[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 761 Reported in Senate (RS)]





                                                       Calendar No. 243

106th CONGRESS

  1st Session

                                 S. 761

                          [Report No. 106-131]

_______________________________________________________________________

                                 A BILL

 To regulate interstate commerce by electronic means by permitting and 
encouraging the continued expansion of electronic commerce through the 
          operation of free market forces, and other purposes.

_______________________________________________________________________

                             July 30, 1999

        Reported with an amendment in the nature of a substitute
                                                       Calendar No. 243
106th CONGRESS
  1st Session
                                 S. 761

                          [Report No. 106-131]

 To regulate interstate commerce by electronic means by permitting and 
encouraging the continued expansion of electronic commerce through the 
          operation of free market forces, and other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 25, 1999

 Mr. Abraham (for himself, Mr. McCain, Mr. Wyden, Mr. Burns, Mr. Lott, 
 Mr. Allard, Mr. Torricelli, Mr. Grams, Mr. Brownback, Mr. Frist, Mr. 
 Hagel, and Mr. Gorton) introduced the following bill; which was read 
     twice and referred to the Committee on Commerce, Science, and 
                             Transportation

                             July 30, 1999

Reported by Mr. McCain, with an amendment in the nature of a substitute
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 A BILL


 
 To regulate interstate commerce by electronic means by permitting and 
encouraging the continued expansion of electronic commerce through the 
          operation of free market forces, and other purposes.

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

<DELETED>SECTION 1. SHORT TITLE.</DELETED>

<DELETED>    This Act may be cited as the ``Third Millennium Electronic 
Commerce Act''.</DELETED>

<DELETED>SEC. 2. FINDINGS.</DELETED>

<DELETED>    The Congress makes the following findings:</DELETED>
        <DELETED>    (1) The growth of electronic commerce and 
        electronic government transactions represent a powerful force 
        for economic growth, consumer choice, improved civic 
        participation and wealth creation.</DELETED>
        <DELETED>    (2) The promotion of growth in private sector 
        electronic commerce through Federal legislation is in the 
        national interest because that market is globally important to 
        the United States.</DELETED>
        <DELETED>    (3) A consistent legal foundation, across multiple 
        jurisdictions, for electronic commerce will promote the growth 
        of such transactions, and that such a foundation should be 
        based upon a simple, technology neutral, non-regulatory, and 
        market-based approach.</DELETED>
        <DELETED>    (4) The Nation and the world stand at the 
        beginning of a large scale transition to an information society 
        which will require innovative legal and policy approaches, and 
        therefore, States can serve the national interest by continuing 
        their proven role as laboratories of innovation for quickly 
        evolving areas of public policy, provided that States also 
        adopt a consistent, minimalist national baseline to eliminate 
        obsolete barriers to electronic commerce such as undue paper 
        and pen requirements, and further, that any such innovation 
        should not unduly burden inter-jurisdictional 
        commerce.</DELETED>
        <DELETED>    (5) To the extent State laws or regulations in 
        fact create an undue burden to interstate commerce in the 
        important burgeoning area of electronic commerce, the national 
        interest is best served by Federal preemption to the extent 
        necessary to eliminate said burden, but that absent such 
        burdens, the best legal system for electronic commerce will 
        result from continuing experimentation by individual 
        jurisdictions.</DELETED>
        <DELETED>    (6) With due regard to the fundamental need for 
        adequate consistency, each jurisdiction that enacts such laws 
        should have the right to determine the need for any exceptions 
        to protect consumers and maintain consistency with existing 
        related bodies of law within a particular 
        jurisdiction.</DELETED>
        <DELETED>    (7) Industry has developed several electronic 
        signature technologies for use in electronic transactions, and 
        the public policies of the United States should serve to 
        promote a dynamic marketplace within which these technologies 
        can compete. Consistent with this Act, States should permit the 
        use and development of any authentication technologies that are 
        appropriate as practicable as between private parties and in 
        use with State agencies.</DELETED>

