Go8 submission to Senate Inquiry into Defence Trade Controls Amendment Bill 2023[Provisions]

February 1, 2024

Senator Raff Ciccone
Chair, Foreign Affairs, Defence and Trade Legislation Committee

The Group of Eight (Go8), representing Australia’s leading research-intensive universities, is pleased to provide this submission to the Senate Committee’s inquiry into the Defence Trade Controls Amendment Bill (2023) Provisions.

Please note that this submission represents the view of the Go8 network and member universities may wish to make their own individual submissions. The Go8 consents for this submission to be published in full.

Go8 universities are all ranked in the world’s top 100, with six in the top 50. We collectively invest $7.7 billion on R&D annually, including 44 per cent of the total university sector’s defence R&D investment; 52 per cent of the sector’s engineering R&D investment; and 43 per cent of the sector’s information and computing sciences R&D investment[1]. Significantly we receive almost 80 per cent of total US Department of Defence funding to Australian universities.

Go8 universities rank among the highest in the world in relevant fields, including: oceanography, automation & control, computer science & engineering, materials science & engineering, nanoscience & nanotechnology, energy science & engineering, aerospace engineering, marine/ocean engineering, transportation science & technology and remote sensing^[2].

As such we are in a strong position to provide expert feedback on this Amendment Bill.

The Go8 strongly supports the intent of this Bill to create an export controls framework that will streamline the flow of defence trade between AUKUS partners, by creating a license-free export environment to support higher education, research and industry across all three countries.

We recognise that the passing of the US National Defense Authorization Act for Fiscal Year 2024 (NDAA) offers Australia a rare opportunity to achieve comparability between the export control regimes of our two countries, a necessary step if Australia is to take full advantage of the AUKUS partnership, especially in relation to Pillar II. However, it is no longer possible to act in isolation or with a limited number of partners. Our broader research and knowledge networks, especially with critical Indo-Pacific partners, also contribute to regional stability and furthering Australia’s strategic goals.

It is therefore critical that we strike a carefully calibrated balance between taking full advantage of our AUKUS partnerships while not damaging our ability to engage more broadly where it is in the national interest.

The Go8 welcomes and acknowledges the considerable efforts made by the Department of Defence to engage with universities and industry on key elements of this Bill, including the inclusion of “fundamental research” as a key term to frame who can be trusted as recipients of controlled goods and services. The use and application of this definition is the single most important factor that will impact the ongoing effectiveness and operation of Australia’s research and higher education sector.

We also raise the following as needing to be clarified as a matter of priority:

How the new definition of “fundamental research” will apply in practice and how it will align with that used in the US.
The meaning of “employees” for the purposes of the proposed changes.
The treatment of Australian citizens or Permanent Residents who also have other citizenship.
The treatment of foreign research students and training.
The application of resupply provisions and offences.
The relevance and applicability of body corporate versus individual status.

We also note that:

These clarifications must be provided explicitly and directly in the Bill or via regulatory changes (e.g. to the Defence Strategic Goods List) at the same time as the Bill is reconsidered by Parliament. It is our assessment that, unless a definition of “fundamental research” is in place at the time the Bill is passed, Australia will not have a regime comparable to that of the US (see Recommendation 2 below).
The Impact Analysis for the Bill contains several measures intended to assist in implementation. These include commitments to a 12-month transition period; a review of operations 18-24 months after the offences take effect; and the establishment of working groups to assist with understanding and compliance. The Go8 requests these be confirmed through inclusion in the Bill, Explanatory Memorandum and amendments to regulations (see Recommendations 3 and 4 below).

Go8 recommendations

That the Committee recommend:

That the definition of “fundamental research” as proposed by the Department of Defence be amended slightly to read:

Fundamental research is defined to mean basic and applied research where the resulting information is ordinarily published and shared broadly within the research community, as distinguished from research whose results are restricted for proprietary reasons.

