Feb 07, 2014

U.S. Satellite Export Regs Remain a Frustration for European Industry

Estimated Article Reading Time: 5 min.

PARIS — European industry’s need to sell telecommunications and Earth observation satellites independent of U.S. technology has not diminished with the promised relaxation of U.S. satellite technology export regulations, government and industry officials said.

The changing expectations of export customers, they said, means that European prime contractors, and their governments, need to be able to offer much more than hardware to close a sale.

If they need to consult U.S. or other non-European authorities about the hardware’s export or eventual use, they risk losing credibility in their effort to position themselves as a U.S. alternative.

What is true for Europe’s Arianespace launch services provider is just as true for European satellite builders: They cannot survive without regular export sales given the current and expected level of government spending.

Several U.S. companies that until recently were content to forgo export markets because of the size of the U.S. government satellite market are becoming active overseas with the downward trend in U.S. military spending.

For European manufacturers, that creates a major threat, especially given the current weakness of the U.S. dollar relative to the euro. One marketing element, they say, is to leverage the U.S. government’s battered reputation in some export markets into European contract opportunities.

European government officials attending a space policy conference Jan. 28-29 in Brussels said they are actively positioning Europe’s Galileo navigation system, now being built, as an alternative to the U.S. GPS service used worldwide for over a decade.

Recent revelations of U.S. government agencies spying on allied nations’ communications have helped create an environment in which this positioning finds an even more favorable audience.

For the moment, neither Galileo nor many other European space efforts is entirely free of U.S. regulatory authority insofar as they include U.S.-built subsystems. This is true for Galileo and is also true for the large AlphaSat technology demonstration satellite, financed by the European and French space agencies, that was designed to give European companies a leg up in large, high-power telecommunications satellites. At a Jan. 30 research and technology review organized by the French space agency, CNES, officials said Alphasat would not escape the reach of the U.S. International Traffic in Arms Regulations (ITAR) rules even if all the made-in-Europe technology intended for Alphasat was already available.

Similarly, a two-satellite contract from the United Arab Emirates for high-resolution optical Earth observation satellites, won by Airbus Defence and Space and Thales Alenia Space of France, includes U.S. components for which export licenses are required.

For this contract, called Falcon Eye, U.S. companies were given U.S. State Department approval to bid, and one U.S. bidder said technology-transfer considerations and limits on “shutter control” were not deciding factors in the European win.

That being the case, an industry official said, concerns about whether ITAR would eventually compromise the contract by foot-dragging on export approval were considered as nonissues.

The European Space Agency and CNES both have programs designed to create a sustainable production line for satellite components that, as of now, are purchased from the United States.

Jean-Loic Galle, chief executive of Thales Alenia Space, told the Brussels conference Jan. 28 that the mere fact of needing permission from a non-European government can be a handicap in sealing a contract with an export customer.

“The concern is not just about the technology itself, but also about the use of the system,” Galle said. “If the customer needs to negotiate with both the European [supplier] and another government, there is no real interest” in buying a European product.

Galle said today’s customers in the emerging markets want more than just the technologies associated with a satellite system. They want the services elements as well as part of a broader relationship that could last years — in which case the satellite sale is only the most visible element.

U.S. government officials are aware that in the nearly 15 years since the ITAR rules were expanded to include satellites on the U.S. Munitions List, some allied governments have moved to create substitute suppliers in their domestic markets.

That, plus the fact that U.S. companies have said ITAR has reduced their effectiveness in international satellite competitions, has persuaded the administration of U.S. President Barack Obama to reform the ITAR rules.

The reforms are underway for satellites and are expected to be spelled out in regulatory language this year, said Caroline Atkinson, deputy assistant to the president and deputy national security adviser in the White House.

In a Feb. 3 speech to the Center for Strategic and International Studies (CSIS), a Washington think tank, Atkinson said 13 of the 21 categories covered by the U.S. Munitions List have been reformed with new regulatory language.

Satellites are top of the to-do list for the interagency group reforming the export regulations in 2014, Atkinson said.

Kevin Wolf, assistant U.S. secretary of commerce for export administration, told the CSIS conference that the export reform entails “essentially moving commercial satellites and spacecraft back to the Commerce Department,” where they were before the ITAR rules became stricter in 2000.

The CSIS conference participants, including Hugh F.T. Hoffman, deputy director of the Defense Technology Security Administration, appeared unanimous in their belief that the U.S. Congress, whose concerns about satellite exports were the cause of the stricter ITAR rules in the first place, was now amenable to export reform.

Brian Nilsson, director for nonproliferation and export controls at the White House National Security Council, said reform of the satellite export rules has been a delicate matter. “As you know, this has a long, somewhat tortured history,” Nilsson said, alluding to allegations a decade ago that U.S. commercial satellite sales to China were aiding Chinese missile development.

Nilsson said 11 separate congressional committees handle export issues, and all of them have been briefed on the reform effort’s motives and goals.

“The fact that we were able to work well with the Hill and obtain legislation where we can right-size our controls on satellites,” he said, augurs well for the reform effort’s likely acceptance by Congress.

Wolf said the public comment period for the proposed satellite export reform rules has been completed, and that the congressional notification process will now begin.

Wolf cautioned that the current reform effort does not include commercial vehicles such as those carrying tourists to the edge of space or to space insofar as these vehicles come under the Missile Technology Control Regime. Any loosening of these regulations, he said, will require a separate effort that has not begun.

“That has not really been part of our effort, given the [MTCR] statutory issues,” Wolf said. “Yes, it needs to be discussed. No, it’s not something we’re changing now.”

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