U.S. companies that make infrared detection technology used in night-vision devices and weapons sights are fighting a Pentagon effort to impose the government’s most stringent export rules on their products.
Raytheon Co. (RTN:US), DRS Technologies Inc. and Flir Systems Inc. (FLIR:US) are pressing the Pentagon not to add the infrared detectors to the U.S. Munitions List. Doing so would make official the government’s current restrictive treatment of the technology.
U.S. companies risk being shut out of a global market of about $2.6 billion by 2017 for commercial uses in the automotive, surveillance and security industries at a time when U.S. military purchases are waning, according to technology analyst Jeff Perkins.
“Such a regulation will give a serious leg up to the foreign competition, from Europe to Korea, Japan and China,” Perkins, president of the U.S. unit of Lyon, France-based Yole Developpement, said in an e-mail. “To hinder the ability of U.S. factories to compete will only lead to moving all of that development offshore.”
While infrared imaging is associated with military equipment such as night-vision goggles, it also is used in collision-avoidance cameras for automobiles, commercial security cameras and thermography that can detect heat leaks in homes.
Raytheon rose 12 cents to $56.35 at 11:30 a.m. in New York trading, and Flir fell 1 cents to $19.51.
The technology in dispute is called uncooled infrared focal plane arrays. These thermal imaging sensors operate at ambient temperatures, eliminating the need for expensive cooling systems. Infrared is the portion of the electromagnetic spectrum between visible and microwave light.
The addition to the U.S. Munitions List, which is maintained by the State Department, is being considered even as the Obama administration seeks to ease export restrictions generally. The U.S. needs “a system where higher walls are placed around fewer, more critical items,” Robert Gates, who was defense secretary at the time, said in 2010.
The infrared technology is being reviewed as part of that inter-agency process, Pentagon spokesman Lieutenant Colonel James Gregory said in an e-mail. “In the coming months, a Federal Register notice for public comment will be published on the results of the review,” he said.
While “dual-use” items that have both military and civilian applications can be placed under Commerce Department export controls, the most sensitive military technology is supposed to go on the more stringent State Department munitions list. It requires export licenses to almost all destinations, setting a higher threshold to grant export licenses and more restrictions on the transfer of the technology to third parties.
“There is a very strict U.S.-content requirement” under the State Department controls, according to William Reinsch, president of the Washington-based National Foreign Trade Council, who administered the Commerce Department export rules during the Clinton administration.
Companies often find it tough to deal with the munitions list because a finished product -- such as a machine gun or an airplane -- can be subject to the controls if it contains an American part as small as a bolt or screw, Reinsch said in an interview.
“The United States would stand alone in deciding to control this commercial technology as military while equivalent, and in some cases better, uncooled detector technology is available worldwide,” executives of three companies wrote in a May 30 letter to Frank Kendall, the Pentagon’s acquisition chief.
The controls would make U.S. companies unable to compete abroad and result in “a significant reduction, if not the complete elimination of manufacturing and design facilities in the United States,” according to the executives, Charles Cartwright, vice president for advanced programs for Waltham, Massachusetts-based Raytheon; Robert Mehmel, president of DRS, a U.S. unit of Finmeccanica SpA (FNC) based in Rome; and William Davis, senior vice president of Wilsonville, Oregon-based Flir.
L-3 Communications Holdings Inc. (LLL:US), which also produces military items with the technology, is “closely following” the issue as well, Jennifer Barton, a spokeswoman for the New York- based company, said in an e-mail.
Pentagon officials expect a vigorous debate over including uncooled infrared technology and critical components as they ready a draft of a revised munitions list for publication as soon as September, according to a U.S. defense official who spoke on condition of anonymity to discuss internal deliberations.
At this point, some military officials believe the technology should be placed on the munitions list to prevent adversaries from getting advanced applications such as the ability to see at night even through smoke, the official said.
Pentagon specialists also are reviewing the extent to which the uncooled infrared technology is being produced by commercial competitors outside the U.S., and that will be weighed in their decision along with industry comments, the official said.
Based on the letter from the U.S. executives, companies outside the U.S. that produce the technology include Ulis of Veurey-Voroize, France; SemiConductor Devices of Haifa, Israel; NEC Avio Infrared Technologies Co. of Tokyo; and Zhejiang Dali Technology Co. (002214) of Hangzhou, China.
“Given that the rest of the world treats uncooled thermal imaging technology as dual-use, restrictions would jeopardize U.S. competitiveness,” DRS Vice President John Baylouny said in an e-mail.
“We feel like we are fighting with one arm tied behind our backs,” Shane Harrison, a spokesman for Flir, said in a telephone interview.
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