Calendar No. 243

106TH CONGRESS

1ST SESSION S. 761

[Report No. 106–131]

A BILL

To regulate interstate commerce by electronic

purposes.the operation of free market forces, and otherued expansion of electronic commerce throughmeans by permitting and encouraging the continJULY 30, 1999

Reported with an amendment in the nature of a

substitute
II

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Third Millennium

3 Electronic Commerce Act’’.

4 SEC. 2. FINDINGS.

5 The Congress makes the following findings:

6 (1) The growth of electronic commerce and

7 electronic government transactions represent a pow8 erful force for economic growth, consumer choice,

9 improved civic participation and wealth creation.

10 (2) The promotion of growth in private sector

11 electronic commerce through Federal legislation is in

12 the national interest because that market is globally

13 important to the United States.

14 (3) A consistent legal foundation, across mul15 tiple jurisdictions, for electronic commerce will pro16 mote the growth of such transactions, and that such

17 a foundation should be based upon a simple, tech18 nology neutral, non-regulatory, and market-based

19 approach.

20 (4) The Nation and the world stand at the be21 ginning of a large scale transition to an information

22 society which will require innovative legal and policy

23 approaches, and therefore, States can serve the na24 tional interest by continuing their proven role as lab25 oratories of innovation for quickly evolving areas of

26 public policy, provided that States also adopt a con-
3

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1 sistent, minimalist national baseline to eliminate ob2 solete barriers to electronic commerce such as undue

3 paper and pen requirements, and further, that any

4 such innovation should not unduly burden inter-ju5 risdictional commerce.

6 (5) To the extent State laws or regulations in

7 fact create an undue burden to interstate commerce

8 in the important burgeoning area of electronic com9 merce, the national interest is best served by Federal

10 preemption to the extent necessary to eliminate said

11 burden, but that absent such burdens, the best legal

12 system for electronic commerce will result from con13 tinuing experimentation by individual jurisdictions.

14 (6) With due regard to the fundamental need

15 for adequate consistency, each jurisdiction that en16 acts such laws should have the right to determine

17 the need for any exceptions to protect consumers

18 and maintain consistency with existing related bod19 ies of law within a particular jurisdiction.

20 (7) Industry has developed several electronic

21 signature technologies for use in electronic trans22 actions, and the public policies of the United States

23 should serve to promote a dynamic marketplace

24 within which these technologies can compete. Con25 sistent with this Act, States should permit the use
4

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1 and development of any authentication technologies

2 that are appropriate as practicable as between pri3 vate parties and in use with State agencies.

4 SEC. 3. PURPOSES.

5 The purposes of this Act are—

6 (1) to permit and encourage the continued ex7 pansion of electronic commerce through the oper8 ation of free market forces rather than proscriptive

9 governmental mandates and regulations;

10 (2) to promote public confidence in the validity,

11 integrity and reliability of electronic commerce and

12 online government under Federal law;

13 (3) to facilitate and promote electronic com14 merce by clarifying the legal status of electronic

15 records and electronic signatures in the context of

16 writing and signing requirements imposed by law;

17 and

18 (4) to promote the development of a consistent

19 national legal infrastructure necessary to support of

20 electronic commerce at the Federal and State levels

21 within existing areas of jurisdiction.

22 SEC. 4. DEFINITIONS.

23 In this Act:

24 (1) ELECTRONIC.—The term ‘‘electronic’’

25 means of or relating to technology having electrical,
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1 digital, magnetic, wireless, optical, electromagnetic,

2 or similar capabilities.

3 (2) ELECTRONIC RECORD.—The term ‘‘elec4 tronic record’’ means a record created, stored, gen5 erated, received, or communicated by electronic

6 means.

7 (3) ELECTRONIC SIGNATURE.—The term ‘‘elec8 tronic signature’’ means a signature in electronic

9 form, attached to or logically associated with an

10 electronic record.

11 (4) GOVERNMENTAL AGENCY.—The term ‘‘gov12 ernmental agency’’ means an executive, legislative,

13 or judicial agency, department, board, commission,

14 authority, institution, or instrumentality of the Fed15 eral Government or of a State or of any county, mu16 nicipality, or other political subdivision of a State.

17 (5) RECORD.—The term ‘‘record’’ means infor18 mation that is inscribed on a tangible medium or

19 that is stored in an electronic or other medium and

20 is retrievable in perceivable form.

21 (6) SIGN.—The term ‘‘sign’’ means to execute

22 or adopt a signature.

