To ECAG Hosts Industry and Government Roundtable at Avalon 2025: The ITAR exemption, FMS and collaboration.

On March 26th, 2025, the Export Controls Australia Group (ECAG) successfully hosted a significant roundtable at Avalon, assembling senior government officials from Australia, the United Kingdom, and the United States—the AUKUS nations—and leading industry representatives, including small and medium enterprises (SMEs) and prime contractors. Through open and constructive dialogue, participants examined current regulatory frameworks and discussed future improvements, emphasising practical measures for facilitating faster and more efficient technology transfer processes.

Strengthening Defence Collaboration Through AUKUS

Central to discussions was the growing strategic importance of the AUKUS alliance. Participants acknowledged the significant shifts in global security landscapes that have necessitated closer cooperation among allies, especially in terms of technology sharing and innovation. Enhanced collaboration was underscored as vital to maintaining defence capabilities and technological superiority.

The discussions centred around the 126.7 AUKUS ITAR exemption—commonly referred to as the ‘Licence-Free Environment’ (LFE)—which was explored in significant detail. It was widely acknowledged that this exemption, along with the introduction of the revised Australian Defence Trade Controls Act (DTCA), represents just the beginning of broader reforms. Government representatives emphasised that these developments are part of a longer-term effort to strike the right balance between safeguarding national security and enabling more streamlined access to defence technologies for trusted allies.

One of the key challenges raised by industry participants was the difficulty in securing timely Third Party Transfers (TPR/TPT) under the Foreign Military Sales (FMS) program, which is not covered under the S126.7 exemption. This issue was acknowledged by government officials, who advised that this is on the agenda of the US government.

AUKUS ITAR Exemption: Understanding and Utilising the 126.7 Exemption

A significant highlight of the roundtable was the detailed examination of the 126.7 exemption under the International Traffic in Arms Regulations (ITAR). Participants acknowledged this exemption as a critical instrument aimed at expediting necessary capability developments by streamlining processes traditionally slowed by bureaucratic constraints. The exemption’s practical applications were thoroughly discussed, including its suitability, limitations, and prerequisites for its effective use.

Industry representatives were particularly attentive to clarifications on exemption criteria. Officials emphasised that not all technologies or transactions would qualify—such as those involving Foreign Military Sales (FMS) or certain technologies outlined in the Export Technology List (ETL). This requirement underscores the need for robust internal compliance assessments within companies before pursuing exemption pathways.

During discussions, clear guidelines were provided to industry stakeholders:

• Confirmation of their status as authorised AUKUS users

• Verification that the relevant technology is listed on the U.S. ETL

• Implementation of detailed technology (trade) control plans (TCPs) that proportionately address and adhere to the exemption’s compliance requirements

Luke Saunders, Trade Compliance Lead for Hanwha Defence Australia (HDA), shared an encouraging industry perspective, explaining his company’s proactive exploration of the exemption to advance innovative defence technologies. This testimony underscored industry willingness to engage constructively with these regulatory tools and adopt new strategies aimed at boosting operational capabilities. Luke said:

“So far, navigating the new environment to become an Authorized User to utilise the 126.7 exemption has been straightforward, with assistance from DEC and relevant US OEMs enabling us to ensure we are meeting the eligibility criteria for the exemption. With this collaborative guidance, including our own extensive due diligence, we are now putting this exemption into action to drive our capabilities forward.”

Government representatives clarified their intent to maintain practical usability of the exemption, referencing past lessons from frameworks such as the Australia–U.S. Defence Trade Cooperation Treaty, which had limited success due to complexity and limited industry uptake. Officials sought to avoid such pitfalls by encouraging ongoing industry feedback and suggested proactive consultations to ensure the exemption remains responsive and beneficial to industry needs.

Australian Defence officials also provided quantitative evidence of the exemption’s early adoption success, reporting over 350 pre-notifications since its introduction, with more than $40 million in technology having successfully crossed borders under this streamlined approach. Such figures demonstrated substantial initial interest and the exemption’s practical viability, indicating broader future uptake as industry understanding and confidence in the process improve.

AUSDEFCON (Australian Defence Contracts)

The Australian Government is encouraging the use of the Licence-Free Environment (LFE) and may include similar wording in AUSDEFCON’s, to continue to drive its use for Defence projects.

ECAG’s interpretation of this is that where use of the exemption under ITAR §126.7 is within scope and expedites access to technology—such as in urgent defence scenarios—Government will encourage the LFE. Where a company is not AU/UK/US-owned, or where the supply chain is expected to include entities ineligible for the LFE (which is often known from the outset), the approach would be to use traditional methods of transfer or rely on the exemption initially while simultaneously applying for the appropriate authorisation (e.g. DSP-5, TAA).

This method ensures continuity and readiness through the Engineering, Operation, and Maintenance phases.

Foreign Military Sales: A Background Summary and the Future

Australia’s Rank in U.S. Foreign Military Sales (FMS)

Australia is one of the United States’ largest defence customers through the Foreign Military Sales program. Cumulative FMS figures show Australia near the very top globally. For example, as of FY2022, Australia had purchased about $45.8 billion worth of U.S. defence articles and services via FMS (1950–2022 total). Historically, this placed Australia among the top five FMS recipients—only Saudi Arabia, Israel, Japan, and Taiwan had higher totals (with countries like Egypt and South Korea at similar levels). In other words, Australia has consistently been one of the biggest consumers of U.S. defence technology through FMS.

