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                                                       Calendar No. 581
105th Congress                                                   Report

 2d Session                                                     105-335



                              R E P O R T

                                 OF THE



                                S. 2107

               September 17, 1998.--Ordered to be printed


                       one hundred fifth congress

                             second session

                     JOHN McCAIN, Arizona, Chairman

TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             WENDELL H. FORD, Kentucky
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas            Virginia
OLYMPIA SNOWE, Maine                 JOHN F. KERRY, Massachusetts
JOHN ASHCROFT, Missouri              JOHN B. BREAUX, Louisiana
BILL FRIST, Tennessee                RICHARD H. BRYAN, Nevada
SPENCER ABRAHAM, Michigan            BYRON L. DORGAN, North Dakota
SAM BROWNBACK, Kansas                RON WYDEN, Oregon

                       John Raidt, Staff Director

                       Mark Buse, Policy Director

                  Martha P. Allbright, General Counsel

     Ivan A. Schlager, Democratic Chief Counsel and Staff Director

             James S. W. Drewry, Democratic General Counsel

                                                       Calendar No. 581
105th Congress                                                   Report

 2d Session                                                     105-335


               September 17, 1998.--Ordered to be printed


       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 2107]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 2107), ``A bill to enhance 
electronic commerce by promoting the reliability and integrity 
of commercial transactions through establishing authentication 
standards for electronic communication, and for other 
purposes'', having considered the same, reports favorably 
thereon with an amendment in the nature of a substitute and 
recommends that the bill as amended do pass.

                          Purpose of the Bill

  S. 2107, as reported, would require Federal agencies to make 
electronic versions of their forms available online and would 
allow individuals and businesses to use electronic signatures 
to file these forms electronically. The intent of the bill is 
to provide a framework for reliable and secure electronic 
transactions with the Federal government, while remaining 
``technology neutral'' and not inappropriately favoring one 
industry over another.

                          Background and Needs

  The widespread use and world-wide accessibility of the 
Internet provides the opportunity for enhanced electronic 
commerce and substantial paperwork reduction. State 
governments, industry, and private citizens have already 
embraced the electronic medium to conduct public and private 
business. Allowing businesses and individuals to conduct their 
affairs with the Federal government within a stable legal 
framework would save financial resources by eliminating 
burdensome paperwork and bureaucracy.
  The widespread use of electronic forms can greatly improve 
the efficiency and speed of government services. Such efforts 
as people traveling to government offices for forms would no 
longer be required. If implemented, the bill would save the 
government millions of dollars in costs associated with such 
things as copying, mailing, filing and storing forms.
  Electronic signatures can offer greater assurances that 
documents are authentic and unaltered. They minimize the 
chances of forgeries or people claiming to have had their 
signatures forged.
  An electronic signature is a method of indicating that a 
particular person has originated and approved the contents of 
an electronic document. There is a wide array of electronic 
signature technologies currently available, which range from 
simply typing one's name on an electronic document or e-mail, 
to scanning a handwritten signature as a bitmap and copying it 
onto an electronic document. More technologically complex 
versions of electronic signatures involve the analysis of 
physical characteristics (biometrics) such as fingerprints, 
retina scans, and the biometrics of an actual signature to 
digitally verify the signer's identity. The widely referred-to 
``digital signature'' is slightly different, and is merely one 
type of electronic signature which often, although not always, 
involves the use of trusted third parties.
  Security levels for all electronic signatures vary according 
to the technology used. Simply typing a name on a document 
offers no security protection, and cannot be verified as unique 
to the originator. Bitmaps, which are digital versions of 
handwritten signatures, require large amounts of memory, are 
vulnerable to copying or pasting, and cannot be used to 
accurately tie the document to the signature. Electronic 
signature technologies which use biometric analysis offer a 
higher level of security. Digital signatures and the use of 
licensed third parties also yield a higher degree of security.
  Several states have enacted electronic signature legislation 
with varying scopes and legal requirements. Some states have 
chosen to limit the scope of the law to transactions with state 
or public entities, or even to more specific purposes such as 
court documents, medical records, and state treasurer checks 
and drafts. Other states have applied their statutes to 
private, as well as public, transactions. State statutes also 
have varying technology requirements which highlight the 
potential for future compatibility and interoperability 

