The Trans-Pacific Partnership (TPP) levels the playing field for American workers and American businesses, leading to more Made-in-America exports and more higher-paying American jobs here at home. By cutting over 18,000 taxes different countries put on Made-in-America products, TPP makes sure our farmers, ranchers, manufacturers, service suppliers, and small businesses can compete — and win — in some of the fastest growing markets in the world. With more than 95 percent of the world’s consumers living outside our borders, TPP will significantly expand the export of Made-in-America goods and services and support American jobs

TPP will help preserve the open Internet and prevent its breakup into multiple, balkanized networks in which data flows are more expensive and more frequently blocked. The Electronic Commerce chapter will ensure the free flow of data (subject to public-interest regulation, for example to prevent spam, protect privacy, and fight cyber-crime); prevent the spread of ‘forced localization’ of technologies and servers; and help to more effectively guarantee the security and privacy of internet users. All this will help to unlock the promise of digital trade through rules that keep the Internet free and open, set digital trade rules-of-the-road, and provide the incentives and a stable framework that can nurture a healthy environment for companies and individuals as they create and use content.

Overview

Cross-Border Data and Information Flows

TPP’s Electronic Commerce chapter includes commitments ensuring that companies and consumers can access and move data freely (subject to safeguards, such as for privacy), which will help ensure free flow of the global information and data that drive the Internet and the digital economy. These commitments, along with others on market access and national treatment, combine to help prevent unreasonable restriction, such as the arbitrary blocking of websites.

Location of Computing Facilities

The chapter includes guarantees that companies will not have to build expensive and unnecessarily redundant data centers in every market they seek to serve. The economies of scale of the digital economy, where capitaland energy-intensive data centers serve multiple countries, depend on this flexibility.

Customs Duties and Other Discriminatory Measures

The chapter prohibits the imposition of customs duties on digital products, to ensure that products distributed electronically, such as software, music, video, e-books, and games are not disadvantaged. A companion provision prevents TPP countries from favoring national producers or suppliers of such products through measures such as discriminatory taxation or outright blocking or other forms of content discrimination.

Consumer Protection and Privacy

To protect consumers, the chapter includes commitments by TPP Parties to adopt and maintain consumer protection laws related to fraudulent and deceptive commercial activities online. It also includes commitments ensuring that privacy and other consumer protections can be enforced in TPP markets. Governments have different ways of implementing privacy protections, and TPP recognizes that diversity and promotes interoperability between diverse legal regimes. The chapter also includes provisions requiring Parties to have measures to stop unsolicited commercial electronic messages (spam).

Facilitating Electronic Transactions and Trading

To facilitate digital trade, the chapter includes provisions encouraging TPP countries to promote paperless trading between businesses and the government, such as customs forms being put in electronic format; as well as providing for electronic authentication and signatures for commercial transactions.

Software

The chapter prohibits requirements that force suppliers to share valuable software source code with foreign governments or commercial rivals when entering a TPP market.

Cooperation

The chapter ensures close cooperation among TPP Parties to help businesses, especially small- and medium-sized enterprises, overcome obstacles and take advantage of electronic commerce. It also encourages cooperation on policies regarding personal information protection, online consumer protection, cybersecurity threats and cybersecurity capacity, especially given the rise of cyber-attacks and the global diffusion of malware.

New Features

As the Internet plays an increasingly vital role in global commerce, TPP will establish a framework of rules for digital trade in the Asia-Pacific that will benefit both businesses and consumers, and support U.S. economic growth, employment, and innovation. In addition to barring customs duties on digital products and building a consensus on other important commitments related to digital trade, the TPP’s Electronic Commerce chapter includes significant new elements that reflect new technological developments and address concerns regarding electronic commerce that have emerged over the past several years. These include:

  • First-ever commitments addressing the twin concerns over requirements that data be stored locally and prohibitions on the flow of data or information across borders. Together, these are among the most serious threats to an open Internet. These commitments will help guarantee that key inputs to digital trade are not arbitrarily impeded by governments, and reduce the threat of “balkanization” of the Internet.
  • Ensuring that consumers have access to an open Internet, while requiring online consumer protection laws and ensuring that privacy and other consumer protections can be enforced.
  • Encouraging cooperation of TPP countries on consumer protection, including privacy and cybersecurity.
  • First-ever commitments underscoring the need to maintain consumer protection, for measures to stop unsolicited commercial electronic messages, and to ensure that privacy protections can be enforced in order to build consumer confidence and trust in the use of the Internet.
  • Barring forced sharing of software code with governments or commercial rivals when entering a TPP market.
  • Comprehensive commitments on cooperation related to digital trade, particularly to help small- and medium-sized enterprises take advantage of digital trade.
  • First-ever commitments in an FTA on cooperation on cybersecurity threats and cybersecurity capacity, a significant problem, on which TPP countries will benefit from working collectively.

