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 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 there under, 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 hereunder, 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.
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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, photo optical, 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