I 

111TH CONGRESS 

2D SESSION H. R. 5178 

To amend the Internal Revenue Code to reduce tobacco smuggling, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 29, 2010 

Mr. DOGGETT (for himself, Mr. LEVIN, Mr. WAXMAN, Mr. WEINER, Mr. 

GEORGE MILLER of California, Mr. VAN HOLLEN, Mr. PASCRELL, Mr. 

LEWIS of Georgia, Mr. MCDERMOTT, Mr. DAVIS of Illinois, Mr. KIND, 

Mr. BLUMENAUER, Ms. LINDA T. SA ́NCHEZ of California, Mr. STARK, 

Ms. SCHWARTZ, Mr. THOMPSON of California, Ms. GINNY BROWN-WAITE

of Florida, Ms. DELAURO, Ms. ESHOO, Mr. ISRAEL, Ms. JACKSON LEE

of Texas, Ms. KILPATRICK of Michigan, Mr. LIPINSKI, Mrs. MCCARTHY

of New York, Mr. SNYDER, Ms. SUTTON, Mr. WALZ, Mr. WELCH, Ms. 

WOOLSEY, Mr. NADLER of New York, Mr. BERMAN, Mr. LANGEVIN, Ms. 

DEGETTE, Mrs. MALONEY, Mr. GENE GREEN of Texas, Mr. HINCHEY, 

Ms. LEE of California, Mr. DEFAZIO, Mr. DELAHUNT, Mr. RUSH, Mr. 

MARKEY of Massachusetts, Mr. CUMMINGS, Mr. FILNER, Ms. ZOE

LOFGREN of California, Ms. MATSUI, Mr. MEEKS of New York, Mr. 

PLATTS, Ms. EDDIE BERNICE JOHNSON of Texas, Mr. PIERLUISI, Mr. 

PALLONE, Mrs. CAPPS, Mr. HOLT, Mr. SMITH of New Jersey, Mr. WU, 

Mr. SHERMAN, Mr. BRALEY of Iowa, Mr. ELLISON, Mr. HARE, Mr. 

HINOJOSA, Mr. HONDA, Ms. CLARKE, Mr. KUCINICH, Mr. MATHESON, 

Ms. SLAUGHTER, Mr. TIERNEY, Mr. GRAYSON, Mr. SERRANO, Ms. WATERS, Mr. BISHOP of New York, Ms. KAPTUR, Ms. WATSON, Mrs. DAVIS

of California, Mr. GRIJALVA, Mr. FARR, Ms. LORETTA SANCHEZ of California, Mr. CARNAHAN, Mr. COHEN, Mrs. NAPOLITANO, Mr. CONNOLLY

of Virginia, Mr. GUTIERREZ, Mr. SIRES, Ms. BALDWIN, Mr. OLVER, Mr. 

PAYNE, Ms. RICHARDSON, Ms. ROYBAL-ALLARD, Mrs. LOWEY, Mr. 

MCGOVERN, Ms. EDWARDS of Maryland, Mr. LOEBSACK, Ms. 

SCHAKOWSKY, Mr. FRANK of Massachusetts, Mr. ROTHMAN of New Jersey, Mr. ANDREWS, Mr. RYAN of Ohio, Ms. TSONGAS, Mr. ACKERMAN, 

Ms. HIRONO, Mr. OBERSTAR, Mr. CAPUANO, Mr. LYNCH, Mr. SARBANES, 

Ms. WASSERMAN SCHULTZ, Ms. NORTON, Mr. ARCURI, Mr. JACKSON of 

Illinois, Ms. KILROY, Mr. SESTAK, Mr. KENNEDY, Mr. HALL of New 

York, Mr. HIMES, Mr. TONKO, Mr. MORAN of Virginia, Mrs. 

DAHLKEMPER, Ms. HARMAN, Mr. MOORE of Kansas, Mr. BAIRD, Mr. 

