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State Department Proposes Exempting Australia, UK from Certain Defense Related Export Controls
On April 30, 2024, the Department of State proposed an amendment to the International Traffic in Arms Regulations (ITAR) intended to facilitate exports of defense articles, the performance of defense services, and brokering activities between or among authorized users in the United States, United Kingdom (UK) and Australia.
This announcement follows the release by the Bureau of Industry and Security (BIS) of an interim final rule on April 19, 2024, aimed at reducing export control restrictions for the same countries and further strengthening the AUKUS trilateral security partnership. We previously provided a summary of the BIS rule here.
Key Changes
The ITAR rule would enact three key changes to help facilitate the exchange of defense articles and services between the UK, Australia and the United States.
- First, it would create a broad exemption for exports and brokering of most defense articles from the U.S. to authorized end users in Australia and the UK.
- Second, ITAR § 126.18 would be expanded to authorize the retransfer of classified defense articles to citizens of Australia and the UK with security clearances even if they are dual nationals of a third country.
- Third, the rule would establish an expedited review timeline for license applications for the export of defense articles and defense services to Australia, the United Kingdom and Canada.
We discuss each of these developments in more detail below.
126.7 Exemption for defense trade and cooperation among Australia, the United Kingdom and the United States.
The new ITAR exemption in ITAR § 126.7 would authorize the export, reexport, retransfer or temporary import of defense articles, as well as the performance of defense services, or engagement in brokering activities, involving authorized end users in Australia and the UK. Authorized end users will include U.S. persons registered with DDTC and not debarred, as well as end users from the AUKUS countries identified on DDTC’s website. Australia and the United Kingdom’s members will undergo an authorized user enrollment process, in coordination with DDTC, and those members will be listed through the DDTC website. UK and Australia authorized users may request that DDTC provide confirmation of the status of U.S. authorized users. The transfer must be to the physical territory of Australia, the UK or the United States.
Certain defense articles identified in Supplement No. 2 to part 126 will be ineligible for transfer under this exemption. Examples of items on this list include: Missile Technology Control Regime (MTCR) articles under USML Cat. I-XV, and XX, readily identifiable anti-tamper articles, cluster munitions, F-22 aircraft and related specifically designed articles, and certain manufacturing know-how and source code.
126.18 Exemptions regarding intra-company, intra-organization, and intragovernmental transfers to employees who are dual nationals or third-country nationals.
The new exemption provisions under § 126.18 would allow certain dual nationals of Australia and the UK to receive classified defense articles without a separate license from DDTC. This is intended to facilitate the use of the § 126.7 exemption above, while allowing allow dual nationals of another country, and Australia or the UK, to handle classified defense articles.
Applicable dual nationals must:
-
- be authorized users of the exemption in § 126.7 or regular employees of such authorized users in § 126.7;
- hold a security clearance approved by Australia, the UK, or the United States that is equivalent to the classification level of SECRET or above in the United States; and
- be either (i) located within the physical territory of Australia, the UK or the United States or (ii) a member of the armed forces of Australia, the UK or the United States acting in their official capacity.
126.15 Expedited processing of license applications for the export of defense articles and defense services to Australia, the United Kingdom, or Canada
The ITAR rule would expedite the licensing review timeline for defense articles and defense services for Australia, the UK and Canada. License applications related to a government-to-government agreement between Australia, the UK, or Canada and the United States must be approved, returned or denied within 30 days of submission. For all other license applications between Australia, the UK, or Canada and the United States, the application must be approved, returned or denied within 45 days of submission.
To qualify for the expedited review, the export must occur wholly within, or between the physical territories of Australia, the UK, Canada or the United States, and between governments or corporate entities from such countries.
Equivalent Systems in the UK and Australia
Reflecting a requirement that the UK and Australia must be found to have export controls in place equivalent to those of the United States, final implementation of the proposed regulations will not be immediate. Public comments on the proposed ITAR regulations are due on May 31, 2024.
In the meantime, the UK and Australia have taken steps to implement similar exemptions for exports to the United States.
United Kingdom
On May 1, the UK Department for Business and Trade issued a draft version of the UK’s Open General License (OGL) that will authorize the export, transfer, supply and delivery of relevant goods among Australia, the UK and the United States. Comments from the public are due July 1, 2024. To be able to use the OGL, UK exporters must be on the Authorized Users List, and the export, transfer, supply or delivery must be to consignees and recipients who are also Authorized Users under the Partnership. Further information on the Authorized Users List will become available “in due course.”
Australia
Also on May 1, Australia’s Department of Defence issued a draft of its “Defence Trade Legislation Amendment Regulations” which proposes to implement the AUKUS license-free environment. Comments from the public are due May 31, 2024. Australia noted these changes would enable license-free trading for over 70 percent of its defense exports that are subject to the ITAR from the United States to Australia. This would remove the requirement for approximately 200 permits valued at over $129 million AUD per year.
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