One of the key features of the new system will be the ability for exporters to both file applications, including relevant attachments, and receive responses from DECO electronically.

It is expected that the first phase of the new system will be launched in the first half of 2013, following extensive testing to ensure a smooth transition from the paper based license application system to the new on-line format. A select few companies will be beta-testing the new system while it runs parallel to the old system to ensure that any issues are worked out in advance of an official national launch. Once the new system is ready for release, the use of on-line SmartForms will be the only option for lodging license and permit applications as the paper based system will be eliminated.

The SmartForms will include:

• Client Registration Form
• DEC01 & DEC60 Form (combined)
• Delivery Verification Certificates Form
• International Import Certificates Form
• Non-Transfer and End-Use Certificates Form
• Brokering Registration Form
• Approved Community Member Form
• A form to transition articles into the scope of the Defence Trade Cooperation Treaty

This new initiative will be important for exporters in managing their compliance programs as the ability to access records and generate reports will make internal audits easier to conduct in order to verify and improve compliance. Furthermore, exporters will be able to see the information DECO retains in their file and make any corrections as required.

To discuss how your company can prepare to take full advantage of the new system, contact Eva Galfi at International Trade Advisors on 0421 506 095 or eva@internationaltradeadvisors.com.au.

Background
In July 2011, Australia’s first foreign bribery charges were laid against two companies partially owned by the Reserve Bank of Australia (RBA), Securency and Note Printing Australia (NPA). The ‘Securency scandal’, as it is widely known, sent shockwaves throughout the international community given that Australia is ranked as the 8th most corruption-free nation by Transparency International. Not only was it surprising that violations occurred, but also that the alleged bribery was committed by RBA owned firms. Apparently, insufficient due diligence was conducted on third-party agents as it has been reported that the foreign agents committing the alleged acts of bribery were introduced to Securency and NPA by Australian diplomats and AUStrade officials overseas. The Securency scandal highlighted the need to increase awareness training for Australian Government employees and law enforcement agencies. The scandal has left some wondering if Australia’s admirable low corruption record is a result not of strong laws and a culture of low tolerance for corruption, but instead for lack of investigation into allegations of bribery and corruption.

Key changes under consideration
The Australian Government is considering making changes to our anti-bribery legislation. A public consultation paper, addressing the need to consider changes to our laws, was published in November 2011. The paper asked for written submission to help the government understand stakeholder views on how possible changes to Australia’s anti-bribery laws would affect stakeholders. Despite the fact that the consultation period ran through the holiday season (November to February), several submissions were received from industry associations, academics and the corporate sector.

One of the changes to the legislation currently being considered by the Attorney General’s Department is a change to the legality of facilitation payments paid by Australian companies to foreign government officials. Currently, it is not illegal for an Australian company to pay a facilitation payment to a foreign public official, but these payments must meet certain conditions under section 70.4 of the Criminal Code Act 1995, including that a record must be made of the nature, value, date and amount of the payment. The U.S. also allows for companies to pay facilitation payments, while the UK’s Bribery Act prohibits such payments.

One month after the consultation period on the facilitation payments defence had begun, the Australian government announced they would begin development of a National Anti-Corruption Plan. The Attorney General’s Department outlined the need for the plan and subsequently held two forums for key stakeholders, inviting members of the public, academic, not for profit, and private sectors to participate. At the July forum held in Canberra, much of the discussion centred around domestic bribery and corruption and most attendees were from the public sector. International Trade Advisors attended and addressed the need for SMEs to receive awareness training and additional guidance about how to implement effective anti-bribery and corruption compliance programs. About fifteen written submissions were also received, some of which contained recommendations including the drafting of a whole of government policy, the pros and cons of centralising investigations, and whistleblower protection considerations. Information obtained from these submissions is still being analysed and compiled and the government has not yet given an indication of when the final plan will be released.

