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One Step Closer to the Implementation of the U.S. – Australia Defence Trade Cooperation Treaty

U.S. and Australian combined task force

On 22 November, the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) published the proposed rule to implement the U.S. – Australia Defence Trade Cooperation Treaty. The proposed licensing exemptions for exports of ITAR controlled goods, data and technology have long been anticipated by affected Australian and U.S. companies.  Although the exemptions under the proposed rule contain restricted provisions exempting only certain types of ITAR controlled goods from DDTC licensing, they nevertheless grant a significant easing of military export controls.  Australian subsidiaries of large defence contractors, defence goods distributors and Australian defence goods manufacturers are among the key beneficiaries of the proposed exemptions.

To be eligible to use the proposed license exemptions, exporters must meet the following requirements:

  1. Be an ‘authorised exporter’. By definition under the treaty, this includes U.S. government departments and agencies, U.S. persons registered with the DDTC.
  2. Be an ‘eligible recipient’. Under the proposed rule, this is defined as being a member of the ‘Australian Community’ at the time of the transaction. Australian companies must apply for inclusion in this community and will be subject to U.S. and Australian government approval. Approved community members will be listed on the DDTC website.
  3. Have an ‘authorised end-use’. Only the following end uses will be eligible to use the exemption:
  • U.S. and Australian combined military or counter-terrorism operations
  • U.S. and Australian cooperative security and defense research, development, production and support programs
  • Specific security and defense projects where the Australian government is the end-user
  • U.S. government end use

In addition to these restrictions on the use of the exemption, the DDTC proposes to add a supplement to the ITAR that lists all defence articles and services that are excluded from using the exemptions. Basically, if a defence articles is included on this list, or the transaction is otherwise ineligible to use the exemption, then a license application must be lodged with the DDTC.

The proposed rule also provides for an exemption to transfer defence articles or services without a license from one community member (in the U.S., U.K. or Australia) to other community members within the community, provided it is for an authorised end-use.

The DDTC is accepting comments on the proposed rule until 22 December 2011.

Australian companies that may qualify to become members of the ‘Australian Community’ should evaluate whether inclusion is beneficial to their operations and make an application if so. An internal review should be conducted to ensure that compliance programs are improved to meet the requirements of Australia’s draft export legislation and that the requirements of being included in the Australian Community can otherwise be met.

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