U.S. Regulation of the Use and Export of Unmanned Aerial Systems

March 16, 2015 Published Work
TerraLex Connections

Introduction

Recent years have seen an exponential growth in Unmanned Aerial System ("UAS") technology. The availability of UASs for ordinary consumers has grown at a similar rate, with UASs available on the Internet for as little as $300. Likewise, the commercial application for UASs has become increasingly apparent to the private sector. Insurers, for example, are increasingly interested in using UASs to access areas cut off by downed power lines or washed-out roads following natural disasters such as hurricanes or earthquakes. Oil and mining companies can use UAS technology to explore potential extraction sites or to inspect current operations. Unmanned aircraft can also provide video for promotional, security, or entertainment purposes. Major corporations have recognized consumer uses, Amazon and Google are leading well-publicized efforts to test and use UASs to deliver goods ordered online. These uses will have a broad economic impact; recent studies predict the addition over the next fifteen years of 23,000 new jobs related to UASs in the United States. Both domestic and international companies stand to benefit from this burgeoning U.S. market.

Standing in the way, however, are two regulatory schemes significantly constraining the use of UASs in the United States and their export to foreign markets.

Within the United States, the Federal Aviation Administration ("FAA") regulates national airspace. The FAA has imposed a ban on UAS operations for commercial use – unless the FAA provides an exemption. Accordingly, in order to operate a UAS in the United States for a commercial purpose, a company must obtain such an exemption from the FAA.

This has led U.S. companies to consider moving their operations overseas. However, the U.S. government regulates the export of UASs through strict regulatory schemes including the International Traffic in Arms Regulations ("ITAR"), the Export Administration Regulations ("EAR"), and the sanctions regimes overseen by the Treasury Department's Office of Foreign Assets Control ("OFAC"). This article gives a general overview of these regulatory schemes.

Commercial Use of UASs in the U.S.

Safety concerns motivate the FAA's ban on the commercial use of UASs. To address the safety issues associated with the proliferation of unmanned aircraft in U.S. airspace, the United States Congress passed the Federal Aviation Administration Modernization and Reform Act of 2012 ("Reform Act"). The goal of the Reform Act was to develop a comprehensive regulatory scheme to integrate commercial unmanned aircraft systems into the National Airspace System ("NAS"). To implement these requirements, the FAA is currently developing an approval process under which UAS operators would be required to employ specific UAS designs and safety equipment, demonstrate training and qualifications for UAS pilots, and comply with safety standards. The FAA has failed to meet its goal of implementing this new regime by 2015. The new goal is 2017.

The absence of a comprehensive regulatory regime has not stopped the FAA from enforcing a ban on the commercial use of UASs, while permitting recreational use of UASs by hobbyists (with certain limitations). The FAA has issued cease-and-desist letters to unauthorized UAS operators and even initiated enforcement proceedings against commercial parties the FAA considers to be in violation of the ban.

One such party has challenged the FAA's authority, without success. In Huerta v. Pirker, the FAA fined a UAS pilot $10,000 for recklessly flying his UAS "directly towards an individual standing on a . . . sidewalk causing the individual to take immediate evasive maneuvers" and "through a . . . tunnel containing moving vehicles." The pilot challenged the fine, arguing that the FAA had no authority to regulate the use of UASs. Ultimately, the fine was affirmed, and the FAA was found to have authority to regulate "aircraft," a flexible term intended to keep pace with rapidly changing aviation technology.

Many have objected to the FAA's ban on commercial UAS operation, noting the negative affect on the UAS industry. During Congressional hearings last summer, industry leaders and academics testified to the possibility that other countries will surpass the United States in commercial UAS use and technological development. Companies such as Google and Amazon have already started testing their drones in Australia and Canada. Academics at private universities have also opposed the FAA's ban on UAS operations, noting that the FAA's commercial ban appears to extend to research conducted by private colleges.

In response, the FAA has allowed commercial operators to apply for an exemption pursuant to Section 333 of the Reform Act.1 In evaluating these applications, the FAA focuses on whether the proposed UAS operation will pose a public danger or threaten national security. Three factors guide this analysis: (1) the UAS's size, weight, speed, and operational capability; (2) whether the UAS will be operated in close proximity to airports and populated areas; and (3) whether the UAS will be operated within visual line of sight of the operator. See Section 333(a)(1). If the FAA concludes that the UAS poses no hazard, it issues an exemption permitting specified commercial use without an airworthiness certificate.

To date, the FAA has granted sixteen exemptions in a variety of industries. Most recently, the FAA granted exemptions to a company to use UASs to film real estate for marketing purposes, and a consulting company to conduct crop reconnaissance in connection with precision agricultural operations. Other exemptions allow companies to perform operations for aerial surveying, construction site monitoring, oil rig inspections, and commercial movie production.

