II

106TH CONGRESS

2D SESSION S. 2493

To amend the Internal Revenue Code of 1986 to deter the smuggling of

tobacco products into the United States, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 2, 2000

Mr. LAUTENBERG 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 deter the

smuggling of tobacco products into the United States,

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.

4 This Act may be cited as the ‘‘Tobacco Smuggling

5 Eradication Act of 2000’’.
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1 TITLE I—AMENDMENTS TO IN2 TERNAL REVENUE CODE OF

3 1986

4 SEC. 101. AMENDMENT OF 1986 CODE.

5 Whenever in this title an amendment or repeal is ex6 pressed in terms of an amendment to, or repeal of, a sec7 tion or other provision, the reference shall be considered

8 to be made to a section or other provision of the Internal

9 Revenue Code of 1986.

10 SEC. 102. IMPROVED MARKING AND LABELING.

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

12 (relating to marks, labels, and notices) is amended—

13 (1) by striking ‘‘, if any,’’ and

14 (2) by adding at the end the following: ‘‘Such

15 marks, labels, and notices shall include marks and

16 notices relating to the following:

17 ‘‘(1) IDENTIFICATION.—The Secretary shall

18 promulgate regulations that require each manufac19 turer or importer of tobacco products to legibly print

20 a unique serial number on all packages of tobacco

21 products manufactured or imported for sale or dis22 tribution. Such serial number shall be designed to

23 enable the Secretary to identify the manufacturer or

24 importer of the product, and the location and date
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1 of manufacture or importation. The Secretary shall

2 determine the size and location of the serial number.

3 ‘‘(2) MARKING REQUIREMENTS FOR EX4 PORTS.—Each package of a tobacco product that is

5 exported shall be marked for export from the United

6 States. The Secretary shall promulgate regulations

7 to determine the size and location of the mark and

8 under what circumstances a waiver of this para9 graph shall be granted.’’.

10 (b) SALES ON INDIAN RESERVATIONS.—Section

11 5723 is amended by adding at the end the following new

12 subsections:

13 ‘‘(f) SALES ON INDIAN RESERVATIONS.—The Sec14 retary, in consultation with the Secretary of the Interior,

15 shall promulgate regulations that require that each pack16 age of a tobacco product that is sold on an Indian reserva17 tion (as defined in section 403(9) of the Indian Child Pro18 tection and Family Violence Prevention Act (25 U.S.C.

19 3202(9)) be labeled as such. Such regulations shall include

20 requirements for the size and location of the label.

21 ‘‘(g) DEFINITION OF PACKAGE.—For purposes of

22 this section, the term ‘package’ means the innermost

23 sealed container irrespective of the material from which

24 such container is made, in which a tobacco product is

25 placed by the manufacturer and in which such tobacco
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1 product is offered for sale to a member of the general pub2 lic.’’.

3 SEC. 103. WHOLESALERS REQUIRED TO HAVE PERMIT.

4 Section 5712 (relating to application for permit) is

5 amended by inserting ‘‘, wholesaler,’’ after ‘‘manufac6 turer’’.

7 SEC. 104. CONDITIONS OF PERMIT.

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

9 of permit) is amended to read as follows:

10 ‘‘(a) ISSUANCE.—

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

12 in business as a manufacturer, wholesaler, or im13 porter of tobacco products or as an export ware14 house proprietor without a permit to engage in such

15 business. Such permit shall be issued in such form

16 and in such manner as the Secretary shall by regula17 tion prescribe, to every person properly qualified

18 under sections 5711 and 5712. A new permit may

19 be required at such other time as the Secretary shall

20 by regulation prescribe.

21 ‘‘(2) CONDITIONS.—The issuance of a permit

22 under this section shall be conditioned upon the

23 compliance with the requirements of this chapter

24 and the Contraband Cigarette Trafficking Act (28
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1 U.S.C. chapter 114), and any regulations issued

2 pursuant to such statutes.’’.

3 SEC. 105. RECORDS TO BE MAINTAINED.

4 Section 5741 (relating to records to be maintained)

5 is amended—

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

7 ‘‘Every manufacturer’’,

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

9 ‘‘every importer,’’,

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

11 ‘‘records concerning the chain of custody of the to12 bacco products and such other records’’, and

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

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

16 of receipt of tobacco products, and such records shall be

17 available to the Secretary for inspection and audit. An or18 dinary commercial record or invoice shall satisfy the re19 quirements of this subsection if such record shows the date

20 of receipt, from whom tobacco products were received, and

21 the quantity of tobacco products received.’’.

