Transcript Export and Re-Export - International trade

Quynh Tran
Saudamini Zarapkar
EXPORT CONTROLS AND THE U.S.
SATELLITE INDUSTRY
What are exports controls?
 Export Control regulations are federal laws that prohibit the
unlicensed export of certain commodities or information for
reasons of national security or protections of trade.
 The Department of Commerce’s Bureau of Industry and
Security (BIS) is responsible for implementing and enforcing
the Export Administration Regulations (EAR), which regulate
the export and reexport of most commercial items.
 The EAR do not control all goods, services, and technologies. Other
U.S. government agencies regulate more specialized exports.
What are export controls?
• Any item that is sent from the United States to a
foreign destination is an export. “Items” include
commodities, software or technology, circuit
boards, automotive parts, blue prints, retail
software packages and technical information.
 The items that BIS regulates as “dual-use” – items that have
both commercial and military or proliferation applications –
but purely commercial items without an obvious military use
are also subject to the EAR.
Problem Overview
 In the late 1990s, Congress made satellite technology
subject to International Traffic in Arms Regulations, or
ITAR, forcing companies to obtain a State Department
license before selling products or sharing information
with businesses and governments overseas.
 The rules were implemented to protect national
security and competitiveness, but they also created
new regulatory hurdles for companies and made them
slower to deliver products.
 Satellite industry advocates and executives said other
nations were able to gain a competitive advantage and
build up their own indigenous capabilities.
Key Provisions of the Arms Export Control
Act
•
Provisions are located in US Code Title 22 Chapter 39 Subchapter III Section
2778
•
(a) Presidential control of exports and imports of defense articles and
services, guidance of policy, etc.; designation of United States Munitions List;
issuance of export licenses; negotiations information –
•
(b) Registration and licensing requirements for manufacturers, exporters, or
importers of designated defense articles and defense services
•
(c) Criminal violations; punishment for violation of the Act
•
(d) Enforcement powers of President
Key Provisions cont.
 (e) Periodic review of items on Munitions List;
exemptions
 (f) Identification of persons convicted or subject
to indictment for violations of certain provisions
 (g) Judicial review of designation of items as
defense articles or services
 (h) Report to Department of State
National Defense Authorization
Act for Fiscal Year 1999
 On October 17, 1998, President Clinton signed into
law H.R.3616, the Strom Thurmond National
Defense Authorization Act for Fiscal Year 1999. In
addition to authorizing FY 1999 appropriations for
the Department of Defense, Section 1513 of the Act
transfers jurisdiction over commercial satellite
exports from the Commerce Department Commerce
Control List (CCL) to the State Department U.S.
Munitions List (USML), effective March 15, 1999.
Problems resulting from Export Controls for the U.S.
Satellite Industry
•
Congress made satellite technology subject to ITAR in the late 1990s as they
were a “dual use” item, i.e. they could have both commercial as well as
potential military uses.
 ITAR: International Traffic in Arms Regulations
 Set of government regulations that control the export and import of defenserelated articles and services on the United States Munitions List.
 Enacted in 1976 during the Cold War with USSR and were intended to implement
unilateral arms export controls

The National Defense Authorization Act for Fiscal Year 1999 transferred
jurisdiction over commercial satellite exports from the Commerce
Department's Commerce Control List (CCL) to the State Department's U.S.
Munitions List (USML)
 required all commercial satellites, satellite components, associated
technical data, and related ground equipment to be treated as
“munitions” for export licensing purposes, regardless of their technical
sensitivity.
Problems (continued)

Rules were implemented to protect national security and competitiveness,
but they also created new regulatory hurdles for commercial satellite
companies
 The new regulations treated satellites as potential military objects, and
thus required DOD monitors to be present at almost all interactions with
foreign customers and suppliers.
 Regulations also do not differentiate between “friendly” and “unfriendly”
countries, resulting in the same strict licensing requirements for all
foreign markets, regardless of potential military risk.

