International Trade in Commercial Space Launch Services; Guidelines for Implementation of the Memorandum of Agreement With the People's Republic of China

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

International Trade in Commercial Space Launch Services;

Guidelines for Implementation of the Memorandum of Agreement With the

People's Republic of China

AGENCY: Office of the United States Trade Representative.

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

Memorandum of Agreement Between the United States of America and the

Government of the People's Republic of China Regarding International

Trade in Commercial Launch Services (the Agreement).

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SUMMARY: On March 13, 1995, the United States and the People's Republic

of China (PRC) Signed a Memorandum of Agreement regarding international

trade in commercial launch services for the period from January 1, 1995

to December 31, 2001. The Agreement renews the first U.S.-PRC

Memorandum of Agreement which was signed on January 26, 1989 and

expired on December 31, 1994. 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 these guidelines.

DATES: The Agreement is effective as of January 1, 1995. These

guidelines on implementation are effective on April 27, 1995.

FOR FURTHER INFORMATION CONTACT:

Donald W. Eiss, Deputy Assistant U.S. Trade Representative for

Industry, (202) 395-5656; Michael A. Spangler, Director of Commercial

Space Policy, (202) 395-9602; or Vanessa P. Sciarra, Assistant General

Counsel, (202) 395-7305; of the Office of the United States Trade

Representative, 600 17th Street NW., Washington, DC 20506.

SUPPLEMENTARY INFORMATION: The current Memorandum of Agreement between

the U.S. and the PRC regarding international trade in commercial launch

services governs relevant trade in this type of service for the period

January 1, 1995 to December 31, 2001. The Agreement renews the first

U.S.-PRC Memorandum of Agreement which was signed on January 26, 1989

and expired on December 31, 1994. 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.

Copies of the Agreement are available for public inspection in the

USTR Reading Room: Room 101, Office of the United States Trade

Representative, 600 17th Street, NW., Washington, DC 20506. An

appointment to review the Agreement may be made by calling Brenda Webb

(202) 395-6186. The USTR Reading Room is open to the public from 10

a.m. to 12 noon and 1 p.m. to 4 p.m., Monday through Friday.

I. Designation of Responsibility

Subject to the direction of the Trade Policy Staff Committee

(TPSC), the TPSC Subcommittee on Commercial Launch Services (the

Subcommittee) will be responsible for overall implementation of the

Agreement.

II. Subcommittee Organization

For purposes of carrying out its responsibilities with respect to

overall implementation of the Agreement, the Subcommittee will be

chaired by USTR and will be composed of TPSC member agencies as may be

invited by the Chairman to participate. A Working Group on Information

(the Working Group) has been established to assemble such information

as may be necessary to enable the Subcommittee to carry out its

responsibilities. The Working Group is chaired by the Department of

Transportation and includes the Department of Commerce, the Department

of State, and such other departments or agencies as are designated by

the Chairman of the Subcommittee.

III. Subcommittee Functions and Procedures

1. Data Collection and Monitoring of the Agreement

Subcommittee Functions. The Subcommittee performs two key functions

with respect to the Agreement: (1) Ongoing assessment of the operation

of the agreement relative to U.S. goals and objectives for the

Agreement; and (2) monitoring PRC compliance with its specific

obligations under the Agreement.

With respect to the first function, those goals and objectives

include, inter alia: (i) Continuing the integration of PRC launch

services providers into the international market on a non-disruptive

basis; (ii) providing a stable international environment within which

U.S. space launch companies can compete on a fair basis as PRC launch

service providers continue their transition to absorbing the

disciplines of the marketplace (costs, prices, profits) fully; (iii)

ensuring that administration of the Agreement responds to changing

conditions so as to support the continued success in the international

commercial marketplace of all segments of the U.S. space industry,

i.e., space launch companies, satellite manufacturers, and systems

operators; and (iv) avoiding shortages of space launch capability that

would prevent the development of new uses of space.

