	Congressional Concerns and Issues for Policy (1)

Members of Congress were concerned about allegations that U.S. firms provided expertise tothe People's Republic of China (PRC) that could be used in its ballistic missile and space programsand that the Clinton Administration's policies on satellite exports facilitated legal or illegal transfersof military-related technology to China. The New York Times reported in April 1998 that the JusticeDepartment began a criminal investigation into whether Loral Space and Communications Ltd. (ofNew York), and Hughes Electronics Corp. (of Los Angeles) violated export control laws. (2) The firmswere alleged to have shared their findings with China, without approval from the U.S. government,on the cause of a PRC rocket's explosion while launching a U.S.-origin satellite in February 1996. In sharing their conclusions, the companies allegedly provided expertise that China could use toimprove the accuracy and reliability of its ballistic missiles, including their guidance systems. (5)
This CRS Report discusses security concerns, significant congressional and administration action, and a comprehensive chronology pertaining to satellite exports to China (since 1988 underthe Reagan Administration). (10)
Loral. However, at least three classified studies found serious concerns about the U.S. firms' assistance to China's ballistic missile modernization program. (34)
Then on December 26, 2002, the Department of State's Office of Defense Trade Controls issued a letter charging the Hughes Electronics Corporation and Boeing Satellite Systems (whichacquired the Hughes Space and Communications Company in 2000) with 123 violations of the ArmsExport Control Act and International Traffic in Arms Regulations in connection with technologytransfers to China after the failed launches of the Apstar-2 satellite in January 1995 and theIntelsat-708 satellite in February 1996, and other activities. On March 5, 2003, Hughes Electronics Corporation and Boeing Satellite Systems announced that they reached a settlement with the State Department with a civil penalty of $32 million ($4million for past expenditures on enhancing export programs, $8 million in future investments tostrengthen export control compliance programs, and $20 million paid over seven years). (37)
Lockheed Martin. (See CRS Report RL31555 , China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues , byShirley Kan.) China has had no commercial satellite launches since 2000 (see Table 3 ). Additional Congressional Mandates

In 1998, Congress passed the Defense Authorization Act for FY1999 ( P.L. Senate Intelligence Committee, July 15, 1998. Investigations

Cox Committee. On May 25, 1999, the Cox Committee released the declassifiedversion of its January 3, 1999 classified report on its investigation of U.S. technology transfers toChina. (60) (See CRS Report RL30220(pdf) .) The NSC, however, opposed other recommendations, including the followingobjections:
assessments at the Departments of State, Defense, Energy, and Justice, and the CIA on security risks in U.S.-PRC lab-to-lab exchanges should be conducted by intelligence experts,not inspector generals;
the United States should not deny exports of high-performance computers ifChina does not permit effective end-use verification, including surprise on-site inspections, by an"arbitrary deadline" of September 30, 1999;
export control procedures do not need longer review periods where an agency'smid-level officials may "stop the clock" on national security grounds with "indefinite" and"unjustified" delays;
export control procedures requiring consensus of reviewing agencies would"hinder the deliberative process;"
new legislation, beyond the Hong Kong Policy Act of 1992, was not neededto require examination of: trade flows to China through Hong Kong, U.S. export control policy oftreating Hong Kong differently from China, and unmonitored border crossings by PRC militaryvehicles;
legislation that would amend the Defense Production Act of 1950 to requiremandatory notifications to the Committee on Foreign Investment in the United States (CFIUS) byany U.S. national security-related business of any planned mergers, acquisition, or takeovers by aforeign or foreign-controlled entity could "chill legitimate foreign investment" that is strongly inU.S. political process in 1996. (79) At a conferencecommittee meeting on September 17, 1998, House and Senate conferees agreed to transfer thelicensing authority over commercial satellites back to the State Department in an effort to strengthenexport controls. 106th Congress. 107th Congress and 108th Congress. 108-7 ) to require that the Department of State notify the Committees onAppropriations at least 15 days in advance of obligating or expending funds for processing licensesto export U.S.-origin satellites (including commercial satellites and satellite components) to China. Legislation for State Department appropriations in FY 2004 ( H.R. 2799 and S. 1585 ) would continue the requirement. In the case of exports to the PRC, approvals for export licenses arealso contingent upon a presidential waiver of post-Tiananmen sanctions.
Congress has been concerned about whether U.S. firms, in activities connected with exporting satellites, provided expertise to China for use in its ballistic missile and space programs and whetherU.S. policy has facilitated transfers of military-related technology to China. This CRS Reportdiscusses security concerns, policy changes, congressional action, and a chronology of majordevelopments since 1988 under President Reagan. It is updated as warranted.
Some critics opposed satellite exports to China, while others were concerned that the Clinton Administration relaxed export controls and monitoring of commercial satellites in moving thelicensing authority from the State Department to the Commerce Department in 1996. A range ofconcerns were prompted by New York Times reports in April 1998 that the Justice Department begana criminal investigation into whether Loral Space and Communications Ltd. and Hughes ElectronicsCorp. violated export control laws. The firms allegedly shared their findings with China on the causeof a rocket's explosion while launching a U.S.-origin satellite in February 1996. The companiesreportedly provided expertise that China could use to improve the accuracy and reliability of itsfuture ballistic missiles, including their guidance systems. At least three classified studies reportedlyfound that U.S. national security was harmed. Congress and the Executive Branch also investigatedHughes' review of China's launch failure of January 1995. After failed satellite launches in 1992,1995, and 1996, China has reported 28 consecutive, successful commercial and government/militaryspace launches. In 2000, the State Department and Lockheed Martin agreed to a settlement with afine of $13 million. In 2002, Loral announced a civil settlement with a fine of $20 million. In early2003, Hughes and Boeing agreed to a civil penalty of $32 million.
In 1998, Congress passed the FY1999 National Defense Authorization Act ( P.L. 105-261 ) that transferred licensing authority over satellites back to the State Department (effective March 15,1999). On December 30, 1998, the Cox Committee unanimously approved a classified report saidto conclude that China's technology acquisitions over the past 20 years, not only that associated withsatellite launches, harmed U.S. national security. The Senate Intelligence Committee released itsunclassified report on May 7, and the Cox Committee issued a declassified report on May 25, 1999(see CRS Report RL30220(pdf) ). Congress has debated whether to shift satellite export controls back toCommerce. Congress also oversees the Bush Administration's actions, including any newPresidential waivers of post-Tiananmen sanctions (after the last waiver in 1998 for Loral'sChinasat-8); export licenses; reviews of policy toward China on satellite exports or spacecooperation; and weapons proliferation sanctions that have banned satellite exports to China sinceSeptember 2001, with new sanctions imposed on September 19, 2003 (see CRS Report RL31555 ). China has had no commercial satellite launches since 2000. Legislation for State Departmentappropriations for FY2004 ( H.R. 2799 and S. 1585 ) wouldcontinue torequire State to notify the Committees on Appropriations at least 15 days in advance of obligatingor expending funds for processing licenses to export U.S.-origin satellites to China.