Recent data suggest Australia’s relative rank is around 5th–6th largest. A 2013 analysis (covering FMS up to 2010) noted Australia was the fifth-largest buyer via FMS, behind Saudi Arabia, Egypt, Israel, and Taiwan. By 2022, Australia still remained in roughly that tier—its ~$45.8 billion cumulative FMS value is only surpassed by a handful of allies (Saudi Arabia by far No.1 and slightly behind Israel, Japan, and Taiwan). Poland’s recent surge in FMS (roughly $30 billion of new U.S. arms deals in FY2023 alone) likely vaults Poland’s total above Australia’s. Taking such new developments into account, Australia appears to be around 6th in overall FMS purchases at present (with Saudi Arabia, Israel, Japan, Taiwan, and now Poland occupying the top five slots by total value).

Third-Party Transfer/Retransfer (TPR) Leadership

Australia is highly active in Third Party Transfers (TPTs) of U.S.-origin defence items—in fact, it is often cited as the number one country in this area. “Third party transfers” occur when a country that bought U.S. defence equipment seeks U.S. consent to re-transfer or share that equipment with another nation. Australia’s close integration with U.S. technology and frequent multilateral projects mean it generates many such requests. According to U.S. officials, Australia leads all allies in the volume of third-party transfer approvals.

For example, prior to recent export-control reforms, Australia had to obtain “close to or slightly over 900 export permits” per year from the U.S. (worth about $5 billion AUD annually) for defence articles and tech—a volume described as higher than any other partner. This reflects Australia’s heavy use of TPRs, whether for cooperative programs (like AUKUS tech sharing) or to re-transfer U.S.-origin equipment in support of allies.

In summary, Australia is indeed one of the top consumers of U.S. defence technology via FMS—roughly 6th largest by recent estimates—and it ranks number one in third-party transfer/retransfer requests of U.S.-origin defence items. Both U.S. government data and defence analyses confirm Australia’s outsized role in U.S. security cooperation via these channels.

This underscores the urgent need to streamline the complex and lengthy, around 6-18 months, Third Party Transfer (TPR) process, particularly when individual suppliers or contractors require rapid access to support Australian defence activities.

Sources:

• U.S. Defense Security Cooperation Agency (DSCA) Historical Sales Book FY2022 – Cumulative FMS totals by country

• JoongAng Daily (Korea) analysis of FMS purchases (1974–2010) – ranked Australia 5th globally at that time

• Air & Space Forces Magazine – FY2023 FMS highlights (Poland’s ~$30B in new FMS deals, etc.)

• Breaking Defense – on AUKUS export control reforms (noting Australia’s ~900 annual export permit requests, ~$5B AUD, highest among allies)

• ASPI Strategist – discussion of Australia’s heavy use of FMS relative to other allies

FMS Executive Order

Proposed Executive Order on Foreign Military Sales Under the Trump Administration (2025)

In early April 2025, reports emerged indicating that former President Donald J. Trump was preparing an executive order designed to significantly revise the regulatory framework governing U.S. Foreign Military Sales (FMS). The proposed measure sought to raise the monetary thresholds that trigger mandatory congressional notification, increasing the limit for direct arms transfers from USD 14 million to USD 23 million, and for military equipment, upgrades, training, and associated services from USD 50 million to USD 83 million. These changes were intended to expedite the review and approval process for U.S. arms exports, with the stated goal of enhancing the global competitiveness of the American defence industry and reducing bureaucratic delays.

The proposed executive order formed part of a broader Trump-era approach to foreign arms transfers, which prioritized economic and strategic advantages for U.S. industry and allies. It also followed earlier initiatives, including the 2018 Conventional Arms Transfer (CAT) Policy, which emphasized expanding U.S. defence sales to support domestic manufacturing and deepen bilateral security partnerships.

As of April 2025, the executive order remained in draft form and had not been formally enacted. It was reportedly still undergoing interagency review, with discussions ongoing between the Departments of State, Defense, and Commerce, as well as with congressional stakeholders.

It will be important to observe whether future policy developments take into account the current complexities of the Third Party Transfer (TPR) and Third Party Transfer Request (TPT) processes. Meaningful reform in this space—particularly amendments designed to streamline approvals—could play a critical role in enabling faster and more efficient support for maintenance and operational activities undertaken by Australian industry. As defence programs grow in scale and urgency under AUKUS and other strategic initiatives, timely access to controlled technologies and components will be essential. Therefore, a more responsive and agile TPR/TPT framework would significantly strengthen Australia’s sovereign industrial capability and reduce bottlenecks in collaborative defence efforts.

Sustaining Industry–Government Dialogue for Improved Compliance

Throughout the roundtable, participants consistently emphasised the importance of ongoing dialogue and collaboration between government and industry. Both groups committed to regular consultations aimed at refining regulatory tools and enhancing compliance processes. Participants agreed that continuous feedback loops were critical for identifying practical improvements and ensuring regulatory measures support rather than hinder technological innovation and defence readiness.

Conclusion and ECAG’s Commitment

The Avalon 2025 roundtable clearly highlighted a shared commitment among AUKUS nations toward strengthening defence cooperation and enhancing technology transfer capabilities. Discussions emphasized the critical role of cross-SME collaboration and adapting regulatory frameworks to meet contemporary defence and strategic needs.

ECAG, as a not-for-profit organisation, is dedicated to enhancing transparency and understanding of Australia’s trade controls environment. Our primary mission involves proactively engaging stakeholders and complementing existing industry efforts. Our collaborative approach focuses on:

• Openly sharing knowledge and facilitating relevant events

• Connecting diverse industry, government, and international stakeholders

• Providing credible insights and timely information

• Light advocating through awareness-raising initiatives

• Supporting innovative ideas and proposals that benefit the export controls community

We deeply value the expertise and contributions of established industry groups, Defence primes, and specialist consultants, recognising their critical role over recent decades and into the future.

ECAG remains steadfast in its core values of transparency, integrity, and open dialogue, committed to advancing collective industry understanding and compliance.