Final AUKUS Rule Address Reexports to Armed Forces, Public Comments

The rule, effective Dec. 30, comes more than a year after DDTC first introduced the AUKUS exemption, which was aimed at removing export control barriers for a range of items that had previously faced strict license requirements under the International Traffic in Arms Regulations (see 2408160019). Trade groups and policy analysts have since called on the agency to continue to refine the exemption, remove additional trade barriers and better harmonize the regulations with Australia and the U.K. (see 2406030056 and 2510240025).

Some groups specifically asked DDTC to address the ITAR’s lingering territorial restrictions over reexports and retransfers that they said hinder “support” to the armed forces of the three countries. The State Department said this week it's revising the rule to create a “new and separate exemption” for reexports, retransfers or temporary imports of defense articles to “support the armed forces of Australia, the United Kingdom, or the United States,” as long as certain requirements are met.

The new language says no export license is required for those reexports, retransfers or temporary imports as long as the defense article was “originally exported pursuant to a license or other approval” and the parties to the transaction are “under contract with and either directly embedded with” those armed forces or “operating alongside and in support of such forces.”

DDTC also said the reexport, retransfer or temporary import must not be listed on the Excluded Technology List and must either be for:

• the provision of “on-site support to the armed forces” of Australia, the U.K. or the U.S., or
• the return to Australia, the U.K. or the U.S. of “defense articles used in on-site support of” their armed forces.

The rule makes several other changes to certain language for the ITAR exemption, including by replacing the term “the performance” with “furnishing” to be “consistent with existing language in the ITAR regarding defense services.”

DDTC also noted that, when the agency first released its AUKUS rule in September 2024, it began expediting all export license decisions for Australia and the U.K., “regardless” of whether the applications qualified for certain language in 126.15(c). But now that over 700 entities in Australia and the U.K. have become authorized users and industry has “utilized and familiarized themselves with” the exemption, DDTC said it’s “now processing expedited licensing requests based on the eligibility criterion of § 126.15(c), which states expedited licensing is available for an export that cannot be undertaken under an exemption.”

DDTC also said it added 126.15(c) and (d) to implement "expedited license processing for exports of defense articles and defense services to Australia, the United Kingdom, and Canada." One commenter asked DDTC whether that expedited license processing applies to all U.K. and Australian companies or only to authorized users. “The Department confirms that the expedited procedures apply to all parties in the United Kingdom, Australia, and Canada,” it said.

DDTC also used the rule to respond to multiple commenters that asked the agency to limit the scope of the Excluded Technology List, which describes items that aren’t eligible for the AUKUS exemption. The agency declined to make those changes, saying it found over a three-month sample period that 18% of license applications it received for Australia and the U.K. weren’t eligible for the exemption because of the ETL, but the agency still expedited those licensing decisions, averaging a processing time of 16.6 days.

Other commenters asked DDTC to do more to align its ETL with those put in place by Australia and the U.K.

“The Department continues to work with its international partners to more clearly align the three ETLs where practicable,” the agency said. “However, due to differences in the underlying export control lists, the three ETLs will not align perfectly and each partner must maintain its own implementation to account for differences in national legal and policy requirements and to remain agile in adapting to revisions of its own national regulations.”

Another commenter asked the State Department to open another public comment period to solicit feedback about the scope of the ETL. Others said the ETL was “burdensome,” while another urged DDTC to change how the ETL describes certain unmanned drones that are also captured by the Missile Technology Control regime.

“As it did in the interim final rule, the Department again declines to rely on the regulated community to interpret elements of the AECA and Missile Technology Control Regime (MTCR), including the term ‘for use in rocket systems,’ for the purposes of authorizing exports,” DDTC said. It also said the agency has committed to carrying out an annual review of the ETL for its first five years, “and periodically thereafter.” DDTC said it may request comments on the ETL at a future date.

Another commenter asked DDTC to consider adding Canada to AUKUS, but it declined because the ITAR exemption was specifically created for Australia and the U.K. “The Department continues to review options to improve standardization of exemption presentation throughout the regulations but also notes that the § 126.7 exemption has requirements that differ from the Canadian exemptions and that are imposed by statute,” the agency said.

Other portions of the rule provide clarifications or promise upcoming guidance about the exemption, including one FAQ that will clarify that U.S. subsidiaries and affiliates of U.S. DDTC registrants “listed in block 8 of the DS-2032,” the agency’s registration firm, “are eligible to self-certify to exemption usage and meets the registration requirement of § 126.7(b)(2)(i).”

Another commenter asked the State Department about licensing, suggesting that the agency either each month or quarter review all the license applications that have been adjudicated but not approved “in order to ensure that license applications are not being rejected because the statutorily required timeframes are approaching.” DDTC said those recommendations are “unnecessary and duplicative” because the director of the Office of Defense Trade Controls Licensing “already routinely reviews all licenses recommended for denial and tracks in real time all licenses subject to the expedited review procedures.”

The agency “has not to date, and has no plans in the future, to implement a policy of denying or returning without action license applications because the statutorily required timeframes are approaching,” it said. “Furthermore, all license applications that are returned without action are also subject to secondary review procedures to ensure consistent treatment and determine whether an incomplete or defective license application can be salvaged.”