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BIS Amends the EAR Removing Most Licensing Requirements to Australia and The United Kingdom to Support the Australia, United Kingdom, United States (AUKUS) Enhanced Trilateral Security Partnership

By John Herzo, Senior Compliance Associate, FD Associates, Inc.
Odyssey Gray III, Senior Associate, FD Associates, Inc.
April 19, 2024
89 Fed. Reg. 28594

Effective April 19, 2024, the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) amended the Export Administration Regulations (“EAR”) to remove license requirements, expand the availability of license exceptions, and reduce the scope of end-use and end-user-based license requirements for exports, reexports, and transfers (in-country) to or within Australia and the United Kingdom (“UK”) to enhance technological innovation among the three countries and support the goals of the Australia, United Kingdom, United States (“AUKUS”) Trilateral Security Partnership. The full Federal Register Notice may be found at the following link:

https://www.federalregister.gov/documents/2024/04/19/2024-08446/export-control-revisions-for-australia-united-kingdom-united-states-aukus-enhanced-trilateral

On December 22, 2023, President Biden signed the National Defense Authorization Act (NDAA) for Fiscal Year 2024, Public Law 118-31, which enacted provisions related to streamlining defense trade between and among the United States, UK, and Australia, provided certain conditions are met. To support the United States’ broader defense trade and technology cooperation with the AUKUS partners, BIS issued this change to remove certain license requirements for exports to Australia and the UK under the EAR.

On September 15, 2021, the leaders of Australia, the UK, and the United States announced their “resolve to deepen diplomatic, security, and defense cooperation in the Indo-Pacific region, including by working with partners, to meet the challenges of the twenty-first century” by creating AUKUS, an enhanced trilateral security partnership. Through AUKUS, partner governments strengthen each other’s ability to support their collective security and defense interests, building on longstanding and ongoing bilateral ties. AUKUS consists of two main pillars. Pillar I focuses on trilateral submarine cooperation. Pillar II focuses initial partner collaboration efforts on advanced capabilities in the following areas: (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) additional undersea capabilities.

The UK and Australia are two of the United States’ closest allies, with longstanding collective defense arrangements. They are also members of all four multilateral export control regimes (i.e., the Wassenaar Arrangement on Export Controls for Conventional Arms and Related Dual-Use Goods and Technologies, Australia Group, Nuclear Suppliers Group, and Missile Technology Control Regime (MTCR)). They are also members of the Global Export Controls Coalition (GECC) of governments that have substantially aligned on export control measures in response to Russia’s illegal war against Ukraine. The UK and Australia have robust export control systems and have taken additional measures in recent months to enhance technology protection and promote secure trade. Specifically, in December 2023, the United Kingdom’s National Security Act 2023 came into force, providing for inter alia enhanced protections against the unauthorized disclosure of certain defense-related information. In March 2024, the Australian Parliament passed the Defence Trade Controls Amendment Act 2024 and the Safeguarding Australia’s Military Secrets Act 2024, providing for inter alia controls on the reexport of items originally exported from Australia and disclosures of controlled technology to certain foreign persons within Australia, as well as controls on the provision of defense services. Following their passage in their respective parliaments, the UK and Australian actions received royal assent. These actions highlight the UK’s and Australia’s commitment to implementing robust export controls and technology protection measures.

 

Summary Of Changes To The EAR

With this rule, Australia and the UK will have nearly the same licensing treatment under the EAR as Canada. The liberal licensing treatment of items destined for Canada was made possible in part because Canada is included in the National Technology and Industrial Base (NTIB) (as defined in 10 U.S.C. 4801(1)). In 2017, this definition was broadened to include the UK and Australia. Accordingly, the regulatory changes in this rule not only advance the goals of the AUKUS Enhanced Trilateral Security Partnership but also further align the treatment of the UK and Australia under the EAR with fellow NTIB member Canada.

The biggest changes to the EAR pursuant to this rule are the removal of list-based license requirements for exports, reexports, and transfers (in-country) to Australia and the UK, including the removal of license requirements for national security column 1 (NS1), regional stability column 1 (RS1), and missile technology column 1 (MT1) reasons for control for the destinations of Australia and the UK. This is an important change as it removes licensing requirements for exports of ALL 600 Series ECCN items to Australia and the UK and many 9×515 satellite-related license requirements to Australia and the UK.

