II 

112TH CONGRESS 

1ST SESSION S. 1706 

To amend the Internal Revenue Code of 1986 to reduce tobacco smuggling, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 13, 2011 

Mr. LAUTENBERG (for himself, Mr. DURBIN, Mr. BLUMENTHAL, and Mr. 

HARKIN) introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to reduce 

tobacco smuggling, and for other purposes. 

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Smuggled Tobacco Prevention Act of 2011’’ or the 

6 ‘‘STOP Act’’. 

7 (b) TABLE OF CONTENTS.—The table of contents of 

8 this Act is as follows: 

Sec. 1. Short title and table of contents. 

TITLE I—AMENDMENTS TO INTERNAL REVENUE CODE OF 1986 


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Sec. 101. Amendment of 1986 code. 

Sec. 102. Machines used to manufacture or package tobacco products or processed tobacco. 

Sec. 103. Improved marking and labeling. 

Sec. 104. Wholesalers and manufacturers, importers, and sellers of tobacco production machines required to have permit. 

Sec. 105. Conditions of permit. 

Sec. 106. Records to be maintained. 

Sec. 107. Reports. 

Sec. 108. Fraudulent offenses. 

Sec. 109. Penalties. 

Sec. 110. Coordination with other government officials. 

Sec. 111. Definitions. 

Sec. 112. Conforming amendments. 

Sec. 113. Effective date. 

TITLE II—IMPORT FRAUD 

Sec. 201. Maximum penalty for importation of tobacco products and cigarette 

papers and tubes by fraudulent means. 

TITLE III—EXCLUSIONS REGARDING INDIAN TRIBES AND TRIBAL 

MATTERS 

Sec. 301. Exclusions regarding Indian Tribes and Tribal matters. 

1 TITLE I—AMENDMENTS TO IN2 TERNAL REVENUE CODE OF 

3 1986 

4 SEC. 101. AMENDMENT OF 1986 CODE. 

5 Except as otherwise expressly provided, whenever in 

6 this title an amendment or repeal is expressed in terms 

7 of an amendment to, or repeal of, a section or other provi8 sion, the reference shall be considered to be made to a 

9 section or other provision of the Internal Revenue Code 

10 of 1986. 

11 SEC. 102. MACHINES USED TO MANUFACTURE OR PACKAGE 

12 TOBACCO PRODUCTS OR PROCESSED TO13 BACCO. 

14 (a) IN GENERAL.—Section 5762 is amended— 


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1 (1) by redesignating subsection (b) as sub2 section (c), and 

3 (2) by inserting after subsection (a) the fol4 lowing new subsection: 

5 ‘‘(b) MACHINES USED TO MANUFACTURE OR PACK6 AGE TOBACCO PRODUCTS OR PROCESSED TOBACCO.— 

7 ‘‘(1) TRANSFER OF MANUFACTURING MACHINES

8 TO LICENSED PERSONS.—Any tobacco production 

9 machine may be sold, leased, imported, exported, de10 livered, or otherwise made available only to per11 sons— 

12 ‘‘(A) lawfully engaged in— 

13 ‘‘(i) the sale, lease, importation, ex14 portation, or delivery of such machines, 

15 ‘‘(ii) the manufacture or packaging of 

16 tobacco products or processed tobacco, or 

17 ‘‘(iii) the application of unique identi18 fication markings onto tobacco product or 

19 processed tobacco packages pursuant to 

20 section 5723, and 

21 ‘‘(B) that have all Federal, State, local, 

22 and Indian tribal government permits, registra23 tions, and licenses required to engage in such 

24 activities. 


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1 ‘‘(2) TRANSFER OF MACHINES TO PERSONS EN2 GAGED IN ILLEGAL MANUFACTURE OF CONTRA3 BAND.—No tobacco production machine shall know4 ingly be manufactured for or be (directly or indi5 rectly) sold, leased, imported, exported, delivered, or 

6 otherwise made available to any person engaged in 

7 the illegal manufacture, distribution, or sale of coun8 terfeit or contraband tobacco products or processed 

9 tobacco, unique identification markings, or other 

10 tax-payment indicia. 

11 ‘‘(3) RENDERING UNUSED MACHINES INOPER12 ABLE.—Any tobacco production machine that is no 

13 longer being used as such shall be made irreparably 

14 inoperable for such use before being disposed of or 

15 put to any other use. This paragraph shall not apply 

16 to any such machines being kept solely for display 

17 or for historical purposes. 

18 ‘‘(4) RECORDS.— 

19 ‘‘(A) IN GENERAL.—Any person selling, 

20 leasing, importing, exporting, delivering, or oth21 erwise making available a tobacco production 

22 machine shall maintain and keep records relat23 ing to any transfers of the machine, including 

24 the name, address, other contact information, 

25 and any permit, registration, or license number 


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1 of the person receiving delivery of the machine, 

2 or to whom the machine is otherwise trans3 ferred, as the case may be. 

4 ‘‘(B) 5-YEAR HOLDING PERIOD FOR

5 RECORDS.—Any record required to be main6 tained and kept under subparagraph (A) shall 

7 be kept for the 5-year period beginning on the 

8 first date such record is required to be so main9 tained and kept. 

10 ‘‘(C) AVAILABILITY OF RECORDS.—Such 

11 records shall be available for inspection by any 

12 internal revenue officer during business hours. 