U.S. government enforcement increased dramatically in regards to the
export regulations of satellites.
 The State department published 29 instances of Consent Agreements
(agreements entered into by parties charged with breaches of ITAR) since
1999. Compare this to the 12 Consent agreements in the preceding 22
years.
Issue: Competing in the Satellite Market
 Before satellite companies could contract with foreign
parties, they have to obtain DSP-5 export licenses and
Technical Assistance Agreements (TAAs)
 Manufacturers have to negotiate a TAA that allows a meaningful
technical interchange to take place but which also satisfies the State
Dept.
 Because the majority of satellite sales by U.S. manufacturers involve
some foreign entities, either subcontractors, launch providers, foreign
insurers and of course foreign customers, a myriad of export licenses
are required through the design and manufacturing phase.
 Lack of State dept. personnel (at least at the beginning) and
uncertainty over the legislation’s mandate caused a significant
slowdown in granting of export licenses, sometimes by several
months.
Issue: Competing in the Satellite Market

Bureaucracy impeded U.S. companies from delivering products as quickly.

Other nations have been able to gain a competitive advantage and build up their
own indigenous capabilities in the meantime.
 U.S. share of the satellite market has fallen from 73 percent in 1998 to less than
30 percent

Foreign companies have used the U.S. export controls to sell prospective buyers on
their products built outside the U.S.
 “The European companies developed a product that they branded as ITARfree, so in other words they didn't use any subcomponents built in the United
States. They did that specifically because they knew they could market that
satellite around the world and say to the customer, ‘Well, look, you don't have
to put up with those U.S. regulations.' ” ~ Barron Beneski, VP of corporate
Communications at Orbital Sciences.
Policy Proposal
 Most technologies employed by major U.S. satellite suppliers are
employed worldwide, so efficiency and ability to respond quickly and
cost-effectively are the discriminating factors.
 Faster turnover in licensing is needed. This can be accomplished by:

Reducing the number of licenses required for foreign interactions, i.e. issuing
a single license for a single commodity
 Fast-tracking licensing requests that are considered “routine”
 Creating a single control list, single licensing agency, unified information,
technology system, and enforcement coordination center
 Differentiate between hostile countries and allies in order to lessen
licensing restrictions between trading partners
 Differentiate between sensitive and non-sensitive technology
Recent Legislation: What has been done?
 H.R. 3288: Safeguarding United States Satellite Leadership and
Security Act of 2011

The bill would authorize the President to remove satellites and related
components from the U.S. Munitions List, subject to certain restrictions
and Congressional oversight.
 Prohibits any satellite or related component from being transferred,
directly or indirectly, to: (1) the government of China (PRC) or any PRC
entity or person; or (2) the government of Cuba, Iran, Sudan, Syria, or
North Korea or any entity or person of Cuba, Iran, Sudan, Syria, or North
Korea.
 It was Referred to Committee in Nov 2011 and is awaiting to be reported to
the Committee and must be passed by the House and Senate before being
signed off by the President.
 The Obama administration has called for a review of federal export
controls as part of its effort to double U.S. exports by 2015. A White
House statement issued in December said the lists of products that
require federal approval before being sold should be consolidated
and made more detailed
Sources
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http://www.sia.org/PDF/SIA_Press_Release_On_Introduction_of_HR_3288_
Satellite_ITAR_Reform_Bill_11.2.11.pdf
Washington Post Article http://internationaltraderelations.com/Article.Export%20Controls%20-%20Satellite%20(WP%203.28.11).pdf
https://www.aiaa.org/uploadedFiles/Issues_and_Advocacy/Policy_Papers/Inf
ormation_Papers/1999_Information_Papers/ExportControl-1999.pdf
https://my.tennessee.edu/portal/page?_pageid=43,618777&_dad=portal&_sc
hema=PORTAL
http://www.bis.doc.gov/licensing/exportingbasics.htm
http://www.law.cornell.edu/uscode/text/22/2778
http://uscode.house.gov/uscodecgi/fastweb.exe?getdoc+uscview+t21t25+2807+0++%28%29%20%20AND%
20%28%2822%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20
w%2F10%20%282778%29%29%3ACITE%20%20%20%20%20%20%20%20
%20
http://pmddtc.state.gov/regulations_laws/aeca.html
http://www.sia.org/news-resources/