WASHINGTON -- The Clinton administration is delaying until mid-January new rules to allow America's high-tech industry to sell even the most powerful data-scrambling technology overseas with almost no restrictions.
The surprise move affords the government more time to consider criticism from industry groups and some members of Congress over a draft circulated last month of its proposed rules, which were denounced as still too restrictive."It's a little bit of a surprise, but I'm sure it's just a small bump in the road," said Gene Hodges, a vice president at Network Associates Inc. of Santa Clara, Calif., which sells encryption software.
William Reinsch, the Commerce Department's undersecretary for export administration, said the new export regulations will be disclosed Jan. 14.
"It's going to result in a better product for them," Reinsch said in an interview. "I understand there were some anxious to get this done before Christmas, but we didn't feel like we should make it final without another round of letting people look at it. Better this than to make a lot of mistakes."
The White House decided in September to largely reverse its long-standing opposition to liberalizing the rules that companies must follow to export the most powerful software to scramble digital messages.
It was an enormous concession to the high-tech industry over he objections of law enforcement and national security officials, because it will help those companies in overseas competition -- and help consumers worldwide guarantee the privacy of their e-mail and online credit-card purchases.
But the White House, which had focused mostly on retail software, didn't publicly suggest then how it might treat the sale overseas of data-scrambling hardware and raw computer code that is later turned into functional encryption software. Industry groups called those omissions a loophole in the spirit of the administration's promises.
Americans for Computer Privacy, one trade group, had said the earlier draft regulations would leave the industry with "a complicated morass of regulations."
Reinsch said the new draft rules, to be circulated among key industry players this week, will include relaxed limits on those types of products, too.
"We added liberalizations not in the September announcement on source code, on chips and on tool kits," he said.
The administration has said it will still require companies to seek permission to sell the scrambling technology to a foreign government or military, and will maintain bans on selling to seven nations accused of terrorism: Iran, Iraq, Libya, Syria, Sudan, North Korea and Cuba.
Previously, the administration allowed companies to sell the most powerful scrambling technology only to specific industries overseas; other foreign customers were generally limited to so-called 56-bit encryption products, meaning those with 72 quadrillion unlocking combinations.
The export limits never directly affected Americans, who are legally free to use encryption technology of any strength. But U.S. companies have been reluctant to develop one version of their technology for domestic use and a weaker overseas version, so they typically sell only the most powerful type that is legal for export, even to Americans.