New Export Control Rules Present Key Regulatory Changes for Space-Related Items, Activities

Vice President Kamala Harris on Dec. 20, 2023, convened the National Space Council to discuss U.S. leadership in space. The U.S. Department of State and U.S. Department of Commerce were subsequently tasked to "review relevant export controls and processes to better enable a globally competitive U.S. space industrial base while protecting our national security and foreign policy interests." In response, four rules were published on Oct. 23, 2024, to amend certain parts of the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR).

The Commerce Department's Bureau of Industry and Security (BIS) published the final rule, Export Administration Regulations: Removal of License Requirements for Certain Spacecraft and Related Items for Australia, Canada, and the United Kingdom (the EAR Final Rule), and the interim final rule, Export Administration Regulations: Revisions to Space-Related Export Controls (the EAR Interim Final Rule). It also published a proposed rule for "revisions to space-related export controls, including additions of license exception commercial space activities (CSA)" (the EAR Proposed Rule).

Further, the State Department's Directorate of Defense Trade Controls (DDTC) issued a proposed rule, International Traffic in Arms Regulations (ITAR): U.S. Munitions List (USML) Categories IV and XV (the ITAR Proposed Rule).

The EAR Final Rule became effective upon its publication in the Federal Register on Oct. 23, 2024. The EAR Interim Final Rule became effective the same day. BIS is still soliciting comments to potentially adjust the EAR Interim Final Rule based on public and industry feedback. Comments can be submitted through the federal rulemaking portal. The deadline for submitting is Nov. 22, 2024.

BIS and DDTC are also currently seeking public comments to help refine the regulatory changes described within the EAR Proposed Rule and ITAR Proposed Rule. The public comment period is open until Nov. 22, 2024. Comments can be submitted via the federal rulemaking portal, and instructions for submitting both public and confidential information are available on the site.

Key Changes Overview

EAR Final Rule

This rule eliminates license requirements for certain spacecraft and related items exported, reexported and transferred (in-country) to and within Australia, Canada and the U.K. This change aligns with the National Space Council's objective to enhance the U.S. space industry's competitiveness by easing trade restrictions with trusted allies. BIS noted that it has not denied a license application for any item affected by this rule in over five years and that these are countries with which the U.S. collaborates closely on both defense industrial base issues and space projects. Items affected include remote sensing spacecraft, spacecraft designed for space-based logistics and assembly or servicing other spacecraft (or technology required for the development, production or installation of those spacecraft), as long as the craft are destined for Australia, Canada or the U.K.

EAR Interim Final Rule

This rule reduces export control restrictions for certain lower-sensitivity space items (including related software and technology) with regard to certain U.S. allies. These changes will significantly reduce the regulatory tension for U.S. space companies with global supply chains that involve procuring parts or components from a variety of countries. Additionally, the rule reclassifies certain lower-risk items, creates exceptions for certain standards-related activities and expands license exceptions. BIS is also seeking public feedback on these updates to further refine regulatory balance.

EAR Proposed Rule

The EAR Proposed Rule proposes further alignment of EAR controls with ITAR revisions to simplify the export of space-related technologies and proposes a new license exception for commercial space activities. This exception would allow specific civil space initiatives, such as space tourism and research, while retaining security measures on sensitive components. Public comments are invited to shape these proposals for better alignment with both industry and security goals.

ITAR Proposed Rule

The DDTC's ITAR Proposed Rule updates the ITAR in several significant ways. It updates USML Categories IV and XV and makes conforming changes in other USML categories. The ITAR Proposed Rule also updates and adds a significant number of space-related definitions to the ITAR. The ITAR Proposed Rule also adds four new license exemptions to support civil space activity, namely:

• Official Space Agency Exemption. This allows transfer of certain defense articles and the furnishing of defense services within U.S. government space programs, excluding launch vehicles.
• Space Activity Exemption. This covers specific services relating to the transmission of launch vehicle telemetry, and activities undertaken in collaboration with foreign persons to operate or use on-orbit defense articles, as long as the activity is either in support of fundamental research, or is in order to geolocate certain radiofrequency transmissions "including geolocating certain automated information broadcasts, emergency transmissions, and cellular transmissions."
• Space Tourism and Research Exemption. This space tourism and research exemption is for the export, reexport and temporary import of certain manned spacecraft used in either space tourism or support of fundamental research. Registration, ownership, and control of the craft must remain with a U.S. person, and the spacecraft's flight path must be approved by the Federal Aviation Administration (FAA) or a foreign counterpart.
• Defense Articles Incorporated into EAR Spacecraft. This creates a special licensing proviso for defense articles incorporated into spacecraft subject to the EAR, fostering easier export of EAR-controlled spacecraft with embedded defense-related items.

