ITAR Reform Bill Should Exempt AUKUS, Expand License Exemptions, Lawmakers Hear

House lawmakers are working on legislation they say could lift some of the International Traffic in Arms Regulations’ burdensome technology sharing restrictions, including controls limiting trade with the U.S.’ closest allies. Rep. Michael McCaul, R-Tex., said the bill could create an ITAR exemption for technology transfers under the Australia-U.K.-U.S. (AUKUS) partnership, among other changes.

“ITAR is a big issue, and it's prohibiting our ability to make weapons with our closest allies in a very expeditious way,” McCaul, chair of the House Foreign Relations Committee, said during a roundtable discussion with defense industry officials this week. “We're working in tandem with the administration, who, I think by all accounts, wants to be headed in this direction as well.”

McCaul’s comments came about a month after the House passed a bill that would direct the State Department to report to Congress on export-related issues under AUKUS and issue an “assessment of recommended improvements to export control laws” (see 2303230031). Industry experts and others say the ITAR is overdue for reform because it prevents technology sharing and collaboration with close allies (see 2302170022, 2303170045 and 2303140018).

Speaking during the roundtable, McCaul said there is consensus that the new legislation should exempt the AUKUS partnership from ITAR controls. “It seems like everybody's in agreement, at least on that as a starter,” he said. “But I am worried. The clock's ticking, and time is not on our side. And the faster we can do this, the more we can defend our interests around the world.”

Shelly O’Neill Stoneman, senior vice president of government relations for BAE Systems, said the U.S. can start by expanding licensing exemptions under the Arms Export Control Act for AUKUS activities. She also said Congress should expand the ITAR’s Canadian exemption -- which provides license exemptions for certain transfers involving Canada -- to also include the U.K. and Australia, which would “make exports and imports more seamless.”

The administration should also create an “AUKUS Industry Forum” that would allow companies to “share information about the hurdles to cooperation and propose solutions” to the government, Stoneman said during the roundtable. “These initial steps would have a noticeable effect on industry's ability to help realize the objectives laid out by the AUKUS governments,” she said.

Congress should also require the departments of State and Commerce to “expand and simplify” existing open general licenses for Australia and the U.K., “pathfinding an approach to broader export control modernization writ large,” said Gregory Kausner, senior vice president for Anduril Industries. The State Department recently extended its Australia, Canada and U.K open general license pilot program for three years, but the program only authorizes certain reexports and retransfers, not exports (see 2303280034).

Although the ITAR has “incorporated amendments over the years aimed at ameliorating an outdated, understaffed and opaque export control process, the conditions surrounding their use remain unnecessarily constrained,” Kausner said. The U.S. needs to “streamline regulations” that govern international cooperation in military technology. “Speed matters in this geostrategic environment,” he said, “yet we're running a sprint at marathon pace.”

Other ITAR revisions could help American companies more easily hire and retain foreign talent, said Chris Power, CEO of Hadrian. He said “many” U.S. defense technology startups can’t hire top software engineers that are working for other large U.S. technology companies, such as Facebook, because of ITAR restrictions.

“We immediately need millions of skilled workers to fill very high-paying jobs across the defense industrial base across the board,” Power said. The U.S. should allow certain “certified companies” to hire talent from the Five Eyes nations and India, he said, which would “flood America’s companies with the talent we need to ramp capacity so that we can do this stuff on shore.”

McCaul called the ideas “great legislative recommendations that we will take a look at” as lawmakers craft a bill.