SCHRADER, and Mr. GARAMENDI) introduced the following bill; which 

was referred to the Committee on Ways and Means 


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A BILL 

To amend the Internal Revenue Code 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 2010’’ 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 

Sec. 101. Amendment of 1986 code. 

Sec. 102. Machines used to manufacture or package cigarettes or other tobacco 

products. 

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. Definitions. 

Sec. 111. Conforming amendments. 

Sec. 112. Effective date. 

TITLE II—IMPORT FRAUD 

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

papers and tubes by fraudulent means. 


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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 CIGARETTES OR OTHER TOBACCO PROD13 UCTS. 

14 (a) IN GENERAL.—Section 5762 (relating to criminal 

15 penalties) is amended— 

16 (1) by redesignating subsection (b) as sub17 section (c), and 

18 (2) by inserting after subsection (a) the fol19 lowing new subsection: 

20 ‘‘(b) MACHINES USED TO MANUFACTURE, PROCESS, 

21 OR PACKAGE CIGARETTES OR OTHER TOBACCO PROD22 UCTS.— 

23 ‘‘(1) SALE, LEASE, DELIVERY OF MANUFAC24 TURING MACHINES TO LICENSED PERSONS.—Any toVerDate Mar 15 2010 16:26 Apr 30, 2010 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5178.IH H5178

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1 bacco production machine may be sold, leased, im2 ported, or delivered only to— 

3 ‘‘(A) persons— 

4 ‘‘(i) lawfully engaged in— 

5 ‘‘(I) the sale, lease, or delivery of 

6 such machines, 

7 ‘‘(II) the manufacture or proc8 essing of tobacco products, or 

9 ‘‘(III) the application of unique 

10 identification markings onto tobacco 

11 product packages pursuant to section 

12 5723, and 

13 ‘‘(ii) that have all Federal and State 

14 permits, registrations, and licenses re15 quired to engage in such activities, or 

16 ‘‘(B) in the case of a machine which is 

17 meant and expected to be used by an individual 

18 to make tobacco products for his or her own 

19 personal use, such an individual. 

20 ‘‘(2) SALE, LEASE, DELIVERY OF MACHINES TO

21 PERSONS ENGAGED IN ILLEGAL MANUFACTURE OF

22 CONTRABAND.—No tobacco production machine 

23 shall knowingly be manufactured for or be (directly 

24 or indirectly) sold, leased, delivered, imported, or 

25 otherwise made available to any person engaged in 


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1 the illegal manufacture, distribution, or sale of coun2 terfeit or contraband tobacco products, unique iden3 tification markings, or other tax-payment indicia. 

4 ‘‘(3) RENDERING UNUSED MACHINES INOPER5 ABLE.—Any tobacco production machine that is no 

6 longer being used as such shall be made irreparably 

7 inoperable for such use before being disposed of or 

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

9 to any such machines being kept solely for display 

10 or for historical purposes. 

11 ‘‘(4) RECORDS.— 

12 ‘‘(A) IN GENERAL.—Any person leasing, 

13 importing, exporting, or delivering a tobacco 

14 production machine shall maintain and keep 

15 records relating to any transfers or deliveries of 

16 the machine, including the name, address, other 

17 contact information, and any permit, registra18 tion, or license number of the person receiving 

19 delivery of the machine, or to whom the ma20 chine is leased or otherwise transferred, as the 

21 case may be. 

22 ‘‘(B) 5-YEAR HOLDING PERIOD FOR

23 RECORDS.—Any record required to be main24 tained and kept under subparagraph (A) shall 

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


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1 first date such record is required to be so main2 tained and kept. 

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

4 records shall be made available to the Secretary 

5 and other Federal and State government law 

6 enforcement officials for inspection and audit 

7 upon request. 

