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Chinese launch
The launch of an “ITAR-free” European communications satellite on a Chinese rocket last month is, in the eyes of industry advocates, the latest evidence for the need for export control reform for the US space industry. (credit: CGWIC)

The Sisyphean task of export control reform

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Export control reform for the US space industry has often been likened—including in the pages of this publication—to the weather: a topic people love to talk about, but where little actually happens. (See “Prospects and concerns for export control reform”, The Space Review, March 29, 2010.) That is, though, perhaps an unfair comparison, as there have been considerable efforts to try and make it easier for American companies to export satellites and related components. The better analogy might be Sisyphus: just as reform proponents appear to be making progress, the effort stalls out, forcing them to start over from scratch in the next Congress or administration.

Now, once again, the boulder of satellite export control reform is inching up the hill, with progress on two fronts. A broader export control reform effort by the Obama Administration is starting to bear fruit as agencies make determinations on what items should remain on the US Munitions List (USML), the more restrictive list governed by the International Traffic in Arms Regulations (ITAR), and which can move to the more permissive Commerce Control List (CCL). Separately, legislation introduced in the House last week would restore the administration’s ability to determine what satellite components would remain on the USML. But do either of these efforts have a real chance of success?

Administration reform efforts

Last year, the Obama Administration announced plans for a broad overhaul of the overall export control regime in the United States. At the heart of the reform plan is something often called the “four singles” or “four singularities”: a single licensing agency, a single enforcement agency, a single IT system, and a single (although tiered) export control list. (See “A fading opportunity for export control reform?”, The Space Review, October 11, 2010.) Some of these reforms can be carried out by the administration, working with the various agencies involved in the export control process, while others require Congressional action.

“It’s going to provide a lot more clarity on what’s controlled,” Nilsson said of the effort. “It’s going to be a positive, detailed list, both on the Munitions List and the Commerce Control List, on what’s controlled and what’s not.”

The export reform effort has three phases, according to Brian Nilsson, a professional staff member on the National Security Council, during a meeting October 13 of the export controls working group of the FAA’s Commercial Space Transportation Advisory Committee (COMSTAC) in Washington. The first phase involved “taking stock” of the system and making “some really hard decisions” about how the reforms should be implemented, followed by the implementation phase, and concluding with a consolidation phase that creates the “four singularities” originally envisioned. “We’re deep in phase two across the board in everything” currently, he said.

Part of that effort includes what is, in effect, a thorough scrub of the entire USML, examining all the items in each of its 19 categories to determine if they still merit inclusion on that list. “It’s going to provide a lot more clarity on what’s controlled,” Nilsson said of the effort. “It’s going to be a positive, detailed list, both on the Munitions List and the Commerce Control List, on what’s controlled and what’s not.” That, he said, will both make it easier for industry to comply with export control regulations and make it easier for the government to enforce the regulations.

Nilsson cited one specific example outside the space industry of the current confusion in export controls: pivot blocks that attach to axles in vehicles. At the COMSTAC working group meeting, he brought two pivot blocks that appeared identical. One, designed for use on fire trucks, is subject to Commerce Department regulations and can usually be freely exported. The other, ordered by the Army for a military vehicle, is identical except that the hole is made to metric specifications. That item, though, is considered a munition and subject to ITAR, as is any vehicle that uses it. That discourages sales of that pivot block both domestically and internationally “since it’s too much trouble,” he said.

The pivot block example comes from Category VII—tanks and other military vehicles—of the USML, the first to be reviewed by the administration during this process. “We have all 19 categories in some form of draft,” Nilsson said. “This has been extraordinarily labor intensive.” The recent focus has been on Category VIII, which covers aircraft and has the largest number of licenses. That will be followed by an update of Category VII, and then categories that feature naval vessels and submersibles.

“The other category in the priority list is Category XV,” which includes satellites and related components, he said. The goal is to have the administration’s review completed and published for these categories by the end of the year.

Tied to the review of Category XV is the completion of what’s known as the “Section 1248 report”, named after the section of the fiscal year 2010 defense authorization act that called for it. That report is designed to be “an assessment of the national security risks of removing satellites and related components from the United States Munitions List,” according to the language of the act, including recommendations for what items should be removed from the USML and other improvements for “space export control policy and processes.”

