• The Canadian Controlled Goods Program could serve as a model for easing the compliance burden on Australian defence industry.
    The Canadian Controlled Goods Program could serve as a model for easing the compliance burden on Australian defence industry. Pixabay

The spectre of Defence Export Control Regulations for Australian Defence businesses is ever-present, and there are emerging changes and challenges that will require a renewed focus.

Factors such as the Cybersecurity Maturity Model Certification (CMMC), National Technology Industrial Base (NTIB), and the 2018 Defence Trade Control Act Review have been introduced or reviewed in the past twelve months. They have created a current and impending compliance dilemma for many businesses that will become clearer as 2020 progresses.

The challenges for businesses attempting to maintain compliance are increasing, while pressures to maintain work and open new markets remains the core focus. These challenges are even more pertinent when we consider the US International Traffic in Arms Regulations (ITAR) and Export Administration regulations (EAR), which Australian businesses must ensure they factor into any risk assessments linked to Defence business associated with US technology.

ITAR is an often confusing and challenging concept for many Defence businesses, particularly SMEs. It requires businesses to be aware of the regulations as they impact their business, and for them to initiate compliance requirements to mitigate the associated risks. Assistance in navigating these regulations is only occasionally given by government, so what do they do to remain compliant?

The implementation of the NTIB for Australia indicates that the US Government wish to encourage US Defence business involvement in Australia, leading to exposure to ITAR and EAR products and technical data. Canada is a long established NTIB member as a result of its geographic location, and has an accepted process for assisting their Defence Industry with compliance measures in the field.

Australia has the pre-existing Australia-US Defence Trade Cooperation Treaty, which was established in 2013 in order to facilitate the efficient transfer of controlled goods between the members of an Approved Community without the need for export licences. The importance of such a Treaty cannot be denied, but the operation of the Treaty is restricting the ability for Australia SMEs to take advantage of it.

Reported difficulties with the Treaty include: Treaty articles authorised for export are limited to those listed on the Defense Trade Cooperation Munitions List 2017; the use of the Treaty is limited to Australian and US Government approved end-use only; and the administrative burden in facilitating changes to projects where items may be required to be exported outside the Treaty boundaries.

In comparison, the Canadian Controlled Goods Program is a dual-focussed Export Control and Security Program. Originating from US revocation of ITAR exemptions for Canada in 1999 due to increased security concerns, it was developed to introduce legislative measures to strengthen defence trade controls in Canada. It ensures that Canadian businesses have the necessary measures in place to not only protect Canadian interests, but also those of the US through ITAR. Notwithstanding numerous changes to this policy construct since establishment, the Program remains in force.

Using the construct already established under the Australia-US Defence Trade Cooperation Treaty, Australia should look to mirror the Canadian example by doing the following:

- Requiring all businesses looking to export or handle US goods to be registered for notification to US and Australian Governments;

- Widening the list of treaty articles to as far as possible mirror the US Munitions List (USML); and

- the introduction of complementing Defence Industry Security Program (DISP) requirements for businesses to ensure security is maintained.

Amendment of the Treaty scope and eligibility should allow for the changes and challenges prevalent in the current world geo-political environment.

More on this will be available through the year as the effects of recent legislative changes are realised.

Note: Kevin Chenney is a Senior Consultant with Goal Professional Services. The author’s views are his own.

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