US to ease encryption rules

Plans to ease export restrictions on encryption hardware and software.

The Clinton administration plans to announce that it will relax restrictions on exports of encryption software and hardware products, a major shift in a longstanding policy and a victory for technology companies.

In an announcement today, the administration is expected to unveil simplified rules governing how US technology firms may sell data-scrambling hardware and software products abroad. For years, US law enforcement and military officials have opposed easing restrictions on encoding technology, contending that wider availability of encryption products would hinder efforts to fight cyber-crimes. High-tech companies, on the other hand, have countered that encryption products are already widely available overseas.

Over the years, the administration's encryption policy has eased somewhat. But administration officials said the new changes will let companies sell data-scrambling products to companies and nongovernment users after a one-time technical review by the US Commerce Department. In addition, these officials said, companies could sell specialised, custom encryption products -- those not designed for retail sale -- to companies or individuals abroad, also after the one-time review. "This is a great leap forward," said Dan Scheinman, senior vice president of legal and government affairs at Cisco Systems, a big maker of networking gear. "Based on our current understanding, the industry can now compete on equal footing with our foreign competitors."

The Commerce Department's current rules are complicated and inconsistent. US firms, for example, can sell encryption products to foreign banks and financial institutions, but not to telecommunications companies. The new rules will scrap that.

Nonetheless, companies will be required to submit detailed lists of clients that buy data-scrambling products, and they will be barred from selling in Iran, Iraq, Libya, Syria, Sudan, North Korea, and Cuba. The Commerce Department also reserves the right to deny the sale of custom encryption products to any other foreign government or military. Any sales to foreign governments will require a license.

The new rules will go into effect this fall and are expected to open new markets for US technology firms. They have long argued that widespread use of encryption helps to secure e-commerce transactions and prevents intellectual-property thefts.

In a concession to the law enforcement community, administration officials said the White House will push for additional funds to help federal law-enforcement and national-security experts develop new ways to fight crime in the digital age. The export changes appear to have the blessing of even the administration's national-security arm. "Finally we are crafting an overall strategy that creates a balance between America's computer industry, Americans' concerns for privacy and interests of law enforcement," Deputy Defence Secretary John Hamre said in an interview.

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