Satellite Industry Applauds DOD's Sec. 1248 Report on Satellite Export Controls

The Satellite Industry Association (SIA) applauded the Department of Defense’s (DOD’s) final report on the national security implications of relaxing export control regulations on satellites.  The “sec. 1248” report was released today.

The report was prepared by DOD and the State Department in response to sec. 1248 of the FY2010 defense authorization act wherein Congress directed DOD to assess whether national security would be negatively impacted by moving satellites from the U.S. Munitions List (USML) controlled by the State Department to the dual-use Commerce Control List (CCL) administered by the Commerce Department. 

The White House issued a fact sheet summarizing the report.

The report concludes that communications satellites that do not contain classified components and remote sensing satellites with performance parameters below certain thresholds do not contain technologies unique to the United States and are not critical to national security.  Thus, they would be more appropriately designated as dual-use on the CCL list instead of on the USML.  That also applies to systems, subsystems, parts and components associated with the satellites.  At a press conference today, Deputy Assistant Secretary of Defense for Space Policy Gregory Schulte said it would move “hundreds of thousands” of components from the USML to the CCL.

U.S. satellite manufacturers have been seeking relief from the comparatively onerous export control system dictated by the USML and its associated International Traffic in Arms Regulations (ITAR) for more than a decade.  The George H.W. Bush and Clinton Administrations had moved commercial communications satellites from the USML to the CCL in the early 1990s.   Congress reversed that decision in the FY1999 defense authorization act (P.L. 105-261) after a special congressional committee determined that U.S. satellite manufacturers violated export control laws and assisted China in developing its missile technology by aiding in analysis of launch failures of Chinese rockets that were carrying U.S.-built satellites.   No U.S.-built satellites or satellites containing U.S. components have been exported to China for launch since that time. 

European companies began building satellites without U.S. components that are “ITAR-free” — not subject to the U.S. ITAR rules — and selling them to customers who do not want to deal with the U.S. export control system.  Today’s report states that the current U.S. export control regime “places the U.S. industrial base at a distinct competitive disadvantage when bidding against companies from other advanced satellite-exporting countries that have less stringent export control policies and practices.”

This report does not recommend changing how China is treated, however.  Appendix 4 of the report points out that an earlier law, P.L.  101-246, that was enacted after the 1989 Tiananmen Square uprising would remain in effect.  It prohibits launching U.S. satellites on Chinese rockets without a presidential waiver.   Such waivers were granted in the first half of the 1990s, which allowed U.S.-built satellites to be launched by China and led to the problems addressed by the 1999 law.  The so-called Tiananmen Square restrictions also prohibit export of items on the USML to China.   If this report’s recommendations are followed and hundreds of thousands of items are transferred from the USML to the CCL, that restriction might no longer apply.  However, the report calls for changes to the CCL, too.   It recommends prohibiting items on the CCL from being transferred to any “embargoed country,” a category that includes China, Syria, North Korea and others.

Some influential members of Congress remain adamantly opposed to allowing transfer of any satellite technology to China, so that recommendation may assuage those concerns.  The anti-China sentiment is quite strong with some Members, however, as illustrated by Rep. Frank Wolf’s (R-VA) long standing opposition to any U.S.-Chinese space cooperation.

SIA, a U.S.-based trade association for the commercial satellite industry, hailed the report.   SIA President Patricia Cooper said it represents “a more contemporary picture of the national security, space and satellite environments.”   She added that SIA and its members hope Congress will pass H.R. 3288, an export control reform bill sponsored by Rep. Howard Berman (D-CA) that contains provisions similar to what is recommended in the report.

Congressional action is needed because the FY1999 defense authorization act removed presidential authority to decide how to regulate satellite exports.  It requires that satellites, their components, associated technical data and related ground equipment be treated as munitions.    The report and the SIA both point out that the satellite industry is the only sector where Congress has mandated export policy by law.   “Space-related items, even if they have civilian applications, are the only dual-use items that are required by law to be controlled as defense articles,” the report states, while the President has the authority to determine which set of export regulations govern any other sector. 

Schulte said today he believes the approach recommended in the report will strengthen U.S. national security “by energizing the industrial base” and allowing U.S. companies to better compete globally.  He is hopeful that Congress will agree.   He and Lou Ann McFadden, Chief of the Strategic Issues Division at the Defense Technology Security Administration (DTSA), stressed that by removing these items from the USML, the government can focus on preventing the transfer of technologies that really could affect national security.

McFadden expressed frustration that DTSA is required by law to sit in on meetings with companies that over the past 15 years have demonstrated a “culture of compliance” with the current export control laws.  “We are frustrated that we have to be present at low risk activities when there are high risk activities we want to monitor,” she said.  “We’re forced to monitor the same people over and over on the same activities.”  Instead, she believes they should be focusing on helping new companies, for example, “get off on the right foot” in understanding and complying with export controls.