Profile | John A. Ordway, Partner, Berliner, Corcoran & Rowe LLP
The U.S. government in 1999 decided that satellites and most satellite components should be classed as weapons covered by the U.S. Munitions List and subject to stricter State Department review rather than the previous, more export-friendly Commerce Department regulations.
Satellites and many other systems intended for use in space have now spent more than a decade in the munitions category covered by the International Traffic in Arms Regulations, ITAR. During that time, even some of the authors of the more restrictive policy have regretted how the rules have been applied, agreeing that forcing ITAR status on all space systems does more harm to U.S. industry than it affords protections for technology that is rightly labeled military and subject to strict export controls.
Smaller space component manufacturers say they have lost export business because they do not have the staff to navigate the ITAR minefield. Engineers from NATO allies say they have been treated as if they had Iranian passports even when performing simple due diligence on the progress of their own hardware being built in the United States.
The Obama administration wants to modify Category 15 of the U.S. Munitions List, the one dealing with spacecraft, to lower the barriers to commerce for satellite components.
The proposed modifications were published May 24 in the U.S. Register, with the State Department asking for comments by July 8.
John A. Ordway, a partner in the Washington law firm Berliner, Corcoran & Rowe LLP, has made a specialty of ITAR over the years. In an interview with SpaceNews staff writer Peter B. de Selding, Ordway was mostly — but not entirely — positive about the proposals.
What is your general assessment of the State Department’s proposed ITAR amendments?
With a few exceptions, State has done an excellent job of paring down United States Munitions List Category 15 to include only items that are clearly military. These include, for example, spacecraft specially designed to mitigate the effects of, or detect, a nuclear detonation; are anti-satellite; or have space-to-ground weapons systems.
Does the new language make clear what is ITAR-controlled and what is not in areas where doubt may remain?
To a large degree, yes. A very important improvement over the existing Category 15 is that to the maximum extent possible State has proposed to define what is controlled through specific technical parameters rather than sticking with the broadly worded current language. The new proposed wording, as one example, identifies thrusters that provide for orbit adjustment greater than a certain level of vacuum thrust.
Do you conclude that U.S. satellite component builders, including smaller companies, will find it easier to sell their products overseas with the new proposed wording?
Major beneficiaries will be U.S. systems, subsystems, component and parts manufacturers — particularly those that supply companies in NATO or European Union and certain other major non-NATO ally nations, such as Japan. It is hoped that foreign manufacturers in such nations will find corresponding benefit as well.
But to benefit fully, an exporter would need to use the Strategic Trade Authorization (STA) license exception, and this involves more than a postcard sent to the U.S. government, correct?
Yes and no. STA is an Export Administration Regulations license exception, and should by no means be confused with “no license required.” Before it can use the exception, an exporter needs to take specific required steps. The paperwork requirements for the use of an STA exception are not insubstantial. However, the exporter does not have to “touch” the U.S. government in order to use the exception.
Thus one great benefit of STA is speed — you don’t have to wait two months or so for approval of a license. The exporter can take care of the requirements for use of the STA exception on its own and then ship the product. Potential beneficiaries are, again, U.S. systems, subsystems, components, and parts manufacturers — and foreign manufacturers that use such U.S. items.
But isn’t shipping under an STA exception possible only on condition that the exporter has previously filed for the STA exception and received a positive response?
No, the STA exception is self-executing. It eliminates any requirement for prior U.S. government approval.
What about cases of exports going from the United States to, say, Britain, and then being retransferred to France?
These re-exports will be much easier under the proposed rule changes because the STA exemption can also be used for re-exports, so there is no need to return to the U.S. government for permission prior to making such a re-export.
Non-U.S. satellite operators have had issues with ITAR restrictions on transferring information about the satellites they are buying. Are these issues dealt with?
Yes, foreign commercial communications satellite purchasers will be able to obtain more data about their satellites from U.S. manufacturers. Clearly the hope here is to reduce the number of cases in which satellite builders or operators avoid U.S.-built satellites and components because of the ITAR.
You have pointed to some specific language making clear what is ITAR-controlled, but in some cases, such as Department of Defense (DoD)-funded hosted payloads, the language leaves lots of room for interpretation, no?
Unlike most of the rest of Category 15, no technical parameters for this item are given. This leads to questions such as, how much of a given payload does DoD need to fund to meet the definition? For instance, what if DoD funded a portion of such a payload and the payload builder funded the remainder?
Let’s take an example:put a UHF payload on one of its satellites on the expectation that DoD would lease the capacity, but there was no guarantee of a deal. What is that payload’s status?
It appears that payload would not fall on the proposed Category 15 because, if I understand that one correctly, Intelsat built the payload on spec. Now, would that change if DoD said, “You build it and put it on your satellite, and we’ll lease the payload for the satellite’s full life?” This is not clear.
Spacecraft that provide “space-based logistics, assembly or servicing of any spacecraft” are also mentioned in the proposed regulations, but is it clear what these are?
This subcategory too lacks any technical parameters. But my greater concern here is that this proposed subcategory of spacecraft is overly broad. If there is no exception for commercial in-orbit refueling of communications satellites, for instance, it could stifle U.S. innovation in this area.
Here is a common scenario: A U.S.-built satellite is being prepared for launch from Europe’s Guiana Space Center in South America, which is French territory. Is everything that happens in the normal course of launch preparation covered by license exception STA?
No. State’s proposed definition of defense services says furnishing assistance, including training, in the integration of a satellite to a launch vehicle, including planning and on-site support, requires State Department authorization — regardless of the ownership or origin of the satellite or whether any technical data is used. So such a U.S.-built satellite could be exported to French Guiana using license exception STA, but the U.S. manufacturer’s assistance in integrating the satellite to a launch vehicle would require prior State Department approval.
So that would not change much from the current situation?
Is there anything in the rule changes to make it easier to launch on a commercial Russian rocket?
Yes. For instance, a foreign-built satellite with de minimis U.S. content — 25 percent or less — would no longer be subject to U.S. export control.
Non-U.S. satellite builders have complained that in the past certain satellite components not ITAR-controlled have been rendered ITAR-controlled without much advance notice. Do the modifications make that less likely given their more-precise technical definitions?
The proposed removal of the “catch all” language in Category 15(e) regarding all items specifically designed or modified for other Category 15 items should go a long way toward reducing this very real problem for foreign satellite builders.
There have been some egregious examples of ITAR overreach — for example, a parachute descent system when used on a planetary science mission. Are you confident those days are behind us?
I’m not familiar with that particular case. However, I’m confident that the proposed changes to Category 15 will focus almost exclusively on spacecraft and related commodities that have a military purpose — unless, of course, Congress believes it has reason to step back onto the field.