Dealing with ITAR | Legal issues | Forum

Post edited 6:12 am – March 24, 2010 by Luke Maurits

One of CSTART's current high priorities is to take steps twoard becoming a legal entity of some kind, like a non-profit organisation.  This would let us open a bank account in the name of CSTART, have property be owned by CSTART, have people enter into contracts with CSTART, etc.  All of these are things we will have to do eventually.  CSTART's community has kindly provided us with a sizeable proportion of the money we need to do this, but before we can do it we need to decide where to incorporate ourselves.

The US seems like an obvious choice:  many of our active members are in the US, many of our future community members are likely to be from the US, and so too are many of our future financial supporters, who would appreciate their donations being tax deductable.

The big obstacle to incorporating in the US is something called ITAR.  ITAR stands for International Trade in Arms Regulations, and basically it is the law which stops US citizens from doing things like selling military secrets to China.

More precisely, it makes it illegal for any US citizen or US company to export anything on a list called the US Munitions List to any non-US citizen or company, unless they apply for a license from the government to do so (licenses are expensive!).  ITAR doesn't just apply to physical objects (ready made hand grenades), it also applies to detailed technical knowledge about those objects (like blueprints for a hand grenade).  "Export" doesn't just mean putting a physical product in a box and shipping it overseas, it means giving a physical product to a non-US citizen even if on US soil, and it also means communicating technical knowledge to non-US citizens by talking to them, or putting the knowledge on, say, a web server that can be accessed by non-US citizens (you can see where this is going).

This is relevant to CSTART because a lot of things we want to design and/or build are on the US Munitions List, including rockets (because of their obvious military application), and a lot of space travel related technology, like high precision navigation and guidance technology (which can be used to aim ICBMs at cities with precision), or heat shielding (which can keep the warhead of an ICBM intact as it falls back to Earth).

On the face of it, this seems to make running an open source space agency in the US completely impossible.  However, the truth is not so clear cut.  For one thing, there are lots of exceptions to ITAR which might work in our favour.  There is also the fact that ITAR is an extremely vague law and can't possibly be enforced to the letter, so there is perhaps some wiggle room.  Some people have expressed concern that we have already violated ITAR and our US members are now technically criminal arms dealers (personally, I doubt this).  Some people have suggested that ITAR has no bearing at all on open source internet engineeing (personally, I doubt this too).  The truth is probably somewhere in between.

It's a very important issue for CSTART to reliably figure out how big of a problem ITAR is for our plans, and what we want to do about it.  Incorporating outside the US is a possibility, but only a partial solution.  This would absolve CSTART, the legal entity, of any ITAR responsibilities, but US citizens contributing to CSTART would still be ITAR-bound.  This could scare away lots of potential contributors.  It also means that a large proportion of the internet could not make tax free deductions.  It may complicate using SpaceX launch vehicles (this would require importing physical items on the US Munitions List into the US, which is also covered by ITAR).

The CSTART community needs to invest time and effort in researching these matters: to what extent does ITAR apply to us, and how do the pros and cons of incorporating outside the US weigh up: does it do more harm than good?

This thread should be used for people to make contributions to this community discussion.  Post any exceptions, loopholes or other parts of the ITAR law that you think can help us keep CSTART's operations inside the law, post links you can find to ITAR case studies that seem relevant to us.  If you have legal qualifications or experience, let us know your thoughts on the matter.  If you are a US citizen, let us know how CSTART incorporating outside of the US might affect the likelihood of you contributing to CSTART.

The sooner we can come to a clear and informed conclusion on this matter, the sooner we can move on to the actual process of incorporating and getting on with our mission!

A note to "old time CSTARTers": I know we have discussed all this more than once before.  However, these discussions are scattered all over the place, and have not been very well researched or justified.  This thread is an attempt to get all the data and thoughts into one place and make sure we have understood them correctly: i.e. to tread the issue seriously and get it dealt with.  If you've said something on this topic before which you think is appropriate to this thread, please don't hesitate to copy and paste.

• The exact wording of ITAR (pdf)
• The exact wording of an old, out of date version of ITAR (html) – included because the pdf above can't be searched, whereas this can.  It's old, but some parts have the same wording, so the ability to search this version is still useful.

An important note on lots of space technology (you can only see this in the 2009 version of the law, not the 1997 version):

Within Category XV (Spacecraft Systems and Associated Equipment), there is a part which says:

This coverage by the United States Munitions List does not [emphasis mine] include the following unless explicitly designed or modified for military application

and then lists a number of useful things related to space-rated communication, solar power and data storage.  So it seems to me that these items are completely ITAR exempt?

Post edited 7:56 am – March 24, 2010 by Luke Maurits

On the applicability of ITAR to the OHKLA project:

Item (a) in category IV of the US Munitions List is "Rockets", so it definitely seems like ITAR has the scope to affect the OHKLA project, which is all about a rocket.

However, the term "rocket" is incredibly vague.  Surely nobody really thinks ITAR applies to the lowest class of model rockets made for hobbyists.   What does "rocket" mean, exactly?

§121.2 of ITAR is titled "Interpretations of the U.S. Munitions List and the Missile Technology Control Regime Annex" and "explain and amplify the terms used in § 121.1", which is exactly what we want to figure out exactly what "rocket" means, for ITAR purposes.