What the OECD thinks of Australia
Our anti-bribery and corruption laws were amended and strengthened in 1999, subsequent to Australia becoming a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Since signing of the Convention, Australia has been subject to peer reviews of the effectiveness of our anti-bribery and corruption legislation. In May of 2012, the OECD Working Group on Bribery visited Australia and conducted a series of panels with key stakeholders to understand and evaluate Australia’s implementation and enforcement of anti-bribery legislation. International Trade Advisors participated in a panel before the Working Group, addressing how SMEs may be affected by a change to our legislation. The 2012 visit by the OECD Working Group was the third of their three-phase evaluation.

Not surprisingly, the OECD’s Phase 3 report, published in October 2012, expressed ‘serious concerns’ that enforcement of anti-bribery and corruption legislation in Australia is ‘extremely low’. Their concerns stemmed from the fact that only one case of foreign official bribery (Securency) had been prosecuted since introduction of strengthened legislation in 1999, and that of the 28 cases reported to the Australian Federal Police (AFP), 21 were concluded without charges having been laid. The report’s many recommendations included that the AFP be better resourced and be more pro-active in its investigations, that enforcement efforts in Australia be strengthened through coordinating efforts between the AFP, federal government and state agencies, and that ASIC should assist the AFP to prevent, detect and investigate foreign bribery. The report also recommended that whistleblower protection be strengthened and altered to afford protection for public and private sector employees who report suspected foreign bribery to the AFP.

Where we stand now
Earlier this month, the Sydney Morning Herald reported that the AFP may be set to reopen two corruption inquiries stemming from allegations made against Australian companies OZ Minerals and Cochlear. It would not be surprising if 2013 saw a renewed interest in previously concluded investigations related to allegations of foreign bribery. Regardless of what course of action the Australian government intends to take to better enforce anti-bribery and corruption legislation, Australian companies with operations overseas are taking note of the impact U.S. and UK legislation can have on their operations. Both the U.S.’ FCPA and the UK’s Anti-Bribery Act have extraterritorial reach and exert influence on corporate policy globally. Indeed it is the U.S. and UK’s laws that create the impetus for Australian companies to create staff training and compliance programs to prevent inadvertent violations of anti-bribery and corruption legislation.

In addition, the U.S.’ 2010 Dodd-Frank Act, has caught the attention of corporations and individuals globally and has created significant controversy. The provisions of the act not only protect whistleblowers but also entitle them to between 10 and 30% of the total fines imposed on companies. The monetary compensation serves as a reward for providing information to assist the SEC with their investigations and is in recognition that whistleblowers may struggle to find employment following the prosecution of their employers. The first such award was issued by the SEC in August 2012 and the SEC now receives 8 tips a day from would-be whistleblowers seeking to ‘cash-in’ on their employers’ misconduct. Though a bounty for whistleblowing may never be something we see in Australia, the prospect should give any employer something to think about.

Conclusion
Regardless of our Australian laws, Australian companies should have policies and procedures in place to educate staff, foreign agents and representatives about what constitutes bribery, where the grey areas are, the company’s stance on bribery, and the consequences of engaging in bribery and corruption both to the individual and the corporation. Multinationals have been proactive in creating compliance programs and training staff to safeguard their reputations and reduce risk of violations. However, not all Australian companies with overseas operations can afford to spend money on creating such programs and the lack of enforcement action in Australia to date leaves little impetus for some to put forth the effort. The Australian government not only needs to provide more resources to companies to understand their obligations under the law, but also needs to work with industry to improve the culture of compliance here in Australia if we are to maintain our ranking as the 8th least corrupt country in the world. If Australia is serious about both maintaining its impressive Transparency International ranking and enforcing anti-bribery and corruption legislation, the government needs to be more transparent in its expectations of companies, stronger in its enforcement actions, and more proactive in providing guidance and resources to companies.

The Bill, which implements the US-Australia Defence Trade Cooperation Treaty and implements more stringent controls on Australia’s intangible defence exports, will become an Act after it receives Royal Assent from the Governor General. Defence is currently redrafting the associated regulations which will reflect feedback they received during consultation.

