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                                                       Calendar No. 263


  1st Session

                                 S. 798

                          [Report No. 106-142]


                                 A BILL

To promote electronic commerce by encouraging and facilitating the use 
of encryption in interstate commerce consistent with the protection of 
               national security, and for other purposes.


                             August 5, 1999

                       Reported without amendment
                                                       Calendar No. 263
  1st Session
                                 S. 798

                          [Report No. 106-142]

To promote electronic commerce by encouraging and facilitating the use 
of encryption in interstate commerce consistent with the protection of 
               national security, and for other purposes.



                             April 14, 1999

Mr. McCain (for himself, Mr. Burns, Mr. Wyden, Mr. Leahy, Mr. Abraham, 
 Mr. Kerry, Mrs. Hutchison, and Mr. Feingold) introduced the following 
 bill; which was read twice and referred to the Committee on Commerce, 
                      Science, and Transportation

                             August 5, 1999

               Reported by Mr. McCain, without amendment


                                 A BILL

To promote electronic commerce by encouraging and facilitating the use 
of encryption in interstate commerce consistent with the protection of 
               national security, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,


    This Act may be cited as the ``Promote Reliable On-Line 
Transactions to Encourage Commerce and Trade (PROTECT) Act of 1999''.


    The purposes of this Act are--
            (1) to promote electronic growth foster electronic 
            (2) create consumer confidence in electronic commerce;
            (3) meet the needs of businesses and individuals using 
        electronic networks;
            (4) prevent crime; and
            (5) improve national security
        by facilitating the widespread use of encryption and assisting 
        the United States Government in developing the capability to 
        respond to the challenges posed by new technological 


    Congress finds the following:
            (1) The ability to digitize information makes carrying out 
        tremendous amounts of commerce and personal communication 
        electronically possible.
            (2) Miniaturization, distributed computing, and reduced 
        transmission costs make communication via electronic networks a 
            (3) The explosive growth in the Internet and other computer 
        networks reflects the potential growth of electronic commerce 
        and personal communication.
            (4) The Internet and the global information infrastructure 
        have the potential to revolutionize the way individuals and 
        businesses conduct business.
            (5) The full potential of the Internet for the conduct of 
        business cannot be realized as long as it is an insecure medium 
        in which confidential business information and sensitive 
        personal information remain at risk of unauthorized viewing, 
        alteration, and use.
            (6) The United States' critical infrastructures 
        increasingly rely on vulnerable commercial information systems 
        and electronic networks and represent a growing risk to 
        national security and public safety because the security and 
        privacy of those systems and networks is not assured.
            (7) Encryption of information enables businesses and 
        individuals to protect themselves, their commercial information 
        and networks, and the United States' critical infrastructures 
        against unauthorized viewing, alteration, and abuse ensuring 
        the security, confidentiality, authenticity, and integrity of 
            (8) American computer software and hardware, 
        communications, and electronics businesses are leading the 
        world technology revolution, and the American information 
        technology industry is a vital sector of the United States 
        economy. These businesses have developed in the commercial 
        marketplace, and are prepared to offer immediately to computer 
        users worldwide, a variety of communications and computer 
        hardware and software that provide strong, robust, and easy-to-
        use encryption.
            (9) Notwithstanding American preeminence in information 
        technology, many foreign companies currently manufacture 
        products and services that are comparable in quality and 
        capabilities to United States products and frequently provide 
        stronger encryption. These foreign companies are competing 
        fiercely with United States companies for sales not only of the 
        encryption product or service, but also for the ultimate 
        product that uses the encryption capability, including 
        applications ranging from online banking to electronic mail to 
            (10) The leading survey of available encryption products 
        reports that, as of December, 1997, there were 656 foreign 
        encryption products (out of 1619 encryption products produced 
        worldwide) available from 474 vendors in 29 different foreign 
            (11) To promote economic growth, foster electronic 
        commerce, meet the needs of businesses and individuals using 
        electronic networks, prevent crime, and improve national 
        security, Americans should be free to continue using lawfully 
        any encryption products and programs, and American companies 
        should be free to sell, license, or otherwise distribute such 
        encryption products and programs worldwide so long as national 
        security is not put at risk.
            (12) The United States government should promote the use of 
        the United States encryption products and expedite its work 
        with the industry to update the United States Data Encryption 
        Standard (DES).
            (13) NIST has proposed requirements and established 
        procedures for adopting a new, stronger, private sector--
        developed Advanced Encryption Standard (AES).
            (14) Similar to DES, it is anticipated that AES will become 
        an international encryption standard adopted by individuals and 
        companies worldwide.
            (15) NIST has requested candidate algorithms, evaluated 
        candidate algorithms, and encouraged public comment at each 
        step of the process. NIST's open and public process for 
        developing and testing the new AES should be applauded and 
            (16) Further demonstrating the worldwide availability, use, 
        and sophistication of encryption abroad, only 5 of the 15 AES 
        candidate algorithms submitted to NIST for evaluation that 
        complied with all requirements and procedures for submission 
        were proposed by companies and individuals in the United 
        States. The remaining 10 candidate algorithms were proposed by 
        individuals and companies from 11 different countries 
        (Australia's LOKI97; Belgium's RIJNDAEL; Canada's CAST-256 and 
        DEAL; Costa Rica's FROG; France's DFC; Germany's MAGENTA; 
        Japan's E2; Korea's CRYPTON; and the United Kingdom, Israel, 
        and Norway's SERPENT algorithms).
            (17) NIST's efforts to create the AES to replace DES are 
        important to the development of adequate global information 
        security to a degree that Congress should explicitly authorize 
        and support NIST's efforts and establish a deadline of January 
        1, 2002, for finalizing the new standard.
            (18) Once NIST finalizes AES, the Federal Government should 
        permit all United States products meeting the new AES standards 
        or its equivalent to be exported worldwide to ensure global 
        security and to permit United States companies to compete 
        effectively with their foreign competitors consistent with the 
        national security requirements of the United States.
            (19) The United States Government has legitimate law 
        enforcement and national security objectives, which can be met 
        by permitting American companies to compete globally, while at 
        the same time recognizing the challenges to law enforcement and 
        national security posed by quickly advancing technological 
        developments and providing for research, development, and 
        adoption of new technology to respond to these challenges.
            (20) As part of its efforts to fight crime with technology 
        and ensure the safety of commercial networks, the United States 
        government should establish a mechanism for facilitating 
        communications with experts in information security industries, 
        including cryptographers, engineers, software publishers, and 
        others involved in the design and development of information 
        security products and should ensure that such sums as necessary 
        are appropriated to ensure and enhance national security and 
        law enforcement.
            (21) The United Government also should expand and expedite 
        its computer security research activities at NIST and the 
        Federal laboratories, work with industry to recommend priority 
        activities at university research facilities, and fund 
        scholarships in information security.


