One Nation, Over Regulated: Is ITAR Stalling the New Space Race?

From Ad Astra, Volume 17 Number 3, Winter 2005

By Jeff Foust

What do launch vehicles and satellites have in common with bombs, tanks, fighter jets, howitzers, sub- marines and land mines? At first glance the answer might be “nothing at all.” Satellites, after all, have a wide range of peaceful applications, from communications to weather forecasting, while the modern-day rockets that launch them bear little resemblance to the ballistic missiles they evolved from decades ago.

However, the United States government sees things differently. All of the items above, including satellites and launch vehicles, are considered munitions by the government, and their export is thus heavily regulated. The fairly recent inclusion of satellite technology to the list of regulated items has become a topic of contention and concern by the space industry and others, who fear that the added regulation could stifle the industry by making it difficult or impossible to work with foreign customers. These same regulations may also become a major obstacle to the development of a space tourism industry in the United States.

The cause and effect of export controls.

Under a set of laws called International Traffic in Arms Regulation (ITAR), the State Department regulates the export of weapons systems and related technologies included on the U.S. Munitions List. Any American individual, company or organization that wants to export a technology on the munitions list to anyone outside the United States—or even discuss details about such systems—has to first gain the approval of the State Department, a lengthy process. Failure to abide by ITAR can lead to significant fines and prison sentences.

While launch vehicles have traditionally been on the munitions list because of their historical association with missiles, satellites had been excluded from the list until several years ago. In the late 1990s, reports surfaced that the Chinese military had obtained advanced U.S. technologies through dealings with U.S. companies. The companies manufactured commercial satellites that were launched on Chinese rockets. In response, Congress passed legislation in 1998 that added satellite technology to the munitions list, transferring oversight of such exports from the relatively permissive Commerce Department to the far stricter State Department.

As a result. it has become far more difficult for U.S. companies to sell satellites and satellite components to customers outside the United States, even to friendly nations such as Canada and Britain. Because of this, foreign customers are turning to non-U.S. companies for alternatives to avoid the hassles of export control regulations. While satellite manufacturers are loathe to discuss particular examples of contracts won or lost because of ITAR, perhaps the most obvious effect the export control regime has had on satellites took place in April of this year with the launch of AsiaSat 6 on a Chinese Long March rocket. Alcatel Space, the French manufacturer of the commercial communications satellite, replaced all the U.S.-built components it normally used on such a spacecraft with European and other alternatives so that the satellite would not be subject to ITAR.

ITAR also affects U.S. companies seeking launch business, such as launch vehicle startup Space Exploration Technologies (SpaceX). “Right now we have the greatest difficulty just dealing with people from New Zealand, U.K. and Canada,” says SpaceX founder Elon Musk. “We really need to do something about ITAR. It is really hurting U.S. industry.”

The addition of satellite technology to the munitions list has had effects far greater than simply making it more difficult to export satellites or sell launches. The space insurance industry is particularly hard hit by ITAR since most insurers are based outside the United States. They are finding it difficult to obtain the technical information they need to make decisions on insurance policy terms and premiums. University researchers have discovered that they are subject to ITAR as well, forcing them to structure space mission collaborations with foreign colleagues in such a way that the technical details of scientific spacecraft are strictly controlled.

The one space company perhaps most affected by export controls is Sea Launch. The multinational venture features a Ukrainian rocket with a Russian upper stage, launched from a Norwegian-built converted oil platform and managed by the U.S. company Boeing. This combination of regulated technologies and international cooperation requires careful coordination of export control licenses. “I probably have a hundred active licenses, as well as a license for every launch,” says James Maser, president of Sea Launch. “I have about 10 people working full time on licenses, he adds. Its a lesson Sea Launch learned the hard way—in 1998, the company paid a $10 million fine to the State Department for improperly sharing data with its Russian and Ukrainian partners.

Concerns for space tourism

While the satellite and launch industries have become well aware of the effects and consequences of export controls, the up- and-coming space tourism industry is only now starting to grapple with the implications of ITAR. One of the first ventures to have to deal with export controls is Virgin Galactic, an offshoot of British- based Virgin Group that has contracted with Scaled Composites for a vehicle based on SpaceShipOne.

