August 28, 2023
U.S. Arms Transfer Restrictions and AUKUS Cooperation
On September 15, 2021, Australia, the United Kingdom
FMS and DCS transfers meeting certain monetary value
(UK), and the United States announced an “enhanced
thresholds are subject to congressional review. Section 36
trilateral security partnership,” named AUKUS after the
of the AECA (22 U.S.C. §2776) requires the President to
participating countries. The partnership consists of two
submit a formal notification of such transactions to
lines of effort, known as pillars: Pillar One is to provide
Congress before issuing a Letter of Offer and Acceptance
Australia with a nuclear-powered submarine capability.
for an FMS transfer or an export license for a DCS transfer.
Pillar Two is intended to jointly develop “advanced military
The executive branch may not proceed with such transfers
capabilities.”
if Congress adopts a joint resolution of disapproval within
an AECA-prescribed time period. In the case of FMS or
Arms Exports Background
DCS transfers to Australia and the UK, the notification
U.S. participation in Pillar Two may require the transfer of
period is 15 days. In addition, 10 U.S.C. §8677 requires the
items or information via Foreign Military Sales (FMS), a
transfer of any naval vessel that exceeds 3,000 tons or is
term that refers to the sale of U.S.-origin defense articles,
less than 20 years of age to be “specifically authorized by
equipment, services, and training (hereinafter referred to as
law.”
“defense articles”) on a government-to-government basis.
Such participation may also require U.S. government-issued
License Exemptions
export licenses for Direct Commercial Sales (DCS), a U.S.
The AECA and the ITAR exempt certain exports from
program for registered U.S. firms to sell defense articles
some licensing requirements. The AECA and the ITAR also
directly to eligible foreign governments and international
authorize export license exemptions for certain projects
organizations. U.S. participation in AUKUS Pillar One is
undertaken pursuant to governmental agreements.
governed by different laws and regulations. (See CRS In
Focus IF11999, AUKUS Nuclear Cooperation, by Paul K.
Defense Trade Cooperation Treaties
Kerr and Mary Beth D. Nikitin, and CRS Report RL32418,
Defense Trade Cooperation Treaties, which entered force in
Navy Virginia (SSN-774) Class Attack Submarine
April 2012 and 2013 with Australia and the United
Procurement: Background and Issues for Congress, by
Kingdom, respectively, exempt certain DCS transfers to
Ronald O'Rourke.)
(and retransfers among) approved communities of
Australian and British end users from export licensing
The FMS and DCS processes are statutorily governed by
requirements. 22 C.F.R. Part 126.15 specifies that license
the Arms Export Control Act (AECA; P.L. 90-629, as
applications for exporting defense articles to Australia or
amended; 22 U.S.C. §§2751 et seq.) and the Foreign
the United Kingdom “will be expeditiously processed” by
Assistance Act of 1961 (FAA; P.L. 87-195, as amended; 22
the State Department “in consultation with” DOD. The
U.S.C. §§2151 et seq.). The Department of State
ITAR also contains provisions governing exports pursuant
administers the AECA through the International Traffic in
to the treaties; these provisions include specific
Arms Regulations (ITAR; 22 C.F.R. Parts 120-130), which
requirements regarding such matters as consignees,
also establishes licensing policy for the export of defense
marking of exported items, and record-keeping. The
articles and contains the U.S. Munitions List (USML), a list
regulations also detail congressional notification
of controlled defense articles. The ITAR do not apply to
requirements covering exports pursuant to these treaties.
FMS transactions.
These treaties may not cover all envisioned AUKUS
The Department of State’s Office of Regional Security and
technology cooperation because the treaties exempt certain
Arms Transfers, in the Bureau of Political-Military Affairs
defense articles from their scope. Moreover, the treaties
(PM), oversees FMS transactions; DOD’s Defense Security
currently cover fewer defense articles than when the treaties
Cooperation Agency (DSCA) implements specific FMS
entered into force because, as a result of Obama
cases. The State Department’s Directorate of Defense Trade
Administration-initiated changes to U.S. export controls,
Controls (DDTC), also in the PM Bureau, issues and
the Department of Commerce now controls exports of those
administers licenses for commercial sales. AECA Section
articles. U.S. regulations may permit only FMS transfers of
38(j)(1)(C) limits the scope of items that the United States
some sensitive AUKUS-covered technology items. (See
can include in Defense Trade Cooperation Treaties, such as
CRS In Focus IF12425, Defense Primer: International
those described below. State Department officials have
Armaments Cooperation, coordinated by Luke A. Nicastro.)
identified the role of the Defense Technology Security
Administration (DTSA), which manages risks from the
Canadian Exemption
international transfer of defense technology and critical
22 C.F.R. Part 126.5(a) permits “the permanent and
information, as particularly important for Pillar 2 activities.
temporary export” of certain unclassified defense articles to
Canada without an export license. Canadian recipients must
be “Canadian Federal or Provincial governmental
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U.S. Arms Transfer Restrictions and AUKUS Cooperation
authorities acting in an official capacity” or a “Canadian-
Special Comprehensive Export Authorizations
registered person.” Some ITAR requirements, such as
Under ITAR 22 C.F.R. Part 126.14, the DDTC issues
license eligibility provisions contained in 22 C.F.R. Part
special comprehensive export authorizations for certain
120.1(c) and Part 120.1(d), still apply to such exports.
“commercial export endeavor[s]” involving registered U.S.
exporters and NATO members, Australia, Japan, or
The Canadian exemptions include provisions governing
Sweden. Part 126.14 describes, as well as specifies
non-Canadian entities. For example, retransfers to non-U.S.
requirements for obtaining, four comprehensive export
destinations of items exported pursuant to these exemptions
“must in all instances have the prior [DDTC] approval.”
authorizations: Major Project Authorization; Major
Program Authorization; Global Project Authorization; and
This requirement also applies to retransfers within Canada.
Technical Data Supporting an Acquisition, Teaming
In addition, a U.S. person must obtain an export license for
Arrangement, Merger, Joint Venture Authorization.
an exempted defense article if the exporter “has knowledge
that the defense article … is being exported for use other
International Armaments Cooperation
than by a qualified Canadian-registered person or for export
to another foreign destination.”
The AECA exempts activities contained in International

