Key points
- The Bill removes the need for permits to trade in goods, technology and services within the scope of the Defence Strategic Goods List (DSGL) within Australia and with the US and UK.
- The Bill is in part designed to provide reciprocal frameworks for information and technology security to underpin the AUKUS partnership. The US requirements for reciprocity are expressed in the National Defense Authorisation Act for Fiscal Year 2024 (US).
- Three new offences are proposed in the Bill and will expand the criminal liability currently imposed by the Defence Trade Controls Act (DTC Act):
- 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.
- Each of the offences has detailed exceptions to permit free trade in goods, technology and services within the AUKUS partnership.
- The offences in the Bill interact with the concept of a foreign work authorisation in the Defence Amendment (Safeguarding Australia’s Military Secrets) Bill 2023 and there appears to be significant overlap with respect to DSGL services.
- Universities and industry generally support the loosening of trade controls with the US and UK.
- Some defence industry participants and universities expressed concern during the brief consultation period on the Exposure Draft of the Bill that the proposed provisions might stifle trade, education, research and innovation with countries other than the UK and US.
Introductory Info
Date introduced: 30 November 2023
House: House of Representatives
Portfolio: Defence
Commencement: The substantive amendments in Schedule 1 will commence on a day to be fixed by Proclamation or 6 months after Royal Assent.
Schedule 2 will commence immediately after Schedule 1 but only if the Defence Amendment (Safeguarding Australia’s Military Secrets) Act 2023 has commenced; otherwise not until that Act has commenced.
Purpose of the Bill
The purpose of the Defence
Trade Controls Amendment Bill 2023 (the Bill) is to amend the Defence Trade
Controls Act 2012 (the DTC Act) to:
- regulate
the supply of certain Defence and
Strategic Goods List (DSGL) military or dual-use technology to foreign
persons within Australia
- regulate
the supply of certain DSGL military or dual-use goods and technology from a
place outside of Australia to another place outside of Australia, or to a
foreign person
- regulate
the provision of services in relation to DSGL Part 1 military goods or
technology to foreign persons or entities and
- remove
the requirement to obtain a permit for supplies of certain DSGL goods and
technology and the provision of certain DSGL services to the United Kingdom or
the United States.
Structure of the Bill
The Bill has two Schedules. Schedule 1 contains the
main amendments which broaden the restrictions on dealing with goods,
technology and services related to the DSGL. The majority of the substantive
amendments are to Part 2 of the DTC Act – Dealings in items in the DSGL.
Item 5 of Schedule 1 introduces several new
definitions.
Item 15 of Schedule 1 introduces 3 new offences.
Items 41 – 50 of Schedule 1 are a series of
consequential technical amendments, including to duties, powers and
delegations.
Schedule 2 contains amendments which are contingent
on the commencement of the Defence Amendment (Safeguarding Australia’s
Military Secrets) Act 2023 (the SAMS Act). The Defence
Amendment (Safeguarding Australia’s Military Secrets) Bill 2023 has been
referred to the Parliamentary Joint Committee on Intelligence and Security.
Background
Increasingly, economic policy and national security policy
are intertwined – a resilient Australian economy underpins national security.
Australia is economically stronger when global trade flows freely ... But how
we trade, who we trade with, and what we trade needs to reflect our current
strategic moment and the challenges we face.
Senator
Don Farrell, Minister for Trade and Tourism
Trade in military use goods and technology is tightly
controlled across the globe for reasons of national and international security.
However, to develop a resilient sovereign industrial base and secure its own
supply chain, successive Australian governments have actively promoted the
growth of Australia’s defence industry with the goal of generating greater
export opportunities.[4]
Australia’s current defence trade controls framework
According to the Department of Foreign Affairs and Trade
(DFAT), ‘[m]aintaining Australian leadership in global arms control,
non-proliferation and disarmament efforts is a fundamental pillar of the Government's
response to international security challenges, especially in the Indo-Pacific’.[5]
The Government also recognises that a sovereign industrial capability is ‘operationally
critical to the Defence mission’ but Australian industry cannot be sustained by
selling to the Australian Defence Force alone.[6]
The Defence
Export Strategy 2018 recognises that exports provide the defence
industry with greater certainty for future investment and support high-end
manufacturing jobs, while safeguarding Australia’s commitment to arms control
and counter-proliferation:
Global opportunities also carry global responsibilities.
Defence exports affect Australia’s national interests and can contribute to
supporting security and stability, both regionally and globally [para 1.5].[7]
Australia fulfils its international obligations while continuing
to export by maintaining a robust defence export controls system, explained
below.
Defence and Strategic Goods List
Australia’s defence related export control framework is
built around the Defence and
Strategic Goods List (DSGL). The Customs
(Prohibited Export) Regulations 1958 (PE Regulations) and the Defence Trade
Controls Act 2012 (DTC Act) define prohibitions and regulations
by reference to the DSGL.
The DSGL
is a compilation of military and commercial goods and technologies that
Australia regulates. The goods, software and technologies on the list are
agreed in conjunction with members of various international non-proliferation
and export control regimes. These items either have a military use, or can be
used to develop weapons of mass destruction. The DSGL also contains
Australia-specific controls relating to firearms and explosives.
Part 1 of the DSGL covers defence and related
goods – inherently lethal goods and technologies designed or adapted for
use by armed forces.
Part 2 of the DSGL covers dual-use goods –
equipment and technologies developed to meet commercial needs but might also be
used either as military components or for the development or production of
military systems or weapons of mass destruction.
The Defence Minister formulates and publishes the DSGL
under paragraph 112(2A)(aa) of the Customs
Act 1901 (see also regulation 2, PE Regulations).
Other goods destined for
military end use
The Defence Minister is given additional power to prohibit
the export of goods not on the DSGL if the Minister suspects that the goods may be for a military end‑use
that would prejudice the security, defence or international relations of
Australia (section 112BA of the Customs Act).