It is expected that it will take a few months for the US and Australia to complete all the required administrative arrangements to bring the Treaty into effect. Once the bill becomes an Act, there will be a 24 month transition period before offence provisions come into effect. This timeline effectively gives Australian companies two years to establish internal compliance programs to manage the effect of strengthened export controls on their operations.

Update: The Bill received Royal Assent and became the Defence Trade Controls Act on 13 November 2012.

In addition to giving effect to the U.S.-Australia Defence Trade Controls Treaty, the draft Bill also seeks to introduce controls on intangibles such as defence technology, including services. It creates a registration and permit regime for brokering goods controlled under Australia’s Defence Strategic Goods List and introduces new criminal offences to enforce provisions of the Bill. The proposed new controls create additional compliance requirements for Australian industry.

The Committee’s preliminary report, issued in August 2012, found that Australian industry had not been sufficiently consulted on the impact of the proposed legislation before the Bill’s introduction into Parliament. The preliminary report explains that during the initial consultation process on the draft Bill, which introduces strengthened export controls in Australia, members of Australian industry raised concerns about the changes to the way certain goods, technology and services were proposed to be controlled by the Bill. The preliminary report found that these concerns were not addressed and that further consultation with Australian industry was required to understand the full impact of the Bill before it could proceed.

Subsequent to the publication of the preliminary report, further consultation was conducted with the academic and research sectors, which expressed concerns over the impact of the Bill on Australian research and innovation, particularly in the pharmaceutical, biotechnology and nanotechnology industries.

The highest level of concern over the Bill’s implications was raised by academia over the limitations and regulatory burden the Bill’s new export controls would impose on academic research and innovation. To better understand the impact on the research sector, two roundtables were conducted in September in which key stakeholders, including Defence, various Commonwealth agencies, and representatives of the university sector discussed provisions of the Bill. At the conclusion of the second roundtable, suggested recommendations for amendments for the bill were agreed by all stakeholders. The roundtable recommended that a pilot study should be conducted before the legislation is enacted to identify potential issues and determine the costs and benefits to industry. Subsequent to the pilot study, a Strengthened Export Controls Steering Group would be established to present advice to Ministers, including advice on additional suggested amendments and whether the transition period will need to be extended. It was recommended that a 24 month transition period, with no offence provisions, would precede enactment of the legislation. Roundtable members are also of the opinion that controls on foreign employees and students in Australia should be removed from the Bill.

Both Sydney University and Universities Australia made subsequent submissions to the Committee stating their concern that the proposed Bill would impose greater restrictions on Australian Universities than their U.S. counterparts. In their submission, the University of Sydney recommended that the Bill be amended to “ensure that the resulting control regime is no broader in scope or more stringent than the arrangements put into place for fundamental research in accredited institutions of higher learning in the US.” According to the Committee’s final report, they believe it is the government’s intention to incorporate outcomes from the roundtable discussions as amendments to the Bill.

The Committee had several recommendations for amendments to the Bill including:

• a 24 month transition period with no offence provisions in effect;
• a pilot study governed by a (to be established) Export Controls Steering Group;
• the deletion of Defence Services from the Bill;
• the removal or controls on Australians overseas; and
• the removal of controls on foreign employees and students in Australia.

The final report also outlined an amendment to the Bill that defines the role of the proposed Export Controls Steering Group and how it would work with stakeholders to conduct the pilot program and advise Parliament on further recommended amendments to the Bill during the transition period.

The final recommendations of the Committee included that the Bill, amended as outlined in their report, should proceed to the Senate for debate and subsequently passed. A dissenting report was prepared by Green and Liberal party Senators advising that in their view the Bill is still a work in progress and that further industry consultation should be conducted with industry on the proposed amendments to the Bill. They recommend that until the Committee can establish that industry concerns have been addressed, the Bill should not be debated.

