Strengthening the AUKUS partnership: what are your obligations under new export controls?

Sweeping changes to Australian export controls came into effect on 1 September 2024. From new controls relating to specialised software, semiconductors, quantum computers, aerospace and propulsion, to new offence provisions for supplying technology to foreign persons in Australia, we break down what the expanded controls mean for you (and your business).

Introduction

Against an ever-changing backdrop of technological development, Australia’s export controls have been given a refresh. In changes that are said to bring Australia in line with international non‑proliferation and export control regimes, the Australian Government has significantly expanded the scope of prohibited exports from Australia. ‘Exports’ are broadly defined and include Australian businesses and universities who deal with regulated goods and technology. Close attention needs to be paid to these changes to not fall foul of new offence provisions before the grace period ends on 1 March 2025.

Top takeaways

• New goods and technologies are now subject to export controls.
• New offences now regulate the supply of certain goods and technology to a foreign person or entity within Australia.
• Secondary suppliers may be liable if they export or supply DSGL-listed goods or technology, which is subsequently on-supplied from a foreign country to a person outside of Australia (regardless of nationality) or to a foreign person (regardless of whether they are within or outside Australia). Greater due diligence obligations apply to exporters to confirm their goods and technology do not end up with third parties.
• Supplying DSGL technology to foreign employees of Australian businesses that are not citizens or permanent residents may breach new offences.
• New offences also regulate the provision of certain services, including training and assistance, to foreign persons or entities (whether in Australia or not).
• Permits are no longer required to supply certain goods or technology, or provide certain services, to AUKUS partners.
• Given the expansion of the regime, owners and distributors of certain goods and technology should check if they are caught by new controls — and confirm what is required to comply before the grace period ends on 1 March 2025.

Overview

Two central components to Australia’s export controls system are the Defence and Strategic Goods List (DSGL) and the Defence Trade Controls Act 2012 (Cth) (Trade Controls Act). The DSGL and Trade Controls Act broadly prohibit the export and supply of certain goods, software and technology from Australia.

Despite vast advances in technology over recent years, both frameworks have remained largely consistent with the original scope — until now. We summarise some of the key updates to both documents below.

Defence and Strategic Goods List

The DSGL lists goods, software, and technology that cannot be exported, supplied, published or brokered from Australia without a permit. It is comprised of two parts:

• Part 1 – Munitions List, which relates to military goods and non-military lethal goods and
• Part 2 – Dual-Use List, which relates to equipment, software and technologies developed for commercial needs, but which may be used in some military context, including in the development or production of military systems of weapons of mass destruction.

The DSGL 2024 repeals and replaces the DSGL 2021. It contains 278 amendments, with the majority of those (231) clarifying or making editorial changes to existing controls. The remaining amendments modify or remove existing, or create new, controls.

From 1 September 2024, new controls apply for:

• semiconductors
• specialised software used to design complex integrated circuits and advanced electronic systems
• quantum computers
• software specially designed or modified for the development or production of digital computers
• technology for the development or production of components and software related to quantum computers and
• the export/supply of technology used in the development, production, or use of unmanned aerial vehicles capable of a range of 300km.

Exporters must be alive to the changes to the DSGL and how the broadened scope might affect them and their business.

Defence Trade Controls Act

The Trade Controls Act regulates the supply, publication and brokering of tangible and intangible military and dual-use goods and technologies. This includes arranging for other persons to supply goods listed on the DSGL, and directly supplying or publishing DSGL technology.

From 1 September 2024, the Trade Controls Act will now also regulate the provision of assistance (including training) of DSGL goods and technology listed in Part 1 of the DSGL (military goods). This includes the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarisation, destruction, processing or use of military goods and non-military lethal goods.

The Explanatory Memorandum refers to emerging strategic circumstances and challenges, and the need for a ‘robust protective security environment’ to enhance defence capabilities, to support the significantly expanded rules.

The Trade Controls Act now:

• extends export control requirements beyond the supply of goods and technologies to the giving of any ‘assistance’ relating to goods or technologies listed on the Munitions List (Part 1) of the DSGL and
• expands the scope of activities subject to export controls, including by creating three new offences relating to:
  • the supply of certain DSGL technology to foreign persons within Australia
  • certain goods and technology being provided from a place outside of Australia to another place outside of Australia, or to a foreign person and
  • the provision of services for DSGL Part 1 listed goods or technology to foreign persons or entities.

In facilitation of AUKUS arrangements, the Trade Controls Act now provides for a carve-out of existing export controls to remove the need to obtain a permit to supply certain DSGL goods and technology, or to supply certain DSGL services, to AUKUS partners.

Some of the key changes include:

Where to from here?

Export controls are complex and, now more than ever, the penalties for non-compliance are significant.

Most relevant to exporters is the extent to which a person can be liable for supply or on-supply of its goods or technology to persons overseas, regardless of whether those people are Australian or not. A greater onus is therefore on exporters to ensure they have robust due diligence checks in place and to understand how and by whom their exports will be used. This is likely to be in full spotlight by the regulator in coming months.

Importantly, the new offence provisions apply only in relation to conduct occurring on or after 1 March 2025 — but do not leave it until then to get up to speed with how these changes will affect you and your business.

Please reach out to the team at KWM if you would like to understand how your exports and activities are caught by the new laws.