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Synthetic aperture radar signal processing issues related to the exploitation of a pulse-to-pulse encoding transponder using pseudorandom codes discussed analytically. Namely the focusing algorithm, the code synchronization procedure and the properties of the code induced gain against non-encoding point scatterers and distributed ones. A time-domain processing algorithm and a code synchronization procedure are proposed and validated on simulated data and on a European Remote Sensing Satellite-2 data set containing prototypes of such a device. The interaction of the transponder signal with terrain backscattering is analyzed by deriving parameters that are useful for performance assessment. These are related to the relevant parameters in radiometric calibration, interferometric applications, and tagging.