The Bureau of Industry and Security (“BIS”) issued an interim final rule (“IFR”), effective on April 19, 2024, amending the Export Administrations Regulations (“EAR”) to ease most licensing restrictions on exports/reexports to and within Australia and the UK of items subject to the EAR. This is a key change in that export licensing requirements under the EAR for Australia and the UK are now largely similar to those for Canada. The driver for this was to align with the Australia, UK, US (“AUKUS”) Trilateral Security Partnership’s goals of strengthening information sharing and defense capabilities among its members and facilitate technological collaboration among the AUKUS nations. The Department of State (“State”) has now also issued a proposed rule (“Proposed Rule”) on May 1, 2024 to amend the International Traffic in Arms Regulations (“ITAR”) to ease licensing restrictions for Australia and the UK in support of the AUKUS partnership.
The BIS IFR
BIS has issued this IFR in support of the broader trade and technology cooperation among the AUKUS members and in recognition that Australia and the UK have robust export control systems, are active participants in the four major non-proliferation agreements (the Wassenaar Arrangement, the Australia Group, the Nuclear Suppliers Group, and the Missile Technology Control Regime), and are part of the Global Export Controls Coalition (GECC) of governments that have substantially aligned export control measures in response to the war in Ukraine.
The revisions to the EAR aim to make the licensing requirements for Australia and the UK almost as liberal as for Canada by:
- Removing the list-based license requirements for exports, reexports, and transfers (in-country) to Australia and the UK of items controlled for reasons of National Security column 1 (NS:1), Regional Stability column 1 (RS:1), and Missile Technology column 1 (MT:1). As a result, “600 Series” items, missile technology-controlled items, and many 9×515 satellite items will no longer require a license for Australia or the UK (although EEI filings are still required).
- Eliminating the ECCN 0A919 military goods license requirement for Australia and the UK, bringing them in line with Canada’s treatment.
- Removing military end use and end user-based license requirements for certain cameras, systems and related components for Australia and the UK.
- Allowing Significant Items (“SI”) controlled under ECCN 9E003.a.1 through a.6, a.8, .h, and .l (i.e., hot section technology for the development, production or overhaul of commercial aircraft engines, systems, and their components) to be exported/reexported, or transferred (in-country) to or within Australia and the UK without a license.
The following firearms and crime control-related items will continue to require a license for Australia and the UK: 0A501 (except 0A501.y), 0A502, 0A503, 0A504, 0A505. a, .b, and .x, 0A981, 0A982, 0A983, 0D501, 0D505, 0E501, 0E502, 0E504, 0E505, and 0E982.
BIS has also made some minor corresponding changes in the EAR, including amending license exceptions to reflect these changes consistent with the current status of Canada. For example:
- License Exception Aircraft, Vessels, and Spacecraft (AVS) is amended to allow Australian and UK vessels and airlines abroad to receive most equipment, parts and other items to the same extent as Canadian airlines without a license;
- License Exception Additional Permissive Exports (APR) is amended to allow reexports from Australia and the UK as well as Canada to third countries if no license would be required when exported directly from the US to the third country and reexports to Australia, the UK as well as Canada if no license would be required to export to those countries; and
- License Exception Encryption Commodities, Software and Technology (ENC) is amended to exclude semi-annual reporting of exports from Australia, the UK as well as Canada of items eligible for License Exception ENC paragraph (b)(2) and (b)(3)(iii) while requiring reporting of reexports from those countries.
The State Proposed Rule
On December 22, 2023, President Biden signed the National Defense Authorization Act (“NDAA”) for fiscal year 2024 (see our related blog post here), which contains provisions streamlining defense trade between Australia, the UK, and the US. The Department of State is the agency responsible for implementing those changes and issued the Proposed Rule as part of these efforts.
The Proposed Rule aims to amend the ITAR to ease the licensing requirements for Australia and the UK by:
- Including an exemption in Section 126.7 that no license or other approval would be required from the Directorate of Defense Trade Controls (“DDTC”) prior to exports, reexports, retransfers, or temporary imports of defense articles, performance of defense services, or engagement in brokering activities between or among designated authorized users within Australia, the UK, and the US, subject to certain conditions and limitations. Both the transferor and recipient would have to be either US persons registered with DDTC or authorized users identified on the DDTC website (an enrollment process will be created).
- A list of defense services and articles not eligible for the exemption would be added to the ITAR as a new Supplement No. 2 to Part 126.
- Adding intra-company, intra-organization, and intra-governmental transfers to the scope of the exemption to enable the transfer of classified defense articles to certain dual nationals of Australia and the UK who are designated authorized users, or regular employees of designated authorized users.
- Revising Section 126.15 to establish a new expedited license application review process for exports of certain commercial, advanced-technology defense articles and defense services to or between Australia, Canada, and the UK.
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State and BIS are accepting comments on these supplementary changes to ITAR and the EAR through the Federal rulemaking portal until May 31, 2024 and June 3, 2024 respectively. BIS specifically requests comments about the potential impact of removing encryption (EI) licensing controls on Australia and the UK, and State is encouraging comments on the scope of excluded defense articles to be included on Supplement No. 2 to Part 126. Companies whose business involves technologies and exports impacted by the IFR and/or Proposed Rule are strongly encouraged to submit detailed comments to BIS and/or DDTC to help shape supplementary changes going forward.
Baker McKenzie would be happy to assist interested companies in preparing and submitting public comments in response to the Proposed Rule and the IFR.
