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Boeing 702 illustration
With the publication of a final rule earlier this month, commercial satellite like the Boeing 702HP (above) and related components will no longer be controlled by ITAR as of November. (credit: Boeing)

Export control reform (almost) reaches the finish line


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For more than a decade, the space industry in the US has been fighting for export control reform. A provision of the fiscal year 1999 defense authorization bill moved satellites and related items from the Commerce Control List to the US Munitions List (USML), placing them under the jurisdiction of the more restrictive International Traffic in Arms Regulations (ITAR). That, in turn, made it more difficult for US companies to export those items, even to close allies and even as similar items became widely available outside the US.

These vehicles have the ability to deliver weapons of mass destruction, and they have the capability to come in very close proximity to national assets in space, and that close proximity can lead to some anti-satellite capabilities,” explained McFadden on why human-rated vehicles remain on the USML.

That fight for export control reform is now largely over, and largely won by the industry. Earlier this month, the State Department issued its “interim final rule” for Category XV of the USML, moving many of those commercial satellites and related items off the list and back to the Commerce Department’s list. However, the industry didn’t get all of the reform it wanted, and there remains some unfinished business regarding both export control reform and industry’s adaptation to a new way of doing business.

Tweaking the draft rule

The interim final rule, published May 13 in the Federal Register, was not particularly different from the draft rule published nearly one year earlier (see “Sweating the small stuff in space policy”, The Space Review, December 16, 2013). That draft rule proposed taking most commercial satellites and components for them off the USML and onto the Commerce Control List (CCL), and thus no longer under the jurisdiction of ITAR.

However, the final rule also kept on the USML several items that many had hoped would be moved off the list. Foremost among them are human-rated spacecraft, an issue that attracted the most public comment of any single item on last year’s draft rule. The final rule tweaked the draft rule, which kept all “man-rated sub-orbital, orbital, lunar, interplanetary or habitat” spacecraft; the final rule specifically includes only such human-rated spacecraft “which have integrated propulsion other than that required for attitude control.”

That decision was based on concerns in the Defense Department about alternative military uses for such spacecraft. “These vehicles have the ability to deliver weapons of mass destruction, and they have the capability to come in very close proximity to national assets in space, and that close proximity can lead to some anti-satellite capabilities,” explained Lou Ann McFadden, chief of the strategic issues division of the Defense Technology Security Administration, during a panel session on export control reform held May 19 in conjunction with the 30th Space Symposium in Colorado Springs, Colorado.

McFadden said that, when creating the final rule, the administration refined the original broad restriction on all such human-rated spacecraft to focus on the Defense Department’s specific concerns. “We determined that if your vehicle, no matter what it is—manned or unmanned—has the capability to move between orbital planes, and has the ability to maneuver in space, that passes our threshold of potential anti-satellite capability and weapons of mass destruction delivery,” she said.

That decision was disappointing for some in industry who hoped to move human-rated vehicles off the USML. “Moving these vehicles to the CCL would give industry an opportunity to pursue global markets, enabling contributions to the US economy and the growth of our space industrial base,” said Michael Lopez-Alegria, president of the Commercial Spaceflight Federation, in a statement after the publication of the final rule.

“There is a possibility” the 35-centimeter aperture limit will be increased by the 180-day review period, McFadden said. “There’s no promises, but there’s a possibility.”

The administration used a similar argument—concerns about technology being used as anti-satellite weapons—to keep satellite servicing systems on the USML. “As the technology and applications in question are at an initial phase of development, the Department does not believe there is currently a commercial impact of this regulation,” the State Department concluded in a statement accompanying the final rule.

The final rule also adjusted a provision of the draft rule that kept all secondary payloads funded by the Defense Department on the USML, regardless of the technology they contained. The final rule retains that provision, but with an escape clause of sorts that McFadden said was borrowed from other USML categories. “When the DOD is going to contract for a payload, at the time of the contract they can determine that the technology is dual use,” she said. “If they do that, they are excepted from the USML.” Alternatively, the payload developer can seek a “commodity jurisdiction” ruling that the payload should not be subject to ITAR based on its technology.