Process for obtaining defence export permits
Defence
Export Controls within the Department of Defence considers applications
made under either the PE Regulations or the DTC Act. It issues several
types of permits for the export and supply of military and dual-use goods
and technologies.
Exports that comply with the requirements of the DTC Act
are not prohibited from export by the PE Regulations and therefore those
exporters are not required to apply for a permit under the PE Regulations.
Permits for export of DSGL goods – PE Regulations
The Defence Minister can grant
permits for export, but only if satisfied that the export of the goods, or of
any DSGL technology contained in the goods, would not prejudice the
security, defence or international relations of Australia. The Defence
Minister must consider 12 criteria listed in a table in regulation 13E(4) of
the PE Regulations and any other matters the minister considers appropriate.
The complete list of criteria can be found in Appendix 1.
About half the listed criteria relate to threats to
Australia’s military and strategic interests. The other half relate to damage
to Australia’s international relations more generally and Australia’s
commitment to international law and international peace and security.
Permits to supply, arrange or publish DSGL technology –
DTC Act
Part 2 of the Defence Trade
Controls Act 2012 plugs some loopholes that would exist if only export
of technology was restricted.
If the Minister is satisfied that the supply would not
prejudice the security, defence or international relations of Australia then
the Minister may issue an export permit (subsection 11(4) of the DTC Act).
The criteria the Minister must consider are the same as those listed in the PE
Regulations.
DTC Act reviews
Senate committee scrutiny 2012 to 2015
Prior to the DTC Act becoming law
in November 2012, the Senate Foreign Affairs, Defence and Trade Legislation
Committee (SFADT) conducted an inquiry into the impact of the proposed Defence
trade controls legislation following concerns raised about the strengthened
export process by industry, the university and research sectors as well as the
pharmaceuticals, biotechnology and nanotechnology sectors.[8] A preliminary report was released in August 2012 that recommended
greater consultation by Defence with these sectors.[9]
The SFADT’s final report was released in
October 2012 and recommended further scrutiny of the implementation of the Bill.
During the 2-year transition period the Committee would examine the progress of
implementation in 6-monthly intervals.[10]
The first progress report was issued in
June 2013 and noted that a steering group and other mechanisms for consultation
had been set up to work through issues between Defence and stakeholders.
However, key issues arose around confidentiality, transparency and the time
taken to process export applications by the Defence Export Control Office
(DECO). Consultation on the accompanying regulations had been delayed due to the
late release of the final Defence Trade Controls Regulations, which caused
uncertainty for the education and industry sectors.[11]
The second progress report was released
in May 2014 noting that positive progress had been made with consultation
processes such as the Steering Group but progress was not being made with DECO.
The Committee noted that DECO appeared to be amending its processes:
DECO seems intent on increasing the scope of items included
on the military list and raising the barriers to obtaining export approval. The
confidential example provided indicates that in this case, civilian items that
have had been exported for some years to low-risk destinations are being
restricted.[12]
By the third progress report, published in March 2015, the
Committee had received positive submissions from some university sector
stakeholders about the level of consultation. However, some sectors
(particularly small to medium businesses) were concerned the ‘cost and
difficulty of complying with the provisions of the Act, even as amended,
continued to be of concern to submitters’.[13]
Nonetheless, the Committee assessed the Defence
Trade Controls Amendment Bill 2015 and recommended it be passed, which
occurred in March 2015.[14]
Independent
reviews
As required under the DTC Act a
review of the operation of the Act must be conducted every 5 years (other
than Part 3, which deals with the Australia-United States Defense Trade
Cooperation Treaty, and Part 4, which deals with monitoring powers).[15]
Dr Vivienne Thom conducted the first
review from April to October 2018.[16] The
Morrison Government released the Independent Review of the Defence Trade Controls Act 2012
and Government
Response in February 2019, accepting all 9 recommendations. The Government also noted at the time ‘it is important … that any future
amendments do not unnecessarily restrict trade, research and international
collaboration and impede the development of Australia’s Defence capability’.[17]
The second independent review was
announced on 29 August 2023 and is being conducted by Peter Tesch (former
Deputy Secretary of Strategy, Policy and Industry Group in Defence) and Graeme
Samuel (former Chairman of the Australian Competition and Consumer Commission).[18] Public submissions closed on 29 October 2023 and, at the time of
writing, the outcome of this review was unknown. It is unclear whether any
review findings have been incorporated in this Bill. A copy of the report should
be made public at some point as the DTC Act requires the Minister to
table a copy in Parliament within 15 sitting days after receiving the report.[19] In the meantime, the Bill’s Explanatory Memorandum makes no mention
of this review and there was no government statement accompanying the release
of the Bill’s Exposure Draft, which was released by the Department of Defence on
14 November 2023 with a very short deadline for submissions.[20]
Special
defence relationship, special rules – no permit required
The Australia-United
States Treaty on Defense Trade Cooperation (DTC Treaty) was signed in 2007
and entered into force in 2013. The DTC Treaty agreed to remove certain defence
export restrictions between Australia and the US.[21]
Part 3 of the DTC Act implements the DTC Treaty. Part 3
created a framework for two-way trade between Australia and the US in specific
defence articles that are listed in Part 1 of the Defense Trade
Cooperation Munitions List (DTC Munitions List). Part 2 of the DTC
Munitions List identifies technologies not covered by the special trade
framework.
Goods listed in
Part 1 of the DTC Munitions List may be transferred
between members of the Australian community and the United
States community through approved registered brokers without
the need for an export licence for each item. Participation in the DTC Treaty framework is voluntary, and
the DTC Act provisions do not affect export permits granted under the PE
regulations.
