Satellite Export Reform Moves Forward

By | February 1, 2013 | Via Satellite

Satellite technology export controls took a long step forward to rationalization as Congress passed, and President Obama signed into law on January 3, the fiscal year 2013 National Defense Authorization Act (NDAA), which returns authority to the President to determine technology export control requirements for commercial satellites and their subsystems.

U.S. satellite manufacturers have been hampered by the International Traffic in Arms Regulations (ITAR) of the U.S. Department of State Directorate of Defense Trade Controls, which impose civil and criminal penalties on the export, without an export license, of certain technologies, deemed to be vital to national security or anti-terrorism measures, and including virtually all satellite technology. The result has been to treat most commercial satellite technology as having military-level sensitivity, crippling the ability of U.S. suppliers to sell satellites and subsystems to non-U.S. customers. In many cases, the proscribed technology is readily available from non-U.S. sources and is not militarily sensitive at all, in any common-sense meaning of the phrase.

The current regime arose as a result of the October 1998 NDAA, which required the Clinton Administration to shift control of communications satellites and related technology exports from the Commerce Department to the State Department, thereby supposedly tightening control of technology transfers. While the Commerce Department is more concerned with business and trade development, the State Department, by law, considers only security issues when reviewing technology exports. Thus, communications satellites and launch vehicles are currently subject to ITAR and are listed on ITAR’s “Munitions List”.

The strict manner in which the State Department administers the regime was exacerbated as a result of the January 3, 1999 Report of the Select Committee of the U.S. House of Representatives (the Cox Report), which charged the People’s Republic of China with engaging in a systematic campaign of espionage to appropriate U.S. missile and thermonuclear weapon technology. According to the Cox Report, part of the Chinese campaign occurred when two U.S. satellite manufacturers analyzed three launch failures involving Chinese-manufactured Long March rockets and satellites manufactured by the U.S. companies, and recommended improvements to the rockets without required State Department export licenses and in violation of ITAR. The Cox Report stated that the assistance given by the two U.S. companies had applications to ballistic missile launchings. The subjugation of commercial satellite technology to the ITAR regime has persisted in the post 9/11 environment as well as a hard line towards China shared by a rare coalition of Congressional Democrats and Republicans.

Signs of possible liberalization of the treatment of satellite technology exports began after the start of the Obama Administration. In December 2009, following House of Representatives action to give the Administration authority to remove communications satellites from the Munitions List and an interagency review of the rules governing export of unclassified military and military/civilian dual-use technologies, President Obama directed the Administration to recommend legislative and regulatory steps necessary for a wholesale overhaul of the export control regime. The Presidential directive followed a move by the Administration to shift delegated authority for certification to Congress that any export of missile equipment or technology to China does not “measurably improve” China’s space technology from the State Department back to the Commerce Department. The December Congressional action restoral of authority to the President will, in practice, allow most commercial satellite technology to be moved back to the Commerce Control List (CCL) of the Export Administration Regulations (EAR) of the U.S. Department of Commerce Bureau of Industry and Security. This is a more relaxed regime than ITAR, but considered robust enough to govern the export of technologies such as software encryption, microorganisms and toxins.

The economic crisis and reduction in U.S. defense spending have played a role in the Government’s willingness to loosen the ITAR regime as pertaining to satellite technology. Industry associations have estimated that U.S. industry’s share of the market has decreased from 65 percent to 30 percent since 1999, and lost as much as $21 billion in satellite revenue and 9,000 jobs between 1999 and 2009. The national security space budget is projected to decrease by 20-25 percent next year. Review of this well-intentioned but ill-guided brake on the U.S. satellite sector’s activity is overdue, but welcome nonetheless.
 

Owen D. Kurtin is the founding member of New York City-based law firm Kurtin PLLC and a founder and principal of private investment firm The Vinland Group LLC. He may be reached at okurtin@kurtinlaw.com.

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