Defense Trade Advisory Group Review of Proposed Bills for Transfer of Satellites and Related Components from the USML to CCL Plenary Session - Washington, DC July 26, 2012
Working Group Members • • • Dale Rill, Working Group Co-Chair, Honeywell International Inc. Joy Robins (Speicher), Working Group Co-Chair, Space Systems/Loral, Inc. Lisa Bencivenga, Lisa Bencivenga LLC Greg Bourn, Finmeccanica North America Dennis Burnett, EADS North America, Inc. Brooke Butler, Globaleyes Dava Casoni, University of Southern California, Institute for Creative Technologies Rebecca Conover, Intel Corporation Steve Cope, Avion Solutions, Inc. Kim Depew, GE Aviation Alfred Furrs, Johns Hopkins University Applied Physics Laboratory Greg Hill, DRS Technologies, Inc. • • Jeremy Huffman, Huffman Riley Kao PLLC Sal Manno, Inmarsat, Inc. Michael Miller, University of Central Florida, Office of Research and Commercialization Terry Otis, Otis Associates, LLC Bill Schneider, International Planning Services, Inc. Sam Sevier, DTAG Co-Chair, Sam Sevier LLC Debbie Shaffer, Southwest Research Institute Bill Wade, DTAG Co-Chair, Raytheon Company 2
Discussion Agenda • Purpose • General Comments • Specific Parts of the Review • Overall Assessment 3
DTAG Task - Purpose • Review two proposed pieces of legislation • • House Bill amendment to the FY 2013 National Defense Authorization Act (NDAA) Senate Bill 3211 § Both proposed Bills grant the authority to move satellites and related components and technology from the U. S. Munitions List (USML) to the Commerce Control List (CCL) 4
General Comments • Considered the Fiscal Year 2010 “Report to Congress” Section 1248 of the NDAA – “Risk Assessment of the United States Space Export Control Policy • Took note of the new definition of “Specially Designed, ” as published in the Department of State and Department of Commerce proposed rules 5
General Comments • DTAG members support the return of the authority to the President to determine whether satellites and related components and technology are controlled under the USML or CCL • The tasking team compared the language in the House and Senate Bills and analyzed the potential impact to industry and academia, and to the USG with respect to direct or indirect effects • The DTAG review process and methodology included reviewing each relevant section of the proposed Bills to include the House Bill Subtitle E, Section 1241 – 1247 and Senate Bill 3211 Sections 1 – 6 6
Overall Assessment • DTAG concurs with the proposal to move certain satellites to the CCL • Parts of the Bills need clarification to better understand the intent of certain language (e. g. definition of satellite, enumeration of all items “to the extent practicable, ” applicability to just USML XV or all USML categories) • The House version appears more restrictive and burdensome for the USG and industry • The Senate version appears to uphold existing authorities of the President • The 1248 Report by Do. S/Do. D appears to establish a strong foundation or baseline that supports the implementation of transferring certain satellites to the CCL • Reporting could potentially be onerous on the USG and/or industry/academia Industry drift - Technology advancements/maturation - Foreign availability 7
Analysis of the Bills – “House Sections” 1241 - 1247 § 1241(a) Language Observation Subject to subsection (b), the President is authorized to remove commercial satellites and related components and technology from the United States Munitions List, consistent with the procedures in section 38(f) of the Arms Export Control Act (22 U. S. C. 2778(f)). • Inconsistent terminology among sections § 1241(a), § 1241(d), § 1244(b), § 1246(b) • § 1247 does not provide clarification regarding terminology • The term “commercial satellite” appears to be restrictive and inconsistent • The outcome produced by the language appears inconsistent with the intent of the legislation Impact • Limiting to commercial satellites fails to take into consideration other spacecraft and related components that are not enumerated in other USML Categories (e. g. scientific, research & experimental satellites, rovers, etc. ) 8
Analysis of the Bills – “House Sections” 1241 - 1247 § 1241(b) Language The President may exercise the authority provided in subsection (a) only if the President submits to the appropriate congressional committees a determination that the transfer of commercial satellites and related components and technology from the United States Munitions List does not pose an unacceptable risk to the national security of the United States. Such determination shall include a description of the risk-mitigating controls, procedures, and safeguards the President will put in place to reduce such risk to an absolute minimum. Observation • “unacceptable risk” is undefined • “risk-mitigating controls” are unspecified • “safeguards” undefined Impact • Undefined or ambiguous terminology complicates regulatory oversight and potentially impacts industry’s ability to comply with undefined safeguards. • Risk mitigating controls to an “absolute minimum” (undefined) may be impossible for industry to satisfy, particularly if more restrictive than current national security requirements. 9
