nyt coverage of 'new' US export policy

[Ariel Glenn <ariel@watsun.cc.columbia.edu>]

      May 9, 1997
      
     
U.S. To Ease Rules on Export
Of Finance Encryption Technology

      By JOHN MARKOFF
      
                                      
    G iving ground on the Clinton administration's computer-data privacy
    policy, the Commerce Department said Thursday that it would begin in
      some cases to allow export of the most powerful data-scrambling
        technologies when used for securing financial transactions.
                                      
   The move departs from previous export policy, which had allowed export
      of the U.S. computer industry's most powerful privacy-protection
    software and hardware only if the technology enabled law-enforcement
    officials to obtain copies of the mathematical keys needed to break
     the codes. The revised policy would require no such code-breaking
      proviso in the case of certain types of financial transactions.
                                      
      Besides international funds transfers between banks, permissible
         applications under the new policy are expected to include
       privacy-protected home-banking software for banks to offer to
    customers worldwide. The new policy would also apply to a technology
    known as the Secure Electronic Transaction standard, which has been
    developed by Mastercard and Visa to permit consumers to send credit
               card information to merchants electronically.
                                      
   Computer-data scrambling, or cryptography, is widely seen as the most
       crucial technology underlying a wide range of new computerized
         communications and commerce applications. But the Clinton
   administration, as did the Bush administration, has limited export of
   the most powerful U.S. encryption technology, for fear it would enable
   foreign criminals or terrorists to conspire with electronic impunity.
                                      
   Privacy-rights advocates have opposed the government's policy, fearing
    Big Brother intrusiveness if law-enforcement officials could obtain
         code keys. And industry officials have argued that because
    data-scrambling technology is already widely available overseas, the
      export laws have forced U.S. companies to miss out on a thriving
                              foreign market.
                                      
     Banks and other financial institutions, meanwhile, have complained
       that the policies made it difficult to insure the security of
      electronic-funds transfers between the United States and foreign
                                 countries.
                                      
         But word of the new rules drew concern from critics of the
      administration's data-scrambling policies, who said the banking
             industry would receive unfair business advantages.
                                      
    "There is a danger of creating a cartel-like environment that gives
      banks advantages over many of the current leaders in electronic
   commerce," said Laurie Fena, the executive director of the Electronic
        Frontier Foundation, a public policy group in San Francisco.
                                      
   Historically, U.S. banking and financial institutions have been given
    special exemptions to export data-scrambling equipment based on the
   20-year-old Data Encryption Standard. But the big increase in computer
       processing power in recent years has made that standard appear
   increasingly vulnerable, and the government has been under pressure to
      permit the export of strong encryption technology for financial
                                 purposes.
                                      
    Administration officials said the new rules would be published soon.
       Until then, it is unclear whether the definition of financial
      institutions and transactions may now be broad enough to include
   software makers like Netscape Communications Corp., which produces the
    most popular software for navigating the Internet's World Wide Web.
     _________________________________________________________________
                                      
                              Related Articles
                    IBM Announces New Encryption Formula
                                (May 7,1997)
                                      
             U.S. Restrictions Give European Encryption a Boost
                               (April 7,1997)
     _________________________________________________________________
                                      
     Netscape's software has a component for insuring secure financial
      transactions; but under current export law, that ability must be
      weakened or disabled when its Web-navigating software is shipped
                                 overseas.
                                      
   "It's very heartening to see the administration finally admitting that
    there are products overseas that are cutting into our markets," said
       Peter Harter, the lawyer in charge of global public policy for
    Netscape. "It's unfortunate to have to watch this happening from the
                             back of the bus."
                                      
                                      
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