That the definition comes into force (therefore changes to the Act or regulations are finalised) at the time the Bill’s provisions are enacted. (This is consistent with the conditions outlined in Recommendation 5).
That the 12-month transition period, as noted in the Impact Analysis, be endorsed, and that this period begin no earlier than the commencement date of the instrument that provides the final definition of “fundamental research” as agreed with stakeholders.
That the proposed review of the operation and functioning of the new regulations 18-24 months after offences take effect, as committed to by the Australian Government^[3], be endorsed, so that the arrangements may be fine-tuned or adjusted as necessary. The review should specifically consider what regulatory impact has resulted and publish this against the initial estimates as calculated in the Impact Analysis^[4] for the Bill.
That Australia’s new export controls framework – in seeking to ensure an export-licence free environment for the three AUKUS countries – is not more restrictive of international collaborations outside the AUKUS partnership than those that apply to counterpart organisations and researchers in the US and UK[5].
That the Government review the Foreign Country List (FCL) as a matter of urgency with a view to additional countries that serve Australia’s strategic interests.
That the Bill or Explanatory Memorandum include the Impact Analysis statement that the ’employees’ exception “exempts a foreign employee that is a citizen or permanent resident of a foreign country that is specified in the FCL… regardless of employment type or length”[6].
That international Higher Degree by Research (HDR) students who are citizens or permanent residents of countries listed on the FCL are allowed the same exemption applied to employees and officers who are citizens or permanent residents of FCL-listed countries.
That the proposed specific exemption for those holding a covered security clearance from Canada and New Zealand authorities be endorsed.
That it be made explicit that any exemptions applied to Australian citizens and Permanent Residents include those who may hold dual citizenship (Australian citizens) or citizenship of another country (Permanent Residents).

Definition of ‘fundamental research’

As noted above, the use and application of the exemption for ‘fundamental research’ is the single most important factor that will impact the ongoing effectiveness and operation of Australia’s research and higher education sector, and, in turn, our capacity to advance the outcomes of the AUKUS partnership.

This is because a significant proportion of Australian university research and research training activities are likely to require permits if the current definition of “basic scientific research” remains unchanged when the new offence provisions come into effect.

The Go8 acknowledges and welcomes the Department’s responsiveness to Go8 feedback regarding the need for a definition of fundamental research. We note the Department’s estimation that the majority of international research students are likely to be covered by the ‘fundamental research’ exemption[7] though it is unclear to us whether this will indeed be the case.

It is critical that the definition be resolved prior to the re-introduction of the Bill in Parliament, given the significant impact its application will have in the higher education sector. The definition will need to be clear and unambiguous, while the intent for the use of the definition to exempt certain categories of researchers including students must also be explicit.

Go8 feedback on the definition is below.

General

The Department’s proposed definition of “fundamental research” represents a close approximation to the US definition as included in the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR). This alignment is welcome. However, we recommend that the US Government be consulted regarding the proposed definition prior to it being finalised, to confirm comparability.

Proposed Amendments

The definition as currently proposed on the Department of Defence website is:

basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community, as distinguished from research whose results are restricted for proprietary reasons or national security reasons[8]

The Go8 suggests the following amendments to help make the definition fit for purpose:

Fundamental research is defined to mean basic and applied research ~~in science and engineering~~ where the resulting information is ordinarily published and shared broadly within the ~~scientific~~ research community, as distinguished from research whose results are restricted for propriety reasons.

Removal of “science and engineering”

The importance of the ‘fundamental research’ definition to the operations of the sector makes it critical that it be clearly understood. The term “science and engineering” does not meet this test in the Australian context as it has no prior meaning here. By comparison, the US National Science Foundation (NSF) categorises ‘social science’, ‘psychology’ and ‘natural resources and conservation’ alongside ‘harder’ disciplines such as ‘geosciences’ and ‘agricultural and veterinary sciences’ as ‘science’[9]. The status of multidisciplinary research – that could include both science and engineering and non-science and engineering fields – is also unclear.

