[Federal Register Volume 68, Number 70 (Friday, April 11, 2003)]
[Proposed Rules]
[Pages 17760-17763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8816]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 73

[Notice No. 5]
RIN 1512-AC84


Electronic Signatures; Electronic Submission of Forms (2000R-
458P)

AGENCY: Alcohol and Tobacco Tax and Trade Bureau (TTB), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) proposes to 
amend its regulations to permit industry members to use electronic 
technology to reduce the need for and storage of paper documents. In 
order to accomplish our goals, we are proposing to allow you to use 
electronic, rather than handwritten, signatures to sign certain forms, 
and to submit certain forms to TTB electronically through a TTB-
approved electronic document receiving system.

DATES: If you wish to comment on this proposal, we must receive your 
written comments on or before May 12, 2003.

ADDRESSES: You may send comments to any of the following addresses:
    [sbull] Chief, Regulations and Procedures Division, Alcohol and 
Tobacco Tax and Trade Bureau, PO Box 50221, Washington, DC 20091-0221 
(Attn: Notice No. 5);
    [sbull] (202) 927-8525 (facsimile);
    [sbull] [email protected] (e-mail);
    [sbull] http://www.ttb.gov (online). A comment form is available 
with the online version of this notice posted on our Internet Web site.
    You may view copies of the proposed regulations and any comments 
received on this notice by appointment at the ATF Reference Library, 
650 Massachusetts Avenue, NW., Washington, DC 20226; phone (202) 927-
8210.
    See the Public Participation section of this notice for specific 
instructions and requirements.

FOR FURTHER INFORMATION CONTACT: Lisa M. Gesser, Regulations and 
Procedures Division, Alcohol and Tobacco Tax and Trade Bureau, 650 
Massachusetts Avenue NW., Washington, DC 20226; phone (301) 290-1460 or 
e-mail [email protected].

SUPPLEMENTARY INFORMATION:

What Would These Proposed Regulations Do?

    This proposal would amend the regulations to allow you to:
    [sbull] Use electronic signatures to sign certain forms you submit 
to us instead of using traditional handwritten signatures; and
    [sbull] Submit certain forms to TTB electronically through an 
electronic document receiving system that we approve.

Why Does TTB Want To Allow You To Submit Certain Forms Electronically?

    We believe that by giving you the option to submit certain forms 
electronically, instead of requiring paper documents, we can:
    [sbull] Reduce the costs associated with submitting and maintaining 
large volumes of paper documents;
    [sbull] Improve the quality and accessibility of data;
    [sbull] Allow for the faster review and approval of a variety of 
documents; and
    [sbull] Allow for a variety of our documents to be available around 
the clock.

What Is TTB's Authority To Propose These Regulations?

    Our authority to propose these regulations comes from:
    (1) Government Paperwork Elimination Act (GPEA). GPEA was signed 
into law on October 21, 1998. GPEA directs federal agencies to provide 
for the optional use and acceptance of electronic documents and 
signatures, and electronic recordkeeping, where practical, by October 
2003. (See Sec. Sec.  1702-1710 of Pub. L. 105-277.)
    (2) Internal Revenue Code of 1986 (26 U.S.C.) The Internal Revenue 
Code of 1986 authorizes the Secretary of the Treasury to, by 
regulation, encourage electronic filing, address what constitutes a 
timely filed electronic document, and develop procedures for the 
acceptance of signatures in digital or other electronic form. (See 26 
U.S.C. 6011, 6061, and 7502.)
    (3) Electronic Signatures in Global and National Commerce Act of 
2000 (E-SIGN). E-SIGN provides that no contract, signature, or record 
relating to a transaction shall be denied legal effect solely because 
it is in electronic form, nor may a document be denied legal effect 
solely because an electronic signature or record was used in its 
formation. E-SIGN applies to documents that are created in a 
commercial, consumer, or business transaction. It does not cover 
transactions that are uniquely governmental such as a compliance 
report. (See Pub. L. 106-229.)
    (4) Office of Management and Budget Circular A-130. OMB's Circular 
A-130 requires agencies to employ electronic information collection 
techniques where such means will reduce the burden on the public, 
increase efficiency, reduce costs, and help provide better service. 
(See Circular A-130, Para. 8.a.1(k).)

How Does TTB Plan on Implementing Electronic Filing?

    We are proposing to create a new part 73 in title 27 CFR, chapter 
I, entitled Electronic Signatures; Electronic Submission of Forms.'' 
This proposed part 73 will explain our overall policy regarding 
electronic signatures and the electronic submission of certain forms to 
TTB.

