International Traffic in Arms Regulations: Exemption for Defense Trade and Cooperation Among Australia, the United Kingdom, and the United States

<RULE> DEPARTMENT OF STATE <CFR>22 CFR Part 126</CFR> <DEPDOC>[Public Notice: 12799]</DEPDOC> <RIN>RIN 1400-AF84</RIN> <SUBJECT>International Traffic in Arms Regulations: Exemption for Defense Trade and Cooperation Among Australia, the United Kingdom, and the United States</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Department of State. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This rule streamlines defense trade and facilitates cooperation among our allies while reducing the regulatory burden for exporters, in support of the President's Executive Order 14268 of April 9, 2025, “Reforming Foreign Defense Sales to Improve Speed and Accountability”. In this rule the Department of State (the Department) finalizes, with changes, the interim final rule published on August 20, 2024. The interim final rule made several amendments to the International Traffic in Arms Regulations (ITAR), pursuant to section 38(l) of the Arms Export Control Act (AECA), to facilitate defense trade and cooperation among Australia, the United Kingdom, and the United States, including through a new exemption to the licensing requirements of the ITAR. The Department is also now responding to public comments received on the interim final rule. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> The rule is effective December 30, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Ms. Engda Wubneh, Foreign Affairs Officer, Office of Defense Trade Controls Policy, U.S. Department of State, telephone (771) 205-9566; email <E T="03">DDTCCustomerService@state.gov,</E> ATTN: Regulatory Change, ITAR Section 126.7 Australia, the United Kingdom, and the United States Exemption. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> In support of the President's Executive Order on “Reforming Foreign Defense Sales to Improve Speed and Accountability,” the Department is publishing this rule to streamline defense trade and facilitate cooperation among our allies while reducing the regulatory burden for exporters. Further, the Department is responding to public comments received pursuant to the interim final rule (89 FR 67270), which created new efficiencies within the ITAR. The interim final rule implemented new authorities provided in section 38(l) of the AECA (22 U.S.C. 2778(l)), as added by section 1343 of the National Defense Authorization Act (NDAA) for Fiscal Year 2024 (Pub. L. 118-31). Specifically, it added § 126.7, which previously had been reserved, to create the exemption for defense trade and cooperation among Australia, the United Kingdom (UK), and the United States (“the § 126.7 exemption”). The § 126.7 exemption states that 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 between or among Authorized Users within the physical territory of Australia, the United Kingdom, and the United States provided certain requirements and limitations are met. The rule also created a new Supplement No. 2 to Part 126, an Excluded Technology List (ETL), that lists the defense articles and defense services ineligible for transfer pursuant to the § 126.7 exemption. Further, the Department added § 126.18(e) for transfers of classified defense articles to dual nationals who are citizens of Australia and the United Kingdom and another country, provided all relevant criteria are met. The Department also added § 126.15(c) and (d), which implemented expedited license processing for exports of defense articles and defense services to Australia, the United Kingdom, and Canada. The Department acknowledges and appreciates the comments submitted in response to the interim final rule and is now publishing this final rule to address these comments. In response to comments received, the primary changes to regulatory text in this rulemaking are as follows: • In ITAR § 126.7, the section heading is revised to “Exemptions” to account for a new and separate exemption for reexports, retransfers, or temporary imports of defense articles to support the armed forces of Australia, the United Kingdom, or the United States, provided certain requirements are met. Titles have been added to the paragraphs found in § 126.7 to clearly delineate each exemption and their associated requirements and limitations. Additionally, the phrase “other approval” is removed in this section. • In ITAR § 126.7(a), the term “furnishing” replaces the phrase “the performance” in order to be consistent with existing language in the ITAR regarding defense services. In ITAR § 126.7(b)(2), language is added so that a United Kingdom or Australian government department or agency is identified as a transferor, recipient, or broker in § 126.7(b)(2), and language pertaining to U.S. persons registered with the applicable Directorate of Defense Trade Controls (DDTC) registration is changed from “not debarred under § 127.7” to “eligible under § 120.16” to account for all reasons a U.S. person may be ineligible to use the § 126.7 exemption. • In ITAR § 126.7, paragraphs (c) and (d) are added for a new exemption for certain reexports, retransfers, or temporary imports of defense articles to support the armed forces of Australia, the United Kingdom, or the United States. • In ITAR §§ 126.7 and 126.18, the phrase “Authorized User” replaces the phrase “authorized user” for consistency throughout the regulations. • In ITAR § 126.18(e), “Australian or United Kingdom parties described in § 126.7(b)(2)(ii) or (iii) or are regular employees thereof” replaced “authorized users or regular employees of an authorized user of the exemption in § 126.7” because the parties described in § 126.7(b)(2) expanded with the addition of a United Kingdom national-level government department or agency or Australian federal government department or agency. The Department notes separately that in the spirit of promoting defense trade between and among Australia, the United Kingdom, and the United States during the initial implementation of the § 126.7 exemption, the Department began expediting all export licensing adjudications for Australia and the United Kingdom on September 1, 2024, when the interim final rule became effective, regardless of whether a license application met the eligibility criterion in ITAR § 126.15(c). The Department now notes over 700 entities from Australia and the United Kingdom have become Authorized Users and industry from all three countries have, over the last year, utilized and familiarized themselves with the ITAR § 126.7 exemption. Now that industry has become better acquainted with the § 126.7 exemption and as it has become more readily available for widespread industry use due to the growing number of Authorized Users, the Department is now processing expedited licensing requests based on the eligibility criterion of § 126.15(c), which states expedited licensing is available for an export that cannot be undertaken under an exemption. Although outside the scope of this rulemaking, comments received related to the Authorized User Terms and Conditions and subsequent changes the Department has made to these terms and conditions facilitate use of the § 126.7 exemption are addressed in detail below. The Authorized User Terms and Conditions are the compliance requirements Australian and United Kingdom parties agree to as part of the process to become an Authorized User. A detailed review and response to the public comments submitted in the interim final rule, organized by ITAR section, is as follows. <HD SOURCE="HD1">ITAR § 126.7: Exemption for Defense Trade and Cooperation Among Australia, the United Kingdom, and the United States</HD> Three commenters recommended expanding the § 126.7 exemption outside of the physical territories of Australia, the United Kingdom, and the United States in support of Australia, the United Kingdom, or the United States' armed forces or Authorized Users deploying overseas to support those armed forces. Another commenter recommended including the modified § 126.7 in § 126.1(a), which describes exceptions to the policy of denial the Department holds toward certain proscribed destinations. Also, another commenter recommended that § 126.7 mirror § 120.54(a)(6). The Department declines to accept all of these comments in full and reiterates that the scope of the § 126.7 exemption was defined pursuant to AECA section 38(l)(1)(C)(2), which did not include transfers outside of Australia, the United Kingdom, or the United States. However, based on these comments and consultations with Australia and the United Kingdom, the Department is adding a new and separate exemption found in § 126.7 for reexports, retransfers, or temporary imports of defense articles to support the armed forces of Australia, the United Kingdom, or the United States, provided certain requirements are met. Two commenters recommended removing the provisions in § 126.7(b)(4) that relate to sections 36(c) and 36(d) of the AECA regarding congressional certifications. The Department declines to accept this recommendation as those provisions are required by law. One commenter sought confirmation that the provision of defense services authorized via a mechanism other than a Technical Assistance Agreement (TAA) or Manufacturing License Agreement (MLA), including the § 126.7 exemption, does not subject the resultant foreign-origin defense article to the ITAR or its reexport and retransfer requirements. The Department states that, pursuant to the Authorized User Terms and Conditions, defense articles produced or manufactured from technical data or defense services exported from the United States via the § 126.7 exemption are subject to reexport and retransfer requirements under the ITAR. Such reexport or retransfer may be authorized, however, pursuan ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 60k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━