Proposed Bill Gives White House Discretion on Satellite Exports

by

WASHINGTON– The U.S. aerospace industry has been pushing for years to change the rules that restrict exports of satellites and satellite components, and now legislation for that change has begun to move.

Control over satellite exports could be turned over to the U.S. Commerce Department and taken away from the State Department if Congress approves a provision in the 2010 State Department Authorization Act.

The House Foreign Affairs Committee approved legislation in May that would give the executive branch the right to decide which agency controls satellite exports.

Under a law passed by Congress in 1998, all space systems and technologies – including garden variety commercial communications satellites and parts – were placed on the State Department’s Munitions List, effectively classifying them as weapons for export purposes. State Department export regulations are different and are generally considered more rigorous than export rules administered by the Commerce Department.

“The law controlling weapons exports is heavily focused on foreign policy considerations,” said aerospace expert Joel Johnson of the Teal Group consulting firm, based in Fairfax, Va. “Hence, we often don’t sell stuff to bad people,” even if the items are not militarily significant, he said.

Commerce Department export rules, on the other hand, “are focused on whether possible national security harm can be done by selling a specific commodity to a specific country,” Johnson said.

Aerospace industry officials believe it will be easier to sell satellites and satellite parts abroad under Commerce Department rules. But shifting jurisdiction over satellites from State to Commerce is far from a sure thing yet.

For one thing, Congress has not passed a State Department authorization act since 2002, although it considers one annually, a staffer on the House Foreign Affairs Committee said.

For another, although the legislation was approved by the Foreign Affairs Committee and is likely to be passed by the full House, its fate is uncertain in the Senate, according to aerospace industry officials. And even if it passes, the bill gives the administration the option to shift control over satellite exports to the Commerce Department, but does not require the move.

Nevertheless, after a decade of trying, industry officials say they are optimistic that the law will soon be changed.

“Both the Senate and the House have shown increased awareness of the limitations of the export control system,” said an industry lobbyist who asked not to be identified.

Marion Blakey, president of the Aerospace Industries Association, a lobbying group here, put it more bluntly during a House Foreign Affairs Committee hearing in April: “Current U.S. export policies threaten the U.S. space industry.”

The law transferring satellite export jurisdiction to State was passed amid allegations that China was benefiting militarily from launches of U.S. commercial satellites. Specifically, two U.S. companies whose satellites were lost in Chinese rocket failures were accused of improperly transferring sensitive technology to
China during the course of the ensuing investigations.

“Commercial satellites were lumped in with the rocket-related technology in the legislation that resulted,” Blakey said. “All parts of a commercial satellite, no matter how innocuous, are restricted as Munitions List items.”

That has proved disastrous for the U.S. satellite industry, Blakey said. “U.S. firms accounted for 73 percent of the world market for commercial satellites in 1998, the year before” the export restrictions went into effect. “By 2000, the U.S. market share dropped to 27 percent. The market is now increasingly dominated by France, Russia and the European Union,” and India is moving in, she said.

The United States “is the only country that classifies commercial communications satellites as a munition,” Blakey told the House committee.

It is questionable whether a decade of tight export controls over U.S.-made satellites and satellite components has kept such technology out of the hands of foreign rivals.

“The technology that we’re talking about is now widely available in Europe and elsewhere where it’s not controlled,” said Nancy Fischer, an international trade lawyer based in
Washington.

Continuing to restrict U.S. satellite exports “at this point is hurting our companies because [foreign satellite makers] are designing out U.S. components from their satellites,” she said. Any satellite containing U.S.-made components is subject to U.S. technology export restrictions. These restrictions effectively bar U.S. hardware from launching on Chinese rockets, for example.

Johnson suggested that the damage has already been done. “This is a perfect example of nailing the barn door shut long after the European horse is wandering about the pasture,” he said.

“A variety of nations are increasingly developing their own commercial satellite technologies that are good enough to compete with U.S. products,” Blakey added.

But changing the law would offer “at least a hope that U.S. companies would be allowed to compete,” Fischer said. And it might stop the practice of designing out U.S.-made satellite components, she said.

“We used to have such a commanding share of the marketplace,” said the lobbyist. “Now a lot of companies face competitors that didn’t exist before.

“But we still make the best products. A lot of foreign companies would buy U.S. products” if they made more available by removing State Department restrictions, he said.