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AUKUS Defence Trade Controls: ECAG's Analysis and the Importance of Collaboration & Learning



The landscape of global defense trade is evolving rapidly, with new regulations and agreements reshaping how countries manage and control the export of military and dual-use goods and technologies. At the forefront of this transformation is the Australian Defence Trade Controls Amendment Act 2024 (DTCA Act) and the Defence Trade Legislation Amendment Regulations 2024 (the Regulations), designed to Australia's export controls in alignment with the AUKUS partnership.


The Australian Government should be commended for its tireless efforts to achieve unprecedented access to certain advanced technologies and its initiatives to significantly enhance export controls in Australia. These efforts are a testament to the government's commitment to strengthening national security and fostering international collaboration, particularly through the AUKUS partnership.


However, as with any major policy shift, these benefits come with their own set of challenges. Implementing such comprehensive changes requires careful navigation and adjustment from all stakeholders involved. The complexity of understanding and complying with the new regulations, particularly for small and medium-sized enterprises (SMEs), presents a notable hurdle.


Analysing US ITAR and UK OGEL Exemptions


US ITAR Exemption (126.7)

The US International Traffic in Arms Regulations (ITAR) provides exemptions under section 126.7, which can be optionally applied by companies. This exemption allows for streamlined processes for certain types of exports, reducing the regulatory burden on businesses. Companies can choose whether to utilise these exemptions based on their specific needs and circumstances, providing flexibility in managing their export controls.


The Excluded Technologies List (ETL) has introduced certain limitations that could impact the benefits of the AUKUS exemption. Recommendations are being made to request the Directorate of Defence Trade Controls (DDTC) to justify why specific technologies are included on the ETL. This would provide an opportunity for stakeholders to present cases for the removal of certain technologies from the list, potentially enhancing the efficacy of the AUKUS exemption.


UK Open General Export Licenses (OGELs)

The UK operates under a system of Open General Export Licenses (OGELs), which simplify the export process for specific goods and destinations. OGELs allow companies to export without needing to apply for individual licenses, provided they meet the criteria outlined in the license. This system offers a balance of security and flexibility, enabling businesses to operate efficiently while maintaining control over sensitive exports.


The New Australian Export Controls

The Australian Defence Trade Controls Amendment Act 2024 introduces significant changes aimed at aligning Australia’s export controls with international standards, particularly in the context of the AUKUS partnership. These changes are designed to enhance the protection of sensitive technologies and increase collaboration between the three countries.


However, the new regulations also introduce complexities, particularly for small and medium-sized enterprises (SMEs). For example, under the new framework, there is a requirement to understand the complex classification of technologies and then meticulously follow each applicable requirement to determine what is relevant and what is exempt for each offence, as well as manage the associated record-keeping obligations.


Addressing Critical Concerns


A challenge is that the impact analysis used by the government to assess resourcing and effort to support this was completed prior to the regulations and specifics begin finalised, with the next review legislated in three years. This lack of ongoing oversight and metrics on performance and potential impact on industry could mean trouble, especially when you are introducing such significant changes 'from zero to deemed exports'.


Impact on Industry and New Frameworks


Challenges for Small Businesses

Small-business owners in Australia often find themselves at a disadvantage under any new system, with limited knowledge and resources they could be impacted. They may also face significant delays in clarification or permit and authorisation requests, which can have severe financial implications. A three-week delay could mean missing crucial business deadlines, highlighting the need for quick turn-around times and a supportive regulatory environment.


Large Businesses and Prime Contractors

Large prime contractors also face their own set of challenges. Despite their resources, they often struggle with the cumbersome processes and lack of alignment between different national regulations. It is important that industry has access to a regulatory framework that supports and empowers them to meet ambitious goals, to enable better cross-border industry collaboration.


Creating an Enabling Environment

The government must focus on enabling businesses of all sizes to thrive. This involves providing more substantial support to small businesses to help them navigate the complexities of international defence procurement. It also means respecting the capabilities of large businesses and working in partnership to facilitate their operations.


Streamlined Processes and Clear Guidance

There is a need for streamlined processes and clear, actionable guidance. Trade control administrators must understand the critical role they play and should not rely excessively on the expertise of large private-sector partners. Clear guidelines and timely support can help all businesses comply with regulations without unnecessary delays.


The Path Forward: A Collaborative Approach


Learning from International Examples

By examining the strengths and weaknesses of the US and the UK's long established export controls ecosystem, Australia can develop a more robust and flexible framework. This framework can introduce and support associations similar to those established in the US and UK, such as the EGADD in the UK and SIA & AIA in the US. These associations support the industry and advocates for it while working closely with the government to bridge gaps and ensure consistent messaging.


Additionally, such a framework can help mitigate the fearmongering and profiteering often seen in the market in these countries by providing clear, unbiased and consistent outreach and messaging. Linking with other international associations can create synergy and support a broader ecosystem. Along with this, upskilling local law firms through government engagement will ensure they can provide necessary support when required, fostering a more collaborative and informed approach to export controls.


ECAG's Commitment to Effective Regulation

Export Controls Group Australia (ECAG) is deeply committed to supporting Australia's defense industry through these changes. We will be submitting detailed feedback on the DTCA Act and the Regulations, focusing on the broader trade control landscape influenced by AUKUS-related activities across the partner governments of Australia, the United States, and the United Kingdom.

Through extensive engagement with the governments of the AUKUS nations and active participation in industry groups, ECAG has been closely monitoring and contributing to the export control reform initiatives.


Encouraging Industry Participation

As we navigate these significant regulatory changes, collaboration and active participation from all stakeholders are crucial. ECAG invites industry professionals, academic researchers, and other interested parties to contribute in shaping a robust and workable defence export control system.


By joining ECAG, you can contribute to meaningful discussions, stay informed about the latest developments, and help advocate for policies that support both national security and the prosperity of Australia's defense sector.


Together, we can ensure that Australia's defence trade controls are effective, efficient, and supportive of our strategic goals. Join ECAG today and be part of the solution.


See here our Membership Prospectus and options.



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POLL: How well do you feel you understand the changes?


How well do you feel you understand the Export Control changes and how it will be implemented? (anonymous)

  • 0%Completely Understand

  • 0%Mostly Understand - still some questions

  • 0%Some of it - lots of questions

  • 0%A little - need more understanding



 

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