On July 19, 2023, Rep. Michael McCaul (R-TX), chair of the House of Representatives Foreign Affairs Committee, introduced a bill to ease trade restrictions among parties to the AUKUS agreement—a trilateral security partnership between Australia, the United Kingdom, and the United States. House Republicans separately have proposed granting the UK and Australia blanket exemptions from requirements under the International Traffic in Arms Regulations (“ITAR”), while a proposed amendment to the National Defense Authorization Action for Fiscal Year 2024 from Senate Democrats stops short of blanket exemptions. The McCaul bill offers a compromise—it amends the Arms Export Control Act (“AECA”) to allow the President to exempt select exports of defense items from licensing requirements for countries that meet certain conditions, and requires the U.S. State Department to appoint a senior AUKUS advisor and establish an AUKUS task force.

Background

The AUKUS agreement, initially announced in September 2021, aims to provide Australia with nuclear-powered submarines and deepen cooperation in the Indo-Pacific region with the United States and UK. A White House fact sheet highlights the agreement’s other goals, including cooperation on cyber capabilities, quantum technologies, artificial intelligence, hypersonic and counter-hypersonic capabilities, electronic warfare, and undersea capabilities.

Three Highlights

1. Modification to the AECA.

• Notably, this amendment of the AECA could have implications beyond AUKUS.
• This would be a notable change from existing law, which authorizes the President to grant such exemptions only with respect to countries (other than Canada, for which the President has discretionary authority) that have entered into a bilateral agreement or defense trade cooperation treaty with the United States.
• The bill would permit the President, acting through the Secretary of State, to exempt from licensing requirements exports of defense items with respect to any country that implements standards for an export control regime comparable to those administered by the United States.

2. Senior Advisor for AUKUS. The proposed bill requires the Secretary of State to appoint a senior advisor to oversee and coordinate implementation of the AUKUS partnership.

3. AUKUS Task Force. The bill establishes a Task Force on AUKUS Governance, which will coordinate every 60 days on issues pertaining to the agreement, focus on interagency effectiveness of arms export regulations, and track defense-related transactions among the three countries.

Overall, the proposed legislation would give the President enhanced authority to exempt exports to Australia and the United Kingdom from ITAR requirements, and advances a congressional objective to deepen defense cooperation among the parties in the spirit of the AUKUS agreement.

Defense contractors engaged in business with Australia and/or the United Kingdom, or interested in such business, should monitor developments regarding AUKUS implementation, including with respect to possible ITAR exemptions, which could streamline compliance obligations.