Crypto Headache

Fifteen months after the Clinton administration relaxed export controls on data-scrambling hardware and software, some U.S. companies are still finding the approval process a troublesome thicket.

“Encryption and export control laws are out of control,” said Sun Microsystems Chief Executive Scott McNealy, in a recent speech at the National Press Club in Washington, D.C. “We should make encryption available, and it should just not be something that were not allowed to export.”

Under the so-called relaxed export rules, the government lets through any software written and distributed by the open source community, such as Crypt, Cryptlib and Samba, with no more than a notification that the package is being widely distributed.

Yet, commercial software such as PGP, Gauntlet Firewall and Checkpoint, whose source code is not public, is still subjected to close scrutiny, even when similar products are available on the open market.

The regulatory review process typically runs at least one month, and more often three or four, according to lawyers who have gone through the process. Legal fees often total $10,000 per product cleared with the Department of Commerce.

The regulatory burden, said attorney Kenneth Bass, remains as high as ever. To win approval, developers must still submit their products to the Commerce Departments Bureau of Export Administration, which passes on all software and hardware to the National Security Agency.

“Youve got a highly technical area that many lawyers dont easily grasp,” he said. “You have a spiders web of complexity and you have an industry that correctly, in my judgment, asks, Why are we doing this? [Encryption controls] remain some of the most complicated export regulations on the books.”

Bureau of Export Administration officials could not comment for this story by the deadline.

The government once controlled encryption exports under the theory that terrorists and spies could use crypto to hide activity just as easily as businesses and individuals could use it to fight the bad guys in the first place.

In addition to banning export of all but the weakest encryption, the government erected a regulatory mechanism that divided encryption technology into dozens of subgroups, at times making distinctions among products that no one in the private sector had made before.

Some industries, such as the banking industry, received more lenient treatment than others — arms suppliers, for instance.

Some say the government is making strides. Stewart Baker, one-time counsel to the NSA and cyberlaw specialist at Steptoe & Johnson, said the NSA is doing a good job of reviewing products quickly. Likewise, he said, the agency earns high marks for complying with promises not to ask for more information about clients than sellers usually retain in their customer databases.

Bass agreed, adding that the Commerce Department bears the brunt of processing the time-consuming applications.

Perry Metzger, CEO of open source software developer Wasabi Systems, said life is much easier for nonproprietary developers. His company simply writes the encryption it needs into its products, sends a boilerplate notice to the Commerce Department and ships the software without having to wait for a response.