    In this Act:
            (1) Computer hardware.--The term ``computer hardware'' 
        includes computer systems, equipment, application-specific 
        assemblies, smart cards, modules, integrated circuits, printed 
        circuit board assemblies, and devices that incorporate 1 or 
        more microprocessor-based central processing units that are 
        capable of accepting, storing, processing, or providing output 
        of data.
            (2) Encrypt and encryption.--The term ``encrypt'' and 
        ``encryption'' means the scrambling (and descrambling) of wire 
        communications, electronic communications, or electronically 
        stored information, using mathematical formulas or algorithms 
        to preserve the confidentiality, integrity, or authenticity of, 
        and prevent unauthorized recipients from accessing or altering, 
        such communications or information.
            (3) Encryption product.--The term ``encryption product''--
                    (A) means computer hardware, computer software, or 
                technology with encryption capabilities; and
                    (B) includes any subsequent version of or update to 
                an encryption product, if the encryption capabilities 
                are not changed.
            (4) Exportable.--The term ``exportable'' means the ability 
        to transfer, ship, or transmit to foreign users.
            (5) Generally available or general availability.--The terms 
        ``generally available'' or ``general availability'' mean--
                    (A) in the case of computer hardware or computer 
                software (including encryption products), computer 
                hardware, or computer software that is--
                            (i) distributed via the Internet;
                            (ii) widely offered for sale, license, or 
                        transfer (without regard to whether it is 
                        offered for consideration), including over-the-
                        counter retail sales, mail order transactions, 
                        telephone order transactions, electronic 
                        distribution, or sale on approval;
                            (iii) preloaded on computer hardware that 
                        is widely available; or
                            (iv) assembled from computer hardware or 
                        computer software components that are generally 
                    (B) not designed, developed, or tailored by the 
                manufacturer for specific purchasers, except that the 
                purchaser or user may--
                            (i) supply certain installation parameters 
                        needed by the computer hardware or computer 
                        software to function properly with the computer 
                        system of the user or purchaser; or
                            (ii) select from among options contained in 
                        the computer hardware or computer software; and
                    (C) are available in more than 1 country through a 
                means described in subparagraph (A).
            (6) Key.--The term ``key'' means the variable information 
        used in a mathematical formula, code, or algorithm, or any 
        component thereof, used to decrypt wire communications, 
electronic communications, or electronically stored information, that 
has been encrypted.
            (7) License exception.--The term ``license exception'' 
        means an authorization by the Bureau of Export Administration 
        of the Department of Commerce that allows the export or re-
        export, under stated conditions, of items subject to the Export 
        Administration Regulations that otherwise would require a 
            (8) NIST.--The term ``NIST'' means the National Institute 
        of Standards and Technology in the Department of Commerce.
            (9) On-line merchant.--The term ``on-line merchant'' means 
        either a person or a company or other entity engaged in 
        commerce that, as part of its business, uses electronic means 
        to conduct commercial transactions in goods (including, but not 
        limited to, software and all other forms of digital content) or 
        services, whether delivered in tangible or electronic form.
            (10) Person.--The term ``person'' has the meaning given the 
        term in section 2510(1) of title 1, United States Code.
            (11) Publicly available or public availability.--The terms 
        ``publicly available'' or ``public availability'' mean--
                    (A) information that is generally accessible to the 
                interested public in any form; or
                    (B) technology and software that are already 
                published or will be published, arise during, or result 
                from fundamental research, are educational, or are 
                included in certain patent applications.
            (12) Recoverable product.--The term ``recoverable product'' 
        means an encryption product that--
                    (A) incorporates an operator-controlled management 
                interface enabling real-time access to specified 
                network traffic prior to encryption, or after 
                decryption, at a designated access point under the 
                control of the network owner or operator (utilizing a 

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