<DELETED>SEC. 3. PURPOSES.</DELETED>

<DELETED>    The purposes of this Act are--</DELETED>
        <DELETED>    (1) to permit and encourage the continued 
        expansion of electronic commerce through the operation of free 
        market forces rather than proscriptive governmental mandates 
        and regulations;</DELETED>
        <DELETED>    (2) to promote public confidence in the validity, 
        integrity and reliability of electronic commerce and online 
        government under Federal law;</DELETED>
        <DELETED>    (3) to facilitate and promote electronic commerce 
        by clarifying the legal status of electronic records and 
        electronic signatures in the context of writing and signing 
        requirements imposed by law; and</DELETED>
        <DELETED>    (4) to promote the development of a consistent 
        national legal infrastructure necessary to support of 
        electronic commerce at the Federal and State levels within 
        existing areas of jurisdiction.</DELETED>

<DELETED>SEC. 4. DEFINITIONS.</DELETED>

<DELETED>    In this Act:</DELETED>
        <DELETED>    (1) Electronic.--The term ``electronic'' means of 
        or relating to technology having electrical, digital, magnetic, 
        wireless, optical, electromagnetic, or similar 
        capabilities.</DELETED>
        <DELETED>    (2) Electronic record.--The term ``electronic 
        record'' means a record created, stored, generated, received, 
        or communicated by electronic means.</DELETED>
        <DELETED>    (3) Electronic signature.--The term ``electronic 
        signature'' means a signature in electronic form, attached to 
        or logically associated with an electronic record.</DELETED>
        <DELETED>    (4) Governmental agency.--The term ``governmental 
        agency'' means an executive, legislative, or judicial agency, 
        department, board, commission, authority, institution, or 
        instrumentality of the Federal Government or of a State or of 
        any county, municipality, or other political subdivision of a 
        State.</DELETED>
        <DELETED>    (5) Record.--The term ``record'' means information 
        that is inscribed on a tangible medium or that is stored in an 
        electronic or other medium and is retrievable in perceivable 
        form.</DELETED>
        <DELETED>    (6) Sign.--The term ``sign'' means to execute or 
        adopt a signature.</DELETED>
        <DELETED>    (7) Signature.--The term ``signature'' means any 
        symbol, sound, or process executed or adopted by a person with 
        intent to authenticate a record.</DELETED>
        <DELETED>    (8) Transaction.--The term ``transaction'' means 
        an action or set of actions occurring between 2 or more persons 
        relating to the conduct of commerce.</DELETED>

<DELETED>SEC. 5. PRINCIPLES GOVERNING THE USE OF ELECTRONIC SIGNATURES 
              IN INTERNATIONAL TRANSACTIONS.</DELETED>

<DELETED>    (a) In General.--To the extent practicable, the Federal 
Government shall observe the following principles in an international 
context to enable commercial electronic transaction:</DELETED>
        <DELETED>    (1) Remove paper-based obstacles to electronic 
        transactions by adopting relevant principles from the Model Law 
        on Electronic Commerce adopted in 1996 by the United Nations 
        Commission on International Trade Law (UNCITRAL).</DELETED>
        <DELETED>    (2) Permit parties to a transaction to determine 
        the appropriate authentication technologies and implementation 
        models for their transactions, with assurance that those 
        technologies and implementation models will be recognized and 
        enforced.</DELETED>
        <DELETED>    (3) Permit parties to a transaction to have the 
        opportunity to prove in court or other proceedings that their 
        authentication approaches and their transactions are 
        valid.</DELETED>
        <DELETED>    (4) Take a non-discriminatory approach to 
        electronic signatures and authentication methods from other 
        jurisdictions.</DELETED>