Electronic Signatures

    Once we publish the final rule, we will recognize electronic 
signatures executed to certain electronic forms as the full equivalent 
of, and having the same legal effect as, traditional handwritten 
signatures executed on paper. We will notify you, by publishing a 
general notice in the Federal Register and on our Web site (http://www.ttb.gov), when you may use electronic signatures to execute certain 
electronic forms. The general notice will provide you with specific 
instructions about how to submit and what technology will be acceptable 
to TTB.

Electronic Submission of Forms to TTB

    We are in the process of developing the means to allow you to 
submit forms electronically. This is a lengthy process; we will need to 
develop the hardware and software components to accept each different 
type of form. Once we are able to accept a certain form, we will 
announce in the Federal Register and on our Web site that you may 
register to submit that form electronically. The announcement will 
provide you with instructions on how to register.

Will I Still Have To Maintain Paper Copies?

    If the regulations require you to maintain certain documents in 
paper format, you must continue to maintain those documents in paper 
format even if you submit them to us electronically. Nothing in this 
proposed part alters any other regulatory or statutory requirement that 
records be maintained in paper format. This part does provide

[[Page 17761]]

that TTB may publish a general notice in the Federal Register 
authorizing you to maintain certain documents electronically instead of 
in paper form.

Regulatory Analyses and Notices

Paperwork Reduction Act

    The provisions of the Paperwork Reduction Act of 1995, 44 U.S.C. 
Chapter 35, and its implementing regulations, 5 CFR part 1320, do not 
apply to this rule because there are no new reporting or recordkeeping 
requirements.

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., provides that 
whenever a Federal agency proposes regulations that may have a 
significant economic impact on a substantial number of small entities, 
the agency must prepare a regulatory flexibility analysis. Today's 
proposal is not subject to the Act because the electronic submission of 
forms to TTB and the use of electronic signatures are voluntary. This 
proposal, if finalized, will only apply to those people who seek our 
approval to transmit certain forms electronically to us. These proposed 
regulations would reduce the burden on all affected entities, including 
small businesses. We have submitted a copy of this proposed rule to the 
Chief Counsel for Advocacy of the Small Business Administration in 
accordance with 26 U.S.C. 7805(f).

Executive Order 12866

    This regulation is not a significant regulatory action as defined 
by Executive Order 12866. Accordingly, this rule is not subject to the 
analysis required by this Executive Order.

Executive Order 13132

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires Federal agencies to ensure ``meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications.'' We certify that this 
proposed rule does not have federalism implications. This rule will not 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
This proposed rule would not require States to accept electronic 
reports. The effect of this rule would be to provide additional 
regulatory flexibility to States because States could choose to accept 
electronic data that would also satisfy our reporting requirements.

Public Participation

Who May Comment on This Notice?

    We request comments from all interested parties. In addition, we 
specifically request comments on the clarity of this proposed rule and 
how it may be made easier to understand. We will carefully consider any 
comments we receive on or before the closing date. We will give 
comments received after that date the same consideration if it is 
practical to do so. We regard all comments as originals.

How Do I Send Comments?

    You may submit comments in any of four ways.
    [sbull] By mail: You may send written comments to TTB at the 
address listed in the ADDRESSES section.
    [sbull] By facsimile: You may submit comments by facsimile 
transmission to 202-927-8525. Faxed comments must--
    (1) Be on 8\1/2\ x 11-inch paper;
    (2) Contain a legible, written signature; and
    (3) Be five or less pages long. This limitation assures electronic 
access to our equipment. We will not accept faxed comments that exceed 
five pages.
    [sbull] By e-mail: You may e-mail comments to [email protected]. 
Comments transmitted by electronic-mail must--
    (1) Contain your e-mail address;
    (2) Reference this notice number on the subject line; and
    (3) Be legible when printed on 8\1/2\ x 11-inch paper.
    [sbull] Online: We provide a comment form with the online copy of 
this proposed rule on the TTB Internet Web site at http://www.ttb.gov/alcohol/rules/index.htm. On this Web page, select ``Send comments via 
e-mail'' under this notice number.

Can I Review Comments Received?

    You may inspect copies of the proposed regulations and any written 
comments by appointment at the ATF Reference Library, 650 Massachusetts 
Avenue, NW., Washington, DC 20226. You may also obtain copies at 20 
cents per page. You may call (202) 927-8210 if you want to schedule an 
appointment or to request copies of comments.
    For your convenience, we will post comments received in response to 
this notice on the TTB Web site. All comments posted on our Web site 
will show the names of commenters, but not street addresses, telephone 
numbers, or e-mail addresses. We may also omit voluminous attachments 
or material that we consider unsuitable for posting. In all cases, the 
full comment will be available in our reference library. To access 
online copies of the comments on this rulemaking, visit http://www.ttb.gov/alcohol/rules/index.htm and select ``View Comments'' under 
this notice number.

