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U.S. Chamber of Commerce Space Enterprise Council The Impact of Export Controls on the Space Industrial Base Presented to the Defense Science Board January 31, 2007

Who We Are: 

Who We Are Founded in 2000 to represent U.S. businesses with a commercial interest in space Chartered by the U.S. Chamber of Commerce, the world’s largest business federation Affiliation with Chamber allows us to reach out to the state, metro, and local business communities Now represents all sectors of the industry including commercial, civil, and national security

Who We Represent: 

Who We Represent Aerojet ATK Ball Aerospace and Technologies Corp* The Boeing Company* Cisco Systems* Computer Sciences Corporation DigitalGlobe General Dynamics GEOEYE* Honeywell IBM* IPDA Mobile Technologies ITT* Knowledge Sharing Systems L-3 Communications* Lockheed Martin* Loral Space and Communications MDA Federal Morgan Franklin Corporation* Orbital Sciences Corporation* Northrop Grumman* Posternak, Blankstein andamp; Lund LLP* Pratt and Whitney Raytheon Swales Aerospace Terrestar Trimble Navigation United Space Alliance XCOR Aerospace * Board of Directors Member Company

Space Enterprise Council Specific Recommendations: 

Space Enterprise Council Specific Recommendations U.S. Chamber of Commerce represents over 1,500 CoCs nationwide If space industrial base is revisited, consider using the Chamber as a source to reach out to the aerospace supplier base

Questions asked of the Space Enterprise Council Member Companies: 

Questions asked of the Space Enterprise Council Member Companies With regard to the export licensing regime, what should be done differently? Specific recommended improvements What is the ideal system? Horror Stories- please provide specific examples on how export policy has affected your business Foreign Competition There is the assumption that the U.S. has lost market share in a number of space product/service areas and that foreign competition has filled in the void in those areas.  Please give examples of how foreign competition has affected your market share. Foreign Technology/Marketing Foreign competitors have been improving their product/service capabilities to address a growing trend of 'ITAR free' foreign buses.  How have improved foreign products/services affected your ability to sell to your foreign customers? New Product Development Have export regulations hindered your company’s effort to either invest in or develop new products?

With regard to the export licensing regime, what should be done differently? Specific recommended improvements : 

With regard to the export licensing regime, what should be done differently? Specific recommended improvements Reduce the regulatory caseload, by revising/clarifying regulatory guidance and criteria applicable to both licensing and commodity jurisdiction process Establish ITAR Sections 120.3 and 120.4 as criteria defining items for inclusion on USML Retain items on the Commerce Control List (CCL) until after a CJ determination is made Establish streamlined licensing processes Implement new procedures to streamline licensing for both major programs and routine export activity Programmatic licensing – for major programs involving extensive inter-allied cooperation, to eliminate need for processing thousands of authorizations on a transaction-specific basis Certified company licensing program – certified of 'best practices' export compliance program, to allow certified companies broader export licensing authority (subject to government audit) Consolidated one-time licensing for routine and administrative export-related activity, and bulk shipments occurring routinely or over a period of years, with appropriate notification requirements

With regard to the export licensing regime, what should be done differently? Specific recommended improvements : 

Broader Bulk Licensing for a new category 'Commodity Class Exports' Propose a different type of 'bulk license' for articles subject to competition that could impair industrial base A commodity class license would issue on approval of DTSA and DOS based on satisfactory showing that: Article would be subject to current or near-term competition in international market place and that U.S. capacity may be displaced Manufacturing know-now shall not be transferable Exporter’s burden would have the burden to reasonably demonstrate likely competitive harm, not make strict proof of imminent harm A Commodity Class Export bulk license can utilize an administrative device that has already been used in a limited area Advanced products would not be eligible for commodity bulk licenses With regard to the export licensing regime, what should be done differently? Specific recommended improvements

With regard to the export licensing regime, what should be done differently? Specific recommended improvements : 

Change the System for Third-Party Transfers Allies will increasingly wish to re-transfer US origin defense equipment. The current cumbersome process is a disincentive for foreign buyers to purchase US equipment. Furthermore, in a coalition operation, we may wish to see defense equipment change hands much more quickly than the USG (both the Administration and the Congress) can currently process requests. Better Differentiate Between Sensitive Technology and Common, Industry Standard Components While controls need to be maintained over technologies critical to US space superiority and those subject to non-proliferation policies, restrictions need to be reduced or eliminated on industry standard technologies and common space hardware available in foreign markets. The definition of sensitive technology should be at the component level rather then the subsystem or system level. With regard to the export licensing regime, what should be done differently? Specific recommended improvements

With regard to the export licensing regime, what should be done differently? Specific recommended improvements : 

Establish License-processing disciplines Timetables imposing specific deadlines on licensing process, including interagency reviews Default to decision, not stalemate (as in dual-use reviews) Augment resources/staffing Re-program funds for Directorate of Defense Trade Controls (DDTC) to add at least 10 new officers for agreements, licenses and CJ evaluations Re-assign military officers back to DDTC to support determination whether or not licenses should be staffed to DOD for review With regard to the export licensing regime, what should be done differently? Specific recommended improvements

With regard to the export licensing regime, what should be done differently? Specific recommended improvements : 

Accelerate establishment of all-electronic licensing system Ensure system has detailed on-line tracking capabilities to enable industry to follow progress of application review through Congressional notification and license issuance Revise Congressional Notification process to make it predictable Eliminate current 'informal' pre-notification process Use Javits Report as a pre-notification vehicle With regard to the export licensing regime, what should be done differently? Specific recommended improvements

With regard to the export licensing regime, what should be done differently? Specific recommended improvements : 

External Name Changes If there is a name change involving a company that is either acquired or merged with a new company, existing TAA in place will be invalid until an amendment is approved (3-5 months) Can be showstopper to a proposal or program U.S. supplier lost the potential for $8.1M in business because of this issue Process needs to be amended With regard to the export licensing regime, what should be done differently? Specific recommended improvements

With regard to the export licensing regime, what should be done differently? What is the Ideal system? : 

A two-phased modernization approach Phase One- Improve Current System and Processes Phase Two- Develop Modern Systems and Processes With regard to the export licensing regime, what should be done differently? What is the Ideal system?

