November 15, 1996 TEXT OF A LETTER FROM THE PRESIDENT TO THE SPEAKER OF THE HOUSE OF REPRESENTATIVES AND THE PRESIDENT OF THE SENATE THE WHITE HOUSE Office of the Press Secretary _______________________________________________________________ For Immediate Release November 15, 1996 TEXT OF A LETTER FROM THE PRESIDENT TO THE SPEAKER OF THE HOUSE OF REPRESENTATIVES AND THE PRESIDENT OF THE SENATE November 15, 1996 Dear Mr. Speaker: (Dear Mr. President:) In order to take additional steps with respect to the national emergency described and declared in Executive Order 12924 of August 19, 1994, and continued on August 15, 1995, and August 14, 1996, necessitated by the expiration of the Export Administration Act (EAA) on August 20, 1994, I hereby report to the Congress that pursuant to section 204(b) of the International Emergency Economic Powers Act, 50 U.S.C. 1703(b) (the "Act"), I have today exercised the authority granted by the Act to issue an Executive order (a copy of which is attached) to revise the provisions that apply to the administration of the export control system maintained by Department of Commerce in the Export Administration Regulations, 15 CFR Part 730 et seq. The new Executive order relates to my decision to transfer certain encryption products from the United States Munitions List administered by the Department of State to the Commerce Control List administered by the Department of Commerce. When I made that decision I also decided to amend Executive Order 12981 of December 5, 1995, which sets forth procedures for the interagency review and disposition of dual-use export license applications, to include the Department of Justice among the agencies that have the opportunity to review such applications with respect to encryption products transferred to Department of Commerce control. Also, in issuing the new order, I provided for appropriate controls on the export and foreign dissemination of encryption products transferred to the Department of Commerce. Among other provisions, I determined that the export of encryption products transferred to Department of Commerce control could harm national security and foreign policy interests of the United States even where comparable products are or appear to be available from foreign sources. Accordingly, the new order makes clear that any EAA provision dealing with issuance of licenses or removal of controls based on foreign availability considerations shall not apply with respect to export controls on such encryption products. Notwithstanding this, the Secretary of Commerce retains the discretion to consider the foreign availability of comparable encryption products in any particular case. Sincerely, WILLIAM J. CLINTON # # # 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 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 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. 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 # # # THE WHITE HOUSE Office of the Press Secretary _______________________________________________________________ For Immediate Release November 15, 1996 EXECUTIVE ORDER - - - - - - - ADMINISTRATION OF EXPORT CONTROLS ON ENCRYPTION PRODUCTS By the authority vested in me as President by the Constitution and the laws of the United States of America, including but not limited to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.), and in order to take additional steps with respect to the national emergency described and declared in Executive Order 12924 of August 19, 1994, and continued on August 15, 1995, and on August 14, 1996, I, WILLIAM J. CLINTON, President of the United States of America, have decided that the provisions set forth below shall apply to administration of the export control system maintained by the Export Administration Regulations, 15 CFR Part 730 et seq. ("the EAR"). Accordingly, it is hereby ordered as follows: Section 1. Treatment of Encryption Products. In order to provide for appropriate controls on the export and foreign dissemination of encryption products, export controls of encryption products that are or would be, on this date, designated as defense articles in Category XIII of the United States Munitions List and regulated by the United States Department of State pursuant to the Arms Export Control Act, 22 U.S.C. 2778 et seq. ("the AECA"), but that subsequently are placed on the Commerce Control List in the EAR, shall be subject to the following conditions: (a) I have determined that the export of encryption products described in this section could harm national security and foreign policy interests even where comparable products are or appear to be available from sources outside the United States, and that facts and questions concerning the foreign availability of such encryption products cannot be made subject to public disclosure or judicial review without revealing or implicating classified information that could harm United States national security and foreign policy interests. Accordingly, sections 4(c) and 6(h)(2)-(4) of the Export Administration Act of 1979 ("the EAA"), 50 U.S.C. App. 2403(c) and 2405(h)(2)-(4), as amended and as continued in effect by Executive Order 12924 of August 19, 1994, and by notices of August 15, 1995, and August 14, 1996, all other analogous provisions of the EAA relating to foreign availability, and the regulations in the EAR relating to such EAA provisions, shall not be applicable with respect to export controls on such encryption products. Notwithstanding this, the Secretary of Commerce ("Secretary") may, in his discretion, consider the foreign availability of comparable encryption products in determining whether to issue a license in a particular case or to remove controls on particular products, but is not required to issue licenses in particular cases or to remove controls on particular products based on such consideration; (b) Executive Order 12981, as amended by Executive Order 13020 of October 12, 1996, is further amended as follows: (1) A new section 6 is added to read as follows: "Sec. 6. Encryption Products. In conducting the license review described in section 1 above, with respect to export controls of encryption products that are or would be, on November 15, 1996, designated as defense articles in Category XIII of the United States Munitions List and regulated by the United States Department of State pursuant to the Arms Export Control Act, 22 U.S.C. 2778 et seq., but that subsequently are placed on the Commerce Control List in the Export Administration Regulations, the Departments of State, Defense, Energy, and Justice and the Arms Control and Disarmament Agency shall have the opportunity to review any export license application submitted to the Department of Commerce. The Department of Justice shall, with respect to such encryption products, be a voting member of the Export Administration Review Board described in section 5(a)(1) of this order and of the Advisory Committee on Export Policy described in section 5(a)(2) of this order. The Department of Justice shall be a full member of the Operating Committee of the ACEP described in section 5(a)(3) of this order, and of any other committees and consultation groups reviewing export controls with respect to such encryption products." (2) Sections 6 and 7 of Executive Order 12981 of December 5, 1995, are renumbered as new sections 7 and 8, respectively. (c) Because the export of encryption software, like the export of other encryption products described in this section, must be controlled because of such software's functional capacity, rather than because of any possible informational value of such software, such software shall not be considered or treated as "technology," as that term is defined in section 16 of the EAA (50 U.S.C. App. 2415) and in the EAR (61 Fed. Reg. 12714, March 25, 1996); (d) With respect to encryption products described in this section, the Secretary shall take such actions, including the promulgation of rules, regulations, and amendments thereto, as may be necessary to control the export of assistance (including training) to foreign persons in the same manner and to the same extent as the export of such assistance is controlled under the AECA, as amended by section 151 of Public Law 104-164; (e) Appropriate controls on the export and foreign dissemination of encryption products described in this section may include, but are not limited to, measures that promote the use of strong encryption products and the development of a key recovery management infrastructure; and (f) Regulation of encryption products described in this section shall be subject to such further conditions as the President may direct. Sec. 2. Effective Date. The provisions described in section 1 shall take effect as soon as any encryption products described in section 1 are placed on the Commerce Control List in the EAR. Sec. 3. Judicial Review. This order is intended only to improve the internal management of the executive branch and to ensure the implementation of appropriate controls on the export and foreign dissemination of encryption products. It is not intended to, and does not, create any rights to administrative or judicial review, or any other right or benefit or trust responsibility, substantive or procedural, enforceable by a party against the United States, its agencies or instrumentalities, its officers or employees, or any other person. WILLIAM J. CLINTON THE WHITE HOUSE, November 15, 1996.