Industry Officials Hoping for Improvements to AUKUS Exemption, Excluded Tech List

LONDON -- Officials at a defense industry conference last week were complimentary of defense export control reforms recently announced by the U.S., Australia and the U.K., but they also said the three governments can do more to incentivize companies to make use of the reforms.

Both the State and Commerce departments released rules this year aimed at reducing licensing burdens for certain trade between the three countries. The State Department’s rule introduced a new exemption under the International Traffic in Arms Regulations (see 2408160019), while Commerce amended the Export Administration Regulations so that Australia and the U.K. would have licensing treatment under the EAR similar to that in Canada (see 2404180035).

Speaking during a conference in London hosted by SAE Media, Andrew Booth, director of international trade compliance with Sierra Nevada Corp., said he’s expecting the ITAR changes to reduce the company’s licensing load, especially for certain trade with Sierra Nevada’s U.K. affiliate.

He also said he was “surprised” that the State Department’s Excluded Technology List (ECL) was so “narrow.” Booth said he was expecting the list, which outlines defense articles and services that are excluded from the ITAR exemption, to cover a broader set of items. “While it’s still an additional process that we need to follow,” he said, “it’s far more beneficial than originally anticipated.”

Other industry officials said they were hoping for a smaller Excluded Technology List. Dak Hardwick, vice president of international affairs at the Aerospace Industries Association, said the list is “longer than we would like,” echoing comments the group made to the State Department earlier this year (see 2406030056). He noted that industry has until Nov. 18 to submit comments to the agency and ask for certain technologies to be removed from the list, saying some of the restrictions don’t “make any sense if you want to do technology cooperation.”

He also stressed that the list may be continually updated. “It's not like the 10 Commandments. It's something that can be changed over time," Hardwick said. “But we need companies on the U.S. side, the U.K. side and the Australia side to access the ITAR exemption in a way to provide use cases back to the government about why some things work and some things don't.”

One conference attendee noted that the three governments’ excluded technology lists aren’t identical, pointing out that the U.K. list includes a certain gas turbine that the ITAR’s ECL doesn’t. Brinley Salzmann, director for overseas and exports for ADS Group, a U.K. defense industry organization, said the group has asked the governments to make sure their respective lists are “mirror images of each other.”

“If you’ve got some inconsistencies, it’s just a breeding ground for confusion,” Salzmann said during the conference. “We want as much consistency and harmonization as possible.”

While AIA said the ITAR exemption and the ECL are too restrictive, it praised a complementary rule by the Bureau of Industry and Security to reduce license requirements for exports between the three countries that are covered by the EAR (see 2406100023).

“BIS got it right on AUKUS in the EAR. They still haven't stuck the landing yet on the ITAR,” Hardwick said. “We see significant changes in the EAR that if you are a commercial technology, you are very excited about the opportunities under the EAR, because they are much more expansive than what they are under the ITAR.”

Sally Peed, a trade compliance adviser with Sierra Nevada Corp. Mission Systems UK, Sierra Nevada’s subsidiary, said the company is expecting to see benefits from the new ITAR exemption. She said it’s specifically “looking forward to the expedited pace of being able to receive” ITAR-controlled information. Current requirements baked into technical assistance agreements, which cover exports of controlled technical data, sometimes take up to 60 to 90 days to fulfill, she said, and the company must follow various provisos in those agreements.

“All of those requirements have been simplified to hopefully allow us to get the technology quicker,” she said. “That just naturally enhances our collaboration from parent to U.K. subsidiary.”

Despite the new AUKUS exemption, both Booth and Peed said there are still some “hurdles” to overcome. Booth said Sierra Nevada sometimes provides “contractor logistic support” to special operations forces around the world, but the AUKUS exemption is limited to defense trade involving “the physical territories” of the three nations.

“As it stands right now, we can't leverage the AUKUS exemption for that support to deploy forces outside of those countries,” he said. There are “rumblings” that could change in the “near future,” Booth said, “but right now, that's a big one for us, because we still do quite a bit of licensing on that side.”

Booth and Peed urged companies to try to use the ITAR exemption, record their experience and submit comments to the State Department on ways it can be improved. “The amount of work that's gone into it, it's worth at least going through and either saying, ‘Yes, I can use it,’ or ‘No, I can't use it, and I can't use it for these reasons, and how can we work to improve it,’” Peed said.

But she also underscored that companies should “research” and understand the exemption fully before trying to use it. Booth said the exemption and the complexity of export regulations highlights the importance of companies employing knowledgeable trade compliance officers.

“If you really know how to navigate the rules and regs, it truly can be an enabler for an enterprise where you otherwise would be afraid to use the exemption, or you'd be hesitant to pursue some of these foreign partnerships,” he said. “Having that expertise in-house to ensure that you can turn compliance into a strategic advantage is crucial to making this stuff effective and successful.”