23 (7) SIGNATURE.—The term ‘‘signature’’ means

24 any symbol, sound, or process executed or adopted

25 by a person with intent to authenticate a record.
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1 (8) TRANSACTION.—The term ‘‘transaction’’

2 means an action or set of actions occurring between

3 2 or more persons relating to the conduct of com4 merce.

5 SEC. 5. PRINCIPLES GOVERNING THE USE OF ELECTRONIC

6 SIGNATURES IN INTERNATIONAL TRANS7 ACTIONS.

8 (a) IN GENERAL.—To the extent practicable, the

9 Federal Government shall observe the following principles

10 in an international context to enable commercial electronic

11 transaction:

12 (1) Remove paper-based obstacles to electronic

13 transactions by adopting relevant principles from the

14 Model Law on Electronic Commerce adopted in

15 1996 by the United Nations Commission on Inter16 national Trade Law (UNCITRAL).

17 (2) Permit parties to a transaction to determine

18 the appropriate authentication technologies and im19 plementation models for their transactions, with as20 surance that those technologies and implementation

21 models will be recognized and enforced.

22 (3) Permit parties to a transaction to have the

23 opportunity to prove in court or other proceedings

24 that their authentication approaches and their trans25 actions are valid.
7

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1 (4) Take a non-discriminatory approach to elec2 tronic signatures and authentication methods from

3 other jurisdictions.

4 SEC. 6. INTERSTATE CONTRACT CERTAINTY.

5 (a) INTERSTATE COMMERCIAL CONTRACTS.—A con6 tract relating to an interstate transaction shall not be de7 nied legal effect solely because an electronic signature or

8 electronic record was used in its formation.

9 (b) METHODS.—Notwithstanding any rule of law

10 that specifies one or more acceptable or required tech11 nologies or business models, including legal or other proce12 dures, necessary to create, use, receive, validate, or invali13 date electronic signatures or electronic records, the parties

14 to an interstate transaction may establish by contract,

15 electronically or otherwise, such technologies or business

16 models, including legal or other procedures to create, use,

17 receive, validate, or invalidate electronic signatures and

18 electronic records.

19 (c) NOT PREEMPT STATE LAW.— Nothing in this

20 section shall be construed to preempt the law of a State

21 that enacts legislation governing electronic transactions

22 which is substantially similar to, and not inconsistent

23 with, subsections (a) and (b). A State that enacts uniform

24 electronic transactions legislation substantially as reported

25 to State legislatures by the National Conference of Com-
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1 missioners on Uniform State Law shall be deemed to have

2 satisfied this criterion.

3 (d) INTENT.—The intent of a person to execute or

4 adopt an electronic signature shall be determined from the

5 context and surrounding circumstances, which may in6 clude accepted commercial practices.

7 SEC. 7. ADVISORY COMMISSION ON ELECTRONIC AUTHEN8 TICATION.

9 (a) ESTABLISHMENT OF COMMISSION.—There is es10 tablished a commission to be known as the Advisory Com11 mission on Electronic Authentication (in this section re12 ferred to as the ‘‘Commission’’). The Commission shall—

13 (1) be composed of 17 members appointed in

14 accordance with subsection (b), including the chair15 person who shall be selected by the members of the

16 Commission from among themselves; and

17 (2) conduct its business in accordance with the

18 provisions of this section.

19 (b) MEMBERSHIP.—

20 (1) IN GENERAL.—The Commissioners shall

21 serve for the life of the Commission. The member22 ship of the Commission shall be as follows:

23 (A) 3 representatives from the Federal

24 Government, comprised of the Secretary of

25 Commerce, the Secretary of the Treasury, and
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1 the United States Trade Representative (or

2 their respective delegates).

3 (B) 4 representatives from State and local

4 governments.

5 (C) 10 representatives of the electronic

6 commerce industry (including small business),

7 banks and other financial service companies,

8 and consumer groups, comprised of—

9 (i) 3 individuals appointed by the Ma10 jority Leader of the Senate;

11 (ii) 2 individuals appointed by the Mi12 nority Leader of the Senate;

13 (iii) 3 individuals appointed by the

14 Speaker of the House of Representatives;

15 and

16 (iv) 2 individuals appointed by the Mi17 nority Leader of the House of Representa18 tives.

19 (2) APPOINTMENTS.—Appointments to the

20 Commission shall be made not later than 45 days

21 after the date of the enactment of this Act. The

22 chairperson shall be selected not later than 60 days

23 after the date of the enactment of this Act.
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1 (3) VACANCIES.—Any vacancy in the Commis2 sion shall not affect its powers, but shall be filled in

3 the same manner as the original appointment.

