In May, the US State Department’s Directorate of Defense Trade Controls (DDTC) published its long-awaited rule amending the International Traffic in Arms Regulations (ITAR) to implement the AUKUS Trilateral Security Partnership.[1] That rulemaking follows determinations and certifications to Congress that Australia and the UK have adopted systems for export controls comparable to the ITAR and reciprocal licensing exemptions for defense trade with the US, as required under section 1343 of the National Defense Authorization Act of 2024. After an initial round of public comments and corresponding minor revisions, the ITAR AUKUS rule went into effect as an interim final rule on September 1, 2024.[2]

The ITAR AUKUS rule, together with the companion rule from the US Commerce Department’s Bureau of Industry and Security (BIS) under the Export Administration Regulations (EAR), stands to be the most impactful change to US export regulations since Export Control Reform. Among other things, the rules eliminate licensing requirements for transfers of defense articles, defense services, and most other controlled items between and among the US, Australia, and the UK, and fast-tracks license reviews for other transactions. Their aim is to facilitate defense trade and strategic cooperation according to the partnership’s two core objectives or “pillars.”[3]  Pillar I is support for Australia acquiring and maintaining a fleet of conventionally armed, nuclear-powered submarines. Pillar II more broadly promotes joint development of targeted advanced technologies and strategic military capabilities, including (1) advanced cyber, artificial intelligence (AI), and autonomy; (2) quantum technologies; (3) hypersonic and counter-hypersonic capabilities; (4) electronic warfare; (5) innovation; (6) information sharing; and (7) undersea capabilities. A core tenet underlying both pillars is strengthening and aligning each country’s export control regimes to safeguard and facilitate greater collaboration.

The new ITAR and EAR AUKUS rules present significant opportunities to reduce export licensing requirements for controlled transactions with Australia and the UK. Nevertheless, there are many boxes to check to confirm eligibility to use these programs, and exporters will need to be careful to comply with ancillary requirements for eligible transactions. The following offers an overview of the new rules.  

ITAR AUKUS Rule

The ITAR AUKUS rule facilitates defense trade and cooperation between and among Australia, the UK, and the US by easing ITAR licensing requirements. It does this through three important revisions to the ITAR: (1) a broad new license exemption for AUKUS countries similar to, but broader in scope than, existing ITAR exemptions for US Defense Trade Cooperation Treaties; (2) a new authorization for transfers of classified defense articles to certain dual nationals of AUKUS countries; and (3) new procedures to expedite ITAR license applications for AUKUS transactions.

The core of the ITAR AUKUS rule is the new license exemption, codified at ITAR § 126.7. The exemption authorizes the export, reexport, retransfer, or temporary import of defense articles, including certain classified and unclassified technical data; the performance of defense services; or the engagement in brokering activities involving designated “Authorized Users”[4] within the AUKUS countries, subject to limitations. Its scope includes cross-border collaborations involving classified and unclassified technical data that previously required a DSP-5 license or DDTC approved Technical Assistance Agreement. However, there are important limitations and conditions on use of the AUKUS exemption, including the following:

• The defense articles, technical data, and defense services must not be excluded from the exemption. Like other country-specific ITAR exemptions, the AUKUS exemption comes with an Excluded Technologies List (ETL), at Supplement Number 2 to ITAR Part 126. The ETL identifies specific defense articles (including classified and unclassified technical data) and defense services excluded from the scope of the exemption due to their importance to US national security and foreign policy interest. Items on the ETL are ineligible for the AUKUS exemption; however, applications involving ETL items and AUKUS partners are eligible for the new expedited license review procedures.
• Transfers must be to or within the physical territory of Australia, the UK, or the US. Also, all intermediate consignees involved in the transaction must be located in AUKUS countries.
• All parties to the transaction (including intermediate consignees) must be individually registered as Authorized Users in the UK or Australia. This requirement applies to subsidiary entities of Australian and UK companies, and to non-US subsidiaries and other affiliates of U.S. companies operating in those countries.
• The US exporter must obtain non-transfer and use assurances for defense articles designated as significant military equipment (SME) and comply with other requirements for ITAR-regulated transactions, such as the Congressional notification requirement for certain high value transactions.
• ITAR recordkeeping and Electronic Export Information (EEI) filing requirements apply to US shipment under the AUKUS exemption. US exporters declare use of the exemption by citing code “126.7” in the appropriate field in the EEI.