8 ‘‘(D) SAFE HARBOR.—An ordinary com9 mercial record or invoice shall satisfy the re10 quirements of this paragraph if such record de11 scribes the transaction and the related machine 

12 and provides the date of the transaction and 

13 the name, contact information, and any permit, 

14 registration, or license number of all parties to 

15 the transaction or acting as agents for those 

16 parties in regard to the transaction. 

17 ‘‘(5) TOBACCO PRODUCTION MACHINE.—For 

18 purposes of this subsection, the term ‘tobacco pro19 duction machine’ means any machine (or component 

20 integral to the operation of such a machine) used to 

21 manufacture, process, or package tobacco products 

22 or to apply unique identification markings to pack23 ages of tobacco products. 

24 ‘‘(6) VIOLATIONS.— 


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

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

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

4 an amount equal to 3 times the fair market 

5 value of the tobacco product machine involved 

6 (whichever is greater), or imprisoned not more 

7 than five years, or both. 

8 ‘‘(B) RECORDKEEPING.—Whoever know9 ingly violates paragraph (4) shall, for each of10 fense, be fined not more than $10,000.’’. 

11 (b) CONFORMING AMENDMENT.—Subsection (c) of 

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

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

14 (c) EFFECTIVE DATE.—The amendment made by 

15 this section shall apply to sales, leases, and transfers more 

16 than 6 months after the date of the enactment of this Act. 

17 SEC. 103. IMPROVED MARKING AND LABELING. 

18 (a) IN GENERAL.—Section 5723 (relating to pack19 ages, marks, labels, and notices) is amended— 

20 (1) by striking ‘‘, if any,’’ in subsection (b), 

21 (2) by adding at the end of subsection (b) the 

22 following: ‘‘Such marks, labels, and notices shall in23 clude marks and notices relating to the following: 

24 ‘‘(1) GENERAL REQUIREMENTS FOR DOMESTIC

25 MARKET.—Each person who is a manufacturer or 


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1 importer of tobacco products shall (in accordance 

2 with final regulations promulgated by the Secretary) 

3 ensure that, before the product leaves the person’s 

4 custody, a unique identification marking is affixed to 

5 or forms part of each package of tobacco product 

6 manufactured or imported by such person for sale or 

7 distribution. To facilitate efficient tracking and trac8 ing of tobacco products through the distribution sys9 tem, all manufacturers or importers of tobacco prod10 ucts shall, in addition to such unique identification 

11 marking, also, in accordance with regulations pre12 scribed by the Secretary, ensure that unique identi13 fication markings are affixed to or form part of ag14 gregate packing modes (such as cartons, cases, and 

15 master cases for cigarettes). The Secretary shall de16 termine the size, location, and methods for such 

17 markings. The Secretary shall establish regulations 

18 requiring that all persons within the distribution 

19 chain, up to but not including the ultimate retailer, 

20 utilize the unique identification markings on aggre21 gate packing modes to facilitate the tracking and 

22 tracing of tobacco product through the distribution 

23 system. 

24 ‘‘(2) MARKING REQUIREMENTS FOR EX25 PORTS.—A unique identification marking shall be afVerDate Mar 15 2010 16:26 Apr 30, 2010 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5178.IH H5178

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1 fixed to or form part of each package of tobacco 

2 product that is exported, or sold for export, that dis3 tinguishes it from those products intended for dis4 tribution or sale within the United States. The Sec5 retary shall by regulation prescribe the size, location, 

6 and other characteristics of such marking, and it 

7 may contain a serial number that is assigned to the 

8 country of export. 