Analysis of the Bills – “House Sections” 1241 - 1247 § 1241(c) Language Prohibition. --No license or other authorization for export shall be granted for the transfer, retransfer, or reexport of any commercial satellite or related component or technology contained on the Commerce Control List to any person or entity of the following: (1) The People's Republic of China. (2) Cuba. (3) Iran. (4) North Korea. (5) Sudan. (6) Syria. (7) Any other country with respect to which the United States would deny the application for licenses and other approvals for exports and imports of defense articles under section 126. 1 of the International Traffic in Arms Regulations. Observation • The proposed language lists “prohibited countries” and 126. 1 as a whole rather than deferring to the authority of State (AECA), Commerce (EAA) and Treasury (OFAC) • “No license or other authorization…” appears to negate the authority of State and Commerce to approve licenses Impact • As country sanctions change this legislation impedes the Administration’s ability to revise its policy. • Licenses would be denied for the listed countries and all 126. 1 countries (not just 126. 1 a) irrespective of intended end -use, reason for sanctions, and other legislative authority such as Presidential Waiver under the Tiananmen Square Sanctions. 10
Analysis of the Bills – “House Sections” 1241 - 1247 § 1241(d) Language Report. -(1) IN GENERAL. --Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the Director of National Intelligence shall submit to the appropriate congressional committees on efforts of state sponsors of terrorism, other foreign countries, or entities to illicitly acquire commercial satellites and related components and technology. (2) FORM. --Such report shall be submitted in unclassified form, but may contain a classified annex. Observation • Industry’s role in the reporting mandates or data collection is undefined. • Tasking is to the Director of National Intelligence and the team did not have insight as to whether this information was already being gathered or was a new requirement (duplicative). Impact • Uncertainty regarding industry and academia role in supporting annual reporting activities by the DNI. 11
Analysis of the Bills – “House Sections” 1241 - 1247 § 1242(a) Language In General. --Not later than 60 days after the end of each calendar quarter, the President shall transmit to the Committee on Banking, Finance, and Urban Affairs of the Senate and the Committee on Foreign Affairs of the House of Representatives a report containing a listing of all licenses and other authorizations to export commercial satellites and related components and technology contained on the Commerce Control List. Observation • Quarterly reporting rather than annual • Concerns regarding the intent to capture all transactions (licensable, NLR, and exemption/ exception) or specific license authorizations issued Impact • Unclear what industry’s role would be in supporting this reporting requirement. • Quarterly reporting is burdensome to all. Adverse impact to industry with the increased reporting requirements. • If the report is made available to the public, it may infringe on proprietary company activities. 12
Analysis of the Bills – “House Sections” 1241 - 1247 § 1243 Language Observation Section 38(f)(1) of the Arms Export Control Act (22 U. S. C. 2778(f)(1)) is amended by striking the last sentence and inserting the following: ``Such notice shall include, to the extent practicable, an enumeration of the item or items to be removed and describe the nature of any controls to be imposed on the item or items under any other provision of law''. • The extent of “enumeration of the item or items” is unclear in light of “to the extent practicable” (what level of enumeration is required? ) • Such “enumeration” is imposed on all items on the USML. • The AECA already requires the President to inform Congress of his intent to remove items from the USML. • Industry and academia are uncertain how enumeration would apply to “technology” instead of a listing of hardware items. Impact • If in order to move commercial satellite parts and components to the CCL, complete enumeration is required, it would be very difficult given that on a single satellite build there are: • From 80 to over 150 suppliers (US and foreign) • Parts average 69, 500 components, representing 3930 unique assemblies and 8380 unique parts (at ~12 levels of indenture) • Since the language isn’t specific to satellites, this can negatively impact the entire export control reform initiative. • If a candidate item for movement to the CCL is inadvertently not included on the notice to Congress, that item would remain under USML thereby retaining higher level controls than required for national security purposes and multiagency licensing requirements. 13