Notwithstanding the dissenting report, the bill and proposed amendments will now be introduced into the Senate for debate. This will occur as early as the week of 29 October.

In this blog post, I will highlight some of the key points presented at BIS Update 2012 that will be important to how Australian defence companies conduct their operations and trade with U.S. business partners.

Background
Export reform in the U.S. has been moving at an impressive pace since the initiative was announced by President Obama in 2009, especially considering the number of government agencies involved. Last week, the three key reasons for the reform initiative were reiterated by the Undersecretary for Industry and Security, Eric Hirschhorn:

1. The U.S. wants to focus its limited resources on the threats that matter most;

2. The U.S. wants to facilitate military interoperability with their close ‘fiends and allies’. It is seeking to build stronger partnerships with allies, including Australia, by helping them to increase their military capability though facilitating access to U.S. military technology.

3. The U.S. wants its defence industry to remain competitive and seeks to reduce incentives for foreign manufacturers to ‘design out’ U.S. origin parts that are controlled under ITAR. Currently, ITAR’s “see-though” effectively causes the entire foreign product to be controlled under the U.S. ITAR, regardless of the amount of U.S. ITAR controlled content.

These reforms will likely have a positive impact for Australian defence companies trading in U.S. goods and technology. However, as the U.S. is ‘building a higher fence around a smaller yard’ in reforming their export controls, Australian companies trading U.S. defence articles will need to ensure their compliance programs are keeping pace with new requirements.

What will U.S. export reform mean to Australian defence companies?

Let’s examine two key U.S. initiatives that directly affect Australian companies:

1. The U.S. is easing licensing restrictions on parts and accessories by moving certain goods from ITAR’s U.S. Munitions List (USML) to the Commerce Department’s Commerce Control List (CCL).

2. The U.S. is working to make it easier to trade with ‘friends and allies’, but expects that Australian companies will be able to safeguard U.S. controlled articles and technology.

The easing of licensing restrictions:

A key part of U.S. export control reform is reviewing the USML and identifying which items need to remain on the list. The reforms will produce a revised USML with items that provide a strategic military, intelligence, or national security advantage to the United States. Items that do not meet this criteria, and which are commercially available outside the U.S., will move to the CCL. (The process of how this review was undertaken is explained in more detail on our website.) The goal of the control list reform is to better protect ‘crown jewel’ technology, while allowing partners allies like Australia to have better access to U.S. goods.

The reform will make it easier to obtain parts and accessories that were ‘specially designed’ to be used for a military application but do not have a military function on their own. Examples include items such as bolts cut to a special length to fit a certain fighter jet. Once the articles move from the USML to the CCL, they can ship under a license from the U.S. Commerce Department, or may be eligible for one of several license exceptions and can ship to Australia without a license. Many of the items moving from the USML to the CCL will move to a newly created ‘600 series’ category, and their exports will be closely monitored by the U.S. Government.

The USML reform creates a significant advantage to Australian companies purchasing ITAR controlled goods that are proposed to move to the CCL. First, it will be easier to obtain these articles. Second, the U.S. will exert less control over Australian made defence articles. Currently, if an Australian-produced defence article contains just one item that is ITAR controlled, even if it is as insignificant as a bracket, the entire end item is subject to the ITAR and requires U.S. State Department licensing for any export from Australia or any retransfer (sale, movement, or access to the article by a foreign national). However, once the U.S. moves certain items to the CCL, it is proposed that the Australian made article must contain at least 25% of U.S. –origin content controlled by the CCL before it becomes subject to U.S. export controls under the Export Administration Regulations. This proposed de minimis rule will ease the licensing burden on Australian companies incorporating U.S. origin components.

In addition to ITAR reform, the U.S. is making submission to various multi-lateral regimes including Wassenaar, the Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control Regime, to recommend items that should be added to or removed from control under these regimes. What this means is that changes made in the U.S. will eventually trickle down as changes to the DSGL, which controls defence articles as part of Australia’s multi-lateral obligations under these regimes.