13 ‘‘(D) SAFE HARBOR.—An ordinary com14 mercial record or invoice shall satisfy the re15 quirements of this paragraph if such record or 

16 invoice contains all of the information required 

17 under subparagraph (A). 

18 ‘‘(5) VIOLATIONS.— 

19 ‘‘(A) IN GENERAL.—Whoever knowingly 

20 violates paragraph (1), (2), or (3) shall, for 

21 each offense, be fined not more than $10,000 or 

22 an amount equal to 3 times the fair market 

23 value of the tobacco product machine involved 

24 (whichever is greater), or imprisoned not more 

25 than five years, or both. 


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1 ‘‘(B) RECORD-KEEPING.—Whoever know2 ingly violates paragraph (4) shall, for each of3 fense, be fined not more than $10,000.’’. 

4 (b) TOBACCO PRODUCTION MACHINE.—Section 5702 

5 is amended by adding at the end the following new sub6 section: 

7 ‘‘(q) TOBACCO PRODUCTION MACHINE.—The term 

8 ‘tobacco production machine’ means any machine (or com9 ponent integral to the operation of such a machine) used 

10 to manufacture or package tobacco products or processed 

11 tobacco or to apply unique identification markings or 

12 other tax-payment indicia to packages of tobacco products 

13 or processed tobacco. Such term includes any machine 

14 used to produce tobacco products for compensation, lease, 

15 or hire, or otherwise used in a commercial setting.’’. 

16 (c) CONFORMING AMENDMENT.—Subsection (c) of 

17 section 5762 (as so redesignated) is amended by striking 

18 ‘‘subsection (a)’’ and inserting ‘‘subsections (a) and (b)’’. 

19 (d) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to transfers more than 6 months 

21 after the date of the enactment of this Act. 

22 SEC. 103. IMPROVED MARKING AND LABELING. 

23 (a) IN GENERAL.—Subsection (b) of section 5723 is 

24 amended to read as follows: 

25 ‘‘(b) MARKS, LABELS, AND NOTICES.— 


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1 ‘‘(1) IN GENERAL.—Subject to paragraphs (2), 

2 (3), and (4), every package of tobacco products, 

3 processed tobacco, or cigarette papers or tubes shall, 

4 before removal, bear the marks, labels, and notices 

5 that the Secretary by regulation prescribes. 

6 ‘‘(2) MARKING REQUIREMENTS FOR DOMESTIC

7 MARKET.— 

8 ‘‘(A) IN GENERAL.—Each person who is a 

9 manufacturer or importer of tobacco products 

10 or processed tobacco shall (in accordance with 

11 regulations prescribed by the Secretary) ensure 

12 that, before any product intended for sale or 

13 distribution within the United States is re14 moved, a unique identification marking is af15 fixed to or forms part of each package of to16 bacco product or processed tobacco manufac17 tured or imported by such person for sale or 

18 distribution. 

19 ‘‘(B) MARKINGS ON INDIVIDUAL PACK20 AGES.—Any markings required to be placed on 

21 a tobacco product or processed tobacco package 

22 by this subsection shall be placed on the inner23 most sealed container visible from the outside 

24 of the individual package. For any tobacco 

25 product or processed tobacco package that conVerDate Mar 15 2010 04:09 Oct 14, 2011 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1706.IS S1706

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1 tains multiple smaller packages of tobacco prod2 ucts or processed tobacco, any markings re3 quired to be so placed on tobacco product or 

4 processed tobacco packages shall be placed on 

5 all the individual tobacco product or processed 

6 tobacco packages. 

7 ‘‘(C) MARKINGS ON AGGREGATE PACKING

8 MODES.—To facilitate efficient tracking and 

9 tracing of tobacco products or processed to10 bacco through the distribution system, all man11 ufacturers or importers of tobacco products or 

12 processed tobacco shall, in addition to such 

13 unique identification marking, also, in accord14 ance with regulations prescribed by the Sec15 retary, ensure that unique identification mark16 ings are affixed to or form part of aggregate 

17 packing modes (such as cartons, cases, and 

18 master cases for cigarettes). The Secretary 

19 shall determine the size, location, and methods 

20 for such markings. The Secretary shall estab21 lish regulations requiring that all persons with22 in the distribution chain, up to but not includ23 ing the ultimate retailer, utilize the unique 

24 identification markings on aggregate packing 

25 modes to facilitate the tracking and tracing of 


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1 tobacco products or processed tobacco through 

2 the distribution system. 

3 ‘‘(3) MARKING REQUIREMENTS FOR EX4 PORTS.—A unique identification marking shall be af5 fixed to or form part of each package of tobacco 

6 product or processed tobacco that is exported, or 

7 sold for export, that distinguishes it from those 

8 products or processed tobacco intended for sale or 

9 distribution within the United States. The Secretary 

10 shall by regulation prescribe the size, location, and 

11 other characteristics of such marking, and it may 

12 contain a serial number that is assigned to the coun13 try of export, except that no such serial number 

14 shall be required on tobacco products or processed 

15 tobacco sold at retail to consumers by duty free 

16 stores for consumption beyond the jurisdiction of the 

17 internal revenue laws of the United States. Such to18 bacco products or processed tobacco shall instead 

19 bear markings indicating the tobacco product or 

20 processed tobacco is only for duty-free sale to con21 sumers, as prescribed through regulation by the Sec22 retary, before the product or processed tobacco is re23 moved. 

