Glossary

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:

• the Defence Legislation Amendment (Naval Nuclear Propulsion) Bill 2023 (Defence Legislation Amendment Bill) was introduced on 10 May 2023 and passed both Houses of Parliament without amendment on 22 June 2023. See the Bills Digest for more information.
•  the Defence Amendment (Safeguarding Australia’s Military Secrets) Bill 2023 was introduced on to the House of Representatives on 14 September 2023. The Bill is yet to be debated. See the Bills Digest for more information.
• Australian Naval Nuclear Power Safety Bill 2023 (ANNPS Bill) and Australian Naval Nuclear Power Safety (Transitional Provisions) Bill 2023 were introduced in the House of Representatives on 16 November 2023. See the Bills Digest for more information.

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

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.

Appendix 3: Arms Export Control Act (US) Subsection 38(j)(2)

(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.