On January 14, 2000, the Department of Commerce issued an interim final rule amending the Export Administration Regulations to change the procedure for obtaining Commerce approval for the export or re-export of software and commodities containing encryption. The new rule is effective immediately. The new interim rule implements the President’s encryption policy announced in September, 1999 and is intended to simplify and liberalize encryption export rules.

Under the new regulation, most commercial exports or re-exports of U.S. encryption software and commodities containing encryption which were classified under ECCN 5A002 and 5D002 will not require a license. A new Cryptography Note is added to Category 5 - Part 2 of the Commerce Control List ("CCL"), and encryption software is removed from the General Software Note. As a result, encryption software is released from ‘EI" (Encryption Items) and ‘NS’ (National Security) controls, making these items exportable to all non-embargoed destinations.

Prior to exporting non-public software, commodities, or source code containing encryption, the new regulation requires the exporter to request a one-time review and classification by the Bureau of Export Administration. Upon receipt of a classification request, BCA will review the item’s specifications and assign the appropriate classification to the CCL. BXA will notify exporters in writing of the classification and proper licensing mechanism. An appeal process allows exporters to challenge the BXA classification.

The export of publically available source code for commercial purposes is permitted without pre-review but requires a written filing with BXA prior to or at the time of export. Finally, exports of most encryption products to Government end-users, whether software, source code or services, will continue to require a license.

The previous sector-specific limitations and the national security limitations on the use of license exception ENC (Encryption commodities and software) are lifted. The interim final rule also provides important guidance regarding a number of practical issues which have arisen as a result of the widespread use of the world wide web as a distribution channel for software products. Encryption software patches for retail products distributed via the web may be exported without pre-review or approval under license exception TSU. A new paragraph added to license exception ENC also permits telecommunications and internet service providers to provide encryption services, including public key infrastructure services to the general public. Private services for Government users are not eligible for this license exception.

Contact our office if you have questions or would like additional information about BXA’s new pre-export review procedure.