{"id":516,"date":"2024-08-26T16:06:06","date_gmt":"2024-08-26T20:06:06","guid":{"rendered":"https:\/\/exportcompliancesolutions.com\/blog\/?p=516"},"modified":"2024-08-26T16:09:19","modified_gmt":"2024-08-26T20:09:19","slug":"new-ddtc-rules-aukus-exemption-defense-services-proposal-and-non-exports","status":"publish","type":"post","link":"https:\/\/exportcompliancesolutions.com\/blog\/2024\/08\/26\/new-ddtc-rules-aukus-exemption-defense-services-proposal-and-non-exports\/","title":{"rendered":"New DDTC Rules: AUKUS Exemption, Defense Services Proposal, and Non-Exports"},"content":{"rendered":"

State\/DDTC Enacts AUKUS Exemption\u00a0\u00a0\u00a0 <\/strong><\/p>\n

On August 20, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) issued an interim final rule (89 FR 67270<\/a>) creating a new International Traffic in Arms Regulations (ITAR) license exception to support the AUKUS (Australia, the United Kingdom, and the United States) Trilateral Security Partnership.\u00a0 This follows the proposed rule<\/a> issued in May.\u00a0 The new exemption, located at ITAR \u00a7 126.7, will be effective September 1, 2024.<\/p>\n

The new exemption includes four main elements:<\/p>\n

    \n
  1. Creates an exemption to the requirement to obtain a license or other approval from DDTC prior to any export, reexport, retransfer, or temporary import of defense articles, the performance of defense services, or engaging in brokering activities\u2026 between or among authorized users\u2026 within Australia, the United Kingdom, and the United States\u201d (new \u00a7 126.7, previously reserved);<\/li>\n
  2. Includes a \u201clist of defense articles and defense services excluded from eligibility for transfer under the proposed new exemption\u201d (affects multiple USML categories, identified in Supplement No. 2 to Part 126);<\/li>\n
  3. Expands the 126.18 exemptions regarding intra-company, intra-organization, and intra-governmental transfers to employees who are dual nationals or third-country nationals to allow for the transfer of classified defense articles to certain dual nationals who are authorized users or regular employees of an authorized user within the United Kingdom and Australia\u201d (new \u00a7 126.18(e)); and<\/li>\n
  4. Revises the section on expediting license review applications by referencing new processes for Australia, the United Kingdom, and Canada. (126.15).<\/li>\n<\/ol>\n

    The exemption is limited to authorized users and with an excluded list of articles and defense services, which is a similar approach to the existing Canadian Exemption (\u00a7 126.6) as well as the Australia and UK Defense Trade Cooperation Treaty exemptions (\u00a7 126.16 and \u00a7 126.17).\u00a0 The proposed exemption does not amend the treaty exemptions, but is intended to be broader in scope and easier to use.<\/p>\n

    A list of \u201cauthorized users\u201d in Australia and the United Kingdom will be available in DDTC\u2019s DECCS<\/a>.\u00a0 Authorized users will be approved by their respective governments.<\/p>\n

    Transfer values must also be less than the \u00a7 123.15 Congressional Notification thresholds and may not involve the manufacturing abroad of significant military equipment (also for Congressional Notification reasons).<\/p>\n

    The interim final rule includes various changes from the proposed rule, including the removal of a requirement to obtain nontransfer and use assurances (Form DSP-83) for significant military equipment (SME), as these will be covered through the \u201cauthorized user\u201d process.\u00a0 The Excluded Technologies List was also significantly revised.<\/p>\n

    The interim final rule includes a request for comments, which will be accepted through November 18, 2024. \u00a0The Federal Register Notice<\/a> contains additional details on how to submit comments.\u00a0 Summaries and responses to previous public comments are also included.<\/p>\n

    The State Department posted a fact sheet<\/a> on the new exemption.\u00a0 DDTC also posted a fact sheet and FAQs on their website<\/a>.<\/p>\n

    This exemption follows the Department of Commerce, Bureau of Industry and Security (BIS) which issued an interim final rule<\/a> on April 19, 2024 implementing changes to the to the Export Administration Regulations (EAR).<\/p>\n

