Wednesday 14 September 2022

Submission on Proposals to Enhance Export Controls Regime Operations

The Ministry of Foreign Affairs and Trade recently consulted on proposals to enhance export controls regime operations. Export controls are the process through which the government prevents the export of goods or technologies that essentially could be used in weapons or warfare. Historically, export controls have existed in the context of countries not wanting to have their high-tech weaponry sold to enemies. In the New Zealand context, there is more of a focus on wanting to protect peace and encouraging non-proliferation, regardless of who the recipients may be. Below is my written submission on the topic.

01 September 2022

1. I make this submission with several hats on:

- Research Fellow at Koi Tū: The Centre for Informed Futures at The University of Auckland, focusing on digital technologies and ethics, with an interest in autonomous weapons regulation and arms control
- Appointed Member of the Public Advisory Committee for Disarmament and Arms Control (PACDAC)
- Venture Partner at Matū Group, early stage deep tech venture capital investors that support the commercialisation of Kiwi research
- Chair of Advemto Limited, a company that produces instrumentation for ultrafast spectroscopy for materials analysis

The views expressed in this submission are mine, and are not necessarily those of the organisations named above.

2. In my opinion, the proposed purpose statement, criteria, and transparency objectives and principles are generally appropriate. The high-level aims are understandable, but the challenges rest in the detail of implementation. Where the criteria rely on legislation and international law the thresholds are relatively clear, but where they rely on subjective assessment such as whether or not an export will compromise New Zealand’s international reputation, there is room for ambiguity and inconsistency. This is somewhat unavoidable and needs to be considered on a case-by-case basis, but processes need to be in place to help provide certainty.

3. Where there is subjectivity, clear processes need to be in place for appeals processes, including defining who has ultimate decision making authority (whether that is the Minister or someone else). Reasonable people may differ in their opinion on goods that are in the grey area, and there needs to be a natural justice process in place to maintain confidence in the system.

4. Businesses need certainty around whether or not what they are developing would potentially intersect with an export control limtation – well before they are ready to apply for a permit. Particularly for R&D-intensive businesses, significant capital can be expended before the company is at a stage where they can apply for a permit. The consultation does not cover some of the operational processes, but it would be helpful to more widely publicise and state that there is an informal “approval in principle” or interim assessment process, where businesses can have a conversation with the Export Controls team and understand their risks and obligations without having to go through the full permit application process.

5. Similarly, in some cases businesses need to be able to demonstrate that their goods are exportable even if they are not a Controlled Good. For example, investors or customers conducting due diligence on some products may have a concern that a product could be a Controlled Good and that this represents a commercial risk of the product not being delivered. Where the business does not need a permit because the product is not actually a Controlled Good, it would be helpful to have a certification letter or a formal opinion that can be provided to clearly indicate that something is not a Controlled Good and thus eliminate that risk. This certification or opinion could be time-limited and relate to specific products if needed to offer MFAT flexibility needed. Investors and customers may not trust a self-certification or self-checklist, so it would be valuable to offer an independent third party certification in this regard.

6. Timeliness of decisions is also an important element in this respect, as businesses need confidence that they can or cannot continue with their work. Resourcing the team appropriately is important, and it would be helpful to give some guidance to applicants on how far in advance they should be applying for permits if needed.

7. I support the calls for the need for better record-keeping and reporting to the public around the Export Controls regime. It is important to be able to understand how many applications are being made and considered, and how many are being granted. It would also be helpful to understand the types of Goods that are being exported (e.g. NZ may be exporting a lot of electronics but not much explosive chemicals). Quarterly reporting would be appropriate to help others monitor our activity in this regard. Commercial and diplomatic sensitivities should be respected, but transparency is helpful for maintaining confidence.

8. Lastly, I have a small concern that the Export Controls regime mostly focuses on physical goods, and that there is not enough attention paid to the export of digital goods (e.g. software) and intellectual property that may contribute towards the proliferation of weapons. Software is listed several times in the Customs Export Prohibition (Strategic Goods) Order 2021, but the rest of the consultation doesn’t touch on this issue much. It would be difficult to enforce Export Controls on intangible goods like software and intellectual property. I am aware that the MFAT Export Controls team are aware of this issue, but the public at large (including other parts of government) may not be. It would be worth clearly explaining in future documentation and proposals that the Controls do not only apply to physical goods.

9. Global supply chains are such that it can be difficult to identify where a product may end up, and especially so with software. It is highly likely that there are pieces of code developed in New Zealand that are in common libraries that are then used in weapons systems overseas, or that data collected from New Zealand is used to help train machine learning models used in weapons systems (e.g. person recognition from videos) without the intent or knowledge of the original developer or subjects. It is helpful that the proposal speaks to intent and knowledge, and perhaps broader awareness building is important to help people understand their obligations. The history of encryption software, particularly in the US, provides a case study for the types of issues that we can face if we get the regulation wrong in this area. There is no easy solution here but it is important to acknowledge the challenges. Ultimately, there is a degree of trust in this system and in our society.

Thank you for the opportunity to make a submission on these proposals.

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