In response to Greg Broiles' and Ulf Möller's posts and the prospect of a UK ban on non-escrowed encryption next Tuesday: Opening Address Under Secretary William A. Reinsch Bureau of Export Administration U.S. Department of Commerce Update West 98 Los Angeles, California February 10, 1998 [Excerpt] Encryption One of the reasons why our licensing load is inching back up is the transfer of encryption licensing to Commerce earlier this year. No speech from me would be complete without a paragraph on encryption, so here it is. Our policy is intended to balance the competing interests of privacy, electronic commerce, law enforcement, and national security. We believe that use of key recovery technologies is the best way to achieve that balance. We do not focus narrowly on a single technology or approach. We expect the market to make those judgments, but we are taking steps to facilitate the development and dissemination of these products. Our regulations allow recoverable encryption products of any strength and key length to be exported freely after a single review by the government. To encourage movement toward recoverable products, we have also created a special, two-year liberalization period during which companies may export 56 bit DES or equivalent products provided they submit plans to develop key recovery products. This provides an incentive for manufacturers to develop these products, which in turn will facilitate the development of key management infrastructures. So far, we have approved 47 plans, from companies large and small, and have five more pending. In terms of licenses, in calendar year 1997, we received 2076 applications, and approved 1801 licenses with a dollar value of $4.7 billion. (The reason for the high dollar value is because we approve encryption licensing arrangements for extended periods of time, from 4 to 10 years.) The interagency working group on cryptography policy, which includes representatives from BXA, NSA, and the FBI, continue to meet to discuss ways to streamline the licensing process on encryption export licenses. Several items have been identified and progress is being made in these areas. We have established a pre-Operating Committee group to discuss contentious cases. In part as a result, no encryption cases have been escalated to the OC since mid-December. We have created an Autolist to eliminate agency referrals. So far, we have agreed to list specific products amounting to 20% of the products we see. This means, once implemented, that a subset of licenses can be processed by Commerce without prior referral to other agencies. Finally, we have posted on our web page "helpful hints" to make the encryption licensing process more transparent: http://www.bxa.doc.gov/encguide.htm We continue to work on other initiatives to streamline the process. We are also discussing with our trading partners a common approach to encryption policy. We have found that most major producing countries have public safety and national security concerns similar to ours. We are working together with these governments to ensure that our policies are compatible, and that they facilitate the emergence of a key management infrastructure. With respect to legislation, we believe the McCain-Kerrey Bill, S. 909, the Secure Public Networks Act, provides a sound basis for legislation acceptable to both Congress and the Administration. In particular, we appreciate the bill's explicit recognition of the need to balance competing objectives and of the potential for key recovery to become a market-driven mechanism to facilitate maintaining that balance. ... [Other excerpts of speeches by BXA officials at the seminar:] Encryption Controls Export Enforcement has new responsibilities in the encryption area. Over the past year, Export Enforcement has opened many new investigations involving alleged violations of the encryption regulations. These cases are being watched very closely. The national security of the United States depends in part on the government's ability to obtain timely information about the activities and plans of potentially hostile foreign parties, such as terrorists and drug dealers. ... the Department of Justice and National Security Agency participate in processing licenses for encryption. ... The increase in licenses we are experiencing is attributable not only to increased exports, but to transfer of items from the Munitions List to Commerce jurisdiction. Encryption licenses account for a significant portion of the increase. We created a special division to handle those. As of today, there is only one encryption case that has been pending over 40 days. ----- For full speeches: http://jya.com/bxa-west98.htm