Friday, November 1, 2024 — 9 am Pacific – 12 noon Eastern
Join GW Law for a free one-hour webinar on Friday, November 1, 2024 at 9 am Pacific / 12 noon Eastern to discuss the Australian – United Kingdom – United States (AUKUS) partnership and its special exceptions for technology transfers between the three countries. This webinar is presented with the kind cooperation of the ABA Public Contract Law Section’s International Procurement Committee.
Background
In September 2021, the three countries announced the AUKUS partnership. AUKUS is an enhanced trilateral security partnership intended to strengthen the three nations’ ability to support security and defense interests. The AUKUS partnership seeks to promote information and technology sharing, and to foster deeper integration of security and defense-related science, technology, industrial bases and supply chains.
The AUKUS partnership launched with two initiatives. The first was a commitment to support Australia in acquiring nuclear-powered submarines for the Royal Australian Navy. The second initiative (“Pillar 2”) seeks to enhance joint capabilities and interoperability, with a focus on cybersecurity, artificial intelligence, quantum technologies and additional undersea capabilities.
As part of that initiative to enhance technology exchanges, in August 2024 the State Department certified to Congress that, in accordance with the AUKUS arrangement, the UK and Australian export control systems are comparable to those of the United States and both nations have implemented reciprocal export exemptions for U.S. entities. On the U.S. side, the two lead U.S. agencies on trade controls, the Commerce Department and the State Department, have announced rule changes (respectively, interim and interim final) to reduce compliance burdens and streamline AUKUS-related trade between the United States, Australia, and the United Kingdom, and more broadly to increase trade between the three countries.
Panelists
- William Greenwalt is a Visiting Fellow, American Enterprise Institute, where he focuses on the expansion of America’s defense industrial base and defense management issues, including on issues of technology-transfer reform, defense acquisition and procurement reform, technology policy and innovation. Dr. Greenwalt is also a founder of the Silicon Valley Defense Group and a member of the Procurement Round Table. When he served as deputy under secretary of defense for industrial policy, he advised the under secretary of defense for acquisition, technology, and logistics on all matters relating to the defense industrial base. In Congress, he served as a senior staff member for the Senate Armed Service Committee, the Senate Governmental Affairs Committee, and the House Appropriations Committee. In the private sector, Dr. Greenwalt worked for Lockheed Martin and the Aerospace Industries Association.
- Marques Peterson is the managing partner of Pillsbury’s Washington, DC office. His practice focuses on counseling and representing aerospace/defense and civil contractors in both federal procurement and international defense sales. He regularly helps clients navigate the intersection of government contracting and international defense sales processes. He advises clients on foreign military sales, direct commercial sales and contracts, and the complex regulatory compliance requirements associated with such international defense sales. Prior to entering private practice, Marques served on active duty in the Air Force Office of General Counsel at the Pentagon, where he counseled senior leaders on numerous acquisition-related matters including services contracting and space acquisitions.
- Lorrine (Lori) Romero is the lead Trade Compliance Counsel with the Global Trade Group of L3Harris Technologies. Lori provides enterprise legal advice and guidance on issues involving international trade controls codified in the Arms Export Control Act, International Traffic in Arms Regulations, Export Administration Regulations, sanctions, boycott and anti-boycott laws and regulations. Lori assumed the position of Director, Lead Trade Compliance Counsel in 2021 and supports the Vice President of L3Harris’ Global Trade Group. Lori reports directly to the L3Harris General Counsel. Before joining L3Harris in 2021, Lori served as Director, Senior Counsel at CGI Federal Inc. Her duties at CGI Federal included international corporate secretarial, trade compliance, privacy, and intellectual property. Before joining CGI Federal, Lori served in increasingly senior roles in the law department of Raytheon Company including trade compliance, supply chain counsel, and providing legal support to various business units within Raytheon. She served as the General Counsel to Raytheon’s transatlantic joint venture, Thales Raytheon Systems, Inc.
