The Space Reviewin association with SpaceNews

Boeing 702 illustration
Current export control restrictions make it difficult for US companies to export not only complete satellites, but also many of their components, making it difficult for US firms to compete against international rivals. (credit: Boeing)

A new hope for export control reform?

For the last several years, it has been almost impossible to go to a conference, forum, or other gathering of space industry professionals and not have the topic of export control come up. Companies of all types in the industry—entrepreneurial and established, prime contractors and component suppliers—have complained, at one point or another, that the strict export control regulations (also known as International Traffic in Arms Regulations, or ITAR) for satellite and launch vehicle equipment, enacted by Congress in the late 1990s in response to allegations of technology transfer by US companies to the Chinese military, have hindered their ability to compete in the global marketplace. However, export control reform is like the weather: everyone talks about it, but no one, it seems, does anything about it.

Now, though, there appears to be a chance to make a serious attempt at some form of export control reform. The change in control of Congress after the 2006 elections has put new people into leadership positions of key committees, including some representatives who may be more amenable to reform. However, getting that reform passed through Congress is no easy task, and is fraught with political peril for those who do support it. The odds of getting meaningful reform passed during this Congress may be higher now than they have been for years, but that doesn’t mean the process will be straightforward or assured of success.

“We didn’t get it right”

Last Wednesday, a session of the Satellite 2007 conference in Washington assembled a panel of government and industry officials to discuss the state of export control and the potential for reform. There was, as expected, considerable discussion from industry representatives about how ITAR has hurt their business over the last several years, and their hopes that a change for the better is on the horizon. However, there was a surprising admission from one of the architects of the current regulations that, through an oversight, they made the regulations far more encompassing than originally envisioned.

However, export control reform is like the weather: everyone talks about it, but no one, it seems, does anything about it.

“I feel some sense of responsibility for what happened,” said David Garner, a retired Air Force colonel. Garner had helped put together the 1998 legislation that was designed to add commercial communications satellites—like those that had been implicated in the transfer of sensitive technology to the Chinese by a House committee led by then-Rep. Christopher Cox—to the Munitions List, meaning that their export would be overseen by the State Department rather than the more permissive Commerce Department. That was, Garner said, exactly what he thought the legislation did.

Shortly after the bill became law, he recounted a meeting where he and other officials discussed the legislation. At that time, he said, “we all had a pretty good sense of what we were going to do, and then the legal office of political affairs at State said, ‘Well, you know, all the parts and components on those comsats are captured, too.’ We all sort of looked at each other said, ‘I didn’t write that. Did you write that?’ None of us around the table believed that that’s what we had done, but in fact that’s what ended up.”

Garner recounted a meeting seven years ago at the headquarters of satellite operator Intelsat where he briefed industry on the effects of the export control change. “I predicted that if we didn’t get this right, we’d really regret it. And I’m sorry to say that I was right: we didn’t get it right. I was really talking at the time about how industry responded, but now I want to say that it also embraces the fact that government didn’t get it right, either.”

“For what little part I played in where we are now, I’m sorry, and I’m trying to make it right by admitting to the error,” he said. “We never wanted to control parts and components.”

Tales of woe, promises of improvement

It wouldn’t be a discussion about ITAR, of course, if there weren’t some complaints about how export controls were hurting US businesses. “What we have found that nothing that we do is routine,” said Melissa Farrell, CEO of Stellar Solutions Aerospace, an engineering services company that frequently has to get technical assistance agreements (TAAs) from the State Department to do international work. “Almost everything we do seems to be an exception which, for a small business, is a tremendous burden.”

“For what little part I played in where we are now, I’m sorry, and I’m trying to make it right by admitting to the error,” Garner said.

That pain was shared by Joe Ramos, manager of business development of ATK Space Systems, a subsidiary of the defense contractor formed by rolling up a number of small “mom-and-pop” space companies that, in many cases, didn’t have the resources to handle the burden of export control regulations alone. “We have lost business because of ITAR issues,” Ramos said. Even something as simple as a name changes caused by a merger or acquisition “stops the process cold” because of all the paperwork that has to be filed to amend existing TAAs. The only reason his company still has a shot against European competitors, he said, is the current favorable exchange rate between the dollar and the euro.

Even big companies have struggled with ITAR. Kent Bossart, director of trade compliance for Intelsat, said he and his staff have struggled with getting names changed on dozens of TAAs after the company merged with PanAmSat. He said he has several secretaries doing nothing but getting signatures on documents needed to update those TAAs. “Only a big company with a dedicated staff can handle something like that,” he said. “You need dedicated staff that really geek out on this stuff.”

