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U.S. Department of Transportation

FEDERAL AVIATION

ADMINISTRATION

NOTICE OF PROPOSED RULEMAKING REGULATORY 

EVALUATION

[CFR Part 440 Waivers of Claims]

OFFICE OF AVIATION POLICY AND PLANS

ECONOMIC ANALYSIS DIVISION

Carole Gaelick

June 2014
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Table of Contents

I. Introduction/Discussion of the Proposed Rule .............................................................................4

II. Assumptions................................................................................................................................6

III. Cost Savings...............................................................................................................................7

IV. Costs ........................................................................................................................................12

IV. Net Benefits.............................................................................................................................14
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Executive Summary

This proposed rule would amend the Code of Federal regulations to be less 

burdensome for those entities signing a reciprocal cross-waiver of claims agreement,

including commercial space launch licensees and permittees, the U. S. Government, and 

the customers who fly payloads on the launches. The rule would amend 14 CFR part 440 

in the following ways:

1. Incorporate the reciprocal waivers of claims requirements into the regulatory text.

2. The only customers who would have to sign the cross-waiver with the 

Government and the licensee or permittee would be those who are in a direct

contractual relationship with a licensee or permittee (i.e., first-tier customers).

Currently, all customers to the launch are required to sign the cross-waiver with 

the government and the licensee or permittee. The responsibility to implement a 

waiver of claims agreement with customers not in a direct contractual relationship 

with the licensee or permittee would shift from the licensee or permittee to the

appropriate first-tier customer.

3. Customers would waive claims against all customers involved in the launch or reentry including those signing a different set of cross-waivers. Currently, if a 

customer is added to the launch after the cross-waiver has been signed all parties 

have to sign again.

4. The FAA would add a template to Appendix C to part 440, for the Waiver of 

Claims and Assumption of Responsibility for Permitted Activities with No 

Customer. Currently the only waiver of claims form in part 440 for permittees is 

for those with at least one customer.
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These changes would result in cost savings to the licensee, government and 

customers and minimal cost to the first-tier customer. Most of these cost savings would 

result because there would be no more requests from licensees that the FAA waive the 

requirement that sub-tier customers sign cross-waivers, as sub-tier customers would no 

longer be required to sign the cross-waivers.

Minimal costs would be incurred by the first-tier customers who would be 

responsible for extending the cross-waiver provisions to their customers, because they

currently do extend cross-waivers to their contractors and subcontractors.

Cost savings are presented in the table below.

I. Introduction/Discussion of the Proposed Rule

U.S. regulations require the U.S. Government, a licensee or permittee, and 

customers of a licensee or permittee to enter into a reciprocal waiver of claims agreement

(cross-waiver agreement) in order to fulfill statutory requirement. The current rule results 

in unnecessary burden for several reasons.

First, the licensee or permittee is required to obtain signatures of all customers, 

including customers of customers (sub-tier customers) on the cross-waiver agreement.

The licensee or permittee may not know the identity of all the sub-tier customers, making 
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the requirement more complex. The FAA has issued waivers to the cross-waiver 

requirement for several launches that contained payloads owned by entities such as 

NanoRacks, LLC, which arranged to carry student experiments on a locker insert to put 

into an experimental locker on board the International Space Station. NanoRacks and 

each student who placed a payload on board the NanoRacks insert qualified as customers 

under the FAA's definitions, and would therefore have had to sign the cross-waiver, if the 

FAA had not issued a waiver to the cross-waiver requirement. This proposal would no 

longer require a licensee or permittee to obtain signatures of its sub-tier customers on the 

cross-waiver. This would save the cost of the licensee or permittee having to identify its

sub-tier customers to obtain signatures, and/or the cost of obtaining a waiver to the crosswaiver requirement. Under the proposal, first-tier customers would be responsible for 

extending the cross-waiver requirements to its customers. The cost to the first-tier 

customer would be minimal, because the first-tier customer could modify existing 

templates and would already be familiar with its customers.