                      Summary of Major Provisions

  As reported, S. 2107 would provide a legal framework and time 
line for electronic transactions between individuals and 
businesses and the Federal government. Major provisions of S. 
2107, as reported, include:
  1. Each Federal agency would be required to make electronic 
versions of their forms available for electronic submission. 
Such electronic submission would be supported by guidelines 
issued by the Director of Office of Management and Budget (OMB) 
and the Secretary of Commerce. Forms submitted electronically 
would have the same legal force as a written document, and any 
payments submitted electronically would be no higher than if 
submitted in paper form.
  2. The bill establishes the following time lines:
          (1) Within 18 months after the date of enactment, the 
        Secretary of Commerce is to report on the bill's effect 
        on electronic commerce and individual privacy, agencies 
        are to make electronic forms available for downloading 
        and printing, agencies are to permit employers to store 
        Federal forms electronically, and agencies are to 
        establish policies and procedures for implementation of 
        this bill.
          (2) Within 21 months after the date of enactment, GAO 
        is to report on the policies, procedures and timeliness 
        for agency implementation of this bill.
          (3) Within 60 months after the date of enactment, 
        final implementation of the bill is to be complete.
  3. The bill provides definitions of key terms, and specifies 
under what circumstances, and in what special cases, an agency 
is not required to provide for the electronic submission of 

                          Legislative History

  The Government Paperwork Elimination Act was introduced by 
Senator Abraham on May 21, 1998. The bill was co-sponsored by 
Senator McCain, Senator Wyden, and Senator Reed. In June 1998, 
Senator Lott, Senator Cochran, and Senator Burns were added as 
co-sponsors to the bill. On July 15, 1998 the Commerce 
Committee held a hearing on digital signatures at which time 
testimony was heard from Mr. Andrew Pincus, General Counsel, 
Department of Commerce; Mr. Scott Cooper, Manager, Technology 
Policy, Hewlett Packard; Mr. Kirk LeCompte, Vice President, 
Product Marketing, PenOp Inc.; and Mr. Dan Greenwood, Deputy 
General Counsel, Information Technology Division, the 
Commonwealth of Massachusetts.
  On July 29, 1998 the Committee met in open executive session 
and, by a voice vote, ordered the bill, as amended, to be 

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 1, 1998.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed estimate for S. 2107, the Government 
Paperwork Elimination Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is John R. 
                                         June E. O'Neill, Director.


S. 2107--Government Paperwork Elimination Act

    S. 2107 would require federal agencies to make certain 
forms available on-line and would allow individuals and 
businesses to submit these forms electronically with 
authenticated signatures. Specifically, to the extent 
practicable and feasible, the bill would require agencies to 
make most forms available on the Internet within 18 months of 
enactment and allow for the electronic filing of forms within 
five years of enactment. S. 2107 would require agencies to 
establish policies and procedures to implement the bill's 
provisions and the Office of Management and Budget to develop 
guidelines for agencies in using and accepting electronic 
signatures. The bill would require the Department of Commerce 
to study the impact of these legislative changes on electronic 
commerce and on individual privacy and to report its findings 
to the Congress within 18 months of enactment.
    CBO estimates that implementing S. 2107 would increase 
administrative costs by a total of less than $1 million over 
fiscal years 1999 and 2000 for the Department of Commerce to 
complete its report and for agencies to adopt new policies and 
procedures. S. 2107 also could affect direct spending; 
therefore, pay-as-you-go procedures would apply. CBO estimates, 
however, that any increase in direct spending would not be 
significant. S. 2107 contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
and would impose no costs on state, local, or tribal 
    The Department of Commerce is currently studying the 
efforts of private industry to protect the privacy of users of 
on-line resources, and much of that information could be used 
to complete the report required by S. 2107. Also, according to 
the Office of Management and Budget, some agencies already have 
procedures in place regarding the use of electronic 
technologies. Thus, CBO estimates that implementing these 
provisions would increase discretionary costs by less than $1 
    Because the remaining provisions of S. 2107 would codify 
current policy, CBO estimates that they would have no 
significant impact. For instance, agencies already make many 
forms available on-line, including receiving some forms 
electronically. Also, the National Institute of Standards and 
Technology has issued standards on, and agencies are conducting 
pilot projects involving the use and acceptance of, electronic 
signatures. In addition, the Administration has submitted to 
the Congress a strategic plan for agencies to provide full-
service electronic commerce to federal customers by 2001. Thus, 
while S. 2107 could accelerate the implementation of 
information technologies at a few agencies, CBO estimates that 
there would probably be no significant change in federal 
spending on such technologies. Because receiving and processing 
forms electronically should generally reduce administrative 
costs at federal agencies, enacting S. 2107 could result in 
savings if it were to increase the number of forms filed 
electronically. CBO, however, has no basis for estimating any 
such potential savings.
    For most agencies, any impact on spending would be subject 
to the availability of appropriated funds; however, the bill 
could also affect direct spending by agencies not funded 
through annual appropriations, such as the Tennessee Valley 
Authority and the Bonneville Power Administration. CBO 
estimates, however, that any increase in spending by these 
agencies would not be significant.
    The CBO staff contact is John R. Righter. This estimate was 
approved by Paul N. Van de Water, Assistant Director for Budget 

