[co-author: Alex Lopes]
- On April 19, 2024, BIS removed almost all controls over exports and reexports to, and transfers within, Australia and the United Kingdom of items subject to the EAR. The action is the first change to U.S. export control regulations to implement AUKUS Pillar II. Except for a small number of crime control and firearms-related items, the EAR controls over trade with Australia and the U.K. are the same as for Canada.
- BIS is accepting comments until June 3, 2024 on the impact of the changes and how the EAR could be further amended to enhance defense industrial base cooperation and technology innovation with Australia and the U.K. BIS also asked for comments on whether it should remove encryption licensing requirements for Australia and the U.K. and what the impact would be if it did.
- The State Department has announced that, to satisfy its statutory requirements to streamline defense trade by and among the three countries, it plans to complete the creation of exemptions to ITAR controls within 120 days.
In an Interim Final Rule, on April 19, 2024, the Commerce Department’s Bureau of Industry and Security (BIS) removed almost all controls over exports and reexports to, and transfers within, Australia and the United Kingdom of items subject to the Export Administration Regulations (EAR). The action is the first change to U.S. export control regulations to implement Pillar II of the AUKUS Trilateral Security Partnership. The changes mean that, except for a small number of crime control and firearms-related items, the EAR controls over trade with Australia and the U.K. are now the same as for Canada.
Summary of AUKUS and the Context for the Amendments
AUKUS is part of a wider United States government effort to coordinate and strengthen the defense relationship between and among the U.K. and Australia to support defense and technological ties in the Indo-Pacific through lessening regulatory burdens for the transfer of defense articles and other sensitive technologies subject to the EAR. Pillar I focuses on trilateral submarine cooperation. Pillar II has a broader scope than Pillar I because it focuses on partner collaboration efforts on advanced capabilities related, among things, to underseas capabilities, quantum technologies, artificial intelligence, advanced cyber, hypersonic and counter-hypersonic capabilities, electronic warfare, innovation and information sharing.
The Complete Removals of Licensing Requirements Are Significant for Many Reasons
The BIS amendments are significant from compliance, substantive and historical perspectives. First, they are simple. They remove entire categories of license requirements for the two countries rather than relying on license exceptions that have conditions on their use. The amendments contain none of the complexity of the 2007 Defense Trade Cooperation Treaties with Australia and the U.K. and their implementing regulations. Second, they remove controls on items that have from the beginning of the EAR been strictly controlled even for close allies. Indeed, the amendments remove controls over a long list of specific types of items that could not be exported under License Exception STA (Strategic Trade Authorization), which was created during the Export Control Reform effort to achieve collective security objectives similar to those of AUKUS.
Specifically, with respect to Australia and the U.K.:
- All Missile Technology (MT) item-based controls are removed. Indeed, this is the first time that BIS has removed or materially relaxed MT controls for any country. (They were never imposed against Canada.)
- MT items subject to the International Traffic in Arms Regulations (ITAR) remain controlled by the ITAR, but significant changes to the ITAR’s licensing obligations are expected later this year.
- All remaining National Security (NS) controls are removed. This means, for example, that all the controls over the “600 series” military items that were moved to the EAR from the ITAR during Export Control Reform no longer exist.
- All remaining Regional Stability (RS) controls are removed. This means, for example, that foreign-made military items that incorporate more than a de minimis amount of controlled night vision-related or military content, or are the direct products of EAR-controlled military technology, are no longer controlled.
- All the extra EAR controls over dual-use night vision cameras and related items for military end users are removed. These extra controls were originally imposed because of the potential significant harm to the U.S. warfighter if foreign commercial suppliers diverted them to hostile military end users.
- All the extra EAR controls over Significant Items (SI), which apply to hot section technologies and related items, are removed. The reason for the long-standing extra controls over hot section technologies is that they are what give military aircraft engines critical performance advantages.
- The EAR’s controls on most spacecraft- and satellite-related items are removed. The worldwide controls on specific types of remote sensing satellites and spacecraft that provide space-based logistics, assembly or servicing for other spacecraft, and related software and technology, remain.
- The EAR amendments and the expected ITAR changes come after the October 26, 2023, signing of the Agreement on Technology Safeguards associated with U.S. participation in space launches from Australia. This U.S.-Australia Technology Safeguards agreement allows for the transfer and other services related to space launch activities, which can bolster U.S.-Australia space cooperation.