As the market evaluates an ever-growing number of new and untested

proposals for the uses of commercial space, the U.S. Government fully

intends to permit the market, not this Agreement, to determine which of

these proposals are commercially successful. It is not the U.S.

Government's intention that the Agreement's disciplines should favor

the development of systems in one orbit as opposed to another (e.g.,

geostationary earth orbit (GEO) or low-earth orbit (LEO). The

Subcommittee will monitor the Agreement carefully so as to ensure that

the Agreement does not create an artificial advantage for business

proposals simply by virtue of [[Page 20797]] the orbit of the

satellites that will provide the service.

In addition, some commercial proposals are distinguishable by the

number of satellites that would be required to deliver the proposed

range and coverage of services. It is possible that some projects under

consideration could fundamentally change the dynamics of demand and

supply in the international space launch market. The Subcommittee will

closely monitor such developments with respect to the Agreement and, in

particular, their implications for the quantitative limitations of the

Agreement.

With respect to the Subcommittee's second function, particular

attention will be given to assessing information relevant to PRC

obligations under the Agreement concerning the number of launches

committed and carried out by the PRC to GEO; PRC participation in the

market for launches to LEO, including in the deployment of individual

communications satellite constellations; prices, terms and conditions

of all PRC launches; and use of government supports, inducements, or

unfair business practices.

Working Group Functions. The Working Group will develop information

and analyses necessary for the Subcommittee to discharge its

responsibilities in each of the two functions. In order to facilitate

the Subcommittee's overall monitoring of the Agreement, the Working

Group will produce information and analyses of conditions in the

international commercial launch services market, general pricing

trends, market performance and forecasts (aggregate, by orbit), launch

commitments, launch services supply and demand relationships, and

progress in the process of economic transition by PRC launch services

providers. In particular, the Working Group will generate information

on the number of commercial launches (including launch failures)

covered by the Agreement for 1995, 1996, 1997 and 1998. This

information will enable the Subcommittee to determine whether the

number of average annual launches is twenty or more in either the first

three or four years of the Agreement as provided for in Article IV(4)

of the Agreement. The Agreement provides for certain automatic

increases in the quantitative limit on launches to GEO if those

circumstances are found to exist.

This information will be provided to the Subcommittee as needed,

but in any event, the relevant information will be provided not later

than 30 days prior to the semiannual reviews of the development of the

market for commercial space launch services to GEO and 90 days prior to

annual consultations.

In order to ensure PRC compliance with the provisions of the

Agreement, the Working Group will collect information and conduct

necessary comparisons with respect to individual launch competitions in

which a PRC launch services provider is a participant, and when a

concern arises regarding compliance by the PRC launch services provider

with the provisions of the Agreement. These comparisons and related

analyses will be provided to the Subcommittee as required in individual

circumstances and 90 days prior to annual consultations.

Information Exchange. In addition, the Subcommittee will review and

determine which information will be provided to the PRC in compliance

with U.S. obligations under the Agreement. In making that

determination, particular attention will be given to U.S. obligations

under the Agreement with respect to the provision of publicly

releasable information to the PRC on prices, terms and conditions

prevailing in the international market for commercial launch services,

including insurance arrangements relating to such services; U.S. views

regarding prevailing international market conditions and likely future

developments; U.S. and other government supports or inducements; and

the number of commitments U.S. launch service providers have undertaken

for international customers.

2. Consultations

In preparing for the consultations discussed below, the

Subcommittee and the Working Group, as appropriate, will seek input

from the U.S. space industry, including the U.S. satellite industry.

Information will be sought sufficiently in advance to permit timely

input from the U.S. private sector. The soliciting of additional input

will be sought as needed in the course of such reviews.

Annual Consultations. The Subcommittee will meet at least 75 days

in advance of the annual consultations required by Article IV(1) of the

Agreement to begin preparations for such consultations. The

Subcommittee will seek to hold annual consultations beginning in April

1996 and during each subsequent April over the life of the Agreement

and to exchange information with the PRC at least thirty days in

advance of such consultations.

