How the defense trade treaties work

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1. Two treaties, one design

The United States has Defense Trade Cooperation Treaties with Australia and with the United Kingdom. The International Traffic in Arms Regulations (ITAR) implement each one in its own section, and the two sections are built the same way (22 CFR 126.16(a)(2) and 22 CFR 126.17(a)(2)). Persons who follow the section’s rules are exempt from the normal licensing requirements. Customs port directors and postmasters must then allow permanent and temporary exports without a license, from the American community to the partner community, for the end uses the treaty allows. Items listed in a supplement to part 126 are excluded.

The treaties do not displace other law (22 CFR 126.16(a)(2)). Rules outside the ITAR on importing, possessing or transferring defense articles still apply, including the firearms regulations of the Bureau of Alcohol, Tobacco, Firearms and Explosives. Other streamlined routes for close allies are covered in streamlined pathways for close allies.

2. What an export is, here

The sections use their own definitions (22 CFR 126.16(a)(1)). An export is the first movement of defense articles or services from the American community to the partner community. A transfer is a later movement within the partner community, or between the two communities. A reexport moves previously exported articles from the approved community to a place outside the partner’s territory, and a retransfer moves them to a place inside it. An intermediate consignee receives items only to pass them on, without access to them.

3. Seven conditions for an export

Every export under a treaty must meet seven conditions (22 CFR 126.16(a)(3) and 22 CFR 126.17(a)(3)). The exporter must be registered with the Directorate of Defense Trade Controls (DDTC) and eligible to receive export authorizations without restriction. The recipient must be a member of the partner community, and any intermediate consignee must not be ineligible. The export must be for an end use that the treaty specifies and both governments have agreed.

The remaining conditions concern the item and the paperwork (22 CFR 126.16(a)(3)). The item must not be excluded from the treaty, and must be marked at least as "Restricted USML". Both exporter and recipient must keep the required records and produce them when the government asks. Where required, the State Department must have notified Congress in advance.

4. Who belongs to each community

The American community has two parts. One is federal departments and agencies and their personnel acting officially. The other is non-governmental American persons registered with DDTC and eligible for export authorizations without restriction, with their employees (22 CFR 126.16(b)). Clearances and need-to-know apply as appropriate. An exporter is barred if any senior officer, board member, party to the export, or source or manufacturer is ineligible for export authorizations (22 CFR 126.16(c)).

The partner community is made up of the partner government’s authorities and non-governmental entities and facilities shown as members on the DDTC website at the time of the transaction (22 CFR 126.16(d) and 22 CFR 126.17(d)). Non-governmental members that become ineligible are removed. What counts is membership as it stands at the time of each transaction.

5. Four authorized end uses

Each treaty names four end uses (22 CFR 126.16(e) and 22 CFR 126.17(e)). They are combined military or counterterrorism operations, cooperative security and defense research, development, production and support programs, and agreed projects where the partner government is the end user. The fourth is end use by the American government.

The end uses must be identified in one of three ways (22 CFR 126.16(f)). Operations, programs and projects that can be named publicly are posted on the DDTC website. Those that cannot are confirmed in writing by DDTC. American government end use is identified in a government contract or solicitation as eligible under the treaty. No other end use qualifies.

6. Items that need more

Most articles and services can move under the treaties, apart from the excluded list, but with limits (22 CFR 126.16(g)). An authorized exporter may market an article to the partner community if DDTC has licensed that exporter to export the identical type of article to any foreign person, and the end use is one the treaty allows. Articles that reveal anti-tamper measures made at government direction always need DDTC’s written approval. Classified American articles and services may go only under a written Defense Department request, directive or contract.

Developmental systems without written Milestone B approval are not eligible, unless a Defense Department solicitation or contract calls for the export for certain end uses (22 CFR 126.16(g)(4)). Excluded items built into an eligible larger system, such as an electronically scanned array radar in an aircraft, still need their own license (22 CFR 126.16(g)(5)). The treaties also do not cover Foreign Military Sales exports (22 CFR 126.16(a)(5)). Once delivered to the partner government, though, such items may be treated as if exported under the treaty, and must then be marked and handled by its rules.

7. Patents, royalties and the two versions

Two commercial points are settled in the sections (22 CFR 126.16(g)(6) and 22 CFR 126.16(g)(7)). The American government takes on no liability for any infringement of private patent or proprietary rights caused by a treaty export. Sales made through the government may not include charges for patent rights the government holds royalty-free, or for information it may use and disclose freely.

The two sections differ in names and in a few rules. The Australian section refers to the Australian Department of Defence. The British section refers to Her Majesty’s Government (22 CFR 126.17(a)(5) and 22 CFR 126.17(d)) and to the United Kingdom Ministry of Defence (22 CFR 126.17(h)(7)). Only the British section bars articles on the European Union Dual Use List from treaty export (22 CFR 126.17(g)(8)). Markings differ too. Australian treaty items read "REL AUS and USA Treaty Community" (22 CFR 126.16(j)(1)). British ones read "REL USA and GBR Treaty Community" (22 CFR 126.17(j)(1)). Moving items once exported is covered in moving items within a treaty community.

Key terms

Approved community	The American and partner communities together, among which treaty items may move.
Partner community	Partner government authorities and listed non-governmental entities and facilities.
Authorized end use	One of the four uses the treaty names, identified publicly, in writing or by contract.
Restricted USML	The minimum marking for unclassified items exported under a treaty.
Milestone B	The Defense Department approval a developmental system needs before treaty export.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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