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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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<p>On August 20, 2024, the State Department published an <a href="https://www.federalregister.gov/documents/2024/08/20/2024-18043/international-traffic-in-arms-regulations-exemption-for-defense-trade-and-cooperation-among" target="_blank" rel="noreferrer noopener">Interim Final Rule</a> in the <em>Federal Register </em>amending the International Traffic in Arms Regulations (ITAR) to add a license exemption regime for exports, reexports, transfers, and temporary imports of defense articles and defense services to and between Australia and the United Kingdom.&nbsp;The Interim Final Rule largely adheres to the Department&rsquo;s May 1, 2024 Proposed Rule to ease ITAR license restrictions imposed on such transactions to and between the two countries, thus entrenching the objective of closer defense trading per the trilateral security partnership known as AUKUS, which was established in 2021 (<em>see </em><a href="https://www.thompsonhinesmartrade.com/2024/05/further-aukus-progress-state-publishes-proposed-rule-for-license-exemptions-for-australia-and-the-united-kingdom/">Update of May 2, 2024</a>).&nbsp;The Interim Final Rule went into effect September 1, 2024.</p>
<h2 class="wp-block-heading">Scope of the Interim Final Rule</h2>
<p>Like the earlier Proposed Rule, the Interim Final Rule adds a new section to ITAR, &sect; 126.7, which states: &ldquo;No license or other approval is required for the export, reexport, retransfer, or temporary import of defense articles, the performance of defense services, or engaging in brokering activities&rdquo; to and between Australia and the United Kingdom subject to certain restrictions and conditions.&nbsp;For example, as initially envisioned by the Proposed Rule, &sect; 126.7 still requires that such activities &ldquo;be [directed] to or within the physical territory of Australia, the United Kingdom, or the United States.&rdquo;&nbsp;Additionally, the exporter/transferor <em>and </em>recipient must be &ldquo;authorized users,&rdquo; meaning a U.S. person registered with the Department&rsquo;s Directorate of Defense Trade Controls (DDTC) and not debarred, or an Australian or United Kingdom person approved by DDTC and so &ldquo;identified through the DDTC website.&rdquo;&nbsp;As noted in <a href="https://www.state.gov/key-elements-of-the-international-traffic-in-arms-regulations-exemption-for-defense-trade-and-cooperation-among-australia-the-united-kingdom-and-the-united-states/" target="_blank" rel="noreferrer noopener">a Department press release</a>, therefore, the Interim Final Rule, like the Proposed Rule, will ensure &ldquo;[t]he vast majority of defense articles and defense serviced described [i]n the [ITAR] are eligible...via the &sect; 126.7 exemption.&rdquo;</p>
<p>Still, the Interim Final Rule introduces a few minor changes from the Proposed Rule.&nbsp;The Interim Final Rule most notably removes certain items previously listed in the new Excluded Technology List (Supplement No. 2 to Part 126 of the ITAR) that renders certain defense articles and defense services ineligible for the special treatment conferred by &sect; 126.7.</p>
<h2 class="wp-block-heading">Public Comment</h2>
<p>Although the Interim Final Rule went into effect September 1, 2024, the State Department seeks public comments to further clarify and refine the ITAR exemption for AUKUS.&nbsp;Comments must be received by DDTC no later than November 18, 2024, and should be filed using the federal rulemaking portal (<a href="http://www.regulations.gov" target="_blank" rel="noreferrer noopener">www.regulations.gov</a>) under Docket DOS-2024-0024.&nbsp;Alternatively, comments can be sent to the State Department via email to <a href="mailto:DDTCPublicComments@state.gov">DDTCPublicComments@state.gov</a> with the subject line: &ldquo;Australia, the United Kingdom, and the United States ITAR Exemption.&rdquo;</p>

core/freeform

SmarTrade

Partner

Francesca M.S. Guerrero

Samir D. Varma

Associate

Aaron C. Mandelbaum

Senior Legislative and Regulatory Policy Advisor

Scott E. Diamond

International Trade

State Department Largely Adopts Proposed Rule Extending License Exemptions for Australia and the United Kingdom into an Interim Final Rule