As global tensions rise and international regulations evolve, New Zealand companies dealing in defence-adjacent and advanced technologies must navigate an increasingly complex export control environment. In the coming year, New Zealand’s export control regime is likely to align with the broader and stricter controls imposed by likeminded countries and may face further reforms to enable New Zealand’s participation in AUKUS Pillar II.

This alert provides an overview of three critical issues for businesses navigating New Zealand's export control framework:

• the proliferation and growing complexity of export controls in likeminded jurisdictions;
• the commercial implications of New Zealand’s participation, or non-participation, in AUKUS Pillar II; and
• the increasing importance of end-user and end-use verification.

It also offers exporters actionable recommendations to strengthen compliance and minimise related risks.

Who needs to read it? Why?

This alert should interest New Zealand companies dealing in military and dual-use goods, who are already subject to export controls, as well as those dealing in advanced technologies, who should expect to be subject to heightened export controls in the foreseeable future:

Dual use goods: Equipment, software and technology developed to meet commercial needs, but which may be used for the development or production of military equipment or technology are ‘dual-use goods’. Companies dealing in dual-use goods typically operate in the defence-adjacent, chemicals, electronics, computing, cyber security, telecommunications, sensors and lasers, navigation, avionics, marine and aerospace sectors.

Advanced technology: The advanced technologies often subject to export controls involve advanced computing, artificial intelligence (AI), autonomous systems and robotics, hypersonics, networked sensors and sensing, networking technologies, quantum information technologies, semiconductors and microelectronics, space technologies and systems, and undersea capabilities.

Reading this alert will provide exporters of controlled goods with timely insights into regulatory trends, potential reforms, and key challenges in the global export control landscape, enabling them to update their compliance programmes and mitigate risks associated with these goods.

Overview of New Zealand’s export control regime

New Zealand's export control regime (NZ Regime) regulates the export of items on the New Zealand Strategic Goods List 2021 (NZ List). The NZ List is derived from the four international export control regimes New Zealand belongs to [1] and includes military and dual-use goods. Since October 2020, New Zealand has also imposed “catch-all controls” that regulate the export of items not on the NZ List, but which may be intended for military (including police) use, or which may have military applications [2]. The NZ Regime also regulates the re-export of goods if they were controlled by the original exporting country.

The Ministry of Foreign Affairs and Trade (MFAT) administers the NZ Regime, which involves international coordination, maintaining the NZ List, conducting risk assessments, issuing permits for controlled goods and supporting the Customs Service (Customs), which is responsible for detecting, investigating and prosecuting violations. Although no prosecutions have been initiated, some non-compliance cases have been investigated.

An independent review of the NZ Regime conducted in 2021 concluded that while controlled goods exports were managed in line with legislative requirements, the design and implementation of the system falls short of contemporary best practice in several respects [3].

Proliferation and growing complexity of export controls for dual-use goods in likeminded jurisdictions

In the past year, offshore exporters of dual use goods based in Western and other nations have faced increasing scrutiny and regulatory complexity due to rising geopolitical tensions.

As international export control regimes have struggled to keep pace with rapidly advancing technologies, some major technology-exporting nations - like the United States (US) [4], the United Kingdom (UK) [5], some European Union (EU) member states [6], and Canada [7] - have introduced unilateral export controls (in a coordinated fashion) to regulate their trade in advanced technologies (including quantum computing items, advanced semiconductor manufacturing equipment, technology for producing computer chips for supercomputers, and additive manufacturing items designed to produce metal or metal alloy components). Further controls on exports of other advanced technologies, including AI capabilities, are anticipated [8].

In the current geopolitical climate, we expect New Zealand will soon update its List to align with the export controls imposed by like-minded jurisdictions.

Recommendations: 

• Exporters should regularly review their internal export compliance programmes, ensuring they align with the latest regulatory requirements and that the goods they deal in are categorised correctly. 
• Exporters should ensure that employee training, record-keeping, and regular audits form part of a broader strategy to mitigate compliance risks. This will likely require a cross-functional response from legal, compliance, production, sales, information security and human resources teams.

Commercial implications of New Zealand’s participation, or non-participation, in AUKUS Pillar II

In 2021, Australia, the UK and the US established AUKUS, a trilateral security partnership aimed at enhancing partners’ defence cooperation efforts. Pillar II of AUKUS focuses on fostering advanced technology collaboration in the following sectors: undersea capabilities; quantum technologies; artificial intelligence and autonomy; advanced cyber; hypersonic and counter-hypersonic capabilities; electronic warfare; innovation; and information sharing.

Pillar II implementation is aligning the Australian, UK and US export control regimes and removing the licencing requirements for most controlled goods exported, re-exported or transferred to, or within, AUKUS nations. These reforms are expected to support unprecedented levels of advanced scientific, technological and industrial cooperation, supporting investments and materially reducing transaction costs for businesses operating within the pact nations [9]. Pact member companies servicing markets outside AUKUS may experience an increased compliance burden given existing business practices may contravene the new requirements.

Recent Ministerial comments indicate that a New Zealand Government decision to join, or otherwise participate in, AUKUS Pillar II may be made in due course [10]. In deciding whether to participate, New Zealand decision-makers will need to strike a delicate balance between the country’s defence interests, economic aspirations, long-standing non-nuclear policy and regional relationships.

