Guidelines for U.S. Implementation of the Agreement Between the U.S. and Russian Federation Government Regarding International Trade in Commercial Space Launch Services

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

Guidelines for U.S. Implementation of the Agreement Between the

U.S. and Russian Federation Government Regarding International Trade in

Commercial Space Launch Services

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of guidelines for U.S. implementation of the agreement

between the Government of the United States of America and the

Government of the Russian Federation regarding international trade in

commercial space launch services.

-----------------------------------------------------------------------

DATES: The Agreement entered into force on September 2, 1993. These

guidelines on monitoring and enforcement are effective upon

publication.

FOR FURTHER INFORMATION CONTACT: Scott Monier, (202) 395-3320, Director

for European Industry and Technology, Office of the U.S. Trade

Representative, 600 17th Street, NW., Washington, DC 20506. (Copies of

the Agreement referenced herein can be obtained from the official

designated above.)

SUMMARY: On September 2, 1993, the United States and the Russian

Federation entered into the Agreement Between the Government of the

United States of America and the Government of the Russian Federation

Regarding International Trade in Commercial Space Launch Services

(Agreement). The Agreement allows the Russian Federation (Russia) to

enter the international commercial space launch market during the

country's transition to an economy based on market principles in a

manner intended to prevent disruption of normal competition. In order

to assist in the successful operation of the Agreement, the U.S.

Government has established certain guidelines it intends to follow in

implementing the Agreement. This notice sets out those guidelines.

SUPPLEMENTARY INFORMATION

Background

At the June 1992 Summit between former President Bush and Russian

President Yeltsin, the United States announced that it was granting a

one-time exception to its policy of prohibiting the export of U.S.-made

satellites or satellites incorporating U.S. technology (essentially all

Western satellites) to Russia for launch on Russian space launch

vehicles. This one-time exception allowed the International Maritime

Satellite Organization (INMARSAT) to select a Russian launcher to

launch an INMARSAT 3 satellite. At the same time, the United States

stated that, while no further exceptions would be granted, it was

willing to undertake negotiations on Russian entry into the

international commercial space launch services market. The negotiations

culminated in an agreement which would provide Russia, during its

transitional phase from a non-market to market economy, access to the

international commercial launch services market yet ensure against

severe market distortion or disruption to the market. The Agreement was

signed by Vice President Gore and Russian Prime Minister Chernomyrdin

and entered into force on September 2, 1993.

The Agreement

Definition of Terms

The Agreement defines certain terms, as follows:

Contract means (i) to agree or commit to the provision of

commercial space launch services such that a launch is effectively

removed from competition in the international market, or (ii) any such

agreement or commitment.

International customer means any person; or any kind of

corporation, company, association, venture, partnership, or other

entity, whether or not organized for pecuniary gain, or privately or

governmentally owned or controlled; or any governmental body, excluding

the Government of the United States of America and the Government of

the Russian Federation; or any intergovernmental organization or quasi-

governmental consortium, including but not limited to INTELSAT,

INMARSAT and their respective legal successors, that is the ultimate

owner or operator of a spacecraft or satellite or that will deliver the

spacecraft or satellite to orbit for use by such ultimate owner or

operator.

Principal payload means a telecommunications satellite or, in the

absence of a telecommunications satellite, any other spacecraft or

combination of spacecraft.

Russian space launch service provider means any entity, agent or

instrumentality acting on its behalf, permitted by the Government of

the Russian Federation to provide commercial space launch services or

the space launch vehicles for such services.

Agreement Terms

The Agreement establishes basic rules for avoiding distortion which

results from government involvement in the commercial space launch

market by prohibiting such practices as certain subsidies, marketing

inducements, and corrupt business practices. The terms of the Agreement

also include the following specific provisions:

Quantity Provisions

The Agreement permits Russian space launch services providers to

contract with international customers for the launch of up to eight (8)

principal payloads, in addition to the INMARSAT-3 satellite, to

geosynchronous earth orbit (GEO) or geosynchronous transfer orbit

(GTO), for the duration of the agreement (through December 31, 2000).

Not more than two (2) such launches may be conducted in any twelve-

month period.

Up to four (4) of these launches may be of two principal payloads,

and each of these may be counted against the quantity limitation as

single launches if the parties mutually agree that the international

space launch market so warrants.

The Agreement also allows Russian space launch service providers to

contract for up to three (3) launches to low earth orbit (LEO) for the

Iridium system. Proposals by Russian space launch service providers for

commercial suborbital launches LEO and launches to orbits other than

GEO and GTO will be considered on a case by case basis, where there are

competing comparable commercial space launch services.