Making it easier to trade with ‘friends and allies’

The reforms being undertaken in the U.S. to reform the ITAR will have concrete benefits for Australian manufacturers. One of the overarching goals of the export control reform initiative in the U.S. is to make it easier for U.S. technology to be shared allies and their armed forces. The U.S. recognises that making it easier for Australian defence companies to obtain U.S. military technology will translate to greater Australian defence capability, stronger coalition operations, and an anticipated greater funding by the Australian government of joint research and development projects.

One key way in which the U.S. is proposing to facilitate access it through a license exception to the Export Administration Regulations’ licensing requirements called the Strategic Trade Authorisation (STA), which was created in 2011. In 2012, changes to STA have been proposed in order to allow the export, re-export and re-transfer of certain items to a non-government entity, such as an Australian defence company, provided certain conditions, including the condition that the item is for ultimate end-use by the Australian government, are met.

STA can be used for multiple shipments of various eligible items to the same consignee, but this exception is subject to both Export Classification Control Number (ECCN) specific conditions as well as ‘special conditions’ listed in Part 740.2 of the Export Administration Regulations (EAR), that must be met for each transaction.

Once an item has been approved for shipment under STA by the U.S. Government, it will be published in a list of STA eligible items. All exporters wishing to use STA for shipments to eligible consignees may refer to this list to verify that their item is eligible. However, the proposed rule contains a provision that all parties to the transaction, including the purchaser, consignee and end user of 600 series items will need to evidence that they have previously been authorised to receive that item under a license from the U.S. government. Otherwise, a license application will need to be lodged with the U.S. Department of Commerce requesting the use of STA. An inter-agency review will determine if the export is eligible for STA going forward, or whether a license is required instead.

To put it plainly, if your company has been importing an item that was previously ITAR controlled but is now moving to the CCL, your U.S. business partner may be able to export it to you under license exception STA, provided the transaction meets the conditions of the license exception. This will make it easier for Australian companies to obtain certain spare parts and accessories from the U.S. If your company is seeking to import the same items but has not previously been listed on a license for those items, then your U.S. partner can submit a license application and request the use of STA on the same application. If they are not eligible to use STA for the export to your company, then a license may be granted for the export by the U.S. Department of Commerce, which has a 26 day average license application turnaround.

To understand how STA works, a practical example may be useful. An Australian company manufactures jet engines. They import a ‘600 series’ component item from the U.S. that ships under the STA. They assemble the part into an Australian made engine, which is sold to a prime defence contractor. The prime then on-sells the jet to the Australian government. In this case, the end-use is the Australian government, so the 600 series component is eligible for export without a license under the STA, provided it meets all conditions of the STA exception.

The benefits and consequences to Australian companies of U.S. export reform

Regardless of whether STA is available for a particular export, or a license from the U.S. Department of Commerce is required for the export, the problems associated with obtaining certain ITAR controlled goods will be mitigated for Australian companies.

The movement of goods from the USML to the CCL’s 600 series will eliminate the ‘ITAR taint’ issue that many Australian manufacturers struggle with. Not only will licensing requirements be eased, as a result of both items moving from the USML to the CCL, but Australian made items that incorporate only CCL controlled goods will not fall under the control of the U.S. Export Administration Regulations until they exceed the proposed 25% de minimis rule for U.S. content. The ITAR affords no de minimis allowance.