<DELETED>SEC. 6. INTERSTATE CONTRACT CERTAINTY.</DELETED>

<DELETED>    (a) Interstate Commercial Contracts.--A contract relating 
to an interstate transaction shall not be denied legal effect solely 
because an electronic signature or electronic record was used in its 
formation.</DELETED>
<DELETED>    (b) Methods.--Notwithstanding any rule of law that 
specifies one or more acceptable or required technologies or business 
models, including legal or other procedures, necessary to create, use, 
receive, validate, or invalidate electronic signatures or electronic 
records, the parties to an interstate transaction may establish by 
contract, electronically or otherwise, such technologies or business 
models, including legal or other procedures to create, use, receive, 
validate, or invalidate electronic signatures and electronic 
records.</DELETED>
<DELETED>    (c) Not Preempt State Law.-- Nothing in this section shall 
be construed to preempt the law of a State that enacts legislation 
governing electronic transactions which is substantially similar to, 
and not inconsistent with, subsections (a) and (b). A State that enacts 
uniform electronic transactions legislation substantially as reported 
to State legislatures by the National Conference of Commissioners on 
Uniform State Law shall be deemed to have satisfied this 
criterion.</DELETED>
<DELETED>    (d) Intent.--The intent of a person to execute or adopt an 
electronic signature shall be determined from the context and 
surrounding circumstances, which may include accepted commercial 
practices.</DELETED>

<DELETED>SEC. 7. ADVISORY COMMISSION ON ELECTRONIC 
              AUTHENTICATION.</DELETED>

<DELETED>    (a) Establishment of Commission.--There is established a 
commission to be known as the Advisory Commission on Electronic 
Authentication (in this section referred to as the ``Commission''). The 
Commission shall--</DELETED>
        <DELETED>    (1) be composed of 17 members appointed in 
        accordance with subsection (b), including the chairperson who 
        shall be selected by the members of the Commission from among 
        themselves; and</DELETED>
        <DELETED>    (2) conduct its business in accordance with the 
        provisions of this section.</DELETED>
<DELETED>    (b) Membership.--</DELETED>
        <DELETED>    (1) In general.--The Commissioners shall serve for 
        the life of the Commission. The membership of the Commission 
        shall be as follows:</DELETED>
                <DELETED>    (A) 3 representatives from the Federal 
                Government, comprised of the Secretary of Commerce, the 
                Secretary of the Treasury, and the United States Trade 
                Representative (or their respective 
                delegates).</DELETED>
                <DELETED>    (B) 4 representatives from State and local 
                governments.</DELETED>
                <DELETED>    (C) 10 representatives of the electronic 
                commerce industry (including small business), banks and 
                other financial service companies, and consumer groups, 
                comprised of--</DELETED>
                        <DELETED>    (i) 3 individuals appointed by the 
                        Majority Leader of the Senate;</DELETED>
                        <DELETED>    (ii) 2 individuals appointed by 
                        the Minority Leader of the Senate;</DELETED>
                        <DELETED>    (iii) 3 individuals appointed by 
                        the Speaker of the House of Representatives; 
                        and</DELETED>
                        <DELETED>    (iv) 2 individuals appointed by 
                        the Minority Leader of the House of 
                        Representatives.</DELETED>
        <DELETED>    (2) Appointments.--Appointments to the Commission 
        shall be made not later than 45 days after the date of the 
        enactment of this Act. The chairperson shall be selected not 
        later than 60 days after the date of the enactment of this 
        Act.</DELETED>
        <DELETED>    (3) Vacancies.--Any vacancy in the Commission 
        shall not affect its powers, but shall be filled in the same 
        manner as the original appointment.</DELETED>
<DELETED>    (c) Other Resources.--The Commission shall have reasonable 
access to materials, resources, data, and other information from the 
Department of Justice, the Department of Commerce, the Department of 
State, the Department of the Treasury, and the Office of the United 
States Trade Representative. The Commission shall also have reasonable 
access to use the facilities of any such Department or Office for 
purposes of conducting meetings.</DELETED>
<DELETED>    (d) Sunset.--The Commission shall terminate 12 months 
after the date of the enactment of this Act.</DELETED>
<DELETED>    (e) Duties of the Commission.--The Commission shall 
conduct a thorough study of electronic authentication systems, 
including third-party verification systems, in the transacting of 
contractual agreements, the use of such systems in electronic commerce 
today, and the role of the electronic commerce industry, the Federal 
Government, and the States in such a system.</DELETED>

