The new AUKUS rules, explained

In September 2021, the announcement of the AUKUS pact between Australia, the United Kingdom, and the United States sent shockwaves through the international community. This trilateral security partnership, aimed at enhancing maritime security, emerging technologies, and defense capabilities in the Indo-Pacific region, has since captured global attention.

In response to this significant development, the U.S. Department of Commerce issued an Interim Final Rule for the Export Administration Regulations (EAR). This rule aims to address the evolving dynamics of international security partnerships and technology cooperation. Another regulatory response is the Notice of Proposed Rulemaking (NPRM) for the International Traffic in Arms Regulations (ITAR). This proposed rule aims to adapt to the evolving dynamics of international defense partnerships and safeguard sensitive technologies. Let’s take a further look at these two rules and what the new chapter of defense cooperation is going to look like.

Understanding EAR and Interim Final Rule:

The Export Administration Regulations (EAR) govern the export and re-export of dual-use items, software, and technology from the United States. Dual-use items are those that have both civilian and military applications, making them subject to export controls to protect national security and foreign policy interests. The Interim Final Rule (IFR) issued by the Department of Commerce represents an expedited regulatory response to emerging developments, such as the AUKUS pact.

The Interim Final Rule differs from the standard Notice of Proposed Rulemaking (NPRM) process in that it becomes effective immediately upon publication, with a provision for public comments and subsequent adjustments. This allows for swift implementation of regulatory changes while still incorporating stakeholder feedback into the final rule.

Understanding ITAR and NPRM:

The International Traffic in Arms Regulations (ITAR) controls the export and import of defense-related articles and services on the United States Munitions List (USML). This set of regulations is crucial for maintaining national security interests by preventing sensitive defense technologies from falling into the wrong hands. However, as global alliances and partnerships shift, ITAR must adapt to ensure effective controls without hindering legitimate international cooperation.

The Notice of Proposed Rulemaking (NPRM) is a standard procedure through which federal agencies solicit public input on proposed regulatory changes. In the context of ITAR, NPRMs serve as a mechanism for stakeholders to voice concerns, provide feedback, and suggest improvements to the proposed regulations. It’s a crucial step in the regulatory process, ensuring that the final rules are well-informed and balanced.

AUKUS and the EAR: What’s Changing?

On April 19, 2024 the Bureau of Industry and Security (BIS) published an interim final rule (IFR) for export control revisions for AUKUS. This IFR removed certain license requirements, expanded license exceptions, and reduced the end-use and end-user based license requirements for exports, reexports, and transfers (in-country) to or within Australia and the United Kingdom. The goal of doing this was to help enhance the technological innovation among the three partnering countries.

The changes to the EAR for AUKUS have several implications, both for the member nations and the broader geopolitical landscape. This partnership was designed to help bolster the cooperation on emerging technological areas, which are:

• Undersea capabilities
• Quantum technologies
• Artificial intelligence and autonomy
• Advanced cyber
• Hypersonic and counter-hypersonic capabilities
• Electronic warfare
• Innovation
• Information sharing

The IFR has removed the license requirements related to many of these areas and has aligned the licensing treatments similar to what is required for Canada. Among those include removing Australia and the UK from certain control reasons, such as national security column 1 (NS1), reginal stability column 1 (RS1) and missile technology column 1 (MT1). These changes are notable because “600 series” items on the Commerce Control List will no longer require a license under the EAR for export from the United States to Australia or the UK.

There are some license requirements that will remain in place for the following items:

• Certain satellites and related items
• Certain items controlled pursuant to the Chemical Weapons Convention, and items controlled for short supply reasons (e.g., certain petroleum products and Western red cedar)
• Certain law enforcement restraints and riot control equipment, implements of torture or execution, and horses exported by sea

Another significant change removes the licensing requirements for items classified under ECCN 0A919, which are military commodities produced or located outside the United States that are not subject to the ITAR.

The last two important changes would remove license requirements for military end-use and end-user based requirements that are covered under ECCN 6A003.a.3, 6A003.a.4 or 6A003.a.6 that will be used by a “military end-user” and the treatment of significant items (SI) that are controlled under ECCN 9E003.a.1-a.6, a.8, .h, .i and .l.

AUKUS and the ITAR: Notice of Proposed Rulemaking (NPRM)

On May 1, 2024, the U.S. Department of State issued a notice of proposed rulemaking. This would amend the International Traffic in Arms Regulations (ITAR) to create exemptions for certain exports, reexports, retransfers, or temporary imports of defense articles or defense related services between authorized users within the United States, Australia, and the United Kingdom.

In this proposed rule there are several interesting changes that will be made.

One is that it would introduce a provision to the exemption in ITAR 126.18 to allow dual nationals of Australia and the UK to received defense articles without a separate DDTC license provided the person meets the following requirements:

• Be an authorized user of the exemption in 126.7 or a regular employee of an authorized user in 126.7;
• Hold a security clearance approved by Australia, the UK, or the United States that is equivalent to or above the U.S. “Secret” level and;
• Be located within the physical territory of Australia, the UK, or the United States (or be a member of the armed forces thereof acting in their official capacity).

The proposed rule also seeks to expedite certain license application review processes by revising 126.15 to require that applications concerning certain commercial, advanced-technology defense articles and defense services to or between the physical territories of Australia, the UK, and Canada within certain timeframes. License requests related to a government-to-government agreement between Australia, the UK, or Canada and the United States must be approved, returned, or denied within 30 days of submission. All other license applications subject to this section should be completed no later than 45 calendar days after the date of the application.

Another is to implement the provisions of the new section 38(l) of the Arms Export Control Act (AECA). This is intended to cover 70% of the defense articles and services subject to ITAR licensing that involve Australia and the UK. This of course is provided that certain conditions are met. All eligible members from Australia and the UK must undergo a DDTC-administered authorized user enrollment process and once approved those members will be listed on a public accessible database. Members in the United States must be registered with DDTC and not debarred under 22 CFR 127.7.

Even with the changes to the exemptions there are still several items that will be excluded and will continue to require ITAR approvals. This will be laid out in Supplement No 2 to Part 126. The proposed rule states that these certain items are excluded either because they are exempt from eligibility by statue, including AECA section 38(j)(1)(C)(ii) or specifically exempted by either the UK, Australia or the United States per AECA section 38(l)(4)(A).

Conclusion

With the advent of AUKUS, adjustments to these regulations became imperative to accommodate the increased collaboration among the member nations in defense-related endeavors. The Interim Final Rule for the Export Administration Regulations (EAR) in response to the AUKUS partnership reflects the U.S. government’s commitment to adapting export controls to evolving security challenges and technology cooperation initiatives. By swiftly implementing regulatory adjustments and soliciting public feedback, policymakers seek to strike a balance between promoting innovation and safeguarding national security interests. As stakeholders navigate the implications of the interim rule, collaboration and compliance will be key to navigating the complex landscape of international trade and technology transfer.

The Notice of Proposed Rulemaking for the International Traffic in Arms Regulations (ITAR) in response to the AUKUS pact underscores the dynamic nature of international defense cooperation and export controls. As the geopolitical landscape evolves, so must regulatory frameworks adapt to new challenges and opportunities. By soliciting feedback from stakeholders and considering a range of perspectives, policymakers can ensure that the final rules effectively safeguard national security while promoting innovation and collaboration in the global defense industry.

The removal of export license requirements for defense and dual-use technologies among the pact’s members represents a pivotal moment in defense cooperation and signals a new chapter in strategic alliances.

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