Now for the ‘catch’. In order to receive articles under the STA exception for the first time, the Australian company will need to agree in writing to the following:

1. That your company is aware the shipment was made under STA and you understand the re-export and re-transfer restrictions of this license exception;

2. That your company received an Export Commodity Classification Number (ECCN) from your U.S. supplier and will provide that to any party that receives the item as part of a re-export or re-transfer;

3. That your company understands that you may not use sections (a) or (b) of license exception APR to further export or re-transfer the item;

4. That the ultimate end-user of the item shipping under STA is the government of an eligible country, including the Australian Government;

5. That your company agrees not to re-export or re-transfer the item in violation of the Export Administration Regulations (EAR);

6. That your company agrees to provide records to the U.S. government upon request.

The last three requirements will mean that your company may need to implement new processes and procedures to both protect EAR controlled items and institute new record-keeping requirements for tracking EAR controlled items. In other words, there is no free lunch. Though it will be easier for your company to obtain certain items, the U.S. government will expect your cooperation in safeguarding these items in accordance with U.S. export regulations. This may mean reviewing and improving your company’s current export compliance program.

STA has different levels of controls for end-items, parts components, accessories and attachments and software and technology as well as various conditions that must be met for its use in re-export or re-transfer. Your company’s ERP system will need to allow for the tracking and record keeping required to meet STA’s conditions.

The U.S. government is intending to conduct end-use checks in Australia to ensure that items shipped under the STA exception were in-fact incorporated into items that were sold or will be sold to the Australian government. Refusing to allow an end-use check at your company can lead to the U.S. government putting your company on the entity list, which will result in an automatic denial of Department of Commerce licenses for shipments to your company.

Watch this two minute video with comments from Kevin Kurland, the Director of the Office of Enforcement Analysis at the U.S. Bureau of Industry and Security about the U.S.’ intention to conduct end-use checks in Australia.

What can your company do to prepare for export reforms in both the U.S. and Australia?

In conclusion, though there will be an additional compliance burden on Australian companies trading in U.S. controlled articles, the reduced lead times and administrative efficiencies realised as a result of U.S. export reform may be worth the effort.

The U.S. has made its expectations and intentions clear. They will expect that Australian companies accessing goods using the STA exception have robust recordkeeping and compliance programs. The U.S. government has said plainly and repeatedly that it will conduct end-use checks in Australia to ensure that controlled technology is adequately safeguarded. This means that Australian companies will need to:

1. Ensure processes and procedures are in place to protect U.S. controlled goods;

2. Develop robust and auditable compliance programs to ensure that a high level of compliance with both U.S. and Australian export controls is maintained;

3. Implement a training program to create awareness throughout the company about the sensitivities around U.S. controlled technology, employee responsibilities for managing access to that technology, and the consequences of non-compliance.

With the imminent implementation of the U.S.-Australia Defence Trade Cooperation Treaty and eventual royal assent of the Defence Trade Controls Regulations bill, the future holds an increase in audits of Australian defence companies, not just by the Australian government, but by the U.S. government as well. Now is the time for Australian companies to review their compliance programs to ensure the program is able to keep up with evolving export control requirements.

Please visit our website for a comprehensive overview of U.S. export reform, its progress and the implications for Australian companies.

• Is a qualified trade compliance professional responsible for conducting the internal audit, or does the responsibility fall to a generalist?
• Is there a schedule of the types of transactions that fall under the scope of the audit? Is there a timeline for when the audits should be conducted (every 3 months, 6 months, etc.)?
• Is there a potential conflict of interest between the auditor and the division being audited?
• Does your company have a standard audit module or self-assessment tool? Do the audits measure the effectiveness of existing policies and procedures?
• Does the audit measure whether there is effective daily oversight of trade activities, including whether the appropriate licenses/permits and appropriate internal shipment authorisations were obtained prior to shipment?
• Does the audit measure the effectiveness of recordkeeping practices?
• Does the audit include staff interviews (HR, IT, Logistics, Legal, Marketing, Sales, etc.) to assess their understanding of trade related responsibilities? Does that audit measure whether training and awareness programs are effective?
• Are audit results reported to management? Are actionable compliance improvement programs developed and implemented subsequent to the audit?
• How is it documented and verified that audits have been conducted? Are records of past audits maintained and reviewed to measure or demonstrate continuous improvement?

