II 

111TH CONGRESS 

2D SESSION S. 3288 

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

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 29, 2010 

Mr. LAUTENBERG (for himself and Mr. DURBIN) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

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. 


jbell on DSKDVH8Z91PROD with BILLS
2 

•S 3288 IS

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. 

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 


jbell on DSKDVH8Z91PROD with BILLS
3 

•S 3288 IS

1 (2) by inserting after subsection (a) the fol2 lowing new subsection: 

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

4 OR PACKAGE CIGARETTES OR OTHER TOBACCO PROD5 UCTS.— 

6 ‘‘(1) SALE, LEASE, DELIVERY OF MANUFAC7 TURING MACHINES TO LICENSED PERSONS.—Any to8 bacco production machine may be sold, leased, im9 ported, or delivered only to— 

10 ‘‘(A) persons— 

11 ‘‘(i) lawfully engaged in— 

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

13 such machines, 

14 ‘‘(II) the manufacture or proc15 essing of tobacco products, or 

16 ‘‘(III) the application of unique 

17 identification markings onto tobacco 

18 product packages pursuant to section 

19 5723, and 

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

21 permits, registrations, and licenses re22 quired to engage in such activities, or 

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

24 meant and expected to be used by an individual 


jbell on DSKDVH8Z91PROD with BILLS
4 

•S 3288 IS

1 to make tobacco products for his or her own 

2 personal use, such an individual. 

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

4 PERSONS ENGAGED IN ILLEGAL MANUFACTURE OF

5 CONTRABAND.—No tobacco production machine 

6 shall knowingly be manufactured for or be (directly 

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

8 otherwise made available to any person engaged in 

9 the illegal manufacture, distribution, or sale of coun10 terfeit or contraband tobacco products, unique iden11 tification markings, or other tax-payment indicia. 

12 ‘‘(3) RENDERING UNUSED MACHINES INOPER13 ABLE.—Any tobacco production machine that is no 

14 longer being used as such shall be made irreparably 

15 inoperable for such use before being disposed of or 

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

17 to any such machines being kept solely for display 

18 or for historical purposes. 

19 ‘‘(4) RECORDS.— 

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

21 importing, exporting, or delivering a tobacco 

22 production machine shall maintain and keep 

23 records relating to any transfers or deliveries of 

24 the machine, including the name, address, other 

25 contact information, and any permit, registraVerDate Mar 15 2010 06:16 Apr 30, 2010 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3288.IS S3288

jbell on DSKDVH8Z91PROD with BILLS
5 

•S 3288 IS

1 tion, or license number of the person receiving 

2 delivery of the machine, or to whom the ma3 chine is leased or otherwise transferred, as the 

4 case may be. 

5 ‘‘(B) 5-YEAR HOLDING PERIOD FOR

6 RECORDS.—Any record required to be main7 tained and kept under subparagraph (A) shall 

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

9 first date such record is required to be so main10 tained and kept. 

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

12 records shall be made available to the Secretary 

13 and other Federal and State government law 

14 enforcement officials for inspection and audit 

15 upon request. 

16 ‘‘(D) SAFE HARBOR.—An ordinary com17 mercial record or invoice shall satisfy the re18 quirements of this paragraph if such record de19 scribes the transaction and the related machine 

20 and provides the date of the transaction and 

21 the name, contact information, and any permit, 

22 registration, or license number of all parties to 

23 the transaction or acting as agents for those 

24 parties in regard to the transaction. 


jbell on DSKDVH8Z91PROD with BILLS
6 

•S 3288 IS

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

2 purposes of this subsection, the term ‘tobacco pro3 duction machine’ means any machine (or component 

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

5 manufacture, process, or package tobacco products 

6 or to apply unique identification markings to pack7 ages of tobacco products. 

8 ‘‘(6) VIOLATIONS.— 

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

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

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

12 an amount equal to 3 times the fair market 

13 value of the tobacco product machine involved 

14 (whichever is greater), or imprisoned not more 

15 than five years, or both. 