With regard to the export licensing regime, what should be done differently? What is the Ideal system? : 

Establishing 'one stop shopping' for both Foreign Military Sales (FMS) and Direct Commercial Sales (DCS) cases at the Defense Security Cooperation Administration (DSCA) DOS would be the last stop in the review process State’s foreign policy oversight of defense exports would be preserved A tiered system, similar to the Export Administration Regulations, would help define allied nations and create a performance based export control system for key foreign partners. With regard to the export licensing regime, what should be done differently? What is the Ideal system?

Horror Stories- specific examples on how export policy has affected your business- Prime Contractor Perspective: 

Horror Stories- specific examples on how export policy has affected your business- Prime Contractor Perspective Program A Issue: Potential subcontractor in Germany was not sent an RFP for a Star Tracker competitive procurement. This was the result of export license requirement driven delays -- instead the RFP was released to the four existing U.S. sources. Impact: Reduced product performance and available product options; reduction in marketplace competitive intensity Issue: Foreign launch service provider questions U.S. policy requiring 'dual and third country nationals' to execute Non-Disclosure Agreements on an individual basis prior to accessing U.S. technical data related to payload integration for launch. Impact: Unable to provide necessary information to effectively plan payload integration, resulting in additional expense and extension of program baseline Program B Issue: Lack of approval of a temporary import license from Office of Defense Trade Controls (DTC) after more than 3 months for a loaned linearized traveling wave tube amplifier (LTWTA) from a German subcontractor (one of only two) for an IRAD demonstration. Item awaited approval to ship so program deadline was not met. Impact: Lack of competition, business leverage and access to differing technology-- possible design trade-off

Horror Stories- specific examples on how export policy has affected your business- Prime Contractor Perspective: 

Program C Issue: Unable to assist in resolving an issue with a component produced by a UK supplier; had a TAA but the necessary information exchange would require a Manufacturing License Agreement; time prohibitive, so we switched to a domestic source. Impact: Increased Cost Program D Issue: Restrictive provisos regarding 'third country nationals'; impeding work with foreign consortiums that are working with/have agreements with U.S. Government agencies Impact: Inability to work with employees possessing superior technical expertise in a collaborative environment Horror Stories- specific examples on how export policy has affected your business- Prime Contractor Perspective

Foreign CompetitionRemote Sensing Manufacturing Industry Perspective: 

Foreign Competition Remote Sensing Manufacturing Industry Perspective Over $1 billion has been allocated to foreign competitors by their respective governments in order to compete internationally Opportunities lost to foreign vendors due to U.S. regulatory restraints include: Spain’s abandonment of ISHTAR to participate in the French HELIOS system Taiwan’s ROCSAT-2 program also built by a French concern South Korea’s latest KOMPSAT program built by an Israeli company Thailand’s remote sensing satellite system built by the French Turkey’s current procurement- where not a single US company bid Singapore’s multi-satellite constellation cooperation with Israel

Foreign CompetitionLarge Sized Supplier Prospective Case Study- Tank Technologies: 

European Tank Market Alcatel SB4100 Alcatel will not be able to use American supplier because of ITAR restrictions American supplier will not be base lined on SB4100, lost business could exceed $20M over lifetime of the satellite bus Continuous funding by ESA will undermine U.S. leadership position Japanese Tank Market In 2005, MELCO was directed by JAXA to seek out tank manufacturers in Europe due to ITAR Foreign Competition Large Sized Supplier Prospective Case Study- Tank Technologies

Foreign Technology/MarketingLarge Sized Supplier Prospective Case Study- Reflectors Technology: 

EADS CASA had limited heritage as a reflector supplier prior to 2000 EADS Les Mureaux was principal reflector supplier in Europe (technology was a decade old) European satellite prime contractors were looking for new technology and turned to US suppliers Space products ITAR regulations took effect in July 2000 CASA was explicitly funded by Astrium and Alcatel to develop reflectors due to perceived export risk CASA is now producing high quality, high tech reflectors in Europe that can be sold to any restricted country Foreign Technology/Marketing Large Sized Supplier Prospective Case Study- Reflectors Technology

Foreign Technology/MarketingSmall Sized Supplier Prospective : 

Foreign Technology/Marketing Small Sized Supplier Prospective U.S. supplier that manufacturers commodity product Alternative sources are now available for product from Astrium, EuroHeatPipe, Melco, Thales, ISRO, and Korean Aerospace Example- Alphasat (marketed as ITAR-free) Large Development program with Astrium and Thales participation CNES backing Potential revenue loss for American supplier is $1.4m One quarter of production volume of specific American supplier will disappear because of ITAR impacts Decline in base would increase indirect rates resulting in price increases to overall market estimated at 15% Capacity for high rate/fast turn-around would diminish

New Product DevelopmentAn Emerging Company Perspective: 

New Product Development An Emerging Company Perspective Company has had to restrict discussions with several foreign investors because they could not perform due diligence Impacted investment capital Export restrictions have severally impacted company’s ability to hire employees with specialized technical expertise

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