Streamlined pathways for close allies

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1. Three countries, three different mechanisms

The regulations give three close partners easier access than the general licensing rules allow, but they do it in different ways. Canada has standing exemptions for many exports. Australia and the United Kingdom share a trilateral exemption with the United States. All three benefit from faster processing where a license is still needed. None of these arrangements removes the other requirements of the regulations.

2. The Canadian exemptions

Unclassified defense articles that originate in Canada may be temporarily imported into the United States and returned to Canada without a license (22 CFR 126.5(a)). In the other direction, unclassified defense articles and defense services on the list may be exported permanently or temporarily to Canada without a license in defined circumstances. They must be for end-use in Canada by federal or provincial authorities acting officially or by a Canadian-registered person, or for return to the United States (22 CFR 126.5(b)).

The exemption has carve-outs. Items listed in a supplement to part 126 are excluded, as are exports that transit third countries, and the other requirements of the regulations continue to apply (22 CFR 126.5(b)). A Canadian-registered person is defined by nationality, residency and registration under Canada’s Defence Production Act, together with certain Crown corporations listed by the Department of State.

Knowledge ends the exemption. An exporter may know that an exempt article is meant for someone other than a qualified Canadian-registered person, or for onward export other than to the United States. In that case an export license must be obtained before the transfer to Canada (22 CFR 126.5).

3. Moving articles on from Canada

Any reexport or retransfer within Canada to another end-user or end-use, or from Canada to anywhere except the United States, needs prior approval from the Directorate of Defense Trade Controls (22 CFR 126.5(d)). "Unless otherwise exempt in this subchapter, the original exporter is responsible, upon request from a Canadian-registered person, for obtaining or providing reexport/retransfer approval" (22 CFR 126.5(d)).

The route depends on the new recipient. If the transfer is to another eligible Canadian recipient that could have received the article directly under the exemption, the original American exporter may authorize it on the government’s behalf by written confirmation. Otherwise the ordinary reexport and retransfer procedure applies (22 CFR 126.5(d)). Where the original exporter is no longer available, the Canadian end-user may apply directly. Requests must carry the information required for any reexport or retransfer request, although a nontransfer and use certificate is not required (22 CFR 126.5(d)).

4. The trilateral exemption with Australia and the United Kingdom

A separate exemption covers trade among Australia, the United Kingdom and the United States. No license is required for exports, reexports, retransfers, temporary imports, defense services or brokering activities between eligible parties (22 CFR 126.7(a)). Five conditions attach (22 CFR 126.7(b)).

• The activity must be to or within the physical territory of the three countries.
• Each party must be a registered and eligible American person, a national-level or federal government department or agency of one of the three, or an Authorized User identified on the Directorate’s website.
• The article or service must not be on the supplement listing items excluded from the exemption.
• The value must not exceed the congressional certification thresholds, and the transfer must not involve manufacturing significant military equipment abroad.
• Transferors must pass on the destination control statement required for all licensed exports.

The exemption is limited to export control. "The exemption in paragraph (a) of this section does not remove other applicable U.S. statutory and regulatory requirements" (22 CFR 126.7(b)). Classified transfers by American parties must still meet the industrial security rules, and Australian and British users must meet their own national security standards.

5. Support to deployed forces

The same section adds a narrower authorization for support to the three countries’ armed forces. Reexports and retransfers among eligible parties, and temporary imports into the United States, need no license where the article was originally exported under a license or other approval (22 CFR 126.7(c) and 22 CFR 126.7(d)).

A contractor party must be under contract with one of the three armed forces and either embedded with it or operating alongside it in support. The purpose must be on-site support to those forces, or the return home of articles used in that support. The general conditions on excluded items, value and destination control still apply (22 CFR 126.7(d)).

6. Faster decisions where a license is still needed

Applications to export to Australia or the United Kingdom are processed expeditiously by the Department of State in consultation with the Department of Defense. "Such license applications will not be referred to any other Federal department or agency, except when the defense articles or defense services are classified or exceptional circumstances apply" (22 CFR 126.15(a)). The destination must be limited to those two countries. "No other country may be included as intermediary or ultimate end-user" (22 CFR 126.15(b)).

A second track extends expedited processing to Canada for exports that cannot use an exemption, where the export stays within or between the four countries and their governments or persons (22 CFR 126.15(c)). Where the application relates to a government-to-government agreement with the United States, it must to the extent practicable be approved, returned or denied within 30 days. Other applications on this track are to be reviewed within 45 calendar days. Neither deadline applies where congressional certification is required (22 CFR 126.15(d)).

7. What this means for a supplier

For work with these three partners, the first question is often which exemption applies rather than which license to seek. Each exemption has eligibility tests, item exclusions and value limits, and each keeps the destination control and reexport rules in place. Government transfers are covered separately in the government and official use exemption.

Key terms

Canadian-registered person	A Canadian national, qualifying resident or listed Crown corporation eligible to receive exempt exports.
Authorized User	An Australian or British entity listed on the Directorate’s website as eligible under the trilateral exemption.
Expedited processing	Faster handling of license applications for Australia, the United Kingdom and Canada, with set review periods.
Excluded items supplement	The supplement to part 126 listing articles and services that cannot move under these exemptions.

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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