The 1999 U.S. International Traffic in Arms Regulations (ITAR) authorizes the president to control the export and import of defense-related articles and services such as software, integrated circuits, computers, electronics and security-related information systems that can be vital for satellites and launch vehicle technologies. U.S. manufacturers also have internal ITAR compliance programs. But has increased ITAR scrutiny of U.S. exports helped international companies close the technology gap and compete better in the marketplace, and will U.S. companies find themselves squeezed out of some markets in the future?

ITAR is intended to protect U.S. national security interests, but have the regulations instead indirectly created threats by forcing other countries to develop technology they used to buy from the United States? ITAR "was helpful at one time, but as you do things with good intentions, you get unexpected consequences," says Rick Fleeter, president and CEO of small satellite manufacturer AeroAstro, a business unit of Radyne Corp. "Those unexpected consequences are that people have decided that we better learn to do this on our own because we can not rely on that [U.S.] supplier…. What ITAR has done is to develop a highly capable industry outside the United States. No one thought the results would be to teach other countries to do what we used to be uniquely able to do. It would have been better if we had been a more open supplier. Nobody would have developed their own star tracker or their own radios or their own piece of equipment. Everyone has learned.

"… I think that ‘ITAR-free’ is reasonable if you are an indigenous business trying to grow a business. Since we are now in a global economy, ITAR does not have any effect anymore," says Fleeter.

Creating Competition

U.S. manufacturers have had little time to prepare for the competition they are facing today from the European Union and China. According to the Satellite Industry Association, in 2000, the global market share for U.S. manufacturers was 61 percent. In 2005, the market share for satellite manufacturers had fallen to 41 percent. "Space-based technology is inherently a global business," says Kent Bossart, director of trade compliance for Intelsat. "Current ITAR controls make solidifying such global contracts a challenge, ultimately resulting in business loss. While the satellite industry certainly supports the national security objectives of U.S. technology transfer controls, the objectives of the ITAR would benefit from a re-calibration of these controls with respect to U.S. allies and trade in satellite-related hardware that is widely available overseas."

Nigel Doran, vice president of engineering and quality for Canada’s Com Dev, says, "Before ITAR and before commercial satellites were moved from the [U.S.] Commerce Department to the State Department, we did buy a lot of U.S. material. Now with ITAR we have reduced our dependence on the U.S. supply chain simply because of the catch-all of anything specially modified or designed applications falls under ITAR." Even when the technology can be exported, the delays that sometimes occur while awaiting approval do not make business sense, he says. "The delays in getting licenses are unacceptable…. For example, the typical project time for filters going on a spacecraft is 10 to 12 months. Switches are less than that. For a three-month delay to get a license for a connector is just too long."

The problems associated with ITAR have had a tremendous impact on second- and third-tier companies and also is affecting primary manufacturers. "The Europeans have aligned themselves with Russian, Chinese and Indian companies to lower their satellite component costs. This is more difficult for U.S. companies to do because of ITAR restrictions," says Pat DeWitt, CEO of Space Systems/Loral. "… It is a matter of record that the technologies used in U.S.-built commercial satellites are used throughout the world…. ITAR regulations are there to protect the more sophisticated technologies that normally do not pertain to commercial programs. However, ITAR regulations still serve as a filter. If we had something sophisticated like dual-use or military technology on board, the filter would require us to coordinate with the State Department in order to ensure protection of U.S. interests."

Promoting Redundancy

Some products that fall under ITAR regulations also are readily available around the globe as commercial-off-the-shelf technologies. For example, traveling wave tubes and traveling wave tube amplifiers manufactured by CPI of Palo Alto, Calif., which employs an ultra-secure ITAR compliance process. However, these ITAR-restricted products are readily available from Thales Alenia Space and EADS Astrium.

One of the prime examples of the unintended consequence of ITAR is Europe’s ITAR-free spacecraft. The spacecraft, developed by Thales Alenia Space and partially funded by the European Space Agency and CNES, the French space agency, is intended to provide customers with a satellite that is free of ITAR components and can be launched on Chinese Long March rockets. The satellite is a modified version of the Thales Spacebus 4000 communications satellite, which includes U.S. parts and technologies. Indosat’s Palapa-D satellite, under construction at Thales Alenia Space, will be ITAR-free so it can be launched on a Chinese Long March rocket in 2009.

"Before ITAR and before commercial satellites were moved from the [U.S.] Commerce Department to the State Department, we did buy a lot of U.S. material. Now with ITAR we have reduced our dependence on the U.S. supply chain […] The delays in getting licenses are unacceptable." — Doran, Com Dev

Without ITAR restrictions, Thales Alenia Space is free to develop China’s market without interference or competition, a development that can hurt both U.S. prime manufacturers and their subcontractors. "U.S. satellite manufacturers suffer commercially because the U.S. satellites cannot be launched by cheaper Chinese launch vehicles due to ITAR," says Eui Koh, president of ProtoStar Asia. "This may sway Asian operators to select European satellite manufactures to go along with Chinese launcher to make [it] commercially attractive compared to U.S. satellites and U.S. launch vehicles," he says.