Will TTB Keep My Comments Confidential?

    We do not recognize any submitted material as confidential. We will 
disclose all information on comments and commenters. Do not enclose in 
your comments any material you consider confidential or inappropriate 
for disclosure.

Can I Request a Public Hearing?

    Yes; you may write to the Administrator within the 30-day comment 
period to ask for a public hearing. The Administrator reserves the 
right to determine, in light of all circumstances, whether a public 
hearing will be held.

Drafting Information

    The principal author of this document is Lisa M. Gesser, 
Regulations and Procedures Division, Alcohol and Tobacco Tax and Trade 
Bureau.

List of Subjects in 27 CFR Part 73

    Electronic signatures, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set out in the preamble, we propose to amend 
chapter I of title 27 of the Code of Federal Regulations by adding a 
new part 73 to read as follows:

PART 73--ELECTRONIC SIGNATURES; ELECTRONIC SUBMISSION OF FORMS

Subpart A--General Provisions

Sec.

Scope

73.1 What does this part do?

Definitions

73.3 What terms must I know to understand this part?
Subpart B--Electronic Signatures
73.10 What does subpart B cover?
73.11 What are the required components and controls for acceptable 
electronic signatures?
73.12 What security controls must I use for identification codes/
passwords?
Subpart C--Electronic Filing of Documents With TTB
73.30 What does subpart C cover?
73.31 Can I submit forms electronically to TTB?
73.32 May I electronically sign forms I submit electronically to 
TTB?
73.33 Am I legally bound by a form I sign electronically?

[[Page 17762]]

73.34 When is an electronically submitted form considered timely 
filed?
73.35 Do I need to keep paper copies of forms I submit to TTB 
electronically?

    Authority: 26 U.S.C. 6011, 6061, 7502; 15 U.S.C. 7001, 7004.

Subpart A--General Provisions

Scope


Sec.  73.1   What does this part do?

    (a) This part provides the conditions under which we will allow you 
to:
    (1) Use electronic signatures or digital signatures executed to 
electronic forms instead of traditional handwritten signatures executed 
on paper forms.
    (2) Electronically submit certain forms to TTB.
    (b) This part does not require you to submit forms to us 
electronically.

Definitions


Sec.  73.3   What terms must I know to understand this part?

    You need to know the following terms to understand this part:
    27 CFR. Title 27 of the Code of Federal Regulations, chapter I.
    Biometrics. A method of verifying an individual's identity based on 
measurement of the individual's physical feature(s) or repeatable 
action(s) where those features and/or actions are both unique to that 
individual and measurable.
    Digital signature. An electronic signature based upon cryptographic 
methods of originator authentication, computed by using a set of rules 
and a set of parameters such that the identity of the signer and the 
integrity of the data can be verified. A signer creates a digital 
signature by using public-key encryption to transform a message digest 
of an electronic message. If a recipient of the digital signature has 
an electronic message, message digest function, and the signer's public 
key, the recipient can verify:
    (1) Whether the transformation was accomplished with the private 
key that corresponds to the signer's public key; and
    (2) Whether the electronic message has been altered since the 
transformation was made.
    Electronic document receiving system. Any set of apparatus, 
procedures, software, records, or documentation used to receive 
documents communicated to it via a telecommunications network.
    Electronic signature. A computer data compilation of any symbol or 
series of symbols executed, adopted, or authorized by an individual to 
be the legally binding equivalent of the individual's handwritten 
signature, and that:
    (1) Identifies and authenticates a particular person as the source 
of the electronic message; and
    (2) Indicates such person's approval of the information contained 
in the electronic message.
    Form(s). The term form(s), when used in this part, includes all 
documents required by 27 CFR, chapter I, to be submitted to TTB.
    Handwritten signature. The scripted name or legal mark of an 
individual handwritten by that individual and executed or adopted with 
the present intention to authenticate a writing in a permanent form. 
The act of signing with a writing or marking instrument such as a pen 
or stylus is preserved. The scripted name or legal mark, while 
conventionally applied to paper, may also be applied to other materials 
or devices that capture the name or mark.
    Paper format. A paper document.
    TTB. Refers to the Alcohol and Tobacco Tax and Trade Bureau within 
the Department of the Treasury.
    You and I. ``You'' and ``I'' refer to the organization or person 
who must maintain records or submit documents to TTB to satisfy the 
requirements of 27 CFR, chapter I.

Subpart B--Electronic Signatures


Sec.  73.10  What does subpart B cover?

    This subpart provides the conditions under which TTB will allow you 
to use electronic signatures executed to electronic forms instead of 
traditional handwritten signatures executed on paper forms. Where 
electronic signatures and their associated electronic forms meet the 
requirements of this part, TTB will consider the electronic signatures 
to be the equivalent of full handwritten signatures, initials, and 
other general signings this chapter requires.