Impact

In the past six years, the world’s Internet-using population has nearly doubled from just over 1.5 billion to 3 billion, with the fastest rates of growth in developing regions like Southeast Asia. The TPP region is now home to close to 600 million Internet users, or almost one in every five global internet users. Transfers of data are rising even more rapidly: an estimated 80 terabytes of data per minute (equivalent to eight times the print content of the Library of Congress) now enters and leaves the United States, and this number grows rapidly each year as ever-faster broadband networks proliferate globally, the global fiber-optic cable network expands, and computer technologies improve.

Americans benefit from this in countless ways. An open Internet makes us more able to access ideas, products, and entertainment — whether one of the billions of “apps” downloaded onto a smartphone, one of the billions of songs, movies, games or books downloaded or streamed onto a digital device, or one of the ubiquitous and now indispensable services digital consumers and businesses around the globe use every day. America’s leadership position in the areas of IT research, the Internet industry, and entertainment makes an open Internet a vastly important asset as we export ideas, digital products, and services to the world. The United States is home to the world’s most innovative companies in the digital environment U.S. digitally-enabled service exports alone were nearly $400 billion in 2011, up from $273 billion in 2007, with small businesses in particular finding the Internet a uniquely powerful way to find customers and sell products worldwide. Over time, the Internet will help Americans take maximum advantage of our economy’s strengths in creativity and technology, enable tens of thousands of small businesses to participate in trade; and facilitate the emergence of non-traditional exporters in fields from health care to the arts and research labs.

However, the Internet is still new and there is a risk that countries could seek to regulate the digital environment in a way that jeopardizes a free and open internet. This would significantly undermine U.S. interests and innovation across the Asia-Pacific region, and would also do incalculable harm to future global growth and technological progress. That is why it is so important to ensure that these technologies remain open to new innovations, which TPP does by addressing, among other issues:

Barriers to cross-border data flows

Such data flows are the building blocks for all digital trade, and barriers to them are among the most serious impediments to the future of digital trade. Impediments to such flows affect not only technology companies, but almost every sector of the economy from manufacturing to farming and small businesses — all of which now depend on digital technology to provide the innovation and efficiency that drive economic growth.

Requirements that companies must store data locally

Such policies, which have been implemented in China and are being proposed by many other governments, undermine the architecture of the Internet, preventing the use of all “cloud” based services — from business software, to online music, e-mail, and travel services. They also affect the ability of companies, particularly small and medium-sized enterprises, to use the Internet as a global platform for delivery of goods and services. This is because small and medium-sized enterprises, which need information from customers in all of their markets, are generally unable to afford to build data centers in every market they serve. Where data localization requirements are instituted, commitments to provide access to specific services on a cross-border basis can become all but meaningless. In addition, even if a company wants to invest in a foreign market, it may still want to use its data processing facilities established in the United States or elsewhere.

TPP’s Electronic Commerce chapter, joining some of the world’s most sophisticated Internet economies with rapidly growing developing nations across four continents, will answer these concerns as the most ambitious trade policy ever designed for the Internet and electronic commerce. Resting both on America’s long-held commitment to the free flow of ideas and on the value of the future digital economy to American growth, prosperity, and employment, it will address the emerging challenges to the integrity and efficiency of the global Internet, ensuring that it remains an open space for commerce, that consumers and Internet users have confidence in regulation for privacy and security, and that electronic commerce achieves its vast future potential.

