Manufacturers could be hit by wider defence export controls – By Amy McDonnell

Manufacturers could be hit by restrictions on the export of fairly commonplace items that could end up in the hands of Russia, now engaged in a brutal invasion of Ukraine, writes Amy McDonnell.

In a world first, Australia, Canada, New Zealand, the United Kingdom, and the United States – collectively referred to as the Export Enforcement Five or E5 – have agreed to strict enforcement of priority dual-use items that Russia is using in its weapons systems, to prevent further diversion of technologies to Russia’s war efforts.

The priority items are dual-use in nature, meaning they are commonplace in industrial and commercial items.

In fact, the items are so common (and arguably innocuous), enforcement of export controls on these items may catch some Australian manufacturers unawares, especially those not actively involved in the Defence ecosystem.

The list of priority dual-use items are:

• Integrated circuits (also referred to as microelectronics)
• Electronics items related to wireless communication, satellite-based radio navigation, and passive electronic components
• Electronic and non-electronic items, such as transistors, diodes, wireless communication apparatus, antenna parts, electrical transformers, ball bearings, navigational instruments etc
• And manufacturing, production and quality testing equipment of electric components and circuits.

As is apparent from the above list, a range of sectors are affected and should take steps now to investigate their exposure.

For example, integrated circuits, quality testing equipment and electronic items like diodes and transistors are commonplace in medical device manufacturing, consumer electronics, the telecommunications sector and automotive sector.

These are sectors that may not have had much experience and exposure to export control requirements in the past.

As a result, many manufacturers in these sectors will look at the list above and be concerned.

These items are incorporated within many Australian exported products, and a key component in many import and export supply chains of critical goods (interacting with the export control regimes of the other E5 countries).

As a result, it is understandably difficult to know where to start to strengthen, or initiate, export controls compliance for these items.

The first step for manufacturers who export from Australia, is to understand their exposure at a high level.

If exposure is likely, the critical next step is to conduct a deep dive to identify whether any of the priority items exist in your inventory, either at a component or final product level.

The focus on enforcement, points to a different path for the Australian export control regulator.

Traditionally, the Australian export control regulator Defence Export Controls (DEC) has taken an information and awareness campaign approach to export controls enforcement in Australia.

Strict investigation and enforcement of export control compliance took a back seat.

This new E5 coordination on enforcement indicates that is no longer the case.

Australian defence industry should be alert to heightened scrutiny and enforcement measures from DEC, as well as US, UK, Canada and NZ government representatives in-country.

Amy McDonnell is an expert across Australian and international security regulations related to trade and defence industry, including export controls. She is General Manager Business Development (Security Trade and Industry) for Goal Group.

Picture: Amy McDonnell