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18 June 1998
Source: http://www.usia.gov/current/news/latest/98061804.elt.html?/products/washfile/newsitem.shtml

United States Information Service Washington File

18 June 1998

TEXT: UNDER SEC. LODAL TESTIMONY ON CHINA SATELLITE EXPORTS

(Current satellite technology export controls adequate) (7470)


Washington -- The current system of export controls for satellite
technology protects U.S. national security, according to Principal
Deputy Under Secretary of Defense for Policy Jan M. Lodal.

In testimony before the Senate Governmental Affairs Subcommittee on
International Security, Proliferation and Federal Services June 18,
Lodal explained the history of U.S. policy towards the exportation of
purely commercial communication satellites to China.

"To help ensure that no significant missile or satellite technology is
transferred to China, the U.S. negotiated a bilateral technology
safeguards agreement with the PRC in 1988," Lodal said. "This
bilateral technology safeguards agreement was renewed with minor
modifications in 1993 and remains in force today. The agreement has
two important features to protect U.S. national security interests:
(1) it prohibits the transfer of specific technical data and
assistance by U.S. companies to China and prohibits the Chinese from
seeking that technical data or assistance; and (2) requires oversight
and monitoring of the launch campaign by the U.S. government."

Following is the official text of Lodal's remarks, as prepared for
delivery:

(begin text)

STATEMENT OF JAN M. LODAL
PRINCIPAL DEPUTY UNDER SECRETARY OF DEFENSE FOR POLICY
BEFORE A JOINT HEARING OF
THE COMMITTEE ON NATIONAL SECURITY
AND THE COMMITTEE ON INTERNATIONAL RELATIONS
U.S. HOUSE OF REPRESENTATIVES

June 18, 1998

I am pleased to appear today to discuss U.S. policy regarding the
export of satellites to China. In my statement I will outline the
policy framework and the role of the Department of Defense in
implementing this policy.

In September 1988, President Reagan decided to permit the launch of
U.S. commercial communication satellites by China. This decision was
motivated by the desire to allow commercial relations with China to
expand in a more normal manner. The Reagan administration understood
the potential risk that such a program could lead to the transfer of
missile-related technology to China, but also recognized that China
had for many years had the basic technology necessary to develop and
deploy effective ballistic missiles, including intercontinental
missiles capable of hitting the United States.

To help ensure that no significant missile or satellite technology is
transferred to China, the U.S. negotiated a bilateral technology
safeguards agreement with the PRC in 1988. This bilateral technology
safeguards agreement was renewed with minor modifications in 1993 and
remains in force today. The agreement has two important features to
protect U.S. national security interests: (1) it prohibits the
transfer of specific technical data and assistance by U.S. companies
to China and prohibits the Chinese from seeking that technical data or
assistance; and (2) requires oversight and monitoring of the launch
campaign by the U.S. government. I will address these particulars of
this monitoring activity later in my statement.

The requirements of the bilateral technology safeguards agreement are
implemented through conditions on export licenses. From 1988 to today,
the jurisdiction for export licensing of satellites has shifted
between the State Department munitions system and the Commerce
Department dual-use system. There are three periods of time where the
jurisdiction was different: (1) 1988 to 1992; (2) 1993 to 1996; and
(3) 1996 to today. I will discuss each of these periods in turn.

From 1988 to the end of 1992, all communications satellites were
licensed by the State Department under the International Traffic in
Arms Regulations. Up to 1988, State had always had jurisdiction over
such satellites and the decision by President Reagan to permit
transfers to China did not change this system. In brief, State
controlled all of the technical data and technical assistance required
to perform a launch of a U.S. built satellite in China. These controls
also extended to all design, development, and manufacturing data on
communication satellites. Licenses issued by State for satellite
transfers to China for launch contained several safeguards including
conditions that required USG monitoring of the launch campaign as
outlined in the U.S.-China bilateral technology safeguards agreement.
During this period, there were four licenses issued by State for the
launch of U.S. built satellites in China.

In late 1990, Congress passed the "Omnibus Export Amendments Act"
which President Bush ultimately vetoed. One of the bill's provisions
was a requirement to transfer to Commerce jurisdiction over those
items on the State munitions list that were on the then-COCOM dual-use
list. As an administrative matter, President Bush directed a review to
accomplish this jurisdictional transfer in a manner that also ensured
national security interests would be protected.

One result of this review was a decision by the Bush Administration in
1992 to transfer license jurisdiction for purely commercial
communication satellites from the State Department to the Commerce
Department. Commerce controls also extended to include "form, fit and
function" technical data necessary to mate the satellite to the launch
vehicle. Nine technologies were identified as giving a satellite
specific military capabilities, and any satellite containing any of
these nine technologies continued to require a license from the
Department of State. For example, satellites with large antennas,
intersatellite relay links, and specialized on- board processing
remained under State control as did the "kick motors" necessary to
launch satellites into high earth orbits. State also retained control
over: (1) all launch vehicles; (2) all technical data beyond "form,
fit, and function" that is - associated with the integration of
satellites with launch vehicles; (3) all design, development, and
manufacturing data on satellites; and (5) all technical assistance
(e.g., engineering services) that might be provided by U.S. companies
to the foreign launch service provider including any analyses of
launch failures. The Clinton Administration issued some of the
regulations implementing this jurisdictional change shortly after
taking office in 1993.

