KEY-RECOVERY DEADLINE NOT MEANT TO BAR ENTRY

KEY-RECOVERY DEADLINE NOT MEANT TO BAR ENTRY

Commerce Department officials said this week that they do not plan to exclude new encrypted software products with key-recovery features for export on the basis of draft regulations that include a December 1997 deadline.

James Lewis - director of the Bureau of Export Administration's Office of Strategic Trade and Foreign Policy Controls - said the date for naming a key-recovery agent was not meant to be a cutoff that would bar market entry.Instead, any applicant seeking to export a key recovery product after December 1997 must name an agent in order to qualify, he said.

The industry generally opposes the entire key-recovery concept and is backing legislation that would allow unrestricted exports of encrypted software sold domestically.

In the meantime, many companies have sought exemptions under existing and proposed rules.

Confusion has resulted from wording of the draft regulation and a recent reply to objections raised by the Industry Coalition for Technology Transfer about the December deadline.

The rules are designed to exempt certain financial institutions from the requirement of placing code keys on deposit with key-recovery agents for law enforcement access.

But the draft also moved up by one year a December 1998 deadline for naming key-recovery agents for other users and software manufacturers seeking to export encryption products with unlimited key lengths.

Mr. Lewis clarified the wording of the regulations, stressing that the deadline was not meant to serve as a cutoff.

''Starting in December 1997, you need to provide us with that name,'' Mr. Lewis said.

William Reinsch, Commerce undersecretary for export administration, also took issue with a Journal of Commerce report Tuesday that said the agency had decided against extending the exemption for financial institutions to the insurance industry.

The encryption exemption is designed primarily for banks to allow secure international communications for financial transactions. Mr. Reinsch said in a letter last week that the exemption will be extended to include credit-card issuers and securities firms.

Mr. Reinsch declined to discuss Commerce's position on insurers, emphasizing that the draft rules are not final and are still subject to interagency review and possible change.

But industry officials familiar with the rules say they do not include the insurance industry, and there is little chance that other agencies, including the Defense and State departments, would recommend extending the break.