Recent movement toward loosening export controls for commercial satellites and related items has that sector of U.S. industry crossing its fingers. Notably, the President recently signed into law an act loosening export controls.

The National Defense Authorization Act of Fiscal Year 2013 (“the Act”), signed on January 2, is a signature step in the movement to ease the constricted controls on exporting commercial satellites and their related items. The Act permits the president to determine the types of export controls the satellites and components will receive.

Until 1999, commercial satellites and their related parts were controlled under the Department of Commerce’s Export Administration Regulations (EAR). The EAR restrictions on exporting commercial satellites allowed for more freedom in international commerce, as in many cases licenses or additional authorization to export a satellite or item was not needed under the EAR.  As a result, U.S. manufacturers of satellites and related items were able to create a burgeoning industry in this field. However, the National Defense Authorization Act for Fiscal Year 1999 was enacted due to a scandal that arose when Chinese government officials appropriated U.S. military satellite technology after a Chinese rocket launcher that carried the U.S. satellite crash-landed in China. This incident, and a growing focus on enforcing export controls in general, led to commercial satellites and related items being moved to the jurisdiction of the Department of State’s International Traffic In Arms Regulations (ITAR).

From 1999 to present day, commercial satellites and related items have been controlled under the ITAR. ITAR items require a license for export, and have more prohibitions on who can receive the export. In the ITAR, commercial satellites and related items fell under enhanced controls that even required extensive extra documentation in some cases, such as if a satellite was to be launched from certain foreign countries. As a result of the enhanced controls, U.S. manufacturers of satellites saw a steady decrease in sales. Mainland European countries began to specialize in manufacturing satellites and related items, and soon became known for providing top quality products. In addition, they were not subject to the strict export controls that the U.S. companies experienced.

The current initiative to relax export controls on U.S. commercial satellites and related items involves moving these products back to the EAR, where many times a license or additional authorization is not needed prior to export. The impetus for the return to EAR control stems from a realization that most commercial satellites and related items do not require the strict control mandated by the ITAR to protect U.S. national security and U.S. proprietary technology. In addition, the President’s Export Control Reform program, which was first introduced in 2007, continues to make strides in streamlining various aspects of U.S. export control and rendering the country’s export program more efficient and adaptable to U.S. business needs, while still protecting national security interests. The Act reflects the recommendations of a joint report by the Department of State and Department of Defense, which found that many satellites and related items did not require the stricter controls provided under the ITAR.

It is important to note that the export control reform aimed at the satellite industry will mostly focus on satellites and related items in the commercial sector. Satellite products for military use will still remain under the stricter ITAR controls. Although it remains to be seen exactly what form the looser controls will take, the joint report recommended that the following should still fall under the more protective ITAR due to sensitivity:

• Satellites that perform a purely military or intelligence mission;
• Remote sensing satellites with high performance parameters;
• Parts and components unique to the above satellites and not common to dual-use satellites (those controlled under both EAR and ITAR);
• Services supporting foreign launch operations for ITAR and non-ITAR designated satellites;

The joint report also recommended that aspects mentioned below of satellites are more appropriately controlled by the EAR and Department of Commerce:

• Communications satellites that do not contain classified components;
• Remote sensing satellites with performance parameters below certain thresholds; and
• Parts and components associated with those satellites and with performance parameters below thresholds specified for items still controlled under ITAR.

However, sale of any satellite technology or indirect transfer will still be prohibited to China, North Korea, or any country identified as a state sponsor of terrorism. While the President has signed the Act into law, it still requires executive branch determinations in order to provide specific guidance, so we are still a long way from the official easing of export controls on commercial satellites and related items. However, it would not be surprising if the Presidential guidance is issued soon this year.

Written By: Jennifer Horvath, Attorney