According to the Australian Government’s impact analysis
of Australia’s export control framework (2023) the intentions of the DTC Treaty
were not met and efficient defence export transfers were not achieved ‘due to
the scope (membership, eligible articles and approved activities) which
restricts Australian industry and government disproportionality more than US
industry and government’.[22]
The AUKUS partnership is expected to improve ‘defence trade among partners,
including through the creation of an export licence-free environment’.[23]
AUKUS means a closer defence
trade relationship with the US and UK
The AUKUS trilateral enhanced
security partnership (AUKUS partnership) was first announced on 16
September 2021.[24] The terms of the partnership are not public,
however, areas of AUKUS collaboration were clarified after the
meeting of the AUKUS Defence Ministers in California on 2 December 2023
(see Appendix 2 for a breakdown and update on AUKUS-related progress).
The Defence Ministers agreed:
… that advancing AUKUS requires continued commitment to
streamlining defense trade controls and information-sharing while minimizing
policy and financial barriers across public and private sectors. [25]
AUKUS promises significant growth for Australian industry
since, as the Defence Minister puts it, Australia can achieve
a genuinely ‘seamless defence industrial base between Australia and the
US’ which ‘is so important in making sure that the whole AUKUS arrangement can
work’.[26]
The US President signed into law the wide-ranging National
Defense Authorization Act for Fiscal Year 2024 (NDAA) on 22 December
2023. The NDAA establishes legislation underpinning the AUKUS agreement and
modifies a number of other US Acts to facilitate freer exchange of defence
goods, technology and information.[27]
The NDAA also requires reciprocal action from Australia and the UK to
make the AUKUS Partnership functional. One purpose of this Bill is to meet some
of those requirements. The requirements of the NDAA are discussed under that
heading below.
Protection of highly classified naval nuclear propulsion
technology
The AUKUS nations formalised some aspects of the
partnership in the Exchange
of Naval Nuclear Propulsion Information Agreement (ENNPIA) signed on 22
November 2021.[28]
The Agreement allows the UK and US to communicate and exchange naval nuclear
propulsion information with Australia in supporting Australia’s acquisition of nuclear-powered
submarines for the Royal Australian Navy (RAN).[29]
The ENNPIA reaffirms each Parties’ respective obligations
under the Treaty on the Non-Proliferation of Nuclear Weapons. Article
IV(C) of the ENNPIA requires the application of International Atomic Energy
Agency (IAEA) safeguards by the parties.[30]
Reflecting the non-proliferation obligations of the
Parties, the ENNPIA also prohibits communication or exchange of naval nuclear propulsion information:
- to
any unauthorized persons or beyond the jurisdiction or control of the Parties
(ENNPIA Article V(D)) and
- to
any other nations, foreign or international entities, or individuals who are
not nationals of the Parties (ENNPIA Article VI).
Requirements
of the National Defense Authorization Act (US)
The main NDAA provisions relating to AUKUS are found in
Title XIII, Subtitle B ‑ Matters relating to the AUKUS partnership
(sections 1321‑1354); however, other important provisions are found
throughout the Act’s 973 pages. Some of the most important provisions are
explained below.
Streamlining and protecting transfers of US military
technology from compromise
Australia and the UK are given priority in foreign
military sales and direct commercial sales (section 1341 NDAA).
Australia and the UK are given the same exemption from the
certification and congressional notifications requirements as Canada enjoys for
the export of ‘defense articles’ and ‘defense services’ (section 1345 NDAA).[31] ‘Defense
articles’ and ‘defense services’ are designated in the United
States Munitions List (USML).
Section 1343 of the NDAA amends the Arms
Export Control Act (US)[32]
to require the President to assess and report to the Foreign Affairs and
Foreign Relations congressional committees whether Australia and the UK have:
- implemented
a system of export controls comparable to those of the US and that satisfies
subsections (j)(2)(A)(i)-(iv) and (j)(2)(B)(i), (ii) and (v) of section 38 the Arms
Export Control Act (US) (22 U.S.C. 2778) for US-origin defense articles
and defense services and for controlling the provision of military training,
and
- implemented
a comparable exemption from its export controls for the US.
Subsection 38(j)(2) is reproduced at Appendix 3.
Redefining ‘domestic source’ in the US Defense Production
Act
‘Domestic source’ is defined in the Defense Production
Act (US) (50 U.S.C. 4552(7)) as a business concern that performs
substantially all of the research and development, engineering, manufacturing,
and production activities for a critical component or critical technology item
in the US or Canada. The NDAA amends this definition to include Australia and the
UK. The US will treat the business concern as a ‘domestic source’ where:
- that
business concern has a contract with the US for those critical items or
- a
different business concern procures those critical items (subsection 1080(a)(4)
NDAA).
This will only apply where the US cannot meet the need for
those critical items in the US (subsection 1080(4) NDAA).
Identification as a ‘domestic source’ potentially gives
‘Australian companies access to $US1 billion ($1.5 billion) currently set aside
for investments in American and Canadian produced and manufactured goods and
services that are deemed so essential they are prioritised as having a wartime
level of urgency’.[33]
AUKUS Submarine Transfer Authorisation Act (US)
Part 3 of Subtitle B, Title XIII of the NDAA is the AUKUS
Submarine Transfer Authorisation Act (US) which authorises the transfer, on
a sale basis, of up to 3 Virginia-class submarines to Australia, under certain
conditions.[34]
Section 1352 of the NDAA provides that the sale of these submarines to
Australia will be exempt from reporting requirements in section 36 of the Arms
Export Control Act (22 U.S.C. 2776) and disposals to foreign nations requirements
at 10 U.S.C. 8677. Prior to the transfer taking place, Australia and the US
must enter into a mutual defense agreement that:
- provides
a clear legal framework for Australia’s acquisition of conventionally-armed,
nuclear powered submarines from the US and
- meets
the highest standards for non-proliferation with regard to exchanging
equipment, information, nuclear materials and technology between the 2
countries (section 1352(d)(3)(B) NDAA).