    State\/DDTC Proposes Revision to Defense Services<\/strong><\/p>\n

    On August 15, 2024, DDTC issued a proposed rule (89 FR 60980<\/a>) which would revise the ITAR definition of defense services and related controls.\u00a0 It would revise the existing definition of defense services found at ITAR \u00a7 120.32 and USML Category IX (Military Training Equipment and Training).<\/p>\n

    As proposed, the definition would read as follows:<\/p>\n

    \u00a7\u2009120.32 Defense service.<\/p>\n

    (a) Defense service means:<\/p>\n

    (1) The furnishing of assistance, including training or consulting, to foreign persons in the development (including, e.g., design), production (including, e.g., engineering and manufacture), assembly, testing, repair, maintenance, modification, disabling, degradation, destruction, operation, processing, use, or demilitarization of a defense article; or<\/p>\n

    (2) The furnishing of assistance, including training or consulting, to foreign persons, regardless of whether a defense article is involved, as described in USML Category IX(s)(2) or (3) in \u00a7\u2009121.1 of this subchapter.<\/p>\n

    Note to paragraph (a):<\/p>\n

    For military training previously described in this paragraph, see paragraph (a)(1) and USML Category IX(s)(2) and (3).<\/p>\n

    Compared to the current \u00a7 120.32<\/a>, the proposed rule would add \u201cconsulting\u201d as a type of assistance and \u201cdisabling\u201d and \u201cdegradation\u201d to the list of services.\u00a0 The new USML Category IX(s) defense services would be:<\/p>\n

    (s) Defense Services, as follows:
    \n(1) [Reserved]
    \n(2) Assistance, including training or consulting, to a foreign government, unit, or force, or their proxy or agent, that creates, supports, or improves intelligence activities, including through planning, conducting, leading, providing analysis for, participating in, evaluating, or otherwise consulting on such activities, for compensation, except for the following types of assistance:<\/p>\n

    (i) Furnishing of medical, translation, financial, insurance, legal, scheduling, or administrative services, or acting as a common carrier;<\/p>\n

    (ii) Participation as a member of a regular military force of a foreign nation by a U.S. person who has been drafted into such a force (see also \u00a7\u2009124.2(b) of this subchapter);<\/p>\n

    (iii) Training and advice that is entirely composed of general scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities;<\/p>\n

    (iv) Information technology services that support ordinary business activities not specific to a particular business sector;<\/p>\n

    (v) Any lawfully authorized investigative, protective, or intelligence activity of a law enforcement or intelligence agency of the United States or of a territory, possession, State, or District of the United States, including political subdivisions thereof; or<\/p>\n

    (vi) Maintenance or repair of a commodity or software.<\/p>\n

    (3) Assistance, including training or consulting, to a foreign government, unit, or force, or their proxy or agent, that creates, supports, or improves the following, other than as specified in paragraph (s)(3)(iv) of this category:<\/p>\n

    (i) The organization or formation of military or paramilitary forces; (ii) Military or paramilitary operations, by planning, leading, or evaluating such operations; or<\/p>\n

    (iii) Military or paramilitary capabilities through advice or training, including formal or informal instruction.<\/p>\n

    (iv) Assistance in paragraphs (s)(3)(i) through (iii) of this category does not include:<\/p>\n

    (A) Furnishing of medical, translation, financial, insurance, legal, scheduling, or administrative services, or acting as a common carrier;<\/p>\n

    (B) Participation as a member of a regular military force of a foreign nation by a U.S. person who has been drafted into such a force (see also \u00a7\u2009124.2(b) of this subchapter); or<\/p>\n

    (C) Training and advice that is entirely composed of general scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities.<\/p>\n

    Comments will be accepted through September 27, 2024.\u00a0 The Federal Register Notice<\/a> contains additional details on how to submit comments.<\/p>\n

    The proposed rule is intended to complement recent Export Administration Regulations (EAR) controls over U.S. person activities related to foreign military, security, and intelligence services.\u00a0 These controls have also seen recent proposals to expand controls in 89 FR 60985<\/a> and 89 FR 60998<\/a> (comments for both accepted through September 27, 2024).<\/p>\n

