News

Defence bid to control uncontrolled technology fails, for now

22.05.2019

3D printers, memory devices – you would be excused for thinking that these were pretty standard products these days. But this is not necessarily the case, as the continuing debate about the dividing line between “benign” and “malign” goods, and the people who trade in them, tell us.  The concern of governments around the world extends further, to any new technology that is “uncontrolled” in cross-border trade.

The Independent Review of the Australian Defence Trade Controls Act 2012 (“Thom Report”) released on 13 February 2019 has slowed down the efforts of the Department of Defence (“DoD”) to extend export controls beyond the identified goods and technologies in the Defence and Strategic Goods List (“DSGL”). Recent changes to the DSGL demonstrate a readiness on the part of Australian regulators to accept that many dual-use goods are now more generally available, and that to interfere in the trade of those products is like believing that a Dutch boy can save his country by putting his finger in a leaking dike.

In this joint IP Communique/Trade Law Bulletin Alistair Bridges and Benjamin Duff of Moulis Legal explain what these trends mean for the non-defence industry, and what is ahead for dual-use technology.

Thom Report investigates the “balance” of security trade

In April 2018 Dr Vivienne Thom AM, former Inspector General of Intelligence and Security, was appointed to review whether the Defence Trade Controls Act 2012 provided appropriate levels of regulation and security for controlled technologies. In its submission to the review, DoD proposed that the Act should include a requirement to obtain a permit to supply DSGL goods and what DoD referred to as uncontrolled technology to foreign entities if there was reason to believe the technology was significant to national defence capability or to Australia’s international relations.

This catch-all export restriction, based on DoD’s opinion from time to time, was heavily criticised by technology companies and institutions. Organisations that made submissions included all the major universities, Boeing, Northrop Grumman, Thales and Saab. Objectors to the open-ended DoD proposal protested that the powers sought by DoD were too arbitrary and uncertain.

Controls should not unnecessarily restrict trade

The Thom Report takes a middle-line approach. It stops short of accepting DoD’s bid to control uncontrolled technology but at the same time recommends that consultations between DoD and industry continue in an effort to improve controls over emerging and sensitive technologies. In qualification of this recommendation, Thom says:

To ensure that any amendment does not unnecessarily restrict trade, research and international collaboration, the legislative proposal should:

  • ensure all decisions are targeted and based on risk-related consideration of the technology being supplied, the end user and the end use
  • contain measures to ensure transparency and scrutiny of decisions
  • limit additional uncertainty, complexity and risk of inadvertent breaches
  • minimise any increased compliance costs.

The Thom Report also recommended improved application processing times, better on-line information resources about the DSGL, more resources for industry education and tougher monitoring powers.

What is the DSGL anyway?

Australia’s export controls system is implemented under the Customs (Prohibited Exports) Regulations 1958. Section 13E deals with the exportation of military and dual-use goods through the publication of the DSGL. The DSGL is often updated to reflect international trends and security concerns. Promoting research and development, and good commercial outcomes for Australian business, are also a consideration, even if secondary to the main defence focus of the DSGL, and not readily admitted.

As technology has become more strongly embedded in our national systems, and becomes more critical to their operation, the concern about the control of those technologies and how they may be interfered with has grown. Artificial intelligence, supercomputer, laser and encryption technologies are just a few of the “goods” that can actually be “bads”.

The DSGL relies on input from DoD and wider consultation in order to ensure it remains “up to date”. For that purpose DoD invites parties with specialisation in the fields under consideration, and those on its register of interested parties, to comment and assist the DoD in making specific updates to the DSGL.

Some security trade restrictions relaxed

On 27 March 2019, the DSGL was revised, with some of the changes substantially loosening pre-existing dual use restrictions. Overall, 70 amendments were made to the DSGL. Of those, 23 sought to remove or reduce the requirement to obtain export approval for certain product groups, 13 introduced new or expanded controls for product groups, and 34 clarified the controls for product groups.

Big win for 3D printers

Probably the most notable changes relate to 3D printers and the machinery and technology that is used within them. The DSGL amendments remove approval requirements for:

  • robots capable of 3D image processing or 3D scene analysis;
  • interactive graphics as an integrated part in numerical control units, which are the automated controls of machining tools and 3D printers; and
  • technology for generating machine tool instructions from design data residing inside numerical control units.

3D printing can be a real security problem, because it allows goods to “turn up” in a country without having been physically imported into the country. The technology is capable of producing goods accurately and at low cost. Further, product specifications can be shared online and used without any additional training. For a 3D printer to create a dangerous weapon all that is required is a 3D-printable gun program. Indeed, Australia’s first publicised case of 3D gun production took place in 2017, with the arrest of Sicen Sun for printing and possessing 3D manufactured glock pistols.1

Memory of a nuclear blast sticks

Electrical erasable programmable read-only memories (EEPROMs), magnetic random access memories (MRAMs) and “flask” memories have been removed from the DSGL, despite having been put on the list only recently. The change appears to reflect the growing interest in MRAM throughout various technology spheres.

MRAM and its various implementations offer higher write and read speeds than normal random access memories, and have virtually limitless endurance and the capability to store data for years at high-temperatures. They are resistant to damage or malfunction caused by radiation, such as might be encountered in outer space and high-altitude flight, around nuclear reactors and particle accelerators, or during nuclear incidents.

Technologies that can act as both computer memory and storage, such as MRAM, and that can withstand extreme conditions, have been considered something of a “holy grail” in the industry and are now becoming more readily available. They are used in avionics, commercial transportation; outers and servers, and are now more openly specified when high performance and security is needed to protect important information flows, such as those relating to financial transactions.

Intel recently announced its first MRAM product, and Samsung has started to ship products utilising MRAM.2 The removal of MRAM from the DSGL reflects an acceptance of the commercial proliferation of the product and a clear interest in facilitating rather than suppressing its further development.

Tougher monitoring and compliance

Other direct legislative amendments suggested by the Thom Report are likely to be acted upon in the near future as well:

  • amending the definition of “brokering” under the DTC Act to capture subsidiaries of Australian entities dodging Australian export controls, and to stop sellers of DSGL goods sourcing items from overseas to fill their overseas contracts;
  • giving DoD better monitoring and investigation powers; and
  • clarifying the digital means by which a DSGL technology can be “supplied”, to stop the use of private networks and email accounts to bypass the requirement to get an export permit (e.g. use of VPNs to access technology that is “in” Australia from overseas, or indeed any download access that is the virtual equivalent to taking a USB overseas).

Keeping on top of constant change

Recent developments seek a proper balance between security and innovation. Instead of ambiguous and open-ended restrictions, we see a more realistic and certain approach being adopted – an approach that does not close its eyes to the proliferation of dual-use technologies that cannot realistically be suppressed.

Nonetheless enforcement powers are being stepped up, and understanding the minefield is … a minefield. An email or an upload containing high technology information can be a criminal act. Technology organisations – research-based, academic, commercial – must pay close attention to the substance of the export control laws and the mandatory procedures that must be followed to comply with them.

At Moulis Legal we have a unique combination of legal and technical expertise – top-flight trade law and patent attorney skills – to advise our clients and protect them from the serious risks involved.

 

[1]  https://www.abc.net.au/news/2018-08-01/3d-printer-guns-in-america-prompts-australian-warning/10059704

[2]  https://www.tomshardware.com/news/intel-stt-mram-mass-production,38665.html; https://www.mram-info.com/