Revisiting Wassenaar

by
Stewart Baker
sbaker@steptoe.com

December 1997

There has been an effort recently by the Clinton Administration to revisit certain terms of the Wassenaar Arrangement that it perceives as discouraging other member countries from imposing meaningful export controls on encryption products.

As you may recall, the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies is an international regime designed to promote communication and cooperation in controlling the transfer of arms and dual-use goods (including cryptography). The arrangement requires participating countries to control cryptography on a statutory or regulatory basis, which may include "forms of licensing" or "the ability to monitor transfers of these items." Still, exports can occur according to the policies and discretion of the participating country.

More importantly, the Wassenaar Arrangement excludes from these controls software that is either mass-market or in the public domain (see the arrangement's "General Software Note" attached at the end of this message). Despite this exclusion, the U.S. has chosen to impose export controls on nearly all mass market and public domain software that contains strong encryption. In most cases, the U.S. only permits 40-bit encryption software to be eligible for "mass market" treatment. By contrast, most other Wassenaar members permit the free exportability of all mass market encryption software. The U.S. would like to close this "loophole."

Another area is which the practice of other Wassenaar members conflicts with U.S. policy is the regulation of Internet distribution of encryption software. Some countries (such as the U.K.) have taken the position that their export controls laws do not permit the control of "intangible" items. Thus, even a non-mass market product, that would be controlled if shipped on a disc, can be freely distributed via the Internet to foreign buyers.

The U.S. is quite concerned about these policies and the resulting freedom that foreign encryption producers have to ship their products across borders. Administration officials are conducting low-key discussions with other Wassenaar members to try to develop a greater consistency between their policies and those of the U.S. on these points. The likelihood of successfully changing the Wassenaar arrangement (or the generally accepted interpretation of it) is probably 50 percent or less. But if the U.S. cannot succeed in influencing its close allies here, it does not bode well for its broader efforts at developing and international consensus on key recovery.

GENERAL SOFTWARE NOTE

The Lists [of dual use goods] do not control "software" which is either:

1. Generally available to the public by being:
a. Sold from stock at retail selling points without restriction, by means of:
1. Over the counter transactions;
2. Mail order transactions; or
3. Telephone call transactions; and
b. Designed for installation by the user without further substantial support by the supplier; or

2. "In the public domain."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information please contact L. Benjamin Ederington on Tel: +202-429-6411, fax: 202-429-3902 or E-mail: bedering@steptoe.com.