License Exceptions Are Harmonized with Those Traditionally Available Only for Canada
The rule contains minor changes to license exceptions to align them with the carve-outs traditionally available only for Canada. These include changes to License Exception AVS (Aircraft, Vessels, Spacecraft), which has treated exports to Canadian airlines in most destinations as exports to Canada. Since Missile Technology items do not require a license for export to Canada, this has meant that Missile Technology-controlled items used on commercial aircraft, such as inertial navigation units, could be exported to most destinations for Canadian airlines to use as spare parts. BIS’s amendment means that U.K. and Australian airlines will now also be able to receive such items in most destinations without a license. In addition, License Exception APR (Additional Permissive Reexports) may now be used to reexport an item to Australia, Canada and the U.K. if the item could be exported to the three countries from the U.S. without a license.
With respect to License Exception ENC for encryption items, the semi-annual reporting requirement is removed for the U.K. and Australia to the same extent as it is for Canada. Although BIS is not removing licensing requirements to Australia or the U.K. for encryption items, BIS asked for comments on whether it should and what the impact would be if it did. BIS noted, however, that License Exceptions ENC and ACE (Authorized Cybersecurity Exports) are available for such items to and within Australia and the U.K., subject to certain conditions.
When Licenses and EEI filings Are Still Required for Exports to Canada, Australia, and the U.K.
Licenses continue to be required for Canada, Australia and the U.K. for (i) unprocessed western red cedar; (ii) horses exported by sea; (iii) items controlled under the Chemical Weapons Convention; (iv) implements of torture; (v) surreptitious intercepting devices and related items; (vi) items designed for the execution of humans; (vii) remote sensing satellites and spacecraft that provide space-based logistics, assembly or servicing for other spacecraft, and related items; and (viii) most types of firearms and related items.
Electronic Export Information (EEI) filings to the Automated Export Control System (AES) will continue to be required for 9x515 (i.e., satellite-related), 600 series (i.e., military) and firearm-related items to Australia, the U.K., Canada and all other countries.
Items Still Requiring a License to Australia and the U.K.,
but not to Canada
Several types of Crime Control items that do not require a license for export to Canada continue to require a license for export to Australia and the U.K. They include (i) law enforcement restraint devices; (ii) discharge type arms and electric shock devices (e.g., stun guns and cattle prods); and (iii) and related technology for such items. BIS also did not make any changes related to controls on firearm-related items. Thus, for example, there continue to be controls on exports to Australia and the U.K., but not to Canada, on specific types of optical sighting devices, and software and technology for developing, producing, or using guns, gun- and ammunition-manufacturing equipment, and ammunition. (Shotgun shells (ECCN 0A505.c) are controlled for Canada, but not to Australia or the U.K.).
Catch-All Controls Were Not Changed
Although BIS made significant changes to the item-based controls pertaining to Australia and the U.K., it did make any changes to the “catch-all” end-use or end-user controls. This means, for example, that licenses are still required to export to any country items for use in developing or producing (i) missiles for the delivery of chemical, biological or nuclear weapons (except for exports to the U.K. and French nuclear weapons delivery programs); (ii) chemical or biological weapons; or (iii) foreign maritime nuclear propulsion. Also, none of the controls is removed over exports, reexports and transfers (in-country) of items when an entity on the Entity List would be a party to the transaction or when there is knowledge of a violation.
Broader Meaning
The U.S., Australia, and the U.K. created AUKUS to respond to China’s broader military aspirations in the Indo-Pacific region and to respond to President Xi’s stated desire to re-unify Taiwan with the mainland. The scope and significance of the amendments are indicators how close the relationship is among the three allies and how aligned they are on their threat assessments. The amendments are also evidence of the U.S. government’s confidence that the recently updated export control systems of Australia and the U.K. will prevent the diversion of the newly decontrolled items to destinations, end uses and end users of concern.
Next Steps
The State Department has announced that, to satisfy its statutory requirements to streamline defense trade by and among the three countries, it plans to complete the creation of exemptions to ITAR controls within 120 days. (For commentary on how such rules could be effective, see “Ten Informal Rules for AUKUS Success.”)
BIS is accepting comments until June 3, 2024, on the impact of the changes and how the EAR could be further amended to enhance defense industrial base cooperation and technology innovation with Australia and the U.K. In particular, BIS asked for comments on whether it should remove encryption licensing requirements for Australia and the U.K. and what the impact would be if it did.
There is speculation in the media about whether Japan or other countries will eventually join AUKUS. BIS did not refer to such possibilities in its amendments.
