Launching a change?

A recent law passed in the U.S. that will ease the export controls on commercial satellites has the potential to make it simpler for ISRO to exploit the international market for launch services.

PSLV C-21, taking off from the Satish Dhawan Space Centre in Sriharikota on September 9, 2012, carrying foreign satellites into space.

ON January 3, United States President Barack Obama signed into law the National Defence Authorisation Act (NDAA 2013), which includes changes in the export controls on communications satellites. This is obviously of significance to the Indian Space Research Organisation (ISRO). The legislation, passed by Congress on December 21, 2012, gives the President the authority to ease the export controls applicable to “commercial satellites and related components and technology”.

Now the President can transfer commercial satellites from the U.S. Munitions List (USML) of the International Traffic in Arms Regulations (ITAR) of the Department of State (Part 121.1 Category XV) to the less restrictive controls of the Commerce Control List (CCL) of the Export Administration Regulations (EAR) of the Department of Commerce (DoC). This means that satellites and related items will no longer be treated as weapons or defence articles but as “dual-use” items, as they indeed are. In fact, satellites are the only dual-use items that are on the USML, and therefore, the President had no authority to ease controls, which the U.S. space industry has consistently maintained reduced its international competitiveness.

The items in this category that the departments believe are more appropriately designated as dual-use items include

Communications satellites that do not contain classified components;

Remote-sensing satellites with performance parameters below certain thresholds; and

Systems, subsystems, parts and components associated with these satellites (including ground-based telemetry, tracking and control systems) and with performance parameters below thresholds specified for items remaining under the ITAR.

A fundamental difference between the ITAR and the EAR process is that under the former there is an a priori “presumption of denial”, and the U.S. Directorate of Defence Trade Controls (DDTC) determines the licence approval on the basis of its assessment whether the item or related service poses any significant threat to national security. Under the EAR process, on the other hand, there is a “presumption of approval”, and the Bureau of Industry and Security (BIS) specifically identifies only those items and the countries of destination for which an export licence is required, while still allowing for exceptions under certain circumstances. This shuttling of the jurisdiction of communications satellites between the Departments of State and Commerce is not new. In October 1996, these items were moved from the USML to the CCL, which was also in conformity with the multilateral Wassenaar Arrangement. Significantly, an amendment in September 1997 concerning commercial communications satellites also allowed the export of satellite fuel, ground support equipment, test equipment, payload adapter/interface hardware and replacement parts to be controlled by the EAR when included with a specific commercial communications satellite. This provision allowed exporters to obtain a single licence for satellite launches.

However, the jurisdiction of U.S.-origin satellites and related items was moved back to the State Department’s USML under provisions of the Strom Thurmond NDAA of 1999 (Section 1513). This was after a Congressional investigation found that China had received restricted technical data and technology from the U.S. satellite manufacturers who built the satellite payloads that were lost in two launch mishaps in 1995 and 1996. China had requested this information ostensibly to investigate the launch failures. The reversion this time is part of the broader exercise in export control reforms that the Obama administration initiated in August 2009.

The U.S. administration has still to take a number of steps before the revision takes effect, which is not expected to happen before 2013 end at the earliest. Thus, when it happens, the status that prevailed until 1999 for the export of commercial satellites and related activities will be restored. Significantly, this reform will not apply to China and other countries subject to U.S. trade and arms restrictions, including North Korea, Iran, Cuba, Syria and Sudan. The President may, however, waive this prohibition on a case-by-case basis.

Section 1248 report

In April 2012, a report prepared jointly by the U.S. Departments of State and Defence recommended that commercial satellites and related components, technology and services be moved from the USML to the CCL and stated that the move would be in the national security interests of the U.S. This report was mandated by Section 1248 of the NDAA 2010 for export control reforms in the space sector and is hence called the Section 1248 Report.

The changes envisaged under the NDAA 2013 are stated to be in line with the recommendations of this report. Significantly, neither this report nor any other proposed legislation has recommended that launch-related technologies and services be moved from the ITAR, which means that they will continue to form part of the USML (Section 1514 et seq . of the Strom Thurmond Act). From the perspective of ISRO, therein lies the real crux of the matter.

The cumbersome licensing process under the ITAR (see The Hindu , February 11, 2006) for launching either U.S.-made satellites or satellites with significant U.S.-made components by India’s launch vehicles has been a major stumbling block to ISRO’s being able to exploit the international market for its launch services, especially with its workhorse, the Polar Satellite Launch Vehicle (PSLV). In the wake of the eased controls on satellites, this, in principle, should become simpler. But, because of the point made above, whether this really happens remains to be seen. Indeed, as K. Radhakrishnan, Chairman, ISRO, said: “This certainly is a positive step but we have to see what the revision actually means.”