4 (c) OTHER RESOURCES.—The Commission shall have

5 reasonable access to materials, resources, data, and other

6 information from the Department of Justice, the Depart7 ment of Commerce, the Department of State, the Depart8 ment of the Treasury, and the Office of the United States

9 Trade Representative. The Commission shall also have

10 reasonable access to use the facilities of any such Depart11 ment or Office for purposes of conducting meetings.

12 (d) SUNSET.—The Commission shall terminate 12

13 months after the date of the enactment of this Act.

14 (e) DUTIES OF THE COMMISSION.—The Commission

15 shall conduct a thorough study of electronic authentication

16 systems, including third-party verification systems, in the

17 transacting of contractual agreements, the use of such sys18 tems in electronic commerce today, and the role of the

19 electronic commerce industry, the Federal Government,

20 and the States in such a system.

21 SEC. 8. STUDY OF LEGAL AND REGULATORY BARRIERS TO

22 ELECTRONIC COMMERCE.

23 (a) BARRIERS.—Each Federal agency shall, not later

24 than 6 months after the date of enactment of this Act,

25 provide a report to the Director of the Office of Manage-
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1 ment and Budget and the Secretary of Commerce identi2 fying any provision of law administered by such agency,

3 or any regulations issued by such agency and in effect on

4 the date of enactment of this Act, that may impose a bar5 rier to electronic transactions, or otherwise to the conduct

6 of commerce online or be electronic means. Such barriers

7 include, but are not limited to, barriers imposed by a law

8 or regulation directly or indirectly requiring that signa9 tures, or records of transactions, be accomplished or re10 tained in other than electronic form. In its report, each

11 agency shall identify the barriers among those identified

12 whose removal would require legislative action, and shall

13 indicate agency plans to undertake regulatory action to

14 remove such barriers among those identified as are caused

15 by regulations issued by the agency.

16 (b) REPORT TO CONGRESS.—The Secretary of Com17 merce, in consultation with the Director of the Office of

18 Management and Budget, shall, within 18 months after

19 the date of enactment of this Act, and after the consulta20 tion required by subsection (c) of this section, report to

21 the Congress concerning—

22 (1) legislation needed to remove barriers to

23 electronic transactions or otherwise to the conduct of

24 commerce online or by electronic means; and
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1 (2) actions being taken by the Executive

2 Branch and individual Federal agencies to remove

3 such barriers as are caused by agency regulations or

4 policies.

5 (c) CONSULTATION.—In preparing the report re6 quired by this section, the Secretary of Commerce shall

7 consult with the General Services Administration, the Na8 tional Archives and Records Administration, and the At9 torney General concerning matters involving the authen10 ticity of records, their storage and retention, and their

11 usability for law enforcement purposes.

12 (d) INCLUDE FINDINGS IF NO RECOMMENDA13 TIONS.—If the report required by this section omits rec14 ommendations for actions needed to fully remove identi15 fied barriers to electronic transactions or to online or elec16 tronic commerce, it shall include a finding or findings, in17 cluding substantial reasons therefor, that such removal is

18 impracticable or would be inconsistent with the implemen19 tation or enforcement of applicable laws

20 SECTION 1. SHORT TITLE.

21 This Act may be cited as the ‘‘Third Millennium Dig22 ital Commerce Act’’.

23 SEC. 2. FINDINGS.

24 The Congress makes the following findings:
13

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1 (1) The growth of electronic commerce and elec2 tronic government transactions represent a powerful

3 force for economic growth, consumer choice, improved

4 civic participation and wealth creation.

5 (2) The promotion of growth in private sector

6 electronic commerce through Federal legislation is in

7 the national interest because that market is globally

8 important to the United States.

9 (3) A consistent legal foundation, across multiple

10 jurisdictions, for electronic commerce will promote the

11 growth of such transactions, and that such a founda12 tion should be based upon a simple, technology neu13 tral, non-regulatory, and market-based approach.

14 (4) The Nation and the world stand at the begin15 ning of a large scale transition to an information so16 ciety which will require innovative legal and policy

17 approaches, and therefore, States can serve the na18 tional interest by continuing their proven role as lab19 oratories of innovation for quickly evolving areas of

20 public policy, provided that States also adopt a con21 sistent, reasonable national baseline to eliminate obso22 lete barriers to electronic commerce such as undue

23 paper and pen requirements, and further, that any

24 such innovation should not unduly burden inter-juris25 dictional commerce.
14

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1 (5) To the extent State laws or regulations do

2 not provide a consistent, reasonable national baseline

3 or in fact create an undue burden to interstate com4 merce in the important burgeoning area of electronic

5 commerce, the national interest is best served by Fed6 eral preemption to the extent necessary to provide

7 such consistent, reasonable national baseline elimi8 nate said burden, but that absent such lack of con9 sistent, reasonable national baseline or such undue

10 burdens, the best legal system for electronic commerce

11 will result from continuing experimentation by indi12 vidual jurisdictions.