“After U.S. government technology transfer issues are clarified and addressed if deemed necessary, we hope to place a firm order for the spacecraft,” Will Whitehorn, president of Virgin Galactic, said at a Congressional hearing on space tourism in April 2005. “At this point, due to uncertainty about possible licensing requirements, we are not able to even view Scaled Composites’ designs for the commercial space vehicle.”

While well-funded companies like Virgin Galactic have the resources to deal with ITAR—the company is in the process of obtaining an export license from the State Department—it is a bigger hurdle for smaller, often cash-strapped entrepreneurial ventures. “ITAR is a royal pain for entrepreneurs,” says Chuck Lauer, director of business development for Rocketplane Limited, an Oklahoma-based company developing a suborbital reusable launch vehicle for space tourism applications. During a presentation at the Space Access ’05 conference in Phoenix in April, Lauer half-jokingly sped through a 277-slide PowerPoint presentation from the company’s recent preliminary design review for its XP vehicle. His goal: to ostensibly put the project in the public domain and thus out of the purview of ITAR, but shown at a speed far too fast for anyone to digest.

Some in the industry are concerned that, in a worst-case scenario, ITAR could greatly restrict who could fly on future space tourism vehicles. Because vehicle operators may have to share some technical information about their vehicles with passengers for safety reasons, those companies might have to get a license for every non-U.S. passenger they fly. That, some fear, could greatly restrict the number of passengers that would fly on U.S.-based vehicles, making it difficult for those companies to succeed or pushing the space tourism market overseas.

The State Department’s reaction

Could such a scenario actually happen? “The question is whether that person will have access to the technology,” says Ann Ganzer, director of the Office of Defense Trade Controls Policy, the division of the State Department that deals with export controls. “He may not, and he may not need a license to board the rocket.” However, she adds that potential tourists may want additional information and training “to fill out the space experience.” The nature of that additional information, she warns, “will constitute a licensing headache.”

Ganzer, speaking at a May 26, 2005 meeting of the FAA’s Commercial Space Transportation Advisory Committee (COMSTAC), defended her office from some of the criticism it has received from the industry. “It is not helpful for us to see press reports that we are not allowing something to be exported to, say, the U.K., when we have never even received their export license application,” she said. “We have not had the opportunity to say whether we would or would not approve that export, although I’m guessing we would.”

Ganzer urges companies to speak with her office early on to avoid problems down the road. “If you are interested in this area, please come and see us,” she says. “We need to work with you on these issues. We are trying to get ahead of these problems. We’re trying not to be your last-minute headache.”

Legislative solutions

While Ganzer says that her office is willing to work with space companies on export control issues, there are limits to what her office can do. “I know export controls on satellites are not very popular with many of you, but this is mandated by law,” she says. “This is written into law, and it is not something the State Department can change. It can only be changed by the Congress.”

There are signs that some members of Congress are willing to address this issue. Congressman Dana Rohrabacher, a longtime proponent of the commercial space industry, has proposed what he called a “two-tier approach,” one that would treat exports to allied countries in a more expeditious manner than under the current system, where all nations are treated the same. Congressman Ken Calvert, the current chairman of the House Science Committee’s space subcommittee as well as a member of the House Armed Services Committee, said at the April space tourism hearing that he will work with Rohrabacher and others to find “some streamlining to make this process work.”

However, that process is unlikely to be completed any time soon. “We are really just coming up to a basic understanding of ITAR on our committee,” says House Science Committee counsel Tim Hughes. “It is now on our radar screens; it wasn’t before. It is the next hurdle over which we have to jump.”

Without changes, some caution that the bright future that space tourism and other new commercial space markets promise could be dimmed. Mike Gold, chief counsel of inflatable space habitat developer Bigelow Aerospace, noted that his company has already had to deal with ITAR as the company plans to launch sub- scale versions of its modules on Russian launch vehicles starting next year. If we don’t enact some simple commonsense changes to ITAR, then probably none of this will ever come to fruition,” he warns. “No Virgin Galactic, no Bigelow Aerospace; nothing.”

In the meantime, though, companies will have to deal with the current export control regime, as onerous as they feel it is. “It’s a critical success factor,” says Sea Launch’s Maser, explaining why his company spends so many resources on export control. “Without licenses I’m out of business.”

Jeff Foust is a launch industry analyst with the Futron Corporation of Bethesda, Maryland, and publisher of The Space Review, a weekly online space publication, and of, a space news aggregator. He also operates the Space Politics weblog.