24 ‘‘(4) AUTHORIZATION OF FEDERAL UNIQUE

25 IDENTIFICATION MARKING.—Not later than 3 years 


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1 after the date of the enactment of the Smuggled To2 bacco Prevention Act of 2011, the Secretary shall by 

3 regulation require the use of a unique identification 

4 marking on all products subject to tax under this 

5 chapter.’’. 

6 (b) UNIQUE IDENTIFICATION MARKING.—Section 

7 5723 is amended by adding at the end the following new 

8 subsection: 

9 ‘‘(f) UNIQUE IDENTIFICATION MARKING.— 

10 ‘‘(1) IN GENERAL.—No tobacco product or 

11 processed tobacco may be sold, offered for sale, dis12 tributed, mailed, or otherwise delivered for final sale 

13 to any consumer in the United States unless the 

14 unique identification marking that meets the re15 quirements of this section (and any regulations pre16 scribed thereunder) is affixed to or forms part of the 

17 package in which it is contained. 

18 ‘‘(2) SYSTEM SPECIFICATIONS.— 

19 ‘‘(A) The Secretary shall design such sys20 tem to coordinate and avoid interference with 

21 State, local, and Indian tribal tax stamps and 

22 markings, facilitate collection of the tax im23 posed by this chapter, impede contraband to24 bacco trafficking, minimize counterfeit marking, 

25 allow for more effective tracking and tracing of 


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1 tobacco products and processed tobacco, facili2 tate the enforcement of related Federal laws, 

3 and utilize such available technology as may 

4 promote the purposes of this chapter. 

5 ‘‘(B) The Secretary shall prescribe the 

6 method and manner in which such unique iden7 tification markings are to be distributed, pur8 chased, and applied to or made part of tobacco 

9 product and processed tobacco packages, and 

10 may provide for the cancellation of such mark11 ings. 

12 ‘‘(C) The unique identification marking 

13 must provide the following information: 

14 ‘‘(i) The denominated value of the 

15 marking. 

16 ‘‘(ii) A unique serial number or track17 ing code for each tobacco product or proc18 essed tobacco package or aggregate pack19 age. 

20 ‘‘(iii) The name and address of the 

21 person purchasing the marking (and, if dif22 ferent, of the person ensuring the marking 

23 is affixed to or made part of the package). 


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1 ‘‘(iv) The date the marking was pur2 chased and when it was affixed to or made 

3 part of the package. 

4 ‘‘(v) The name and address of the 

5 first unrelated person purchasing or other6 wise receiving the tobacco product or proc7 essed tobacco from the person who ensures 

8 the marking is affixed to or made part of 

9 the package and the date of such purchase 

10 or receipt. 

11 ‘‘(vi) Such other information as the 

12 Secretary may prescribe to carry out the 

13 purposes of this chapter. 

14 ‘‘(D) The information described in sub15 paragraph (C) shall, to the extent practicable— 

16 ‘‘(i) be cryptographically encrypted, 

17 and 

18 ‘‘(ii)(I) be readable by a portable 

19 scanning device (or similar device) to be 

20 utilized by regulatory and law enforcement 

21 officials at the time and place of inspec22 tion, or 

23 ‘‘(II) be otherwise accessible re24 motely at such time and place. 


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1 ‘‘(3) UNRELATED PERSON.—For purposes of 

2 this subsection, the term ‘unrelated person’ means a 

3 person other than a related person within the mean4 ing of section 267(b) or 707(b)(1).’’. 

5 (c) DEFINITIONS.—Section 5723, as amended by 

6 subsection (b), is amended by adding at the end the fol7 lowing new subsections: 

8 ‘‘(g) PACKAGE DEFINED.—For purposes of this sec9 tion, the term ‘package’ means a pack, box, carton, or con10 tainer of any kind or, if no other container, any wrapping 

11 (including cellophane), in which a tobacco product or proc12 essed tobacco is sold, offered for sale, distributed, or oth13 erwise delivered for final sale to any consumer. 

14 ‘‘(h) UNIQUE IDENTIFICATION MARKING DE15 FINED.—For purposes of this section, the term ‘unique 

16 identification marking’ means a device in such design and 

17 denomination as the Secretary authorizes by regulation 

18 that is affixed to or made part of a package of a tobacco 

19 product or processed tobacco. Such markings shall contain 

20 overt security features for public authentication and covert 

21 security features embedding a unique, secure, encrypted 

22 identifier onto the marking, enabling law enforcement au23 thentication, production control, and tracking and tracing 

24 of the product or processed tobacco bearing the marking.’’. 


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1 (d) REGULATIONS.—The Secretary of the Treasury 

2 shall consult with the Secretary of Health and Human 

3 Services as may be appropriate to carry out the purposes 

4 of subsection (f), and paragraphs (2), (3), and (4) of sub5 section (b), of section 5723 of the Internal Revenue Code 

6 of 1986 (as added by this section). 

7 SEC. 104. WHOLESALERS AND MANUFACTURERS, IMPORT8 ERS, AND SELLERS OF TOBACCO PRODUC9 TION MACHINES REQUIRED TO HAVE PER10 MIT. 

11 (a) WHOLESALERS.—Section 5712 is amended by in12 serting ‘‘, wholesaler,’’ after ‘‘manufacturer’’. 

