SATELLITE COMPANIES STILL WAITING FOR FINAL EXPORT REGULATIONS

Senate Banking, Housing & Urban Affairs Committee Chmn. Gramm (R-Tex.), will hold hearing today (Tues.) on nomination of Kenneth Juster as Undersecy. of Commerce for Export Administration. At State, Undersecy. Richard Armitage and Asst. Secy.-Political Affairs nominee Lincoln Bloomfield are expected to take “conservative, promilitary” approach to dealing with export problems, which could “further hinder” U.S. satellite operators, industry source said. “No one is going to say anything publicly, but the satellite industry has its work cut out for it.” Mowry said he didn’t know enough about nominees to comment, but said SIA was continually supportive of Berman bill that would return commercial satellite components to Commerce from State, where companies have said, is “where they belong.”

Appointments of Armitage and Bloomfield could be particularly “troublesome” for satellite industry, sources said. Both have told aides they will keep open mind on issue of satellite exports, but each comes to his post with strong promilitary reputation. Bloomfield will have responsibility of approving arms transfers, military assistance programs, regional security arrangements and weapons proliferation. Transfer of satellite technology would be covered in those areas. “If he takes a hard-line stance, satellite companies could find themselves with a major problem,” industry official said: “The timing couldn’t be worse. We were just starting to make progress -- at least the satellite industry thought it was -- on the Hill with lawmakers.”

Change in leadership comes as State and Commerce attempt to resolve jurisdictional dispute over “space-qualified items” those specifically designed and manufactured to meet govt. regulations for launch or deployment of satellites. IG reports are 2nd in series ordered by Congress to help it assess policies and procedures for developing, maintaining and revising Commerce Control List and U.S. Munitions List. U.S. companies have complained that placing satellites on munitions list has cost nation dominant position in global satellite market, with foreign companies sending business elsewhere because of tough U.S. govt. regulations, industry officials maintain.

Impact of strict U.S. satellite export controls was highlighted in Aerospace Industries Assn. report released last week. Exports of satellites and parts fell sharply to $246.6 million in 2000 from $739.5 million in 1999 and from $1.202 billion in 1998. “There’s nothing industry can do when govt. shoots you in the head,” AIA Vp-International Affairs Joel Johnson said. Mowry said numbers were significant because “it gets harder and harder” for U.S. parts to be used in foreign satellites. Export controls have resulted in many Europan companies’ seeking out non-U.S. suppliers. “You've created competition that didn’t exist before,” Johnson said.

Authorizations for FY 2000 require President Bush to provide Congress with annual reports on transfer of sensitive military technology to non-NATO countries, including China. Statute requires Commerce, Defense (DoD), Energy and State Depts. to have their IGs examine policies and procedures to determine whether they are adequate to prevent export of sensitive technologies. Examination by DoD and State Dept. found Office of Defense Trade Controls had not performed comprehensive review of munitions list since 1993 and in most cases found it was more difficult to understand than similar listing from Commerce. DoD expects to complete review of 5 of 19 munitions categories by next month. National Security Council is expected to decide which agency should handle issue of space-qualified items. Decision had been expected in April, but govt. officials have given no indication when they will make final determination.

Meanwhile, foreign satellite companies say recent $4.2 million fine against Boeing for violating International Traffic in Arms Regulation (ITAR) has made company “much more cautious” and “more difficult” to deal with on sales involving exports. State Dept. cited Boeing for its connection with Wedgetail project. Satellite operations weren’t involved in violation, but latest penalty had entire company “re-evaluating relationships” with foreign operators, industry attorney with ties to foreign operator told us. “It’s making Boeing much more difficult to deal with. They are running scared.” Submarine incident involving Chinese vessel also may hurt effort, satellite attorney said. Boeing denied charges. “We haven’t had any problems and we have worked very closely with State Dept.,” spokesman said. “In fact, we think they are doing a much better job in streamlining requests and processing applications.” - Bruce Branch