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National Defense > Blog > Posts > Satellite Industry Wary as Export Reforms Enter Final Leg
Satellite Industry Wary as Export Reforms Enter Final Leg
By Sandra I. Erwin


Global Positioning System III Satellite

After a 12-Year wait, U.S. satellite manufacturers could soon be able to sell spacecraft and other space technologies in the international market under a less restrictive export-control regime.

At the Satellite 2013 industry trade show this week in Washington, D.C., administration officials sought to reassure manufacturers that relief from ITAR is only months away, but cautioned that there are still potential roadblocks in the way.

Since 1999, exports of communications and lower-performing imagery satellites have been subject to the same stringent licensing requirements that govern sales of military weaponry.

The new rules would apply to spacecraft as well as the individual pieces that make up a satellite. The average military satellite has about 700,000 components.

The Obama administration expects to unveil revised rules next month that are intended to remove these items from the U.S. munitions list so they can be treated as dual-use products that would not be subject to the International Traffic in Arms Regulations. Export licenses for ITAR-restricted items are overseen by the State Department, whereas dual-use technologies fall under the Commerce Department. The new rules would also propose a new category of export licensing, known as “strategic trade authorization,” or STA, that would ease licensing requirements for 36 allied countries.

Satellite manufacturers for years have sought these reforms, claiming the restrictions have put U.S. firms at a disadvantage in the international market. Other nations have been able to sell comparable technologies without subjecting buyers to the onerous ITAR regime. Controls on satellite exports began when President Clinton signed into law in the fiscal year 1999 National Defense Authorization Act. Congress passed the legislation after it was reported that U.S. engineers employed by satellite manufacturers shared technical details with Chinese customers that potentially could be have been transferred to the Chinese government’s rocket program.

The 2013 NDAA repeals the 1999 law that requires satellites be treated as munitions. The new legislation has been cheered by industry groups, although there are still concerns that Congress will push back on some of the administration’s proposals, and that partisan gridlock could delay the implementation.

The administration will publish a proposed draft rule in April, and will allow 45 days for public comments, said Anthony M. Dearth, chief of special projects at the State Department's office of defense trade controls. There will be no big surprises in this rule, as it will largely reiterate the recommendations that the administration unveiled a year ago in the so-called 1248 report, Dearth told industry executives at Satellite 2013.

The report calls for satellites to be removed from the munitions list to help boost industry competitiveness. It also asserts that shifting oversight of satellite exports to the Commerce Department will not pose risks to national security.

“If you’re looking forward to a new rule, start looking at the 1248 report,” Dearth said. “It will look substantially the same, with a few nuanced differences.”

He urged industry representatives to participate in the 45-day comment period, and suggested that the administration is looking for positive reinforcement from satellite makers. “We need to counterbalance naysayers out there,” he said.

After the comment period, the administration will offer a final rule that will be submitted for interagency review. The next step, and arguably the toughest, will be the notifications to Congress, known as 38(f), which are required by the Arms Export Control Act. Each notification will seek congressional approval to remove items from the munitions list.

“We have told the Hill we are not going to flood them with 38(f)s and that we will give them time to review them,” Dearth said. In today’s political climate, he noted, it is important to assure lawmakers that “we are not pulling the wool over their eyes or [engaging in] any other sneaky administration trick,” he said.

It could take six months to plow through the notification process, he said. “A lot of work that has to be done until we start receiving licenses.”

David Fite, professional staff member of the House Foreign Affairs Committee, said he is optimistic  that Congress will support 38(f) requests. “All satellites currently controlled can be removed at the discretion of the president from the munitions list, not just commercial but any satellites,” he said. The 38(f) notifications will detail exactly what he proposes to take off the list. Congress could pass a law if it doesn’t like what it sees, Fite said, “but I don’t see that happening. I don’t think there is going to be a lot of controversy about that.”

A caveat, however, is there are still powerful members who are skeptical of any change to export controls, he noted. Any potential moves by China to seize U.S. technology could be a major setback to export reforms, Fite said. “You could see another legislative effort like what started in 1998.” He advised companies to set realistic expectations. “I suggest you don’t ask for the moon,” Fite said. “Be satisfied with a glass not completely full.”

Industry executives at the satellite expo said it is too early to celebrate. "This is a major accomplishment, to get this done in this environment," said Mike Gold, director of Washington operations for Bigelow Aerospace. Exporters now have to do their part to help the administration's reforms get to the finish line. "The last  thing we need during this implementation process is some giant blunder, particularly when it comes to China, that will get the China hawks in Congress reengaged, he said. No one should forget, he said, that China is the third rail of export control reform. "If we lose sight of what we need to do in maintaining compliance both in industry and government, we can derail this thing and not get to the promised land."

It is important that industry help the administration, he said. "We need to stay positive. Industry ... A lot of people are always complaining about ITAR and don’t do a damn thing about it," he added. "If we drop the ball now when we’re so close, shame on us."

Just because the NDAA passed doesn't mean the work is done, he insisted. "It’s now more important than ever to remain engaged to finish this."

Another piece of advice for satellite suppliers is to prepare to deal with foreign customers that may still be doubtful about U.S. policies, said John Ordway, a partner at Berliner, Corcoran & Rowe. "A challenge for companies is to explain the changes to a somewhat skeptical rest of the world, especially in Europe.

Photo Credit: Lockheed Martin

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