9 ‘‘(3) AUTHORIZATION OF FEDERAL UNIQUE

10 IDENTIFICATION MARKING.—Not later than 1 year 

11 after the date of the enactment of the Smuggled To12 bacco Prevention Act of 2010, the Secretary shall by 

13 regulation require the use of a unique identification 

14 marking on all products subject to tax under this 

15 chapter.’’, and 

16 (3) by adding at the end the following new sub17 section: 

18 ‘‘(f) UNIQUE IDENTIFICATION MARKING.— 

19 ‘‘(1) IN GENERAL.—No tobacco product may be 

20 sold, offered for sale, distributed, or otherwise deliv21 ered for final sale to any consumer in the United 

22 States unless the unique identification marking that 

23 meets the requirements of this section (and any reg24 ulations prescribed thereunder) is affixed to or forms 

25 part of the package in which it is contained. No perVerDate Mar 15 2010 16:26 Apr 30, 2010 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5178.IH H5178

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1 son shall deliver or mail tobacco products unless the 

2 tax imposed by this chapter with respect to such 

3 product has been paid and the unique identification 

4 marking required under this section is affixed to or 

5 forms part of the package containing such product. 

6 ‘‘(2) SYSTEM SPECIFICATIONS.— 

7 ‘‘(A) The Secretary shall design such sys8 tem to coordinate and avoid interference with 

9 State and local tax stamps and markings, facili10 tate collection of the tax imposed by this chap11 ter, impede contraband tobacco trafficking, 

12 minimize counterfeit marking, allow for more 

13 effective tracking and tracing of tobacco prod14 ucts, facilitate the enforcement of related Fed15 eral laws, and utilize such available technology 

16 as may promote the purposes of this chapter. 

17 ‘‘(B) The Secretary shall prescribe the 

18 method and manner in which such unique iden19 tification markings are to be distributed, pur20 chased, and applied to or made part of tobacco 

21 product packages, and may provide for the can22 cellation of such markings. 

23 ‘‘(C) The unique identification marking 

24 must provide the following information: 


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1 ‘‘(i) The denominated value of the 

2 marking. 

3 ‘‘(ii) A unique serial number or track4 ing code. 

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

6 person purchasing the marking (and, if dif7 ferent, of the person ensuring the marking 

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

9 ‘‘(iv) The date the marking was pur10 chased and when it was affixed to or made 

11 part of the package. 

12 ‘‘(v) The name and address of the 

13 first unrelated person purchasing or other14 wise receiving the tobacco product from 

15 the person who ensures the marking is af16 fixed to or made part of the package and 

17 the date of such purchase or transfer. 

18 ‘‘(vi) Such other information as the 

19 Secretary may prescribe to carry out the 

20 purposes of this chapter. 

21 ‘‘(D) The information described in sub22 paragraph (C) shall, to the extent practicable— 

23 ‘‘(i) be cryptographically encrypted, 

24 and 


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

2 scanning device (or similar device) to be 

3 utilized by law enforcement officials at the 

4 time and place of inspection, or 

5 ‘‘(II) be otherwise accessible remotely 

6 at such time and place. 

7 ‘‘(E) Tax reporting information shall be 

8 held on a secure government-controlled data9 base to monitor tobacco production and for 

10 tracking and tracing the product from the point 

11 of production through the supply chain to the 

12 retailer. 

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

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

15 person other than a related person within the mean16 ing of section 267(b) or 707(b)(1).’’. 

17 (b) DEFINITIONS.—Section 5723, as amended by 

18 subsection (a), is amended by adding at the end the fol19 lowing new subsections: 

20 ‘‘(g) PACKAGE DEFINED.—For purposes of this sec21 tion, the term ‘package’ means the innermost sealed con22 tainer visible from the outside of the individual container 

23 irrespective of the material from which such container is 

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1 facturer and in which such tobacco product is offered for 

2 sale to a member of the general public. 

3 ‘‘(h) UNIQUE IDENTIFICATION MARKING DE4 FINED.—For purposes of this section, the term ‘unique 

5 identification marking’ means a device in such design and 

6 denomination as the Secretary authorizes by regulation 

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

8 product as evidence that the tax imposed by this chapter 

9 is paid. Such markings shall contain overt security fea10 tures for public authentication and covert security features 

11 embedding a unique, secure, encrypted identifier onto the 

12 marking, enabling law enforcement authentication, pro13 duction control, and tracking and tracing of the product 

14 bearing the marking.’’. 

