AUKUS in focus

A version of this article was first published by The DCN in June 2024.

In an industry replete with acronyms, the AUKUS acronym has gained significant use and attention across the last few years.

With AUKUS now established and its members implementing legislative and administrative arrangements to facilitate the intended outcomes of the partnership, it is timely to examine some of its initiatives.

What is AUKUS?

Australia, the United Kingdom (UK) and the United States (US) entered into a tripartite security partnership — widely known as AUKUS — for the Indo-Pacific region on 21 September 2021.

AUKUS involves the US and the UK assisting Australia to acquire nuclear-powered submarines. It includes co-operation on a variety of military capacity and advanced defence technology such as cyber-mechanisms, artificial intelligence, quantum technologies, undersea capabilities, hypersonic and counter-hypersonic capabilities, electronic warfare, innovation and information sharing.

For Australia, the partnership involves two of its traditional defence allies with whom we also have significant trade relationships. It has been seen as a natural extension to those alliances to deal with perceived threats in the Indo-Pacific region.

AUKUS focuses on military capability and operates separately to other Australian partnerships such as the Five Eyes intelligence-sharing alliance with the US, UK, New Zealand and Canada and the Quad diplomatic alliance between Australia, India, Japan and the US.

Implementing AUKUS

While much of the implementation of AUKUS will operate on existing secure arrangements for the sharing of information, there remained the issue of exchanges of defence goods and technology which would otherwise require licences or approvals under existing defence export controls regimes in Australia, the UK and the US. To facilitate the exchange of such goods and technology, the parties are working towards establishing an ‘AUKUS licence-free environment’ to pursue enhanced co-operation by removing barriers to that sharing.

According to commentary on these new arrangements on the website of our Department of Defence:

The licence-free environment is being operationalised by the three AUKUS nations providing national exemptions for each other from their export control licencing requirements. These exemptions will remove the licencing requirements for most military goods and technology items exported, re-exported, or transferred (in-country) to or within the three AUKUS partners.

On 1 May 2024, the members of AUKUS released their mechanisms for the national exemption and consultation is taking place in each country.

For these purposes of AUKUS, the Department of Defence lists the following as the AUKUS partners’ national exemptions:

• Australia’s national exemption under the Defence Trade Controls Amendment Act 2024 (Amendment Act);
• the US Department of State’s draft national exemption for military goods and technology under the International Traffic in Arms Regulations (ITAR);
• the US Department of Commerce’s interim final rule (in effect) national exemption for dual-use goods and technology under the Export Administration Regulations (EAR); and
• the UK’s draft national exemption for military and dual-use goods and technology under an AUKUS-specific Open General Export Licence (OGEL).

New export controls and the AUKUS national exemption

The steps to implement the AUKUS national exemptions in Australia took place at the same time as the passage of additional defence export controls by the Amendment Act. As described on the Department of Defence website, the Amendment Act amends our defence export control framework by doing the following.

• Creating three new criminal offences in the Defence Trade Controls Act 2012 for the:
  • supply of Defence and Strategic Goods List (DSGL) technology to a non-exempt foreign person within Australia (section 10A);
  • supply of goods and technology on Part 1 (Munitions) and Part 2 (Dual Use) ‘Sensitive’ and ‘Very Sensitive’ Lists of the DSGL, that was previously exported or supplied from Australia (section 10B); and
  • provision of DSGL services related to Part 1 of the DSGL to foreign nationals outside of Australia (section 10C).
• Providing a national exemption to the UK and the US from Australia’s export control permit requirements under the Defence Trade Controls Act 2012.

The Amendment Act passed through our Federal Parliament on 27 March 2024 with its commencement anticipated to be on 27 September 2024. However, as with many legislative developments, much of the important detail is included in the relevant regulations. On 1 May 2024, Australia released an Exposure Draft of the Defence Trade Legislation Amendment Regulations (the Draft Defence Amendment Regulations) proposing amendments to the Defence Trade Controls Regulation 2013 and the Customs (Prohibited Exports) Regulation 2013 and the Customs (Prohibited Exports) Regulations 1958.

The draft defence amendment regulations are now subject to a comprehensive engagement strategy effected by the Department of Defence ending on 31 May 2024.

Overall, the engagement between government and industry on these issues has been open and well-organised. Industry has responded positively to the engagement with one of the highlights being the work of the newly established Export Controls Australia Group (ECAG) as a ‘special interest industry group, established in 2023, with a primary focus on export and trade control matters’.

ECAG describes itself as the ‘sole dedicated national industrial body in Australia that deals exclusively with export control issues’. The timing for ECAG to be introduced into the national agenda has been excellent (as you would expect from a group comprising, in part, people working in export controls in the defence private sector).

Related provisions in the UK and the US

At the same time that Australia is working through its implementation of the Amendment Act and the draft defence amendment regulations, the UK and the US are working through their own corresponding provisions under ITAR, ERA and OGEL.

If the proposed timelines in the UK and the US are met, and there are no impediments then the AUKUS licence-free regime could be in place in towards the end of 2024. Of course, forthcoming elections in the US and the UK could create problems, although there seems to be significant support for AUKUS in both countries, especially as both countries will be involved in the sale and developments of nuclear-powered submarines and other technology.

Preparation for the new regime in Australia

According to the ECAG website, if passage of the draft defence export regulations takes place as anticipated; as of 27 September 2024, the exemption for exports to the UK and the US can be used, providing the transferor has opted in for an AUKUS Defence Client Registration Number. Recipients will not need to be registered with the Department of Defence. However new Australian export permits will be required for non-exempt activities.

For those involved in the export of goods and technology subject to the export controls regime (in whatever capacity) it is vital to be aware of the current developments and develop expertise and procedures to properly comply with the requirements of the new regime.

Importantly, that includes the knowledge of what falls outside of the new national exemptions. An assumption as to the existence of exemptions, which are not, in fact, in existence, could lead to significant liabilities for those involved in the trade.

Contact us

If you are an individual or Australian business and would like to discuss any current trade or supply chain issues your business is facing, please contact a member of our Customs & Trade team.