The European satellites are more expensive than U.S.-built spacecraft, but "customers are willing to pay for ITAR-free at the spacecraft level and one of the realities is that the European primes have written [ITAR-free] into their contracts," says Doran….What that means in practical terms is that none of the European primes want ITAR material, and they will penalize a supplier if the supplier uses ITAR material if it impacts their program. Many of the satellite operators are non-U.S., [so] U.S. satellite manufacturers are in a terrible box. The only solution is that the ITAR regulations need to be revised to remove commercial communication satellites from the control of the U.S. State Department and push it back to the U.S. Department of Commerce," he says.

"The greatest concern that I have is that foreign satellite manufacturers have the ability to take advantage of the low-cost Long March launch vehicle from China. I just want a level playing field with my competitors for getting access to space," says DeWitt.

Europeans, spurred on by ITAR-free components and satellites, also are preparing to gain market share from U.S. component and satellite manufacturers by developing their own manufacturing base as well as one in China. China is now solidly in the global satellite and launch business and will become an aggressive competitor to U.S. manufacturers by supplying components, subsystems and systems to European countries willing to do business with them. "The Chinese suppliers have truly become world-class suppliers," says John Bruns, vice president of China operations for Boeing.

But not everyone sees ITAR as the main issue hampering U.S. manufacturers. "I have been in this business for 23 years and can speak from first-hand experience — ITAR is not at the root of any levels of competition in our industry, especially for launchers or spacecraft," says Rob Peckham, the former president and general manager of Sea Launch. "I would state that in only a small percentage of cases ITAR has had any significant impact on the numbers of spacecraft units or revenue figures. ITAR just does not have a significant impact. After all, it is the customer’s decision. I don’t see that compliance is bad at all. At Sea Launch we have learned to work with ITAR as we operate in so many cultures and foreign nations. We all work together in a seamless manner," he says.

"Lockheed Martin supports a U.S. export control regime that is rigorous, efficient, predictable and transparent," says Dee Valleras, spokeswoman for Lockheed Martin Commercial Space Systems. "While we believe current U.S. policies and procedures would benefit from further modernization, we continue to successfully manage compliance with applicable export controls, which enables us to be competitive in international markets. As an example, we recently won a contract in a highly competitive environment to build Vinasat-1, Vietnam’s first telecommunications satellite." The spacecraft was placed in orbit in April by an Ariane 5 rocket.

R&D Impact

U.S. universities have noted an impact on their work due to ITAR, as international students are having a more difficult time coming to the United States to study and do research. Professor Bob Twiggs, a professor at Stanford University’s Space Systems Development Lab, says "ITAR is driving research out of the United States, isolating the United States and causing markets to be developed outside of the United States. Foreign students who are at the cutting edge of GPS, electronics, control systems and rocket systems can not do research in the United States," he says. "The best way to do technology transfer is to allow a graduate foreign engineering student to go back home."

But this loss for U.S. universities does not directly result in a benefit for international institutions, says, John Jørgensen, a professor at the Danish Technical University, Danish National Space Center. "The consequences of the ITAR rules can clearly be singled out in the research we entertain," he says. "Being an institution that collaborates on and develops methods and instruments for international research satellites as well as performing the fundamental research in the measurements and results from space, we feel the unexpected consequences from ITAR…. The most significant effects are delays and manpower losses, conception and design of future missions. ITAR also hinders having an exchange of engineering and system ideas. The core problem here is, that a free and constructive discussion of possibilities never comes up in peer meetings between U.S. and non-U.S. experts, since the discussion naturally will have many potential ITAR issues. Our experience is that very often, less than optimal solutions are arrived at since the true potential of a technology is not realized because it is not discussed. But probably far worse is the effect from new science and improved missions not being promoted due to the lack of communication between the relevant centers of expertise, as not all of these are U.S. based."

Level the Playing Field

"It is clear that modernization of an outdated and overburdened U.S. export control system is essential to safeguarding America’s national security and promoting economic growth and global industrial competitiveness," says Joanne Maguire, executive vice president, Lockheed Martin Space Systems Co. "Specifically, we would like the government to revisit the licensing process for commercial communications satellite exports, presently under State Department jurisdiction. A recent CSIS report concluded that current export controls are adversely affecting the U.S. space industrial base. Ideally, we believe Congress should return to the executive branch the authority to decide how communications satellites should be licensed — authority it has with respect to all other technologies."

According to Dave Wendling, vice president of space systems at Telesat, "ITAR controls appear specifically designed for items uniquely suited for military applications — not a good fit for commercial communications satellites and related technology. The solution — known to everyone in industry and discussed in numerous articles — is to remove the controls on standard commercial satellites," he says.

ITAR, as it stands now, no longer provides economic or security assurances. U.S. and international industry leaders must realize that staying with the status quo will no longer work. In regards to ITAR, it is time for a clear shift in awareness.