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       number of persons covered

  The Committee believes that the bill will not subject any 
individuals or businesses affected by the bill to any 
additional regulation.

                            economic impact

  After full implementation of the bill, individuals and 
businesses will benefit from potential cost savings by having 
the opportunity to conduct transactions electronically with the 
Federal government.


  This legislation will not have an adverse impact on the 
privacy of individuals. The Secretary of Commerce will conduct 
an ongoing study of the bill's impact on individual privacy.


  This legislation will not increase the paperwork requirement 
for private individuals or businesses. The legislation would 
require two reports: (1) the Secretary of Commerce would be 
required to submit to Congress a report on the bill's effect on 
electronic commerce and individual privacy; and (2) the General 
Accounting Office would be required to submit to Congress a 
report on agencies' policies, procedures, and timeliness for 
the implementation of the bill.

                      Section-by-Section Analysis

Section 1. Short title

  This section would permit the bill to be cited as the 
``Government Paperwork Elimination Act.''

Section 2. Studies on use of electronic signatures to enhance 
        electronic commerce

  This section would require the Secretary of Commerce to 
conduct an ongoing study on how this bill affects electronic 
commerce and individual privacy. A report would be made to the 
Senate Committee on Commerce, Science, and Transportation and 
the House of Representatives Committee on Commerce no later 
than 18 months from enactment.

Section 3. Electronic availability of forms

  Subsection (a) would immediately require Federal agencies to 
make virtually all new forms, questionnaires, and surveys 
created after enactment available electronically for 
downloading or printing through the Internet or other suitable 
electronic medium.
  Subsection (b) would require this to be accomplished for all 
existing forms, questionnaires and surveys no later than 18 
months from enactment. These existing forms, questionnaires and 
surveys are required to be made available to the affected 
public for downloading or printing through the Internet or 
other suitable electronic medium.
  Subsections (a) and (b) would apply only to forms, 
questionnaires, and surveys that are expected to be submitted 
to an agency by more than 1000 non-governmental persons or 
entities per year. An agency must comply with these 
requirements unless it is determined by the head of the agency 
or operating unit that doing so for particular documents would 
be impracticable or otherwise unreasonable.
  Subsection (c) would exempt from this section surveys that 
are both distributed and collected one-time only or that are 
provided directly to respondents by an agency.
  Subsection (d) would require that forms subject to this 
section be available for electronic submission (with an 
electronic signature when necessary) under the provisions of 
Section 8. They are also required to be available for 
electronic storage by employers as described in Section 7.
  Subsection (e) would require each agency and operating unit 
to continue to make forms, questionnaires, and surveys 
available in paper form.

Section 4. Payments

  Paragraph (1) would direct agencies to seek to develop or 
otherwise provide means for individuals and businesses that 
submit documents electronically to submit any associated 
payments electronically as well. The electronic payment option 
would be provided by agencies when deemed appropriate and 
practicable, and in accordance with Department of Treasury 
  Paragraph (2) would ensure that payments associated with 
forms, applications or similar documents submitted 
electronically would be no higher than payments submitted in 
paper form. Specific charges for costs associated with 
electronic transmission, such as those made by merchants in 
connection with credit card transactions, however, could be 
imposed without violating this provision.