The ITAR Proposed Rule aims to streamline exports for nonmilitary space initiatives and provide a clear path for regulatory compliance, especially in collaborative and research-based projects.

Together, these updates reflect a coordinated effort to support the U.S. space industry's international competitiveness, easing regulatory burdens on civil and allied space activities while upholding strong national security standards. The following provides a closer look at the content and changes introduced by each rule.

The EAR Final Rule

Prior to this change, a worldwide license requirement applied to exports of certain spacecraft items, including those to Australia, Canada and the U.K. With the new exemption for these trusted partners, BIS anticipates approximately 90 fewer license applications annually, reducing administrative burdens and expediting processing for exporters engaged with these nations.

Changes in License Requirements

The EAR Final Rule includes precise modifications to the License Requirement Notes for Export Control Classification Numbers (ECCNs) 9A515 and 9E515 in Supplement No. 1 to Part 774 of the Commerce Control List. These changes clarify which countries require a license for specific spacecraft and related technologies.

The EAR Final Rule revised the License Requirement Notes for ECCNs 9A515 and 9E515 on the Commerce Control List, clarifying which countries require licenses for specific spacecraft and related technologies. Previously, items under ECCN 9A515.a.1., a.2., a.3., a.4., .g, such as required worldwide licenses without using the Commerce Country Chart to determine licensing needs. The rule now exempts exports to Australia, Canada and the U.K. for these items, reducing the license requirement for these trusted allies.

Similarly, for ECCN 9E515.f., which addresses technology critical for the development and maintenance of spacecraft classified under the 9A515 subparagraphs identified above, a worldwide license was previously mandated. The revised rule now exempts technology exports to Australia, Canada and the U.K. from this requirement, promoting easier collaboration with these countries.

Related Items

• ECCN 9A515 – "Spacecraft" and Related Commodities. This category covers a range of spacecraft items, including satellites and space vehicles, as well as specific components and technologies used in space-based applications. This category includes items related to remote sensing spacecraft or spacecraft designed for space-based logistics, assembly or servicing other spacecraft

Impacted Subcategories:

• a.1, spacecraft with electro-optical remote sensing capabilities, clear aperture between 0.35 and 0.50 meters
• a.2, spacecraft with remote sensing capabilities beyond Near Infrared (NIR) into Short-Wave Infrared (SWIR), Mid-Wave Infrared (MWIR) or Long-Wave Infrared (LWIR)
• a.3, spacecraft with radar remote sensing capabilities (e.g., AESA, SAR or ISAR) in specific frequency ranges
• a.4, spacecraft for space-based logistics, assembly or servicing
• g, remote sensing components specifically designed for spacecraft in the above categories

• ECCN 9E515 – "Technology" for Spacecraft. This category covers technology that is essential for the development, production, installation, repair, overhaul or refurbishing of the spacecraft items described in ECCN 9A515.

Impacted Subcategory:

• f, technology required for the development and maintenance of the spacecraft classified in 9A515.a.1, a.2, a.3, a.4, and g

The EAR Interim Final Rule

The EAR Interim Final Rule simplifies license requirements for certain less-sensitive spacecraft components when exported to trusted U.S. allies, updated certain changes with the descriptions of specific Export Control Classification Numbers (ECCNs) under the EAR. Additionally, BIS has provided exemptions for standards development activities, facilitating U.S. participation in international standards-setting, and introduced clarifications for government space projects, offshore exports and specific exceptions for International Space Station launches, promoting regulatory clarity and easing compliance burdens.

Reduction of License Requirements

Reduced Export Controls for Less-Sensitive Spacecraft Parts. The reason for the control on parts and components specially designed for spacecraft and related software and technology classified under ECCNs 9X515.x is downgraded from National Security (NS)1 and Regional Security (RS)1 to NS2 and RS2 in the Interim Final Rule. Similar changes were made to ECCN 9A004 to align it with these new changes in 9X515, although the changes did not extend to technology and software related to 9A004 items. Under the Commerce Country Chart in Part 738, a license is not required for exports of NS2 and RS2 items for a much wider range of countries than items covered by NS1 and RS1 controls. A new 9A515.w is created and reserved, with NS1 and RS1 license requirements, to classify parts and components previously designated 9A515.x that warrant a more restrictive license requirement.