• help your staff detect and react to questions about the legitimacy of a customer order or export transaction,
• provide sufficient resources to employees to assess risk, and
• provide guidance on how to handle suspected violations.

 An effective EMCP will have the following key elements:

1. A corporate policy. A corporate policy on export controls that is issued by senior management and communicated to all employees. Employees should be required to acknowledge their understanding of the policy in writing.


2. Ongoing risk analysis. The EMCP should include risk analysis at the transaction level and provide procedures for the screening and evaluation of each export transaction. It should also include clear guidelines for how to escalate concerns and should recognize employees for their diligence in assessing risk. Placing an emphasis on risk analysis will help to reduce the risk of violations, while recognizing employee efforts to assess risk and prevent violations will help to create a culture of compliance.


3. Accessible policies and procedures. The EMCP’s policies and procedures should be accessible to all employees. It should be made clear who in the organisational structure is responsible for performing each part of the risk analysis process and who is ultimately responsible for the overall effectiveness of the compliance program. Procedures should also outline how advice should be sought on transactions where risk analysis has identified potential issues. Providing these resources to staff will help them to perform their export control responsibilities more consistently and effectively.


4. Regular training. Adequate training should be part of every EMCP. The training should be tailored to the function of the individual and to their role in helping to minimise risk and ensure compliance. Training should be conducted regularly to keep employees aware of their responsibilities and updated on legislative or procedural changes. Clear guidelines about which employees should attend training, the type of training required and how to record training attendance should be documented as part of your EMCP.


5. Emphasis on recordkeeping. Easy retrieval of records related to export transactions is essential to your internal audit program. A formal recordkeeping program, with defined filing formats, guidance of the length of time to keep records, and a clear archiving protocol is an important element of your EMCP.


6. Internal and external audits. Conducting regular audits of your export transactions can help to identify gaps in your processes and highlight areas requiring improvement. An audit program should include both a focused audit of high-risk areas as well as a random audit to get an overall picture of how your compliance program is performing.


7. Reporting violations and remedial activities. You EMCP should have a mechanism for employees to report suspected violations internally. It should also have a mechanism for making voluntary disclosures to the Australian government and for informing your customers or suppliers where required. Remedial activities should seek to determine the root cause of the violation and work quickly to create or amend procedures that will prevent future violations from occurring.

Australian companies exporting controlled articles should have a comprehensive EMCP and regular training in place to ensure they are compliant with Australian export controls. Companies trading in articles subject to the U.S. ITAR will need to have more stringent policies and procedures in place, which we will discuss in another blog post. If your company is trading in controlled goods and does not have an EMCP, or has not reviewed policies and procedures related to export controls in over a year, contact us to find out how we may be able to assist you.

Of note were the following comments from DECO representative Patricia Dennis (paraphrased):

• Provisions for making voluntary disclosures to DECO will likely be incorporated into the Defence Trade Controls Regulations.

• A ‘Community Portal’ will be created that Approved Community Members from both Australia and U.S. can log into to verify Community membership status and view eligible goods lists.

• With respect to research conducted at universities, ‘applied research’ will be restricted under the Act.

• Companies in both countries raised concerns about the definition of a ‘facility’ and it was clarified that a facility can be as large as a building or as small as a room. The company making the application for membership will define ‘facility’ as it applies to their organisation within their application.

• With respect to recordkeeping for phone conversations, it will be sufficient to keep a record of the nature of information that was communicated, to whom it was communicated and the time frame during which it was communicated (which may be several weeks or months). A record of each phone conversation will not need to be kept.

DECO did not provide any updates on the defence article marking requirements set out in the draft regulations at the seminar held in Sydney. It is anticipated that in the coming weeks, more information will be made available to Australian industry through continued outreach efforts.

Following further consultation with industry and academia, the Foreign Affairs, Defence and Trade Legislation Senate Committee is due to report to Parliament on the 15th of August and it is anticipated that the bill will pass in the Spring of 2012.