Section 5. Use of electronic signatures by Federal agencies

  Subsection (a) would require agency heads to issue guidelines 
for the use of electronic signatures by agency employees in 
conjunction with their Federal employment.
  Subsection (b) would permit agencies to provide a person 
entitled to receive written notice, with the opportunity to 
receive electronic notice instead.
  Subsection (c) would require the Director of the Office of 
Management and Budget, in consultation with the Secretary of 
Commerce, to develop guidelines for agency use and acceptance 
of electronic signatures. Each federal agency should determine 
when an electronic form, questionnaire, or survey available for 
electronic submission under the bill requires a legally binding 
electronic signature. A legally binding electronic signature 
means an electronic signature of a person used to show approval 
of or assent to be bound to the content of the message as 
opposed to use of an electronic signature to provide a mere 
indication of the identity of the signer. Paragraph (1) would 
ensure that these procedures would be compatible with those 
used in the commercial and State government sectors. Paragraph 
(2) would require that these procedures not inappropriately 
favor one industry or technology. The intent of the bill is for 
the government to remain ``technology neutral.'' The intent of 
the bill is not to mandate the use of a particular technology. 
Rather, the bill is intended to be technology neutral leaving 
open the possibility that a wide variety of existing 
technologies or technologies that will be developed in the 
future may be used by the Federal government in satisfying the 
requirements of this bill. And, so as not to prescribe one 
electronic signature security level for all documents, 
paragraph (3) would allow the security level to be commensurate 
with the document's sensitivity. Paragraph (4) would require 
agencies to electronically acknowledge the submission of 
electronic forms. Further, once an agency receives 50,000 
electronic submittals of a particular form, paragraph (5) would 
require the agency to make multiple electronic signature 
formats available for submitting the forms. To further ensure 
technology neutrality, ``multiple formats'' are required when a 
form is submitted in substantial enough volume so that the 
government does not favor a particular technology provider by 
accepting only one electronic signature technology.

Section 6. Enforceability and legal effect of electronic records

  This section stipulates that electronic records, or 
electronic signatures or other forms of electronic 
authentication, submitted in accordance with agency procedures, 
will not be denied legal effect, validity or enforceability 
because they are in electronic form. This provision is intended 
to preclude agencies or courts from systematically treating 
electronic documents and signatures less favorably than their 
paper counterparts.

Section 7. Employer electronic storage of forms

  After 18 months from enactment, employers that are required 
by law to collect, file and store Federal forms concerning 
their employees, would be permitted to collect, file and store 
the same forms electronically. If an agency determines that the 
electronic storage of a particular form is inconsistent with 
security or the proper administration of an agency program, and 
publishes written finding to that effect, electronic storage 
would not be permitted.

Section 8. Implementation by agencies

  Subsections (a) and (b) direct Federal agencies, within 18 
months of enactment, to establish policies and procedures to 
authorize electronic submission and storage of their forms, 
applications and similar documents or records, and to establish 
timelines for full implementation of these electronic commerce 
measures. These agencies' policies and procedures shall be 
consistent with the Privacy Protection Act of 1980 (42 U.S.C. 
2000aa), in consultation with the Attorney General, and subject 
to applicable laws and regulations pertaining to the Department 
of the Treasury concerning Federal payments and collection and 
the National Archives and Records Administration concerning the 
proper maintenance and preservation of agency records. Agency 
guidelines should also be consistent with the above provisions.
  Subsection (c) would direct the General Accounting Office 
(GAO) to provide a report to the Senate Committee on Commerce, 
Science, and Transportation and the House of Representatives 
Committee on Commerce, within 21 months from enactment, on the 
Federal agencies' proposed policies, procedures, and 
  Subsection (d) requires that all Federal forms must be 
available for electronic submission within 60 months after 
enactment, except when an agency makes a written finding that 
the electronic filing of a form is either technically 
infeasible or economically unreasonable, or may compromise 
national security. The Committee anticipates that the Senate 
Committee on Commerce, Science, and Transportation and the 
House of Representatives Committee on Commerce will be notified 
whenever such a written finding is made. In addition, the 
Committee notes that the bill is not intended to create private 
rights of action, or to invalidate agency actions, in the event 
of non-compliance with one of the bill's provisions.

Section 9. Sense of the Congress

  This section expresses the sense of the Congress that under 
Federal and State law, electronic transactions be treated 
similarly to those conducted in written form.

Section 10. Application with other laws

  This section would exempt the Internal Revenue Service (IRS) 
and the Department of the Treasury from the provisions in the 
bill, when in conflict with the administration of internal 
revenue laws or conflicts with the Internal Revenue Service 
Restructuring and Reform Act of 1998 or the Internal Revenue 
Code of 1986. The IRS collection process should also be 
exempted from the bill.

Section 11. Definitions

  This section would provide the definitions of several key 
terms used throughout this bill.
  For purposes of the public and confidential financial 
disclosure forms required or authorized to be filed in the 
executive branch by the Ethics in Government Act, the Office of 
Government Ethics should be deemed to be an ``agency'' as that 
term is used in this bill.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, the Committee states that the bill as 
reported would make no change to existing law.