Pricing Provisions

The Agreement provides that prices, terms, and conditions offered

by Russian space launch service providers shall be comparable to those

offered for comparable space launch services by commercial launch

service providers from market economy countries. For GEO and GTO

launches, the Agreement establishes a specific pricing mechanism. Bids

or offers for launches to GEO or GTO more than 7.5% below the lowest

market economy bid trigger special consultations in which Russia must

demonstrate that its offer conforms to the principles of the Agreement.

Bids or offers for Russian launch services to orbits other than GEO/GTO

are not subject to a specific pricing mechanism; however, prices,

terms, and conditions must be comparable to those offered by providers

from market economy countries. Accordingly, the comparable pricing

provision of the Agreement applies to all launches by Russian space

launch service providers, including those to LEO.

The pricing provisions of the Agreement apply to bids or offers

made as part of a sole-source procurement as well as to completed

contracts.

Consultations

The Agreement requires the United States and Russia to hold annual

consultations to ``* * * review and examine implementation of the

Agreement and market developments in commercial space launch

services.'' The Agreement also allows the United States or Russia to

request special consultations ``on an urgent basis'' prior to the

conclusion of a contract, if possible, if either Party has reason to

believe that a contract or pending contract is inconsistent with the

terms of the Agreement.

Applicability Guidelines

Russian Launch Vehicles

All types or classes of launch vehicles that may be used by a

Russian space launch service provider to provide commercial space

launch services are subject to the Agreement.

Russian Space Launch Service Providers

Transactions involving launch service providers, regardless of

nationality, permitted by the Russian Federation to provide commercial

space launch services on Russian launch vehicles are subject to the

terms of the Agreement.

Leasing on-Orbit

Leasing a satellite on orbit or satellite transponders does not

remove a transaction from the terms of the Agreement. As a general

rule, the Agreement applies to a contract calling for the leasing of a

satellite on-orbit as to one requiring the launch of a satellite

purchased by the customer. The definition of ``international customer''

as defined in the Agreement makes no distinction based upon the

financing arrangement selected for the satellite. There will be no

special consideration given to leased satellites launched solely for

use by an international customer.

Nationality of Satellite Manufacturer

The terms of the Agreement apply to all satellites, regardless of

the manufacturer's nationality. The Agreement is intended to be neutral

in its effects on the satellite market.

Contracts Signed Prior to the Agreement

Contracts signed prior to the Agreement for the launch of a

satellite subject to United States export controls will be considered

under the terms of the Agreement.

Contracts signed prior to the Agreement for the launch of a

Russian-built satellite for purchase or lease by an international

customer are excluded from the terms of the Agreement.

Options Agreements/Reservations

An option agreement or reservation for Russian commercial space

launch services, entered into on or before September 2, 1993, is

subject to the terms and provisions of the Agreement.

Monitoring and Enforcement

A. Designation of Responsibility

The Trade Policy Staff Committee Subcommittee on Russian Space

Launch Services (Subcommittee), will be responsible for overall

implementation of the Agreement.

B. Subcommittee Organization

For purposes of carrying out its responsibilities with respect to

overall implementation of the Agreement, the Subcommittee will be

chaired by the Office of the United States Trade Representative (USTR)

and will be composed of the Departments of Transportation, State,

Commerce, Justice, Defense and Treasury, the Office of Management and

Budget (OMB), the National Aeronautics and Space Administration (NASA),

the Office of Science and Technology Policy (OSTP), the Joint Chiefs of

Staff, and such other departments and agencies as may be invited by the

Chair to participate. A Working Group on Information (WGI) will be

established to assemble such information as is necessary to enable the

Subcommittee to carry out its responsibilities. The WGI will be chaired

by the Department of Transportation (DOT) and will include the

Departments of Commerce, State, Defense, and such other departments or

agencies as designated by the Chair of the Subcommittee.

C. Monitoring and Data Collection

The Subcommittee will monitor Russian compliance with the

Agreement. To this end, the Subcommittee will review market and other

information relevant to participation in the commercial launch services

market by Russian space launch service providers and compliance by

those providers with the terms of the Agreement. This information will

be assembled, together with a preliminary assessment, and presented to

the Subcommittee by the WGI. In monitoring Russian compliance with the

Agreement, particular attention will be given to information on the

number of contracts with international customers and the distribution

of contracts by Russian space launch service providers within any

twelve-month period; prices, terms and conditions offered or provided

by Russian space launch service providers; unfair business practices;

grants and subsidies to commercial space launch services suppliers;

inducements to international customers; insurance or reflight

guarantees; and government-supported financing for commercial space

launch vehicles or services except in accord with the Organization for

Economic Cooperation and Development's (OECD) ``Arrangement on

Guidelines for Officially-Supported Export Credits.''