Sec.  73.11  What are the required components and controls for 
acceptable electronic signatures?

    (a) Electronic signatures not based on biometrics. If you use 
electronic signatures that are not based upon biometrics you must:
    (1) Employ at least two distinct identification components such as 
an identification code and a password.
    (2) Use both identification components when executing an electronic 
signature to an electronic document.
    (3) Ensure that the electronic signature can only be used by the 
authorized user.
    (b) Electronic signatures based on biometrics. If you use 
electronic signatures based upon biometrics, they must be designed to 
ensure that they cannot be used by anyone other than their genuine 
owners.


Sec.  73.12  What security controls must I use for identification 
codes/passwords?

    If you use electronic signatures based upon use of identification 
codes in combination with passwords, you must employ controls to ensure 
their security and integrity. Such controls must include:
    (a) Maintaining the uniqueness of each combined identification code 
and password, such that no two individuals have the same combination of 
identification code and password.
    (b) Ensuring that identification code and password issuances are 
periodically checked, recalled, or revised (e.g., to cover such events 
as password aging).
    (c) Following loss management procedures to electronically de-
authorize lost, stolen, missing, or otherwise potentially compromised 
tokens, cards, or other devices that bear or generate identification 
code or password information, and to issue temporary or permanent 
replacements using suitable, rigorous controls.
    (d) Use of transaction safeguards to prevent unauthorized use of 
passwords and/or identification codes, and to detect and report in an 
immediate and urgent manner any attempts at their unauthorized use to 
the system security unit, and, as appropriate, to organizational 
management.
    (e) Initial and periodic testing of devices, such as tokens or 
cards, that bear or generate identification code or password 
information to ensure that they function properly and have not been 
altered in any unauthorized manner.

Subpart C--Electronic Filing of Documents with TTB


Sec.  73.30  What does subpart C cover?

    This subpart provides the conditions under which we will allow you 
to satisfy certain reporting requirements of this chapter by submitting 
forms to us electronically.


Sec.  73.31  Can I submit forms electronically to TTB?

    Yes; you may submit an electronic form, instead of a paper form, to 
satisfy any reporting requirement in this chapter, only if:
    (a) We have published a notice in the Federal Register and on our 
Web site (http://www.ttb.gov) announcing that we are prepared to 
receive a particular form electronically.
    (b) You have registered to do so pursuant to the instructions in a 
notice

[[Page 17763]]

published in the Federal Register and on our Web site as stated above.
    (c) You submit the electronic form to an electronic document 
receiving system that we have designated for the receipt of that 
specific form.
    (d) The electronic form bears valid electronic signatures, as 
provided in subpart B of this part, to the same extent that the paper 
submission for which it substitutes would bear handwritten signatures.


Sec.  73.32  May I electronically sign forms I submit electronically to 
TTB?

    You may electronically sign the electronic form you submit to us 
if:
    (a) You have registered with TTB to do so and have certified, prior 
to the time of such use, that the electronic signatures or digital 
signatures in your system are intended to be the legally binding 
equivalent of traditional handwritten signatures;
    (b) The electronic or digital signature meets the standards of this 
part and is authorized by TTB in accordance with this part; and
    (c) The electronic or digital signature is sufficiently trustworthy 
and reliable that the signing party may not repudiate the signature.


Sec.  73.33  Am I legally bound by a form I sign electronically?

    Yes; by electronically signing a form you submit to us, you are 
agreeing to be legally bound to the same extent as if you applied a 
traditional handwritten signature on a paper document submitted to 
satisfy the same reporting requirement. Persons using electronic 
signatures shall, upon TTB's request, provide additional certification 
or testimony that a specific electronic signature is the legally 
binding equivalent of the signer's handwritten signature.


Sec.  73.34  When is an electronically submitted form considered timely 
filed?

    If you submit a form to our electronic document receiving system, 
your report will be considered filed on the date of the electronic 
postmark given by that system.


Sec.  73.35  Do I need to keep paper copies of forms I submit to TTB 
electronically?

    Nothing in this part alters any other regulatory or statutory 
requirement that records be maintained in paper format. If the 
regulations in this chapter require you to keep paper copies of certain 
forms, you must continue to do so unless TTB otherwise authorizes you 
to maintain electronic copies of these documents through a general 
notice in the Federal Register or through a variance.

    Signed: February 13, 2003.
Arthur J. Libertucci,
Administrator.
    Approved: March 11, 2003.
Timothy E. Skud,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 03-8816 Filed 4-10-03; 8:45 am]
BILLING CODE 4810-31-P