[Congressional Record (Bound Edition), Volume 145 (1999), Part 5]
[Senate]
[Pages 6104-6106]
[From the U.S. Government Publishing Office, www.gpo.gov]




                MILLENNIUM DIGITAL COMMERCE ACT--S. 761

  Statements on the bill, S. 761, introduced on March 25, 1999, did not 
appear in the Record. The material follows:
      By Mr. ABRAHAM (for himself, Mr. McCain, Mr. Wyden, and Mr. 
        Burns):
  S. 761. 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 for other 
purposes; to the Committee on Commerce, Science, and Transportation.


                    millennium digital commerce act

 Mr. ABRAHAM. Mr. President, I rise to introduce the Millennium 
Digital Commerce Act, a bill to promote the use of electronic 
authentication technologies and enhance the Internet's capacity to 
serve as a business tool. I am joined in introducing this bill by 
Senator John McCain, the chairman of the Senate Commerce Committee, 
Senator Ron Wyden, and Senator Conrad Burns. This legislation builds on 
the Government Paperwork Elimination Act, a bill I sponsored to promote 
the use of electronic signatures by the Federal Government, which was 
signed into law by the President as part of the Omnibus Appropriations 
Act.
  The Internet has experienced almost exponential growth since its 
inception. Where once the Internet was a medium limited to the sharing 
of ideas between scientists and educators, it is now a tool which 
allows every person with a computer to access more information than is 
contained in any single library, communicate with friends for a 
fraction of the cost of phone service, or purchase goods from retailers 
located all over the world. Electronic commerce is clearly booming. But 
in order to realize its full potential, we must enact Federal and State 
legislation to enable, enhance, and protect the next generation of 
Internet usage.
  The Internet is poised to serve as an efficient new tool for 
companies to transact business as never before. The development of 
electronic signature technologies now allow organizations to enter into 
contractual arrangements without ever having to drive across town or 
fly thousands of miles to personally meet with a client or potential 
business partner. The Internet is prepared to go far beyond the ability 
to buy a book or order apparel on-line. It is ready to lead a 
revolution in the execution of business transactions which may involve 
thousands or millions of dollars in products or services; transactions 
so important they require that both parties enter into a legally 
binding contract.
  This capability is provided by the development of secure electronic 
authentication methods and technologies. These technologies permit an 
individual to positively identify the person with whom they are 
transacting business and to ensure that information being shared by the 
parties has not been tampered with or modified without the knowledge of 
both parties. While such technologies are seeing limited use today, the 
growth of the application has out-paced government's ability to 
appropriately modify the legal framework governing the use of 
electronic signatures and other authentication methods.
  Mr. President, the Millennium Digital Commerce Act is designed to 
promote the use of electronic signatures in business transactions and 
contracts. At present, the greatest barrier to such transactions is the 
lack of a consistent and predictable national framework of rules 
governing the use of electronic signatures. Over forty States have 
enacted electronic authentication laws, and no two laws are the same. 
This inconsistency deters businesses from fully utilizing electronic 
signature technologies for contracts and other business transactions. 
The differences in our State laws create uncertainty about the 
effectiveness or legality of an electronic contract signed with an

[[Page 6105]]