Analysis of the Bills – “House Sections” 1241 – 1247 § 1244(a) Language In General. --Not later than 120 days after the date of the enactment of this Act, the Attorney General and Secretary of Homeland Security shall submit to the appropriate congressional committees a report that contains an assessment of the extent to which the terms and conditions of an exemption foreign countries from the licensing requirements of the Commerce Munitions List (or analogous controls for commercial satellites and related components and technology) contain strong safeguards. Observation • The criteria for “strong safeguards” are not defined • This section is for reporting on country exemption for licensing of munitions – it’s unclear if commercial satellites will be “munitions” on the CCL Impact • Industry and academia may decide to apply for unnecessary licenses due to uncertainty regarding “strong safeguards” • Industry and academia are uncertain whether license exceptions would be authorized before this report is issued analyzed. This would result in licensing of CCL items that currently qualify for ITAR exemption. • See 1244(b) on next page 14
Analysis of the Bills – “House Sections” 1241 - 1247 § 1244(b) Language Matters to Be Included. --The report shall include a compilation of sufficient documentation relating to the export of munitions, commercial spacecraft, and related technical data to facilitate law enforcement efforts to effectively detect, investigate, deter, and enforce criminal violations of any provision of the Export Administration Regulations, including efforts on the part of state sponsors of terrorism, other foreign countries, or entities to illicitly acquire such controlled United States technology. Observation • “Sufficient documentation” and “commercial spacecraft” are not defined Impact • Reporting requirements levied on the AG and DHS would likely require significant input from industry and academia. • If EAR exceptions cannot be used immediately, licenses would be required for items that currently qualify for ITAR exemption. 15
Analysis of the Bills – “House Sections” 1241 - 1247 § 1245(a) Language Observation Establishment of Monitoring Program. --In order to ensure accountability with respect to the export of munitions and related technical data on the Commerce Munitions List, the President shall establish a program to provide for the end-use monitoring of such munitions and related technical data. • Team was unclear whether this was intended to be a new end-use monitoring program since end-use monitoring programs already exist within State, Commerce, and Defense. • Language seems to include monitoring for all “munitions and related technical data” and not limited to satellites. Impact • Language suggests a new monitoring program, which will lead to an unpredictable increase in cost to industry and academia. 16
Analysis of the Bills – “House Sections” 1241 - 1247 § 1245(b) Language Report. --Not later than 180 days after the date of the enactment of this Act, and annually thereafter, the President shall submit to Congress a report describing the actions taken to implement this section, including a detailed accounting of the costs and number of personnel associated with the program established under subsection (a). Observation • Will there be end use monitoring and reporting costs levied upon industry? Impact • An additional monitoring program could lead to an increase in monitoring and reporting cost to industry and academia. 17
Analysis of the Bills – “House Sections” 1241 - 1247 § 1246(a) Language Interagency Review. --Subject to the procedures in section 38(f) of the Arms Export Control Act (22 U. S. C. 2778(f)), the President shall ensure that, through interagency procedures or regulations, the Secretary of State, the Secretary of Defense, the Secretary of Commerce, and as appropriate the Director of National Intelligence concur on all subsequent modifications to Category XV of the United States Munitions List (relating to spacecraft systems and associated equipment). Observation • Interagency review is consistent with current practice Impact • No impact to industry and academia 18
Analysis of the Bills – “House Sections” 1241 - 1247 § 1246(b) Language Annual Report. -(1) IN GENERAL. --Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the President shall submit to the appropriate congressional committees a report on the results of the interagency reviews required by subsection (a). (2) MATTERS TO BE INCLUDED. -- ………. Observation • The matters to be included in the report are quite extensive and include: review of space-related technologies on the USML, national security risk in removing those items from the USML, other nations’ export policies, and provide recommendations Impact • Uncertain of the extent of the report and whether it will impact industry and academia. 19
Analysis of the Bills – “House Sections” 1241 - 1247 § 1247 Definitions (2) COMMERCIAL SATELLITES AND RELATED COMPONENTS AND TECHNOLOGY. --The term ``commercial satellites and related components and technology'' means-(A) communications satellites that do not contain classified components, including remote sensing satellites with performance parameters below thresholds identified on the United States Munitions List; Observation • A number of terms in the Bill are not defined, including the term “spacecraft, ” “strong safeguards, ” etc. Impact • Confusion regarding multiple terms being used to describe COMSATS 20