13 (6) With due regard to the fundamental need for

14 a consistent national baseline, each jurisdiction that

15 enacts such laws should have the right to determine

16 the need for any exceptions to protect consumers and

17 maintain consistency with existing related bodies of

18 law within a particular jurisdiction.

19 (7) Industry has developed several electronic sig20 nature technologies for use in electronic transactions,

21 and the public policies of the United States should

22 serve to promote a dynamic marketplace within

23 which these technologies can compete. Consistent with

24 this Act, States should permit the use and develop25 ment of any authentication technologies that are ap-
15

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1 propriate as practicable as between private parties

2 and in use with State agencies.

3 SEC. 3. PURPOSES.

4 The purposes of this Act are—

5 (1) to permit and encourage the continued ex6 pansion of electronic commerce through the operation

7 of free market forces rather than proscriptive govern8 mental mandates and regulations;

9 (2) to promote public confidence in the validity,

10 integrity and reliability of electronic commerce and

11 online government under Federal law;

12 (3) to facilitate and promote electronic commerce

13 by clarifying the legal status of electronic records and

14 electronic signatures in the context of writing and

15 signing requirements imposed by law;

16 (4) to facilitate the ability of private parties en17 gaged in interstate transactions to agree among them18 selves on the terms and conditions on which they use

19 and accept electronic signatures and electronic

20 records; and

21 (5) to promote the development of a consistent

22 national legal infrastructure necessary to support of

23 electronic commerce at the Federal and State levels

24 within existing areas of jurisdiction.
16

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1 SEC. 4. DEFINITIONS.

2 In this Act:

3 (1) ELECTRONIC.—The term ‘‘electronic’’ means

4 relating to technology having electrical, digital, mag5 netic, wireless, optical, electromagnetic, or similar ca6 pabilities.

7 (2) ELECTRONIC AGENT.—The term ‘‘electronic

8 agent’’ means a computer program or an electronic or

9 other automated means used to initiate an action or

10 respond to electronic records or performances in whole

11 or in part without review by an individual at the

12 time of the action or response.

13 (3) ELECTRONIC RECORD.—The term ‘‘electronic

14 record’’ means a record created, generated, sent, com15 municated, received, or stored by electronic means.

16 (4) ELECTRONIC SIGNATURE.—The term ‘‘elec17 tronic signature’’ means an electronic sound, symbol,

18 or process attached to or logically associated with an

19 electronic record and executed or adopted by a person

20 with the intent to sign the electronic record.

21 (5) GOVERNMENTAL AGENCY.—The term ‘‘gov22 ernmental agency’’ means an executive, legislative, or

23 judicial agency, department, board, commission, au24 thority, institution, or instrumentality of the Federal

25 Government or of a State or of any county, munici26 pality, or other political subdivision of a State.
17

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1 (6) RECORD.—The term ‘‘record’’ means infor2 mation that is inscribed on a tangible medium or

3 that is stored in an electronic or other medium and

4 is retrievable in perceivable form.

5 (7) TRANSACTION.—The term ‘‘transaction’’

6 means an action or set of actions relating to the con7 duct of commerce between 2 or more persons, neither

8 of which is the United States Government, a State, or

9 an agency, department, board, commission, authority,

10 institution, or instrumentality of the United States

11 Government or of a State.

12 (8) UNIFORM ELECTRONIC TRANSACTIONS ACT.—

13 The term ‘‘Uniform Electronic Transactions Act’’

14 means the Uniform Electronic Transactions Act as

15 reported to State legislatures by the National Con16 ference of Commissioners on Uniform State Law in

17 the form or any variation thereof that is authorized

18 or provided for in such report.

19 SEC. 5. PRINCIPLES GOVERNING THE USE OF ELECTRONIC

20 SIGNATURES IN INTERNATIONAL TRANS21 ACTIONS.

22 To the extent practicable, the Federal Government

23 shall observe the following principles in an international

24 context to enable commercial electronic transaction:
18

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1 (1) Remove paper-based obstacles to electronic

2 transactions by adopting relevant principles from the

3 Model Law on Electronic Commerce adopted in 1996

4 by the United Nations Commission on International

5 Trade Law (UNCITRAL).

6 (2) Permit parties to a transaction to determine

7 the appropriate authentication technologies and im8 plementation models for their transactions, with as9 surance that those technologies and implementation

10 models will be recognized and enforced.