16 ‘‘(B) RECORDKEEPING.—Whoever know17 ingly violates paragraph (4) shall, for each of18 fense, be fined not more than $10,000.’’. 

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

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

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

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

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

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


jbell on DSKDVH8Z91PROD with BILLS
7 

•S 3288 IS

1 SEC. 103. IMPROVED MARKING AND LABELING. 

2 (a) IN GENERAL.—Section 5723 (relating to pack3 ages, marks, labels, and notices) is amended— 

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

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

6 following: ‘‘Such marks, labels, and notices shall in7 clude marks and notices relating to the following: 

8 ‘‘(1) GENERAL REQUIREMENTS FOR DOMESTIC

9 MARKET.—Each person who is a manufacturer or 

10 importer of tobacco products shall (in accordance 

11 with final regulations promulgated by the Secretary) 

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

13 custody, a unique identification marking is affixed to 

14 or forms part of each package of tobacco product 

15 manufactured or imported by such person for sale or 

16 distribution. To facilitate efficient tracking and trac17 ing of tobacco products through the distribution sys18 tem, all manufacturers or importers of tobacco prod19 ucts shall, in addition to such unique identification 

20 marking, also, in accordance with regulations pre21 scribed by the Secretary, ensure that unique identi22 fication markings are affixed to or form part of ag23 gregate packing modes (such as cartons, cases, and 

24 master cases for cigarettes). The Secretary shall de25 termine the size, location, and methods for such 

26 markings. The Secretary shall establish regulations 


jbell on DSKDVH8Z91PROD with BILLS
8 

•S 3288 IS

1 requiring that all persons within the distribution 

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

3 utilize the unique identification markings on aggre4 gate packing modes to facilitate the tracking and 

5 tracing of tobacco product through the distribution 

6 system. 

7 ‘‘(2) MARKING REQUIREMENTS FOR EX8 PORTS.—A unique identification marking shall be af9 fixed to or form part of each package of tobacco 

10 product that is exported, or sold for export, that dis11 tinguishes it from those products intended for dis12 tribution or sale within the United States. The Sec13 retary shall by regulation prescribe the size, location, 

14 and other characteristics of such marking, and it 

15 may contain a serial number that is assigned to the 

16 country of export. 

17 ‘‘(3) AUTHORIZATION OF FEDERAL UNIQUE

18 IDENTIFICATION MARKING.—Not later than 1 year 

19 after the date of the enactment of the Smuggled To20 bacco Prevention Act of 2010, the Secretary shall by 

21 regulation require the use of a unique identification 

22 marking on all products subject to tax under this 

23 chapter.’’, and 

24 (3) by adding at the end the following new sub25 section: 


jbell on DSKDVH8Z91PROD with BILLS
9 

•S 3288 IS

1 ‘‘(f) UNIQUE IDENTIFICATION MARKING.— 

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

3 sold, offered for sale, distributed, or otherwise deliv4 ered for final sale to any consumer in the United 

5 States unless the unique identification marking that 

6 meets the requirements of this section (and any reg7 ulations prescribed thereunder) is affixed to or forms 

8 part of the package in which it is contained. No per9 son shall deliver or mail tobacco products unless the 

10 tax imposed by this chapter with respect to such 

11 product has been paid and the unique identification 

12 marking required under this section is affixed to or 

13 forms part of the package containing such product. 

14 ‘‘(2) SYSTEM SPECIFICATIONS.— 

15 ‘‘(A) The Secretary shall design such sys16 tem to coordinate and avoid interference with 

17 State and local tax stamps and markings, facili18 tate collection of the tax imposed by this chap19 ter, impede contraband tobacco trafficking, 

20 minimize counterfeit marking, allow for more 

21 effective tracking and tracing of tobacco prod22 ucts, facilitate the enforcement of related Fed23 eral laws, and utilize such available technology 

24 as may promote the purposes of this chapter. 


jbell on DSKDVH8Z91PROD with BILLS
10 

•S 3288 IS

1 ‘‘(B) The Secretary shall prescribe the 

2 method and manner in which such unique iden3 tification markings are to be distributed, pur4 chased, and applied to or made part of tobacco 

5 product packages, and may provide for the can6 cellation of such markings. 