<DELETED>SEC. 8. STUDY OF LEGAL AND REGULATORY BARRIERS TO ELECTRONIC 
              COMMERCE.</DELETED>

<DELETED>    (a) Barriers.--Each Federal agency shall, not later than 6 
months after the date of enactment of this Act, provide a report to the 
Director of the Office of Management and Budget and the Secretary of 
Commerce identifying any provision of law administered by such agency, 
or any regulations issued by such agency and in effect on the date of 
enactment of this Act, that may impose a barrier to electronic 
transactions, or otherwise to the conduct of commerce online or be 
electronic means. Such barriers include, but are not limited to, 
barriers imposed by a law or regulation directly or indirectly 
requiring that signatures, or records of transactions, be accomplished 
or retained in other than electronic form. In its report, each agency 
shall identify the barriers among those identified whose removal would 
require legislative action, and shall indicate agency plans to 
undertake regulatory action to remove such barriers among those 
identified as are caused by regulations issued by the agency.</DELETED>
<DELETED>    (b) Report to Congress.--The Secretary of Commerce, in 
consultation with the Director of the Office of Management and Budget, 
shall, within 18 months after the date of enactment of this Act, and 
after the consultation required by subsection (c) of this section, 
report to the Congress concerning--</DELETED>
        <DELETED>    (1) legislation needed to remove barriers to 
        electronic transactions or otherwise to the conduct of commerce 
        online or by electronic means; and</DELETED>
        <DELETED>    (2) actions being taken by the Executive Branch 
        and individual Federal agencies to remove such barriers as are 
        caused by agency regulations or policies.</DELETED>
<DELETED>    (c) Consultation.--In preparing the report required by 
this section, the Secretary of Commerce shall consult with the General 
Services Administration, the National Archives and Records 
Administration, and the Attorney General concerning matters involving 
the authenticity of records, their storage and retention, and their 
usability for law enforcement purposes.</DELETED>
<DELETED>    (d) Include Findings If No Recommendations.--If the report 
required by this section omits recommendations for actions needed to 
fully remove identified barriers to electronic transactions or to 
online or electronic commerce, it shall include a finding or findings, 
including substantial reasons therefor, that such removal is 
impracticable or would be inconsistent with the implementation or 
enforcement of applicable laws</DELETED>

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Third Millennium Digital Commerce 
Act''.

SEC. 2. FINDINGS.

    The Congress makes the following findings:
            (1) The growth of electronic commerce and electronic 
        government transactions represent a powerful force for economic 
        growth, consumer choice, improved civic participation and 
        wealth creation.
            (2) The promotion of growth in private sector electronic 
        commerce through Federal legislation is in the national 
        interest because that market is globally important to the 
        United States.
            (3) A consistent legal foundation, across multiple 
        jurisdictions, for electronic commerce will promote the growth 
        of such transactions, and that such a foundation should be 
        based upon a simple, technology neutral, non-regulatory, and 
        market-based approach.
            (4) The Nation and the world stand at the beginning of a 
        large scale transition to an information society which will 
        require innovative legal and policy approaches, and therefore, 
        States can serve the national interest by continuing their 
        proven role as laboratories of innovation for quickly evolving 
        areas of public policy, provided that States also adopt a 
        consistent, reasonable national baseline to eliminate obsolete 
        barriers to electronic commerce such as undue paper and pen 
        requirements, and further, that any such innovation should not 
        unduly burden inter-jurisdictional commerce.
            (5) To the extent State laws or regulations do not provide 
        a consistent, reasonable national baseline or in fact create an 
        undue burden to interstate commerce in the important burgeoning 
        area of electronic commerce, the national interest is best 
        served by Federal preemption to the extent necessary to provide 
        such consistent, reasonable national baseline eliminate said 
        burden, but that absent such lack of consistent, reasonable 
        national baseline or such undue burdens, the best legal system 
        for electronic commerce will result from continuing 
        experimentation by individual jurisdictions.
            (6) With due regard to the fundamental need for a 
        consistent national baseline, each jurisdiction that enacts 
        such laws should have the right to determine the need for any 
        exceptions to protect consumers and maintain consistency with 
        existing related bodies of law within a particular 
        jurisdiction.
            (7) Industry has developed several electronic signature 
        technologies for use in electronic transactions, and the public 
        policies of the United States should serve to promote a dynamic 
        marketplace within which these technologies can compete. 
        Consistent with this Act, States should permit the use and 
        development of any authentication technologies that are 
        appropriate as practicable as between private parties and in 
        use with State agencies.

