Monday, July 7, 1997

 

Vol. 33, No. 27, ISSN: 0511-4187

 

Memorandum on electronic commerce.

 

 

� July 1,1997

 

 

� Heads of Executive Departments and Agencies

 

 

� Subject: Electronic Commerce

 

 

� The invention of the steam engine two centuries ago and the

subsequent harnessing of electricity for communications ushered in an

industrial revolution that fundamentally altered the way we work,

brought the world's people closer together in time and space, changed

the way we organize our economies, and brought us greater prosperity.

 

 

� Today, we are on the verge of another revolution. Inventions like the

integrated circuit, the computer, fiber optic cable, and the Internet

are changing the way we work, learn, and communicate with each other.

 

 

� Students and teachers can have immediate access to the world's

informationfrom their classrooms; doctors can administer diagnoses to

patients in remote parts of the globe from their offices; and citizens

of many nations are finding additional outlets for personal and

political expression.

 

 

� As the Internet empowers citizens and democratizes societies, it is

also changing the way business is conducted: entrepreneurs are able to

start new businesses more easily by accessing the Internet's worldwide

network of customers; world trade involving computer software,

entertainment-products, information services, professional consulting,

financial services, education businesses, medical diagnostics,

advertising, and technical services is increasing rapidly as the

Internet dramatically lower costs and facilitates new types of

commercial transactions; engineers, product developers, and managers

thousands of miles apart can collaborate to design and manufacture new

products more efficiently; businesses can work more efficiently with

their suppliers and customers; consumers have greater choice and can

shop in their homes for a wide variety of products from manufacturers

and retailers all over the world, and they will be able to view these

products on their computers or televisions, access information about

the products, and order and pay for their choices, all from their

living rooms.

 

 

� According to several estimates, commerce on the Internet will total

tens of billions of dollars by the turn of the century and could expand

rapidly after that, helping fuel economic growth well into the 21st

century.

 

 

� For this potential to be realized, governments must adopt a

market-oriented approach to electronic commerce, one that facilitates

the emergence of a global, transparent, and predictable environment to

support business and commerce.

 

 

� Government officials must respect the unique nature of the medium and

recognize that widespread competition and increased consumer choice

should be the defining features of the new digital marketplace.

 

 

� Many businesses and consumers are still wary of conducting extensive

business over the Internet because of the lack of a predictable legal

environment governing transactions. This is particularly true for

international commercial activity where concerns about enforcement of

contracts, liability, intellectual property protection, privacy,

security, and other matters have caused businesses and consumers to be

cautious.

 

 

� Many companies and Internet users are also concerned that domestic or

foreign governments will impose extensive regulations on the Internet

and electronic commerce including taxes and tariffs, restrictions on

the type of information transmitted, control over standards

development, licensing requirements, and extensive regulations of

Internet service providers. Indeed, signs of these types of

commerce-inhibiting actions already are appearing in many nations.

 

 

� Governments can have a profound effect on the growth of electronic

commerce. By their actions, they can facilitate electronic trade or

inhibit it. Knowing when to act and - at least as important - when not

to act, will be crucial to the development of electronic commerce.

 

 

� Today I have approved and released a report - "A Framework For Global

Electronic Commerce" - outlining the principles that will guide my

Administration's actions as we move forward into the new electronic age

of commerce. This report articulates my Administration's vision for the

emerging digital marketplace by declaring a set of principles,

presenting a series of policies, and establishing an agenda for

international discussions and agreements to facilitate the growth of

electronic commerce. I expect all executive departments and agencies to

review carefully the principles in this framework and implement

appropriate policies.

 

 

� Accordingly, I am hereby directing that executive department and

agency heads should be guided in any future actions they take related

to electronic commerce by the following principles:

 

 

� * For electronic commerce to flourish, the private sector must lead.

Therefore, the Federal Government should encourage industry

self-regulation wherever appropriate and support private sector efforts

to develop technology and practices that facilitate the growth and

success of the Internet.

 

 

� * Parties should be able to enter into legitimate agreements to buy

and sell products and services across the Internet with minimal

government involvement or intervention. Therefore, the Federal

Government should refrain from imposing new and unnecessary

regulations, bureaucratic procedures, or taxes and tariffs on

commercial activities that take place on the Internet.

 

 

� * In some areas, government involvement may prove necessary to

facilitate electronic commerce and protect consumers. Where

governmental involvement is necessary, its aim should be to support and

enforce a predictable, consistent, and simple legal environment for

commerce.

 

 

� * The Federal Government should recognize the unique qualities of the

Internet including its decentralized nature and its tradition of

bottom-up governance. Existing laws and regulations that may hinder

electronic commerce should be revised or eliminated consistent with the

unique nature of the Internet.

 

 

� * The Internet is emerging as a global marketplace. The legal

framework supporting commercial transactions on the Internet should be

governed by consistent principles across State, national, and

international borders that lead to predictable results regardless of

the jurisdiction in which a particular buyer or seller resides.