13 (b) MANUFACTURERS, IMPORTERS, AND SELLERS OF

14 TOBACCO PRODUCTION MACHINES.—Section 5712 is 

15 amended by striking ‘‘or as an export warehouse propri16 etor’’ and inserting ‘‘, as an export warehouse proprietor, 

17 or as a manufacturer, seller, or importer of tobacco pro18 duction machines’’. 

19 SEC. 105. CONDITIONS OF PERMIT. 

20 (a) ISSUANCE.—Subsection (a) of section 5713 is 

21 amended to read as follows: 

22 ‘‘(a) ISSUANCE.— 

23 ‘‘(1) IN GENERAL.—A person shall not engage 

24 in business as a manufacturer, wholesaler, or im25 porter of tobacco products or processed tobacco, as 


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1 an export warehouse proprietor, or as a manufac2 turer, seller, or importer of tobacco production ma3 chines without a permit to engage in such business. 

4 Such permit, conditioned upon compliance with this 

5 chapter and regulations issued thereunder, shall be 

6 issued in such form and in such manner as the Sec7 retary shall by regulation prescribe, to every person 

8 properly qualified under sections 5711 and 5712. 

9 Any entity granted such a permit is not eligible to 

10 provide any services the Secretary may elect to pro11 cure to facilitate the purposes of section 5723. Per12 mit holders shall automatically count output and 

13 register, record, and transmit the quantities meas14 ured, in the form, conditions, and time limits estab15 lished by the Secretary. A new permit may be re16 quired at such other time as the Secretary shall by 

17 regulation prescribe. 

18 ‘‘(2) CONDITIONS.—The Secretary shall not 

19 issue a permit under this section unless— 

20 ‘‘(A) the applicant is in compliance with 

21 the requirements of— 

22 ‘‘(i) this chapter, 

23 ‘‘(ii) chapter 114 of title 18, United 

24 States Code, 


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1 ‘‘(iii) the Act of October 19, 1949 (15 

2 U.S.C. 375 et seq.; commonly referred to 

3 as the ‘Jenkins Act’), 

4 ‘‘(iv) the Fair and Equitable Tobacco 

5 Reform Act of 2004, and any amendments 

6 made thereby, 

7 ‘‘(v) the Family Smoking Prevention 

8 and Tobacco Control Act, and any amend9 ments made thereby, 

10 ‘‘(vi) the Prevent All Cigarette Traf11 ficking Act of 2009, and any amendments 

12 made thereby, and 

13 ‘‘(vii) any related regulations there14 under, 

15 as in effect on the date of the issuance of the 

16 permit, 

17 ‘‘(B) the applicant certifies that the appli18 cant is in compliance with all other Federal, 

19 State, local, and Indian tribal laws relating to 

20 the taxation, manufacture, importation, expor21 tation, distribution, marketing, sale, or trans22 portation of tobacco products, processed to23 bacco, or tobacco production machines, as in ef24 fect on the date of the issuance of the permit, 

25 and 


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1 ‘‘(C) the applicant identifies in the applica2 tion any violation of a law described in subpara3 graph (A) or (B) by the applicant resulting in 

4 a penalty under any such law during the 5-year 

5 period ending on the date of the application.’’. 

6 (b) SUSPENSION OR REVOCATION.—Subparagraph 

7 (A) of section 5713(b)(1) is amended by inserting ‘‘or any 

8 other law described in subparagraph (A) or (B) of sub9 section (a)(2)’’ after ‘‘this chapter’’. 

10 SEC. 106. RECORDS TO BE MAINTAINED. 

11 (a) IN GENERAL.—Section 5741 is amended— 

12 (1) by inserting ‘‘(a) IN GENERAL.—’’ before 

13 ‘‘Every manufacturer’’, 

14 (2) by inserting ‘‘every wholesaler,’’ after 

15 ‘‘every importer,’’, 

16 (3) by striking ‘‘such records’’ and inserting 

17 ‘‘records concerning the chain of custody of the to18 bacco products and processed tobacco (including the 

19 foreign country of final destination for packages 

20 marked for export) and the serial numbers, marks, 

21 labels, and notices required under section 5723, and 

22 such other records’’, and 

23 (4) by adding at the end the following new sub24 sections: 


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1 ‘‘(b) RETAILERS.—Retailers shall maintain records 

2 of receipt, and any non-retail sale or delivery, of tobacco 

3 products and processed tobacco. Such records shall be 

4 available to the Secretary for inspection and audit. An or5 dinary commercial record or invoice shall satisfy the re6 quirements of this subsection if such record shows the date 

7 of receipt, from whom tobacco products or processed to8 bacco were received, and the quantity of tobacco products 

9 or processed tobacco received (or, in the case of non-retail 

10 sale or delivery, the date of sale or delivery, to whom the 

11 tobacco products or processed tobacco were sold or deliv12 ered, and the quantity of the tobacco products or proc13 essed tobacco sold or delivered). To the extent the Sec14 retary determines that the records maintained by retail 

15 entities licensed pursuant to section 555(b) of the Tariff 

16 Act of 1930 (19 U.S.C. 1555(b)) satisfy the recordkeeping 

17 requirements of this section, no additional records shall 

18 be required for such entities under this section. The pre19 ceding provisions of this subsection shall not be construed 

20 to limit or preclude other recordkeeping requirements im21 posed on any retailer. 