The overall review process has had one negative side effect: increasing the time it takes to process current export license applications.

One problem with the Section 1248 report is that it is long overdue. The legislation, signed into law in October 2009, required that the report be submitted to Congress within 180 days. Only this past May, though—more than a year late—did the administration submit what it called an “interim” version of the report, one that, according to one congressional staffer who saw the report last spring, concluded there were “no unacceptable security risks” to moving commercial satellites and related components off the USML.

That interim report, Nilsson admitted, “didn’t really answer the mail, quite candidly,” because that work was originally done in a separate, parallel process from the overall review of the USML. The plan now, he said, is to submit the final Section 1248 report when the Category XV review is complete, which will identify which components should remain on the USML and which can go to the CCL.

The overall review process has had one negative side effect: increasing the time it takes to process current export license applications. At a space law conference in Washington October 12 organized by the University of Nebraska College of Law, Dennis Burnett, vice president for trade and export controls for EADS, said he had noticed an “uptick” in turnaround times for licenses recently because so much staff time has been devoted to the reform work. That’s particularly the case with categories deep in the review process, like Category VIII. “You’re seeing really big delays” in that category, he said, adding that the turnaround times have been much faster, so far, for Category XV space items.

Congressional action

The export control list reform process does not end with the reviews of the various categories of the USML. In order to formally remove something from the USML, the administration must then notify the relevant committees in the House and Senate of its plans, a process known as a “38(f)” after the section of the Arms Control Export Act that requires that notification. This notification is, in reality, a de facto Congressional consent, since any proposed changes are closely reviewed by those committees.

An exception to this process is Category XV, satellites and related items. Congress placed those items on the USML in the late 1990s as a response to the Cox Report, which found evidence that sensitive technologies were transferred to China during investigations of failures of Chinese launches of US-built commercial satellites. Since Congress placed those items on the USML, only an act of Congress can take them off, or at least return authority governing their placement on the USML to the White House.

Last week, a bipartisan group of representatives introduced legislation to do just that. HR 3288 would give the president the authority “to remove commercial satellites and related components from the United States Munitions List”, following the same procedures as other items on the USML. The administration would have to certify with Congress that such a move “does not pose an unacceptable risk” to national security and also provide a report on “risk-mitigating licensing controls, procedures, and safeguards,” topics similar to those covered by the Section 1248 report.

“It is time we undo the damage this restriction has unintentionally created for US business, US competitiveness, and US national security,” said Rep. Howard Berman (D-CA), the ranking member of the House Committee on Foreign Affairs and the sponsor of the bill, in a statement. “The current ITAR restrictions place an unnecessary burden on the commercial satellite manufacturing industry and seriously hamper its ability to compete on the world market,” added Rep. Mike Coffman (R-CO), one of eight cosponsors of the bill.

Much of the Congressional interest, and concern, about satellite export control reform revolves around China. Technology transfer to China was the reason satellites ended up on the USML. However, since ITAR made it more difficult for companies to export satellites and related components anywhere outside the US, even to close allies, US companies—particularly smaller firms without the resources to deal with ITAR—have suffered.

“It is time we undo the damage this restriction has unintentionally created for US business, US competitiveness, and US national security,” said Rep. Berman.

Measuring the effects has been a challenge, though. While the US share of the global commercial satellite manufacturing market dropped after satellites went on to the USML, attributing that loss of market share to ITAR, as a primary or contributing factor, has been a tough sell given other market factors. “It’s difficult, sometimes, for industry to prove harm,” said Remy Nathan, vice president for international affairs at the Aerospace Industries Association, at last month’s COMSTAC working group meeting. “It’s hard, because what you’re talking about is friction more than anything else. We’re getting to ‘yes’; it’s how long it takes and how hard it is to get to yes that is the real problem.”

What has helped generate action in Congress is the rise of so-called “ITAR-free” satellites that contain no US-manufactured components, and thus are not governed by ITAR. Thales Alenia Space, a European satellite manufacturer, has developed a niche market of ITAR-free communications satellites, which can be exported to China for launch. Last month a Long March rocket launched the Thales-built Eutelsat W3C communications satellite for European satellite operator Eutelsat, the first time a major Western satellite operator used a Chinese launch since Congress shifted satellites to the USML.