The current ‘basic scientific research’ definition and exemption in the Defence Strategic Goods List does not qualify or restrict areas of research, and the Go8 recommends that this discipline-neutral approach be retained in the definition of “fundamental research”. For this reason, we recommend the removal of the “science and engineering” clause in the current draft.

“National security reasons”

It will be unclear to researchers whether their results may be restricted for national security reasons, and therefore trigger the non-applicability of the ‘fundamental research’ exemption.

This could result in researchers declining to collaborate due to concerns that their work may not be captured by the exemption and therefore requiring permits. The question for researchers will be: given the level of security and restriction around national security reasons, how will they know if such reasons exist, let alone if they will cause a restriction on their research results? Anecdotally, researchers in some domains – for example in cryptography – may already be considering pulling back from research on the grounds of not knowing whether their research dissemination or collaboration may be inhibited. This raises the issue as to whether such self-censorship is really in the national interest.

The current version of the Defence Trade Controls Act 2012 allows the Minister to prohibit persons from supplying or publishing DSGL goods on ground relating to the security of Australia[10]. This means that the inclusion of this clause in the definition of “fundamental research” is unnecessary, given provisions already exist in the Act.

The Go8 advocates for a removal of the term ‘national security’ in the definition. However, if the term ‘national security’ is retained for the purposes of this definition, it should be contextualised using the same wording that US universities operate under currently through the USA regulations’ Public Domain definition (highlighted extract below) which clearly define the specific types of university research that are not covered by the USA Fundamental Research exemption:

(eCFR :: 22 CFR 120.34 — Public domain[11])

“… Fundamental research is defined to mean basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community, as distinguished from research the results of which are restricted for proprietary reasons or specific U.S. Government access and dissemination controls. University research will not be considered fundamental research if:

(i) The University or its researchers accept other restrictions on publication of scientific and technical information resulting from the project or activity; or

(ii) The research is funded by the U.S. Government and specific access and dissemination controls protecting information resulting from the research are applicable.

Replace “scientific community” with “research community”

We note that, in the USA, the ITAR regulations say “scientific community” while the EAR says “research community”. The Go8 suggests that “research community” may be more easily understood.

The Go8 therefore recommends the following refinement to the definition:

Impact on research collaborations and talent attraction

The Impact Analysis for the Bill notes that:

the time taken to grant licences or permits impacts on innovation, collaboration and speed to delivery, collectively disadvantaging our research and industrial bases from maintaining and increasing our military defence technological advantage^[12]

The Go8 strongly supports this statement. Global research collaboration is a key pillar of prosperity and competitiveness in today’s knowledge economies, and working with allies to share and boost our collective knowledge is a core premise behind the creation of the AUKUS partnership.

Go8 universities are the heavy lifters in this space. Collectively, we contribute almost 60 per cent of all international collaborations by Australian universities. Our extensive international connections provide access to leading global experts in numerous fields, cutting-edge knowledge, and networks that promote advanced or emerging technological development. Our universities are heavily engaged in defence and defence related research. All members have either attained or are in the process of attaining Defence Industry Security Program (DISP) membership. We account for 44 per cent of the sector’s investment in defence R&D, and we receive almost 80 per cent of total US Department of Defence funding to Australian universities^[13]. This capacity will be essential to helping Australia deliver on, and maximise the benefits of, our AUKUS commitments.

It is therefore vital that the exemptions in the Bill are sufficient to avoid unnecessary barriers to international research collaboration and talent recruitment, while still maintaining adequate protections.

To achieve this balance, it is necessary to consider the importance and contribution of all of Australia’s international research connections. While the US and UK are the Go8’s largest two collaborators^[14], the Go8 also partners with researchers from other countries, including across the Indo-Pacific and members of the European Union. China is the third highest collaborator with the Go8 based on co-publications and India is of growing significance, partly due to its status as a Quad partner. These collaborations are vital, not only to research developments to address shared global challenges, including those with the US and the UK, but also to support the security and geopolitical stability of our region.

