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Australia’s Strengthened Export Controls- World ECR December 2013

The Australian government is in the process of implementing strengthened export controls to regulate the export of intangible supplies of technology and brokering activities, creating a major change that affects companies across a wide variety of industries as well as the research and education sectors.

The Defence Trade Controls Act 2012 (the Act) put into place new measures to control deemed exports and bring Australia in line with international best-practice. The Act requires that any intangible supply of technology related to goods controlled on the Defence and Strategic Goods List (DSGL), or brokering activities related to DSGL controlled goods will require a permission from the Australian government in order to legally supply the controlled technology to an entity outside Australia. To illustrate the change with an example, exporting a CD containing blue prints of a DSGL controlled item currently requires a permit to export, but emailing a link to the same information to an entity overseas does not. The strengthened export controls seek to close this gap by implementing controls on deemed exports.

Given that so much of the Australian industrial base will be affected by the strengthened export controls, a two year transition period was established, during which individuals and organizations will not be required to seek permission to supply DSGL controlled goods intangibly, or to conduct brokering activities. In effect, the strengthened export controls will be implemented at the end of the transition period, which is set to end in May 2015, unless there is an earlier ministerial proclamation announcing they have come into effect.

In the interim, a Strengthened Export Controls Steering Group (SECSG), consisting of representatives from prime defense companies, academic and research institutions and government, was formed to conduct pilot programs and review the impact of the legislation on industry. The group seeks to understand the impact of the strengthened export controls, identify the resources required for industry to comply with the new regulatory requirements, and make recommendations to the Minister for Defence for modifications to the Act and the publication of additional guidance to ensure its successful implementation at the end of the transition period. They will also make recommendations to amend other existing legislation to ensure that the strengthened export controls are not in conflict with other state or federal legislation.

The SECSG meets regularly to discuss the effect of the controls to observe whether they are striking an appropriate balance between creating additional obligations for industry and meeting Australia’s international obligations. When the Act first became law, there was concern within both industry and the research sector that the strengthened export controls would hinder Australian industry’s competitiveness and restrict international collaboration in the research sector. The SECSG will seek to review the issues raised by industry and academia and test legislative, governance and policy solutions for these issues to ensure a smooth transition to the laws becoming effective in 2015.

The Australian Government’s Defence Export Control Office (DECO) has also implemented a new Defence Export Control System, allowing exporters to apply on-line for export permissions and phasing out several existing forms previously required to request export permissions in favour of a single export permission. The additional government funding for DECO’s new system and industry outreach program comes at good time as the strengthened export controls will require a great deal of guidance for companies and institutions not accustomed to requesting export permissions for intangible supplies and brokering activities. In advance of the strengthened export controls taking effect, companies will be required to self-assess the controls on their proposed intangible supplies and implement policies and procedures to ensure compliance with the new legislation. DECO is expected to conduct extensive outreach prior to the end of the transition period to assist companies in understanding their obligations.

Though the final recommendations of the SECSG will not be made for some time, it is expected that permissions to export intangible supplies of technology may take the form of one-off permits or a broad license that covers a number of transactions over a period of time. The type of permission required will depend on the end-use, end-user, destination and nature of the technology. In addition, organizations involved in ‘brokering activities’ will need to register as brokers and obtain permission to arrange the supply of DGSL goods or technology before the end of the transition period. Definitive guidance will be published once the SECSG completes its work and any changes to the legislation are finalized through ministerial and parliamentary processes. For more information, on Australia’s Strengthened export controls, one can visit the Defence Export Controls Office website at www.defence.gov.au/deco

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