[Weekly Compilation of Presidential Documents Volume 32, Number 46 (Monday, November 18, 1996)]
[Pages 2397-2399]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Memorandum on Encryption Export Policy

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 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

[[Page 2398]]

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 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

[[Page 2399]]

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.
    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