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As an effort to move of satellites and related components off the US Munitions List works its way through Congress, the White House is planning an export control reform proposal of its own. (credit: J. Foust)

Prospects and concerns for export control reform

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In the space industry in the US, export control reform is a bit like the weather: everyone likes to talk about it, but doing anything about it is a whole other matter. In late 1998 Congress passed a defense authorization bill that included a section moving satellites and related items to the US Munitions List (USML), subjecting it to the control of the International Traffic in Arms Regulations (ITAR). Since then, the industry, citing the adverse effects that move has had on companies trying to export such items even to friendly nations, has lobbied to reverse that shift, but with little success.

Now more than ever before, though, there’s hope for significant export control reform, including reversing that 1998 move of satellites to the USML. Legislation currently working its way through Congress would allow the White House to make that change as well as other reforms to export control policy. Other studies of export control reform are underway in the administration, including proposals that could be announced in the immediate future. However, while the prospects for reform look good, some warn that—particularly in a contentious election year—there’s no guarantee anything will be enacted.

Satflex and other reforms

The biggest potential reform is contained in HR 2410, a State Department authorization act currently making its way through Congress (see “Boring but important policy developments”, The Space Review, November 2, 2009). Included in the bill is a provision dubbed “Satflex” that would give the president the authority to remove satellites and related components from the USML. Even if that authority wasn’t exercised, other aspects of the bill would still provide reform, including setting goals for rapid review of license applications and also performing a rolling review of all the items contained on the USML to determine if they still warrant protection under ITAR.

Key to getting the House to approve export control reform was a provision that still bans satellite exports to China. “Had there been no special restriction on comsat sales to China,” Fite said, “I have no doubt that this provision would not have passed the House.”

Satflex finally came about after members finally were convinced of ITAR’s adverse impacts after years of lobbying by the industry. “However, the problem with getting Congress to move on those concerns is that until very recently there hasn’t been any clear evidence that export controls were responsible for problems and hindrances to US satellite exports. These were always attributable to other factors, such as a general downturn in the industry,” said David Fite, a senior staff member on the House Foreign Affairs Committee but speaking for only himself, during a panel on ITAR earlier this month at the Satellite 2010 conference outside Washington.

What changes peoples’ minds on Capitol Hill about this, he said, was the move by “a major European manufacturer” to sell so-called “ITAR-free” satellites that contain no US-built components and hence are not subject to US export controls. Fite didn’t name the manufacturer but it was a clear reference to Thales Alenia Space, which has sold several such communications satellites. “This has changed the environment, I think, significantly,” he said.

The Satflex provisions in the bill have two important caveats, Fite said. One is that removing satellites and related components required the notification of, and consent by, key congressional committees. This is important, he noted, not just for Congress’s oversight role but to also help improve the bill’s prospects for passage. The other caveat still prevents the export of satellites and components to China. “Had there been no special restriction on comsat sales to China,” Fite said, “I have no doubt that this provision would not have passed the House.”

With those caveats in place, HR 2410 did pass the House last June. The Senate has not yet taken up the bill, though, raising concerns by some in the space industry that this opportunity for reform might be lost. Fite, though, said that the current authorization bill was “somewhat on schedule” compared to similar bills in previous congresses. He expected the Senate to pass its version of the bill this summer, with a conference report reconciling the differences between the bills completed by September.

“People are excited because the president himself has taken export control under his wing,” said Reinsch.

Meanwhile, the administration is taking up its own efforts at export control reform. In a speech earlier this month at the Ex-Im Bank in Washington, President Obama mentioned efforts underway to institute changes to export control policies. “What we want to do is concentrate our efforts on enforcing controls on the export of our most critical technologies, making America safer while enhancing the competitiveness of key American industries,” he said. “We’ve conducted a broad review of the Export Control System, and Secretary [of Defense Robert] Gates will outline our reform proposal within the next couple of weeks.”