To participate fully in AUKUS Pillar II, substantial amendments to the NZ Regime would be needed, including: aligning the NZ List with those of the AUKUS partners; expanding controls over emerging advanced technologies (discussed above); introducing deemed export controls [11]; strengthening end-use and end-user verification processes (discussed below); creating new offences [12] and increasing penalties for breaches; enhancing NZ Regime monitoring and enforcement activities; and enabling closer cooperation with national security and intelligence agencies. Delivering reforms of this nature in good time would be a significant undertaking.

If New Zealand remains outside of Pillar II, New Zealand exporters of advanced technologies, dual use goods and defence-related items are likely to face new market access barriers and competitive disadvantages in Australia, the UK and the US. They may also find it challenging to participate in certain international projects, as AUKUS Pillar II partners progress joint research and development efforts, often benefiting from shared government funding and defence procurement contracts.

Recommendations: 

• Exporters may benefit from engaging in government advocacy efforts to ensure their interests relating to AUKUS are understood and that New Zealand remains involved in broader international security and technology initiatives. 
• As a hedge, Exporters may also want to explore alternative international partnerships and R&D collaborations outside AUKUS.

Increasing importance of end-user and end-use verification

As geopolitical tensions escalate, particularly between major powers, the risk of dual-use goods being diverted to unauthorised military or intelligence applications has grown. This threat has made rigorous end-user and end-use verification essential for ensuring compliance with international export control obligations.

Regulators in other markets are increasingly expecting exporters to implement more comprehensive due diligence processes, going beyond basic customer checks. Specific areas of increased scrutiny include: end-user identity verification; end use assessments; and final destination checks. With tighter scrutiny likely to emerge in New Zealand in the near term, exporters of controlled goods should anticipate more requests for supporting documentation, evidence of enhanced screening of high-risk entities, and end-user compliance audits.

Recommendations: 

• Exporters may want to invest in bolstering due diligence processes, including the use of third-party tools for end-user screening and enhanced documentation protocols, to ensure full compliance with evolving export controls. 
• Exporters should also take particular care to ensure that sensitive items are not exported, directly or indirectly, to Russia, given the significant restrictions and penalties introduced by New Zealand’s Russia Sanctions Act 2022 and its Regulations. MFAT has produced guidance notes to assist exporters to detect and mitigate diversion risks [13].

Conclusion

New Zealand exporters must brace for an increasingly complex export control landscape, with mounting geopolitical pressures, emerging technology controls, and possible domestic reforms driven by strategic alliances like AUKUS. The growing focus on advanced technologies and dual-use goods means exporters will face heightened scrutiny, stricter compliance requirements, and potentially severe penalties for non-compliance. By staying informed of regulatory developments, engaging in advocacy efforts, and proactively strengthening compliance frameworks, New Zealand exporters can position themselves to navigate these challenges effectively while seizing new opportunities in the global market.

How we can help?

We assist businesses to mitigate and manage export control related risks by:

• conducting audits and risk assessments to identify potential compliance gaps;
• providing legal advice on regulatory obligations under export control laws and international regimes;
• drafting and reviewing internal compliance policies and procedures tailored to discharge export control requirements;
• providing training sessions for employees, management and boards on export control compliance and best practices;
• assisting with preparing and submitting export licence applications and other regulatory documentation; and 
• advising on contractual provisions to ensure risk allocation and compliance with export control regulations in business transactions.

For more detailed advice on how these developments may affect your business, please contact us.

Footnotes

1. The Wassenaar Arrangement, the Australia Group, the Nuclear Suppliers Group and the Missile Technology Control Regime.
2. See the Catch all Gazette Notice and Explanatory Notes. 
3. The report is available here. These recommendations proposed include: reviewing and refreshing the criteria for assessment; investing in more structured and comprehensive systems and processes; strengthening the decision-making framework; strengthening record-keeping and evidencing of critical steps; enhancing the transparency and public confidence in the regime; extending proactive outreach and education; and conducting regular independent reviews.
4. See here.
5. See here. 
6. France, Spain, and the Netherlands have recently implemented new export controls on semiconductors and quantum technologies, with France's controls starting in March 2023 and Spain and the Netherlands' controls taking effect in September 2023.
7. See here. 
8. See here. 
9. See here. 
10. In May 2024, New Zealand’s Foreign Minister said: “(w)hile we are a long way from being invited to participate in Pillar 2’s technology sharing arrangement, as a responsible government we are exploring its economic and security benefits”. In June 2024, the Defence Minister said the Government is: “investigating opportunities for New Zealand’s potential involvement…, but any decisions about participation would be a matter for cabinet, and the existing members, in due course”. Last month, the Prime Minister “acknowledged New Zealand’s interest in exploring potential collaboration on advanced capability projects under AUKUS Pillar II”.
11. Deemed export controls regulate the transfer of controlled technology or technical data to foreign nationals within a country, treating it as an export to the individual's home country.
12. As a minimum, we anticipate a need to create a deemed export offence, a re-export offence, and a services offence. 
13. See MFAT guidance here, here, here and here.