The Departments of State and Commerce recently proposed rule amendments to ease export controls on satellite-related items.  Under existing export control rules, the vast majority of satellites, related components and technology cannot be exported and related assistance cannot be provided to foreign companies without obtaining a license pursuant to the restrictive International Traffic in Arms Regulations (“ITAR”).  As discussed in an earlier entry, Congress recently passed legislation to facilitate less restrictive approaches to exporting satellites and related technology. The proposed rules published by State and Commerce, respectively, implement this legislation.

Under the proposed rules, fewer satellite items would remain subject to the more onerous ITAR.  The ITAR typically impose rigorous licensing procedures on covered items and technologies.  Satellite-related items are currently controlled under Category XV of the ITAR’s U.S. Munitions List, which essentially covers most satellites and any parts, components and technology “specifically designed or modified” for covered satellites.  The “specially designed or modified” criterion is not defined, thereby extending the scope of the ITAR to an overly broad range of products, including many not related to space applications or otherwise of military significance.

The proposed rules would revise Category XV so that it controls only satellites and related components that have military significance.  This would be accomplished by listing only specific satellites under Category XV, such as satellites that mitigate the effects of nuclear detonations, track military hardware via infrared, radar or laser systems, perform designated logistics functions, such as refueling or signatures intelligence, or those having very specific remote sensing capabilities.  Satellite exporters should assess this proposed list to ensure only items having true military significance remain on the list.  There are also two other notable issues for exporters to review:

1.      Controls on certain GPS receiving equipment would continue to be defined by using the phrase “specifically designed” even though discontinuing use of this undefined and ambiguous term has been a priority of the export control reform effort.  Retaining this approach serves only to perpetuate the problems underlying ITAR reform.

2.      Many parts and components relating to spacecraft will remain controlled if categorized as “space qualified.”  This differs from the approach taken with respect to export control reform applicable to most other industries in that in those contexts parts and components remain controlled under the ITAR if they meet a detailed definition of being “specially designed” for the controlled application.  The definition of “space qualified” generally applies if a part or component is designed, manufactured or qualified through successful testing for operation at altitudes greater than 100km above the earth.  Limiting controls to parts and components that are “space qualified” should reduce regulatory uncertainty associated with the export of satellite-related equipment.

Many of the proposed reforms for the export of satellites and related technology likely will benefit industry, but the proposed rules should be reviewed closely to ascertain the impact on particular products and technologies.  Comments on these proposals are due on or before July 8, 2013.