CHAPTER 14 ELECTRONIC COMMERCE

Article 14.1: Definitions

For the purposes of this Chapter:

computing facilities means computer servers and storage devices for processing or storing information for commercial use;

covered person[1] means:

(a) a covered investment as defined in Article 9.1 (Definitions);

(b) an investor of a Party as defined in Article 9.1 (Definitions), but does not include an investor in a financial institution; or

(c) a service supplier of a Party as defined in Article 10.1 (Definitions),

but does not include a “financial institution” or a “cross-border financial service supplier of a Party” as defined in Article 11.1 (Definitions);

digital product means a computer programme, text, video, image, sound recording or other product that is digitally encoded, produced for commercial sale or distribution, and that can be transmitted electronically;[2][3]

electronic authentication means the process or act of verifying the identity of a party to an electronic communication or transaction and ensuring the integrity of an electronic communication;

electronic transmission or transmitted electronically means a transmission made using any electromagnetic means, including by photonic means;

personal information means any information, including data, about an identified or identifiable natural person;

trade administration documents means forms issued or controlled by a Party that must be completed by or for an importer or exporter in connection with the import or export of goods; and

unsolicited commercial electronic message means an electronic message which is sent for commercial or marketing purposes to an electronic address, without the consent of the recipient or despite the explicit rejection of the recipient, through an Internet access service supplier or, to the extent provided for under the laws and regulations of each Party, other telecommunications service.

Article 14.2: Scope and General Provisions

1. The Parties recognise the economic growth and opportunities provided by electronic commerce and the importance of frameworks that promote consumer confidence in electronic commerce and of avoiding unnecessary barriers to its use and development.

2. This Chapter shall apply to measures adopted or maintained by a Party that affect trade by electronic means.

3. This Chapter shall not apply to:

(a) government procurement; or

(b) information held or processed by or on behalf of a Party, or measures related to such information, including measures related to its collection.

4. For greater certainty, measures affecting the supply of a service delivered

or performed electronically are subject to the obligations contained in the relevant provisions of Chapter 9 (Investment), Chapter 10 (Cross-Border Trade in Services) and Chapter 11 (Financial Services), including any exceptions or non- conforming measures set out in this Agreement that are applicable to those obligations.

5. For greater certainty, the obligations contained in Article 14.4 (Non- Discriminatory Treatment of Digital Products), Article 14.11 (Cross-Border Transfer of Information by Electronic Means), Article 14.13 (Location of Computing Facilities) and Article 14.17 (Source Code) are:

(a) subject to the relevant provisions, exceptions and non-conforming measures of Chapter 9 (Investment), Chapter 10 (Cross-Border Trade in Services) and Chapter 11 (Financial Services); and

(b) to be read in conjunction with any other relevant provisions in this Agreement.

6. The obligations contained in Article 14.4 (Non-Discriminatory Treatment of Digital Products), Article 14.11 (Cross-Border Transfer of Information by Electronic Means) and Article 14.13 (Location of Computing Facilities) shall not apply to the non-conforming aspects of measures adopted or maintained in accordance with Article 9.12 (Non-Conforming Measures), Article 10.7 (Non- Conforming Measures) or Article 11.10 (Non-Conforming Measures).

Article 14.3: Customs Duties

1. No Party shall impose customs duties on electronic transmissions, including content transmitted electronically, between a person of one Party and a person of another Party.

2. For greater certainty, paragraph 1 shall not preclude a Party from imposing internal taxes, fees or other charges on content transmitted electronically, provided that such taxes, fees or charges are imposed in a manner consistent with this Agreement.

Article 14.4: Non-Discriminatory Treatment of Digital Products

1. No Party shall accord less favourable treatment to digital products created, produced, published, contracted for, commissioned or first made available on commercial terms in the territory of another Party, or to digital products of which the author, performer, producer, developer or owner is a person of another Party, than it accords to other like digital products.[4]

2. Paragraph 1 shall not apply to the extent of any inconsistency with the rights and obligations in Chapter 18 (Intellectual Property).

3. The Parties understand that this Article does not apply to subsidies or grants provided by a Party, including government-supported loans, guarantees and insurance.

4. This Article shall not apply to broadcasting.

Article 14.5: Domestic Electronic Transactions Framework

1. Each Party shall maintain a legal framework governing electronic transactions consistent with the principles of the UNCITRAL Model Law on Electronic Commerce 1996 or the United Nations Convention on the Use of Electronic Communications in International Contracts, done at New York, November 23, 2005.

2. Each Party shall endeavour to:

(a) avoid any unnecessary regulatory burden on electronic transactions; and

(b) facilitate input by interested persons in the development of its legal framework for electronic transactions.

Article 14.6: Electronic Authentication and Electronic Signatures

1. Except in circumstances otherwise provided for under its law, a Party shall not deny the legal validity of a signature solely on the basis that the signature is in electronic form.

2. No Party shall adopt or maintain measures for electronic authentication that would:

(a) prohibit parties to an electronic transaction from mutually determining the appropriate authentication methods for that transaction; or

(b) prevent parties to an electronic transaction from having the opportunity to establish before judicial or administrative authorities that their transaction complies with any legal requirements with respect to authentication.

