Department of Industry backs strict quantum export controls amid backlash
The Department of Industry has backed Defence’s decision to impose stricter export controls on quantum computing.
The Department of Industry, Science and Resources (DISR) has supported the Department of Defence’s recent decision to impose stricter export controls on quantum computing technology.
The new export controls on quantum computing are part of a broader effort under the AUKUS alliance, which was established in September 2021 between Australia, the US and UK.
AUKUS aims to enhance defence and security cooperation among the three nations, particularly in emerging technologies.
A key element of AUKUS is the alignment of export controls to facilitate smoother defence trade and collaboration. However, it has also resulted in stricter controls on sensitive technologies.
This now includes quantum computing, which the Department of Defence added to the Defence and Strategic Goods List (DSGL) last week as a regulated dual-use technology.
This means quantum computers with 34 or more qubits and a two qubit gate error rate beyond a certain level will be captured under these controls – despite most quantum computers today still being too small or error-prone to be considered commercially viable.
This move aligns Australia with countries such as the UK and France, which have imposed similar restrictions on nascent technologies.
However, a major point of difference is the strict penalties that will apply when technologies on the DSGL list are shared with individuals from non-AUKUS countries – even if this occurs within Australian borders.
Unless a license has been obtained, even accidental violations can result in imprisonment of up to 10 years with no criminal defense.
Now, this will also apply to the quantum sector.
“Quantum computers and related technologies present a significant economic and strategic opportunity for Australia as reflected in the National Quantum Strategy,” a DISR spokesperson told SmartCompany this week.
The National Quantum Strategy was announced ahead of the 2023-24 federal budget and is part of the Labor government’s National Reconstruction Fund — $1 billion of which was set aside for critical technologies such as quantum.
Since then we have seen $18.4 million set aside for Quantum Australia, $36 million for an early-stage quantum tech grant, and $18.5 million for the Australian Centre for Quantum Growth.
Most controversial has been a dual $1 billion investment alongside the Queensland government into US-based startup PsiQuantum, with the deal being heavily scrutinised in the public and private sectors.
“The Strategy recognises the need to ensure that regulatory measures and frameworks are fit for purpose to maximise opportunities and manage risks while protecting Australia’s national interests,” the DISR spokesperson said.
“Importantly, Australia, the United Kingdom and the United States have established an export licence-free environment, unlocking billions of dollars of investment and cutting red tape for Australian industry and our AUKUS partners.”
The spokesperson stressed the new controls don’t ban exports or collaborations, but “require a permit for such activities in some instances”.
“DISR will continue to work with Defence to ensure the quantum sector understands the new requirements and to listen to their feedback,” the spokesperson said.
The Department of Defence declined to comment when contacted by SmartCompany.
Quantum industry concerns over the new regulatory landscape
This regulatory action has raised concerns among experts and founders, who question the necessity of imposing such strict export controls on a technology that is still in its early stages.
Critics argue these measures could stifle innovation and unnecessarily complicate research and development efforts.
Michael Biercuk, founder and CEO of quantum startup Q-CTRL, holds deep concerns about the effect of these controls on the quantum sector.
“Australia has what’s called a strict liability offence, which means that all that has to be proven in a court is that the illicit behaviour happened, that you exported in a way that violated the rules, which could all happen on Australian shores, ” Biercuk told SmartCompany.
“There was no criminal defence in Australia, and the penalties are extreme — 10 years in jail.”
Biercuk is also critical of the inclusion of quantum computing on the DSGL before the relevant technology exists, arguing the regulations create unnecessary costs and slow down the local sector.
“The new technology that is controlled is quantum computing. And the really interesting thing about this is that adding this technology to the defence strategic goods list represents the first time Defence has ever export controlled something before it exists,” Biercuk says.
“It’s really hard when the technology is research-grade, and we are trying across our teams to bring together people to solve really hard problems.
“All of a sudden we face a question – is what we’re building going to be controlled? We have to take the most strict interpretation of whether what you’re doing is controlled or not because you don’t know.”
The challenges for quantum businesses
Biercuk also highlights the challenges these controls pose for companies.
“We’re now in a position where we have to thoroughly audit our teams to ensure compliance, which includes verifying the citizenship status of every team member,” Biercuk explains.