This involves helping to foster the next generation of researchers across the globe and ensuring that many will have a personal connection to Australia and Australian values. Of the Go8’s 30,000 research students, 37 per cent are international, originating from 145 home countries. Ten per cent of these are from countries listed on the FCL, and 2 per cent from both the US and UK (2023).

It should also be noted that Australia is not unusual amongst AUKUS partners in having significant research connections with China. China is the largest co-publication partner for the US, ahead of both the UK and Canada, and is the third largest co-publication partner for the UK.In fact, the US has three times the number of co-publications with China than does either Australia or the UK^[15].

The impact of transnational campuses must also be considered. Monash University has campuses in both Indonesia and Malaysia, which are important contributors to Australia’s international student diversification strategy[16]. Any changes to the export controls regime should minimise the impact on transnational models.

Importance of clear and sufficient exemptions to reduce unintended negative impacts

An appropriately regulated export controls environment requires:

Clarity of conditions, e.g. when permits or approvals are required and the circumstances under which exemptions apply;
Streamlined processes which avoid unnecessary delays. Research teams are often multinational, and speedy permit assessment processes will be necessary to avoid delays or cancellation of vital research projects.

An effective regime therefore needs to be clear and unambiguous to the greatest extent possible.

The definition and interpretation of “fundamental research” will be critical to the smooth operation of research-intensive universities, and our capacity to advance national strategic priorities such as AUKUS.

Parts of the reforms that would benefit from clarification as to the impact and possible consequences on research collaborations, foreign research staff or foreign research students include:

Re-supply provisions. It would be helpful to clarify – through worked examples – whether a resupply of goods (originally provided to an offshore location with a permit) back to the original supplier in Australia would require a new permit application. Examples are provided in Appendix A: Scenarios 1, 2 and 3).
No disadvantage. It would be helpful to also ensure that no disadvantage occurs in the Australian context versus that which applies to USA or UK contexts. For example, a permit would not be needed for Australian University X to transfer goods (that Australian University Y had provided it under a permit) to a team at a USA University Z that included a national of a country not on the FCL; but a permit would be needed for Australian University X to transfer those goods to a similar team within University X. This is because of difference in how relevant supply is regarded in the US vs Australian regime.
Whether transfer from researchers in one Australian university to another Australian university constitutes transfer to another body corporate, or to an individual, with the possibility of exemption from offences if the body corporate is considered “an Australian person” (See Appendix A, Scenario 3)[17].
The treatment of Australian citizens who hold another citizenship (i.e. dual citizens) of countries not on the FCL.
Whether DSGL services are intended or not to include HDR training. The Go8 welcomes the amendment of the Bill to narrow the scope of DSGL services to Part 1 only; nevertheless the Go8 seeks formal confirmation that

HDR training is NOT in scope for DSGL services; and
that the exemption associated with the definition of fundamental research also applies to HDR training, being training of research
Further clarity on what is included in the “covered security clearance” exemption.
Meaning of “employee” for the purposes of exemptions (see further discussion below).
The implications for universities with foreign campuses. The Go8 seeks advice on whether the changes will result in additional scrutiny of researchers from international campuses coming to the Australian campus and undertaking research with DSGL technologies.

Exemption for Employees

Application of the Foreign Country List

The Go8 welcomes the inclusion of an exemption for citizens or permanent residents of a country listed on the FCL. However, we are concerned this may be insufficient to prevent unnecessary impacts or delays.

As per our recommendation 6, we urge that the Government review the Foreign Country List (FCL) as a matter of urgency with a view to including additional countries that serve Australia’s strategic interests. We note that there is in fact a lack of equivalency with the US export controls regime, which uses no comparable list, rather takes a policy of denying licences and other approvals for exports and imports of defence articles and defence services, destined for or originating in certain proscribed countries.

The FCL currently contains only 25 countries, many of which are in Europe. Notable omissions include many strategically important countries and research collaborators across the Indo-Pacific, including India, Indonesia, South Korea, Singapore and Malaysia. This means that foreign employees who are citizens of non-FCL countries may require permits to conduct their research activities if is not covered by the fundamental research exemption.