Reclassification of Low-Risk Spacecraft Items. The Interim Final Rule also moves a significant number of items previously controlled under ECCN 9A515.x to 9A515.y, pursuant to an interagency-cleared commodity classification. 9A515.y is controlled only under AT and a regional security control that requires licenses for exports to China, Russia and Venezuela. For example, spacecraft passenger exercise systems, fire suppression systems and a number of other objects, systems and facilities intended for use with manned spacecraft are reclassified. Similar carveouts were created under the extensive list of new entries in ECCN 9A004.y.

Exemptions for Standards Development Activities. Technology and software used in creating international standards for spacecraft safety no longer require a license, promoting global safety standards and reducing trade barriers.

In Section 734.10, BIS added references to software and technology under ECCNs 9D515 and 9E515 for standards-related activities. These items, crucial for commercial spacecraft safety in servicing and logistics, are exempt from license requirements in standards development activities, supporting U.S. participation in international standards and reducing risks from foreign actors in this area.

Clarifications and Refinements in Existing Controls

Expanded Export Permissions for Government Space Projects. The Interim Final Rule specifies that Space Act Agreements involving NASA meet criteria under License Exception GOV (Section 740.11), authorizing exports pursuant to these agreements. This ensures efficient collaboration in government-related space activities.

Guidance on Exports to Offshore Launch Platforms. BIS added a note in Section 744.7 clarifying that shipments to launch platforms in international waters are considered exports or reexports to the country that owns, controls or operates the platform.

Special Permission for Russian Launches to the International Space Station (ISS). BIS updated License Exception GOV to allow for exports to Russia of certain ECCN 9A004 items for launches to the ISS on short notice, provided they meet EAR requirements. This change ensures continuity in U.S. support for ISS activities while adhering to national security interests.

The EAR Proposed Rule

The EAR Proposed Rule seeks to align U.S. space-related export controls with proposed ITAR changes to Categories IV and XV of the USML. This involves updates to specific ECCNs under the EAR, broadening controls to cover additional space technologies that have shifted from ITAR oversight, ensuring appropriate regulation of both defense and commercial space items.

Additionally, the EAR Proposed Rule introduces a new License Exception CSA designed to streamline authorization for space agency programs and commercial space activities such as tourism and research. This new exception allows certain exports and reexports without a license, provided they meet specified guidelines under EAR.

Changes to Conform to ITAR Changes in Reference to USML Categories IV and XV

To conform to ITAR changes made in reference to Categories IV and XV of the USML, the Proposed Rule provides for expanding ECCNs 9A515, 9D515 and 9E515, as well as adding 9C515.

• Regarding ECCN 9A515, the Proposed Rule largely provides for an expansion of scope – namely, pursuant to the Proposed Rule ECCN 9A515 would control spacecraft that provide space-based logistics, assembly or servicing of another spacecraft, along with certain electric (Plasma/Ion) thrusters and their associated power control systems, control moment gyroscopes (CMG) "specially designed" for certain spacecraft, and certain hold-down or satellite release mechanisms (i.e., clampbands, adapters, dispensers or motorized lightbands).
• Regarding ECCN 9C515, the Proposed Rule provides for adding this ECCN to control materials no longer subject to the ITAR (i.e., certain materials, coatings and treatments for reducing in-orbit signatures of spacecraft, such as radar, optical, ultraviolet and infrared).
• Regarding ECCN 9D515, the Proposed Rule provides for adding ECCN 9D515.c to control Space Situational Awareness (SSA) analysis "software."
• Regarding ECCN 9E515, the Proposed Rule provides for adding ECCNs 9E515.g, 9E515.h and 9E515.i to control technology required for commodities controlled by new provisions in ECCN 9A515 (i.e., ECCN 9A515.i, 9A515.j and 9A515.k, respectively).

Adding a New License Exception to the EAR for Certain CSA

The EAR Proposed Rule provides adding a provision for a license exception for CSA. This new rule outlines license exceptions that permit the export or reexport of items subject to the EAR that would otherwise require a license.

The proposed license exception would cover official space agency programs, as well as space tourism and research initiatives. This License Exception is structured into three parts: 1) Scope, which defines the range of activities and items eligible under the CSA exception, 2) Exclusions, which specifies circumstances and entities excluded from this exception, such as high-risk destinations or specific hardware, and 3) Authorizations, which grants permissions for qualified activities under defined conditions.

