                               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

                                    2

      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

                                    3

      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
      "de minimis" 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.

                                    4

      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

                                    # # #