Export Technology or Software? What you Need to Know to avoid Fines or Prison

There has been a recent flurry of activity among exporters of technology or software as the new provisions under the Defence Trade Controls Act 2012 (Act) become operative (after a trial period of some 12 months).

The purpose of the Act is to strengthen controls on the transfer/export of sensitive technologies in order that Australia meets its international obligations under various treaties.

From 2 April 2016, goods in intangible form which – if they were in a tangible form (the actual goods) would require a permit to export – will also require an export permit.

Are your goods affected?

The Act applies to technology or software (in hard copy or intangible form) (DSGL technology) that is on the Defence Strategic Goods List (List).

The List (available on-line at https://www.legislation.gov.au/Details/F2013C00051) is divided into two parts. Part 1 is the Munitions List which describes goods that are developed or adapted for military purpose.

Part 2 of the List details goods that are “dual purpose”, that is, the goods described have been developed for commercial purposes but could be repurposed or componentry could be used for military applications. This article only deals with requirements in relation to dual purpose goods.

The List divides dual purpose goods into categories as follows:

Category 0 – Nuclear Materials

Category 1 – Materials, Chemicals, Microorganisms and Toxins

Category 2 – Materials Processing

Category 3 – Electronics

Category 4 – Computers

Category 5 – Telecommunications and Information Security

Category 6 – Sensors and Lasers

Category 7 – Navigation and Avionics

Category 8 – Marine

Category 9 – Aerospace and Propulsion

If your company exports goods which fall under these categories, and particularly if those goods are at the “high tech” end of the spectrum, we recommend that you check whether an export permit is required.

Are you exporting without the requisite permit?

The Act makes it an offence to supply, without first obtaining a permit, DSGL technology (in hard copy or intangible form) that is on the List. There are some exceptions which relate to DSGL technology already in the public domain or which can be considered to be basic research.

Specifically, the Act provides that a supplier commits an offence if the supplier supplies DSGL technology to another person and either:

1. the supply is from Australia to a place outside Australia; or
2. if the supply is the provision of access to DSGL technology – at the time of the provision of access, the supplier is in Australia and the other person is outside Australia…

For the purposes of the Act:

• supply is defined to include the provision of access to the DSGL technology, as well as the more traditional forms of supply such as sale or lease.
• the supply must be to another person located outside of Australia, that is, to a different legal entity or natural person to the person supplying the DSGL technology.
• Australia is used in its geographical sense.

Intangible form means that the information relating to the goods or services is supplied via electronic communications such as by email, or file transfer.

The Act sits alongside the Customs Act 1901 which regulates the export of various goods.

Goods that may require an export permit

Export permits may be required for:

• some types of composite materials (Category 1);
• machine milling tools (Category 2);
• some carbides and coating technologies (Category 2);
• various lasers (Category 6);
• decryption algorithms (Category 7); and
• technology for machining propellers to reduce underwater noise (Category 8).

How do you get a permit?

If you have determined that you need an export permit, you must apply on-line (http://www.defence.gov.au/deco/forms.asp) for a licence to export your DSGL technology. When making the application, you will be required to nominate the countries to which you wish to export.

Sanctions regimes

There are further export restrictions under Australian laws and as part of Australia’s international obligations under the UN Sanctions regime.

UN Sanctions prohibit exports of DSGL technology to a number of countries and Australia imposes its own additional sanctions.

As the list of prohibited countries changes, you should check the DFAT website regularly.

But wait – there’s more!

If your export incorporates any tangible or intangible goods that you acquired from the US under conditions where the US exporter was required to obtain a permit to supply, you may well need export permits from both Australian and US authorities. The Defence Export Control Office (DECO) is unable to grant any authorisations with respect to US requirements.

Penalties

There are quite significant penalties for failure to comply with the Act.  The penalties apply to any person (body corporates as well as individuals) who exports without a permit, goods or services (including in an intangible form) that appear on the List. The penalties are tough – 10 years prison and/or $450,000.

Our Services

Francis Abourizk Lightowlers (FAL Lawyers) advises directly on compliance issues arising out of export requirements and can assist with applications for DECO registrations and applications for export licences.

FAL Lawyers also works with John Gaunt at FAL Consulting and Doug Tozer at TradeFox, who assist with Customs queries. FAL Consulting are experts in Customs consulting, including Customs duty management systems and compliance.  TradeFox runs a software program to assist with assessing the correct Export Control Classification Number (ECCN) required for exports and imports. The Customs (Prohibited Exports) Regulations 1958, which are also referenced in the TradeFox program, are a useful reference for checking goods against the dual use Categories nominated above.