Written by Brinley Salzmann, Director – Overseas & Exports
The AUKUS initiative, announced in September 2021, is designed to facilitate close cooperation between Australia, the UK and the US on a broad range of defence capabilities. Expansion of the partnership in future has not been ruled out, with vast scope for technological and information cooperation.
Since the start of the AUKUS partnership, it has been clearly identified that the successful delivery of such an ambitious multinational initiative will require the need to address a number of practical barriers, including the three nations’ export control systems, to enable the frictionless flow of defence technologies between them.
This process has now begun, with the three nations altering their export regulations from September 2024 to open up trade between them. This most prominently includes an exemption to the USA’s complex International Traffic in Arms Regulations (ITAR), but also multiple other changes across the AUKUS nations. This blog will explore these changes and what they mean for your business.
Consultations with Industry
In May, the US State Department published its draft proposals for the ITAR exemption for AUKUS. This was matched by similar updates to the export regulations in all three AUKUS countries, all designed to generally open up trade within AUKUS. All drafts were open to feedback by industry, which had an opportunity to ensure that the potential problems caused by the national export control systems for the successful delivery of AUKUS could be mitigated .
While proposed changes to the US’s Export Administration Regulations were seemingly met with unanimously positive comments from export control experts, the responses to the proposed ITAR changes and the UK’s Open General License (OGL) were much more focused on a significant number of areas where greater clarity was needed.
ADS, on behalf of the AUKUS Advanced Capability Industry Forum , undertook consultations across UK Industry, as well as engaging with counterpart organisations in both Australia and the US to ensure the consistency of messaging. ADS also organized a range of activities to enable UK firms to be briefed, following which UK industry’s views on the proposals were presented to all three governments.
The three Governments published the results of their consultations across mid August, and the new processes were started to be implemented on September 1.
A further 90-day public comment period also began on Tuesday 20 August 2024, which may result in additional revisions in a future rule by the US Department of Defense Trade Controls.
The new rules are designed to harness the innovative power residing in the three nations’ defence industrial bases by facilitating secure license-free defence trade. The vast majority of commercial defence trade between and among the US, Australia, and the UK, for both AUKUS and non-AUKUS programs, is eligible for transfer under the ITAR Exemption . With this Exemption, the US Government aims to enhance the three nations’ collective efforts to address the security challenges of the future and promote security and stability in the Indo-Pacific and around the World.
What this means for UK companies
UK firms need to thoroughly read and understand what the potential implications of these changes might be for them and their commercial activities. It must be noted, as per a message from one of ADS’ larger Member Companies, that: “The ITAR Exemption represents exemption from licensing requirements, not exemption from the ITAR”.
If a technology is on the associated Excluded Technologies List (ETL), except for some “expedited licensing” requirements mandated by Congress, it will essentially be the normal licensing process for both Australia and the UK. That doesn’t mean something won’t be exported; it just means you still need some form of license or agreement.
For all three nations’ industries, the ITAR Exemption and the ETL now effectively regulate the AUKUS partnership, and are crucial for its successful delivery. They reduce or remove a number of different requirements for exporting. However, the ETL is still quite extensive and complex.
At the end of the day, the success of this initiative will be down to practical usage, as the officials of the three governments stated during the consultation phase; it will only work if companies from the three nations actually take up the presented opportunity to apply for membership of the Authorised User Community (AUC) , UK firms register to use the Open General License and companies start to use it for their commercial activities. Thus, the frequency and extent of usage will dictate whether these changes have proven to be worthwhile and successful.
All UK entities need to consider carefully seeking to apply for Membership of the AUC to make full use of the changes that are planned. We have been working with the UK MoD to try to ensure that the process proposed is as simple and straightforward as possible and does not serve as an active disincentive to companies (especially SMEs) to consider applying for AUC Membership.
Also, all companies are to be actively encouraged to try to ensure that as many of their UK-based suppliers as possible are aware of AUC, and that they are encouraged to consider applying for AUC membership. The more UK companies who are Members of the AUC, the greater the likelihood of the success of this initiative. All UK entities need to consider carefully registering for the Export Control Joint Unit’s Open General Licence, and to read carefully its associated terms and conditions (as with any Open Licence).
What has been introduced is not the end of the story, but it does represent a significant change in the previous ways in which this activity had been controlled within the three nations. There is still work to be done to try to identify practical lessons that can be learnt, both by industry and Government, to identify additional beneficial ways in which this initiative can further evolve in its efforts to facilitate the sort of collaboration needed to achieve the true vision of the AUKUS partnership.
ADS members can see a more detailed summary of these changes here.
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