Letter to the Hon. Mike Pompeo - Grassley, Ernst Press State Department on Satellite Sales to China

Letter

Dear Secretary Pompeo:

On April 23, 2019, the Wall Street Journal (WSJ) published an article entitled "China Exploits Fleet of U.S. Satellites to Strengthen Police and Military Power."[1] According to the WSJ, The Boeing Company (Boeing) has constructed nine communications satellites, with the construction of a tenth satellite halted since the release of this article.[2] These satellites are allegedly "part of efforts to connect Chinese soldiers on contested outposts in the South China Sea, strengthen police forces against social unrest and make sure state messaging penetrates far and wide."[3] The use of American satellite technology by the Chinese military and police raises serious military, national security, and human rights concerns.

This is not the first time Boeing has engaged in controversial satellite transactions involving China.[4] Earlier this year, Ranking Member of the House Financial Services Committee, Congressman McHenry, wrote a letter to Boeing seeking information on whether "a firm with
connections to the Chinese government may have used a complex financing arrangement in an attempt to skirt U.S. export controls related to national security."[5] This past December, Ranking Member of the Senate Foreign Relations Committee, Senator Menendez, wrote a letter to Treasury Secretary Mnuchin and Commerce Secretary Ross about the same issue.[6] On December 26, 2002, the Department of State filed charges against Boeing and Hughes Electronics Corporation (Hughes), alleging 123 violations of export control laws resulting from impermissible transfers of data and detailed satellite technology to Chinese companies.[7] In 2003, Boeing and Hughes agreed to pay a $32 million fine to settle the charges, and agreed to appoint special compliance officers to oversee the companies' activities in China.[8] Despite the fact that these data and technology transfers only related to commercial satellites manufactured by Hughes and Boeing, they nonetheless improved the capabilities of China's intercontinental ballistic missile fleet and damaged U.S. national security.[9]

U.S. law generally prohibits any satellite from being "exported, re-exported, or transferred, directly or indirectly" to the Chinese government or to "any entity or person in or acting for or on behalf of such government, entity, or person."[10] Additionally, satellites may not be "launched in [China] or as part of a launch vehicle owned, operated, or manufactured by the [Chinese government] or any entity or person in or acting for or on behalf of such government, entity, or person."[11] However, despite this broad statutory language and intent, the Chinese government appears to have evaded U.S. law through two loopholes that enabled it to have access to, and direct use of, American-built satellites. First, China reportedly rents bandwidth from satellites that it is otherwise prohibited from buying.[12] According to the WSJ, despite the clear statutory prohibition on any direct or indirect transfer of satellites to the Chinese government or to persons or entities acting on behalf of the Chinese government, the U.S. "doesn't regulate how a satellite's bandwidth is used once the device is in space."[13] Second, Chinese-owned companies based in Hong Kong -- including some which seem to act on behalf of the Chinese government -- have been able to purchase satellites from American manufacturers.[14] Under the U.S.-Hong Kong Policy Act of 1992, Hong Kong should be considered separate from China for export control purposes, but only "for so long as the United States is satisfied that [sensitive] technologies are protected from improper use or export."[15] Current U.S. policy has allowed companies such as Asia Satellite Telecommunications (AsiaSat), a Hong Kong-based company majority owned by the U.S.-based Carlyle Group (Carlyle) and the Chinese state-controlled Citic Group (Citic), to purchase, launch, and operate satellites from American manufacturers.[16]

China's past use of American-built satellites is deeply disturbing. In 2008 and 2009, China used satellites manufactured by Boeing to support police communications while suppressing protests in Tibet and Xinjiang.[17] The Xinjiang protests were led by Uyghur Muslims voicing their opposition to China's increasingly restrictive anti-Muslim laws.[18] China's treatment of Uyghurs in the decade following its quashing of these protests is nothing short of abhorrent. Since 2017, China has imprisoned between 800,000 and 2 million Muslims, most of them Uyghur, in detention camps across the country.[19] Hundreds of these camps are located in Xinjiang, home to over 11 million Uyghurs.[20] According to the WSJ, when asked, AsiaSat refused to comment on whether its satellites are still being used today by Chinese security forces to support its anti-Muslim campaign in Xinjiang.[21] China's flagrant human rights abuses are numerous and well-documented.[22] It is impermissible for any American company to support or enable China's brutal anti-Muslim campaign, or any other human rights abuses China may commit now or in the future.

