Wednesday, September 16, 1998

U.S. Relaxes Exports Limits on Encryption

by Aaron Pressman

WASHINGTON (Reuters) -- The Clinton administration on Wednesday announced a further relaxation of U.S. export limits on data scrambling technologies, considered vital for secure electronic commerce and Internet communications.

The latest plan will continue the administration's piecemeal strategy of easing some controls on data scrambling, or encryption, products without fully lifting the limits as many high-tech companies and civil liberties groups would prefer.

Vice President Al Gore said the new policy reflected the difficult task of balancing commerce and privacy interests against the needs of law enforcers who fear that unfettered export of encryption will aid criminals and terrorists.

"We must make sure that in the Information Age, you get information about the rest of the world and not the other way around", Gore said at a White House briefing. "We must ensure that new technology does not mean new and sophisticated criminal and terrorist activity, which leaves law enforcement outmatched. We can't allow that to happen."

The multifaceted plan included allowing for rapid export of strong encryption products that scramble information carried over computer or communications networks.

A group of computer companies led by Cisco Systems Inc.(CSCO) proposed such a network-based encryption scheme in July. That allows law enforcers to get access to decoded information from the operator of the network.

The plan will also relax controls for encryption products used by almost all foreign subsidiaries of U.S. companies and non-U.S. companies in 45 countries in the insurance and health care businesses. The sector exceptions were modelled on a similar policy announced last year for the financial industry.

Non-U.S. online merchants, such as a Web site selling books or software, will also receive preferential export treatment.

And the plan will broadly relax controls on some of the weakest types of encryption products.

Virtually all products use mathematical formulas to scramble information and render it unreadable without a password or software "key." Part of the strength of any particular encryption product relies on the length of the key measured in bits, the ones and zeros that are the smallest unit of computer data.

The plan will ease controls on 56-bit products, well-below the 128-bit keys used in cutting-edge products.

Privacy advocates criticised the plan for helping big companies but leaving ordinary users out in the cold.

"The administration is pursuing a divide-and-conquer strategy", said Alan Davidson, staff counsel at the Centre for Democracy and Technology in Washington. "Unfortunately, the last person left standing is the average user, like ordinary people using the Internet or human rights workers worldwide who rely on encryption."

Computer and software industry officials were generally pleased with the new policy but said they hoped the administration eventually go further.

"We found today's announcement to be very encouraging", said Robert Holleyman, president of the Business Software Alliance, which includes Microsoft Corp.(MSFT) "It is not a total solution because as mass-market software companies we're looking for solutions that all computer users can adopt."

Netscape Communications Corp.(NSCP) public policy counsel Peter Harter said the new export rules would apply to "a decent chunk" of customers for Netscape's products that include encryption, but individual users were still left out.

Under current law, use of encryption is not regulated within the United States. On Wednesday, White House officials declined to rule out seeking domestic controls later, but said they hoped industry would provide technical solutions to help law enforcers deal with criminals using encryption.

The White House plan backs the establishment of a technical centre to aid law enforcement efforts to crack encryption.

Wednesday's announcement came in part as a response to a private-sector proposal in May to broadly relax the export limits.

The plan was also a response to congressional efforts to relax the export limits more substantially. Several lawsuits are also pending challenging the constitutionality of the limits.

Copyright © 1998 by Reuters Limited. All Rights Reserved. Reprinted with permission.