ON May 13, the United States’ Department of State (DoS) and Department of Commerce (DoC) announced the much-awaited—by the U.S. space industry and its customers worldwide—(interim) final rules that relax export controls on commercial satellites, associated space and ground-segment components and subsystems, and related services ( Frontline , February 22, 2013).
The U.S. National Defence Authorisation Act, 2013, granted the U.S. President the authority to bring the export controls applicable to commercial satellites and related components and technology, which had been administered by the DoS since 1999, under the jurisdiction of the DoC. The controls are less restrictive under the DoC. The new rules are a result of the President exercising this authority largely on the basis of the recommendations of what is called the Section 1248 Report, jointly prepared by the DoS and the Department of Defence in April 2012.
Thus, the new rules transfer commercial satellites and related components from the U.S. Munitions List (USML) of the International Traffic in Arms Regulations (ITAR) of the DoS (Part 121.1 Category XV) to the Commerce Control List (CCL) of the Export Administration Regulations (EAR) of the DoC. This implies that commercial satellites and related items and technologies will no longer be treated as weapons or defence articles and defence services but as “dual-use” items. The U.S. space industry had always maintained that moving satellite-related items from the DoC’s to the DoS’ jurisdiction—which happened following the congressional determination that China had received restricted data and technology from U.S. satellite manufacturers after two Chinese launch failures in 1995 and 1996—had significantly affected its international competitiveness.
A U.S. DoC survey of the space industry (called “Deep Dive Assessment”, covering the period 2009-12), which was completed in May 2013 found that 995 entities (out of nearly 4,000) responded to the query on the impact of U.S. export controls on space products and services. Their responses are quite interesting (see table) and show that these controls have had a significant impact on their businesses: The value of lost sales opportunities in 2009-12 is estimated to be $1-2 billion. As an aside, from the perspective of the Indian Space Research Organisation (ISRO), the survey revealed that India constituted only 5 per cent of the U.S. space industry’s business with non-U.S. organisations and, more significantly, it did not see India as a significant competitor in space-related products/services (see graphs). However, the new reforms could change the picture.
On May 24, 2013, the DoS published the draft rules of the ITAR, which include the new Category XV list (carrying the items that would remain on the Munitions List) and a list of items that would move to the CCL. These closely reflected the Section 1248 Report, which had recommended that it would be in the U.S.’ national interest to move out of ITAR controls communication satellites that do not contain classified and sensitive technologies, remote-sensing satellites with performance parameters below certain thresholds, and systems, subsystems and components associated with these satellites (including ground-based telemetry, tracking and control systems) with performance parameters below certain thresholds. It also recommended that the export of satellites and associated systems and technologies above the thresholds should still be governed by the ITAR/USML.
Industry’s concernsWhile the U.S. space industry had by and large welcomed these changes, it was unhappy about some of the satellite categories and services still under the USML and conveyed this to the government during the 45-day period (until July 8, 2013) given for public comments. One of the industry’s major concerns was regarding suborbital spacecraft. The draft new Category XV of the USML has retained “man-rated suborbital, orbital, lunar, interplanetary or habitat” spacecraft. U.S. space companies such as Virgin Galactic and XCOR Aerospace already have plans to develop such spacecraft for suborbital spaceflights for space tourism, suborbital space science missions and orbital human spaceflight and market or operate such spacecraft from outside the U.S. as well. But their retention in the USML will make commercial exploitation of such plans difficult.
The industry’s other big concern was the emerging market of satellite servicing. Several U.S. companies are developing technologies to extend the life of satellites by refuelling them after they exhaust their fuel or by repairing them in space. However, the draft USML has retained such technologies as well by including spacecraft that “[P]rovide space-based logistics, assembly or servicing of any spacecraft (e.g., refuelling)” in Category XV. Another specific concern of the industry has been the upper limit of 35 centimetres for apertures on remote-sensing systems to bring them under the CCL. The U.S. industry had sought an increase in the limit to compete in the international arena, where commercial remote-sensing technology is growing at a tremendous pace.
The industry had expected the final rules to be published by the end of 2013, but the government shutdown in October 2013 contributed to the general delay in the process. The final rules were notified almost exactly a year after the draft rules were published after taking into consideration all the comments received. While the notification cannot be said to have satisfied the U.S. industry fully, the DoS did effect some minor changes triggered by the comments and also provided detailed clarifications on why certain items, which the industry felt had significant commercial potential, were retained under the USML.
The new rules have amended Category XV of the ITAR/USML to cover a more narrowly defined spacecraft (mainly military, intelligence, certain remote-sensing satellites, in particular those with synthetic aperture radar capabilities; satellites with classified components; and satellites with performance characteristics above certain threshold parameters) and related ground systems, components, software and technical data. Significantly, telemetry data are now excluded from the definition of technical data under the ITAR and will be subject to the EAR under the classification EAR99. (Items subject to the EAR that are not specified in any of the categories under the CCL are designated by the number EAR99. These generally do not require any export licence except when exported or re-exported to embargoed destinations.)
The rules further clarify that satellites subject to the EAR remain subject to it even if USML items are integrated into such satellites , unless such integration gives the otherwise EAR-controlled satellites capabilities described in Category XV. In the former case, the integrated USML items are termed “hosted payloads” as against the latter when they are termed “primary” or “secondary” payloads. The new rules describe in detail the distinctions between these payload categories.
The above rule, a significant departure from the present one, is known as the “see-through” rule, under which the presence of a single, non-critical ITAR-controlled part, such as a switch or a bolt, will render an entire foreign-made satellite subject to U.S. re-export controls. This resulted in worldwide customers, including ISRO, selecting non-U.S. satellite parts and components to avoid making the end product subject to the ITAR.