15 (c) REGULATIONS.—The Secretary of the Treasury 

16 shall consult with the Secretary of Health and Human 

17 Services as may be appropriate to carry out the purposes 

18 of subsection (f), and paragraphs (1), (2), and (3) of sub19 section (b), of section 5723 of the Internal Revenue Code 

20 of 1986. 


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1 SEC. 104. WHOLESALERS AND MANUFACTURERS, IMPORT2 ERS, AND SELLERS OF TOBACCO PRODUC3 TION MACHINES REQUIRED TO HAVE PER4 MIT. 

5 (a) WHOLESALERS.—Section 5712 (relating to appli6 cation for permit) is amended by inserting ‘‘, wholesaler,’’ 

7 after ‘‘manufacturer’’. 

8 (b) MANUFACTURERS, IMPORTERS, AND SELLERS OF

9 TOBACCO PRODUCTION MACHINES.—Section 5712 is 

10 amended by striking ‘‘or as an export warehouse propri11 etor’’ and inserting ‘‘, as an export warehouse proprietor, 

12 or as a manufacturer, seller, or importer of tobacco pro13 duction machines (as defined in section 5762(b)(5))’’. 

14 SEC. 105. CONDITIONS OF PERMIT. 

15 Subsection (a) of section 5713 (relating to issuance 

16 of permit) is amended to read as follows: 

17 ‘‘(a) ISSUANCE.— 

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

19 in business as a manufacturer, wholesaler, or im20 porter of tobacco products or processed tobacco, as 

21 an export warehouse proprietor, or as a manufac22 turer, seller, or importer of tobacco production ma23 chines (as defined in section 5762(b)(5)) without a 

24 permit to engage in such business. Such permit, con25 ditioned upon compliance with this chapter and reg26 ulations issued thereunder, shall be issued in such 


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1 form and in such manner as the Secretary shall by 

2 regulation prescribe, to every person properly quali3 fied under section 5711 and 5712. Any entity grant4 ed such a permit is not eligible to provide any serv5 ices the Secretary may elect to procure to facilitate 

6 the purposes of section 5723. Permit holders shall 

7 automatically count output and register, record, and 

8 transmit the quantities measured, in the form, con9 ditions, and time limits established by the Secretary. 

10 A new permit may be required at such other time 

11 as the Secretary shall by regulation prescribe. 

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

13 issue a permit under this section unless— 

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

15 the requirements of— 

16 ‘‘(i) this chapter, 

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

18 States Code, 

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

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

21 as the ‘Jenkins Act’), 

22 ‘‘(iv) the Fair and Equitable Tobacco 

23 Reform Act of 2004, and any amendments 

24 made thereby, 


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1 ‘‘(v) the Family Smoking Prevention 

2 and Tobacco Control Act, and any amend3 ments made thereby, and 

4 ‘‘(vi) any related regulations there5 under, and 

6 ‘‘(B) the applicant certifies that the appli7 cant is in compliance with all other Federal and 

8 State laws relating to the taxation, manufac9 ture, importation, exportation, distribution, 

10 marketing, sale, or transportation of tobacco 

11 products, processed tobacco, or tobacco produc12 tion machines. 

13 ‘‘(C) the applicant identifies in the applica14 tion any violation of a law described in subpara15 graph (A) or (B) by the applicant resulting in 

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

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

18 SEC. 106. RECORDS TO BE MAINTAINED. 

19 (a) IN GENERAL.—Section 5741 (relating to records 

20 to be maintained) is amended— 

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

22 ‘‘Every manufacturer’’, 

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

24 ‘‘every importer,’’, 


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

2 ‘‘records concerning the chain of custody of the to3 bacco products (including the foreign country of 

4 final destination for packages marked for export) 

5 and the serial numbers, marks, labels, and notices 

6 required under section 5723, and such other 

7 records’’, and 

8 (4) by adding at the end the following new sub9 sections: 

