Australia has new export control rules. In response to changes in Australia’s strategic environment, Parliament passed the Defence Trade Controls Amendment Act 2024. One of these rules has garnered much attention - the new Defence Trade Controls Act 2012 (the Act) section 10A Offence—supply of Defence Strategic Goods List (DSGL) technology to a non-exempt foreign person within Australia without a permit.
So, what does it mean and is it really that bad?
The policy rationale
To keep pace with the challenges posed by an Indo-Pacific defined by major power competition and the rapid militarisation of emerging and disruptive technologies, it is critical that Australia has a robust export control regime. The introduction of this offence responds to these changes in Australia’s strategic environment. The offence is one of the measures Defence has taken to protect and safeguard Australian technology and information, as well as that of key partners.
The language in the Section explained
In summary, the language in the section says that a person commits an offence if they supply* 'DSGL technology''*, to a foreign person* who is also in Australia, without the proper permit from DEC*.
What is meant by Supply?
For the purposes of the section 10A Offence, supply is defined in subsection 5B(1) of the Act and the definition is broad covering all supplies of DSGL goods or technology. In practice, this means that all supplies of DSGL goods or technology are subject to the section 10, 10A, 10B and 10C Offences. For the purposes of the section 10A Offence this means a non-exempt supplier will need to obtain a defence export controls permit in order to supply DSGL technology (capturing both physical and electronic supplies) within Australia.
What is DSGL Technology?
The term Technology is a defined term within Australian export control law (in the DSGL). It means specific information necessary for the “development”, “production” or “use” of a product. This information takes the form of ‘technical data’ or ‘technical assistance’. Technical assistance may take forms such as instruction, skills, training, working knowledge and consulting services and may involve the transfer of technical data. Technical data may take forms such as blueprints, plans, diagrams, models, formulae, tables, engineering designs and specifications, manuals and instructions written or recorded on other media or devices such as disc, tape or read-only memories. For the purposes of this offence, DSGL technology excludes technology that has been produced in the course of, or for the purposes of, fundamental research.
Who is a Foreign Person?
The Act defines foreign person as a person other than an Australian person. This includes someone who does not hold Australian citizenship or is not a permanent residence, or a company that is not incorporated by or under a law of the Commonwealth or of a State or Territory.
However, the Act does not mean that all foreign persons inside Australia need permits before they can receive DSGL technology. The Act provides an exemption for citizens of the countries listed on the Foreign Country List.
The Foreign Country List (FCL) is a legislative instrument within the Australian export control framework. In recognition of the regulation imposed by members of the international export control system and taking into consideration Australia’s national security, foreign relations and economic well-being, legislative exemptions (including from the section 10A offence) have been created in the Defence Trade Controls Act 2012 for the countries specified in the instrument.
This updated list contains 31 countries. Foreign Persons, i.e. those inside Australia who do not hold Australian citizenship, but do hold citizenship of one of these 31 countries, are excluded from the requirement to obtain a permit for section 10A activities. This means, Australian individuals and businesses do not need a DEC permit to supply these individuals with DSGL technology inside Australia.
What does it mean for my business?
This new export control offence regarding supply of DSGL goods and technology to non-exempt Foreign Persons within Australia needs consideration and incorporation into your business as usual. There are two main areas of risk to address, first your personnel management and second, your domestic supply chain.
Personnel management
To address your Section 10A obligations and embed it within your business, consider enhancing policies and processes for incoming employees.
Australian businesses already have a framework for employee screening within the Australian Standard for Employment Screening (AS 4811:2022), which supports best practice pre-employment screening approaches across Australia. This or an equivalent framework is a good place to start, as it requests information and evidence from applicants on their right to work, address and historical addresses, employment history, references, criminal history, education and supports a social media check. This process could then be enhanced to also capture current and previous citizenship or permanent residency, as well as any additional checks currently done to satisfy ITAR 126.18(c).
This process provides a record, accessible within the constraints of Australian privacy laws. It enables businesses/employers to make informed choices about whether they require a permit to provide DSGL technology to an employee to comply with section 10A.
Domestic Supply Chain Management
Prior to supplying DSGL technology to a subcontractor or supplier, Section 10A checks should be satisfied to understand whether your business requires a permit to supply the goods or technology.
Section 10A checks could be subsumed within normal supplier onboarding processes, with a focus on periodic renewal to ensure supplier provided information remains current and reliable.
Conclusion
Section 10A is here to stay, so it is time for Australian businesses and universities to incorporate compliance requirements within business as usual. You may find the language of the offence daunting or complex, yet compliance is achievable by developing or adjusting existing internal policy and process. Training your staff that are most affected by the compliance requirements is also essential, and big businesses (Primes, etc.) may need to lean in to support smaller suppliers to understand the additional questions being asked.
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