7 ‘‘(C) The unique identification marking 

8 must provide the following information: 

9 ‘‘(i) The denominated value of the 

10 marking. 

11 ‘‘(ii) A unique serial number or track12 ing code. 

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

14 person purchasing the marking (and, if dif15 ferent, of the person ensuring the marking 

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

17 ‘‘(iv) The date the marking was pur18 chased and when it was affixed to or made 

19 part of the package. 

20 ‘‘(v) The name and address of the 

21 first unrelated person purchasing or other22 wise receiving the tobacco product from 

23 the person who ensures the marking is af24 fixed to or made part of the package and 

25 the date of such purchase or transfer. 


jbell on DSKDVH8Z91PROD with BILLS
11 

•S 3288 IS

1 ‘‘(vi) Such other information as the 

2 Secretary may prescribe to carry out the 

3 purposes of this chapter. 

4 ‘‘(D) The information described in sub5 paragraph (C) shall, to the extent practicable— 

6 ‘‘(i) be cryptographically encrypted, 

7 and 

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

9 scanning device (or similar device) to be 

10 utilized by law enforcement officials at the 

11 time and place of inspection, or 

12 ‘‘(II) be otherwise accessible remotely 

13 at such time and place. 

14 ‘‘(E) Tax reporting information shall be 

15 held on a secure government-controlled data16 base to monitor tobacco production and for 

17 tracking and tracing the product from the point 

18 of production through the supply chain to the 

19 retailer. 

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

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

22 person other than a related person within the mean23 ing of section 267(b) or 707(b)(1).’’. 


jbell on DSKDVH8Z91PROD with BILLS
12 

•S 3288 IS

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

2 subsection (a), is amended by adding at the end the fol3 lowing new subsections: 

4 ‘‘(g) PACKAGE DEFINED.—For purposes of this sec5 tion, the term ‘package’ means the innermost sealed con6 tainer visible from the outside of the individual container 

7 irrespective of the material from which such container is 

8 made, in which a tobacco product is placed by the manu9 facturer and in which such tobacco product is offered for 

10 sale to a member of the general public. 

11 ‘‘(h) UNIQUE IDENTIFICATION MARKING DE12 FINED.—For purposes of this section, the term ‘unique 

13 identification marking’ means a device in such design and 

14 denomination as the Secretary authorizes by regulation 

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

16 product as evidence that the tax imposed by this chapter 

17 is paid. Such markings shall contain overt security fea18 tures for public authentication and covert security features 

19 embedding a unique, secure, encrypted identifier onto the 

20 marking, enabling law enforcement authentication, pro21 duction control, and tracking and tracing of the product 

22 bearing the marking.’’. 

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

24 shall consult with the Secretary of Health and Human 

25 Services as may be appropriate to carry out the purposes 


jbell on DSKDVH8Z91PROD with BILLS
13 

•S 3288 IS

1 of subsection (f), and paragraphs (1), (2), and (3) of sub2 section (b), of section 5723 of the Internal Revenue Code 

3 of 1986. 

4 SEC. 104. WHOLESALERS AND MANUFACTURERS, IMPORT5 ERS, AND SELLERS OF TOBACCO PRODUC6 TION MACHINES REQUIRED TO HAVE PER7 MIT. 

8 (a) WHOLESALERS.—Section 5712 (relating to appli9 cation for permit) is amended by inserting ‘‘, wholesaler,’’ 

10 after ‘‘manufacturer’’. 

11 (b) MANUFACTURERS, IMPORTERS, AND SELLERS OF

12 TOBACCO PRODUCTION MACHINES.—Section 5712 is 

13 amended by striking ‘‘or as an export warehouse propri14 etor’’ and inserting ‘‘, as an export warehouse proprietor, 

15 or as a manufacturer, seller, or importer of tobacco pro16 duction machines (as defined in section 5762(b)(5))’’. 