Analysis of the Bills – “House Sections” 1241 - 1247 No Comments Offered Language contained under the referenced sections provides definitions clarification between the various Congressional Committees. Negligible reference to the purpose of the group’s tasking. Sections § 1241 (e) § 1242 (b) § 1244 (c) 21
Analysis of the Bills – “Senate Bill” 3211 Section 1 - 6 Section 1: This Act may be cited as the ‘‘Safeguarding United States Satellite Leadership and Security Act of 2012’’. Section 2: AUTHORITY TO DETERMINE APPROPRIATE EXPORT CONTROLS FOR SATELLITES AND RELATED ITEMS. Notwithstanding any other provision of law, the President is authorized to determine the appropriate export controls of satellites and related items and transfer such items based on national security and foreign policy objectives from the jurisdiction of the International Traffic in Arms Regulations (22 C. F. R. part 120 et seq. ) to the Export Administration Regulations (15 C. F. R. part 730 et seq. ), consistent with the procedures in section 38(f) of the Arms Export Control Act (22 U. S. C. 2778(f)). Observations & Impact • Returns the authority to the President to determine whether satellites and related components and technology are controlled under the USML or CCL • “Satellites” not defined • Supports procedures set forth in section 38(f) of the Arms Export Control Act (AECA) 22
Analysis of the Bills – “Senate Bill” 3211 Section 1 - 6 Section 3. PROHIBITION ON TRANSFERS TO THE PEOPLE’S REPUBLIC OF CHINA. No satellite or related item made subject to the jurisdiction of the Export Administration Regulations pursuant to section 2 may be transferred, directly or indirectly, to the Government of the People’s Republic of China or any entity or person in or acting for or on behalf of the People’s Republic of China or launched in the People’s Republic of China or as part of a launch vehicle owned, operated, or manufactured by the Government of the People’s Republic of China. Section 4. PROHIBITION ON TRANSFERS TO STATE SPONSORS OF TERRORISM AND NORTH KOREA. No satellite or related item made subject to the jurisdiction of the Export Administration Regulations pursuant to section 2 may be transferred, directly or indirectly, to— (1) North Korea, Cuba, Iran, Sudan, Syria, or any country that is designated by the Secretary of State as supporting international terrorism under section 6 of the Export Administration Act (50 U. S. C. App. 2405(j) (as continued in effect pursuant to the International Emergency Economic Powers Act; 50 U. S. C. 1701 et seq. )), section 40 of the Arms Export Control Act (22 U. S. C. 2780), or section 620 A of the Foreign Assistance Act of 1961 (22 U. S. C. 2371); (2) any entity or person in or acting for or on behalf of such a country; or (3) as part of a launch vehicle owned, operated, or manufactured by the government of such a country. Observations & Impact • Concerns related to specifically listed “prohibited countries” in legislation rather than deferring to the authority of State (AECA), Commerce (EAA) and Treasury (OFAC) - Same as House Bill 23
Analysis of the Bills – “Senate Bill” 3211 Section 1 - 6 Section 5. RULE OF CONSTRUCTION REGARDING PRESIDENTIAL WAIVER AUTHORITY. Nothing in this Act shall be construed as removing or limiting the waiver authority of the President under part 126 of the International Traffic in Arms Regulations (22 C. F. R. part 126), as in effect on the date of the enactment of this Act. Section 6. RULE OF CONSTRUCTION REGARDING SPECIAL EXPORT CONTROL AUTHORITIES. Nothing in this Act shall be construed as removing or limiting existing authorities of the President under section 1514 (a) and (b) of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public Law 105– 261; 22 U. S. C. 2778 note) with respect to defense articles that remain subject to the jurisdiction of the International Traffic in Arms Regulations or to otherwise take such actions as are necessary to implement requirements for improving national security controls in the export licensing of satellites, launch vehicles, and related items. Observations & Impact • Provides authority under the AECA • Upholds existing Presidential authority 24
Overall Assessment • DTAG concurs with the proposal to move certain satellites to the CCL • Parts of the Bills need clarification to better understand the intent of certain language (e. g. definition of satellite, enumeration of all items but where practicable, applicability to just USML XV or all USML categories) • The House version appears more restrictive and burdensome for the USG and industry • The Senate version appears to uphold existing authorities of the President • The 1248 Report by Do. S/Do. D appears to establish a strong foundation or baseline that supports the implementation of transferring certain satellites to the CCL • Reporting could potentially be onerous on the USG and/or industry/academia Industry drift - Technology advancements/maturation - Foreign availability 25
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