Second, under the current rule, when a new customer is added to the launch after 

signatures have been obtained on the cross-waiver, all the signatures have to be obtained 

again. The proposed changes to the rule language would resolve this so that a customer 

added at the last minute could sign a new and separate waiver of claims without all the 

other customers having to sign again. This would save the potential cost to the parties to 

the cross-waiver of re-signing the cross-waiver when a customer was added after the 

initial set of signatures.

Third, the Code of Federal Regulations (CFR) does not currently contain a 

template for Waiver of Claims and Assumption of Responsibility for Permitted Activities 
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with No Customer. This rule proposes to add such a template. This would save the 

permittee who has no customer the costs involved in modifying the cross-waiver 

agreement in Appendix C to pertain to a permittee with no customer.

II. Assumptions

The following assumptions apply to the analysis.

 Ten year time horizon

 2013 dollars

 Without the rule the FAA would issue 4 partial waivers to the reciprocal cross 

waiver requirement per year

 Without the rule the licensee would have to obtain some signatures from sub-tier 

customers on launches unless waivers have been issued; however, the costs of 

obtaining these signatures have not been quantified

 Slight discrepancies in tables are due to rounding 

 The following wage rates are used in the calculations:
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The proposal would amend the CFR in three ways that would lead to cost savings as 

discussed below.

III. Cost Savings

The proposed rule would provide cost relief to launch operators, customers and the 

Federal Government. These cost savings are estimated in this section.

1. Amend § 440.17 and appendices B and C so that any customer not contracting 

directly with a licensee or permittee would not have to sign a waiver directly with 

the licensee or permittee or the FAA.

Six times in the last year and a half, upon request from the licensee, the FAA has 

waived, in part, the requirement that a launch operator enter into a reciprocal waiver of 
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claims with each customer. Three of these waivers have been issued to SpaceX and three 

to Orbital Sciences, Corp. (OSC) for missions in which NASA is a customer. 

While avoiding the cost that would be incurred by the licensee in obtaining all the 

customers’ signatures, the process of obtaining this waiver from the FAA has added cost

for the government (both NASA and the FAA) and the licensee. Assuming the FAA 

would issue waivers at the same rate without the proposal that it is currently issuing them 

(6 every year and a half), then 4 waivers would be issued per year in the future. In the 

past, it has taken FAA staff 11 to 52 hours to review and grant a request for waivers 

received from launch operators. NASA spends 10 to 20 hours compiling materials and 

preparing a letter to send to the licensee confirming that NASA has agreements in place 

with all of its customers that conform to NASA’s cross-waiver requirements in 14 CFR 

1266. The table below indicates the hours spent and the associated wage rates by the 

government in the waiver process and the table following that shows total government 

costs.
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Companies provided cost estimates to request the FAA waive cross-waiver

requirements with all customers. Three waivers have been issued to SpaceX and three to 

OSC by the date of this writing. One company provided estimates for the hours used the 

first time it was issued a waiver, then for a stand-alone mission and for several missions 
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under CRS. The estimated hours used to obtain a waiver for the several missions was the 

lowest and to be conservative we used this in our average. We have weighted each 

company’s response by 50%. The table below indicates the average estimated cost (50 

hours) the industry incurs when obtaining a waiver from the FAA. At a burdened hourly

rate of $68.14 the total cost per waiver is $3,407 (50 times $68.14). The FAA calls for 

comment.

For some missions, licensees may obtain signatures of sub-tier customers on the 

cross-waiver. Based on discussion with a launch operator, we estimate that on average 

operators spend about 100 hours per mission on this task. At a weighted wage rate of 

$68.14 per hour, this would result in $6,814 cost per mission. Based on feedback 

provided by this launch operator, we are aware that there have been at least 5 launches 1

over the past 20 years where sub-tier customers have had to sign waivers. If we make the 

conservative assumption that this trend would continue, we estimate that launch operators 

would save the cost of obtaining signatures for sub-tier customers on an average of 0.25 

 

1 This represents only the one launch operator. Without the proposed rule, the number of launches where sub-tier 

customers would sign the cross-waiver would likely exceed 0.25 per year.
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launches per year. This would result in cost savings of $1,704 per year (or $17,035 over 

ten years).

