Chapter 1Introduction
1.1On 30 November 2023, the Senate referred the Defence Trade Controls Amendment Bill 2023 [Provisions] (the bill) to the Senate Foreign Affairs, Defence and Trade Legislation Committee (the Committee) for inquiry and report by 30 April 2024.
1.2The bill seeks to strengthen Australia’s national security and protect sensitive defence goods and technology by enhancing Australia’s defence export controls system.
Conduct of the inquiry
1.3The Committee advertised the inquiry on its website and wrote to relevant stakeholders, inviting submissions by 1 February 2024.
1.4The Committee received twenty-four submissions, listed at Appendix 1.
1.5A public hearing was held on 1 March 2024 in Canberra. A list of witnesses is available at Appendix 2.
Background
1.6Australia faces an increasingly challenging strategic environment, requiring government to adapt and respond with a robust protective security framework.
1.7Australia’s export control system is a key facet of this framework. The system aims to prevent the transfer of military goods and technologies to foreign individuals or entities in ways which might prejudice Australia’s interests.
1.8A fit-for-purpose export control system is key to achieving the desired security environment. The system works by ensuring that controlled goods and technology cannot be transferred to individuals, states or groups whose interests run counter to Australia’s security, defence or international relations.
1.9A 2018 review into the Defence Trade Controls Act 2012 (DTC Act) identified gaps in Australia’s current export control legislation.
1.10As in Australia, trade in military-use goods, technology and services is controlled around the world for reasons of national security. A number of other international actors have already strengthened their export control framework with the aim of addressing the current and emerging geostrategic environment, including:
Japan, which regulates the transfer of controlled dual-use technology to non-residents within Japan.
The People’s Republic of China, which regulates the transfer of controlled technology to foreigners.
The European Union, which introduced regulations pertaining to non-EU residents in the EU in 2021.
New Zealand, which expanded controls in 2021 to cover activities which materially enable or support operations and activities which are of a military or internal security nature.
Cooperation with AUKUS partners
1.11Maintaining a robust security environment relies on cooperation with like-minded partners, notably Australia’s AUKUS partners, the United States of America (US) and the United Kingdom of Great Britain and Northern Ireland (UK), as well as a strong export control system. Realising the full potential of AUKUS requires significant changes to how Australia and its AUKUS partners work together on defence industrial and technology issues. Achieving a streamlined export licence-free environment for Australia and its AUKUS partners would facilitate innovation and cooperation in the industry, higher education and research sectors, lowering the costs of trade and technology transfer barriers.
1.12All three states are currently reviewing their respective export control regimes with the aim of creating a shared export licence-free environment.
1.13The United States signed the 2024 National Defence Authorisation Act (NDAA) into law on 22 December 2023. The NDAA allows for the transfer of controlled goods and technology between the United States, the United Kingdom and Australia without the need for export licences.For Australia to access this exemption, the United States Congress must be satisfied that Australia has a comparable export control framework in place, as well a reciprocal exemption.
1.14The NDAA requires that at least every 120 days after it is enacted the President of the United States must certify to the United States Congress the status of Australia’s export control framework—that is, whether it meets the requirements of the United States to access this exemption. The first of these reporting dates in on 20 April 2024.
1.15The bill would shape Australia’s export control framework so that it is comparable to that of the United States and would, together with the exemptions provided under the NDAA, support an export licence-free environment for Australia and its AUKUS partners.
1.16Achieving the desired streamlining presents an opportunity for significant growth for Australia’s industry and economy.
1.17The bill would remove the need for permits to trade goods and technology within the scope of the Defence Strategic Goods List (DSGL) to the United States and the United Kingdom.
Key provisions of the bill
1.18The bill seeks to amend the Defence Trade Controls Act 2012 in four ways.
(1)The bill would regulate the supply of military and dual-use technology on the DSGL from Australia to foreign nationals in Australia.
(2)The bill would regulate the supply of military or dual-use technology on the DSGL from outside Australia to another place outside Australia, or to a foreign person.
(3)The bill would regulate the provision of services related to military items which are on the DSGL Part 1 to foreign nationals or entities.
(4)The bill would create a licence-free environment for the supply of goods and technologies on the DSGL, as well as the provision of DSGL services from Australia to the United States and the United Kingdom.
1.19If enacted, the bill would create new offences, with appropriate penalties and exemptions, to give effect to the proposed changes. These include:
Supplying DSGL technology in Australia to a foreign person
Supplying DSGL goods or DSGL technology outside Australia or to a foreign person in certain circumstances and
Providing DSGL services without a permit or in contraventions of permit conditions.
1.20The above new offences have exemptions to permit free trade of goods and technology within AUKUS.
Structure of the bill
1.21The bill consists of two schedules. The first contains the main amendments, while the second contains amendments contingent on the commencement of the Defence Amendment (Safeguarding Australia’s Military Secrets) Act 2023, which has been referred to the Parliamentary Joint Committee on Intelligence and Security.
Defence and Strategic Goods List
1.22Australia’s export control framework is built around the DSGL The DSGL sets out military and commercial goods and technologies which Australia regulates. Items on the list are agreed together with members of international non-proliferation and export controls regimes, and can either be used in a military capacity, or to develop weapons of mass destruction. The list also contains controls specific to Australia relating to firearms and explosives.
1.23The DSGL has two parts:
Part 1: covers defence and related goods which are designed for military purposes.
Part 2: covers dual-use goods. These include equipment or technology developed to meet commercial needs but could also be used for military purposes, for the development of military systems or weapons of mass destruction.
1.24The DSGL is published by the Minister of Defence under the Customs Act 1901.
Human rights implications
1.25The explanatory memorandum states that the bill is compatible with human rights and freedoms declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Financial impact of the bill
1.26The explanatory memorandum states that resourcing associated with the administration of the measures of the bill will be the responsibility of the Department of Defence. The National Security Committee and the Expenditure Review Committee will develop and consider a detailed implementation plan as part of the 2024-25 Budget Submission.
Scrutiny of Bills Committee
1.27The Senate Standing Committee for the Scrutiny of Bills has raised a number of issues around the reversal of the evidential burden of proof and broad delegation of administrative powers or functions.
1.28The Committee notes that the Senate Standing Committee for the Scrutiny of Bills has sought a response from the Government on the issues it has identified.
Acknowledgement
1.29The Committee would like to thank the individuals and organisations that contributed to this inquiry.