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

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

12 products. Such records shall be available to the Secretary 

13 for inspection and audit. An ordinary commercial record 

14 or invoice shall satisfy the requirements of this subsection 

15 if such record shows the date of receipt, from whom to16 bacco products were received, and the quantity of tobacco 

17 products received (or, in the case of non-retail sale or de18 livery, the date of sale or delivery, to whom the tobacco 

19 products were sold or delivered, and the quantity of the 

20 tobacco products sold or delivered). The preceding provi21 sions of this subsection shall not be construed to limit or 

22 preclude other recordkeeping requirements imposed on 

23 any retailer. 

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

25 CUSTODY.—Records concerning the chain of custody and 


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

2 shall be made available to Federal and State law enforce3 ment officials for inspection and audit upon request.’’. 

4 (b) CONSULTATION WITH HEALTH AND HUMAN

5 SERVICES.—The Secretary of the Treasury shall consult 

6 with the Secretary of Health and Human Services as may 

7 be appropriate to carry out the purposes of section 5741 

8 of the Internal Revenue Code of 1986. 

9 SEC. 107. REPORTS. 

10 Section 5722 (relating to reports) is amended— 

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

12 ‘‘Every manufacturer’’, and 

13 (2) by adding at the end the following new sub14 section: 

15 ‘‘(b) REPORTS BY EXPORT WAREHOUSE PROPRI16 ETORS.— 

17 ‘‘(1) IN GENERAL.—Prior to exportation of to18 bacco products from the United States, the export 

19 warehouse proprietor shall submit a report (in such 

20 manner and form as the Secretary may by regula21 tion prescribe) to enable the Secretary to identify 

22 the shipment and assure that it reaches its intended 

23 destination. 

24 ‘‘(2) AGREEMENTS WITH FOREIGN GOVERN25 MENTS.—Notwithstanding section 6103 of this title, 


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1 the Secretary is authorized to enter into agreements 

2 with foreign governments to exchange or share infor3 mation contained in reports received from export 

4 warehouse proprietors of tobacco products if— 

5 ‘‘(A) the Secretary believes that such 

6 agreement will assist in— 

7 ‘‘(i) ensuring compliance with the pro8 visions of this chapter or regulations pro9 mulgated thereunder, or 

10 ‘‘(ii) preventing or detecting violations 

11 of the provisions of this chapter or regula12 tions promulgated thereunder, and 

13 ‘‘(B) the Secretary obtains written assur14 ances from such government that the informa15 tion will be held in confidence and used only for 

16 the purposes specified in clauses (i) and (ii) of 

17 subparagraph (A). 

18 No information may be exchanged or shared with 

19 any government that has violated such assurances.’’. 

20 SEC. 108. FRAUDULENT OFFENSES. 

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

22 amended— 

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

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

25 through (5), respectively, and 


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

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

3 equal to 3 times the amount of the tax imposed 

4 under this chapter on the tobacco product involved 

5 (whichever is greater)’’. 

6 (b) OFFENSES RELATING TO DISTRIBUTION OF TO7 BACCO PRODUCTS.— 

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

9 by section 102 of this Act) is amended— 

10 (A) by redesignating subsection (c) as sub11 section (d), and 

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

13 following new subsection: 

14 ‘‘(c) OFFENSES RELATING TO DISTRIBUTION OF TO15 BACCO PRODUCTS.—It shall be unlawful— 

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

17 manufacturer or importer of tobacco products or cig18 arette papers and tubes, as a wholesaler or an ex19 port warehouse proprietor, or as a manufacturer, 

20 seller, or importer of tobacco production machines 

21 without filing the bond and obtaining the permit 

22 where required by this chapter or regulations there23 under, 

24 ‘‘(2) for a manufacturer, importer, or whole25 saler to knowingly ship, transport, deliver, or receive 


