Key updates on International Traffic in Arms Regulations (ITAR): exemption for defense trade and cooperation among Australia, the United Kingdom, and the United States
Date of publication: September 4, 2024
Introduction
In August 20th edition of the Federal Register, the Department of State has introduced an Interim Final Rule with significant amendments to the International Traffic in Arms Regulations (ITAR). This interim final rule adopts the proposed rule published on May 1, 2024, with some additional changes. The proposed rule was contingent upon the U.K. and Australia aligning their export control regimes with that of the U.S. and implementing a comparable export controls exemption for the U.S. These changes, effective from September 1, 2024, are designed to maximize the innovative power residing in the partners' defense industrial bases and facilitate license-free defense trade and cooperation among Australia, the United Kingdom, and the United States. The Interim Final Rule is aimed to enhance the collective efforts brought forward by AUKUS to address security challenges and promote global stability.
This article provides an overview of these updates to ensure our clients are well-informed about the new regulatory landscape.
Key ITAR amendments
1. New exemption for defense trade and cooperation
The Department of State has established a new exemption under § 126.7 to streamline defense trade among Australia, the United Kingdom, and the United States. Key aspects of this exemption include:
- Scope of Exemption: no license or other approval is required for the export, reexport, retransfer, or temporary import of defense articles, the performance of defense services, or engaging in brokering activities between or among authorized users within these three countries provided certain requirements and limitations are met.
- Authorized Users: the exemption applies to U.S. persons registered with the Directorate of Defense Trade Controls (DDTC), U.S. Government departments or agencies, and authorized users identified through the DDTC website. Authorized users must also be registered with DDTC if engaging in brokering activities.
- Excluded Technologies: certain defense articles and services are excluded from the provisions in § 126.7, as listed in the Excluded Technology List (ETL) in Supplement No. 2 to Part 126. This list identifies certain defense articles and services ineligible for transfer under the new AUKUS Exemption, based on statutory obligations and policy decisions, including national security considerations. Additionally, the manufacturing of significant military equipment (SME) abroad is not permitted under the AUKUS Exemption, as such activity is subject to congressional certification requirements.
- Compliance and Reporting: the Interim Final Rule does not alter or replace other ITAR exemptions and requirements such as recordkeeping and reporting. Transferors must comply with specific requirements, including those related to nontransfer and use assurances, and must ensure that the value of the transfer does not exceed specified amounts or involve the manufacturing abroad of significant military equipment.
2. Expedited licensing process
To further facilitate defense trade, the Department has introduced an expedited licensing process for certain exports to Australia, the United Kingdom, and Canada:
- Eligibility: any application for the export of defense articles or services to these countries that cannot be undertaken under an exemption will be processed expeditiously. The prospective export must occur wholly within or between the physical territories of these countries.
- Processing Timelines: applications related to government-to-government agreements must be approved, returned, or denied within 30 days of submission. All other applications must be reviewed within 45 calendar days.
3. Handling of classified information
The amendments also address the transfer of classified defense articles to dual nationals who are authorized users. To qualify as an authorized user for purposes of the AUKUS Exemption, the Interim Final Rule requires that U.K. and Australian transferors or recipients complete an enrollment process initiated through their respective governments. The State Department has indicated that details on the enrollment process will be provided separately but managed by agencies of the U.K. and Australian governments. This is an expansion on the scope of the existing ITAR exemption for intracompany, intra-organization and intragovernmental transfers:
- Dual Nationals: no license is required for the retransfer or reexport of classified defense articles to citizens of Australia or the United Kingdom, provided they hold a security clearance equivalent to the U.S. classification level of SECRET or above and meet other specified criteria.
Conclusion
These ITAR updates represent a significant step towards enhancing defense trade and cooperation among Australia, the United Kingdom, and the United States. By introducing new exemptions and expedited processes, the Department of State aims to streamline regulatory requirements and facilitate more efficient defense trade operations.
As a result of these rules, the vast majority of commercial defense and dual-use trade between the three countries is now authorized without a license, thereby enhancing technological innovation in support of the goals of AUKUS, the Trilateral Security Partnership between Australia, the U.K. and the U.S.
As this is an interim final rule, the Department of State will be accepting public comments. Comments are due on or before November 18, 2024. Interested parties may submit comments by one of the following methods:
Email: DDTCPublicComments@state.gov, with the subject line “Australia, the United Kingdom, and the United States ITAR Exemption”
Internet: At www.regulations.gov, search for this notice using Docket DOS-2024-0024.
Comments submitted after the rule takes effect will be considered by the State Department when deciding whether to finalize the Interim Final Rule. This Interim Final Rule follows similar updates to the Export Administration Regulations (EAR) published by the Commerce Department's Bureau of Industry and Security (BIS) earlier this year in a separate rulemaking. The rulemaking from BIS removed certain restrictions and license requirements for most items on the Commerce Control List (CCL) to allow Commerce Department-controlled military items, as well as items related to missile technology and hot section engines, to be exported or reexported to Australia and the U.K. without a license.
For more information on how ONESOURCE Global Trade solutions can assist you in managing sanctions and export controls, please contact your Account Manager or Client Services Manager.