Authorizations are outlined in paragraph (c) of the proposed license exception. Under Authorizations, (c)(1) would provide an authorization for certain "official space agency programs," and (c)(2) would provide an authorization for space tourism and research.

Authorizations under (c)(1) are available for exports, reexports and transfers (in-country) of items subject to the EAR and classified in 9x5zz or 9A004 ECCNs. Eligible "official space agency programs" are programs for formal spacecraft, independent of the launch vehicles that deliver them to orbit listed within the EAR Proposed Rule.

Authorizations under (c)(2) are available for the export, reexport or transfer (in-country) of manned spacecraft subject to the EAR classified under ECCNs 9A004 or 9A515 and "parts," "components," "accessories" and "attachments" subject to the EAR solely for use in or with such spacecraft. This authorization is limited to suborbital trajectories, and the purpose of the activity must be limited to either space tourism or supporting "fundamental research." The activity also must not transfer registration, control or ownership of the spacecraft to a foreign person, and the spacecraft's destinations, including planned diverts and contingencies, must be approved by the FAA or its foreign equivalent in all countries and must not include any destinations listed in Country Groups D:5 or E.

ITAR Proposed Rule

The ITAR Proposed Rule includes four new licensing exemptions "to promote U.S. industrial base participation in civil space activity commensurate with U.S. national security and foreign policy goals," as well as revisions to USML Categories IV (Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines) and XV (Spacecraft and Related Articles).

Civil Space-Related License Exemptions and Special Licensing Provisions

The ITAR Proposed Rule introduces three new licensing exemptions and proposes to codify a fourth existing licensing exemption, currently outlined in a note within the USML, to encourage U.S. industry involvement in civil space activities.

Official Space Agency Activities Exemption. The ITAR Proposed Rule creates an official space agency exemption for the transfer of defense articles and the furnishing of defense services "entirely within the scope of an official space agency program." The exemption applies only to NASA's Lunar Gateway, NASA's Mars Sample Return, the Nancy Grace Roman Telescope and the Orion spacecraft. It does not apply to any space launch vehicles, for the purposes of producing defense articles offshore or arranging procurement offshore, to classified defense articles or services, to commercial communications satellites launched from Russia, Ukraine or Kazakhstan, or to activities involving significant military equipment manufactured abroad. Further, it does not apply to activities of such a high value that congressional certification is required.

Certain Space Activity Exemption. The ITAR Proposed Rule includes license exemptions in four areas:

• The first provision authorizes certain transfers of defense articles and services supporting spaces launches.
• The second provision authorizes services related to space launch vehicle telemetry to enhance flight safety. This authorization is limited to space launch vehicles since similar data can be used by rockets and missiles to deliver weapons of mass destruction.
• The third provision authorizes services for collaboration with foreign persons when on-orbit defense articles are used in support of fundamental research. Under the ITAR, fundamental research is defined as basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community.
• The final provision authorizes services related to radiofrequency transmissions using on-orbit defense articles, including geolocating certain automated information broadcasts, emergency transmissions and cellular transmissions.

Space Tourism and Research Exemption. The ITAR Proposed Rule also creates a space tourism and research exemption for the export, reexport and temporary import of manned spacecraft as long as the craft are limited to suborbital trajectories and the activity's purpose is either space tourism or support of fundamental research. Registration, ownership, and control of the craft must remain with a U.S. person, and the spacecraft's flight path must be approved by the FAA or a foreign counterpart. The spacecraft may not go to destinations prohibited in Section 126.1(d). DDTC notes that the research exemption does not apply to the "engineering development phase of research and development" but to only basic and applied research.

Special Licensing Provision for Defense Articles Incorporated into Spacecraft Subject to the EAR. Finally, the ITAR Propose Rule draws from the Note to XV(e) and the Note to XV(e)(17) to create a special licensing provision for defense articles incorporated into spacecraft subject to the EAR. This provision authorizes the transfer of certain defense articles controlled by Category XV – anything listed in subsections (c), (d) or (e) – via a license from BIS, rather than DDTC, as long as the article is incorporated into a spacecraft subject to the EAR. This exemption requires that the article be an "integral part of" the EAR-regulated spacecraft, and the article must remain incorporated into the craft to remain eligible for the exemption.

USML Category Revisions

The ITAR Proposed Rule updates USML Categories IV and XV by adding new space-related defense articles and removing other space-related items "that no longer warrant designation on the USML" and are more appropriately governed by the EAR as dual-use items.