11 (3) Permit parties to a transaction to have the

12 opportunity to prove in court or other proceedings

13 that their authentication approaches and their trans14 actions are valid.

15 (4) Take a non-discriminatory approach to elec16 tronic signatures and authentication methods from

17 other jurisdictions.

18 SEC. 6. INTERSTATE CONTRACT CERTAINTY.

19 (a) IN GENERAL.—The following rules apply to any

20 commercial transaction affecting interstate commerce:

21 (1) A record or signature may not be denied

22 legal effect or enforceability solely because it is in

23 electronic form.
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1 (2) A contract may not be denied legal effect or

2 enforceability solely because an electronic record was

3 used in its formation.

4 (3) If a law requires a record to be in writing,

5 or provides consequences if it is not, an electronic

6 record satisfies the law.

7 (4) If a law requires a signature, or provides

8 consequences in the absence of a signature, the law is

9 satisfied with respect to an electronic record if the

10 electronic record includes an electronic signature.

11 (b) METHODS.—The parties to a contract may agree

12 on the terms and conditions on which they will use and

13 accept electronic signatures and electronic records, includ14 ing the methods therefor, in commercial transactions affect15 ing interstate commerce. Nothing in this subsection requires

16 that any party enter into such a contract.

17 (c) INTENT.—The following rules apply to any com18 mercial transaction affecting interstate commerce:

19 (1) An electronic record or electronic signature is

20 attributable to a person if it was the act of the person.

21 The act of the person may be established in any man22 ner, including a showing of the efficacy of any secu23 rity procedures applied to determine the person to

24 which the electronic record or electronic signature was

25 attributable.
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1 (2) The effect of an electronic record or electronic

2 signature attributed to a person under paragraph (1)

3 is determined from the context and surrounding cir4 cumstances at the time of its creation, execution, or

5 adoption, including the parties’ agreement, if any,

6 and otherwise as provided by law.

7 (d) FORMATION OF CONTRACT.—A contract relating to

8 a commercial transaction affecting interstate commerce

9 may not be denied legal effect solely because its formation

10 involved—

11 (1) the interaction of electronic agents of the par12 ties; or

13 (2) the interaction of an electronic agent of a

14 party and an individual who acts on that individ15 ual’s own behalf or for another person.

16 (e) APPLICATION IN UETA STATES.—This section does

17 not apply in any State in which the Uniform Electronic

18 Transactions Act is in effect.

19 SEC. 7. STUDY OF LEGAL AND REGULATORY BARRIERS TO

20 ELECTRONIC COMMERCE.

21 (a) BARRIERS.—Each Federal agency shall, not later

22 than 6 months after the date of enactment of this Act, pro23 vide a report to the Director of the Office of Management

24 and Budget and the Secretary of Commerce identifying any

25 provision of law administered by such agency, or any regu-
21

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1 lations issued by such agency and in effect on the date of

2 enactment of this Act, that may impose a barrier to elec3 tronic transactions, or otherwise to the conduct of commerce

4 online or be electronic means. Such barriers include, but

5 are not limited to, barriers imposed by a law or regulation

6 directly or indirectly requiring that signatures, or records

7 of transactions, be accomplished or retained in other than

8 electronic form. In its report, each agency shall identify the

9 barriers among those identified whose removal would re10 quire legislative action, and shall indicate agency plans to

11 undertake regulatory action to remove such barriers among

12 those identified as are caused by regulations issued by the

13 agency.

14 (b) REPORT TO CONGRESS.—The Secretary of Com15 merce, in consultation with the Director of the Office of

16 Management and Budget, shall, within 18 months after the

17 date of enactment of this Act, and after the consultation

18 required by subsection (c) of this section, report to the Con19 gress concerning—

20 (1) legislation needed to remove barriers to elec21 tronic transactions or otherwise to the conduct of

22 commerce online or by electronic means; and

23 (2) actions being taken by the Executive Branch

24 and individual Federal agencies to remove such bar25 riers as are caused by agency regulations or policies.
22

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1 (c) CONSULTATION.—In preparing the report required

2 by this section, the Secretary of Commerce shall consult

3 with the General Services Administration, the National Ar4 chives and Records Administration, and the Attorney Gen5 eral concerning matters involving the authenticity of

6 records, their storage and retention, and their usability for

7 law enforcement purposes.

8 (d) INCLUDE FINDINGS IF NO RECOMMENDATIONS.—

9 If the report required by this section omits recommenda10 tions for actions needed to fully remove identified barriers

11 to electronic transactions or to online or electronic com12 merce, it shall include a finding or findings, including sub13 stantial reasons therefor, that such removal is impracticable

14 or would be inconsistent with the implementation or en15 forcement of applicable laws