The FAA calls for comment how much the licensee might save by no longer 

obtaining signatures of sub-tier customers.

2. Amend the CFR to so that customers that sign a cross-waiver waive claims 

against all other customers involved in the licensed activity, including customers 

signing a separate cross-waiver. 

Under the CFR, if a new customer is added to the cross-waiver after all the 

signatures are obtained, currently all parties have to re-sign the cross-waiver with all the 

names of all the parties on the cross-waiver. The FAA proposes amending the CFR to 

allow a customer who is added later to sign a new and separate waiver of claims with the 

Government and licensee or permittee, while still waiving claims against all of the other 

customers on a launch who have signed a separate waiver of claims.

The FAA has identified that once in the past 6 years a customer was added to the 

cross-waiver after signatures were obtained. A customer was added to SpaceX Flight 
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003-D2. The original waiver contained signatures from the FAA, SpaceX and Space 

Services Inc. TAGHeuer was added and all the parties had to re-sign the waiver for the 

launch. For the reentry of the flight, only the FAA and SpaceX had to re-sign the waiver.

The FAA assumes that one instance of re-signing could be avoided over the ten year 

period following the rule publication. The FAA estimates that each re-signing entity

required 1 hour to review the new cross-waiver and re-sign. These cost savings are 

minimal and might amount to less than $400 over ten years, based on each of the 

signatories saving one hour.

3. Amend the CFR to add a template of a cross-waiver to part 440 for permittees 

with no customers to use.

A template would allow permittees with no customers to avoid the cost of 

modifying the waiver of claims form found in Appendix C to part 440 for permittees with 

customers. This would result in minimal cost savings.

IV. Costs

Although the proposal would no longer require signatures of sub-tier customers on 

cross-waiver agreements with the licensee or permittee and the government, all customers 

would still have to enter into a waiver of claims agreement. The responsibility to 

implement cross-waivers with customers who are not in a direct contractual relationship 

(i.e., sub-tier customers) with the licensee or permittee would shift under the proposal, 

from the licensee or permittee to the appropriate first-tier customer. Additionally, under 

the proposal, first-tier customers would have to indemnify other parties to the crosswaiver and their respective entities against claims its customers might bring were it not to 

extend the cross-waiver requirements correctly. So rather than the licensee or permittee 
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obtaining signatures of sub-tier customers on the cross-waiver, the first-tier customer 

would have to implement a cross-waiver with its customers (the sub-tier customer). This 

would be a new requirement on the first-tier customer.

The FAA expects the costs the first-tier customer would incur would be minimal 

because the first-tier customer could modify the templates provided in Appendices B and 

C to part 440 and add it to the contract that it has with its customers. Furthermore, 

customers are all currently required to extend the FAA cross-waiver obligations to their 

respective contractors and subcontractors.

The hourly burdened wage rate for a lawyer is $92.39, based on Bureau of Labor 

Statistics 2including a 17% employee benefit factor. Estimating that a lawyer would 

spend two hours to add cross-waiver provisions to the contract template, the cost would 

be $185 for each sub-tier customer.

The FAA does not know how many first-tier customers would extend cross-waiver 

requirements to their customers because we do not know how many first-tier customers 

fly hosted payloads. The only entities that the FAA is aware of currently that fly hosted 

payloads are NASA and the Air Force although we understand companies such as 

SpaceFlight, Inc. may have future plans to fly hosted payloads. The FAA calls for 

comment on the cost estimates and on how many first-tier customers fly hosted payloads

and how many sub-tier customers are expected on each launch.

Some licensees, customers and the U.S. Government may also have to modify

verbiage on templates used to extend cross-waiver obligations to their contractors and 

subcontractors to account for the new language. The FAA calls for comments.

 

2 Lawyers, Occupation Code, 231011, http://www.bls.gov/oes/2013/may/naics4_551100.htm
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IV. Net Benefits

The proposal would result in cost savings to government and industry as indicated 

below and minimal costs to first-tier customers.

Note: Totals may not add due to rounding error.