The Go8 welcomes the advice in the Impact Analysis of the Bill that “The Australian Government will review the FCL as needed”[18] and urges the Government to do this as a matter of urgency with a view to adding additional countries that serve Australia’s strategic interests[19]..

Without this, universities may have to continue to take the same compliance approach to employees who are citizens or permanent residents of strategically important partners (such as Singapore or South Korea) as those on the Sanctions list or which present significant geopolitical challenges. This could result in unnecessary regulatory burden and delays for relatively low risk partners.

The FCL exemption also does not include to international research students. The Go8 therefore seeks as a minimum that the exemption be extended to cover international research students who are citizens or permanent residents of countries on the FCL.

Definition of Employee

The Impact Analysis states that “the ‘employees’ exemption exempts a foreign employee that is a citizen or permanent resident of a foreign countries that is specified in the FCL… regardless of employment type or length”[20]. The Go8 welcomes this qualification, and strongly advises it be included in the Bill or the Explanatory Memorandum, given that an employee is not currently defined in the Bill, nor are there any parameters to guide a consistent approach by universities or industry as to who might be an employee in their organisation.

This will be a threshold issue as a range of personnel may be considered employees (or not), including:

Contracted personnel
Casual staff
Staff who are also students of the university
Support staff, such as IT staff or research infrastructure specialists, who in the course of providing support may need access to DSGL goods or technology
Visiting scholars, Adjunct staff, Affiliate staff or Honorary staff.

Exemption related to covered security clearance from Canada and New Zealand authorities

The Go8 welcomes and supports the proposed measure in the bill to provide an exemption from offences for those holding a covered security clearance from Canada or New Zealand authorities.

Noting that a ‘covered security clearance’ is to be ‘of a kind prescribed by the regulations for the purpose of this definition’, the Go8 seeks that the Committee seek clarification as to which specific clearances are in scope.

Specific references or commitments in the Impact Analysis

The Impact Analysis states that it was “used to inform the Australian Government’s final decision on whether or not to introduce the DTC Bill into the Australian Parliament”[21]. It includes a number of statements and commitments as being instrumental to an acceptance of the Bill by stakeholders. Noting that a number of the statements respond in part to concerns the Go8 raised in our submission to the Exposure Draft of the bill, the Go8 advocates that as a minimum the following statements be honoured and if possible codified in the Bill or Explanatory Memorandum:

Recommendations received through consultation: the Impact Assessment states that:

All recommendations received through consultation were considered and were either incorporated into the DTC Bill if in-scope or, based on advice provided by Defence Legal and the Australian Government Solicitor, will be incorporated in the Defence Trade Controls Regulation 2013 (DTC Regulation) or Customs (Prohibited Export) Regulations 1958 (Customs PE Regulations)[22]

The Go8 recommends that these inclusions are completed to the regulatory instruments and accompany the Bill when it is reconsidered by Parliament.

Review of operation and functioning of new regulations: If the DTC Bill passes, the Government has committed to “Undertake a review of the operation and functioning of these new regulations 18-24 months after the offences take effect (that is, after the 12-month transition period), via a working group with members drawn from research, industry, policy and government”.[23]
Review of the Foreign Country List: “The Australian Government will review the FCL as appropriate”, in response to feedback that there should be a review of the FCL “to determine whether it is appropriate to add any additional countries to the list in light of Australia’s current strategic and defence partnerships”. [24]
Establishment of working groups: Defence to establish a working group by December 2023, in response to feedback (including the Go8’s) that the Government “Re-establish the Strengthened Export Controls Steering Group (Section 74A of the Act)”. [25]
Transition/grace period: “Defence will lead stakeholder engagement and implementation during the 12-month grace period prior to offence provisions coming into effect. This includes by establishing two working groups – one for industry and investment stakeholders and another for higher education and research stakeholders – commencing in December 2023. Each working group would consist of 15 representatives drawn from across the sector. The initial focus of the working groups will be to support the drafting of the exceptions in the DTC Regulation and DSGL and to support development of the new permits for deemed supply and DSGL services”.[26]
Supportive environment for reform: Noting the Go8 advocates for outreach and engagement programs to educate the sector on the application of new practices, we welcome the statements in the Impact Assessment that “Defence is actively increasing resourcing” and “has commenced work to upgrade the existing DEC ICT System and will engage and seek feedback from with the working group”. [27]

