Cross-border defence procurement and trade in Australia

International trade rules

What export controls limit international trade in defence and security articles? Who administers them?

The Defence and Strategic Goods List (DSGL) published under the Customs Act 1901 identifies military and dual-use items regulated under Australia’s export controls. Australia implements export controls on the export of controlled items in both tangible and intangible forms. Under the Customs (Prohibited Exports) Regulation 1958, it is prohibited to export controlled items from Australia without a permit. Since April 2016, under the Defence Trade Controls Act 2012, intangible transfer of export controlled items (DSGL technology) by a person within Australia to another person outside Australia is regulated as part of export controls. Intangible transfer can occur, for example, by a person emailing DSGL technology from a place within Australia to another person outside Australia. Intangible transfer can also occur by a person within Australia providing another person outside Australia with the means to access DSGL technology situated in Australia (eg, a password to access DSGL technology on a server). Unlike some jurisdictions, Australia does not apply export control rules to transfers of controlled items to foreign nationals within Australia. There are limited situations where no permit is required or where an alternative, easier-to-­administer permit may be available. Defence Export Controls within the Department of Defence is responsible for issuing permits and giving guidance on export controls.

What domestic preferences are applied to defence and security procurements? Can a foreign contractor bid on a procurement directly?

Foreign contractors regularly successfully bid directly on Australian defence and security procurements. They also regularly bid using an Australian subsidiary or as part of a joint venture. A foreign contractor may directly bid on an Australian government defence and security procurement other than where the government relies on a trade agreement provision entitling the government to place limits on bidders or do selective sourcing.

Australia has agreed in the government procurement chapter of several free trade agreements to treat foreign suppliers no less favourably than the procuring entity accords to domestic suppliers for covered procurements. Defence procurement above a monetary threshold is usually a covered procurement. However, the free trade agreements contain some carveouts from this commitment, such as for procurement of supplies for identified essential security defence needs. Most free trade agreements to which Australia is a party also switch off the government procurement chapter obligations for any form of preference to benefit small-to-medium enterprises.

Australian domestic and foreign bidders for defence and security procurement are required to participate in the Australian Industry Capability (AIC). The AIC requirements applicable for a procurement are set out in the procurement terms. Requirements are generally more extensive if the procurement is estimated to be over A$20 million or for supplies relevant to the priority areas where the government wishes to develop Australian defence capability. The AIC programme commitments that bidders offer in their bids form part of the procurement assessment criteria and the contractual obligations of the successful bidder. While not a domestic preference, a foreign contractor may also face some practical challenges in meeting the criteria for an Australian defence and security procurement if the project requires substantial access to security classified information.

Are certain treaty partners treated more favourably?

There are measures benefiting trade in defence articles with US suppliers. The governments of Australia and the United States have agreed the Defense Trade Cooperation Treaty. A measure facilitated by the treaty is that US suppliers can apply to be members of the Australian Community. A member has been vetted to meet certain security requirements. As a result, the member should find that trade in controlled items is streamlined and subject to fewer licensing or permit requirements. Given their traditionally close defence relationship, the Australian and US governments have also established protocols for transfer of defence-related material and working on joint defence projects that can benefit participating suppliers.

Are there any boycotts, embargoes or other trade sanctions between this jurisdiction and others?

The Australian federal government implements the United Nations Security Council sanctions and applies its own autonomous sanctions. The government does not tend to apply boycotts or embargoes in trading with a jurisdiction. Instead, the government prohibits without a permit direct or indirect trade with designated persons and entities and industry-sector targeted trade in certain goods and services connected with a sanctioned jurisdiction.

When sector sanctions are applied against a jurisdiction, the sanctioned supplies usually include exporting arms and related materiel to or providing services concerning arms and related materiel benefiting the jurisdiction.

The Department of Foreign Affairs and Trade (DFAT) administers Australian sanctions but consults with Defence Export Controls on arms and related materiel matters. DFAT generally treats all items listed on the DSGL as falling within the meaning of arms and related materiel.

Sanctions vary with changes to the political climate. At the time of writing, Australian sanctions apply for the Central African Republic, Counter-terrorism, Crimea and Sevastopol, the Democratic People’s Republic of Korea (North Korea), the Democratic Republic of the Congo, Eritrea, the Former Federal Republic of Yugoslavia, Guinea-Bissau, Iran, Iraq, ISIL (Da’esh) and Al-Qaida, Lebanon, Libya, Myanmar, Russia, Somalia, South Sudan, Sudan, Syria, the Taliban, Ukraine, Yemen and Zimbabwe.

Are defence trade offsets part of this country’s defence and security procurement regime? How are they administered?

The Australian government does not use trade offsets in its procurement regime.