The Defense Department released a report today assessing the risk of transferring satellites and space-related items from the U.S. Munitions List (USML). The so-called “1248 Report” was requested from the Secretaries of State and Defense in Section 1248 of the National Defense Authorization Act for FY 2010. The White House also issued a Fact Sheet on the report.
“For the sake of national and economic security, the Departments recommend that authority to determine the appropriate export control status of satellites and space-related items be returned to the President. Specifically: The President should be authorized to determine the export control jurisdiction status of satellites and related items; and The Department of Defense should be authorized to determine the need to apply special export controls to U.S. companies providing technical services in support of foreign satellite or launch vehicle development and associated launch operations, and to be reimbursed as appropriate.”
Appendix 1 of the report includes a draft proposal of USML Category XV (Satellite and Related Items), and Appendix 2 includes a draft proposal for CCL ECCN 9X515 (Spacecraft and Related Commodities). These two proposals will need legislation to be enacted.
This issue was examined by the House Foreign Affairs Committee in February, with testimony by the Aerospace Industries Association and Satellite Industry Association. Earlier this year, AIA released a study on satellite export policy that outlined the case for modernized export controls on satellites and related components.
Rep. Howard Berman and Rep. Don Manzullo also introduced legislation (H.R. 3288) last fall that would allow the president to shift satellites from the USML to the CCL.
The NAM has been a leading advocate on efforts to make the U.S. export control system more predictable, efficient and transparent. We have urged Congress to remove its long-standing mandate requiring that all satellites and related items be regulated by the International Trade in Arms Regulations (ITAR) on the USML, without regard to their technological sensitivity. The current one-size-fits-all satellite export controls were intended to enhance national security, but the requirement has actually undermined the nation’s security and the U.S. satellite industry’s global competitiveness.
In 1999, the year all satellites were moved to the U.S. Munitions List by the FY1999 National Defense Authorize Act, the U.S. share of world satellite manufacturing revenue dropped from 63%. Within two years, that market share dropped to 40 percent. By 2008, it had fallen to 30 percent.
A recent study concluded that the shift in 1999 that put all satellites and their components on the USML cost the satellite manufacturing industry $20.8 billion between 1999 and 2009, which translates into more than 27,000 jobs lost annually during that time period.
The U.S. satellite industry is growing, but it isn’t growing as fast as our competitors in Japan, China and Europe. Futron’s 2011 Space Competitiveness Index, an analysis of the space industry in 10 countries, found that only the United States had shown four straight years of competitiveness declines. The study stated, “By contrast, Russia, China and Japan have improved their own space competitiveness by 12 percent, 27 percent and 45 percent, respectively.”
These findings have potentially dramatic implications for U.S. manufacturers of satellites and related components. With federal space budgets under pressure and satellite export policies that hinder export sales, manufacturers may be forced to reduce or eliminate involvement in the space sector. This scenario could lead to a devastating loss of space capabilities that are essential to national security.
Lauren Airey is director of trade facilitation policy, National Association of Manufacturers.