- Nicholas Townsend has extensive experience in export controls, trade sanctions, cybersecurity, privacy, and the aerospace industry. His practice includes conducting internal investigations and audits regarding the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR), advising foreign and domestic companies on compliance with financial sanctions on Iran, Russia, Ukraine, Cuba, Venezuela, and other countries, representing companies before the Committee on Foreign Investment in the United States (CFIUS), obtaining Office of Foreign Assets Control (OFAC) licenses and export authorizations under the ITAR and EAR, and preparing Foreign Corrupt Practices Act (FCPA) and export control compliance plans.
Moderators: Christopher Yukins (GW Law) & Allen Green (Dentons/GW Law).
Agenda
Open Issues
As the webinar will explain, the AUKUS arrangement leaves open a number of issues in export controls, including (1) the definition of controlled “defense services” which the U.S. Department of State seeks to expand, and (2) “ITAR contamination” which could slow the development of new technologies under AUKUS.
Expanded Regulation of Defense Services
Under the Arms Export Control Act (AECA), the President is permitted to control the import and export of “defense articles and defense services.” The President has delegated that authority to the State Department, through executive order, and the State Department in turn promulgates the International Trafficking in Arms Regulation (ITAR). “Defense services” are defined in the ITAR. The State Department traditionally defined “defense services” by reference to a “defense article.” Under the current definition, “defense services” currently mean (1) “the furnishing of assistance (including training) to foreign persons . . . [relating to the] use of defense articles;” (2) the furnishing of technical data related to defense articles to foreign persons; or (3) military training.
But the State Department now proposes to untether the definition of “defense services” from defense articles. The proposed rule, 89 Fed Reg. 60980 (July 29, 2024), maintains the first element of the current rule, but would replace the second and third with a cross-reference to the U.S. Munitions List (which would also be revised).
The key is that the proposed rule would sweep in, under “defense services,” any “assistance… that creates, support, or improves intelligence activities . . . [or] military or paramilitary” forces, operations, or capabilities “regardless of whether a defense article is involved.” To be sure, the proposed rule exempts six categories of what would otherwise be assistance, including certain services (such as medical, translation, and legal), certain training commonly taught in schools and colleges, and certain information technology services. Even with those exemptions, however, the new definition could capture a much broader array of services if they could create, support or improve certain intelligence or military activities by a foreign power or its proxies.
Whereas businesses were previously able to include or exclude themselves from this regulatory regime — by identifying whether they sought to export defense articles — much more review will be required of those services providers potentially covered by the proposed rule. And with regard to the AUKUS arrangement, the State Department’s proposed rule leaves open the question whether the United States’ strategic partners will need to align their own export controls with this expanded regime.
“ITAR Contamination”
As Tom Corben and panelist William Greenwalt explained in a piece for the United States Studies Center, “Breaking the barriers: Reforming US export controls to realise the potential of AUKUS,” one lingering problem under AUKUS is what is sometimes called “contamination” under the International Trade in Arms Regulations (ITAR). The “contamination” arises when, for example, a trusted ally freely receives otherwise ITAR-controlled information under an allied arrangement with the United States (such as AUKUS) and then uses that technical data to produce a new item abroad – which the United States may then claim is subject to ITAR controls. The “indiscriminate and extraterritorial application of US International Trade in Arms Regulations (ITAR),” they warned, will slow “cooperation on existing technology transfer and capability-building initiatives” under AUKUS.
Tom Corben and Bill Greenwalt explained the “ITAR contamination” problem, and how it hampers defense innovation among the United States and its allies:
. . . ITAR now poses its own unique threat to US national security. The stasis of export control regimes over recent decades has seen them become a considerable barrier to bringing the best engineering and scientific talent to work on defence matters from outside the United States. Firms control the engineering talent, knowledge, manufacturing skills, and intellectual property (IP) needed for modern defence innovation programs to push the boundaries of the possible. However, these entities often see the ITAR process as an expropriation of their IP and often decide to turn that IP and engineering talent to other uses in the commercial sector. It is no coincidence that an entire industry of export control lawyers makes their living advising US commercial companies about how best to protect their IP and avoid the ITAR. The advice to these companies is often not to enter the defence research and development process in the first place, and to focus on their commercial prospects to avoid entanglement in the ITAR. US allies increasingly exhibit that same agency, although this is usually cloaked in the discourse of sovereignty and sovereign control rather than commercial gain. When a company within an allied country develops a new piece of technology, they and the host government generally believe that they should have the right to control that technology. Yet under current regimes, working with the United States at any level on that technology effectively guarantees the loss of control of that IP to the US State Department through the ITAR process.