The annual consultations provide the opportunity for the two

parties to review the operation of the Agreement relative to its goals

and objectives as well as the performance of each party in implementing

the specific obligations of the Agreement over the preceding year (in

particular, the PRC's adherence to its commitments regarding its

participation in the market for launches to GEO and LEO). In addition,

the annual consultations will provide opportunities for the United

States to assess overall market trends as well as to identify the

emergence of a commercially viable project that fundamentally changes

demand in the overall launch services market. Prior to engaging in

annual consultations on such a development, the Subcommittee will

consider the implications of such a development for the disciplines

contained in this Agreement, taking into account the results of input

from the U.S. private sector on the matter.

One of the important new elements in the Agreement is Annex II,

which enumerates a list of comparability factors that will be used in

evaluating PRC compliance with its ``par pricing'' obligations on its

launches to GEO. The Annex contains a brief description of each factor

and an average range of values representing the impact that the factor

could have on the ultimate price to the customer when applied in a

procurement. During the annual consultations, these average values will

be reviewed and updated to ensure that they remain relevant to actual

conditions in the market.

Semiannual Consultations. The Agreement provides for a semiannual

review of the limitations on the total number of satellites that may be

launched to GEO by PRC providers of commercial launch services for

international customers and, if appropriate, adjustment to such

limitations.

In preparation for U.S. participation in that review, the

Subcommittee will assess whether: (i) International demand for GEO

launches is significantly greater than the estimated average of 12-15

commercial launches per year upon which the GEO quantitative

restriction is based over the life of the Agreement and (ii) the

development of a commercially viable project for satellite services has

fundamentally changed demand for launch services. The Working Group

will develop information on launch pricing, demand/supply projections

and launch availability and commitments, which it will provide to the

Subcommittee to permit these assessments. The Subcommittee will seek to

hold this review as provided for in Article IV(3) of the Agreement

during April and October of each year and to exchange information with

the PRC at least thirty [[Page 20798]] days after the Subcommittee's

assessment has been completed.

Special Consultations. The United States and the PRC have also

undertaken to consult within thirty (30) days of a request by either

party regarding any matter of particular concern relating to the

operation of the Agreement. The Agreement contemplates three particular

circumstances that would be the basis for such special consultations.

First, the United States may believe that the PRC has not upheld

its commitment to price ``on a par'' with Western launch service

providers in either the GEO or LEO markets. With respect to pricing in

competitions for launches to GEO, a request for special consultations

could be made in those instances in which the differential between the

PRC price and Western price is greater than 15 percent and after

preliminary analysis takes into account the pricing comparability

factors set out in Annex II of the agreement (see discussion of ``Price

Compliance'' below.)

Second, the United States may believe that there is an absence of

launch availability from a Western supplier for a satellite to GEO. The

purpose for this provision is to avoid a situation in which the

Agreement would deny to a satellite manufacturer/user the alternative

of a PRC launch vehicle and service for a launch to GEO even though no

Western alternative exists. Without the flexibility to respond to this

situation in a timely manner, the balance in the Agreement for all

segments of U.S. industry involved in space could be disrupted.

The third circumstance explicitly provided for in the Agreement

involves PRC participation in providing services for launches to LEO.

In the Agreement, the PRC has committed that its participation in the

LEO market will be consistent with the overall provisions of the

Agreement (inter alia, with respect to pricing, government inducements,

subsidies and nondiscrimination) and with significant U.S.

participation in the development of the LEO market, and the PRC has

agreed to take steps to ensure that such participation will be

proportionate and non-disruptive. The U.S. may request special

consultations if it believes that the PRC is participating, or may

participate, in the LEO market in a manner inconsistent with these

commitments.