Other minor changes to the EAR pursuant to this rule include the applicability of License Exceptions under §§ 740.15, 740.16, and 740.17 (License Exceptions Aircraft, Vessels and Spacecraft (AVS), Additional Permissive Reexports (APR), and Encryption Commodities, Software, and Technology (ENC), respectively), for use to Australia, Canada, and the UK.

BIS also exempted Australia, the UK, and Canada from unilateral reporting requirements for thermal imaging camera transactions.

Consistent with recent changes to the EAR concerning thermal imaging cameras, the interim final rule removes military end-use and end-user-based license requirements for exports, reexports, and transfers (in-country) of certain cameras, systems, or related components detailed under § 744.9(a)(1)(i) and (a)(1)(iii) of the EAR which previously only applied to Canada.  The exception now applies to Australia, Canada, and the UK.

BIS requires certain transactions involving Canada to be reported in Electronic Export Information (EEI) filings, and these paragraphs now include Australia and the UK for clarity without changing existing EEI filing requirements. There is no change to the requirement to file EEI for shipments to Australia and the UK. For instances involving the use of a license exception or license, the usual EEI license codes apply. If exporting as No License Required, the license code is C33 in EEI.

There are two sections under the EAR where Canada is still treated differently than Australia and the UK. Pursuant to § 742.7(a)(4), Canada remains exempted from certain crime control-related license requirements for non-firearms items. The text in this section has been edited to read “Canada only,” as these items still require a license to Australia and the UK. Firearms-related items and other CC-controlled items in ECCNs 0A501 (except 0A501.y), 0A502, 0A503, 0A504, 0A505. a, .b, and .x, 0A981, 0A982, 0A983, 0D501, 0D505, 0E501, 0E502, 0E504, 0E505, and 0E982 will continue to require a license when destined to and among the UK and Australia.

In addition, existing license requirements for the following items will remain in place:

  • 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); and
  • Certain law enforcement restraints and riot control equipment, implements of torture or execution, and horses exported by sea.

 

Detailed Description Of The Specific Changes To The EAR

BIS made the following six major export control policy changes to further align the treatment of Australia, Canada, and the UK under the EAR:

  1. The first three changes involve the removal of list-based license requirements for exports, reexports, and transfers (in-country) to Australia and the UK. Specifically, BIS is removing license requirements for national security column 1 (NS1), regional stability column 1 (RS1), and missile technology column 1 (MT1) reasons for control for the destinations of Australia and the UK. As Australia and the UK are not currently subject to NS2 or RS2 controls, with this rule all Commerce Country Chart-based NS and RS controls are removed for these countries.
    • To facilitate this change, the Xs are removed from the Country Chart (supplement no. 1 to part 738) for NS1, RS1, and MT1 for Australia and the UK.
    • Corresponding to the Commerce Country Chart, provisions in part 742 of the EAR that specify the license requirements for NS, MT, and RS reasons (§§ 742.4(a), .5(a), and .6(a), respectively) are revised in order to fully remove the license for Australia and the UK.
  2. Based on the change above, “600 series” items, which are generally items on the Wassenaar Arrangement Munitions List, no longer require a license to Australia or the UK. In addition, items controlled under the EAR for missile technology reasons consistent with the MTCR Annex no longer require a license to Australia or the UK.
  3. Except for those items requiring a license to all destinations worldwide pursuant to § 742.6(a)(9), many 9×515 satellite-related items no longer require a license to Australia or the UK.
  4. The fourth policy change is consistent with the general RS1 removal. BIS maintains a special RS Column 1 license requirement in § 742.6(a)(3) applicable to military commodities described under ECCN 0A919. Specifically, the special RS1 control required a license for reexports to all destinations except Canada for items classified under ECCN 0A919 except when such items are being reexported as part of a military deployment by a unit of the government of a country in Country Group A:1 (see supplement no. 1 to part 740 of the EAR) or the United States. This final rule removes license requirements for 0A919 items to Australia and the UK.
  5. BIS removed military end-use and end-user-based license requirements for exports, reexports, and transfers (in-country) of certain cameras, systems, or related components detailed under § 744.9(a)(1)(i) and (a)(1)(iii) of the EAR. Prior to this rule, the only exception to the requirements under these paragraphs was for Canada. With the publication of this rule, the exception now applies to Australia, Canada, and the UK.
  6. BIS revised its treatment of significant items (SI) ( e., hot section technology for the development, production or overhaul of commercial aircraft engines, components, and systems) controlled under ECCN 9E003.a.1 through a.6, a.8, .h, .i, and .l, and related controls to allow these items to be exported, reexported, or transferred (in-country) to or within Australia and the UK without a license, consistent with the current exception for Canada. This provision is in § 742.14(a).