During this period, monitoring by the U.S. government was required in
all licenses for launches of satellites that contained one or more of
the identified military-related technologies or kick motors, any
launch vehicle integration technical data or any technical assistance
- that is, in all the licenses issued by the Department of State.
There were three launches during this period that were not monitored.
These were launches of purely commercial satellites, licensed by
Commerce, that did not include DoD monitoring. Monitoring had always
been associated with the licenses issued by the State Department, and
DoD license review procedures anticipated that there would be at least
one State license required for the launch of even these commercial
satellites now licensed by Commerce. However, these launches did not
require any State licenses. We are not aware of any transfer of
technology from these unmonitored launches that contributed to China's
missile or military satellite capabilities. Nevertheless, DoD did
conclude that full monitoring would be a strong safeguard at
relatively low cost to the companies that should be applied to all
license cases, even those that did not require Department of State
licenses. This was agreed by all agencies and incorporated as a
requirement in 1996 when jurisdiction was transferred to Commerce for
all commercial communication satellites

The basic approach to implementation of the Bush Administration policy
was to follow the established interagency procedures for the review of
dual-use export licenses. During this period, it became increasingly
clear that these procedures needed reform, not just for satellites,
but across the board. The Clinton Administration undertook such a
review, which led to the issuance of Executive Order 12981 in December
of 1995. This Executive Order established strict timelines for license
reviews, and put into place a disciplined dispute resolution process.

In 1996, President Clinton decided to transfer additional jurisdiction
for commercial communication satellites from the State Department to
the Commerce Department. DoD supported this transfer because the
transfer did not involve certain sensitive technology associated with
satellites and launch vehicles and because the transfer was
accompanied by several changes in procedures that protect DoD's
ability to ensure that transfers are consistent with U.S. national
security. The system is now the following:

(1) Companies can export complete commercial communication satellites
under a Commerce license even if they contain one or more of the
individual military technologies that defined State jurisdiction over
communication satellites prior to 1996. All of those individual
military technologies, however, must still get a State license when
not exported as part of a complete communications satellite.

(2) Commerce continues to control certain limited "form, fit, and
function" technical data necessary to mate the satellite to the launch
vehicle.

(3) State retains control over all launch vehicles, all technical data
associated with launch vehicles or the integration of satellite
payloads with launch vehicles, all design and manufacturing data for
satellites, and all technical assistance that might be provided by
U.S. companies to Chinese launch service providers including any
launch failure analyses.

In addition, several changes were made to strengthen the Commerce
system and the 1995 Executive Order governing interagency reviews of
dual-use licenses. The changes in procedures that are now in effect
include:

(1) License determinations are subject to majority vote of reviewing
agencies with a continuing right of any dissenting agency to escalate
the matter up to and including the President.

(2) Licenses can be denied for broad national security reasons to any
destination.

(3) Communication satellites are not subject to formal foreign
availability determinations under the Export Administration Act.

(4) All communication satellite licenses must include strong
safeguards including DoD monitoring and payment of DoD monitoring
expenses by the companies.

DOD currently reviews all communication satellite licenses to ensure
that the proposed export would be consistent with U.S. national
security interests. DOD's recommendations reflect inputs from relevant
DoD components such as the Air Force and the National Security Agency.
DoD's recommendations to approve such satellite exports are
conditional on strong safeguards including:

-- A requirement that the satellite exporter prepare a Technology
Control Plan which must be approved by DOD.

-- The Technology Control Plan must include: (1) a detailed
transportation plan for shipping the satellite to ensure that only
U.S. personnel have access to the satellite at all times; and (2) a
detailed physical and operational security plan including procedures
for the supervised mating of the satellite to the launch vehicle.

-- A requirement that technical data that the U.S. company wants to
transfer to the Chinese launch service provider is approved in advance
by DoD's Defense Technology Security Administration.

-- A requirement that a DOD monitor be present at technical meetings
between the U.S. exporter and Chinese launch service personnel to
ensure that no information is exchanged that would improve Chinese
missile or satellite capabilities. This includes a requirement that
DOD monitors be present at the launch site in China to oversee
physical site security and launch operations.

Statutory Tiananmen sanctions require that the President issue a
"national interest" waiver before a license may be issued for any U.S.
satellite export to China. A memorandum with a recommendation is
prepared for the President, typically by the State Department. In this
connection, DOD has reviewed such memoranda to ensure that the
memorandum accurately describes the safeguards and other conditions
that DoD has recommended for inclusion on the license.

As the committees know, allegations that Loral Space Systems and
Hughes Aircraft Company have committed export violations in connection
with a failure of a Chinese launch of a Loral satellite in February
1996 are the subject of an ongoing criminal investigation by the
Department of Justice. There is little that I can say about this
matter beyond assuring you that DOD is cooperating fully with all
Department of Justice inquiries into this matter. DoD was aware of
these allegations at the time it was asked to review the export
license applications for the launch of Loral's Chinasat-8 satellite in
1998. Those applications were reviewed carefully taking into account
all the relevant information available to DoD at that time. DoD's
decision to recommend approval of those licenses was based on the
facts of those particular cases and on the specific safeguards
required by the licenses.

In addition, DOD is cooperating fully with all Congressional inquiries
and requests for a broad range of documents. DOD has already provided
some documents even as we continue to collect and assemble additional
documentation. I should note that the range and scope of those
document requests is quite voluminous. We are committed to being fully
responsive, but this means taking the time to make sure we are
providing all of the materials that you and others have requested.

In summary, DoD takes its overall role in the development and
implementation of export control policies very seriously. The case of
commercial communication satellites and China presents significant
challenges to the U.S. export control system as we seek to ensure that
no technology is transferred that would improve China's indigenous
missile or satellite capabilities. We believe that the current system
protects our national security.

(end text)