22 SEC. 106. REPORTS.

23 Section 5722 (relating to reports) is amended—

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

25 ‘‘Every manufacturer’’, and
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1 (2) by adding at the end the following new sub2 section:

3 ‘‘(b) REPORTS BY EXPORT WAREHOUSE PROPRI4 ETORS.—

5 ‘‘(1) IN GENERAL.—Prior to exportation of to6 bacco products from the United States, the export

7 warehouse proprietor shall submit a report (in such

8 manner and form as the Secretary may by regula9 tion prescribe) to enable the Secretary to identify

10 the shipment and assure that it reaches its intended

11 destination.

12 ‘‘(2) AGREEMENTS WITH FOREIGN GOVERN13 MENTS.—Notwithstanding section 6103 of this title,

14 the Secretary is authorized to enter into agreements

15 with foreign governments to exchange or share infor16 mation contained in reports received from export

17 warehouse proprietors of tobacco products if—

18 ‘‘(A) the Secretary believes that such

19 agreement will assist in—

20 ‘‘(i) ensuring compliance with the pro21 visions of this chapter or regulations pro22 mulgated thereunder, or

23 ‘‘(ii) preventing or detecting violations

24 of the provisions of this chapter or regula25 tions promulgated thereunder, and
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1 ‘‘(B) the Secretary obtains assurances

2 from such government that the information will

3 be held in confidence and used only for the pur4 poses specified in clauses (i) and (ii) of sub5 paragraph (A).

6 No information may be exchanged or shared with

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

8 SEC. 107. FRAUDULENT OFFENSES.

9 (a) IN GENERAL.—Subsection (a) of section 5762

10 (relating to fraudulent offenses) is amended by striking

11 paragraph (1) and redesignating paragraphs (2) through

12 (6) as paragraphs (1) through (5), respectively.

13 (b) OFFENSES RELATING TO DISTRIBUTION OF TO14 BACCO PRODUCTS.—Section 5762 is amended—

15 (1) by redesignating subsection (b) as sub16 section (c),

17 (2) in subsection (c) (as so redesignated), by in18 serting ‘‘or (b)’’ after ‘‘(a)’’, and

19 (3) by inserting after subsection (a) the fol20 lowing new subsection:

21 ‘‘(b) OFFENSES RELATING TO DISTRIBUTION OF TO22 BACCO PRODUCTS.—It shall be unlawful—

23 ‘‘(1) for any person to engage in the business

24 as a manufacturer or importer of tobacco products

25 or cigarette papers and tubes, or to engage in the
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1 business as a wholesaler or an export warehouse pro2 prietor, without filing the bond and obtaining the

3 permit where required by this chapter or regulations

4 thereunder;

5 ‘‘(2) for an importer, manufacturer, or whole6 saler permitted under this chapter intentionally to

7 ship, transport, deliver, or receive any tobacco prod8 ucts from or to any person other than a person per9 mitted under this chapter or a retailer, except a per10 mitted importer may receive foreign tobacco prod11 ucts from a foreign manufacturer or a foreign dis12 tributor that have not previously entered the United

13 States;

14 ‘‘(3) for any person, except a manufacturer or

15 an export warehouse proprietor permitted under this

16 chapter to receive any tobacco products that have

17 previously been exported and returned to the United

18 States;

19 ‘‘(4) for any export warehouse proprietor inten20 tionally to ship, transport, sell, or deliver for sale

21 any tobacco products to any person other than a

22 permitted manufacturer or foreign purchaser;

23 ‘‘(5) for any person other than an export ware24 house proprietor permitted under this chapter inten25 tionally to ship, transport, receive, or possess, for
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1 purposes of resale, any tobacco product in packages

2 marked pursuant to regulations issued under section

3 5723, other than for direct return to a manufacturer

4 or export warehouse proprietor for repacking or for

5 re-exportation;

6 ‘‘(6) for any manufacturer, export warehouse

7 proprietor, importer, or wholesaler permitted under

8 this chapter to make intentionally any false entry in,

9 to fail willfully to make appropriate entry in, or to

10 fail willfully to maintain properly any record or re11 port that such person is required to keep as required

12 by this chapter or the regulations promulgated

13 thereunder; and

14 ‘‘(7) for any person to alter, mutilate, destroy,

15 obliterate, or remove any mark or label required

16 under this chapter upon a tobacco product held for

17 sale, except pursuant to regulations of the Secretary

18 authorizing relabeling for purposes of compliance

19 with the requirements of this section or of State law.

