Complying with defence export controls

Australian companies involved with defence technology must remain aware of, and compliant with, existing export controls, particularly for dual-use products across both defence and commercial sectors.

Controls relate not just to a physical item but also technical data, information, services and know how.

The export controls are necessary due to Australia’s commitment to various international laws and regulations, including multilateral arms control treaties.

Additionally, the controls are designed to preserve Australia’s national interests.

Similarly, the US has its own framework strictly overseeing the export, sale and re-transfer of US-developed defence articles and services.

This includes the Export Administration Regulations (EAR) and International Trade In Arms Regulations (ITAR).

ITAR focuses directly on the control of defence and military products that perform an inherently military function.

ITAR controls are linked to national security objectives and products listed on the US Munitions List (USML) as subject to ITAR, overseen by the US Department of State.

Anything US-made not covered by ITAR or the USML falls under the regulatory regime of EAR, and is overseen by the Department of Commerce.

The US Department of State can implement ITAR via authority granted by the US president, who is granted authority by the Arms Export Control Act.

The Australian equivalent of the USML is the Defence and Strategic Goods List (DSGL), governed by the Department of Defence.

The Customs Act 1901, Defence Trade Controls Act 2012 and other legislation creates the legal framework for export control in Australia.

 The Defence Export Control (DEC) branch is responsible to the defence minister for complying with the DSGL and assessing applications for export licences.

For exporting Australian DSGL product, applications can be made via the DEC page on the Department of Defence website, and it includes a useful self-assessment tool.

These export control mechanisms can cause frustration and led to some much-needed reform.

Fifteen years ago, the general sentiment that surrounded ITAR was that it was so complex both in a selling and operational context that, if there were viable alternatives to the ITAR-controlled product, then that alternative should be strongly considered.

In 2006, The Space Review was among many publications to note the impact that shifting satellite technology onto the ITAR register had on the US manufacturers.

In an article titled ‘The effects of export control on the space industry’, it notes a market share drop from 83 per cent to 50 per cent in a six-year period following the introduction of ITAR controls. There are numerous other reports relating to the same issue for the space industry, and various others noting speculation that international defence contracts moved away from a US product due to ITAR controls.

One other example of which I am personally aware was a commercial transaction for a dual-use product, for which a failure to provide the most basic specification data due to ITAR controls prevented a $US200 million contract being executed.

These examples highlighted the need for reform that protected the original intentions of export regulations but did so sensibly.

The Australia US Treaty on Defence Trade Cooperation, implemented in 2013, delivered that reform. This treaty creates an “approved community”, where members of the treaty will not be required to apply for export licences or approvals if transferring goods to either nation.

To become registered as a member of the approved community, a company must first register with Defence Export Controls.

The process is defined, with application links, on the defence website via the Defence Export Controls and US Trade Treaty pages, leading to the ‘Australian Community Membership’ page.

The reforms were certainly welcomed and will possibly undergo further refinement as part of the broad technology-sharing objectives of the AUKUS alliance.

A short note of caution is that ITAR compliance may require Australian businesses to strictly control who accesses information and product based on their nationality.

Please consider and carefully manage the implications of that discrimination within the workplace as it relates to culture, morale, work scope, future promotion opportunities and legal exposures.

For any business with defence export ambitions, or the potential for ITAR-controlled imports, registering with the relevant bodies will be an important step in ensuring compliance and enabling your business to meet the challenges ahead.

• Kristian Constantinides is the general manager of Airflite, and chairperson of AIDN-WA; the opinions expressed are purely his own