3. Notwithstanding paragraph 2, a Party may require that, for a particular category of transactions, the method of authentication meets certain performance standards or is certified by an authority accredited in accordance with its law.

4. The Parties shall encourage the use of interoperable electronic authentication.

Article 14.7: Online Consumer Protection

1. The Parties recognise the importance of adopting and maintaining transparent and effective measures to protect consumers from fraudulent and deceptive commercial activities as referred to in Article 16.6.2 (Consumer Protection) when they engage in electronic commerce.

2. Each Party shall adopt or maintain consumer protection laws to proscribe fraudulent and deceptive commercial activities that cause harm or potential harm to consumers engaged in online commercial activities.

3. The Parties recognise the importance of cooperation between their respective national consumer protection agencies or other relevant bodies on activities related to cross-border electronic commerce in order to enhance consumer welfare. To this end, the Parties affirm that the cooperation sought under Article 16.6.5 and Article 16.6.6 (Consumer Protection) includes cooperation with respect to online commercial activities.

Article 14.8: Personal Information Protection[5]

1. The Parties recognise the economic and social benefits of protecting the personal information of users of electronic commerce and the contribution that this makes to enhancing consumer confidence in electronic commerce.

2. To this end, each Party shall adopt or maintain a legal framework that provides for the protection of the personal information of the users of electronic commerce. In the development of its legal framework for the protection of personal information, each Party should take into account principles and guidelines of relevant international bodies.[6]

3. Each Party shall endeavour to adopt non-discriminatory practices in protecting users of electronic commerce from personal information protection violations occurring within its jurisdiction.

4. Each Party should publish information on the personal information protections it provides to users of electronic commerce, including how:

(a) individuals can pursue remedies; and

(b) business can comply with any legal requirements.

5. Recognising that the Parties may take different legal approaches to protecting personal information, each Party should encourage the development of mechanisms to promote compatibility between these different regimes. These mechanisms may include the recognition of regulatory outcomes, whether accorded autonomously or by mutual arrangement, or broader international frameworks. To this end, the Parties shall endeavour to exchange information on any such mechanisms applied in their jurisdictions and explore ways to extend these or other suitable arrangements to promote compatibility between them.

Article 14.9: Paperless Trading

Each Party shall endeavour to:

(a) make trade administration documents available to the public in electronic form; and

(b) accept trade administration documents submitted electronically as the legal equivalent of the paper version of those documents.

Article 14.10: Principles on Access to and Use of the Internet for Electronic Commerce

Subject to applicable policies, laws and regulations, the Parties recognise the benefits of consumers in their territories having the ability to:

(a) access and use services and applications of a consumer’s choice available on the Internet, subject to reasonable network management;[7]

(b) connect the end-user devices of a consumer’s choice to the Internet, provided that such devices do not harm the network; and

(c) access information on the network management practices of a consumer’s Internet access service supplier.

Article 14.11: Cross-Border Transfer of Information by Electronic Means

1. The Parties recognise that each Party may have its own regulatory requirements concerning the transfer of information by electronic means.

2. Each Party shall allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person.

3. Nothing in this Article shall prevent a Party from adopting or maintaining measures inconsistent with paragraph 2 to achieve a legitimate public policy objective, provided that the measure:

(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and

(b) does not impose restrictions on transfers of information greater than are required to achieve the objective.

Article 14.12: Internet Interconnection Charge Sharing

The Parties recognise that a supplier seeking international Internet connection should be able to negotiate with suppliers of another Party on a commercial basis. These negotiations may include negotiations regarding compensation for the establishment, operation and maintenance of facilities of the respective suppliers.

Article 14.13: Location of Computing Facilities

1. The Parties recognise that each Party may have its own regulatory requirements regarding the use of computing facilities, including requirements that seek to ensure the security and confidentiality of communications.

2. No Party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory.

3. Nothing in this Article shall prevent a Party from adopting or maintaining measures inconsistent with paragraph 2 to achieve a legitimate public policy objective, provided that the measure:

(a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and

(b) does not impose restrictions on the use or location of computing facilities greater than are required to achieve the objective.