BIS also made the following minor changes to the EAR to further align the treatment of Australia, Canada, and the UK under the EAR pursuant to this rule:

  1. Under § 734.17(c)(1), precautions for internet transfers of products eligible for export under § 740.17(b)(2) shall include such measures as an access control system that, either through automated means or human intervention, checks the address of every system outside of the U.S. or Canada to check against transfers to foreign government end users, was edited to include Australia and the UK within the list of countries exempted from the required measures.
  2. Under §§ 740.15, 740.16, and 740.17 (License Exceptions Aircraft, Vessels and Spacecraft (AVS), Additional Permissive Reexports (APR), and Encryption Commodities, Software, and Technology (ENC), respectively), BIS expanded the explicit applicability of these License Exceptions for use to Australia, Canada, and the UK.
  3. Under § 742.2(a)(1), a license was required to all destinations, including Canada, for CB Column 1 items; with the publication of this rule the countries exempt from the license requirement is expanded to include Australia and the UK in the list for clarity, although the revision does not change existing license requirements.
  4. Under § 742.7(a)(4), Canada remains exempted from certain crime control-related license requirements for non-firearms items, but the text has been edited to read “Canada only” as these items are not available without a license in Australia and the UK.
  5. Under § 742.13(a)(1), Canada is mentioned as requiring a license for certain communications intercepting devices; with the publication of this rule, this phrase now includes Australia and the UK for clarity, although the revision does not change existing license requirements.
  6. Under § 742.18(a)(1), Canada is mentioned as requiring a license under the Chemical Weapons Convention; with the publication of this rule, this phrase now includes Australia and the UK for clarity, although the revision does not change existing license requirements.
  7. Under § 743.3(b), BIS exempted Australia, the UK, and Canada from unilateral reporting requirements for thermal imaging camera transactions.
  8. Under §§ 754.3(a), .4(a), and .5(a), a license is required for short supply reasons for control for certain items, including to Canada; these phrases now include Australia and the UK for clarity without changing existing license requirements.
  9. Under § 758.1(b)(3), (6), and (9), BIS requires certain transactions involving Canada to be reported in Electronic Export Information (EEI) filings, and these paragraphs now include Australia and the UK for clarity without changing existing EEI filing requirements.
  10. Under § 758.11(a), which covers the scope of export clearance requirements for firearms and related items, BIS now includes Australia and the UK alongside Canada for clarity as destinations to which certain clearance requirements continue to pertain.

Among other things, license exception Aircraft, Vessels, and Spacecraft (AVS) treats exports to Canadian airlines in most destinations as an export to Canada. Since MT1 items do not require a license for export to Canada, the primary impact of this AVS eligibility is that Canadian airlines in most destinations may receive MT1 items as spare parts. Consistent with the removal in this rule of MT1 license requirements for the UK and Australia, and as discussed above, BIS added AVS eligibility for Australian and United Kingdom airlines to receive such items in most destinations. As a conforming change, BIS created two new definitions for what constitutes an “Australian airline” and “United Kingdom (or UK) airline.” These two definitions are added to § 772.1 and mirror the definition of “Canadian airline.”

Lastly, the following requirements will remain unchanged as a result of this rule. Under the EAR, firearms-related items and other CC-controlled items in ECCNs 0A501 (except 0A501.y), 0A502, 0A503, 0A504, 0A505. a, .b, and .x, 0A981, 0A982, 0A983, 0D501, 0D505, 0E501, 0E502, 0E504, 0E505, and 0E982 will continue to require a license when destined to and among the UK and Australia. This license requirement mirrors the license requirement for firearms-related items in ECCNs 0A501 (except 0A501.y), 0A502, 0A504 (except 0A504.f), and 0A505 (except 0A505.d) destined to Canada. Prior to this IFR, license requirements for these items to the UK and Australia were implemented through NS1/RS1 reasons for control. Since these license requirements are removed for the UK and Australia in this rule, BIS added a footnote to the Commerce Country Chart for the UK and Australia, which indicates that a license is still required for these 0x5zz firearms-related items in those two countries. This does not change the scope of the license requirements for these items to the UK and Australia that applied prior to the effective date of this rule.

Please contact your FD Associates consultant for guidance on transactions with Australia and the UK.