Department of State publishes final rule finalizing AUKUS defense trade ITAR exemption

On December 30, 2025, the United States Department of State’s Directorate of Defense Trade Controls (DDTC) published a final rule amending the International Traffic in Arms Regulations (ITAR). This final rule implements, with changes, the August 20, 2024 interim final rule, which made several amendments to the ITAR to facilitate defense trade cooperation among Australia, the United Kingdom, and the United States (AUKUS partners).

The final rule, effective upon publication in the Federal Register, includes amplifying commentary in the preamble to respond to public comments DDTC received during the rulemaking process. DDTC also published an accompanying fact sheet.

In this alert, we provide a brief overview of the regulatory updates, key details included in the preamble text, and implications for businesses.

Overview of the final rule

The final rule notes that the amendments support the goal of streamlining defense trade by reducing the regulatory burden for exporters as set out in President Donald Trump’s Executive Order 14268, “Reforming Foreign Defense Sales To Improve Speed and Accountability.” Notably, the final rule includes a new exemption, ITAR § 126.7(c), for certain reexports, retransfers, or temporary imports of defense articles to support the armed forces of Australia, the UK, or the US.

To use ITAR § 126.7(c), the following requirements set out in ITAR § 126.7(d) must be met:

1. The defense article must have originally been exported pursuant to a license or other approval
   
   
2. To the extent that any US DDTC-registered person or Authorized User is a party to the reexport, retransfer, or temporary import, such person must be (i) under contract with and either directly embedded with the armed forces of the AUKUS partners or (ii) operating alongside and in support of such forces
   
   
3. The purpose of the reexport, retransfer, or temporary import is for (i) the provision of on-site support to the armed forces of the AUKUS partners or (ii) the return to Australia, the UK, or the US of defense articles used in on-site support of the armed forces of the AUKUS partners, and
   
   
4. The reexport, retransfer, or temporary import (i) is not regarding a defense article or defense service described in Supplement No. 2 of ITAR part 126 (the Excluded Technology List), (ii) does not exceed the congressional notification value thresholds specified under ITAR § 123.15 or involve the manufacturing abroad of significant military equipment, and (iii) must inform the end-user and all consignees that the defense articles being exported are subject to US export laws and regulations as specified in ITAR § 123.9(b)

The final rule also updated the definition of Authorized User to explicitly include UK national-level and Australian federal government departments or agencies. As a result, although not every UK national-level or Australian federal government department or agency is enumerated on the Authorized User list (unless the department or agency specifically requests DDTC to list them), the amendment clarifies that these entities are Authorized Users.

The final rule does not amend the Excluded Technology List to allow a broader range of defense articles or defense services to be eligible for the ITAR § 126.7 exemption.

Preamble text

In addition to the amendments described above, DDTC made several additional clarifying changes and provided amplifying commentary in the final rule’s preamble text in response to public comments.

Specifically, DDTC noted that:

1. More than 700 Australian and UK persons have become Authorized Users
   
   
2. Starting September 1, 2024, while industry was familiarizing themselves with the ITAR § 126.7 exemption, DDTC expedited all export licensing application adjudications for Australia and the UK; however, DDTC will now only expedite applications that meet the eligibility criteria of ITAR § 126.15(c)
   
   
3. ITAR § 126.7 cannot be used for transfers to ITAR § 126.1 countries
   
   
4. Pursuant to the Authorized User Terms and Conditions, defense articles produced or manufactured from technical data or defense services exported from the US via the ITAR § 126.7 exemption are subject to the ITAR’s reexport and retransfer requirements
   
   
5. If a technical assistance agreement or manufacturing license agreement does not include the updated ITAR § 124.8(a)(5) clause referencing the ITAR § 126.7 exemption, a minor amendment must be approved before the parties can use the ITAR § 126.7 exemption as the authorization for a reexport or retransfer
   
   
6. If a warehouse and distribution agreement (WDA) does not identify ITAR § 126.7 as a likely method of authorizing distribution, transfers of defense articles licensed under a WDA using ITAR § 126.7 should not occur
   
   
7. DDTC will publish an FAQ to clarify that US subsidiaries and affiliates of US person DDTC registrants listed in block 8 of the DS-2032 are eligible to self-certify to exemption usage and meets the registration requirements of ITAR § 126.7(b)(2)(i)
   
   
8. Expedited processing of license applications detailed in ITAR § 126.15(c) and (d) only applies to exports (not reexports or retransfer requests)
   
   
9. The Director of Defense Trade Controls Licensing routinely reviews all licenses recommended for denial and tracks in real time all licenses subject to the expedited review procedures detailed in ITAR § 126.15(c) and (d)
   
   
10. During a three-month period, DDTC determined that only 18 percent of licensing requests received were ineligible for transfers due to the Excluded Technology List
    
    
11. While DDTC is exploring upgrades to the Authorized User List in the Defense Export Control and Compliance System (DECCS) to increase functionality (e.g., providing an Application Programming Interface), currently, users of the ITAR § 126.7 exemption are responsible for checking the Authorized User List in DECCS prior to using the exemption to ensure the recipient has not been removed from the list

Practical impacts

The implementation of the new ITAR § 126.7(c) exemption and the update to the definition of Authorized User to explicitly include UK national-level and Australian federal government departments or agencies could result in increased opportunities for businesses to use the ITAR § 126.7 exemptions to facilitate license-free defense trade between the AUKUS partners.

In addition, the amplifying information DDTC provided in the preamble comments may help industry in Australia and the UK to understand the scope of the ITAR § 126.7(c) exemption and the general jurisdiction and authorization mechanisms of the ITAR.

Conclusion

The final rule represents another step in aligning US export controls with one of the main objectives of the AUKUS partnership: enhancing defense trade and cooperation among the AUKUS partners.

Learn more

For more information on the final rule’s implications for your business and how DLA Piper can help determine the applicability of ITAR exemptions in specific scenarios, please contact any of the authors.