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18 September 1998
Source: http://www.usia.gov/current/news/latest/98091704.elt.html?/products/washfile/newsitem.shtml

See related Senate hearing testimony: http://jya.com/cn-sat-export.htm

USIS Washington File
_________________________________

17 September 1998

### TEXT: DEFENSE DAS MILLER ON TECHNOLOGY TRANSFERS TO CHINA

    (Current export controls protect U.S. national security) (1910)

    Washington -- "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,"
    according to Deputy Assistant Secretary of Defense Franklin Miller.

    The Department of Defense, Miller said in testimony before the
    Committee of Commerce, Science, and Transportation September 17, takes
    its role in the development and implementation of export controls very
    seriously. "We believe that the current system protects our national
    security," he said.

    The launch of U.S. commercial communication satellites by China was
    first permitted by President Reagan in September 1988, after the
    United States negotiated a bilateral technology safeguards agreement
    with Beijing to ensure no missile or satellite technology was
    transferred to China.

    In 1996, Miller said, President Clinton decided to transfer additional
    jurisdiction for commercial communication satellites from the State
    Department to the Commerce Department. "The Department of Defense
    supported this transfer," Miller said, "because the transfer was
    accompanied by several changes in procedures that protect Department
    of Defense's ability to ensure that transfers are consistent with U.S.
    National Security," he said.

    Following is the text of Miller's testimony, as prepared for delivery:

    (begin text)

    Statement of Franklin C. Miller
    Principal Deputy Assistant Secretary of Defense
    For Strategy and Threat Reduction

    Before A Hearing Of
    The Committee on Commerce, Science, and Transportation U.S. Senate

    September 17, 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. Indeed, such Chinese
    intercontinental missiles were deployed in 1988 and remain deployed
    today.

    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.

    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.

    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 mate a U.S. built satellite to a Chinese launch vehicle. 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 so-called
    "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
    -- which was not a reason for the veto -- 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, specialized on- board processing and the
    "kick motors" necessary to launch satellites into high earth orbits
    were required to be licensed by State. 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 (4) 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 the second period, 1993-1996, 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
    three launches were deemed not to require any State licenses. DoD is
    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. Thus for the third period of time, from 1996 to the present,
    the following system applies:

    (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. On each license,
    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.

    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)