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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
  
  
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                           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 
  
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  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.
  
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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, 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
  
  
  
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                           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 

  
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  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.

  
  
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