Related AUKUS legislation
The Defence Minister has indicated that there will be
‘multiple tranches of legislation’ required to support the AUKUS partnership.[35] To date, the
following additional bills designed to support the AUKUS partnership have been
introduced:
Committee consideration
Senate Foreign Affairs, Defence and Trade Legislation
Committee
The Bill has been referred by the Senate to the Senate
Foreign Affairs, Defence and Trade Legislation Committee for inquiry and report
by 30 April 2024. Details of the inquiry are at Defence
Trade Controls Amendment Bill 2023 [Provisions]. Submissions
close 1 February 2024.
Senate
Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
considered the Bill and identified several issues of concern.[36]
Reversal of
the evidential burden of proof where there are significant penalties[37]
Proposed sections 10, 10A, 10B and 10C of the DTC Act
create offences of supplying or providing DSGL technology under certain
circumstances. Each offence has a penalty of 10 years imprisonment or 2,500
penalty units, or both. Each offence has multiple exceptions and several of
those require the defendant to bear the evidential burden of proof.
The Committee emphasized that at common law, ordinarily
the prosecution must ‘prove all elements of an offence’ with the understanding
a defendant has the ‘right to be presumed innocent until proven guilty’. The
reversal of the burden of proof interferes with this common law right. The
Committee expressed concern about the proposed reversed burden of proof given the
significant penalties attached to these offences.[38]
The Explanatory Memorandum provides little explanation of
why these matters were drafted as exceptions rather than elements of the
offence. The Committee was not satisfied that the Explanatory Memorandum
adequately explained the justification for use of a reversed onus of proof.
Broad
delegation of administration powers or functions[39]
Proposed subsection 73(2A) seeks to amend the delegation
of functions or powers under sections 11 and 12 of the DTC Act to
Department of Defence staff holding or acting in Executive Level 1 or 2
equivalent positions. The Committee noted its preference is that delegates be
confined to the holders of nominated offices or to members of the SES.
The Committee questioned the appropriateness and necessity
for delegating functions or powers of the Minister to Executive Level 1 or 2
staff and whether those exercising those powers or functions would possess the
‘appropriate training, qualifications, skills or experience’.[40]
The Committee sought further detailed advice from the
Minister, with specific reference to how the proposed provisions address the
requirements set out in the Attorney-General’s Department’s Guide to Framing
Commonwealth Offences, Infringement Notices and Enforcement Powers.[41]
Policy position of non-government parties/independents
In response to the release of the Exposure Draft of the
Bill, the Australian Greens were critical of the short duration allowed for
consultation about the Bill, stating that:
The Bill will have serious ramifications for Australia’s
scientific and research sectors, introducing new criminal offenses for breaches
and creating a new super bureaucracy controlled by Defence that will control
export and research permits.
Given the sensitive, controversial and complex nature of the
Bill, public consultation is paramount …[42]
Position of major interest groups
In the submissions and statements of major interest groups
there are two main themes:
- there
was insufficient time allowed for consultation about the Bill and
- the
Bill, if passed in its current form, has the potential to restrict normal
scientific collaboration between Australian science and technology entities and
international counterparts.
A typical example is Universities Australia which
requested that more time be allowed to study and comment on the Bill and
expressed a more direct criticism in saying:
Universities are concerned that the Bill, as drafted, could
place at risk our sector’s ability to engage in collaborative research with
non-AUKUS partner nations. This is not in anyone’s interest. “The amount of
detail that is deferred to subordinate legislation, in particular around the
application of exemptions, is also a significant issue. “Our researchers are
working right now with their international peers to fight climate change,
develop vaccines and drive innovations to help us grow and prosper. This work
must continue. …”[43]
Similarly, the Australian Academy of Science welcomed
aspects of the Bill but stated:
A more seamless collaborative environment with the US and UK
as part of the AUSKUS arrangements is welcomed, but the Academy is concerned
about the negative impacts this will have on research collaborations with all
other countries, which serve our national interest. In particular, the Academy
suggests that the proposed exemption for fundamental or basic research,
consistent with the United States definition, should be placed in the
legislation to protect and give confidence to scientists that this legislation
will not unnecessarily restrict scientific progress.[44]
The Group of Eight (Universities) welcomed the passage of
the 2024 National Defense Authorization Act (NDAA) through the US
Congress and noted that they had worked with the Australian Government on the
current Bill.[45]
However, they also noted the importance of ensuring that new restrictions did
not negatively impact upon other important areas of scientific research.
This is also why it is important to ensure that Australia
includes a comprehensive definition of “Fundamental Research” in our
Defence Trade Controls Amendment Bill. This will facilitate and streamline the
ability of the best research minds across the AUKUS partnership to
continue to place us at the leading edge.[46]
Consultation on Exposure Draft Bill
A range of organisations responded to the Bill’s Exposure Draft
and the following is intended as representative of the submissions as a whole.
The
Australian Industry Group
The Australian Industry Group (Ai Group) submitted a
detailed response to the Exposure Draft. The response welcomed the ‘intent’ of
the proposed amendments and supported the ‘development of a license-free
environment for trade in sensitive technology and services with our AUKUS
partners.’[47]
In addition to the issues set out above, the Ai Group noted the impact of
additional compliance costs and legal risks to their members and asked for
clear guidelines on the new measures as well as training programs to educate
members about the new regulatory regime.[48]
In relation to the Defence Strategic Goods List (DSGL) the
Ai Group submission states:
There is continued uncertainty around any proposed exceptions
and how they might be applied. The broad nature of the DSGL complicates the
issue. This is especially with the ML22 category, as some data which would be
considered extremely low risk within that category will now have the same
restrictions imposed on it as higher risk data that warrants higher
protections.[49]
Australian
Technology Network of Universities
The Australian Technology Network of Universities
submission on the Exposure Draft also noted the short timeframe for
consultation on the Bill and recommended:
- that
there be more consultation with universities on any supporting regulations, in
particular, around the status of dual citizens and the definition of
regulations
- collaboration
and information sharing aimed at helping universities understand the
requirements of the legislation while maintaining a viable framework for global
collaboration
- that
the Australian Government ensure the system operates cohesively and does not
limit international collaboration.[50]
The Group
of Eight Australia
The Group of Eight Australia submission supported the
intent of the Bill and acknowledged that changes to the current defence export
regulatory environment will be critical to Australia’s ability to maximise the
opportunities created by the AUKUS agreement.[51]
However, the Group of Eight also stated that aspects of the Bill needed
additional clarity. Specifically:
- the
definition of research
- the
meaning of employees where they are the recipients of DSGL technology or
services
- the
treatment of Australian citizens or permanent residents who also have other citizenship
- the
treatment of foreign research students and training.[52]
Amongst other things, the submission called for
“Fundamental Research” to be defined as a matter of priority through
consultation via the University Foreign Interference Taskforce (UFIT). Another
recommendation is:
That the new export controls framework – in seeking to ensure
an export-licence free environment for the three AUKUS countries – does not
impose controls on Australian firms, research institutions and researchers that
are more restrictive of international collaborations than those that apply to
counterpart organisations and researchers in the US and UK.[53]
Australian
Academy of Science and the Academy of Technological Sciences & Engineering
The Australian Academy of Science and the Academy of
Technological Sciences & Engineering made a joint submission in response to
the exposure draft. The submission also highlighted the short timeframe for
consultation and expressed some of the same reservations set out by other
respondents.