electronic signature. Of course, certainty is the basis for commerce, 
and contracts provide that certainty. Parties enter into contracts 
understanding that they will be bound by the terms of the agreement. 
However, the fear is that a business located in a State with different 
electronic authentication rules may be able to escape contractual 
obligations agreed to through electronic signatures. This legal 
uncertainty limits the potential of electronic commerce, and, thus, our 
nation's economic growth.
  The needs for uniformity in electronic authentication rules is not 
only recognized by the business community, but by the States as well. 
For the past two years, the National Conference of Commissioners on 
Uniform State Law, an organization comprised of e-commerce experts from 
the States, has been working to develop a uniform system for the use of 
electronic signatures for all fifty States. Their product, the Uniform 
Electronic Transactions Act, or UETA, is in the final stages of review 
and the drafters expect to have the Act completed by October. Assuming 
the UETA is finished as scheduled, and I believe it will be, it will 
then fall on each State legislature to enact the legislation and 
establish the uniformity necessary for the interstate use of electronic 
signatures.
  But agreement on the final language of the UETA proposal is not the 
same as enactment. Uniformity will not occur until all fifty States 
actually enact the UETA. Because some State legislatures are not in 
session next year and other States have more pressing legislative 
items, it could take three to four years for forty-five or fifty States 
to enact the UETA. With the rapid state of development in the high-
technology sector, four years is an eternity.
  The Digital Millennium Commerce Act is an interim measure to provide 
relief until the States adopt the provisions of the UETA. It will 
provide companies the baseline they need until a national baseline 
governing the use of electronic authentication exists at the State 
level.
  First, the legislation provides that the electronic records produced 
in the execution of a digital contract shall not be denied legal effect 
solely because they are electronic in nature. This provision assures 
that a company will be able to rely on an electronic contract and that 
another party will not be able to escape their contractual obligations 
simply because the contract was entered into the Internet or any other 
computer network. By granting such certainty, this bill will reduce the 
likelihood of dissatisfied parties attempting to escape electronic 
contractual agreements and transactions.
  Mr. President, let me stress that this Federal preemption of State 
law is designed to be an interim measure. It provides relief until the 
States enact uniform standards which are consistent with those 
contained in the Uniform Electronic Transactions Act and this 
legislation. Simply put, once States enact the UETA or other 
legislation governing the use of electronic signatures which is 
consistent to the UETA, the Federal preemption is lifted.
  I consider myself a Federalist. I believe strongly in States rights 
and view with great caution proposals which call for the preemption of 
State law. After considerable study, it is my option that the need for 
a national baseline for the use of electronic signatures justifies a 
temporary, Federal action until such time as the States can enact a 
uniform standard.
  Second, the bill grants parties to a transaction the freedom to 
determine the technologies and business methods to be used in the 
execution of an electronic contract. In essence, this assures that the 
Federal baseline will extend to the various aspects of State law 
governing authentication including such matters as registration and 
certification requirements, liability allocations, maintenance of 
revocation lists, payment of fees and other legal and regulatory 
concerns.
  Third, this legislation sets forth the principles for the 
international use of electronic signatures. In the last year, U.S. 
negotiators have been meeting with the European Commissioners to 
discuss electronic signatures in international commerce. In these 
negotiations, the U.S. Department of Commerce and the State Department 
have worked in support of an open system governing the use of 
authentication technologies. Some European nations oppose this concept. 
For example, Germany insists that electronic transactions involving a 
German company must utilize a German electronic signature application. 
I applaud the Administration for their steadfast opposition to that 
approach. In an effort to bolster and strengthen the U.S. position in 
these international negotiations, this legislation lays out a series of 
principles to govern the use of electronic signatures in international 
transactions. These principles included the following:
  One, paper-based obstacles to electronic transactions must be 
eliminated.
  Two, parties to an electronic transaction should choose the 
electronic authentication technology.
  Third, parties to a transaction should have the opportunity to prove 
in court that their authentication approach and transactions are valid.
  Fourth, the international approach to electronic signatures should 
take a nondiscriminatory approach to electronic signature. This will 
allow the free market--not a government--to determine the type of 
authentication technologies used in international commerce.
  Mr. President, these principles will bolster the U.S. convention that 
the Departments of State and Commerce are advocating abroad, and, 
hopefully, increase the likelihood of an open, market-based 
international framework to electronic commerce.
  Finally, the bill directs the Department of Commerce and Office of 
Management and Budget to report on Federal laws and regulations that 
might pose barriers to e-commerce and report back to Congress on the 
impact of such provisions and provide suggestions for reform.
  Mr. President, as with any legislation seeking to affect both Federal 
and State law, drafting this bill has been a challenging balancing act. 
During the drafting process, my office has received invaluable support 
from the Technology Division of the State of Massachusetts. Governor 
Paul Cellucci's staff have provided indispensable counsel on existing 
State law governing the use of electronic signatures and the manner in 
which Federal law can bolster or hamstring State contract law. Of 
course, the business and technology sectors have also been crucial in 
helping to craft this bill. Representatives from the Information 
Technology Association of America, the U.S. Chamber of Commerce, 
Microsoft, Hewlett-Packard and the National Association of 
Manufacturers have each lent their time and expertise to this effort. I 
appreciate their contributions and look forward to continuing this 
effort to ensure that we develop the best approach possible to promote 
use of electronic signatures in business transactions.
  I urge my colleagues to support the Millennium Digital Commerce Act. 
Mr. President, I ask that the text of this legislation be placed in the 
Record.
  The bill follows:

                                 S. 761

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``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 transaction, 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

[[Page 6106]]

     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 
     currently 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 national baseline 
     and eliminate said burden, but that absent such lack of a 
     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. PURPOSE.

       The purposes of this Act are--
       (1) to permit and encourage the continued exepansion 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 of or 
     relating to technology having electrical, digital, magnetic, 
     wireless, optical, electromagnetic, or similar capabilities.
       (2) Electronic record.--The term ``electronic record'' 
     means a record created, stored, generated, received, or 
     communicated by electronic means.
       (3) Electronic signature.--The term ``electronic 
     signature'' means a signature in electronic form, attached to 
     or logically associated with an electronic record.
       (4) Governmental agency.--The term ``governmental agency'' 
     means an executive, legislative, or judicial agency, 
     department, board, commission, authority, institution, or 
     instrumentaility of the Federal government or of a State or 
     of any country, municipality, or other political subdivision 
     of a state.
       (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.
       (6) Sign.--The term ``sign'' means to execute or adopt a 
     signature.
       (7) Signature.--The term ``signature'' means any symbol, 
     sound, or process executed or adopted by a person or entiry, 
     with intent to authenticate or accept a record.
       (8) Transaction.--The term ``transaction'' means an action 
     or set of actions occurring between 2 or more persons 
     relating to the conduct of commerce.

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

       (a) In General.--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 nondiscriminatory approach to electronic 
     signatures and authentication methods from other 
     jurisdictions.

     SEC. 6. INTERSTATE CONTRACT CERTAINTY.

       (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.
       (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.
       (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 that is 
     consistent with subsections (a) and (b). A State that enacts, 
     or has in effect, 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, provided 
     such legislation as enacted is not inconsistent with 
     subsections (a) and (b).
       (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.

     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 to 
     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 any existing 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.

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