In addition, the ITAR AUKUS rule expands the existing exemption for intra-company, intra-organization, and intra-governmental transfers at ITAR § 126.18 to cover transfers of classified defense articles to certain dual nationals. That exemption now applies to transfers involving dual nationals of an AUKUS country and another country who are Authorized Users or employees of Authorized Users, who hold a security clearance in an AUKUS country equivalent to SECRET level clearance or above in the US, and who are within the physical territory of an AUKUS country or are a member of the AUKUS country military and acting in an official capacity.

Finally, the ITAR AUKUS rule implements expedited license processing for certain defense articles and defense service exports to Australia, the UK, and Canada, that are not eligible for the exemption. Under the new rule, DDTC must decide license applications involving government or corporate entities in the AUKUS countries within 30 days of submission. Other applications will be decided within 45 days, except those requiring Congressional notification.

EAR AUKUS Rule

Effective April 19, 2024, the EAR AUKUS rule[5] essentially aligns the restrictions on exports, reexports, and transfers (in-country) for items subject to the EAR to Australia and the UK with those already in place for Canada. The rule sharply reduces the number and types of transactions requiring specific BIS licenses by both easing controls on sensitive Commerce Controls List (“CCL”) goods, technology, and software, and broadening certain EAR license exceptions. Collectively, these measures remove hurdles in defense trade among the AUKUS countries and is particularly important for technical collaborations under AUKUS’ Pillar II.

Most significantly, the EAR’s AUKUS rule removes list-based licensing requirements for exports, re-exports, and transfers to and among Australia and the UK for most items classified in an Export Control Classification Number (ECCN) on the CCL. It does this by removing the list-based licensing requirement for these countries (i.e., the “x” in the box on the Commerce Country Chart (15 C.F.R. Part 738, Supplement 1)) under National Security column 1 (NS1), Regional Stability column 1 (RS1), and Missile Technology column 1 (MT1) reasons for control.[6] These and other changes under the EAR AUKUS rule eliminate EAR licensing requirements for the AUKUS partners, including for the following significant categories of items subject to the EAR:

• “600 series” Military Items. The EAR AUKUS rule eliminates list-based licensing requirements to Australia and the UK for most “600 series” military items and items controlled for missile technology reasons, and associated parts and components of these systems.
• CCL Category 6 Camera Systems. The EAR AUKUS rule eliminates licensing requirements for CCL Category 6 camera systems and components thereof, when exported, reexported, or transferred for military end-uses or military end-users in Australia or the UK (under EAR §  744.9(a)(1)).
• Commercial Satellite Items.  The EAR AUKUS rule eliminates licensing requirements for many satellite-related items controlled in ECCN 9x515. However, items requiring a license for export worldwide under the special Regional Stability Column 1 controls (at EAR § 742.6(a)(9)) continue to require a license to Australia and the UK, including items classified in ECCN 9A515.a.1, .a.2., .a.3., .a.4., .g, and ECCN 9E515.f.
• Foreign-Made Military Commodities. A BIS license is no longer required for exports, reexports, or transfers to Australia and UK (and Canada) of military commodities produced outside the US (that are not subject to the ITAR) that incorporate more than de minimis Category 6 or “600 series” content, or that are the direct product of “600 series” technology or software. This special Regional Stability control (under EAR § 742.6(a)(3)) remains in place for all other countries, with the exception of certain reexports for military deployments by Country Group A:1 countries or the US.
• Commercial Aircraft Engine Hot Section Technology. To further align with controls applicable to Canada, the EAR AUKUS rule revises EAR § 742.14(a) to eliminate the licensing requirement to Australia and the UK for items on the CCL designated as significant items (having an “SI” under the “Reason for Control” paragraph). This includes certain ECCN 9E003 commercial aircraft engine hot section technology for the development, production, or overhaul of commercial aircraft engines, components, and systems.

Notably, BIS estimates that removal of National Security, Regional Stability, and Missile Technology controls alone will reduce licensing burdens for trade with Australia and the UK by over 1,800 total licenses valued at over $7.5 billion annually.