In a more recent commentary, Bill Greenwalt wrote that the “framework that will guide AUKUS technology cooperation has now become clearer and is incredibly disappointing.” Referencing an August 2024 report with Tom Corben on limited export control reforms in the United States and Australia, Bill Greenwalt argued that failures to truly reform export controls “ensure that the benefits from AUKUS either remain far off into the future or are unlikely to ever be achieved.”
Prepared with the assistance of Jason Floyd, GW Law LLM candidate
Editor’s note: Students from GW Law’s Foreign Government Contracting class, run by Professors Green and Yukins, will be joining us as part of a class module on international trade controls. Professor Green is the author of International Government Contract Law (Thomson Reuters), the text for the course.
Resources
Arnold & Porter, AUKUS at Last — Commerce and State Announce Rules to Reduce U.S. Export Barriers for Australia and the UK (May 6, 2024).
Australian Government – Defence, Generational export reforms to boost AUKUS trade and collaboration (Aug. 16, 2024)
Deborah Cheverton & John T. Watts, AUKUS is hamstrung by outdated US export control rules. Here’s what Congress can do (Atlantic Council, Nov. 15, 2023).
Congressional Research Service, The U.S. Export Control System and the Export Control Reform Act of 2018 (June 2021)
Tom Corben, Even with intended reforms, US defence trade rules threaten AUKUS cooperation (Australian Strategic Policy Institute, June 18, 2024)
William Greenwalt (American Enterprise Institute) & Tom Corben (United States Studies Center), AUKUS enablers? Assessing defence export control reforms in Australia and the United States (Aug. 21, 2024)
John Hill, AUKUS “breakthrough” in trilateral export controls exemption, Naval Technology (Aug. 16, 2024)
Pillsbury, Further Enhancing Australia, United Kingdom, United States (AUKUS) Trilateral Security Partnership through Export Controls (May 2024)
Sidley & Austin, U.S. State Department Publishes Defense Trade Controls Exemption for Australia and the United Kingdom (Sept. 9, 2024)
United Kingdom Government, Historic Breakthrough in defence trade between AUKUS partners (August 15, 2024)
United Kingdom Government, Notice to Exporters (NTE) 2024/09: Update on AUKUS (May 1, 2024)
United Kingdom Government, NTE 2024/18: Update on AUKUS and publication of new open general licence (Aug. 16, 2024)
UK House of Commons Library, The AUKUS Agreement (Oct. 2021)
U.S. Department of Commerce, Interim Rule: Export Control Revisions for Australia, United Kingdom, United States (AUKUS) Enhanced Trilateral Security Partnership, 89 Fed. Reg. 28594 (April 19, 2024)
U.S. Department of Commerce, Press Release: Commerce Significantly Streamlines Export Controls for Australia and the United Kingdom, Advances Goals of the AUKUS Enhanced Trilateral Security Partnership (April 18, 2024)
U.S. Department of State, Proposed Rule: International Traffic in Arms Regulations: Exemption for Defense Trade and Cooperation Among Australia, the United Kingdom, and the United States, 89 Fed. Reg. 35028 (May 1, 2024). Interim Final Rule (August 20, 2024; effective Sept. 1, 2024).
U.S. Department of State, AUKUS Partners Rule Changes for Secure License-Free Defense Trade (May 2, 2024)
U.S. Department of State, The ITAR Canadian Exemption
Mary Anne Zivnuska, Federalist Society Blog: AUKUS Nuclear Information Safeguards – More Than Just Export Controls (June 29, 2024)