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1 any tobacco products from or to any person other 

2 than a person who has obtained the permit required 

3 by this chapter, a retailer, or a person handling such 

4 products solely for purposes of shipment or delivery; 

5 except an importer who has obtained the permit re6 quired by this chapter may receive, from a foreign 

7 manufacturer or a foreign distributor, foreign to8 bacco products that have not previously entered the 

9 United States, 

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

11 knowingly ship, transport, sell, or deliver processed 

12 tobacco to any person other than a manufacturer of 

13 processed tobacco, a manufacturer of tobacco prod14 ucts, or an export warehouse proprietor, 

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

16 manufacturer of such tobacco products or an export 

17 warehouse proprietor authorized to receive any to18 bacco products that have previously been exported 

19 and returned to the United States) to knowingly re20 ceive any tobacco products that have previously been 

21 exported and returned to the United States, 

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

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

24 any tobacco products to any person other than the 

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1 other export warehouse proprietor, or a foreign pur2 chaser, 

3 ‘‘(6) for any person (other than a manufacturer 

4 or an export warehouse proprietor permitted under 

5 this chapter) to knowingly ship, transport, receive, 

6 or possess, for purposes of resale, any tobacco prod7 uct in packages marked pursuant to regulations 

8 issued under section 5723, other than for direct re9 turn to a manufacturer for repacking or for re-ex10 portation or to an export warehouse proprietor for 

11 re-exportation, 

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

13 warehouse proprietor, or wholesaler permitted under 

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

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

16 properly any record or report required by this chap17 ter or the regulations promulgated thereunder with 

18 the intent to defraud the United States, 

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

20 the United States, to alter, mutilate, destroy, oblit21 erate, or remove any mark or label required under 

22 this chapter upon a tobacco product held for sale, or 

23 to create, possess, or apply on any tobacco product 

24 or its packaging any counterfeit versions of any such 

25 marks or labels, and 


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

2 3,000 cigarettes in a single transaction or in a series 

3 of related transactions, or, in the case of other to4 bacco products, an equivalent quantity as deter5 mined by regulation. 

6 Any person violating any of the provisions of this sub7 section shall, upon conviction, be fined as provided in sec8 tion 3571 of title 18, United States Code, or imprisoned 

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

10 (2) CONFORMING AMENDMENT.—Section 

11 5762(d) (as so redesignated) is amended by striking 

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

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

14 5762 (as so redesignated) is amended by striking ‘‘not 

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

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

17 on the tobacco product involved (whichever is greater)’’. 

18 SEC. 109. PENALTIES. 

19 (a) IN GENERAL.— 

20 (1) Subsection (a) of section 5761 (relating to 

21 civil penalties) is amended— 

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

23 ‘‘knowingly’’, and 

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

25 ‘‘$10,000’’. 


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1 (2) Subsection (b) of section 5761 (relating to 

2 failure to pay tax) is amended by striking ‘‘5 per3 cent’’ and inserting ‘‘10 percent’’. 

4 (b) USE OF INCREASE IN PENALTIES AND FINES.— 

5 Subchapter G of chapter 52 is amended by adding at the 

6 end the following new section: 

7 ‘‘SEC. 5764. USE OF CERTAIN PENALTIES AND FINES. 

8 ‘‘(a) IN GENERAL.—There is established a separate 

9 account in the Treasury known as the ‘Anti-Contraband 

10 Tobacco Trafficking Fund’. Amounts equivalent to 50 per11 cent of the increase in revenues from criminal and civil 

12 penalties and fines collected under this chapter and attrib13 utable to title I of the Smuggled Tobacco Prevention Act 

14 of 2010 (or the amendments made thereby) shall be trans15 ferred into the Anti-Contraband Tobacco Trafficking 

16 Fund. Such amounts shall be available, as provided in ap17 propriations Acts, to the Secretary solely for the purpose 

18 of expanding government efforts and available resources

19 to enforce this chapter and other laws relating to contra20 band or illegal tobacco products. 

