Courtesy Australia Department of Defense
The U.S. Department of State announced on August 15, 2024 that progress had been made in the AUKUS defense trade integration. This has resulted in an interim final rule amendment to the International Traffic in Arms Regulations (ITAR) that will facilitate billions of dollars in secure license-free defense trade between Australia, the United Kingdom, and the United States. The Department of State will now implement a 90-day public comment period to allow industry to provide refinements to the rulemaking process.
Results of New ITAR Rules
These AUKUS defense trade rule changes were implemented largely due to revisions Australia put in place to strengthen its export policies with regards to military articles and technologies. Under the new rules most military goods will be able to be shared between the three countries. This will shorten the approval process of exports to AUKUS participants of ITAR articles and technology. Normally the Directorate of Defense Trade Controls (DDTC) which administers the ITAR, operates on a policy of denial for licensing which has caused delays in processing exports.
The resulting exemption as defined in 22 CFR part 126.7 will go into effect on September 1, 2024. The exemption applies to transfers within the physical territories of the three countries to authorized users that are registered with the DDTC, A U.S. government department, or UK or Australian users identified in the DECCS system. The exemption will be allowed for most defense articles with the exception of those items found in the Excluded Technology List (ETL). ETL items will include chemical, biological, and nuclear weapons for which licensing requirements will stay in place.
AUKUS Background and History
AUKUS is a trilateral security partnership between Australia, the United Kingdom, and the United States that was initiated in 2021. Its initial priority was to facilitate the Royal Australian Navy’s acquisition of nuclear-powered submarines to address threats from China in the Indo-Pacific arena. The strategic partnership has also involved information sharing, counter-hypersonic technologies, cyber capabilities, artificial intelligence quantum technologies and additional undersea capabilities.
In May of 2024 the partnership published proposed changes to defense trade controls to create license exemptions for billions of dollars of cutting edge defense technologies between the neighbor states. A more complete easing of restrictions in export regulations was hindered by a perception of differences between the participant countries’ export control system. The U.S. Department of State has now determined that the control systems of Australia and the UK are sufficiently comparable to move forward with easing of restrictions.
AUKUS Revisions Affecting the EAR
Export Administration Regulations (EAR) control the export of commodities by prohibiting or placing licensing requirements on specific items. the term commodities can include software, technology, and intellectual properties. The EAR are administered and enforced by the Bureau of Industry and Security (BIS). Items controlled under the EAR are listed in the Commerce Control List (CCL), and identified by a unique Export Control Classification Number (ECCN). Prohibition of export or requirements for licensing are based on the classification of the item, the destination of export, the end user, and the end use of the item.
The Bureau of Industry and Security (BIS) had published an interim final rule in April 2024 to remove license requirements for exports, reexports, and in-country transfers between the three countries. In May 2024 the BIS made corrections to that publication to footnote 9. This change, while easing licensing and end use requirements for most items would leave in place license requirements for firearms-related items and other CCL items.
CVG Strategy Export Compliance Management Programs
AUKUS defense trade integration will ease export restrictions between the nations of the trilateral security partnership, however, export compliance remains a dynamic concern for businesses engaged in international sales. Failure to comply with regulations can result in criminal prosecution including imprisonment and fines. It can also result in civil penalties and disbarment from export activities.
CVG Strategy can help you in understanding the ITAR and EAR, and help you establish a coherent and effective export compliance program. We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team. Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help.