It's a bit stranger than that, as this is our government we're dealing with after all.
The seminal cryptography textbook Applied Cryptography could be exported, including the source code in it for advanced encryption algorithms. However, the associated disk could not be exported. People typed it in overseas and posted it, and that electronic version was perfectly legal. Essentially the same thing happened with PGP.
Basically, these export controls hurt our high-tech businesses. Our companies could build high-strength encryption into their software sold here, but had to dumb-down or remove it for overseas sales. This allowed foreigners -- who were equally capable of turning basic public cryptographic knowledge into algorithms -- build encryption into their software, thus giving them an advantage in foreign markets.
Yup. Only lawyers could dream up a situation so nonsensical and stupid.
On a semi-non-related note. Someone walked off with my copy of Applied Cryptography. I've been missing it ever since.
Basically, these export controls hurt our high-tech businesses. Our companies could build high-strength encryption into their software sold here, but had to dumb-down or remove it for overseas sales. This allowed foreigners -- who were equally capable of turning basic public cryptographic knowledge into algorithms -- build encryption into their software, thus giving them an advantage in foreign markets.
Several Russian and Isreali firms capitalized on this. For a while, companies were purposefully locating any employees involved in any meaningful crypto overseas. Talk about a perverse outcome. It almost seemed like the government was trying to claim that foreigners were too stupid to do the math involved.