Article 14.14: Unsolicited Commercial Electronic Messages[8]

1. Each Party shall adopt or maintain measures regarding unsolicited commercial electronic messages that:

(a) require suppliers of unsolicited commercial electronic messages to facilitate the ability of recipients to prevent ongoing reception of those messages;

(b) require the consent, as specified according to the laws and regulations of each Party, of recipients to receive commercial electronic messages; or

(c) otherwise provide for the minimisation of unsolicited commercial electronic messages.

2. Each Party shall provide recourse against suppliers of unsolicited commercial electronic messages that do not comply with the measures adopted or maintained pursuant to paragraph 1.

3. The Parties shall endeavour to cooperate in appropriate cases of mutual concern regarding the regulation of unsolicited commercial electronic messages.

Article 14.15: Cooperation

Recognising the global nature of electronic commerce, the Parties shall endeavour to:

(a) work together to assist SMEs to overcome obstacles to its use;

(b) exchange information and share experiences on regulations, policies, enforcement and compliance regarding electronic commerce, including:

(i) personal information protection;

(ii) online consumer protection, including means for consumer redress and building consumer confidence;

(iii) unsolicited commercial electronic messages;

(iv) security in electronic communications;

(v) authentication; and

(vi) e-government;

(c) exchange information and share views on consumer access to products and services offered online among the Parties;

(d) participate actively in regional and multilateral fora to promote the development of electronic commerce; and

(e) encourage development by the private sector of methods of self- regulation that foster electronic commerce, including codes of conduct, model contracts, guidelines and enforcement mechanisms.

Article 14.16: Cooperation on Cybersecurity Matters

The Parties recognise the importance of:

(a) building the capabilities of their national entities responsible for computer security incident response; and

(b) using existing collaboration mechanisms to cooperate to identify and mitigate malicious intrusions or dissemination of malicious code that affect the electronic networks of the Parties.

Article 14.17: Source Code

1. No Party shall require the transfer of, or access to, source code of software owned by a person of another Party, as a condition for the import, distribution, sale or use of such software, or of products containing such software, in its territory.

2. For the purposes of this Article, software subject to paragraph 1 is limited to mass-market software or products containing such software and does not include software used for critical infrastructure.

3. Nothing in this Article shall preclude:

(a) the inclusion or implementation of terms and conditions related to the provision of source code in commercially negotiated contracts; or

(b) a Party from requiring the modification of source code of software necessary for that software to comply with laws or regulations which are not inconsistent with this Agreement.

4. This Article shall not be construed to affect requirements that relate to patent applications or granted patents, including any orders made by a judicial authority in relation to patent disputes, subject to safeguards against unauthorised disclosure under the law or practice of a Party.

Article 14.18: Dispute Settlement

1. With respect to existing measures, Malaysia shall not be subject to dispute settlement under Chapter 28 (Dispute Settlement) regarding its obligations under Article 14.4 (Non-Discriminatory Treatment of Digital Products) and Article 14.11 (Cross-Border Transfer of Information by Electronic Means) for a period of two years after the date of entry into force of this Agreement for Malaysia.

2. With respect to existing measures, Viet Nam shall not be subject to dispute settlement under Chapter 28 (Dispute Settlement) regarding its obligations under Article 14.4 (Non-Discriminatory Treatment of Digital Products), Article 14.11 (Cross-Border Transfer of Information by Electronic Means) and Article 14.13 (Location of Computing Facilities) for a period of two years after the date of entry into force of this Agreement for Viet Nam.

[1] For Australia, a covered person does not include a credit reporting body.
[2] For greater certainty, digital product does not include a digitised representation of a financial instrument, including money.
[3] The definition of digital product should not be understood to reflect a Party’s view on whether trade in digital products through electronic transmission should be categorised as trade in services or trade in goods.
[4] For greater certainty, to the extent that a digital product of a non-Party is a “like digital product”, it will qualify as an “other like digital product” for the purposes of this paragraph.
[5] Brunei Darussalam and Viet Nam are not required to apply this Article before the date on which that Party implements its legal framework that provides for the protection of personal data of the users of electronic commerce.
[6] For greater certainty, a Party may comply with the obligation in this paragraph by adopting or maintaining measures such as a comprehensive privacy, personal information or personal data protection laws, sector-specific laws covering privacy, or laws that provide for the enforcement of voluntary undertakings by enterprises relating to privacy.
[7] The Parties recognise that an Internet access service supplier that offers its subscribers certain content on an exclusive basis would not be acting contrary to this principle.
[8] Brunei Darussalam is not required to apply this Article before the date on which it implements its legal framework regarding unsolicited commercial electronic messages.

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