Comprehensive Review. The Subcommittee will meet at least six

months in advance of the comprehensive review required by Article VII

of the Agreement to begin preparations for the review. Among its key

tasks, the Subcommittee will carefully monitor the implementation of

the Agreement to ensure that it contributes to, rather than detracts

from, the balanced development of the GEO and LEO market segments and

other segments of the market. In this regard, the Subcommittee will

consider adjustments to the quantitative and bunching restrictions in

Articles II(B)(ii) and II(B)(vi) to avoid distortive effects on various

market segments in light of the development of a commercially viable

project for satellite services that fundamentally changes demand for

launch services or the emergence of higher than anticipated demand for

GEO launches as provided for in Article IV(3)(a). The U.S. Government

will seek to conclude the comprehensive review with the PRC in October

1998 to coincide with the semi-annual review to be held at that time.

3. Lack of Western Launch Availability

Article IV(2) of the Agreement provides that the United States may

increase the quantitative limitation established under Article

II(b)(ii) or relax the bunching provision set out in Article II(b)(vi):

(i) If the United States is satisfied that there is an absence of

Western launch availability due to full manifests or launch failures

during the required launch period (generally within three months before

and after the preferred launch date), and (ii) if the PRC has reached

the limitation set out in Article II(b)(ii), or if the bunching

provisions established in Article II(b)(vi) would apply to prevent the

launch of a satellite.

In administering Article IV(2), the Subcommittee will follow the

procedures described in Sections A and B below.

(A) In support of a request that the United States increase the

quantitative limitation established under Article II(b)(ii) or relax

the bunching provision set out in Article II(b)(vi) due to the lack of

Western launch availability, a U.S. satellite manufacturer or U.S.

international customer (either of which constitutes a ``certifying

entity'') shall provide a properly executed written certification to

USTR. The written certification must contain the following elements:

(1) A statement by the certifying entity that, in the course of

negotiating with a prospective international customer for the sale of a

commercial satellite or with a launch provider for the launch of a

satellite, the certifying entity or an international customer of the

certifying entity has contacted all launch service providers with a

technically compatible vehicle, including all such domestic launch

service providers;

(2) A statement that the certifying entity or an international

customer of the certifying entity has contacted a launch vehicle

provider in the PRC regarding the availability of launch services by a

PRC provider and that space for the proposed satellite is available on

the PRC launch service provider's launch manifest;

(3) A statement that the PRC launch service provider is the only

launch service provider that is available during the required launch

period as defined in Article IV(2); and

(4) A statement that the certifying official is an official of the

certifying entity and is familiar with and responsible for the

negotiations regarding the proposed launch based upon information and

belief.

The above certification must be signed and dated by the certifying

official of the certifying entity. It must be accompanied by supporting

documents, including copies of the written requests made to each launch

service provider and a copy of the written response, if any was

received, from each provider regarding its unavailability to provide

the launch in the required launch period as defined in Article IV(2).

If no written response from a particular provider was received, the

certification should indicate the nature of the response.

USTR will exempt from public disclosure confidential business

information contained in any supporting documents in accordance with

the Freedom of Information Act, 5 U.S.C. Sec. 552, and any other

applicable law. Confidential business information submitted to USTR

must be clearly marked ``Business Confidential'' at the top of each

cover page or letter and each succeeding page containing such

information.

Upon receipt of a certification, USTR will review the certification

to ensure that it was executed properly and will review the supporting

documents to ensure that they provide satisfactory evidence of the

facts alleged in the certification.

(B) Within ten working days of the date of receipt of the

certification and supporting documents, USTR will indicate to the

certifying entity whether additional information will be required to

satisfy USTR that the facts as described in the certification are

correct. As soon as such information has been received which provides

such assurance, USTR will, within an additional ten working days,

determine that one of the conditions listed in Article IV(5) of the

Agreement has been [[Page 20799]] met and will notify the PRC that the

United States is exercising its unilateral authority under Article

IV(5) of the Agreement to raise the quota set out in Article II(b)(ii)

or relax the bunching provision described in Article II(b)(vi) in order

to permit the launch by a PRC launch service provider.