SEC. 3. PURPOSES.

    The purposes of this Act are--
            (1) to permit and encourage the continued expansion of 
        electronic commerce through the operation of free market forces 
        rather than proscriptive governmental mandates and regulations;
            (2) to promote public confidence in the validity, integrity 
        and reliability of electronic commerce and online government 
        under Federal law;
            (3) to facilitate and promote electronic commerce by 
        clarifying the legal status of electronic records and 
        electronic signatures in the context of writing and signing 
        requirements imposed by law;
            (4) to facilitate the ability of private parties engaged in 
        interstate transactions to agree among themselves on the terms 
        and conditions on which they use and accept electronic 
        signatures and electronic records; and
            (5) to promote the development of a consistent national 
        legal infrastructure necessary to support of electronic 
        commerce at the Federal and State levels within existing areas 
        of jurisdiction.

SEC. 4. DEFINITIONS.

    In this Act:
            (1) Electronic.--The term ``electronic'' means relating to 
        technology having electrical, digital, magnetic, wireless, 
        optical, electromagnetic, or similar capabilities.
            (2) Electronic agent.--The term ``electronic agent'' means 
        a computer program or an electronic or other automated means 
        used to initiate an action or respond to electronic records or 
        performances in whole or in part without review by an 
        individual at the time of the action or response.
            (3) Electronic record.--The term ``electronic record'' 
        means a record created, generated, sent, communicated, 
        received, or stored by electronic means.
            (4) Electronic signature.--The term ``electronic 
        signature'' means an electronic sound, symbol, or process 
        attached to or logically associated with an electronic record 
        and executed or adopted by a person with the intent to sign the 
        electronic record.
            (5) Governmental agency.--The term ``governmental agency'' 
        means an executive, legislative, or judicial agency, 
        department, board, commission, authority, institution, or 
        instrumentality of the Federal Government or of a State or of 
        any county, municipality, or other political subdivision of a 
        State.
            (6) Record.--The term ``record'' means information that is 
        inscribed on a tangible medium or that is stored in an 
        electronic or other medium and is retrievable in perceivable 
        form.
            (7) Transaction.--The term ``transaction'' means an action 
        or set of actions relating to the conduct of commerce between 2 
        or more persons, neither of which is the United States 
        Government, a State, or an agency, department, board, 
        commission, authority, institution, or instrumentality of the 
        United States Government or of a State.
            (8) Uniform electronic transactions act.--The term 
        ``Uniform Electronic Transactions Act'' means the Uniform 
        Electronic Transactions Act as reported to State legislatures 
        by the National Conference of Commissioners on Uniform State 
        Law in the form or any variation thereof that is authorized or 
        provided for in such report.

SEC. 5. PRINCIPLES GOVERNING THE USE OF ELECTRONIC SIGNATURES IN 
              INTERNATIONAL TRANSACTIONS.

    To the extent practicable, the Federal Government shall observe the 
following principles in an international context to enable commercial 
electronic transaction:
            (1) Remove paper-based obstacles to electronic transactions 
        by adopting relevant principles from the Model Law on 
        Electronic Commerce adopted in 1996 by the United Nations 
        Commission on International Trade Law (UNCITRAL).
            (2) Permit parties to a transaction to determine the 
        appropriate authentication technologies and implementation 
        models for their transactions, with assurance that those 
        technologies and implementation models will be recognized and 
        enforced.
            (3) Permit parties to a transaction to have the opportunity 
        to prove in court or other proceedings that their 
        authentication approaches and their transactions are valid.
            (4) Take a non-discriminatory approach to electronic 
        signatures and authentication methods from other jurisdictions.