When enacted, the Bill will be accompanied by regulations. It
is our strong view that the intent of this Bill could be subverted by changes
to the regulations after enactment, which can occur without consultation or
scrutiny, for example criminalising some activities that the research community
considers normal, indeed desirable, for a researcher to develop their ideas and
outcomes.[54]
The submission proposed the inclusion in the Bill of an
exemption for ’fundamental research‘ and that the definition of this could
align with that contained in the US National Security
Directive 189, which reads:
Fundamental research is defined to mean basic and applied
research in science and engineering where the resulting information is
ordinarily published and shared broadly within the scientific community, as
distinguished from research the results of which are restricted for proprietary
reasons or specific U.S. Government access and dissemination controls.[55]
The submission makes further extensive comments and
recommendations.
The
University of Melbourne
The University of Melbourne’s response to the Exposure Draft
of the Bill covers similar ground to those above.[56]
The University asks for greater clarity about the treatment of dual nationals
as well as the scope of the proposed exemption for fundamental research. In
addition, it asks for greater clarity about:
- the
scope of ‘employee’ or ‘officer’ in Sections 10, 10A, and 10C
- interpretation
of a DSGL technology recipient as a foreign person, individual or a body
corporate in the context of domestic research across different institutions
- legal
liability and requirements for research organisations to manage re-supply
pursuant to Section 10B
- the
scope of ‘training’ and its possible application on research training
activities in academia. [57]
Defence media commentary
The Australian Strategic Policy
Institute’s Bec Shrimpton and George Henneke noted the reactions recorded above
but also said that the proposed changes represent an ‘unprecedented
opportunity’ for Australian defence industry companies.[58] Shrimpton and Henneke make comments and recommendations for the
proposed legislation:
Ongoing work must be grandfathered under the new regime.
Those affected should be asked to submit commitments to align their practices
with the new rules over a reasonable period.
Under the proposal as currently written, a companies could
incur criminal penalties for breaking the new rules when they become active in
12 months. That could slam the brakes on the Australian defence industry. The
small and medium-sized enterprises on which it depends don’t have armies of
lawyers standing ready to facilitate the transition. The amendments must apply
a phased approach, introducing an intermediate period in which civil rather
than criminal penalties apply.
The administrative burden of compliance is manageable for
larger companies and prime contractors. It is absorbed as a cost of doing
business. But that is often beyond the capability of smaller firms. A grant
program should be established to assist small and medium enterprises with
compliance paperwork and legal advice.
Expanding the scope of the export-control regime will also
increase the workload on administrators. The amendment takes no account of
this, postponing an analysis of the financial impact until the next budget
cycle. Winning in the new competitive environment will demand smooth
functioning of administrative processes. Permit-processing delays resulting
from an understaffed administration will set Australia on a path to assuming
all the worst aspects of ITAR. We need immediate investment in administrative
capacity and technical expertise. A permanent body must evaluate and monitor
performance, including all associated governance, audit and resourcing
functions.[59]
Former senior United States Department of Defense official
William Greenwalt responded to the Exposure Draft by saying:
“It looks like Australia just gave up its sovereignty and got
nothing for it,” Bill Greenwalt, former US deputy undersecretary of Defense for
industrial policy and one of America’s foremost experts on arms export laws and
regulations, told Breaking Defense. He wrote many of the current laws governing
both arms exports and defense acquisition while a congressional staff member.
“It appears that the Australians adopted the US export
control system lock, stock and barrel, and everything I wrote about in my USSC (US
Studies Center) piece in the 8 deadly sins of ITAR section will now apply
to Australian innovation. I think they just put themselves back 50 years,”
Greenwalt said in an email.[60]
Some months prior to the release of the Exposure
Draft the United States Studies Centre released a paper by Greenwalt and Tom
Corben which warned that Australia ran the risk of replicating some of the
problems of ITAR and recommended that the US export
control regime needed to be reformed for AUKUS to realise its full potential.[61]
Corben and Greenwalt write that there are
eight facets of ITAR that need to be addressed: ‘an outdated mindset;
universality and non-materiality; extraterritoriality; anti-discrimination;
transactional process-compliance; knowledge taint; non-reciprocity; and
unwarranted predictability.[62]
The paper discusses these eight facets at some length.
Australia’s Chief Defence Scientist Tanya
Monro expressed enthusiasm for the prospect of US legislative reform allowing
change to ITAR to ease US export controls for AUKUS Pillar II cooperation to
proceed but also noted that this must be accompanied by cultural change in the
US Defense bureaucracy.[63]
Financial implications
The Department of Defence will be responsible for
resourcing associated with the administration of the measures in the Bill. A
detailed implementation plan will be developed and considered by the National
Security Committee and the Expenditure Review Committee as part of the 2024–25
Budget Submission.[64]
Statement of Compatibility
with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[65]
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights
considered the Bills and made no comment.[66]
Key issues and provisions
The proposed legislation predominantly aims to give effect
to AUKUS partnership arrangements to facilitate the transfer of technology,
goods and services among the Parties.
