Bloomberg News

Satellite Export Controls Should Be Eased, U.S Says

April 18, 2012

An artist's rendering of a Northrop Grumman Corp. Advanced Extremely High Frequency (AEHF) system communications satellite.  Source: Northrop Grumman

An artist's rendering of a Northrop Grumman Corp. Advanced Extremely High Frequency (AEHF) system communications satellite. Source: Northrop Grumman

Satellite export controls should be relaxed by Congress so that U.S. companies can better compete globally for sales of communications and remote-sensing equipment, a report by the Pentagon and State Department found.

“Limited national security benefits” are provided by a 1998 law that applies more stringent controls on satellites than on other equipment that may have both civilian and military uses, the departments said in the report requested by Congress and released today to lawmakers.

The report is “a key step toward relieving U.S. commercial satellite system, component, and part manufacturers of unnecessary controls,” said John Ordway, an export-licensing attorney with Berliner, Corcoran & Rowe LLP in Washington.

Among companies that may benefit are Northrop Grumman Corp. (NOC:US), Boeing Co. (BA:US), Loral Space & Communications Inc. (LORL:US), Honeywell International Inc. (HON:US),L-3 Communications Holdings Inc. (LLL:US), Alliant Techsystems Inc. (ATK:US), Orbital Sciences Corp. (ORB:US), Moog Inc. (A:US) and America Pacific Corp., according to Ordway.

The report recommends removing from strict State Department license requirements communication satellites that don’t contain classified components and remote-sensing satellites that fall short of certain performance parameters as well as subsystems, parts and components for those systems.

U.S. at Disadvantage

“Current law forces the U.S. government to continue to protect commonly available satellites and related items, thus impeding the U.S. ability to work with partners and putting U.S. manufacturers at a disadvantage but providing no noticeable benefit to national security,” according to the State and Defense departments.

The report specifies items that should remain on the State Department’s more restrictive munitions licensing lists and those than can be moved to the less restrictive oversight of the Commerce Department’s “Commerce Control List.”

The equipment that can be shifted encompasses “hundreds of thousands of items we think U.S. industry should be able to compete” on, Gregory Schulte, deputy assistant secretary of defense for space policy, told reporters on a conference call.

The 1998 law “places the U.S. space industrial base at a distinct competitive disadvantage when bidding against companies from other advanced satellite-exporting countries that have less stringent export control practices and policies,” the report found.

GPS Equipment

Global Positioning System, or GPS, equipment and radiation- hardened circuits should remain subject to trade controls, the departments said because both have military applications and aren’t exclusively satellite technologies.

Their “final disposition” will depend on pending reviews and agency discussions, according to the report.

Ordway said Congress needs to pass legislation sponsored by Representatives Howard Berman, a California Democrat, and Don Manzullo, an Illinois Republican, to supersede the 1998 law.

“The report makes clear that restricting exports of all commercial satellites and components as if they were lethal weapons, regardless of whether they’re going to friend or foe, has gravely harmed U.S. space manufacturers,” Berman said in an e-mailed statement.“My bipartisan bill would fix this situation, and refocus our export controls on the true national security threats: Iran, North Korea, Cuba, Syria, Sudan and China.”

Representative Mike Turner, an Ohio Republican and chairman of a strategic issues subcommittee, said he wasn’t convinced.

‘Dragged Its Feet’

“The administration’s request would not make this country safer or further our goals,” Turner said in an e-mailed statement. The State Department “has dragged its feet enforcing the current regime ‘‘specifically when it comes to companies the department believes have illegally diverted our space technology to China.’’

Representative Ileana Ros-Lehtinen, a Florida Republican who is chairman of the House Foreign Affairs Committee, said Congress ‘‘must carefully scrutinize this report’’ because the Obama administration was ‘‘seeking to ease restrictions on these sensitive technologies and bypass congressional oversight.’’

The 1998 law was passed after a congressionally mandated commission headed by Representative Christopher Cox, a California Republican, concluded some U.S. companies gave China access to U.S. technology that may have aided the communist nation’s military missile programs.

Industry Groups

Industry groups such as the Aerospace Industries Association say the law has stifled U.S. exports. The report today backs that assertion, concluding, ‘‘Over the last 15 years, a substantial number of commercial satellite systems, subsystems and related technologies have become less critical to national security.’’

‘‘At a time when the budget request for national security space is already slated for a 22 percent reduction, Congress needs to act to ensure the U.S. space industrial base remains viable,’’ AIA President and Chief Executive Officer Marion C. Blakey said.

‘‘These companies can only sustain our technological edge if they aren’t regulated out of legitimate commercial markets,’’ she said in an e-mailed statement. U.S. manufacturers lost $21 billion in satellite revenue from 1999 to 2009, costing about 9,000 jobs because of the controls, according to her group.

China’s Role

The report emphasizes that the State and Defense departments aren’t advocating a wholesale abandonment of the 1998 law, saying the U.S. ‘‘should maintain strict controls on transfers of ‘‘non-critical’’ items ‘‘that are likely to be used against the U.S. national interest.’’

China’s continuing efforts to acquire U.S. military and dual-use technologies require vigilance, according to the report. That nation’s civilian and military space industry ‘‘are fused together such that reasonable regulators must consider the high likelihood that space-related items and technology will be diverted from a civil use and applied to military programs.”

China recently attempted to acquire a “fully functional, European imaging satellite constellation” that was blocked because it contained U.S. technology, the report found.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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Companies Mentioned

  • NOC
    (Northrop Grumman Corp)
    • $143.62 USD
    • -0.17
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  • BA
    (Boeing Co/The)
    • $125.06 USD
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