Limiting the amount of live munitions left on the battlefield would lessen the danger to civilians who have been killed or severely injured when they accidentally detonate the bombs.
Also, by next June the defence department will begin to reduce its inventory of cluster bombs that do not meet the new safety requirements.
A little more than a month ago 111 countries, including many of America's key Nato partners, adopted a treaty outlawing all current designs of cluster munitions.
The agreement also required that stockpiles be destroyed within eight years.
Opponents have complained that the Pentagon has moved too slowly to reduce the cluster munitions from its inventory.
Cluster bombs scatter hundreds of smaller explosives over a large area, where those bomblets can sit for years until they are disturbed and explode.
US leaders boycotted the May talks, as did Russia, China, Israel, India and Pakistan, all leading cluster-bomb makers, citing the military value of the deadly explosives.
At the time, Bob Mehal, a Pentagon spokesman, said the elimination of cluster bombs from the US stockpile "would put the lives of our soldiers and those of our coalition partners at risk".
Patrick Leahy, the Democratic senator who has led efforts to outlaw cluster munitions, said the Pentagon's move is a step back.
A defence policy issued by then-defence secretary William Cohen in early 2001 called for a similar reduction in submunitions from the cluster bombs by 2005, Leahy said.
"Now the Bush administration's 'new' policy is to wait another 10 years," said Leahy, calling it "another squandered opportunity for US leadership".
Leahy said that in the wake of the international treaty agreement, the Pentagon's plan to wait another decade before requiring the 99 per cent detonation rate cannot be justified.
The use of cluster bombs has seen opposition in Congress, which last year passed a one-year ban on US exports of such munitions to other countries.
It is expected that the ban, which received bipartisan support, will be extended again by Congress.
The new Pentagon policy appears to plan for a possible end to that ban.
The memo states that until 2018, the defence department would seek to transfer cluster munitions that don't meet the new 1 per cent failure rate to other foreign governments.
Any transfer would require that the foreign government not use them after 2018, and the sale would have to be "consistent with US law", according to the memo.