22 ‘‘(c) RECORDS CONCERNING MARKS AND CHAIN OF

23 CUSTODY.—Records concerning the chain of custody and 

24 the marks, labels, and notices required under section 5723 


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1 shall be available for inspection by any internal revenue 

2 officer during business hours.’’. 

3 (b) CONSULTATION WITH HEALTH AND HUMAN

4 SERVICES.—The Secretary of the Treasury shall consult 

5 with the Secretary of Health and Human Services as may 

6 be appropriate to carry out the purposes of section 5741 

7 of the Internal Revenue Code of 1986. 

8 SEC. 107. REPORTS. 

9 Section 5722 is amended— 

10 (1) by inserting ‘‘(a) IN GENERAL.—’’ before 

11 ‘‘Every manufacturer’’, and 

12 (2) by adding at the end the following new sub13 section: 

14 ‘‘(b) REPORTS BY EXPORT WAREHOUSE PROPRI15 ETORS.—Prior to exportation of tobacco products or proc16 essed tobacco from the United States, the export ware17 house proprietor shall submit a report (in such manner 

18 and form as the Secretary may by regulation prescribe) 

19 to enable the Secretary to identify the shipment and as20 sure that it reaches its intended destination.’’. 

21 SEC. 108. FRAUDULENT OFFENSES. 

22 (a) IN GENERAL.—Subsection (a) of section 5762 is 

23 amended— 


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1 (1) by striking paragraph (1) and redesignating 

2 paragraphs (2) through (6) as paragraphs (1) 

3 through (5), respectively, and 

4 (2) by striking ‘‘not more than $10,000’’ and 

5 inserting ‘‘not more than $10,000 or an amount 

6 equal to 3 times the amount of the tax imposed 

7 under this chapter on the tobacco product involved 

8 (whichever is greater)’’. 

9 (b) OFFENSES RELATING TO DISTRIBUTION OF TO10 BACCO PRODUCTS, ETC.— 

11 (1) IN GENERAL.—Section 5762 (as amended 

12 by section 102 of this Act) is amended— 

13 (A) by redesignating subsection (c) as sub14 section (d), and 

15 (B) by inserting after subsection (b) the 

16 following new subsection: 

17 ‘‘(c) OFFENSES RELATING TO DISTRIBUTION OF TO18 BACCO PRODUCTS, ETC.—It shall be unlawful— 

19 ‘‘(1) for any person to engage in business as a 

20 manufacturer or importer of tobacco products, proc21 essed tobacco, or cigarette papers and tubes, as a 

22 wholesaler or an export warehouse proprietor, or as 

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1 ing the permit where required by this chapter or 

2 regulations thereunder, 

3 ‘‘(2) for a manufacturer, importer, or whole4 saler to knowingly ship, transport, deliver, or receive 

5 any tobacco products or processed tobacco from or 

6 to any person other than a person who has obtained 

7 the permit required by this chapter, a retailer, or a 

8 person handling such products or processed tobacco 

9 solely for purposes of shipment or delivery; except 

10 that an importer who has obtained the permit re11 quired by this chapter may receive, from a foreign 

12 manufacturer or a foreign distributor, foreign to13 bacco products or processed tobacco that have not 

14 previously entered the United States, 

15 ‘‘(3) for a manufacturer of processed tobacco to 

16 knowingly ship, transport, sell, or deliver processed 

17 tobacco to any person other than a manufacturer of 

18 processed tobacco, a manufacturer of tobacco prod19 ucts, or an export warehouse proprietor, 

20 ‘‘(4) for any person (other than the original 

21 manufacturer of such tobacco products or processed 

22 tobacco or an export warehouse proprietor author23 ized to receive any tobacco products or processed to24 bacco that have previously been exported and re25 turned to the United States) to knowingly receive 


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1 any tobacco products or processed tobacco that have 

2 previously been exported and returned to the United 

3 States, 

4 ‘‘(5) for any export warehouse proprietor to 

5 knowingly ship, transport, sell, or deliver for sale 

6 any tobacco products or processed tobacco to any 

7 person other than the original manufacturer of such 

8 tobacco products or processed tobacco, another ex9 port warehouse proprietor, a duty free store, or a 

10 foreign purchaser, 

11 ‘‘(6) for any person (other than a manufac12 turer, wholesaler, or an export warehouse proprietor 

13 permitted under this chapter) to knowingly ship, 

14 transport, receive, or possess, for purposes of resale, 

15 any tobacco product or processed tobacco in pack16 ages marked pursuant to regulations issued under 

17 section 5723, other than for direct return to a man18 ufacturer for repacking or for re-exportation or to 

19 an export warehouse proprietor for re-exportation, 

20 ‘‘(7) for any manufacturer, importer, export 

21 warehouse proprietor, or wholesaler permitted under 

22 this chapter to make any false entry in, to fail to 

23 make an entry in, or to knowingly fail to maintain 

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1 ter or the regulations promulgated thereunder with 

2 the intent to defraud the United States, 

3 ‘‘(8) for any person, with the intent to defraud 

4 the United States, to alter, mutilate, destroy, oblit5 erate, or remove any mark or label required under 

6 this chapter upon a tobacco product or processed to7 bacco held for sale, or to create, possess, or apply 

8 on any tobacco product or processed tobacco or its 

9 packaging any counterfeit versions of any such 

10 marks or labels, and 

11 ‘‘(9) for any person to sell at retail more than 

12 3,000 cigarettes in any single transaction (or series 

13 of related transactions), or, in the case of other to14 bacco products, an equivalent quantity as deter15 mined by regulation. 

