July 19, 1995

Hon. Thomas E. McNamara
Assistant Secretary for Political-Military Affairs
Department of State
Washington, DC  20520

Re: 	CJ  081-94

Dear Mr. McNamara:
We are replying to your letter of June 13, 1995, to our client, Philip R. Karn., Jr., explaining your decision to reaffirm the determination of the Department of State ("the Department") that the "Applied Cryptography source code disk" ("the Diskette") should be removed from United States Munitions List controls and transferred to the jurisdiction of the Department of Commerce ("Commerce").

Your decision is strikingly silent on the principal argument advanced in this appeal. As you know, the Department has previously determined that the identical information contained in the appendix to the printed version of Applied Cryptography is subject to Commerce's jurisdiction and not subject to controls under the International Traffic in Arms Regulations ("the ITAR").

While your decision analyzes the ITAR provisions at some length, it is totally silent with respect to any analysis of the fundamental inconsistency and utter irrationality of treating identical information in book form as a non-ITAR-controlled commodity, while continuing to insist that when the information is in the form of a computer-readable disk file, it constitutes non-exportable "munitions" under the ITAR regime. We believe your failure to address this fundamental fallacy of the Department's decisions in this case is not an oversight, but is instead a tacit admission that the distinction is irrational, arbitrary, capricious and insupportable. There simply cannot be any legitimate government interest in imposing the ITAR strictures on information that is freely exportable in textbook form.

We note that your letter indicates that Mr. Karn "may request that [your] determination be reviewed by Dr. Lynn Davis, the Under Secretary for Arms Control and International Security Affairs." We understand that the Department has suggested to other CJ appellants that requests for discretionary review beyond Dr. Davis's office can be made to the Secretary and the President.

As you know, there is no provision in the published ITAR for any appeal or discretionary review of commodity jurisdictions beyond your office. Indeed, your own letter implicitly confirms this proposition since it indicates that we may "request a review by Dr. Davis." This language is substantially and significantly different from the language in the ITAR, which was used by Dr. Harris in her letter of October 7, 1994, and which reaffirmed the decision by the Office of Defense Trade Controls ("the Office") that the Diskette is a defense article. Dr. Harris wrote that:

As you know, section 120.4(g) of the ITAR provides that, if you so desire, an appeal of my determination may be made to the Assistant Secretary for Politico-Military Affairs.

We have fully considered your invitation to seek such a discretionary review of your decision. We remain convinced that any further consideration of this matter within the Executive Branch at any level would be entirely futile. The position of the National Security Agency ("the NSA"), the executive agency with primary concern over this matter, is well known. There is no real chance that their position, or the decision of the Department, would ever be changed as a result of additional review by any individual within the Executive Branch.

Indeed, the entire history of this matter and the lengthy delays that have been encountered throughout the process are substantial evidence of the fact that the NSA and your Department intends to deter the development of cryptography and chill the speech and research activities of individuals like Mr. Karn by continued delay and adverse decisions. Mr. Karn filed his initial request on March 9, 1994. That request was denied on May 12, 1994. Mr. Karn filed his appeal with Dr. Harris on June 7, 1994, who "reaffirmed" the initial decision of the Office in a letter dated October 7, 1994. We filed our appeal with you on December 5, 1994, and subsequently met with you and your colleagues on February 28, 1995. Your response was dated June 13, 1995. Thus, this matter has been pending before your department for well over a year. Throughout that time no new facts have emerged, and no flexibility in the Department's position has been evident.

Further Executive Branch review would not only be futile, it is plainly not required by any statutes or regulations. Neither the Administrative Procedure Act nor the decisions of the courts regarding exhaustion of administrative remedies require citizens to pursue futile "reviews" that are not required by published regulations as a precondition to seeking judicial review.

We remain convinced that the decision of the Department in this matter is unlawful because it is an arbitrary, irrational, capricious and an unconstitutional prior restraint on speech. We remain convinced that it is very much in the public interest to obtain judicial review of this decision in order to dispel the cloud of uncertainty that continues to chill the development of cryptography. Because strong cryptography is essential to the maintenance of privacy in an electronic age, and because it is important to our national economy that American software developers preserve their position of pre-eminence in the world software market, the principles at stake in this case deserve full, prompt and decisive judicial attention.

We intend to seek such judicial review in the near future. When our complaint is filed, we will send you and Dr. Harris courtesy copies.


						Kenneth C. Bass, III

						Thomas J. Cooper


Hon. Thomas E. McNamara
July 12, 1995
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