21 ‘‘(b) ALLOCATION OF FUNDS.—Of the respective 

22 amounts available to the Secretary under subsection (a), 

23 not less than 50 percent shall be allocated to the Federal 

24 departments and agencies that are responsible for the en25 forcement actions (including underlying investigations and 


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1 administrative and judicial proceedings) in which such 

2 penalties and fines were imposed.’’. 

3 (c) PENALTY AMOUNTS ADJUSTED FOR INFLA4 TION.—Section 5761 of such Code is amended by redesig5 nating subsection (f) as subsection (g) and inserting after 

6 subsection (e) the following new subsection: 

7 ‘‘(f) INFLATION ADJUSTMENT.— 

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

9 year beginning after 2011, the penalty dollar 

10 amounts provided under this chapter shall each be 

11 increased by an amount equal to— 

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

13 ‘‘(B) the cost-of-living adjustment deter14 mined under section 1(f)(3) for the calendar 

15 year, determined by substituting ‘calendar year 

16 2010’ for ‘calendar year 1992’ in subparagraph 

17 (B) thereof. 

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

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

20 amount shall be rounded to the next highest multiple 

21 of $10.’’. 

22 SEC. 110. DEFINITIONS. 

23 (a) EXPORT WAREHOUSE PROPRIETOR.—Subsection 

24 (i) of section 5702 (relating to definition of export ware25 house proprietor) is amended by inserting before the peVerDate Mar 15 2010 02:14 May 01, 2010 Jkt 089200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\H5178.IH H5178

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1 riod the following: ‘‘or any person engaged in the business 

2 of exporting tobacco products from the United States for 

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

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

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

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

7 other tobacco products as the Secretary shall by regulation 

8 prescribe, shall be deemed an export warehouse proprietor 

9 under this chapter’’. 

10 (b) RETAILER; WHOLESALER.—Section 5702 is 

11 amended by adding at the end the following new sub12 sections: 

13 ‘‘(p) RETAILER.—The term ‘retailer’ means any deal14 er who sells, or offers for sale, any tobacco product at re15 tail. The term ‘retailer’ includes any duty free store that 

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

17 any single transaction (or series of related transactions) 

18 3,000 or fewer of cigarettes, or an equivalent quantity of 

19 other tobacco products as the Secretary shall by regulation 

20 prescribe. 

21 ‘‘(q) WHOLESALER.—The term ‘wholesaler’ means 

22 any person engaged in the business of purchasing tobacco 

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

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

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


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1 SEC. 111. CONFORMING AMENDMENTS. 

2 (a) Section 2341 of title 18, United States Code is 

3 amended— 

4 (1) in paragraph (2), by inserting ‘‘Federal 

5 taxes, wherever found, or’’ after ‘‘payment of appli6 cable’’; and 

7 (2) in paragraph (2)(C), by inserting ‘‘in regard 

8 to State or local taxes,’’ before ‘‘a person’’. 

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

10 Code, are each amended— 

11 (1) by striking ‘‘STATE’’ in the heading there12 of; and 

13 (2) by striking ‘‘tax stamps’’ each place it ap14 pears and inserting ‘‘tax stamps or markings’’. 

15 SEC. 112. EFFECTIVE DATE. 

16 Except as otherwise provided in this title, the amend17 ments made by this title shall take effect 1 year after the 

18 date of the enactment of this Act. 

19 TITLE II—IMPORT FRAUD 

20 SEC. 201. MAXIMUM PENALTY FOR IMPORTATION OF TO21 BACCO PRODUCTS AND CIGARETTE PAPERS 

22 AND TUBES BY FRAUDULENT MEANS. 

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

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

25 (1) by striking ‘‘A fraudulent violation of sub26 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 January 1, 2011, and 

20 shall apply with respect to violations of section 592 of the 

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

22 that date. 

Æ 


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