Satellite Industry Wins Long-Fought Battle to Change Export Regime

By Stew Magnuson
While the 112th Congress at year’s end failed to permanently remove the giant ax known as sequestration, at least one sector of the defense industry is applauding lawmakers.
The National Defense Authorization Act President Barack Obama signed into law Jan. 2 included language that will move satellite components out of the most restrictive export control regime. That ended a nearly 14-year effort on the part of the U.S. space industry to reverse a law that it said hurt its competitiveness.
The law that went into effect in 1998 required that under International Traffic in Arms Regulations (ITAR), satellite products had to be uniformly regulated as munitions. This harmed the U.S. satellite industry’s international standing, dampened investment and innovation in the nation’s space manufacturing sector, and deterred training and advanced research in space technologies to the detriment of national security, according to one trade group, the Satellite Industry Association.
The bill restored the authority of the president to move satellites and related items from the United States Munitions List to the Commerce Control List. This included commercial satellites intended for the private sector. Opponents for more than a decade complained that categorizing such spacecraft as weapons made them harder to export, damaged U.S. manufacturers and sent potential customers to overseas competitors.
The stricter law was passed in 1998 in the wake of U.S. satellite manufacturer Space Systems/Loral being caught giving a Chinese launch provider technical data. It received a $20 million fine.
It may take until the end of the year before the new regulations are put in place, and authorities sort out what space-based technologies will be considered “commodities,” and which will remain too sensitive to export, Patricia Cooper, president of the association, told National Defense.
More immediately, the message that “the U.S. is not interested in being part of the international space world, that we are not able to cooperate, that we don’t trust you — that signal has been undone,” she said.
For the military, intelligence and civil space communities, which have been concerned about the strength of the space industrial base, this is welcome news.
“The space industrial base that feeds them, also feeds the commercial satellite sector,” Cooper said.
Rep. Adam Smith, D-Wash., ranking member of the House Armed Services Committee, said, “The language strikes the right balance between economics and security. It allows our satellite industry to keeps its competitive edge, while protecting information and technology vital to our national security.”
Jay Gullish, director of the space & telecommunication division at Futron, an industry consultant and market research group based in Bethesda, Md., said it is hard to  quantify the damage the law did over the past decade. Most of the evidence is anecdotal. Many second- and third-tier component suppliers went out of business or discontinued product lines. Most of them won’t be coming back.
Overseas competitors, particularly in France, grabbed some of this business, and began marketing “ITAR-free satellites.” The new law will undermine this pitch, he said.
Cooper said the last decade saw many nations entering the space realm for the first time. More will come. “This is a really powerful signal to those new entrants into the satellite and space world that the U.S. wants to supply them and do research with them,” she added.
ITAR is not going away. Cutting edge space technologies and payloads that the nation is known for will still be restricted. Many of the components on the munitions list, however, were decades old.  
Despite the outcry during the past 14 years, the prime contractors such as The Boeing Co. and Lockheed Martin Corp. made adjustments and weathered the storm quite well, Gullish added.
“We are never going to really know what the true impact of this was,” he said. Even if it was just a perception that U.S. manufacturers were harder to buy from, “perceptions matter,” Gullish said.
“What we can say is that U.S. [satellite manufacturers] are strong. They develop really good products,” he said.
Photo Credit: Boeing Co.

Topics: Business Trends, Space

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