If, at the end of the ten-day period described above, USTR had not

indicated to the certifying entity that additional information is

required to satisfy USTR that the facts as described in the

certification are correct, then USTR will, within an additional ten

working days, determine that one of the conditions listed in Article

IV(5) of the Agreement has been met and will notify the PRC that the

United States is exercising its unilateral authority under Article

IV(5) of the Agreement to raise the quota set out in Article II(b)(ii)

or relax the bunching provision described in Article II(b)(vi) in order

to permit the launch by a PRC launch service provider.

4. Price Compliance

The Agreement allows the PRC to offer launch services at prices

``on a par with those prices, terms and conditions prevailing in the

international market for comparable commercial launch services'' as

stipulated in Article II(B)(iv).

The Agreement further describes the following mechanism that will

be utilized in applying the ``par-pricing'' requirement for launches to

GEO. Article II(B)(iv)(a) states that an unadjusted PRC price falling

within 15 percent of the lowest Western price will be assumed to be in

compliance with the Agreement. That assumption will only be reviewed if

clear evidence to the contrary is presented to the Subcommittee. In

those instances in which the price differential is greater than 15

percent, PRC compliance with the ``par pricing'' obligation will be

evaluated in light of the comparability factors and values contained in

Annex II of the Agreement. The U.S. intends to make a preliminary

evaluation prior to any decision to request special consultations.

Its is important to note that the 15 percent price differential is

only applicable to the difference between Western and PRC offer prices.

If a PRC offer price is more than 15 percent less than the lowest

Western price, the relevant comparability adjustments described in

Annex II will be made to the unadjusted PRC or Western offer prices, as

appropriate. Comparison will then be made of the PRC and Western prices

adjusted only for the relevant comparability factors, and not for the

15 percent price differential as well.

5. Low Earth Orbit (LEO) Provisions

In light of the emergence of the remote-sensing and weather-

tracking market for launches to LEO since 1989 and commercial plans for

the deployment of telecommunications satellite constellations into LEO

beginning in 1997, the Agreement contains specific disciplines and

guidelines regarding Chinese launches to LEO in Article II(B)(iii).

Pursuant to that Article, legitimate behavior in the international

market for commercial launch services is governed by the following

norms of behavior previously developed for the GEO market: (i) Market

principles including avoidance of below-cost pricing, government

inducements and unfair business practices; (ii) the use of government

supports in a manner consistent with practices prevailing in the

international market; (iii) the need to ``price on a par'' with the

prices offered by commercial launch service providers from market

economy countries including the United States; (iv) the need to act in

a manner consistent with prevailing practices in international markets

with respect to insurance or reflight guarantees; and (v) avoidance of

unfair discrimination against any international customer or supplier.

PRC participation will be consistent with significant U.S.

participation in the development of the LEO market and such

participation by the PRC will be proportionate and non-disruptive.

In evaluating Chinese compliance with the above provisions as they

pertain to LEO communications satellite constellations, the U.S. will

be guided first with respect to the initial deployment of such

constellations by the level of participation of providers from

countries with whom the U.S. has bilateral space launch agreements.

Accordingly, the Subcommittee will review proposals for the initial

deployment of a LEO communications satellite constellation in order to

determine if, in such proposals, the overall level of participation by

launch service providers in countries with whom the U.S. has concluded

a bilateral launch services agreement is more than 50 percent of the

participation of market economy launch service providers (as measured

according to the distribution of payloads).

In deciding whether a situation in which more than 50 percent of

the initial deployment has been granted to countries with whom the U.S.

has concluded bilateral space launch agreements raises concerns

regarding PRC compliance with its LEO commitments, the Subcommittee may

take into account certain other factors including: (i) The extent of

PRC and U.S. participation in the deployment; (ii) launch scheduling

requirements and the need to optimize launch vehicle selection to meet

deployment or operational requirements; (iii) the availability of

competitively-priced market economy launches to meet these

requirements; (iv) opportunities made available to the parties for

participation in the replacement market; (v) reasonable considerations

by the proposed system operator regarding commercial risk sharing

(``commercial risk sharing'' is defined to include equity participation

arrangements); and (vi) customers' requirements.