The general approach taken in the Bill is to require
regulation of all possible dealings with goods and technology on the DSGL and
then exclude particular well-defined transactions from its coverage. That is,
everything is prohibited unless it is specifically permitted. This is
consistent with the current approach in the PE Regulations and the DTC Act
and seems designed to minimise the possibility of loopholes.
The Bill applies to certain dealings in DSGL goods,
DSGL technology and DSGL services.
DSGL technology is already defined in the DTC Act
and the definition remains unchanged:
DSGL technology means a thing that is:
(a) technology, or software, as defined in the Defence
and Strategic Goods List; and
(b) within the scope of that list.[67]
The proposed additional definitions are:
DSGL goods means goods within the scope of the
Defence and Strategic Goods List.
DSGL services means the giving of assistance
(including training) in relation to the design, development, engineering,
manufacture, production, assembly, testing, repair, maintenance, modification,
operation, demilitarisation, destruction, processing or use of DSGL goods that
are, or DSGL technology that is, within the scope of Part 1 of the Defence
and Strategic Goods List [the Munitions List].[68]
The inclusion of ‘giving
assistance (including training)’ in the definition of DSGL services reflects
provisions in the proposed SAMS Act.[69]
No permits
for supply and provision of services to Australia, US or UK
The Bill contains several provisions that establish the constitutional
heads of power for the offences and appear to be designed to maximise the
jurisdiction available.[70]
If the dealing with the DSGL meets the definition of constitutional
supplies or constitutional DSGL services then a provider
will need to apply for a permit.[71]
However, the concepts of relevant supply and relevant DSGL
services are then used to restrict the scope of the provisions.
Proposed subsection 5C(1) provides a supply will not
be a relevant supply if it is:
- to
(or at) a place in Australia, or the UK or the US or
- access
is provided to DSGL technology and the person to whom the access is provided is
in Australia, the UK or the US and
- the
DSGL goods or DSGL technology services is not excluded and
- the
supply is to:
- an Australian
person (defined broadly in proposed subsection 4(1) to include
Australian corporations, citizens and permanent residents)
- a
citizen or permanent resident of the US or UK
- a
US or UK corporation
- the
Government of the US or UK or
- an
authority of the Government of the US or UK.
If the supply is not a relevant supply then no permit is
required.
In similar fashion, a service is not a DSGL service if it
is provided to the persons listed above and:
- the
services are received at a place in Australia, or the UK or the US
- the
services are not in relation to excluded DSGL goods or DSGL technology and
- any
requirements made by regulation are satisfied.
If the service is not a relevant DSGL service then no
permit is required.
The Minister will be able to further refine the dealings
that will require permits by excluding (by legislative instrument) particular
DSGL goods and DSGL technology from the scheme (proposed subsection 5C(3)).
‘Five-eyes’ security clearances mutually recognised
Security clearances given by an authorised Commonwealth
provider and those given by or on behalf of the Governments of Canada, New
Zealand, the UK or the US are all defined as covered security clearances.[72]
The PE Regulations will further define what kind of clearances are prescribed.
This definition is only relevant for the offences in the DTC
Act. For each offence, if the supply was made by a person holding a covered
security clearance, for the purpose prescribed in the regulations, then no
offence is committed.[73]
Appendix 1: Criteria for permission to export DST goods
Customs (Prohibited Exports) Regulations 1958
Regulation 13E
| Criteria for permissions |
| Item |
Criterion |
|
1
|
The risk that the goods or the DSGL technology may go to,
or become available to, a country upon which the Security Council of the
United Nations or Australia has imposed a sanction
|
|
2
|
The risk that the goods or the DSGL technology may go to,
or become available to, a country where they may be used in a way contrary to
Australia’s international obligations or commitments
|
|
3
|
The risk that the goods or the DSGL technology may be
used to commit or facilitate serious abuses of human rights
|
|
4
|
Whether the export of the goods or the DSGL technology:
- (a) may aggravate:
- (i) an existing threat to international peace and security or
to the peace and security of a region; or
- (ii) a particular event or conflict of concern to Australia;
or
- (b) may otherwise contribute to political instability
internationally or in a particular region
|
|
5
|
Whether the goods or the DSGL technology may:
- (a) be used for conflict within a country or for
international conflict by a country; or
- (b) further militarise conflict within a country
|
|
6
|
Whether the export of the goods or the DSGL technology
may compromise or adversely affect Australia’s defence or security interests,
its obligations to its allies or its international obligations and
responsibilities
|
|
7
|
Whether the goods or the DSGL technology may go to, or
become available to, a country that has policies or strategic interests that
are inconsistent with the policies and strategic interests of Australia or
its allies
|
|
8
|
The risk that the export of the goods or the DSGL
technology may:
- (a) adversely affect Australia’s military capability; or
- (b) substantially compromise an Australian defence operation;
or
- (c) increase the military capability of a country that is a
potential adversary of Australia
|
|
9
|
The risk that the goods or the DSGL technology may go to,
or become available to, a country:
- (a) that is developing, or is reasonably suspected of
developing:
- (i) weapons that may be capable of causing mass destruction;
or
- (ii) the means of delivering such weapons; or
- (b) that supports, or is reasonably suspected of supporting,
terrorism; or
- (c) whose actions or foreign policies pose a risk of major
disruption in global stability or the stability of a particular region
|
|
10
|
Whether the export of the goods or the DSGL technology
may lead to a reaction by another country that may damage Australia’s
interests or relations with the other country or with a particular region
|
|
11
|
Whether the goods or the DSGL technology may be used for
mercenary activities or a terrorist or other criminal activity
|
|
12
|
Whether preventing the export of the goods or the DSGL
technology may have an adverse effect on Australian industry, trade and
economic prosperity to the extent that it may adversely affect the security,
defence or international relations of Australia
|
Appendix 2:
AUKUS partnership progress
Extract from AUKUS
Defense Ministers Meeting Joint Statement[74]
PILLAR I—CONVENTIONALLY ARMED,
NUCLEAR-POWERED SUBMARINES
The Secretaries and Deputy Prime Minister
reviewed the exceptional progress that has been made since the March 2023
announcement of the Optimal Pathway for Australia to acquire conventionally
armed, nuclear-powered submarines. They discussed the strategic significance of
this endeavor and the deterrence effect it is already delivering. They
reaffirmed their commitment to delivering each phase, to include establishing
Submarine Rotational Force-West (SRF-West) in Australia as early as 2027,
selling U.S. Virginia-class submarines to Australia from the early 2030s, and
delivering SSN-AUKUS to the Royal Navy in the late 2030s and the first
Australian-built SSN-AUKUS to the Royal Australian Navy (RAN) in the early
2040s.