16 Any person violating any of the provisions of this sub17 section shall, upon conviction, be fined as provided in sec18 tion 3571 of title 18, United States Code, or imprisoned 

19 for not more than 5 years, or both.’’. 

20 (2) CONFORMING AMENDMENT.—Section 

21 5762(d) (as so redesignated) is amended by striking 

22 ‘‘and (b)’’ inserting ‘‘, (b), and (c)’’. 

23 (c) OTHER OFFENSES.—Subsection (d) of section 

24 5762 (as so redesignated) is amended by striking ‘‘not 

25 more than $1,000’’ and inserting ‘‘not more than $2,500 


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1 or an amount equal to the tax imposed under this chapter 

2 on the tobacco product or processed tobacco involved 

3 (whichever is greater)’’. 

4 SEC. 109. PENALTIES. 

5 (a) IN GENERAL.— 

6 (1) Subsection (a) of section 5761 is amend7 ed— 

8 (A) by striking ‘‘willfully’’ and inserting 

9 ‘‘knowingly’’, and 

10 (B) by striking ‘‘$1,000’’ and inserting 

11 ‘‘$10,000’’. 

12 (2) Subsection (b) of section 5761 is amended 

13 by striking ‘‘5 percent’’ and inserting ‘‘10 percent’’. 

14 (b) PENALTY AMOUNTS ADJUSTED FOR INFLA15 TION.—Section 5761 is amended by redesignating sub16 section (f) as subsection (g) and inserting after subsection 

17 (e) the following new subsection: 

18 ‘‘(f) INFLATION ADJUSTMENT.— 

19 ‘‘(1) IN GENERAL.—In the case of a calendar 

20 year beginning after 2011, the penalty dollar 

21 amounts provided under this chapter shall each be 

22 increased by an amount equal to— 

23 ‘‘(A) such dollar amount, multiplied by 

24 ‘‘(B) the cost-of-living adjustment deter25 mined under section 1(f)(3) for the calendar 


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1 year, determined by substituting ‘calendar year 

2 2010’ for ‘calendar year 1992’ in subparagraph 

3 (B) thereof. 

4 ‘‘(2) ROUNDING.—If any amount as adjusted 

5 under paragraph (1) is not a multiple of $10, such 

6 amount shall be rounded to the next highest multiple 

7 of $10.’’. 

8 SEC. 110. COORDINATION WITH OTHER GOVERNMENT OF9 FICIALS. 

10 (a) IN GENERAL.—Subchapter F of chapter 52 is 

11 amended by adding at the end the following new section: 

12 ‘‘SEC. 5755. COORDINATION WITH OTHER GOVERNMENT OF13 FICIALS. 

14 ‘‘The Secretary shall make reasonable efforts to co15 ordinate with other Federal agencies and with officials of 

16 foreign, State, local, Indian tribal, and other governments 

17 to promote the purposes of this chapter, to prevent and 

18 reduce tobacco tax evasion and contraband trafficking in 

19 tobacco products and processed tobacco, to enforce settle20 ment agreements between tobacco companies and State or 

21 other governments and related laws, or for other law en22 forcement or administration purposes.’’. 

23 (b) INFORMATION SHARING.— 


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1 (1) IN GENERAL.—Paragraph (1) of section 

2 6103(o) is amended by adding at the end the fol3 lowing new subparagraph: 

4 ‘‘(C) INFORMATION SHARING FOR TO5 BACCO PRODUCT LAW ADMINISTRATION AND

6 ENFORCEMENT PURPOSES.— 

7 ‘‘(i) FEDERAL, STATE, LOCAL, AND

8 TRIBAL GOVERNMENTS.—Returns and re9 turn information with respect to taxes im10 posed by chapter 52 may be open to in11 spection by or disclosure to officers and 

12 employees of any Federal agency, the State 

13 Tax Administrators, or any other agency 

14 of any State, local, or Indian tribal govern15 ment responsible for the administration 

16 and enforcement of laws and regulations 

17 relating to tobacco products and processed 

18 tobacco, or their legal representative, solely 

19 for use in such administration and enforce20 ment, unless the Secretary determines that 

21 such disclosure would seriously impair 

22 Federal tax administration. 

23 ‘‘(ii) FOREIGN GOVERNMENTS AND

24 ORGANIZATIONS.—The Secretary shall, 

25 upon written request, disclose returns and 


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1 return information with respect to taxes 

2 imposed by chapter 52 to officers and em3 ployees of any agency of any foreign gov4 ernment, OLAF (European Anti-Fraud 

5 Office), EUROPOL, INTERPOL, or the 

6 World Customs Organization responsible 

7 for the administration and enforcement of 

8 laws and regulations relating to tobacco 

9 products and processed tobacco, or their 

10 legal representative, solely for use in such 

11 administration and enforcement, if the 

12 Secretary obtains written assurances from 

13 such government or organization that the 

14 information will be held in confidence and 

15 used only for such use. No return or re16 turn information shall be disclosed under 

17 this clause if the Secretary determines that 

18 such disclosure would seriously impair 

19 Federal tax administration. 

20 ‘‘(iii) PUBLIC INFORMATION.—The 

21 identity and business address of those per22 sons that have a valid permit, pursuant to 

23 chapter 52, to engage in business as a 

24 manufacturer, wholesaler, or importer of 

25 tobacco products or processed tobacco, as 


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1 an export warehouse proprietor, or as a 

2 manufacturer, seller, or importer of to3 bacco production machines (as defined in 

4 section 5702(q)) shall be made publicly 

5 available at such time and in such manner 

6 as the Secretary may prescribe.’’. 