17 SEC. 105. CONDITIONS OF PERMIT. 

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

19 of permit) is amended to read as follows: 

20 ‘‘(a) ISSUANCE.— 

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

22 in business as a manufacturer, wholesaler, or im23 porter of tobacco products or processed tobacco, as 

24 an export warehouse proprietor, or as a manufac25 turer, seller, or importer of tobacco production maVerDate Mar 15 2010 06:16 Apr 30, 2010 Jkt 089200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S3288.IS S3288

jbell on DSKDVH8Z91PROD with BILLS
14 

•S 3288 IS

1 chines (as defined in section 5762(b)(5)) without a 

2 permit to engage in such business. Such permit, con3 ditioned upon compliance with this chapter and reg4 ulations issued thereunder, shall be issued in such 

5 form and in such manner as the Secretary shall by 

6 regulation prescribe, to every person properly quali7 fied under section 5711 and 5712. Any entity grant8 ed such a permit is not eligible to provide any serv9 ices the Secretary may elect to procure to facilitate 

10 the purposes of section 5723. Permit holders shall 

11 automatically count output and register, record, and 

12 transmit the quantities measured, in the form, con13 ditions, and time limits established by the Secretary. 

14 A new permit may be required at such other time 

15 as the Secretary shall by regulation prescribe. 

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

17 issue a permit under this section unless— 

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

19 the requirements of— 

20 ‘‘(i) this chapter, 

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

22 States Code, 

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

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

25 as the ‘Jenkins Act’), 


jbell on DSKDVH8Z91PROD with BILLS
15 

•S 3288 IS

1 ‘‘(iv) the Fair and Equitable Tobacco 

2 Reform Act of 2004, and any amendments 

3 made thereby, 

4 ‘‘(v) the Family Smoking Prevention 

5 and Tobacco Control Act, and any amend6 ments made thereby, and 

7 ‘‘(vi) any related regulations there8 under, and 

9 ‘‘(B) the applicant certifies that the appli10 cant is in compliance with all other Federal and 

11 State laws relating to the taxation, manufac12 ture, importation, exportation, distribution, 

13 marketing, sale, or transportation of tobacco 

14 products, processed tobacco, or tobacco produc15 tion machines. 

16 ‘‘(C) the applicant identifies in the applica17 tion any violation of a law described in subpara18 graph (A) or (B) by the applicant resulting in 

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

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

21 SEC. 106. RECORDS TO BE MAINTAINED. 

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

23 to be maintained) is amended— 

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

25 ‘‘Every manufacturer’’, 


jbell on DSKDVH8Z91PROD with BILLS
16 

•S 3288 IS

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

2 ‘‘every importer,’’, 

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

4 ‘‘records concerning the chain of custody of the to5 bacco products (including the foreign country of 

6 final destination for packages marked for export) 

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

8 required under section 5723, and such other 

9 records’’, and 

10 (4) by adding at the end the following new sub11 sections: 

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

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

14 products. Such records shall be available to the Secretary 

15 for inspection and audit. An ordinary commercial record 

16 or invoice shall satisfy the requirements of this subsection 

17 if such record shows the date of receipt, from whom to18 bacco products were received, and the quantity of tobacco 

19 products received (or, in the case of non-retail sale or de20 livery, the date of sale or delivery, to whom the tobacco 

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

22 tobacco products sold or delivered). The preceding provi23 sions of this subsection shall not be construed to limit or 

24 preclude other recordkeeping requirements imposed on 

25 any retailer. 


jbell on DSKDVH8Z91PROD with BILLS
17 

•S 3288 IS

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

2 CUSTODY.—Records concerning the chain of custody and 

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

4 shall be made available to Federal and State law enforce5 ment officials for inspection and audit upon request.’’. 

