AUKUS at Last — Commerce and State Announce Rules to Reduce U.S. Export Barriers for Australia and the UK

On April 30, 2024, the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) announced a proposal to amend the International Traffic in Arms Regulations (ITAR) to significantly reduce restrictions to U.S. defense-related trade with the United Kingdom (UK) and Australia. The proposed rule — a long-awaited change in support of the AUKUS enhanced trilateral security partnership (AUKUS) — would add a new exemption (22 C.F.R. § 126.7) to various ITAR license authorization requirements for certain vetted parties in Australia, the UK, and the United States. Interested parties have 120 days, or until May 31, 2024, to submit comments on the proposed rule.

DDTC’s announcement follows the U.S. Department of Commerce, Bureau of Industry and Security’s (BIS) own AUKUS interim final rule (IFR) issued on April 19, 2024, which amended U.S. export control-related restrictions for Australia and the UK under the Export Administration Regulations (EAR).¹ These measures eliminated many licensing requirements for the UK and Australia, rendering the EAR’s liberal treatment of these countries effectively the same as its treatment of Canada. BIS is accepting comments on the interim rule until June 3, 2024.

The specifics of DDTC’s proposed rule and BIS’ IFR and corresponding policy changes are described in detail below.

ITAR

Under the proposed rule, the ITAR § 126.7 exemption would reduce license or other approval requirements for the export, reexport, retransfer (in-country), or temporary import of unclassified defense articles and defense services between or among Australia, the United Kingdom, and the United States. Engagement in certain brokering activities between or among designated authorized users in these countries will also no longer require any other licenses or approvals. Finally, classified defense articles and defense services would be eligible for transfer to Australian and UK users, including certain dual national-employees thereof, provided certain requirements have been met.

However, these changes are contingent on certain limitations and requirements. First and foremost, only an “Authorized User” will be eligible to use the ITAR § 126.7 exemption. Similar to the ITAR’s exemption for participants in Canada’s Controlled Goods Program, eligible parties in Australia and the UK will need to apply to their respective governments to receive “Authorized User” status, which will be coordinated with DDTC. The approved “Authorized User” list will be available on DDTC’s website.

Further, certain defense articles and defense services listed in a new Supplement No. 2 to Part 126 will not be eligible for use of the exemption. According to DDTC, these defense articles and services were excluded from the exemption “due to their importance to the national security and foreign policy interests of the United States.” The excluded items, however, will be subject to expedited license review procedures for export-related requests involving Australia and the UK, including 30-day review limits for requests related to government-to-government agreements, and 45-day reviews for other license requests.

EAR

The BIS IFR makes a number of revisions to the EAR to lessen restrictions on trade with Australia and the UK. The first of such changes to the EAR revolve around the removal of list-based license requirements for Australia and the UK. Specifically, BIS removed license requirements for national security column 1, regional stability column 1, and missile technology column 1 reasons of control for Australia and the UK. As a result, “600 series” items and items controlled under the EAR for missile technology reasons, among others, will no longer require a license for export to Australia or the UK.

The IFR also eliminates licensing requirements for Australia and the UK for non-U.S.-produced military commodities classified under Export Control Classification Number (ECCN) 0A919. Relatedly, the IFR removes licensing requirements for military-end-users and -end-use licensing requirements for Australia and the UK with respect to certain cameras, systems, and related components described under Sections 744.9(a)(1)(i) and (a)(1)(iii) of the EAR.

Further, the IFR amended the EAR to permit “significant items,” which includes sensitive hot section technology for the development, production, or overhaul of advanced commercial aircraft engines, components, and systems, to be exported, reexported, or transferred (in-country) to or within Australia and the UK without prior BIS authorization or use of an EAR license exception.

In addition to the significant amendments outlined above, the IFR also includes certain minor amendments to add Australia and the UK sections of the EAR that previously only referenced Canada. However, the IFR’s changes did not reach certain exemptions for certain crime control license requirements, which remain available only for Canada.

Conclusion

These noteworthy regulatory changes (if adopted in the case of the proposed rule for the ITAR) will significantly reduce compliance burdens and streamline AUKUS-related trade between the United States, Australia, and the UK, as well as increase trade relations with these countries more broadly. Companies should keep a close eye on how these developments affect their existing partnerships, and they should evaluate what new opportunities exist for growth and expansion.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.