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Subsection (a) of section 6103 is 

9 amended— 

10 (i) by striking ‘‘or any local’’ in para11 graph (2) and inserting ‘‘any local’’, 

12 (ii) by inserting ‘‘, or any agency de13 scribed in subsection (o)(1)(C)(i)’’ after 

14 ‘‘subsection (l)(7)(D)’’ in paragraph (2), 

15 (iii) by striking ‘‘or subsection (n)’’ in 

16 paragraph (3) and inserting ‘‘subsection 

17 (n), or subsection (o)(1)(C)(i)’’. 

18 (B) Paragraph (4) of section 6103(p) is 

19 amended— 

20 (i) by striking ‘‘(o)(1)(A)’’ both places 

21 it appears and inserting ‘‘(o)(1)(A) or 

22 (C)(i)’’, and 

23 (ii) by striking ‘‘(15), or (16),’’ and 

24 inserting ‘‘(15), or (16), or (o)(1)(C)(i),’’. 


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1 (C) Paragraph (2) of section 7213(a) is 

2 amended— 

3 (i) by striking ‘‘(21) or’’ and inserting 

4 ‘‘(21),’’, and 

5 (ii) by striking ‘‘or (7)’’ and inserting 

6 ‘‘or (7), or (o)(1)(C)(i)’’. 

7 (c) CLERICAL AMENDMENT.—The table of sections 

8 for subchapter F of chapter 52 is amended by adding at 

9 the end the following new item: 

‘‘Sec. 5755. Coordination with other government officials.’’. 

10 SEC. 111. DEFINITIONS. 

11 (a) EXPORT WAREHOUSE PROPRIETOR.—Subsection 

12 (i) of section 5702 is amended by inserting before the pe13 riod the following: ‘‘or any person engaged in the business 

14 of exporting tobacco products from the United States for 

15 purposes of sale or distribution. Any duty free store that 

16 sells, offers for sale, or otherwise distributes to any person 

17 in any single transaction (or series of related transactions) 

18 more than 3,000 cigarettes, or an equivalent quantity of 

19 other tobacco products as the Secretary shall by regulation 

20 prescribe, shall be deemed an export warehouse proprietor 

21 under this chapter’’. 

22 (b) RETAILER; WHOLESALER.—Section 5702, as 

23 amended by this Act, is amended by adding at the end 

24 the following new subsections: 


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1 ‘‘(r) RETAILER.—The term ‘retailer’ means any per2 son who sells, or offers for sale, any tobacco product at 

3 retail. The term ‘retailer’ includes any duty free store that 

4 sells, offers for sale, or otherwise distributes at retail in 

5 any single transaction (or series of related transactions) 

6 not more than 3,000 cigarettes, or not more than an 

7 equivalent quantity of other tobacco products as the Sec8 retary shall by regulation prescribe. 

9 ‘‘(s) WHOLESALER.—The term ‘wholesaler’ means 

10 any person engaged in the business of purchasing tobacco 

11 products for resale at wholesale, or any person acting as 

12 an agent or broker for any person engaged in the business 

13 of purchasing tobacco products for resale at wholesale.’’. 

14 SEC. 112. CONFORMING AMENDMENTS. 

15 (a) Paragraph (2)(C) of section 2341 of title 18, 

16 United States Code is amended by inserting ‘‘in regard 

17 to State, local, or Indian tribal government taxes,’’ before 

18 ‘‘a person’’. 

19 (b) Sections 2314 and 2315 of title 18, United States 

20 Code, are each amended— 

21 (1) by striking ‘‘STATE’’ in the heading there22 of; and 

23 (2) by striking ‘‘tax stamps’’ each place it ap24 pears and inserting ‘‘tax stamps or markings’’. 


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1 (c) The headings for subchapters B, C, and E of 

2 chapter 52 are each amended by inserting ‘‘, Processed 

3 Tobacco,’’ after ‘‘Products’’. 

4 (d) The items relating to subchapters B, C, and E 

5 in the table of subchapters for chapter 52 are each amend6 ed by inserting ‘‘, processed tobacco,’’ after ‘‘products’’. 

7 (e) The heading for chapter 52 is amended by insert8 ing ‘‘, PROCESSED TOBACCO,’’ after ‘‘PROD9 UCTS’’. 

10 (f) The item relating to chapter 52 in the table of 

11 chapters for subtitle E is amended by inserting ‘‘, proc12 essed tobacco,’’ after ‘‘products’’. 

13 SEC. 113. EFFECTIVE DATE. 

14 Except as otherwise provided in this title, the amend15 ments made by this title shall take effect 1 year after the 

16 date of the enactment of this Act. 

