                           The White House
  
                    Office of the Press Secretary
  
  _______________________________________________________________
  
  For Immediate Release                         November 15, 1996
  
  
  
                          November 15, 1996
  
  
  
  Memorandum For The Vice President
                 The Secretary Of State
                 The Secretary Of The Treasury
                 The Secretary Of Defense
                 The Attorney General
                 The Secretary Of Commerce
                 United STATES Trade Representative
                 Director Of The Office Of Management And Budget
                 Chief Of Staff To The President
                 Director Of Central Intelligence
                 Director, Federal Bureau Of Investigation
                 Director, National Security Agency
                 Assistant To The President For National
                    Security Affairs
                 Assistant To The President For Economic Policy
                 Assistant To The President For Science And
                    Technology Policy
                 
  Subject:       Encryption Export Policy
  
  
  Encryption products, when used outside the United States, can 
  jeopardize our foreign policy and national security interests.  
  Moreover, such products, when used by international criminal 
  organizations, can threaten the safety of U.S. citizens here 
  and abroad, as well as the safety of the citizens of other 
  countries.  The exportation of encryption products accordingly 
  must be controlled to further U.S. foreign policy objectives, 
  and promote our national security, including the protection of 
  the safety of U.S. citizens abroad.  Nonetheless, because of 
  the increasingly widespread use of encryption products for the 
  legitimate protection of the privacy of data and communications 
  in nonmilitary contexts; because of the importance to U.S. 
  economic interests of the market for encryption products; 
  and because, pursuant to the terms set forth in the Executive 
  order entitled Administration of Export Controls on Encryption 


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  Products (the "new Executive order") of November 15, 1996, 
  Commerce Department controls of the export of such dual-use 
  encryption products can be accomplished without compromising 
  U.S. foreign policy objectives and national security interests, 
  I have determined at this time not to continue to designate such 
  encryption products as defense articles on the United States 
  Munitions List.
  
  Accordingly, under the powers vested in me by the Constitution 
  and the laws of the United States, I direct that:
  
  1.  Encryption products that presently are or would be 
  designated in Category Xiii of the United States Munitions 
  List and regulated by the Department of State pursuant to 
  the Arms Export Control Act (22 U.S.C. 2778 et seq.) shall 
  be transferred to the Commerce Control List, and regulated 
  by the Department of Commerce under the authority conferred 
  in Executive Order 12924 of August 19, 1994 (as continued on 
  August 15, 1995, and August 14, 1996), Executive Order 12981 
  of December 5, 1995, and the new Executive order except 
  that encryption products specifically designed, developed, 
  configured, adapted, or modified for military applications 
  (including command, control, and intelligence applications), 
  shall continue to be designated as defense articles, shall 
  remain on the United States Munitions List, and shall continue 
  to be controlled under the Arms Export Control Act.  The 
  transfer described in this paragraph shall be effective upon 
  the issuance of final regulations (the "Final Regulations") 
  implementing the safeguards specified in this directive and 
  in the new Executive order.
  
  2.  The Final Regulations shall specify that the encryption 
  products specified in section 1 of this memorandum shall be 
  placed on the Commerce Control List administered by the 
  Department of Commerce.  The Department of Commerce shall, 
  to the extent permitted by law, administer the export of such 
  encryption products, including encryption software, pursuant 
  to the requirements of sections 5 and 6 of the former Export 
  Administration Act (50 U.S.C. App. 2405 and 2406), and the 
  regulations thereunder, as continued in effect by Executive 
  Order 12924 of August 19, 1994 (continued on August 15, 1995, 
  and on August 14, 1996), except as otherwise indicated in or 
  modified by the new Executive order, Executive Order 12981 of 
  December 5, 1995, and any Executive orders and laws cited 
  therein.
  
  3.  The Final Regulations shall provide that encryption 
  products described in section 1 of this memorandum can be 


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  licensed for export only if the requirements of the controls 
  of both sections 5 and 6 of the former Export Administration 
  Act (50 U.S.C. App. 2405 and 2406), and the regulations 
  thereunder, as modified by the new Executive order, Executive 
  Order 12981 of December 5, 1995, and any Executive orders 
  and laws cited therein, are satisfied.  Consistent with 
  section 742.1(f) of the current Export Administration 
  Regulations, the Final Regulations shall ensure that a license 
  for such a product will be issued only if an application can 
  be and is approved under both section 5 and section 6.  The 
  controls on such products will apply to all destinations.  
  Except for those products transferred to the Commerce Control 
  List prior to the effective date of the Final Regulations, 
  exports and reexports of encryption products shall initially be 
  subject to case-by-case review to ensure that export thereof 
  would be consistent with U.S. foreign policy objectives and 
  national security interests, including the safety of U.S. 
  citizens.  Consideration shall be given to more liberalized 
  licensing treatment of each such individual product after 
  interagency review is completed.  The Final Regulations shall 
  also effectuate all other specific objectives and directives set 
  forth in this directive.
  
  4.  Because encryption source code can easily and mechanically 
  be transformed into object code, and because export of such 
  source code is controlled because of the code's functional 
  capacity, rather than because of any "information" such code 
  might convey, the Final Regulations shall specify that 
  encryption source code shall be treated as an encryption 
  product, and not as technical data or technology, for export 
  licensing purposes.
  
  5.  All provisions in the Final Regulations regarding 
  <U>"de minimis"</U> domestic content of items shall not apply with 
  respect to the encryption products described in paragraph 1 
  of this memorandum.
  
 
  6.  The Final Regulations shall, in a manner consistent with 
  section 16(5)(C) of the Eaa, 50 U.S.C. App. 2415(5)(C), provide 
  that it will constitute an export of encryption source code 
  or object code software for a person to make such software 
  available for transfer outside the United States, over radio, 
  electromagnetic, photooptical, or photoelectric communications 
  facilities accessible to persons outside the United States, 
  including transfer from electronic bulletin boards and Internet 
  file transfer protocol sites, unless the party making the 
  software available takes precautions adequate to prevent the 
  unauthorized transfer of such code outside the United States.


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  7.  Until the Final Regulations are issued, the Department of 
  State shall continue to have authority to administer the export 
  of encryption products described in section 1 of this memorandum 
  as defense articles designated in Category Xiii of the United 
  States Munitions List, pursuant to the Arms Export Control Act.
  
  8.  Upon enactment of any legislation reauthorizing the 
  administration of export controls, the Secretary of Defense, 
  the Secretary of State, and the Attorney General shall reexamine 
  whether adequate controls on encryption products can be 
  maintained under the provisions of the new statute and advise 
  the Secretary of Commerce of their conclusions as well as any 
  recommendations for action.  If adequate controls on encryption 
  products cannot be maintained under a new statute, then such 
  products shall, where consistent with law, be designated or 
  redesignated as defense articles under 22 U.S.C. 2778(a)(1), 
  to be placed on the United States Munitions List and controlled 
  pursuant to the terms of the Arms Export Control Act and the 
  International Traffic in Arms Regulations.  Any disputes 
  regarding the decision to designate or redesignate shall be 
  resolved by the President.
  
  
  
                                     William J. Clinton
  
  
  
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