20 Any person violating any of the provisions of this sub21 section shall, upon conviction, be fined as provided in sec22 tion 3571 of title 18, United States Code, imprisoned for

23 not more than 5 years, or both.’’.

24 (c) INTENTIONALLY DEFINED.—Section 5762 is

25 amended by adding at the end the following:
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1 ‘‘(d) DEFINITION OF INTENTIONALLY.—For pur2 poses of this section and section 5761, the term ‘inten3 tionally’ means doing an act, or omitting to do an act,

4 deliberately, and not due to accident, inadvertence, or mis5 take, regardless of whether the person knew that the act

6 or omission constituted an offense.’’.

7 SEC. 108. CIVIL PENALTIES.

8 Subsection (a) of section 5761 (relating to civil pen9 alties) is amended—

10 (1) by striking ‘‘willfully’’ and inserting ‘‘inten11 tionally’’, and

12 (2) by striking ‘‘$1,000’’ and inserting

13 ‘‘$10,000’’.

14 SEC. 109. DEFINITIONS.

15 (a) EXPORT WAREHOUSE PROPRIETOR.—Subsection

16 (j) of section 5702 (relating to definition of export ware17 house proprietor) is amended by inserting before the pe18 riod the following: ‘‘or any person engaged in the business

19 of exporting tobacco products from the United States for

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

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

22 in any single transaction more than 30 packages of ciga23 rettes, or its equivalent for other tobacco products as the

24 Secretary shall by regulation prescribe, shall be deemed

25 an export warehouse proprietor under this chapter’’.
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1 (b) RETAILER; WHOLESALER.—Section 5702 is

2 amended by adding at the end the following:

3 ‘‘(q) RETAILER.—The term ‘retailer’ means any deal4 er who sells, or offers for sale, any tobacco product at re5 tail. The term ‘retailer’ includes any duty-free store that

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

7 any single transaction 30 or less packages, or its equiva8 lent for other tobacco products.

9 ‘‘(r) 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. 110. EFFECTIVE DATE.

15 The amendments made by this title shall take effect

16 on January 1, 2000.

17 TITLE II—AMENDMENTS TO THE

18 CONTRABAND CIGARETTE

19 TRAFFICKING ACT

20 SEC. 201. AMENDMENTS TO THE CONTRABAND CIGARETTE

21 TRAFFICKING ACT.

22 (a) DEFINITIONS.—Section 2341 of title 18, United

23 States Code, is amended—

24 (1) in paragraph (2), by striking ‘‘60,000’’ and

25 inserting ‘‘30,000’’;
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1 (2) in paragraph (4), by striking ‘‘and’’ at the

2 end;

3 (3) in paragraph (5), by striking the period and

4 inserting a semicolon; and

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

6 ‘‘(6) the term ‘tobacco product’ means cigars,

7 cigarettes, smokeless tobacco, and pipe tobacco (as

8 such terms are defined in section 5701 of the Inter9 nal Revenue Code of 1986); and

10 ‘‘(7) the term ‘contraband tobacco product’

11 means a quantity of tobacco product that is equiva12 lent to or more than 30,000 cigarettes as determined

13 by regulation, which bear no evidence of the pay14 ment of applicable State tobacco taxes in the State

15 where such tobacco products are found, if such State

16 requires a stamp, impression,or other indication to

17 be placed on packages or other containers of product

18 to evidence payment of tobacco taxes.

19 (b) UNLAWFUL ACTS.—Section 2342 of title 18,

20 United States Code, is amended—

21 (1) in subsection (a), by inserting ‘‘or contra22 band tobacco products’’ before the period;

23 (2) by striking subsection (b) and inserting the

24 following:

25 ‘‘(b) It shall be unlawful for any person—
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1 ‘‘(1) knowingly to make any false statement or

2 representation with respect to the information re3 quired by this chapter to be kept in the records or

4 reports of any person who ships, sells, or distributes

5 any quantity of cigarettes in excess of 30,000 in a

6 single transaction or tobacco products in such equiv7 alent quantities as shall be determined by regulation,

8 or

9 ‘‘(2) knowingly to fail to maintain records or

10 reports, alter or obliterate required markings, or

11 interfere with any inspection, required under this

12 chapter, with respect to such quantity of cigarettes

13 or other tobacco products.’’; and

14 (3) by adding at the end the following:

15 ‘‘(c) It shall be unlawful for any person knowingly

16 to transport tobacco products under a false bill of lading

17 or without any bill of lading.’’.