“People are excited because the president himself has taken export control under his wing,” said Bill Reinsch, president of the National Foreign Trade Council, during the Satellite 2010 panel. The interagency reform effort, he said, had started with simply making short-term changes but has now evolved into an overhaul of the overall export control system. Although the specifics of that reform have not been released, he expected to see a phased series of reforms in the process of handing export controls.

Separate from that effort is a study underway by the Defense Department known as the “1248 review” after the section of the FY2010 Defense Department authorization act that ordered it. The legislation calls for “an assessment of the national security risks of removing satellites and related components from the United States Munitions List”. That report, which will feature input from industry and other government agencies, will include recommendations of what space-related technologies should remain on the USML as well as other improvements to space export control policies and processes. “With all the export control reform efforts that are ongoing, we see what we’re doing as consistent with those activities,” said Jay Walding of the DoD’s Defense Technology Security Administration (DTSA) at the Satellite 2010 panel. That report is due to Congress in late April.

Hopes and hindrances in an election year

Enacting export control reform of some kind has the backing of other government officials involved in both civil and military space, who are concerned about the obstacles of the current system to international cooperation as well as negative effects it has on the domestic industrial base.

“I am very hopeful that, if we don’t see a broad revamping of export regulations and control, that we will at least see some opportunities open up for NASA to be included in some of the exceptions as the DoD and others are,” NASA administrator Charles Bolden said in a speech earlier this month, in respond to a question about ITAR reform. “I’m really hoping that it happens, and it happens soon.”

“We’re working hard to change export controls, so that our industry can more easily compete in the international market,” Gary Payton, the deputy under secretary of the Air Force for space programs, said in a speech Friday at a Space Transportation Association luncheon on Capitol Hill. He wants to see such changes to improve the robustness of the industrial base that also supports his missions. “The House had done some good work there. We’d like to see the Senate pick up that same motivation.”

It’s not certain, though, that Congress will follow through, particularly during what is shaping up to be a particularly contentious election year. In his 11 years on Capitol Hill, Fite said, “I have never seen an environment that has been this partisan.” Reinsch concurred. “The danger is that this will become a political issue in an election year, which means it’s not going to be addressed on its merits, it will be addressed by slogans.”

Reinsch said export control reform could become a partisan issue, with Republicans seizing on any reforms proposed by the White House as evidence that they’re soft on national security. He said he was particularly concerned that the president linked export control reform with jobs in his speech earlier in the month. “You can’t win an export control reform fight talking about jobs and exports,” he said. “The only way to win an export control fight is talking about national security.”

“The Republicans in the Congress, particularly in the Senate, are already sharpening their rhetoric, their talking points for this,” he warned. When those attacks come, he said, the question will be whether the president fights back. “Will he persist and push it through, or will all the Democrats fold?” he asked. “That’s why my optimism is tempered with caution.”

“You can’t win an export control reform fight talking about jobs and exports,” Reinsch said. “The only way to win an export control fight is talking about national security.”

The irony in this debate, though, is that even if satellites and their components are removed from the USML, the effect on the space industry may not be as great as reform proponents hope for—or as dire as reform opponents fear. John Ordway, a lawyer with, Berlinger, Corcoran & Rowe, LLP who specializes in export licensing, noted that one of the biggest complaints about ITAR, the long delays in getting an export license, have been addressed in previous reforms by the Bush Administration that set a goal of adjudicating license applications within 60 days. “In my experience, 60 days is pretty much the norm now,” he said. “Generally, the ITAR licensing process is working smoothly.”

Moving satellites and their components off the USML—presumably back onto the Commerce Control List and thus under the jurisdiction of the Commerce Department—would not necessarily make things that much faster and smoother for companies. “I’m not sure it would be a really huge deal,” Ordway said. The biggest difference, he said, might be in the culture in the Commerce licensing office, which he said would be more willing to be advocates for the companies than in the current system.

Those issues have not deterred advocates for reform. “It’s long overdue,” said Marjorie Chorlins, director of government and regulatory affairs at Lockheed Martin, at the end of the Satellite 2010 panel. “It’s an uphill climb, but it’s a much-needed one.”