Amendments to the Defence Trade Controls Act 2012: What employers dealing in DSGL technologies need to know

Amendments to the Defence Trade Controls Act 2012: What Employers Dealing in DSGL technologies need to know

New offences under the Defence Trade Controls Act 2012 (DTCA) took affect on 1 September 2024, and the compliance transition period came to an end on 1 March 2025, meaning the criminal penalty provisions now apply. Among the new offences is section 10A, which makes it an offence to supply technology on the Defence and Strategic Goods List (DSGL) to non-exempt foreign persons within Australia. Each individual offence carries a potential penalty of imprisonment for 10 years or 2,500 penalty units ($825,000), or both.

Many employers within defence, and defence-adjacent industries, will be familiar of the requirements imposed by the United States’ International Traffic in Arms Regulations (ITAR), which imposes controls on the export of defence technology to non-US citizens. Obligations under ITAR continue to operate alongside the new DTCA obligations. Whilst the section 10A offence echoes some ITAR provisions, these new obligations will capture many Australian businesses who may not have previously contended with such requirements. This may raise challenges for employers within Australia’s defence-adjacent industries, who will be required to carefully consider their existing workforce and their hiring practices to ensure compliance with the DTCA. 

Defence-adjacent industries are those linked to the sector through their industrial capability, technical expertise, and specialised skills. It includes businesses which provide products and services that can be adapted for use by Defence companies and contractors, or by the Australian Department of Defence, such as aerospace/aircraft manufacturing, advanced manufacturing, engineering, and advanced technology industries.

What businesses will be affected?

Section 10A will affect any business that operates within Australia and deals with DSGL technology. Readers would know the DSGL is a legislative instrument that lists the goods that are regulated under Australia’s export control laws. It includes goods manufactured for solely military purpose, as well as dual-use goods (which may have both civilian and military applications). The list is broad – with upwards of 2,500 unique items, ranging from software designed to enhance the performance of high-speed cameras, to technology required for the development of telecommunications equipment designed to be used on board satellites. 

Section 10A makes it an offence to supply those prescribed technologies to non-exempt foreign persons within Australia. The term ‘supply’ is defined broadly within the DTCA, including supply by way of sale, exchange, gift, lease, hire or hire-purchase, and, in relation to DSGL technology, providing access. Consequently, this can include any action that allows a person to view or gain access to DSGL technology, such as (example only) through access to documents. As a result, by employing a person, an Australian business that deals with DSGL technology is likely also at risk of unlawfully ‘supplying’ that person with that technology, if not managed correctly (and note that some supplies are excluded due to the AUKUS partnership).

It is also important to remember that section 10A of the DTCA relates to “DSGL technology”, which does not include DSGL goods (unless those goods constitute technology as defined in the DSGL).

When is a ‘foreign person’ exempt?

A ‘foreign person’ is an individual who is not either an Australian citizen nor a permanent resident. A foreign person is exempt from the section 10A requirements if (1) they are from a specified exempt country or (2) they have a ‘covered security clearance’.

1. Specified Exempt Countries: persons from certain countries are exempt from these requirements, including most European Union member states, the UK, the US, New Zealand, India, Japan, and a handful of others. A full list is set out in the Defence Trade Controls (Foreign Country) Instrument 2024, otherwise known as the Foreign Country List.

   
   

2. Covered Security Clearances: this may include a clearance at Negative Vetting 1 level or higher, given by an Australian Commonwealth agency, or a clearance permitting access to information classified as secret, given by or on behalf of Canada, New Zealand, the UK, or the US.

   
   

What will this mean for Employers?

Interaction with ITAR

Australian defence-adjacent employers must continue to observe ITAR obligations, alongside the new DCTA provisions. The two regimes have some practical similarities, but may conflict in limited situations concerning duel citizens and permanent residents of Australia. Section 10A does not appear to be concerned with a person’s dual citizenship status, so long as they are a citizen or permanent resident of Australia. ITAR, meanwhile, prohibits the export of defence technology to any person with a non-US citizenship who is not authorised with the US Directorate of Defence Trade Controls to deal with ITAR technology (although note that due to the AUKUS partnership, there have been some exemptions introduced such as for ‘regular employees’). Therefore, the supply of technology controlled by both the DTCA and ITAR to a person who is a dual-citizen of Australia and a non-exempt country is permissible under the DTCA, but may, in limited circumstances depending on the Territory, be impermissible under ITAR.

Incompatibility with Anti-Discrimination Laws

On its face, section 10A may force defence-adjacent businesses to treat prospective employees’ unfavourably if they are not Australian citizens or permanent residents or an exempt foreign person. Employers are at risk of falling foul of unlawful discrimination legislation. Such legislation operates across all Australian jurisdictions, and uniformly prevents employers from making employment conditional on a person’s nationality.

Employers will have two avenues for complying with both DTCA and anti-discrimination obligations. They may (1) secure a permit for the supply of DSGL technology or (2) apply for an exemption from anti-discrimination laws in the relevant jurisdiction(s). In many cases employers should consider both of these options.

Application for Permit

As an employer the best approach to avoid breaching section 10A, particularly in relation to existing employees who are non-exempt foreign persons, will be to apply for a permit to perform activities that would otherwise constitute a supply of DSGL technologies. A business that successfully obtains a permit for any non-exempt foreign persons it may employ, will be able to continue to employ those non-exempt foreign persons without risk of breaching section 10A; however, that business must maintain records of relevant activities. This includes descriptions of the DSGL technology supplied and the name of any person to whom it is supplied. 

The Minister can be expected to take a permissive approach to the granting of permits. However, the Minister may refuse if they are not satisfied that the granting of a permit would not prejudice the security, defence or international relations of Australia.

Application for Exemption

Employers should also consider seeking an exemption to anti-discrimination laws with respect to nationality and country of origin (other protected attributes may be appropriate depending on the jurisdiction). Obtaining such an exemption would allow an employer to treat attributes such as nationality and country of origin as relevant factors in hiring new employees, to the extent that it is necessary for compliance with section 10A. Importantly, Federal anti-discrimination legislation does not exclude or limit the operation of equivalent State and Territory laws. This means that employers must consider the specific requirements for exemptions in each State or Territory in which they operate.

The tests for discrimination law exemptions differ between jurisdictions, but important considerations will generally include public interest, necessity, and appropriateness and reasonableness. In some jurisdictions such as South Australia and Victoria, employers are required to pay a lodgement fee to apply for an exemption. Employers may generally apply for a renewal of an exemption upon its expiry.

The maximum length of exemptions varies between jurisdictions. For example, NSW provides a maximum length of ten years, Queensland, and WA are five years, and SA is three years. 

What about current employees?

If a business employs a non-exempt foreign person and is unable to secure a permit in relation to that person’s access to DSGL technologies, it may become difficult for that employee to perform tasks inherent to their role, potentially putting their ongoing employment at risk. This will depend on several factors, including the individual circumstances of the employee, the key duties they are expected to perform in their role, and whether any adjustments can be made to their role allow them to continue their employment while ensuring DTCA compliance. In addition to considering DTCA compliance, employers will need to bear in mind the terms of the employee’s contract of employment, and their  statutory employment rights.

If a business is in a position where it must dismiss an employee in order to maintain DTCA compliance, it is important that this is done in accordance with Fair Work legislation. If unsure, independent advice should be obtained that is specific to the circumstances.

This article reflects the author's views and not necessarily those of the Export Controls Australia Group.