Unfinished business

The final rule goes into effect 180 days after its May 13 publication, a waiting period that Eric L. Hirschhorn, Under Secretary for Industry and Security at the Department of Commerce, said last week was a compromise between industry requests that the rule take effect immediately and that the waiting period last for up to several years.

There are some exceptions to that 180-day period, though. The provision regarding DOD-funded secondary payloads takes effect an additional six months after that 180-day period. Another section, which moves certain kinds of radiation-hardened electronics off the USML to the CCL, takes effect in just 45 days. “The rad-hardened chip industry has let us know how fast their technology is moving,” Hirschhorn said, and was concerned that any more delays in implementing the rule could cause a broad range of commercially-available components under development to fall under the ITAR.

Also during that 180 days, the government will be revisiting one item on the final rule, which keeps remote sensing systems with apertures greater than 35 centimeters on the USML. Industry had sought to increase that aperture limit significantly to allow it to more easily sell such systems commercially as overseas competition in commercial remote sensing grows stronger.

McFadden said debate over that rule was tied to another policy debate on the limitations of the sale of commercial satellite imagery. Current rules limit companies selling such imagery to resolutions no sharper than 50 centimeters, although industry has been lobbying to change that limit to perhaps 25 centimeters, a change currently under debate in the administration. (A 35-centimeter-aperture system can, depending on the spacecraft’s orbit and other technologies, produce images of “sub-meter” resolution, noted Mike Conschafter of Exelis, a manufacturer of such systems.)

“These two items are kind of linked together,” she said, “so as we work out possibly changing or updating commercial imagery release rules, then we’re going to start to look at the export rules to make sure that they align.” That policy alignment is just one step of the review, she added, noting that any change would need to be coordinated with national security policy.

“There is a possibility” the 35-centimeter aperture limit will be increased by the 180-day review period, McFadden said later in the panel. “There’s no promises, but there’s a possibility.”

“A more nuanced system, unfortunately but necessarily, is a more complex system,” Hirshhorn said. “Export control reform will help your business, but you almost certainly will need to dedicate additional resources to the important task of compliance.”

“This is a wonderful step. We’re very excited about this,” Conschafter said of having at least systems with apertures of 35 centimeters or less off the USML. “We the potential for real benefit in our supply chain” by allowing Exelis to do business with companies that are not registered with the State Department to sell ITAR-controlled components. He added that the company would be pushing, though, for changing the imagery resolution limits, which in turn could allow larger imaging systems to be moved off the USML.

Another challenge facing the industry is enforcement of the new export control rules. Most items moving off the USML are not being totally “decontrolled,” but instead are now on the CCL, with its own set of policies and regulations. “There are no free lunches,” Hirschhorn said. “We are serious about compliance and we are serious about enforcement.”

If anything, he said, the new environment may be more complex than the old one. Previously, almost all space-related items were on the USML, but now some will be on the CCL while others remain on the USML. “A more nuanced system, unfortunately but necessarily, is a more complex system,” he said, with greater responsibilities on companies to comply with those new rules. “Export control reform will help your business, but you almost certainly will need to dedicate additional resources to the important task of compliance.”

The industry, though, seems willing to accept those greater responsibilities and challenges with adhering to a new export control system if it means getting many of its products out of the shadow of ITAR. “This is a big deal for industry,” said Jeffrey Trauberman, vice president for space intelligence and missile defense at Boeing, during the May 19 panel. “Overall, this is a very major step and one that we applaud.”

“It’s been a long time in coming,” said Patricia Cooper, president of the Satellite Industry Association, introducing the May 19 panel session, which she described as the first such event since the publication of the final rule the previous week. “It is good fun to do an ITAR panel nowadays.”


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