The only stuff in the interpretations section which refers to rockets is §121.16, "Missile Technology Control Regime Annex".  The definition of "rocket" given here is restricted only to those devices "capable of delivering at least a 500 kg payload to a range of at least 300 km".  If this is what "rocket" means in ITAR, then OHKLA is 100% unaffected by ITAR, because it has capacities far, far below that benchmark.  This would be great news.

However, I am hesitant to jump to this conclusion.  §121.16 is not worded the same way other interpretation sections are.  Other sections are very clear.  E.g:

Vessels of war means vessels, waterborne or submersible,

designed, modified, or equipped for military purposes, including vessels

described as developmental, "demilitarized" or decommissioned. Vessels of

war in Category VI, whether developmental, "demilitarized" and/or decommissioned

or not, include, but are not limited to, the following:

   (a) Combatant vessels.

   (1) Warships (including nuclear-powered versions):

   (i) Aircraft carriers.

   (ii) Battleships.

   (iii) Cruisers.

   (iv) Destroyers.

   (v) Frigates.

   (vi) Submarines.

(the list continues, btw, if you're interested).  This is very clear: "X means Y.  Here are some examples:  A, B, C".  The section that includes the defintion of rocket involving payload mass and ranges is not worded in this nice clear way at all.  It begins with:

Some of the items on the Missile Technology Control Regime

Annex are controlled by both the Department of Commerce on the Commodity

Control List and by the Department of State on the United States Munitions

List. To the extent an article is on the United States Munitions List, a

reference appears in parentheses listing the U.S. Munitions List category

in which it appears. The following items constitute all items on the Missile

Technology Control Regime Annex which are covered by the U.S. Munitions List:

I am not sure if it is trying to say that the definition of "rocket" for ITAR purposes is the same as the definition of "rocket" for the purposes of this other law, the Missile Technology Control Regime

Annex, (in which case, OHKLA is 100% okay and we can celebrate), or if it just trying to draw attention to the fact that some of things covered by ITAR are also covered by MTCRA (i.e. the "interpretations" section of the document is over at this point and this is just something tacked on the end).  I am particularly uneasy about the part "The following items constitute all items on the Missile

Technology Control Regime Annex which are covered by the U.S. Munitions List".  This suggests that there may be items which are on the USML (and hence covered by ITAR) but not on the MTCRA, and these items might include rockets which don't meet MTCRA's definition.

Basically, it is very confusing and unclear to me what "rocket" means for the purposes of ITAR, but it looks like it is possible it means rockets which can carry 500 kg or stuff 300 km, and if that is what it means, then the OHKLA project has nothing to fear.  Let's hope we can confirm that this is what it means.

EDIT: Very relevant, Item (a) in category IV of the USML is, in full, "Rockets (including but not limited to meteorological
and other sounding rockets)".  I don't think many meteorological rockets can carry 500 kg 300 km.  So this biases me to think that that definition is not the only kind of rocket ITAR applies to.  But if this is the case…hobby rockets are covered by ITAR?  That's absurd.  Are they excluded from ITAR by virtue of the Public Domain exceptions?  Or the general science exceptions?

antinode said:

It's worth noting that all of this has recently gone under an in depth review, with plans to announce reform by April. This means that all of this will very likely change in the next few days. The reform is intended to promote trade and eliminate unnecessary obstacles, so hopefully this will solve all of the ITAR issues. If anyone can find out exactly when this will be announced, please let us know.

EDIT: See Obama's speech on this topic from March 11th: Text and video.

This is great news, and we should definitely wait until these reforms are described in more detail before making a hard and fast decision on anything related to ITAR.  I will try not to get too excited, though, as the SpaceNews.com article makes it sound like the main reform on the space front will be related to satellites.  This is great news for the CubeSat project, but it may not make a difference to ITAR's impact on OHKLA and CLLARE.  Hopefully it will, though.  That would be excellent.

Rocket-To-The-Moon said:

Ultimately we would need the full review of a lawyer to tell us the intricacies of ITAR. Short of doing that I think that our current understanding is sufficient to make some decisions. Correct me if I am wrong, but if we incorporate outside of the US then CSTART itself won't be subject to ITAR, but members inside the US will still be under the law and their participation will be punishable (if so prosecuted). Since a large majority of the members and the funding will come from the US I think that it probably makes sense to incorporate in the US. If all of our design work is done from public domain sources then we should be good to go. Any original research work would have to be undertaken by groups offline and then published in online summaries that lack technical details.

I think that the tax benefit to our donors is worth incorporating in the US.

I am inclined to agree with pretty much everything in here.  Incorporating outside the US is a fairly poor solution to the ITAR problem because individual US contributors to CSTART are actually worse off, and we lose tax benefits for our largest expected source of donors.

So, would I be correct in thinking that most people remain in favour of a US incorporation, based on our analysis of ITAR above?

Another link to add to the pile: this page has (under the section "Export Regulations") a short list of people who have violated ITAR, claimed in court that ITAR was a restriction of their First Amendment right to free speech, and been successful in doing so.  Both cases are related to crypotgraphy, not rocketry or space technology, so perhaps the relevance to us is slim, but it shows that ITAR can in principle be contested.  Also, the wording of the ruling in these cases seems to be very clear in suggesting that any source code, regardless of subject matter, cannot be controlled under ITAR:

the computer source code is an
expressive means for the exchange of information and ideas about
computer programming . . . it is protected by the First
Amendment.

That's pretty black and white.  It should apply equally well to, e.g., source code for navigation systems.