China remains a hot topic in Congress in the area of export control and technology transfer. Last Wednesday, the same day that Berman and colleagues announced the introduction of HR 3288, the oversight and investigations subcommittee of the Foreign Affairs Committee held a hearing titled “Efforts to Transfer America’s Leading Edge Science to China”. The hearing, led by subcommittee chair Rep. Dana Rohrabacher (R-CA), devoted much of its attention to whether the Office of Science and Technology Policy (OSTP) violated a provision of the FY 2011 appropriations bill that prohibits OSTP and NASA from spending money on any cooperative activities with China. OSTP had hosted a meeting with Chinese officials in May at a total cost of approximately $3,500.

To head off any concerns about China, HR 3288 includes a provision prohibiting the export of satellites and components to China. (It also includes a similar prohibition of exports to Cuba, Iran, Sudan, Syria, and North Korea.) Will this language be enough to assuage members of Congress?

Rohrabacher, while a China hawk, has also been a proponent of export control reforms that make it easier for US companies to export satellite components to allied countries. “We should treat our friends like they’re our friends, and our enemies as if they’re our enemies, instead of the other way around,” he said in remarks at the COMSTAC working group meeting last month. Much of his comments at that meeting were devoted to China and his concerns about any prospects of trade with or technology transfer to China in the area of space. Asked, though, if he would in principle support export control reform efforts provided exceptions were made for China and other countries subject to arms embargoes, Rohrabacher offered a one-word response: “Yes.”

Limited time for reform

HR 3288 is not the first time Congress has tried to move satellites and related components off the USML. In the previous Congress a State Department authorization act included language like that in HR 3288, including an exception prohibiting exports to China. That bill passed the House but died in the Senate, forcing reform advocates, like the mythical Sisyphus, to start over this year.

The prospects for overall export control reform are mixed. Mike Gold, director of DC operations and business growth for Bigelow Aerospace and chairman of the COMSTAC export controls working group, told a meeting of the full COMSTAC on October 14 that he had previously been “relatively pessimistic” about the administration’s “four singles” proposal, because of the lukewarm reception it received in Congress.

“In a best-case scenario, we would see export control reform to many of the categories,” said Gold. “But the impact for comsats and a lot of space technology may be negligible to none.”

Now, he says he is “cautiously optimistic” about some kind of export control reform. While the overall “four singles” concept may be in trouble, some elements of it may make it through in the near term, including a series of 38(f) notifications to transfer items from the USML to the CCL. A move to a single, updated IT system is also likely to proceed, something that Gold said is desperately needed. “The Department of Commerce literally still uses DOS,” he said.

“What the administration is going to proceed with is a very pragmatic, very practical approach,” Gold said. “They’re not abandoning but postponing the structural changes in terms of uniting the lists, single agency, et cetera. Instead what they’re going to try and do simply update the USML and CCL to better reflect modern reality.”

Gold was more skeptical that Congress will pass legislation like HR 3288 to “normalize” Category XV. “Bills like that have been introduced in the past,” he said, “and nothing’s ever happened. Particularly given the hawkish nature of many members towards China, and the lack of priority that this issue gets in general, I just don’t see it happening.”

One thing to watch for is how Congress responds to the administration’s initial batch of 38(f) notifications in the coming months. If Congress accepts them with little debate, Gold said, “then there’s the chance we could see substantive change.” If Congress pushes back on those requests, or simply takes an extended period to review them, “then, frankly, nothing will happen.”

“In a best-case scenario,” he concluded, “we would see export control reform to many of the categories, at least updating USML and CCL, via the 38(f) process. But the impact for comsats and a lot of space technology may be negligible to none due to the fact that we’re still under the legislative restrictions of Category XV.”

Although the current Congress has a year still to deal with legislation like HR 3288, the next few months may be critical for export control reform efforts because the 2012 election cycle will soon be ramping up. Burnett said he expects an accelerated push for reforms now. “The administration knows they’re running out of time,” he said, “and they need to get as much done as they can.” This time, can they get the boulder all the way up the hill?