The Subcommittee will review and determine which information is to

be provided to Russia to comply with U.S. obligations under the

Agreement. This information will be assembled, together with a

preliminary assessment, and presented to the Subcommittee by the WGI in

a timely fashion so that it could then be made available to Russia in

accordance with the terms of the Agreement.

Particular attention will be given to U.S. obligations under the

Agreement with respect to the provision of publicly releasable

information to Russia on prices, terms, and conditions offered in the

international market for commercial launch services, including

insurance arrangements relating to such services.

The WGI will periodically produce information and preliminary

assessments of conditions in the commercial launch services market,

including prices, terms and conditions, commitments, and market

forecasts for the Subcommittee as needed to implement effectively the

Agreement and at least 30 days prior to annual consultations.

The WGI will also provide to the Subcommittee such additional

information and preliminary assessments on compliance by Russian space

launch service providers with the provisions of the Agreement as

needed, and at least 30 days prior to annual consultations, or as

needed prior to any additional or special consultations.

D. Consultations

The Subcommittee will hold annual consultations with the Russian

Federation as outlined in the Agreement. The Subcommittee will exchange

information with Russian authorities in advance of such consultations.

The Subcommittee will meet in advance of the annual consultations.

The Subcommittee will provide all information, including prices, terms

and conditions offered for commercial space launch services, necessary

to monitor the Agreement and carry out regular and special

consultation. Such information shall be provided to U.S. and/or Russian

government authorities promptly, and in any case, no later than 30 days

after a request, except that such information need not be provided

prior to bids for commercial space launch services.

Following consultations, the Subcommittee will also report on the

results of the consultations and recommend any follow-up actions to the

TPSC or other appropriate government agencies.

The Subcommittee will consider whether consultations with other

international parties could be beneficial, by aiding in the monitoring

of the Agreement. If the Subcommittee determines that consultations

could be beneficial, it will recommend to the TPSC and to the USTR that

such consultations be initiated.

The Subcommittee and the WGI may, in carrying out the functions and

procedures set forth herein, consult with U.S. commercial launch

services providers, launch vehicle and satellite manufacturers, and, as

appropriate, interested Congressional committees, the user community,

and other interested parties, including the relevant private sector

advisory committees. Such contacts will be made in conjunction with the

information collection and assessments referred to herein and U.S.

preparation for, and follow-up on the results of, meetings with Russia

held under the Agreement. The Subcommittee will also, as appropriate,

inform such interested parties of significant requests or notifications

made by Russia under the Agreement, or significant developments under

the Agreement.

E. Information Sharing

In the course of consulting with interested parties, in particular

prior to annual consultations under the Agreement, the U.S. Government

may provide such information provided by Russia as is allowed and

appropriate under the Agreement, subject to business confidentiality.

F. Collection of Information

DOT, as Chair of the WGI, will have primary responsibility for

soliciting and receiving relevant information, and will maintain data

to be collected and reviewed by the WGI for purposes of this Agreement.

Members of the U.S. industry, and other interested members of the

public, are invited to submit written comments on issues related to the

Agreement and its operation. Comments must be provided in twenty copies

to the DOT Office of Commercial Space Transportation, Attention:

Working Group on Information for Russian Space Launch Services, 400 7th

Street, SW., room 5408, Washington, DC 20590-0001.

Submissions from the public will be placed in a file open to public

inspection at the above address pursuant to 15 CFR Sec. 2003.5, except

confidential business information exempt from public inspection in

accordance with 15 CFR 2003.6. Confidential business information

submitted in accordance with 15 CFR 2003.6 must be clearly marked

``Business Confidential'' at the top of the cover page or letter and

each succeeding page, and must be accompanied by a nonconfidential

summary of the confidential information.

G. Enforcement

If the Subcommittee is of the view that the provisions of the

Agreement have been violated as a result of information obtained in any

annual or special consultation and review required under Article VII of

the Agreement or on the basis of information presented to it by the

WGI, the Subcommittee will notify the TPSC and recommend consultations

with Russia. If consultations proceed and satisfactory resolution is

not achieved with Russia, or if consultations are deemed to be

inappropriate in the circumstances, based on recommendations of the

Subcommittee, the Section 301 Committee may be requested to review the

case.

The USTR will, from time to time, advise the Secretary of State and

the Secretary of Commerce of the status of the implementation of the

agreement in order that this information may be available to the

Secretaries with respect to the State Department export license

responsibilities under the Arms Export Control Act and the implementing

regulations, the International Traffic in Arms Regulations, 22 CFR

parts 120-130 and the Commerce Department export license

responsibilities under the Export Administration Act.

Frederick L. Montgomery,

Chairman, Trade Policy Staff Committee.

[FR Doc. 94-5498 Filed 3-9-94; 8:45 am]

BILLING CODE 3190-01-M