SEC. 6. INTERSTATE CONTRACT CERTAINTY.

    (a) In General.--The following rules apply to any commercial 
transaction affecting interstate commerce:
            (1) A record or signature may not be denied legal effect or 
        enforceability solely because it is in electronic form.
            (2) A contract may not be denied legal effect or 
        enforceability solely because an electronic record was used in 
        its formation.
            (3) If a law requires a record to be in writing, or 
        provides consequences if it is not, an electronic record 
        satisfies the law.
            (4) If a law requires a signature, or provides consequences 
        in the absence of a signature, the law is satisfied with 
        respect to an electronic record if the electronic record 
        includes an electronic signature.
    (b) Methods.--The parties to a contract may agree on the terms and 
conditions on which they will use and accept electronic signatures and 
electronic records, including the methods therefor, in commercial 
transactions affecting interstate commerce. Nothing in this subsection 
requires that any party enter into such a contract.
    (c) Intent.--The following rules apply to any commercial 
transaction affecting interstate commerce:
            (1) An electronic record or electronic signature is 
        attributable to a person if it was the act of the person. The 
        act of the person may be established in any manner, including a 
        showing of the efficacy of any security procedures applied to 
        determine the person to which the electronic record or 
        electronic signature was attributable.
            (2) The effect of an electronic record or electronic 
        signature attributed to a person under paragraph (1) is 
        determined from the context and surrounding circumstances at 
        the time of its creation, execution, or adoption, including the 
        parties' agreement, if any, and otherwise as provided by law.
    (d) Formation of Contract.--A contract relating to a commercial 
transaction affecting interstate commerce may not be denied legal 
effect solely because its formation involved--
            (1) the interaction of electronic agents of the parties; or
            (2) the interaction of an electronic agent of a party and 
        an individual who acts on that individual's own behalf or for 
        another person.
    (e) Application in UETA States.--This section does not apply in any 
State in which the Uniform Electronic Transactions Act is in effect.

SEC. 7. STUDY OF LEGAL AND REGULATORY BARRIERS TO ELECTRONIC COMMERCE.

    (a) Barriers.--Each Federal agency shall, not later than 6 months 
after the date of enactment of this Act, provide a report to the 
Director of the Office of Management and Budget and the Secretary of 
Commerce identifying any provision of law administered by such agency, 
or any regulations issued by such agency and in effect on the date of 
enactment of this Act, that may impose a barrier to electronic 
transactions, or otherwise to the conduct of commerce online or be 
electronic means. Such barriers include, but are not limited to, 
barriers imposed by a law or regulation directly or indirectly 
requiring that signatures, or records of transactions, be accomplished 
or retained in other than electronic form. In its report, each agency 
shall identify the barriers among those identified whose removal would 
require legislative action, and shall indicate agency plans to 
undertake regulatory action to remove such barriers among those 
identified as are caused by regulations issued by the agency.
    (b) Report to Congress.--The Secretary of Commerce, in consultation 
with the Director of the Office of Management and Budget, shall, within 
18 months after the date of enactment of this Act, and after the 
consultation required by subsection (c) of this section, report to the 
Congress concerning--
            (1) legislation needed to remove barriers to electronic 
        transactions or otherwise to the conduct of commerce online or 
        by electronic means; and
            (2) actions being taken by the Executive Branch and 
        individual Federal agencies to remove such barriers as are 
        caused by agency regulations or policies.
    (c) Consultation.--In preparing the report required by this 
section, the Secretary of Commerce shall consult with the General 
Services Administration, the National Archives and Records 
Administration, and the Attorney General concerning matters involving 
the authenticity of records, their storage and retention, and their 
usability for law enforcement purposes.
    (d) Include Findings If No Recommendations.--If the report required 
by this section omits recommendations for actions needed to fully 
remove identified barriers to electronic transactions or to online or 
electronic commerce, it shall include a finding or findings, including 
substantial reasons therefor, that such removal is impracticable or 
would be inconsistent with the implementation or enforcement of 
applicable laws