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Proposed ITAR Changes a Mixed Bag for U.S. Satellite Industry

John A. Ordway, a satellite export specialist at law firm Berliner, Corcoran & Rowe LLP, said the hosted-payload language leaves too much room for confusion. Credit: Photo by Ashley Littleton

PARIS — The U.S. State Department’s proposed reform of rules controlling the export of satellites and space components removes many of the glaringly perverse effects on space commerce but does nothing to make it easier for industry to work with the U.S. Defense Department on hosted payloads, according to industry officials reviewing the proposals.

There also appears to be no material change to restrictions imposed on U.S. satellite owners launching their spacecraft — U.S.-built or not — from the world’s principal commercial spaceports, which are all outside the United States, officials said.

The State Department issued the proposed changes to the International Traffic in Arms Regulations (ITAR) on May 24. The modifications are generally intended to remove the armaments label from nonessential space components that, since 1999, have been lumped together in Category 15 of the U.S. Munitions List.

“[T]he U.S. government does not want to inadvertently control items on the ITAR that are in normal commercial use,” the State Department says in its proposed rulemaking.

The proposed reforms have been welcomed by the U.S. satellite industry despite what industry officials agree are areas that need further review before the final regulations take effect.

One industry official said: “The overall changes are so positive that industry should consider it a win, and we’ll have to keep working” on areas of concern.

The U.S. Satellite Industry Association (SIA) of Washington, after applauding the simple fact that the proposed rules were published so quickly after the U.S. Congress restored the U.S. administration’s rights to review ITAR, is crafting a more nuanced assessment that it will file before the July 8 deadline, SIA President Patricia Cooper said June 13.

“This is a big deal,” Cooper said of the proposed rules and their likely positive effect on U.S. satellite and space component exports. She said SIA would be seeking clarifications or modifications on two points: Hosted payloads owned by, or built for, the U.S. Defense Department and launched on commercial satellites; and the new regulatory proposals on Earth observation satellites.

Two industry officials cited the hosted payload provisions as surprising given that the Defense Department, which is looking at cost-saving ways of pursuing military space work, presumably had input into the proposed rules.

“Putting hosted payloads on the Munitions List is needlessly broad — and odd,” an industry official said. “Categorizing by funding source, instead of the actual technology, is not smart, and probably not what the drafters intended.”

The proposals detail 19 categories of items that will remain on the Munitions List, including: “Department of Defense-funded secondary or hosted payload, and specially designed parts and components therefore.”

Cooper agreed that the language — not talking about a given capacity or technology, but just the source of the funding — “is unusual in the export control environment.” She suggested that some of the proposed rulemaking’s language dates from several years back, and that those Defense Department officials most familiar with the U.S. military’s thinking about hosted payloads were out of the review loop.

John A. Ordway, a satellite export specialist at the Washington law firm Berliner, Corcoran & Rowe LLP, said the hosted payload language leaves too much room for confusion. For example, he said, at what point is a given payload considered “funded” by the Department of Defense? A payload financed by the private sector following an agreement that the U.S. military will lease it may be covered, or may not.

Similarly, the rule’s proposed changes to U.S. regulations on Earth observation satellites appear to reflect “the state of the art in the 1990s,” Cooper said, without taking into account the change in the global market’s assessment of what constitutes commercially available technology.

The new rules cover optical, radar and hyperspectral imaging satellites, and set clear technical parameters for what will remain on the Munitions List. The problem, according to industry officials, is that many of the technologies the rules are designed to restrict are easily available outside the United States and are being integrated into satellites owned by at least a dozen nations.

U.S. companies have been mostly absent from the growth in global Earth observation hardware exports, whose providers have been mainly from Europe and East Asia. U.S. companies have said they do not blame government rules for U.S. industry’s absence from this potential hardware-export market, however. 

 

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