As a result of the changes, the different agreements with the exporter that are required at different stages before a licence is granted for the export of a communications satellite —namely, the Technical Assistance Agreement (TAA) and the Technology Safeguards Agreement (TSA)—will now be replaced by a single export licence from the DoC, which may even include provisions of the September 1997 amendment. But to be able to launch such satellites, a Commercial Launch Service Agreement (CLSA) is required as well. This will still involve controls of the State Department because integration of the satellite with the launch vehicle would require the exchange of technical data and services that are still under the purview of the State Department vide Section 1514 of the Strom Thurmond Act. This is because the technology for payload integration with missiles is the same.

Section 1514 mandates the following: (1) A technology transfer control plan approved by the U.S. Secretary of Defence and an encryption technology transfer control plan approved by the Director of the National Security Agency. (2) Monitoring of all aspects of a launch, including technical assistance and technical data, by the Secretary of Defence to ensure that no unauthorised transfer of technology occurs.

The monitoring as mandated by the Act is so exhaustive that, not unreasonably, ISRO has viewed on-site monitoring of launch services by U.S. personnel as intrusive, not to mention the fact that the Act also mandates that costs of such monitoring services are to be fully borne by ISRO. This development is likely to figure importantly in the next meeting of the India-U.S. Joint Working Group on Civil Space Cooperation, scheduled to take place this summer in Washington, says Radhakrishnan. To recall, the working group has been discussing for long, without making much headway, to find ways to simplify satellite export control procedures and to arrive at a CLSA for India. The transfer of the jurisdiction from the ITAR to the EAR could result in significant forward movement in this regard.

“But more than the security-related aspects, which are now generally accepted in the business the world over, it is the trade-related conditions that have proved to be the real hurdle,” says K.R. Sridharamurthy, the former managing director of Antrix Corporation of ISRO and the current vice-president of the Paris-based International Institute of Space Law, who was involved with the India-U.S. negotiations. “These two aspects are independently negotiated in the working group,” he added. Indeed, India and the U.S. negotiated a TSA on July 20, 2009, which has facilitated export licences for launching some foreign civil and non-commercial satellites from India.

The U.S. stand on commercial launches has been that launch costs should follow market principles and not be subsidised by the government. “Unlike the U.S., where this has been fully industrialised and the state performs only the anchor-parent role, our programme is still evolving. Unfortunately, this is not fully appreciated,” he pointed out.

Missile proliferation-related security concerns apart, by retaining Section 1514 under the USML/ITAR, the U.S. is actually creating business for its launch service providers. A country may now be able to import a U.S.-made satellite or satellite components more easily, but by making its launch from elsewhere as difficult as before, the new law is ensuring that the buyer will be forced to turn to U.S. launch services.

“As regards a CSLA with India, as long as rules are the same for both the sides, there is no issue,” Sridharamurthy said. “But the U.S. wants us to agree on some conditions which are not really reciprocal, especially with regard to data exchange. Their argument is that data are not controlled by the government. But nothing seemed beyond resolution, and we were pretty close to agreement,” he added.

“We should in any case be prepared to be able to take advantage of the opportunities that might open up,” Radhakrishnan said. Important for this is quicker turnaround times for launches so that ISRO is able to provide at least five to six launches a year, pointed out Sridharamurthy. But this requires a larger turnover of launch vehicle fabrication and integration. Towards this ISRO has been seriously considering moving these routine operations to industry, including the private sector. In fact, already nearly 80 per cent of value addition to the PSLV comes from industry, with ISRO maintaining strict quality control and carrying out the final vehicle integration. Now, with the new changes in the export control of U.S.-made satellites, this will assume greater importance and urgency.

“In its own interest, ISRO must launch a strong programme to create capacities to become competitive,” Sridharamurthy said. “The buyer-seller relationship has to evolve and become innovative. We also need to prepare on the legal front, particularly with regard to launch insurance. We do not have launch insurance companies, and at present insurance gets included in launch costs. The government policy should be clear on how it wants to deal with these aspects. We have not made anything into a law,” he added.

A discussion on these aspects between ISRO and the Confederation of Indian Industry has been going on for some time, and in the meeting on January 11, the topic of the revised export controls was discussed. According to Radhakrishnan, there was a positive response from Adi Godrej, the CII chief, and it was decided to form a group involving all the stakeholders and sort out some of the issues within the next three to four months.