“This is not only a massive administrative burden but also raises serious legal questions around discrimination.”
The challenges extend beyond internal operations; Biercuk also highlights the issues involved in obtaining export permits.
“We have found in the past that to get a license to export a known technology to ourselves – Q-CTRL would send it to another Q-CTRL team overseas – it took 47 days,” he says.
According to Biercuk, this process has to be repeated for every transfer.
“You don’t get a license that says you can send to anybody in Argentina, you get a license per purchase,” says Biercuk.
Despite these challenges, this isn’t the most pressing problem for Biercuk – the new penalties are.
“It is super annoying, but we could deal with bureaucracy. What we find untenable is this very specific, punitive criminal regime,” Biercuk says.
“For us, this is particularly tricky. Quantum technology is still in its early stages, and the parameters that define what’s controlled under these regulations are often vague. This creates a huge grey area that we have to navigate carefully,” he adds.
The quantum sector’s frustration is compounded by what some say was a lack of consultation in the lead-up to these changes.
While Defence has been engaging with industry on quantum computers since 2019, Biercuk argues the consultations did not adequately account for the fundamental changes to the Defence Trade Controls Act (DTCA) made in the last year.
Biercuk says these penalties could have broader implications for Australia’s position in the global quantum race.
“If Australia becomes known as a place where it’s too risky to develop quantum technology, we could see a talent and capital flight to countries with more favourable regulations,” he says.
The Tech Council of Australia’s push back
The Tech Council of Australia (TCA), which also represents the Australian Quantum Alliance, has expressed concerns over the recent changes in export controls. This includes the potential negative effect on Australia’s burgeoning quantum sector.
In its submission regarding the Exposure Draft Defence Trade Controls Amendment Bill 2023, the TCA acknowledged the strategic intent of the legislation – to align Australia’s regulations with those of the US and UK.
However, it also warned the current form of the legislation could have unintended consequences that might stifle innovation and competitiveness.
One of the primary issues raised in the submission is the lack of distinction between military and dual-use goods in the regulations.
Unlike the US, which uses separate regimes — International Traffic in Arms Regulations (ITAR) for military goods and Export Administration Regulations (EAR) for dual-use goods — Australia’s approach does not differentiate, potentially leading to over-regulation.
The TCA emphasised this could deter non-traditional industry players and startups from participating in defence-related research and development.
SmartCompany understands the TCA also raised several issues in its responses to questions on notice from a Senate Foreign Affairs, Defence and Trade (FADT) committee hearing regarding the Defence Trade Controls Amendment Bill 2024.
Regarding the use of “absolute liability” in the legislation, the TCA is said to have warned that firms could face lengthy prison sentences or financial ruin by unintentionally committing an offence, with limited opportunity to defend themselves in court.
The TCA recommended either removing “absolute liability” from the legislation, or providing further clarity and practical examples to help the industry understand how these provisions would be applied.
The TCA argued this would prevent Australian companies from being disproportionately affected, particularly those in emerging tech fields such as quantum computing.
The TCA also highlighted the potential overlap between the Defence permit process and the new critical tech visa screening process managed by the Department of Home Affairs.
Both processes aim to prevent unwanted technology transfer, yet they operate separately under different government portfolios, which could lead to inefficiencies and delays. The TCA recommended a review to streamline these processes, ensuring that companies do not face unnecessary bureaucratic hurdles that could impede their operations.
SmartCompany understands the organisation also raised broader systemic issues that could further complicate the implementation of these new regulations.
It is said to have highlighted that Australia’s export controls could become more stringent than those in the US under the EAR, which would disadvantage Australian firms competing globally in dual-use technologies.
To avoid this, the TCA suggested developing specific exceptions in the Defence Trade Controls (DTC) Regulations, aligning Australia’s regime more closely with that of the US. This would help prevent over-regulation that could hamper innovation and growth in emerging sectors like quantum computing.
The TCA also recommended implementing sunsetting provisions for the new deemed re-supply offence. This would ensure the offence does not have long-term negative effects on the export of dual-use technologies, providing a necessary balance between national security and industry development.
SmartCompany has contacted the TCA for further comments.
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