While the new rules have moved the jurisdiction of controls on the export of commercial satellites and related items to the DoC under its EAR, the launches of commercial satellites from a non-North Atlantic Treaty Organisation country or from a country that is not a major non-NATO ally of the U.S. will continue to be controlled by the ITAR (Section 124.15). As noted in an earlier article ( Frontline , February 22, 2013), this requirement directly impacts ISRO being able to provide launch services to U.S.-built satellites of external customers.
The concerns expressed by the U.S. industry have largely remained as they were in the draft rules except for minor tweaking done to clarify the reasons for retaining items under the USML. The final rule modifies the broad draft rule regarding “man-rated suborbital, orbital, lunar, interplanetary or habitat” with a qualification that ITAR controls apply only to such spacecraft “which have integrated propulsion other than that required for attitude control”.
To explain why such man-rated spacecraft were retained under the USML, Lou Ann McFadden, chief of the strategic issues division of the Defence Technology Security Administration, said: “These vehicles have the ability to deliver weapons of mass destruction, and they have the capability to come in very close proximity to national assets in space, and that close proximity can lead to some anti-satellite capabilities… if your vehicle, no matter what it is—manned or unmanned—has the capability to move between orbital planes, and has the ability to manoeuvre in space, that passes our threshold of potential anti-satellite capability and weapons of mass destruction delivery.”
Similarly, the same qualification of “integrated propulsion other than that required for attitude control” has been added to retain satellite-servicing technology under the USML, and the DoS has advanced the same argument of its concerns regarding the use of such technology as anti-satellite weapons. The aperture limit for remote-sensing systems continues to be the same as before, namely, 35 cm, and this is linked to the limit of 50 cm resolution set under U.S. law for the commercial sale of remote-sensing imagery. A 35 cm aperture would produce a sharper than 50 cm resolution image. The U.S. industry has been lobbying for decontrolling down to 25 cm resolution, and it is currently under debate in the U.S. The limit of 35 cm may change if the marketable resolution limit comes down. However, none of the U.S. industry concerns have any implications for ISRO’s future shopping needs except perhaps in the case of higher aperture remote-sensing systems for sub-metre resolution imagery.
In a parallel notification, the DoC too announced its (interim) final rules that detail how spacecraft and related items previously controlled by the ITAR will now be controlled by the EAR. To accommodate the items that have been migrated from the USML Category XV to the CCL, the DoC has created a new “500” series Export Control Classification Number. (The ECCN is a five-character alphanumeric classification used in the CCL to identify a specific dual-use item for export control purposes. It categorises items on the basis of their nature—that is, type of commodity, software or technology, and its respective technical parameters.) These items will now be classified under the new ECCNs 9A515, 9B515, 9D515 and 9E515.
Like all EAR-controlled items on the CCL, these new “500 series” commodities too will be subject to national security, regional stability, anti-terrorism, nuclear proliferation and missile technology considerations for export-licensing purposes. According to the EAR, there will be a “presumption of denial” of export licences to countries that face U.S. arms embargoes (known as Country Group D:5, which includes China, Cuba, North Korea, Sri Lanka, Sudan and Syria) and those that “support terrorism” (Country Group E:1, which includes Iran, Sudan and Syria). That is, these D:5 and E:1 countries do not benefit from the relaxed export controls.
Like all other EAR-controlled items, “500 series” items too will be subject to the de minimis provision of the EAR. It is applicable to foreign-made products that incorporate U.S.-made components, according to which a non-U.S. product (in this case, say, a satellite) will be subject to the export controls of the U.S. if the combined value of all U.S.-origin and EAR-controlled components incorporated therein exceeds 25 per cent of the value of the product itself. The provision will not be available for any non-U.S. product exported to U.S.-embargoed destinations (Country Groups D:5 and E:1), that is, a non-U.S.-made satellite bound for a U.S.-embargoed country, say China, cannot have any U.S.-made components.
These (interim) final rules will become effective from November 10 (180 days from the date of notification), but rules related to radiation-hardened electronic devices will be effective from June 27 itself (45 days from the date of notification). These rules are termed as “interim” because they are still open for public comments until June 27 and may have changes, if any, arising from them. It seems that at least one change relating to the higher upper aperture limit of remote-sensing systems is likely to happen.
ISRO’s perspectiveFrom ISRO’s perspective, the prospects of being able to provide launch services to U.S.-made satellites seem remote since the cumbersome ITAR controls still apply to satellite launches outside the U.S. However, relaxed controls on spacecraft components and subsystems, which ISRO has until now been sourcing from Europe and Japan (radiation-hardened devices, for example), could lead to the organisation looking at U.S. sources as well. ISRO/Antrix would do well to go over their international shopping lists carefully to see how U.S. companies can now be a source for specific subsystems and components in terms of cost and performance advantages.
But, most importantly, ISRO can now explore new opportunities for joint fabrication of satellites in association with U.S. companies. It may be recalled ( The Hindu , February 11, 2006) that in 2004, under the India-U.S. Next Steps in Strategic Partnership (NSSP), Boeing showed an interest in ISRO’s 2K and 3K satellite buses for possible joint fabrication of satellites for the international market. However, the negotiations fell through because of the complex ITAR controls involved in the process. But a similar joint venture of ISRO/Antrix with the European space company EADS Astrium, a wing of the company European Aerospace Defence and Space (EADS), has led to the joint fabrication of satellites W2M for Eutelsat (based on the I-3K bus) and Hylas for Avanti Communications (based on the I-2K bus). Boeing too had revived its interest in 2010, which did not, however, progress much. While one more joint venture may prove too much for ISRO/Antrix, ISRO could nevertheless explore the possibility.
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