For 14 years, the U.S. commercial satellite industry has tried to reverse a law that aimed to limit dual-use satellite technology but has instead, industry insiders insist, put U.S. exports at a competitive disadvantage.

The restriction on satellite exports was instituted in 1998, in response to fears that China could use U.S. commercial satellite components to bolster its own launch and missile capabilities. The law classified even commercial satellites and components as military ones and left the decision as to which could be exported in the hands of the State Department.

Now, the House version of the defense authorization bill for fiscal 2013 includes a provision that would remove commercial satellites and components from the U.S. Munitions List (USML) and allow the president to decide which satellite technologies are the most important to protect. The bill still restricts the export and transfer of technology to China, Cuba, Iran, North Korea, Sudan and Syria. But the change would vastly improve the U.S. satellite industry's ability to compete in the global marketplace, industry advocates say

Inclusion in the defense policy bill represents a significant milestone in a gridlocked Congress. The defense bill is considered must-pass legislation that has not failed to clear both chambers in half a century. To pass, the trick will be retaining the provision in the Senate version, which has been quashed in the past by powerful senators including Jon Kyl (R-Ariz.).

The language is not in the version of the defense bill passed last month by the Senate Armed Services Committee, though on May 23, Sen. Michael Bennet (D-Colo.) introduced a companion bill in the Senate.

Without a Republican co-sponsor for Bennet's bill, industry officials say they may rather place their bets on the House-Senate conference committee, because two of the four top negotiators, the leaders of the House Armed Services Committee—Rep. Buck McKeon (R-Calif.) and Rep. Adam Smith (D-Wash.)—are both advocates of loosening the restrictions on satellite exports.

If it comes to a vote on the Senate floor, Kyl still backs the ban on exports and will oppose its reversal.

“He does not believe it is a good idea to give the president the authority to remove satellites from the more restrictive U.S. Munitions List because this could lead to sensitive technologies falling into the hands of potential adversaries—especially with respect to remote sensing, navigation, and perhaps some multi-mission satellites,” according to a Senate aide. “Even with a ban on transfers to specific countries . . . there is no assurance that sensitive technologies won't make their way to these countries through third-party sales.”

To win Republican support for the satellite export issue in the House, the defense bill also included a change to the Arms Export Control Act that could impinge on the Obama administration's broader overhaul of the USML. The administration has been working to transfer items from the munitions list controlled by the State Department to one managed by the Commerce Department in order to smooth what is regarded by all to be a cumbersome export control process.

Some lawmakers and the administration have been at odds over a legal requirement to notify Congress of items transferred off the munitions list. The bill revises that notification requirement, saying that the notice “shall include to the extent practicable, an enumeration of the item or items to be removed and describe the nature of any controls to be imposed on the item or items under any other provision of law.”

The compromise, however, does not resolve the ongoing difference of opinion.

A congressional aide sees this provision being refined during the House-Senate conference process. The aide contends that the change is a slight one, and actually is a slight improvement. He points to the clause “the extent practicable” as providing some latitude to the executive branch in the level of detail it would have to provide to Congress.

But the White House sees “enumeration” as an onerous requirement that fails to consider the administration's even more extensive plan for notifying the public about the items it is transferring from the USML to the Commerce Control List. “Enumeration is not something that we're able to do for every nut, bolt and screw that we license,” says an administration official. The administration is publishing proposed rules for each of the export control categories, including the one governing aircraft. It contains 200,000 items alone. “If we have to enumerate those 200,000 items, we'll never actually finish,” says an administration official.

But, he says, “I understand [the need for] a compromise. We'll work with that.”

Export issues are one of a number of differences between the versions of the defense policy bill passed by the House and the Senate Armed Services Committee (SASC) that will have to be resolved by a conference.

Senate floor action on the bill could happen as early as June, SASC Chairman Carl Levin (D-Mich.) says. Even in a good year, the defense authorization bill is typically one of the last pieces of legislation to be reconciled in Congress and fully passed by both chambers. So, the bill probably won't be fully passed before the November elections. But SASC leaders are optimistic it will pass for reasons that will keep the satellite industry smiling—the bill has passed every year for more than 50 years running.

Potential Defense Authorization Bill Conference Issues
Senate Armed Services Committee Version House Version
Global Hawk Block 30 UAVs Upholds Air Force termination to recover $545 million in unspent funds from fiscal 2011 and 2012. Retains unspent funding to prevent the Air Force from moving the UAVs to storage.
Ground-based Midcourse Defense system Does not authorize exploration of a third missile defense site in the U.S. Adds $100 million to the Missile Defense Agency’s budget to start planning for a third system site in the eastern U.S.
Includes a nonbinding resolution indicating congressional support for improvements to the system and the homeland defense hedging posture.
Iron Dome short-range rocket defense system for Israel Authorizes the Pentagon to spend $210 million to help Israel buy the systems. Authorizes the Pentagon to spend $680 million to help Israel buy the systems.
Contractor reforms Limits the use of cost-type contracts for major weapon-system production and lowers contractor pay caps to $237,000 from $750,000. Neither limits use of cost-type contracts nor caps contractor pay.
Sources: Senate and House armed services committees