17 TITLE II—IMPORT FRAUD 

18 SEC. 201. MAXIMUM PENALTY FOR IMPORTATION OF TO19 BACCO PRODUCTS AND CIGARETTE PAPERS 

20 AND TUBES BY FRAUDULENT MEANS. 

21 (a) MAXIMUM PENALTY.—Section 592(c)(1) of the 

22 Tariff Act of 1930 (19 U.S.C. 1592(c)(1)) is amended— 

23 (1) by striking ‘‘A fraudulent violation of sub24 section (a)’’ and inserting the following: 


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1 ‘‘(A) IN GENERAL.—Except as provided in 

2 subparagraph (B), a fraudulent violation of 

3 subsection (a)’’; and 

4 (2) by adding at the end the following: 

5 ‘‘(B) TOBACCO PRODUCTS AND CIGARETTE

6 PAPERS AND TUBES.—In the case of importa7 tion of tobacco products and cigarette papers 

8 and tubes subject to tax under chapter 52 of 

9 the Internal Revenue Code of 1986, a fraudu10 lent violation of subsection (a) is punishable by 

11 a civil penalty in an amount not to exceed the 

12 sum of— 

13 ‘‘(i) the domestic value of the mer14 chandise, and 

15 ‘‘(ii) four times the amount of Federal 

16 excise tax that could be imposed on the 

17 merchandise, if applicable.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 subsection (a) shall take effect on the date which is 90 

20 days after the date of the enactment of this Act, and shall 

21 apply with respect to violations of section 592 of the Tariff 

22 Act of 1930 (as so amended) that occur on or after that 

23 date. 


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1 TITLE III—EXCLUSIONS RE2 GARDING INDIAN TRIBES AND 

3 TRIBAL MATTERS 

4 SEC. 301. EXCLUSIONS REGARDING INDIAN TRIBES AND 

5 TRIBAL MATTERS. 

6 (a) IN GENERAL.—Nothing in this Act or the amend7 ments made by this Act shall be construed to amend, mod8 ify, or otherwise affect— 

9 (1) any agreements, compacts, or other inter10 governmental arrangements between any State or 

11 local government and any government of an Indian 

12 tribe relating to the collection of taxes on tobacco 

13 products sold in Indian country; 

14 (2) any State laws that authorize or otherwise 

15 pertain to any such intergovernmental arrangements 

16 or create special rules or procedures for the collec17 tion of State, local, or tribal taxes on tobacco prod18 ucts sold in Indian country; 

19 (3) any limitations under Federal or State law, 

20 including Federal common law and treaties, on 

21 State, local, and tribal tax and regulatory authority 

22 with respect to the sale, use, or distribution of to23 bacco products or processed tobacco by or to Indian 

24 tribes, tribal members, tribal enterprises, or in In25 dian country; 


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1 (4) any Federal law, including Federal common 

2 law and treaties, regarding State jurisdiction, or 

3 lack thereof, over any Indian tribe, tribal member, 

4 tribal enterprise, Indian reservations, or other land 

5 held by the United States in trust for one or more 

6 Indian tribes; or 

7 (5) any State or local government authority to 

8 bring enforcement actions against persons located in 

9 Indian country. 

10 (b) COORDINATION OF LAW ENFORCEMENT.—Noth11 ing in this Act or the amendments made by this Act (other 

12 than the amendments relating to section 6103 of the In13 ternal Revenue Code of 1986) shall be construed to inhibit 

14 or otherwise affect any coordinated law enforcement effort 

15 by 1 or more States or other jurisdictions, including In16 dian tribes, through interstate compact or otherwise, 

17 that— 

18 (1) provides for the administration of tobacco 

19 product laws or laws pertaining to interstate sales or 

20 other sales of tobacco products or processed tobacco; 

21 (2) provides for the seizure of tobacco products, 

22 processed tobacco, or other property related to a vio23 lation of such laws; or 

24 (3) establishes cooperative programs for the ad25 ministration of such laws. 


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1 (c) TREATMENT OF STATE AND LOCAL GOVERN2 MENTS.—Nothing in this Act or the amendments made 

3 by this Act shall be construed to authorize, deputize, or 

4 commission States or local governments as instrumental5 ities of the United States. 

6 (d) ENFORCEMENT WITHIN INDIAN COUNTRY.— 

7 Nothing in this Act or the amendments made by this Act 

8 shall prohibit, limit, or restrict enforcement by the Attor9 ney General of the United States of this Act or an amend10 ment made by this Act within Indian country. 

11 (e) AMBIGUITY.—Any ambiguity between the lan12 guage of this section or its application and any other pro13 vision of this Act shall be resolved in favor of this section. 

14 (f) DEFINITIONS.—In this section— 

15 (1) the term ‘‘Indian country’’ has the meaning 

16 given that term in section 1151 of title 18, United 

17 States Code; 

18 (2) the term ‘‘tribal enterprise’’ means any 

19 business enterprise, regardless of whether incor20 porated or unincorporated under Federal or tribal 

21 law, of an Indian tribe or group of Indian tribes; 

22 (3) the term ‘‘Indian reservation’’ has the 

23 meaning given that term in section 168(j)(6) of the 

24 Internal Revenue Code of 1986; 


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1 (4) the term ‘‘Indian tribe’’ has the meaning 

2 given that term in section 4(e) of the Indian Self3 Determination and Education Assistance Act (25 

4 U.S.C. 450b(e)); and 

5 (5) the terms ‘‘tobacco products’’ and ‘‘proc6 essed tobacco’’ have the meanings given such terms 

7 by section 5702 of the Internal Revenue Code of 

8 1986. 

Æ 


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