australian businesses or individuals supplying DSGL technology, or brokering the supply of DSGL technology and/or goods listed on the DSGL, to someone outside of Australia.

Academic institutions could also be affected. This could occur, for example, in instances where an institution engages with an overseas counterpart institution or business relating to items listed in the DSGL (e.g. research partnerships, consulting, training, etc.). The intangible transfer of DSGL technology might also occur through other channels – such as presentations at overseas conferences, or through post-graduate courses taught at an overseas campus of the institution.

Contacts

To discuss the potential impact of the Act on your organisation's operations, please contact either of the following Deloitte Customs and Global Trade specialists:

Michael Roche
Tel: +61 2 6263 7059
Email

David Ware
Tel: +61 3 9671 7518
Email

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