Armaments Cooperation (IAC) agreements from certain
Reacting to State Department-described past
AECA reporting and export license requirements. Such
“unauthorized” exports and re-exports of U.S.-origin
agreements comprise a range of research, development,
defense articles to Canada, the State Department announced
testing, and evaluation (RDT&E); procurement; and
revisions to the Canadian exemption in April 1999. These
sustainment partnerships between DOD and foreign
revisions included “removal of the exemption for several
governments, militaries, or commercial entities. According
USML items.” The two governments subsequently
to DSCA, IAC activities entail “interfacing with
announced in October 1999 that Canada had agreed to
international partners during the research, development,
improve Ottawa’s export controls in exchange for U.S.
test, and evaluation … and production phases of the U.S.
revision of Washington’s controls. Following Canada’s
systems acquisition process.” IAC programs use bilateral or
implementation of such improvements, the State
multilateral agreements with participating governments to
Department announced in 2001 an ITAR amendment
authorize, scope, and manage particular programs and
expanding “significantly the scope of the Canadian
projects. Pursuant to AECA Section 27(g), FMS and DCS
exemption.”
transactions governed by IAC agreements with NATO
countries are exempt from some congressional review
AECA Section 38(j)
requirements.
AECA Section 38(j)(1)(A) authorizes the President to
“exempt a foreign country” from AECA export licensing
Pillar Two Implementation
requirements if the United States “has concluded a binding
Assistant Secretary of State Jessica Lewis testified on May
bilateral agreement with the foreign country.” This
24, 2023, that the State Department will implement an
provision does not apply to existing licensing exemptions
initial interim measure, named the AUKUS Trade
for exports to Canada or pursuant to the Defense Trade
Authorization Mechanism (ATAM), to establish license
Cooperation Treaties. AECA Section 38(j)(2) mandates that
exemptions for certain exports to approved entities within
such an agreement require the foreign government to
AUKUS countries. Noting that the “vast majority of U.S.-
implement changes necessary for establishing “an export
Australia defense trade occurs via FMS,” Lewis explained
control regime that is at least comparable” to U.S. “law,
that ATAM will permit “most items that would typically be
regulation, and policy” governing transfers and retransfers
transferred under FMS authorities” to be “transferred under
of both tangible and intangible exports, including defense
DCS authorities.” As noted above, only DCS transactions
articles.
are eligible for export license exemptions. Lewis noted that
the United States also intends to request commitments from
AECA Section 38(j)(3) requires the President to, at least 30
Australia and the United Kingdom “on shared standards for
days before exempting a country from AECA export
the protection of defense information and materials
licensing requirements, transmit to the House Foreign
consistent with” applicable U.S. standards.
Affairs Committee and the Senate Foreign Relations
Committee a certification that the United States and the
Draft legislation the Biden Administration submitted to
foreign government have entered into a bilateral agreement
Congress on June 28 would add a subsection to AECA
meeting the above-described requirements. Similarly,
Section 38 authorizing the Secretary of State to exempt
AECA Section 38(f)(2) stipulates that the President may not
certain DCS transfers to Australia and the UK from export
exempt a country from AECA export licensing
licensing requirements “after the Secretary submits to
requirements unless the President has transmitted a report to
Congress a certification” that the recipient government “has
the same committees that describes the exemption’s scope
implemented standards for a system of export controls
and contains an Attorney General determination that a
“satisfying the elements of” AECA Section 38(j)(2)(A), but
bilateral agreement concluded pursuant to Section
not Section 38(j)(2)(b). The proposed legislation would also
38(j)(1)(A) “requires the compilation and maintenance of
exempt retransfers of U.S.-origin defense articles from the
sufficient documentation” concerning exports of U.S.-
certification and congressional review requirements
origin defense articles “to facilitate law enforcement efforts
contained in Section 3(d)(1-3) of the AECA.
to detect, prevent, and prosecute criminal violations.”
Paul K. Kerr, Specialist in Nonproliferation
Ilana Krill, Research Assistant
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U.S. Arms Transfer Restrictions and AUKUS Cooperation

IF12483


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