- Increased Royal Australian Navy Education and Training. The Secretaries and Deputy Prime Minister acknowledged the
significant progress on increased education and training opportunities for RAN
personnel to attend specialized U.S. and UK schools, including training at the
U.S. Submarine School in Groton, U.S. Nuclear Power School in Charleston, and
the UK Nuclear Power School at HMS Sultan. The Secretaries and Deputy Prime
Minister were pleased that six RAN officers have now graduated the U.S. Nuclear
Power School, with a further three RAN officers on track to graduate from the
UK Nuclear Power School in January 2024. This follows two RAN officers who have
completed other Sultan nuclear operator courses, with two more planned. These
pioneering cohorts will be the first to operate Australia’s future nuclear-powered
submarines.
- Increased Industry Training. The
Secretaries and Deputy Prime Minister were pleased that the first tranche of
Australian industry personnel have commenced work at Pearl Harbor Navy Shipyard
in the United States and Barrow-in-Furness shipyard in the UK to develop their
skills to build and sustain nuclear-powered submarines. This will support
future maintenance activities during nuclear-powered attack submarine (SSN)
visits to Australia.
• Preparing for Submarine Rotational Force-West. The Secretaries and Deputy Prime Minister noted that efforts are
well underway to increase Australia’s experience with nuclear-powered
submarines and build Australia’s capacity to participate in future maintenance
activities. The Secretaries and Deputy Prime Minister
announced that Australian sailors will commence duty in Guam in early 2024 to
build their SSN maintenance skills and qualifications in the lead up to
SRF-West. The Secretaries and Deputy Prime Minister also agreed to the
increased frequency of SSN visits to HMAS Stirling in 2024, building on
the USS NORTH CAROLINA visit in August 2023. The next U.S. SSN visit is planned
to occur in the first half of 2024. The first planned maintenance activity of a
U.S. SSN is planned to occur at HMAS Stirling in the second half of 2024. This
will represent a substantial increase in Australian Defence Force participation
in maintenance activities on U.S. SSNs. The UK reiterated its commitment to
increasing SSN port visits beginning in 2026.
- Upholding the Highest Non-Proliferation Standard. The Secretaries and Deputy Prime Minister reaffirmed their shared
commitment to upholding the highest standard for nuclear non‑proliferation,
and welcomed the regular, open, and transparent engagement with the
International Atomic Energy Agency (IAEA) to date. The Secretaries and Deputy
Prime Minister acknowledged commencement of Australia’s bilateral negotiations
with the IAEA on an arrangement pursuant to Article 14 of Australia’s
Comprehensive Safeguards Agreement.
- Enabling Legislation. The Secretaries
and Deputy Prime Minister discussed the importance of securing legislative
support across all three systems to ensure the success of AUKUS. Secretaries
and Deputy Prime Minister welcomed the new Foreign Military Sales case between
Australia and the United States presented to the U.S. Congress, which will
facilitate early delivery of capability to support SRF-West and provide
mechanisms to train Australians. The Secretaries and Deputy Prime Minister also
welcomed Australia’s introduction of legislation to the Australian Parliament
which will establish the framework to ensure nuclear safety within Australia’s
nuclear-powered submarine enterprise, including establishing an independent
nuclear safety regulator. They also welcomed the entry into force of the first
AUKUS enabling legislation introduced to the Australian Parliament, the Defence
Legislation Amendment (Naval Nuclear Propulsion) Act 2023, in July 2023.
PILLAR II—ADVANCED CAPABILITIES
Pillar II is accelerating and deepening
the development and delivery of advanced military capabilities. The strategic
alignment of our national defense strategies, anchored by our shared values, is
facilitating unprecedented collaboration in advanced technologies. In addition
to work focused on dedicated AUKUS capabilities, AUKUS is providing a vehicle
to break down barriers and improve cooperation in other areas. While many
AUKUS-related advanced capability activities remain classified, the Secretaries
and Deputy Prime Minister shared the following commitments:
- AUKUS Maritime Autonomy Experimentation and Exercise Series. The AUKUS partners will undertake a series of integrated
trilateral experiments and exercises aimed at enhancing capability development,
improving interoperability, and increasing the sophistication and scale of
autonomous systems in the maritime domain. The experiments and exercises will
provide opportunities for defense industry to participate in capability
demonstration, development, and delivery. Through these experiments and
exercises, the AUKUS partners will also further test and refine the ability to
jointly operate uncrewed maritime systems, share and process maritime data from
all three nations, and provide real-time maritime domain awareness to support
decision-making.
- Trilateral Anti-Submarine Warfare. The
AUKUS partners have demonstrated and will deploy common advanced artificial
intelligence (AI) algorithms on multiple systems, including P-8A Maritime
Patrol Aircraft, to process data from each nation’s sonobuoys. These joint
advances will allow for timely high-volume data analysis, improving our
anti-submarine warfare capabilities.
