Crypto Export Rules Fall Short of Total Decontrol

The Clinton administration today is winning praise for its new encryption export policy, but at the same time software vendors and privacy organizations point out that the U.S. government still maintains considerable oversight on the sale of encryption products outside of its home market.

Many advocates for revision of the U.S. government's encryption export policy say that while the long-awaited regulation represents fundamental change, the rules are complex and will require many companies to hire experts to ensure compliance. They also say they feel compelled to continue working with the U.S.

Department of Commerce (DOC) to try to further liberalize the process of exporting encryption.

The new regulations, which were released by the DOC's Bureau of Export Administration yesterday, are more in step with the economic realities of the information age than the old policy, according to Americans for Computer Privacy (ACP), a Washington-based organization that worked closely with the Clinton administration and industry representatives to rewrite the export policy.

"ACP is extremely pleased with the progress that was made. We believe the administration took all our concerns very seriously," said Sue Richards, a spokeswoman for the ACP. "However, the bottom line is there is still a feeling in the government that somehow ... encryption is controllable. We believe encryption is inherently uncontrollable."

The Center for Democracy and Technology (CDT), which also fought for a relaxation of the export rules, concurred with the ACP assessment, but also cautioned that not all export controls have been removed.

The regulations remain very complicated and do not change the premise that those who wish to export encryption -- including researchers and others who want to exchange certain kinds of source code -- must still comply with a process that may prove daunting for some individuals and small businesses, Alan Davidson, staff counsel at the CDT said in a statement.

Throughout the debate on encryption export rules the U.S. government defended its tight control on strong encryption products as necessary to ensure that law enforcement and national security bodies would not find themselves unable to access computer files and other digital evidence because it was sheathed in strong encryption.

But encryption vendors complained that the export controls created a void in the market that their competitors outside the U.S. were more than happy to fill. Meanwhile, privacy advocates griped that the strict export rules were hampering worldwide electronic commerce.

The new regulations allow U.S. companies to export any encryption product to commercial firms, individuals and other nongovernment users without a license, but a one-time technical review of the products is required before the products can ship.

The regulations also create a new category of "retail" encryption products that permit the export of encryption products available in the market to any end-user. But the Bureau of Export Administration will review any product before it can be exported and the bureau will determine which products qualify as retail encryption offerings. [See "U.S. Frees Up Encryption Export Policy," Jan. 12.]At 30-plus pages, the new regulation leaves a lot of room for interpretation, especially when it comes to the definition of a retail product and the definition of a government entity, said Lynn McNulty, director of government affairs for RSA Security Inc.

"Individual companies still are going to have to probably retain some sort of expertise in order to be able to interpret the regulation and not run afoul of any of its provisions," McNulty said. "This is not ... complete decontrol and anyone who was expecting decontrol is disappointed."

However, McNulty, who provided input for drafting the policy as a member of the encryption subcommittee of the President's Export Council, said RSA is "very encouraged" about being better able to compete for business overseas and praised the Clinton administration for showing flexibility and willingness to listen to people in the industry.

Bill Crowell, president and chief executive officer of Cylink Corp., also praised the U.S. administration. He isn't critical of the new rules' continued restrictions because Cylink has been exporting its products for years and is already familiar with how to comply with regulations, he said.

Crowell said the biggest improvement for Cylink is that the new rules reduce the number of individual licenses the company will have to obtain and eliminate the need entirely for licenses for commercial customers, which is Cylink's primary business.

"This might fall short of complete decontrol, but frankly its an incredibly large step forward and it levels the playing field," Crowell said.

ACP, in Washington, can be found on the Web at http://www.computerprivacy.org/.

CDT, in Washington, can be reached at +1-202-637-9800 or found on the Web at http://www.cdt.org/. RSA Security, in Bedford, Massachusetts, can be found on the Web at http://www.rsasecurity.com/. Cylink, in Santa Clara, California, can be found on the Web at http://www.cylink.com/.

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