The “bad guy” in this struggle has been the Directorate of Defense Trade Controls in the State Department, the office where companies apply for TAAs, export licenses, and related documents needed to sell products to foreign customers or to simply engage in technical discussions with them. Many in the industry have complained for months about slow response times from the office because of a lack of staffing, something that Anthony Dearth, acting chief of the missile and spacecraft division of the directorate, said the office has been working hard to improve.

In October, Dearth said, the office started “what we affectionately called the ‘winter offensive’” to reduce the caseload backlog the office had. “We took our overall open caseload from almost 11,000 on October 1st to just over 5,400 at the first of the year,” he said. That number has since crept back up to about 6,000, he said, but with all their military officer billets and licensing officer positions filled, the office is turning around applications much faster than just a year ago. A switch to an all-electronic filing system for license applications is also improving review times, he added.

Dearth said that companies should do more to make their applications as accurate and as precise as possible to help speed up the process. “Some large company export offices are triple and quadruple [the size of our office] yet we still continue to get substandard licenses,” he said. “The one thing you can do for yourselves is to get it right the first time so that we don’t have to handle it twice.”

A path for reform

While the situation may be improving at the State Department, there continues to be a push for loosening export controls to some degree, at least to make it easier for companies to export hardware to NATO countries and other close allies like Australia and Japan. The effect of export controls on the industry is currently being studied by the Defense Science Board (DSB), with a report due out later this year that could serve as the springboard for a new Congressional effort.

Despite the change in part control, said one staffer, the leadership of key committees “is more pro-security than pro-business. So I would see a fairly conservative outlook for major change in the short term.”

One of the strongest advocates for export control reform on Capitol Hill has been Rep. Ellen Tauscher (D-CA), the new chairperson of the strategic forces subcommittee of the House Armed Services Committee. In a speech last September at the Center for Strategic and International Studies, Tauscher made the case for reform, noting that the current system has been hurting US industry and yielding global market share to European competitors. “Our self-inflicted inability to take advantage of more recent positive trends in the global market means that we are harming our national security,” she said in that speech. “Missed opportunities mean that our industrial base will continue to shrink and more American jobs will be lost in a growing labor and technology market. That’s not acceptable.”

Tauscher had engineered what was the closest attempt at reform in 2003 when she and a Republican colleague, Doug Bereuter, offered an amendment that would have waived the requirement for export licenses to NATO countries. That amendment appeared to have passed the House, but the heads of the two committees with jurisdiction on the issue, armed services and international relations, held the vote open long enough to convince enough members to change their votes so that the amendment was defeated.

Simon Limage, deputy chief of staff for Tauscher, said that the congresswoman has met with the DSB and is familiar with their work, but that there was no immediate solution to the issue in the works. “Not much has changed” in Congress, Limage said, noting that the international relations and armed services committees have leadership that “is more pro-security than pro-business. So I would see a fairly conservative outlook for major change in the short term.”

He added that there is some trepidation about moving too far too quickly on any reform efforts. “We’re a little nervous about getting ahead of industry or our colleagues in the administration on something that’s not going to go very far,” he said. It’s also difficult to simply get the attention of other members of Congress on this topic. “You’re not reelected because of your stance on export control.”

Garner said that the export control changes got through Congress in the late 1990s because “the Republicans had a hammer: the Cox Report. And the Democrats are in a particularly difficult position. You don’t want to go out there and do something and have your head handed to you” by the press or other members of Congress, he said. “It’s a very difficult thing for anyone to get behind because the incentive is the next election. The incentive is not helping US business, the incentive is get reelected and keep the party in power or to wrest control from the other party.”

Despite that situation, he said, now “is the perfect time” for starting export control reform, if done the right way. “Congress can’t do it on its own,” he said, noting the political pressures such as those that caused the failure of the 2003 House amendment. Instead, he argues, what’s needed is a commission on export control reform created by the president at the recommendation of the DSB. Such a committee would provide an “apolitical” examination of the issue and, thus, provide political cover for members of Congress to later act on the committee’s recommendations on export control reform.

“The opportunity is right but it’s not going to be there forever,” Garner said. “If we don’t take the opportunity, politics is going to eat us alive and, frankly, my good friends across the Atlantic will take advantage, as they have for the last seven years, of the legislation we created and they’re just going to continue to beat the crap out of us.”