 

 

� I also direct the relevant agencies as identified in "A Framework For

Global Electronic Commerce" to pursue the following policies:

 

 

� 1. I direct the U.S. Trade Representative to work with foreign

governments to secure agreement within the next 12 months that all

products and services delivered across the Internet will not be subject

to tariffs and that all equipment from which the Internet is built will

also not be subject to tariffs.

 

 

� 2. I direct the U.S. Trade Representative to work with foreign

governments to enforce existing agreements and secure new agreements to

make electronic commerce a seamless global marketplace. This will

include enforcing provisions of the recently concluded World Trade

Organization (WTO) Telecommunications Services Agreement; ensuring that

product testing, certification, and approval processes do not

unnecessarily restrict trade; ensuring that service providers have

nondiscriminatory access to customers worldwide; and other measures

that ensure a free flow of commerce.

 

 

� 3. I direct the Secretary of Commerce to seek the protection of

copyright in the digital environment by working to achieve ratification

in the United States and overseas within the next 12 months of the

World Intellectual Property Organization (WIPO) Copyright Treaty and

the WIPO Performances and Phonograms Treaty.

 

 

� 4. I direct the Secretary of Commerce to update and make more

efficient our system for protecting patentable innovations to meet the

needs of the fast-moving electronic age and to seek agreements with

other governments to protect patentable innovations worldwide.

 

 

� 5. I direct the Secretary of Commerce to support efforts to make the

governance of the domain name system private and competitive and to

create a contractually based self-regulatory regime that deals with

potential conflicts between domain name usage and trademark laws on a

global basis.

 

 

� 6. I direct the Secretary of the Treasury to work with State and

local governments and with foreign governments to achieve agreements

that will ensure that no new taxes are imposed that discriminate

against Internet commerce; that existing taxes should be applied in

ways that avoid inconsistent national tax jurisdictions and double

taxation; and that tax systems treat economically similar transactions

equally, regardless of whether such transactions occur through

electronic means or through more conventional channels of commerce.

 

 

� 7. I direct the Secretary of Commerce to work with the private

sector, State and local governments, and foreign governments to support

the development, both domestically and internationally, of a uniform

commercial legal framework that recognizes, facilitates, and enforces

electronic transactions worldwide. I further direct the Secretary of

Commerce within the next 12 months to seek to gain agreement with the

private sector, State and local governments, and foreign governments,

both domestically and internationally, on common approaches for

authentication of electronic transactions through technologies such as

digital signatures.

 

 

� 8. I direct the Secretary of Commerce and the Director of the Office

of Management and Budget to encourage private industry and privacy

advocacy groups to develop and adopt within the next 12 months

effective codes of conduct, industry developed rules, and technological

solutions to protect privacy on the Internet consistent with the

Privacy Principles issued by the Information Infrastructure Task Force

(IITF) Privacy Working Group. I further direct the Director of the OMB

to develop recommendations on the appropriate role of government

consistent with "A Framework for Global Electronic Commerce." I further

direct the Secretary and the Director to ensure that means are

developed to protect the privacy of children.

 

 

� 9. I direct the Secretary of Commerce to encourage the development

and adoption within the next 12 months by industry of easy to use and

effective rating systems and filtering technologies that empower

parents, teachers, and other Internet users to block content that is

inappropriate for children.

 

 

� 10. I direct the Secretary of Commerce to support private sector

development of technical standards for the Internet and the U.S. Trade

Representative to oppose efforts by foreign governments to impose

standards or to use standards for electronic commerce as non-tariff

trade barriers.

 

 

� 11. I direct the Secretary of the Treasury to cooperate with foreign

governments to monitor newly developing experiments in electronic

payment systems; to oppose attempts by governments to establish

inflexible and highly prescriptive regulations and rules that might

inhibit the development of new systems for electronic payment; and as

electronic payment systems develop, to work closely with the private

sector in order to keep apprised about policy development and ensure

that governmental activities flexibly accommodate the needs of the

emerging marketplace.

 

 

� 12. I direct all executive departments and agencies to promote

efforts domestically and internationally to make the Internet a secure

environment for commerce. This includes ensuring secure and reliable

telecommunications networks; ensuring an effective means for protecting

the information systems attached to those networks; ensuring an

effective means for authenticating and guaranteeing confidentiality of

electronic information to protect data from unauthorized use; and

providing information so that Internet users become well-trained and

understand how to protect their systems and their data.

 

 

� 13. I direct the Administrator of General Services to move the

Federal Government into the age of electronic commerce by expanding

"GSA Advantage," its online shopping service for the Federal community

to cover four million items by 12 months from now.

 

 

� I am asking the Vice President to lead an interagency group

coordinating the U.S. Government's electronic commerce strategy.

Further, I am directing that executive department and agency heads

report back to the Vice President and me through this interagency group

every 6 months on their progress in meeting the terms of this

directive.

 

 

� 1 White House correction.

 

 

� William J. Clinton