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

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U.S. Arms Transfer Restrictions and AUKUS Cooperation
license eligibility provisions contained in 22 C.F.R. Part
Sweden. Part 126.14 describes, as well as specifies
120.1(c) and Part 120.1(d), still apply to such exports.
requirements for obtaining, four comprehensive export
authorizations: Major Project Authorization; Major
The Canadian exemptions include provisions governing
Program Authorization; Global Project Authorization; and
non-Canadian entities. For example, retransfers to non-U.S.
Technical Data Supporting an Acquisition, Teaming
destinations of items exported pursuant to these exemptions
“must in all instances have the prior [DDTC] approval.”
Arrangement, Merger, Joint Venture Authorization.
This requirement also applies to retransfers within Canada.
International Armaments Cooperation
In addition, a U.S. person must obtain an export license for
The AECA exempts activities contained in International
an exempted defense article if the exporter “has knowledge
Armaments Cooperation (IAC) agreements from certain
that the defense article … is being exported for use other
AECA reporting and export license requirements. Such
than by a qualified Canadian-registered person or for export
agreements comprise a range of research, development,
to another foreign destination.”
testing, and evaluation (RDT&E); procurement; and
sustainment partnerships between DOD and foreign
Reacting to State Department-described past
“unauthorized” exports and re
governments, militaries, or commercial entities. According
-exports of U.S.-origin
to DSCA, IAC activities entail “interfacing with
defense articles to Canada, the State Department announced
international partners during the research, development,
revisions to the Canadian exemption in April 1999. These
revisions included “removal of the exemption for several
test, and evaluation … and production phases of the U.S.
systems acquisition process.”
USML items.” The two governments subsequently
IAC programs use bilateral or
multilateral agreements with participating governments to
announced in October 1999 that Canada had agreed to
improve Ottawa’s export controls in exchange for U.S.
authorize, scope, and manage particular programs and
revision of Washington’s controls. Following Canada’s
projects. Pursuant to AECA Section 27(g), FMS and DCS
transactions governed by IAC agreements with NATO
implementation of such improvements, the State
countries are exempt from some congressional review
Department announced in 2001 an ITAR amendment
expanding “significantly th
requirements. 22 C.F.R. Part 126.4 exempts from AECA
e scope of the Canadian
licensing requirements the “export, reexport, retransfer, or
exemption.”
temporary import of a defense article or the performance of
AECA Section 38(j)
a defense service,” pursuant to an IAC agreement with any
AECA Section 38(j)(1)(A) authorizes the President to
government.
“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,
regulation, and policy” governing transfers and retransfers
that ATAM will permit “most items that would typically be
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
AECA Section 38(j)(3) requires the President to, at least 30
the United States also intends to request commitments from
days before exempting a country from AECA export
Australia and the United Kingdom “on shared standards for
licensing requirements, transmit to the House Foreign
the protection of defense information and materials
Affairs Committee and the Senate Foreign Relations
consistent with” applicable U.S. standards.
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 certifying to Congress that the
requirements unless the President has transmitted a report to
recipient government “has implemented standards for a
the same committees that describes the exemption’s scope
system of export controls” satisfying the elements of AECA
and contains an Attorney General determination that a
Section 38(j)(2)(A). The proposed legislation would also
bilateral agreement concluded pursuant to Section
38(j)(1)(A) “requires the compilation and maintenance of
exempt retransfers of U.S.-origin defense articles from the
certification and congressional review requirements
sufficient documentation” concerning exports of U.S.-
contained in Section 3(d)(1-3) of the AECA. The House-
origin defense articles “to facilitate law enforcement efforts
to detect, prevent, and prosecute criminal violations.”
passed (H.R. 2670) and Senate-passed (S. 2226) versions of

the National Defense Authorization Act for Fiscal Year
Special Comprehensive Export Authorizations
2024 contain a very similar version of the draft legislation.
Under ITAR 22 C.F.R. Part 126.14, the DDTC issues
special comprehensive export authorizations for certain
Paul K. Kerr, Specialist in Nonproliferation
“commercial export endeavor[s]” involving registered U.S.
Ilana Krill, Research Assistant
exporters and NATO members, Australia, Japan, or
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U.S. Arms Transfer Restrictions and AUKUS Cooperation

IF12483


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https://crsreports.congress.gov | IF12483 · VERSION 3 · UPDATED

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