- Undersea Vehicle Launch and Recovery.
The AUKUS partners are integrating the ability to launch and recover undersea
vehicles from torpedo tubes on current classes of submarines to deliver effects
such as strike and intelligence, surveillance, and reconnaissance. This
capability increases the range and capability of our undersea forces and will
also support SSN-AUKUS.
- Quantum Positioning, Navigation, and Timing. The AUKUS partners are accelerating the development of quantum
technologies for positioning, navigation, and timing in military capabilities.
These capabilities create resilience for our trilateral forces in Global
Positioning System-degraded environments and enhance stealth in the undersea
domain, which will also support SSN-AUKUS.
- Resilient and Autonomous Artificial Intelligence Technologies
(RAAIT). The AUKUS partners are delivering
artificial intelligence algorithms and machine learning to enhance force
protection, precision targeting, and intelligence, surveillance, and
reconnaissance. This effort builds on joint work demonstrated in the UK in April
2023 and in South Australia in October 2023. The AUKUS nations aim to integrate
RAAIT into national programs in 2024, to pursue the rapid adoption of these
technologies across land and maritime domains.
- Deep Space Advanced Radar Capability. AUKUS
is accelerating capabilities that provide trilateral partners with advanced technology
to identify emerging threats in space. AUKUS played a critical role in
advancing trilateral collaboration on the Deep Space Advanced Radar Capability
program, which will provide 24-hour continuous, all-weather global coverage to
detect, track, and identify objects in deep space and increase space domain
awareness. This capability will contribute to the security, safety, and
responsible use of space. Sites will be in the United States, United Kingdom,
and Australia. The first radar site in Western Australia will be operational in
2026, with all three in service by the end of the decade.
- Cyber. Trilaterally, AUKUS partners are
engaging on cyber security with critical suppliers to the naval supply chain.
We are collaborating with industry partners to deploy some advanced tooling
which will uplift the cyber security of our supply chains, while also giving us
greater insight into the threats to AUKUS. The AUKUS partners are also working
to strengthen cyber capabilities, including protecting critical communication
and operations’ systems.
- Establishing Trilateral Requirements. The
AUKUS partners are committed to ensuring AUKUS capability and technology
development focuses on the most important military challenges each nation faces.
The Secretaries and Deputy Prime Minister noted that the International Joint
Requirements Oversight Council, co-chaired by the Vice Chiefs of Defense from
the United States, the United Kingdom, and Australia, is a key collaborative
forum for identifying and validating operational requirements common to our
three nations that will contribute to deterrence and our ability to prevail if
deterrence fails.
- AUKUS Innovation Challenges. The AUKUS
partners are aligning our defense innovation ecosystems by creating seamless
opportunities for trilateral cooperation. AUKUS partners will launch a series
of AUKUS innovation challenges in which companies from across all three
innovation ecosystems will be able to compete for prizes on a common innovation
challenge topic. In early 2024, partners will launch the first trilateral
Innovation Prize Challenge, focusing on electronic warfare.
- Defense Trade and Industrial Base Collaboration. The AUKUS partners are working to facilitate deeper and more rapid
defense trade between the three nations by streamlining policies and processes,
along with implementing comparable security standards for guiding the transfer
of sensitive military technology, data, and know-how. These efforts, including
proposed legislative changes, will increase private-sector cooperation across
the AUKUS partners in emerging technologies and strengthen resiliency across
our supply chains.
- AUKUS Advanced Capabilities Industry Forum. The AUKUS partners will establish and convene a standing Industry
Forum with trilateral government and industry representatives to help inform
policy, technical, and commercial frameworks to facilitate the development and
delivery of advanced capabilities. The first meeting will occur in the first
half of 2024.
- AUKUS Defense Investors Network. The
AUKUS partners are increasing and expanding private sector engagement by
welcoming the creation of an AUKUS Defense Investors Network, leveraging the
current networks in all three countries to strengthen financing and facilitate
targeted industry connectivity.
(j) REQUIREMENTS RELATING TO COUNTRY EXEMPTIONS FOR
LICENSING OF DEFENSE ITEMS FOR EXPORT TO FOREIGN COUNTRIES.—
(2) REQUIREMENTS OF BILATERAL
AGREEMENT.—A bilateral agreement referred to in paragraph (1)—
(A) shall,
at a minimum, require the foreign country, as necessary, to revise its policies
and practices, and promulgate or enact necessary modifications to its laws and
regulations to establish an export control regime that is at least comparable
to United States law, regulation, and policy requiring—
- (i)
conditions on the handling of all United States-origin defense items exported
to the foreign country, including prior written United States Government
approval for any reexports to third countries;
- (ii)
end-use and retransfer control commitments, including securing binding end-use
and retransfer control commitments from all end-users, including such
documentation as is needed in order to ensure compliance and enforcement, with
respect to such United States-origin defense items;
- (iii)
establishment of a procedure comparable to a ‘‘watchlist’’ (if such a watchlist
does not exist) and full cooperation with United States Government law
enforcement agencies to allow for sharing of export and import documentation
and background information on foreign businesses and individuals employed by or
otherwise connected to those businesses; and
- (iv)
establishment of a list of controlled defense items to ensure coverage of those
items to be exported under the exemption; and
(B) should, at a minimum,
require the foreign country, as necessary, to revise its policies and
practices, and promulgate or enact necessary modifications to its laws and
regulations to establish an export control regime that is at least comparable
to United States law, regulation, and policy regarding—
- (i)
controls on the export of tangible or intangible technology, including via fax,
phone, and electronic media;
- (ii)
appropriate controls on unclassified information relating to defense items
exported to foreign nationals;
- (iii)
controls on international arms trafficking and brokering;
- (iv)
cooperation with United States Government agencies, including intelligence
agencies, to combat efforts by third countries to acquire defense items, the
export of which to such countries would not be authorized pursuant to the
export control regimes of the foreign country and the United States; and
- (v)
violations of export control laws, and penalties for such violations.