USML Category IV. The proposed revisions to USML Category IV focus on launch vehicles, guided missiles, ballistic missiles, rockets, torpedoes, bombs and mines. The definitions for these items have been updated to include specific criteria for control, such as payload capacity and propulsion types. This ensures that the definitions reflect current technological capabilities and military applications. For instance, the definitions for guided missiles and ballistic missiles now encompass advanced guidance systems and propulsion technologies. Similarly, the descriptions for rockets and torpedoes have been enhanced to ensure precise control over these items, incorporating new propulsion and guidance technologies.

New inclusions in Category IV cover advanced propulsion systems, such as hypersonic propulsion, and modern guidance and control systems that utilize artificial intelligence (AI) and machine learning. Conversely, obsolete technologies that are no longer in use have been replaced by more advanced systems. Redundant entries have also been eliminated to streamline the list and reduce complexity.

USML Category XV. The proposed revisions to USML Category XV include several significant changes. First, the coverage of Category XV is expanded to include new types of spacecraft and related technologies. This expansion encompasses spacecraft capable of noncooperative grappling or docking, moving, in-orbit construction of other defense articles, and deploying multiple other spacecraft into different orbits, as well as star trackers, along with payloads funded by the U.S. Department of Defense and specially designed parts and components therefor.

Additionally, the proposed revisions provide detailed descriptions of what constitutes controlled items within Category XV. These clarifications are intended to avoid ambiguity and ensure compliance.

Technological updates have also been made to account for the latest developments in space technology. This includes updates to spacecraft components and subsystems, among them advanced propulsion systems such as electric and nuclear propulsion, and new power systems such as advanced solar panels and nuclear power sources.

The revisions also consider international space cooperation and joint ventures. This ensures that the regulations facilitate rather than hinder such collaborations, aligning with international agreements and treaties.

New Definitions

The ITAR Proposed Rule adds definitions for a variety of space-related terms, including "spacecraft," "excluded NASA spacecraft," "spacecraft housekeeping data and output" and "amateur rocket," among others.

For example, the ITAR has defined for the first time the word "spacecraft." In the rule, "spacecraft" is defined as vehicles, satellites, and other craft designed to operate at least 100 kilometer (km) over the Earth's mean sea level. However, the definition specifically excludes objects solely intended to operate either within a spacecraft, in a spacecraft's immediate proximity for a short time or on a celestial body. It also excludes articles launched suborbitally or atmospherically from celestial bodies other than Earth and any objects described in USML Category IV. The current language of ITAR, in contrast, does not define "spacecraft" at all.

Conclusion

These new rules represent a significant step toward modernizing U.S. export controls in the space sector. They have several implications for companies involved in the space industry:

• Reduced Licensing Burdens. The EAR Final Rule exempts certain spacecraft and related items, as well as related software and technology, from licensing requirements for exports, reexports and transfers (in-country) to and within Australia, Canada and the U.K. This change reduces the number of license applications companies need to submit, streamlining the export process and lowering administrative costs.
• Enhanced Collaboration with Allies. By easing export restrictions to trusted allies, companies can more easily collaborate on international space projects. This fosters stronger partnerships and can lead to increased opportunities for joint ventures and shared technological advancements.
• Simplified Licensing Requirements. The EAR Interim Final Rule reclassifies lower-sensitivity components and provides new exemptions for international standards development activities. This simplification supports U.S. leadership in space standards and reduces the complexity of compliance for companies, allowing them to focus more on innovation and less on regulatory hurdles.
• Support for Commercial Space Activities. The EAR Proposed Rule introduces a new License Exception for Commercial Space Activities (CSA), covering space agency programs, space tourism and scientific research. This exception aims to foster growth and innovation in civil space sectors by making it easier for companies to engage in these activities without extensive licensing requirements.
• Streamlined Compliance for Civil Space Activities. The ITAR Proposed Rule adds new licensing exemptions for civil space activities and updates USML Categories IV and XV. These changes better define controlled space-related defense articles, making it easier for companies to comply with regulations while participating in space tourism, research and international collaborations.

Overall, these regulatory updates reflect a coordinated effort by State Department and Commerce Department to support the U.S. space industry's international competitiveness while maintaining strong national security standards. By reducing regulatory burdens and aligning export controls with current industry needs and national security objectives, companies can more effectively compete on a global scale. Companies should stay informed about these updates and consider how they can leverage the new regulations to enhance their operations and strategic initiatives in the space sector.

For more information on the implications of these series of rules or assistance with complying with the space-related export control regulations, please contact the authors or another member of Holland & Knight's International Trade Group.

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