18 (c) RECORDKEEPING.—Section 2343 of title 18,

19 United States Code, is amended—

20 (1) in subsection (a)—

21 (A) by inserting after ‘‘transaction’’ the

22 following: ‘‘, or, in the case of other tobacco

23 products an equivalent quantity as determined

24 by regulation,’’;
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1 (B) by striking ‘‘60,000’’ and inserting

2 ‘‘30,000’’; and

3 (C) by striking the last sentence and in4 serting the following: ‘‘Except as provided in

5 subsection (c) of this section, nothing contained

6 herein shall authorize the Secretary to require

7 reporting under this section.’’;

8 (2) in subsection (b)—

9 (A) by striking ‘‘60,000’’ and inserting

10 ‘‘30,000’’; and

11 (B) by inserting after ‘‘transaction’’ the

12 following: ‘‘, or, in the case of other tobacco

13 products an equivalent quantity as determined

14 by regulation,’’; and

15 (3) by adding at the end the following:

16 ‘‘(c)(1) Any person who ships, sells, or distributes

17 cigarettes or tobacco products for resale in interstate com18 merce, whereby such cigarettes or tobacco products are

19 shipped into a State taxing the sale or use of such ciga20 rettes or tobacco products or who advertises or offers ciga21 rettes or tobacco products for such sale or transfer and

22 shipment shall—

23 ‘‘(A) first file with the tobacco tax adminis24 trator of the State into which such shipment is made

25 or in which such advertisement or offer is dissemi-
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1 nated, a statement setting for the person’s name,

2 and trade name (if any), and the address of the per3 son’s principal place of business and of any other

4 place of business; and

5 ‘‘(B) not later than the 10th of each calendar

6 month, file with the tobacco tax administrator of the

7 State into which such shipment is made a memo8 randum or a copy of the invoice covering each and

9 every shipment of cigarettes or tobacco products

10 made during the previous calendar month into such

11 State; the memorandum or invoice in each case to

12 include the name and address of the person to whom

13 the shipment was made, the brand, and the quantity

14 thereof.

15 ‘‘(2) The fact that any person ships or delivers for

16 shipment any cigarettes or tobacco products shall, if such

17 shipment is into a State in which such person has filed

18 a statement with the tobacco tax administrator under

19 paragraph (1)(A) of this subsection, be presumptive evi20 dence that such cigarettes or tobacco products were sold,

21 shipped, or distributed for resale by such person.

22 ‘‘(3) For purposes of this subsection—

23 ‘‘(A) the term ‘use’ in addition to its ordinary

24 meaning, means consumption, storage, handling, or

25 disposal of cigarettes or tobacco products; and
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1 ‘‘(B) the term ‘tobacco tax administrator’

2 means the State official authorized to administer to3 bacco tax laws of the State.’’.

4 (d) PENALTIES.—Section 2344 of title 18, United

5 States Code, is amended—

6 (1) in subsection (b), by inserting ‘‘or (c)’’ after

7 ‘‘section 2342(b)’’; and

8 (2) in subsection (c), by inserting ‘‘or contra9 band tobacco products’’ after ‘‘cigarettes’’.

10 (e) STATE JURISDICTION NOT AFFECTED.—Section

11 2345 of title 18, United States Code, is amended—

12 (1) in subsection (a)—

13 (A) by inserting ‘‘or tobacco product’’ after

14 ‘‘cigarette’’; and

15 (B) by inserting ‘‘, tobacco products,’’

16 after ‘‘cigarettes’’; and

17 (2) in subsection (b)—

18 (A) by inserting ‘‘or tobacco product’’ after

19 ‘‘cigarette’’; and

20 (B) by inserting ‘‘, tobacco products,’’

21 after ‘‘cigarettes’’.

22 (f) REPEAL.—The Act entitled ‘‘An Act to assist

23 States in collecting sales and use taxes on cigarettes’’, ap24 proved October 19, 1949 (15 U.S.C. 375 et seq.) is re25 pealed.
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1 (g) CIVIL FORFEITURE.—Section 981(a)(1)(C) of

2 title 18, United States Code, is amended by striking ‘‘or

3 1344’’ and inserting ‘‘1344, or 2344’’.

Æ