    State\/DDTC Addresses Sovereign Deployments and Previously Imported Foreign Defense Articles\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong><\/p>\n

    On August 15, 2024, DDTC issued a final rule (89 FR 66210<\/a>) amending the ITAR definition of activities that are not exports, reexports, retransfers, or temporary imports.\u00a0 The new rule, initially proposed in December 2023, will be effective September 16, 2024.\u00a0 These changes largely formalize longstanding policy.<\/p>\n

    The new rule adds two paragraphs to ITAR \u00a7 120.54 (Activities that are not exports, reexports, retransfers, or temporary imports):<\/p>\n

    1. Sovereign deployments:<\/p>\n

    (a)(6) The taking of a defense article subject to the reexport or retransfer requirements of this subchapter on a deployment or training exercise outside a previously approved country, provided:<\/p>\n

    (i) There is no change in end-use or end-user with respect to the defense article;<\/p>\n

    (ii) The defense article is transported by and remains in the possession of the previously authorized armed forces of a foreign government or United Nations military personnel; and<\/p>\n

    (iii) The defense article is not being exported from or temporarily imported into the United States;<\/p>\n

    2. Foreign defense articles:<\/p>\n

    (a)(7) The transfer of a foreign defense article previously imported into the United States that has since been exported from the United States pursuant to a license or other approval under this subchapter, provided:<\/p>\n

    (i) The foreign defense article was not modified, enhanced, upgraded, or otherwise altered or improved in a manner that changed the basic performance of the item prior to its return to the country from which it was imported or a third country;<\/p>\n

    (ii) A U.S.-origin defense article was not incorporated into the foreign defense article; and<\/p>\n

    (iii) The defense article is not being exported from or temporarily imported into the United States.<\/p>\n

    Paragraph (a)(6) is meant \u201cto clarify long-standing policy regarding reexports and retransfers outside of the United States of properly authorized defense articles previously exported from the United States and in the possession of the armed forces of a foreign government or United Nations military personnel.\u201d<\/p>\n

    Paragraph (a)(7) is meant to eliminate \u201cthe need to submit reexport and retransfer requests for activities that are routinely approved and to provide clarity regarding subsequent control of unmodified foreign-origin defense articles that have been subject to ITAR control while in the United States.\u201d<\/p>\n

    As the explanation within the rule states:<\/p>\n

    Like foreign persons who generally become subject to U.S. laws and regulations when they enter the United States, foreign defense articles that enter the United States generally become subject to U.S. laws and regulations, including the ITAR, while in the United States. However, U.S. laws and regulations generally do not govern the activities of foreign persons abroad. Similarly, foreign defense articles that leave the United States are no longer subject to the ITAR under the circumstances described in paragraph (a)(7).<\/p>\n

    The Federal Register Notice<\/a> includes the new text and responses to comments from the proposed rule.<\/p>\n","protected":false},"excerpt":{"rendered":"

    State\/DDTC Enacts AUKUS Exemption\u00a0\u00a0\u00a0 On August 20, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) issued an interim final rule (89 FR 67270) creating a new International Traffic in Arms Regulations (ITAR) license exception to support the AUKUS (Australia, the United Kingdom, and the United States) Trilateral Security Partnership.\u00a0 This follows the […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","footnotes":""},"categories":[7,9],"tags":[],"class_list":["post-516","post","type-post","status-publish","format-standard","hentry","category-all","category-licensing"],"yoast_head":"\nNew DDTC Rules: AUKUS Exemption, Defense Services Proposal, and Non-Exports - Export Compliance Solutions<\/title>\n<meta name=\"description\" content=\"State\/DDTC enacts AUKUS exemption, proposes defense services revision, addresses sovereign deployments and foreign defense articles\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exportcompliancesolutions.com\/blog\/2024\/08\/26\/new-ddtc-rules-aukus-exemption-defense-services-proposal-and-non-exports\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"New DDTC Rules: AUKUS Exemption, Defense Services Proposal, and Non-Exports - 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