This recent thawing of the FAA freeze gives companies a promising alternative to ceasing all commercial operations. However, the process is not without cost. The Section 333 application requires a detailed petition and can take months to obtain. A petitioner must describe the nature of exemption sought, explain why granting the exemption would be in the public interest, and supply a summary that the FAA will publish in the Federal Register. The FAA then allows public comment on the petition. Companies or institutions seeking to take advantage of this program should engage competent counsel to guide them through the process.

U.S. Regulations Restrict the Export of UASs

As noted above, many companies are considering moving their operations to other countries to avoid strict FAA regulation of UASs. One such destination is Canada, which recently announced new regulations that will allow broad use of small UASs in Canadian airspace. The regulations allow operation of small, commercial UASs (under 2 kilograms) in unrestricted airspace without prior governmental approval. Larger UASs (up to 25 kilograms) are similarly exempt, as long as they have a maximum airspeed of 100.1 mph.

Companies looking to transport UASs – or UAS technology – across the U.S. border must navigate a challenging regulatory labyrinth. These regulatory constraints are motivated by the U.S. government's goal to prevent the proliferation of military and other sensitive technology to U.S. adversaries. Whether a company manufactures UASs for military or civil applications, it must comply with U.S. export law if it intends to be involved in exports.

The U.S. government's definition of the term "export" is broad. For example, an export occurs when technical data is transmitted outside the United States. Likewise, an export occurs when a foreign person accesses a computer database, receives an email with controlled data, or speaks to a U.S. person about controlled technology – even inside the United States. A U.S. person traveling abroad with a laptop or other electronic devices containing controlled data or software exports that data. The breadth of this definition has vast ramifications for the UAS industry, as regulations apply not only to the transfer of the UAS itself, but also to blueprints, performance data, services, or related technology and know-how.

Accordingly, any company seeking to export a UAS or UAS technology must determine whether the export requires authorization from the United States government. Authorization typically takes one of three possible forms: (1) a license from the cognizant government agency; (2) an exemption or exception to the requirement for a license; or (3) a determination that no license is required for a particular item to go to a particular person or location.

The first step is to determine if the proposed export is governed by the ITAR, which regulates the export of defense articles, including technical data, and defense services. Certain UASs and their sub-components are considered defense articles subject to the ITAR because of the sophisticated military technology they contain and, in some cases, the UAS's capacity to deliver weapons (even if that is not their intended purpose). The United States is a signatory to the Missile Technology Control Regime ("MTCR"), under which UASs are treated like missile technology and subjected to stricter controls if they have certain capabilities. As such, the United States scrutinizes license applications for UASs with certain range (300 kilometers) and payload (500 kilograms) capacities, often subjecting such license applications to a "presumption of denial," depending on the particular ability of the UAS, the ultimate end use, and the end user. In simple terms, the MTCR applies to a UAS with a 300-kilometer range, calculated as the maximum distance the UAS can fly in one direction in perfect flight conditions when fully fueled, even if the UAS loses its data link. The export of such a UAS is likely governed by the ITAR.

Even if the export of a UAS, its sub-components, and related technology is not governed by the ITAR, it might be governed by the EAR. This regulatory scheme applies to some military items and to so-called "dual use" items, and is based on the specific capabilities of the UAS and the export's destination, including the nationality of the recipient. Like the ITAR, the EAR applies to the transfer of technical information, even within the United States, to foreign nationals.

In addition, the United States Treasury Department's OFAC prohibits exports to a number of sanctioned nations, such as Sudan, Syria, North Korea, and Iran, and to certain denied persons, regardless of whether the export would require a license under the ITAR or the EAR.

This export primer provides only a snapshot of the many legal issues a UAS manufacturer must evaluate when considering an export.

Conclusion

As businesses seek to participate in the UAS global market, they must comply with FAA regulations and U.S. export law to avoid running afoul of the U.S. government. Failure to do so could result in serious consequences, including fines, cease-and-desist orders, denial of export privileges, and – in the worst cases – prison sentences. A rigorous and comprehensive compliance program is required to avoid these adverse results, in order to take advantage of the full range of opportunities the explosion in UAS technology offers.

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1 On February 15, 2015, the FAA proposed a new regulatory framework that would allow limited commercial use without prior FAA approval. The proposed regulations would allow commercial operators to fly UASs that are under 55 pounds during daylight, within the operator's line-of-sight, and below 500 feet as long as the operation does not occur "over any persons not directly involved in the operation." The regulations would also establish requirements for the operator of a UAS. The FAA is currently accepting public comment on the proposed regulations.