6 (b) CONSULTATION WITH HEALTH AND HUMAN

7 SERVICES.—The Secretary of the Treasury shall consult 

8 with the Secretary of Health and Human Services as may 

9 be appropriate to carry out the purposes of section 5741 

10 of the Internal Revenue Code of 1986. 

11 SEC. 107. REPORTS. 

12 Section 5722 (relating to reports) is amended— 

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

14 ‘‘Every manufacturer’’, and 

15 (2) by adding at the end the following new sub16 section: 

17 ‘‘(b) REPORTS BY EXPORT WAREHOUSE PROPRI18 ETORS.— 

19 ‘‘(1) IN GENERAL.—Prior to exportation of to20 bacco products from the United States, the export 

21 warehouse proprietor shall submit a report (in such 

22 manner and form as the Secretary may by regula23 tion prescribe) to enable the Secretary to identify 

24 the shipment and assure that it reaches its intended 

25 destination. 


jbell on DSKDVH8Z91PROD with BILLS
18 

•S 3288 IS

1 ‘‘(2) AGREEMENTS WITH FOREIGN GOVERN2 MENTS.—Notwithstanding section 6103 of this title, 

3 the Secretary is authorized to enter into agreements 

4 with foreign governments to exchange or share infor5 mation contained in reports received from export 

6 warehouse proprietors of tobacco products if— 

7 ‘‘(A) the Secretary believes that such 

8 agreement will assist in— 

9 ‘‘(i) ensuring compliance with the pro10 visions of this chapter or regulations pro11 mulgated thereunder, or 

12 ‘‘(ii) preventing or detecting violations 

13 of the provisions of this chapter or regula14 tions promulgated thereunder, and 

15 ‘‘(B) the Secretary obtains written assur16 ances from such government that the informa17 tion will be held in confidence and used only for 

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

19 subparagraph (A). 

20 No information may be exchanged or shared with 

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

22 SEC. 108. FRAUDULENT OFFENSES. 

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

24 amended— 


jbell on DSKDVH8Z91PROD with BILLS
19 

•S 3288 IS

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.— 

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.—It shall be unlawful— 

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

20 manufacturer or importer of tobacco products or cig21 arette papers and tubes, as a wholesaler or an ex22 port warehouse proprietor, or as a manufacturer, 

23 seller, or importer of tobacco production machines 

24 without filing the bond and obtaining the permit 


jbell on DSKDVH8Z91PROD with BILLS
20 

•S 3288 IS

1 where required by this chapter or regulations there2 under, 

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

5 any tobacco products from or to any person other 

6 than a person who has obtained the permit required 

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

8 products solely for purposes of shipment or delivery; 

9 except an importer who has obtained the permit re10 quired by this chapter may receive, from a foreign 

11 manufacturer or a foreign distributor, foreign to12 bacco products that have not previously entered the 

13 United States, 

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

15 knowingly ship, transport, sell, or deliver processed 

16 tobacco to any person other than a manufacturer of 

17 processed tobacco, a manufacturer of tobacco prod18 ucts, or an export warehouse proprietor, 

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

20 manufacturer of such tobacco products or an export 

21 warehouse proprietor authorized to receive any to22 bacco products that have previously been exported 

23 and returned to the United States) to knowingly re24 ceive any tobacco products that have previously been 

25 exported and returned to the United States, 


jbell on DSKDVH8Z91PROD with BILLS
21 

•S 3288 IS

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

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

3 any tobacco products to any person other than the 

4 original manufacturer of such tobacco products, an5 other export warehouse proprietor, or a foreign pur6 chaser, 

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

8 or an export warehouse proprietor permitted under 

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

10 or possess, for purposes of resale, any tobacco prod11 uct in packages marked pursuant to regulations 

12 issued under section 5723, other than for direct re13 turn to a manufacturer for repacking or for re-ex14 portation or to an export warehouse proprietor for 

15 re-exportation, 

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

17 warehouse proprietor, or wholesaler permitted under 

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

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

20 properly any record or report required by this chap21 ter or the regulations promulgated thereunder with 

22 the intent to defraud the United States, 

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

24 the United States, to alter, mutilate, destroy, oblit25 erate, or remove any mark or label required under 


jbell on DSKDVH8Z91PROD with BILLS
22 

•S 3288 IS

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

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

3 or its packaging any counterfeit versions of any such 

4 marks or labels, and 

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

6 3,000 cigarettes in a single transaction or in a series 

7 of related transactions, or, in the case of other to8 bacco products, an equivalent quantity as deter9 mined by regulation. 