The U.S. Government understands that the scope and complexity of

these LEO satellite communications constellations makes these potential

ventures particularly sensitive to delays. Consistent with the

commitment to ensure a balance among all segments of the U.S. private

sector participating in space, the Subcommittee intends to conduct

reviews of LEO satellite communications constellations expeditiously so

as to avoid unnecessary uncertainty in the market place.

6. Discussions With Other International Parties

At least annually, the Subcommittee will consider whether

discussions with other international parties could be beneficial. If

the Subcommittee determines that discussions could be beneficial, it

will recommend to the TPSC and to the U.S. Trade Representative that

such discussions be initiated.

IV. Consultations With Domestic Interests

The Subcommittee and the Working Group will, in carrying out the

functions and procedures set forth in Section III above, consult with

and seek the advice of representatives of U.S. commercial launch

service providers, launch vehicle manufacturers and satellite

manufacturers and operators, 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 and

assessments referred to in Section III(1) above and U.S. preparation

for, and follow-up on, the results of consultations with the PRC held

under the Agreement. The Subcommittee will [[Page 20800]] also, as

appropriate, inform such interests of significant requests or

notifications made by the PRC under the Agreement, or significant

developments under the Agreement.

V. Information Sharing

In the course of consulting with domestic interests, in particular

prior to annual consultations under the Agreement, the Subcommittee may

provide such information provided by the PRC as is allowed by the

Agreement subject to business confidentiality.

VI. Treatment of Business Confidential Information

The Department of Transportation (DOT), as Chair of the Working

Group, will have primary responsibility for soliciting and receiving,

and will maintain information to be collected and reviewed by the

Working Group 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 PRC 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 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.

VII. Enforcement

If, as a result of information obtained in any consultation or the

comprehensive review required under Article VII of the Agreement or, on

the basis of information presented to it by the Working Group, the

Subcommittee is of the view that the PRC is not in compliance with the

terms of the Agreement, the Subcommittee will notify the TPSC and

recommend consultations with the PRC if appropriate. If consultations

proceed and satisfactory resolution is not achieved with the PRC or, if

consultations are deemed to be inappropriate in the circumstances based

on recommendations of the TPSC, the section 301 Committee may consider

whether the USTR should initiate an investigation pursuant to the

authority set forth in Section 301 of the Trade Act of 1974, as

amended.

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 its implementing

regulations, the International Traffic in Arms Regulations (see 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. 95-10334 Filed 4-26-95; 8:45 am]

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Sunshine Act Meetings

Federal Register / Vol. 60, No. 81 / Thursday, April 27, 1995 /

Sunshine Act Meetings

[[Page 20801]]

ASSASSINATION RECORD REVIEW BOARD

TIME AND DATE: 1:00 p.m., May 3, 1995.

PLACE: 600 E Street, NW, Room 206, Washington, D.C. 20530.

STATUS: Open.

MATTERS TO BE CONSIDERED:

1. Update by a representative of the National Archives and

Records Administration (NARA) on the President John F. Kennedy

Assassination Records Collection at NARA.

2. Discussion of and vote upon final interpretive regulations,

based on proposed interpretive regulations published for notice and

comment on February 8, 1995 (60 FR 7506-7508).

CONTACT PERSON FOR MORE INFORMATION: Thomas Samoluk, Press and Public

Affairs Officer, 600 E Street, NW, Second Floor, Washington, D.C.

20530. Telephone: (202) 724-0088; Fax: (202) 724-0457.

David G. Marwell,

Executive Director.

[FR Doc. 95-10495 Filed 4-25-95; 2:03 pm]

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