[1] Go8 internal calculations based on Go8 inputs to ABS 2022, Research and Experimental Development, Higher Education Organisations
[2] 2023 Shanghai subject rankings
[3] Impact Analysis: Strengthening Australia’s Export Control Framework, p. 57; p.70
[4] https://www.defence.gov.au/sites/default/files/2023-11/Impact-Analysis-Australia%27s-Export-Control-Framework.pdf
[5] The Go8 understands that a permit would not be needed for Australian University X to transfer goods (that Australian University Y had provided it under a permit) to a team at a USA University Z that included a national of a country not on the FCL; but that a permit would be needed for Australian University X to transfer those goods to a similar team within University X. This is because of difference in how relevant supply is regarded in the US vs Australian regime. Relevant supply which accrues penalties without permit includes to foreign person not otherwise exempted.
[6] Impact Analysis: Strengthening Australia’s Export Control Framework, p. 53. Emphasis added.
[7] The Department of Defence has estimated in the Impact Assessment for the bill that only 5.8 per cent of the identified workforce and students would meet the threshold for deemed supply (supply to a foreign person in Australia), an estimate based on the US experience. This estimate draws on 2021 Census and Department of Education data to determine the proportion of overseas postgraduate research students who are studying at the doctorate level, and ‘therefore likely to not qualify for the fundamental research exception’, being 4 per cent.
[8] https://www.defence.gov.au/about/reviews-inquiries/defence-trade-controls-amendment-bill-2023
[9] https://ncses.nsf.gov/pubs/nsf23311/table/2
[10] Defence Trade Control Act 2012, section 14 and 14B.
[11] https://www.ecfr.gov/current/title-22/chapter-I/subchapter-M/part-120/subpart-C
[12] Impact Analysis: Strengthening Australia’s Export Control Framework, p.13
[13] A selection of our capabilities is listed in our Defence Capability Statement, available on our website.https://go8.edu.au/go8-publication-go8-defence-capability-statement
[14] This is based on academic co-publications over the last five years (2018-2022).
[15] This is based on academic co-publications over the last five years (2018-2022).
[16] Australian Strategy for International Education 2021-2030, https://www.education.gov.au/australian-strategy-international-education-2021-2030
[17] For example, an offence under 10A applies under a range of conditions, including that the supply must be a relevant supply [10A(d)]. It is not a relevant supply if it occurs to an Australian person [5C(1)(a)(i)]. Australian person includes a body corporate incorporated by or under a law of the Commonwealth or of a State or Territory. Therefore, if the transfer occurs to a body corporate, it could impact whether or not the transfer is exempt.
[18] Impact Analysis, p.56
[19] It is worth noting arrangements in the USA of seeking sufficient risk management demonstrated by the individual organisation which set as a condition of transferring to foreign person employees of ‘effective procedures to prevent diversion to destinations, entities, or for purposes other than those authorized by the applicable export license or other authorization (e.g., written approval or exemption) in order to comply with the applicable provisions of the Arms Export Control Act and the ITAR.’ [ITAR 126.18]
[20] Impact Analysis, p. 53; emphasis added.
[21] Impact Assessment, p.5
[22] Impact Assessment, p.3, emphasis added.
[23] Impact Assessment, p.57.
[24] Impact Assessment, p.56.
[25] Impact Assessment, p.57.
[26] Impact Assessment, p.61
[27] Impact Assessment, p.57