1998 Congressional Hearings
Special Weapons
Nuclear, Chemical, Biological and Missile

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

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

(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

(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

(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)