On May 1, 2024, the State Department published a proposed rule to amend the International Traffic in Arms Regulations (ITAR) and establish an exemption to the licensing requirement for exports, reexports, transfers, or temporary import of defense articles to or within Australia and the United Kingdom. This proposed rule is intended to promote the goals of greater defense trading, innovation, and information and technology sharing between the members of the trilateral security partnership known as AUKUS that was established on September 15, 2021. Importantly, the proposed rule also exempts the performance of defense services from ITAR’s licensing regimen, as well as the engagement in brokering activities of defense articles and/or defense services.
This AUKUS ITAR exemption is prospective in nature, with the State Department noting its proposal is “in the interest of preparing for a future exemption” as prescribed by the AUKUS-related provisions contained in the National Defense Authorization Act (“NDAA”) for Fiscal Year 2024 (Public Law No. 118-31) (see Thompson Hine Bulletin of February 26, 2024). The AUKUS-related provisions of the NDAA assert that once the president reports to Congress that Australia, the United Kingdom, or both, have successfully “implemented a system of export controls comparable to those of the United States” including comparable exemptions for U.S. defense articles, defense services, or technical data, then “the [State] Department would immediately implement an ITAR exemption…for the partner nation(s)[.]”
Scope of Proposed Exemption
Creating a new ITAR provision at 22 C.F.R. § 126.7, the proposed rule would establish the license exemption for AUKUS members, while also instituting notable conditions and restrictions. For example, one limitation would be that the AUKUS ITAR exemption can only be used for transfers within the physical territories of Australia, the United Kingdom, and the United States. Additionally, the exporter/transferor and recipient must be “authorized users,” meaning a U.S. person registered with the State Department’s Directorate of Defense Trade Controls (DDTC) and not debarred, or an Australian or United Kingdom person who has “undergo[ne] an authorized user enrollment process, in coordination with DDTC, and [who] will be listed [on] the DDTC website.”
Consistent with certain statutory limitations found in the Arms Export Control Act, the proposed rule designates certain defense articles and defense services as excluded from and ineligible for the AUKUS ITAR exemption. These defense articles and defense services would be found on the Excluded Technology List proposed as Supplement No. 2 to Part 126. However, the proposed rule provides that in instances where a license application remains necessary for AUKUS-related exports that DDTC will expedite the application processing timeframe for a review within 30 days if the license application is for a government-to-government shipment, and within 45 days for all other license applications.
This proposed rule follows an interim final rule issued by the Department of Commerce’s Bureau of Industry and Security that took effect April 19, 2024, and eases various licensing requirements prescribed by the Export Administration Regulations for exports, reexports, and transfers (in-country) of dual-use items to Australia and the United Kingdom (see Update of April 18, 2024).
Public Comment
The State Department is seeking public comments addressing the clarity and utility of the AUKUS ITAR exemption, including the proposed list of excluded defense articles and defense services. Comments must be received by DDTC no later than May 31, 2024, and should be filed using the federal rulemaking portal (www.regulations.gov) under Docket No. DOS-2024-0013. Alternatively, comments can be sent to the State Department via email to DDTCPublicComments@state.gov with the subject line: “Australia, the United Kingdom, and the United States ITAR Exemption.”