Chinese companies using American-made satellites also raises serious military concerns since these satellites are used for more than commercial communication. Commercial satellites can be deployed "for military purposes such as imaging an adversary's military installations for intelligence, surveillance, and reconnaissance (ISR) purposes."[23] China has recently pivoted toward a strategy of "military-civil fusion as a means to modernize the People's Liberation Army (PLA), particularly in emerging sectors like space."[24] China has employed this same strategy to upgrade its commercial space industry.[25] Military-civil fusion refers to China's "push to enlist private enterprises to upgrade [its] defense industrial base through developing scale and efficiency in dual-use sectors like information technology, robotics, and aerospace."[26] Under the guise of supporting commercial space development, military-civil fusion enables China to "continue developing military space capabilities while publicly claiming to oppose militarization of space."[27]

AsiaSat's purchase of American-made satellites is an excellent example of how China's military-civil fusion works in practice since these satellites are used for both commercial and military purposes.[28] AsiaSat frequently leases its satellites to the BeiDou Navigation Satellite System (BDS), a rapidly growing alternative to the U.S. Government-owned and -operated Global Positioning System (GPS).[29] Currently, the only fully operational global alternative to GPS is Russia's GLONASS, meaning that other countries are heavily dependent on the U.S. for satellite navigation services.[30] In China, GPS accounts for 95 percent of the country's $65 billion satellite navigation products market.[31] However, China plans for BDS products to capture 70-80 percent of the market by 2020, by encouraging or requiring domestic companies to manufacture or adopt BDS enabled devices.[32] As BDS's market share grows in China and across the world, the demand for AsiaSat's satellite bandwidth will increase, meaning AsiaSat's demand to purchase and launch satellites from manufacturers such as Boeing will increase as well, giving manufacturers a strong financial incentive to continue skirting the intent of export control laws.
Just as GPS has significant military applications, so too does BDS.[33] China is attempting to reduce its reliance on GPS by using BDS to support ballistic and cruise missiles, anti-satellite weaponry, and emerging weaponry such as hypersonic missiles and spaceplanes.[34] This would enable China to use BDS to "guide a missile to its target if GPS were denied, and…attack an adversary's access to GPS without disrupting its own capabilities."[35] China is using BDS to enhance the military capabilities of other countries as well. In 2018, Pakistan became the first country to receive "access to [BDS's] military service, allowing more precise guidance for missiles, ships and aircraft."[36] By manufacturing satellites for AsiaSat, American companies such as Boeing are contributing to the development of BDS, and thereby assisting in the development of China's military capabilities.

Robust export control laws are critical to ensuring that sensitive technology does not fall into the hands of those who may use it against us. In order to ensure compliance with export control laws and conduct oversight of satellite transactions involving China, please answer the following questions no later than July 10, 2019:

Does the State Department dispute any of the facts or accounts in the WSJ article cited in footnote 1?

Does the State Department consider any of the facts or accounts in the WSJ article cited in footnote 1 to represent a violation of any of the statutory prohibitions barring any satellite from being (i) "exported, re-exported, or transferred, directly or indirectly" to the Chinese government or to "any entity or person in or acting for or on behalf of such government, entity, or person" or (ii) "launched in [China] or as part of a launch vehicle owned, operated, or manufactured by the [Chinese government] or any entity or person in or acting for or on behalf of such government, entity, or person"?[37]

How can the U.S. prevent Chinese-owned companies organized outside mainland China (such as in Hong Kong) from evading or circumventing American export controls to procure or otherwise obtain access to regulated technology?

How can we ensure that China does not obtain further access to or use of American-built satellites or other regulated technology to support its oppression and subjugation of religious and ethnic minorities, including the internment of the Uyghur population?

How would China's development of BDS be impacted by the loss of access to American-manufactured satellites?


Sincerely,

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