News

USIS Washington 
File

07 January 1999

TEXT: COMMERCE UPDATES EXPORT CONTROLS ON ENCRYPTION PRODUCTS

(To enhance the global competitiveness of U.S. businesses) (580)

Washington -- New regulations significantly streamlining government
export controls on powerful encryption -- products that scramble
computer data -- will be published by the Commerce Department, making
the government more efficient and enhancing the global competitiveness
of U.S. businesses, according to a press release December 30.

"These amendments to the Export Administration Regulations ... end the
need for licenses for powerful U.S. encryption products to companies
worldwide in several important industry sectors after a one-time
review by the Commerce Department," the announcement stated.

Following is the text of the press release:

(Begin text)

U.S. Department of Commerce
Bureau of Export Administration
December 30, 1998


COMMERCE UPDATES EXPORT CONTROLS ON ENCRYPTION PRODUCTS


Washington, D.C. -- The Commerce Department will publish new
regulations significantly streamlining government export controls on
powerful encryption -- products that scramble computer data -- as part
of the Clinton Administration initiatives to make government more
efficient and enhance the global competitiveness of U.S. businesses.
These amendments to the Export Administration Regulations, on public
notice today at the Federal Register, end the need for licenses for
powerful U.S. encryption products to companies worldwide in several
important industry sectors after a one time review by the Commerce
Department. The regulations implement the policy changes announced by
Vice President Gore in September.

"Through the hard work of industry and government officials to
finalize this regulation, U.S. encryption firms will be better able to
compete effectively with encryption manufacturers around the world,"
said William A. Reinsch, Commerce Under Secretary for Export
Administration.

Virtually eliminated are restrictions on selling powerful computer
data scrambling products to subsidiaries of U.S. corporations. There
will also be favorable licensing treatment to strategic partners of
U.S. companies. Strong U.S.-made encryption products are now
available, under license exception, to insurance companies
headquartered in 46 countries and their branches worldwide. Sales of
powerful encryption to health and medical organizations in the same
countries are also eased. To facilitate secure electronic
transactions, between on-line merchants in those same countries, and
their customers, the updated regulations permit, under a license
exception, the export of client-server applications (e.g., SSL) and
applications tailored to on-line transactions to on-line merchants. A
list of eligible countries is posted on the BXA web-site.

Further easing government restrictions are new allowances for U.S.
encryption manufacturers to share their source code with their own
foreign subsidiaries (while requiring that any resulting new products
remain subject to U.S. regulation) and streamlining reporting
requirements for U.S. firms so that compliance is less burdensome.

The new regulations expand the policy of encouraging the use of
recoverable encryption by removing the requirement to name and approve
key recovery agents for exports of key recovery products from
regulations. It also defines a new class of "recoverable" encryption
products which can now be exported under Export Licensing Arrangements
to foreign commercial firms for internal company proprietary use.

As part of its stated goal to balance the needs of national security
and public safety with the desire to protect personal privacy and
strong electronic commercial security, the Administration continues to
encourage the development and sale of products which enable the
recovery of the unscrambled data, in an emergency situation.

Finally, the regulations eliminate the need to obtain licenses for
most encryption commodities and software up to 56-bits or equivalent
strength.

(End text)