10 Any person violating any of the provisions of this sub11 section shall, upon conviction, be fined as provided in sec12 tion 3571 of title 18, United States Code, or imprisoned 

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

14 (2) CONFORMING AMENDMENT.—Section 

15 5762(d) (as so redesignated) is amended by striking 

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

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

18 5762 (as so redesignated) is amended by striking ‘‘not 

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

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

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

22 SEC. 109. PENALTIES. 

23 (a) IN GENERAL.— 

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

25 civil penalties) is amended— 


jbell on DSKDVH8Z91PROD with BILLS
23 

•S 3288 IS

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

2 ‘‘knowingly’’, and 

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

4 ‘‘$10,000’’. 

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

6 failure to pay tax) is amended by striking ‘‘5 per7 cent’’ and inserting ‘‘10 percent’’. 

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

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

10 end the following new section: 

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

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

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

14 Tobacco Trafficking Fund’. Amounts equivalent to 50 per15 cent of the increase in revenues from criminal and civil 

16 penalties and fines collected under this chapter and attrib17 utable to title I of the Smuggled Tobacco Prevention Act 

18 of 2010 (or the amendments made thereby) shall be trans19 ferred into the Anti-Contraband Tobacco Trafficking 

20 Fund. Such amounts shall be available, as provided in ap21 propriations Acts, to the Secretary solely for the purpose 

22 of expanding government efforts and available resources

23 to enforce this chapter and other laws relating to contra24 band or illegal tobacco products. 


jbell on DSKDVH8Z91PROD with BILLS
24 

•S 3288 IS

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

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

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

4 departments and agencies that are responsible for the en5 forcement actions (including underlying investigations and 

6 administrative and judicial proceedings) in which such 

7 penalties and fines were imposed.’’. 

8 (c) PENALTY AMOUNTS ADJUSTED FOR INFLA9 TION.—Section 5761 of such Code is amended by redesig10 nating subsection (f) as subsection (g) and inserting after 

11 subsection (e) the following new subsection: 

12 ‘‘(f) INFLATION ADJUSTMENT.— 

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

14 year beginning after 2011, the penalty dollar 

15 amounts provided under this chapter shall each be 

16 increased by an amount equal to— 

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

18 ‘‘(B) the cost-of-living adjustment deter19 mined under section 1(f)(3) for the calendar 

20 year, determined by substituting ‘calendar year 

21 2010’ for ‘calendar year 1992’ in subparagraph 

22 (B) thereof. 

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

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


jbell on DSKDVH8Z91PROD with BILLS
25 

•S 3288 IS

1 amount shall be rounded to the next highest multiple 

2 of $10.’’. 

3 SEC. 110. DEFINITIONS. 

4 (a) EXPORT WAREHOUSE PROPRIETOR.—Subsection 

5 (i) of section 5702 (relating to definition of export ware6 house proprietor) is amended by inserting before the pe7 riod the following: ‘‘or any person engaged in the business 

8 of exporting tobacco products from the United States for 

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

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

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

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

13 other tobacco products as the Secretary shall by regulation 

14 prescribe, shall be deemed an export warehouse proprietor 

15 under this chapter’’. 

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

17 amended by adding at the end the following new sub18 sections: 

19 ‘‘(p) RETAILER.—The term ‘retailer’ means any deal20 er who sells, or offers for sale, any tobacco product at re21 tail. The term ‘retailer’ includes any duty free store that 

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

23 any single transaction (or series of related transactions) 

24 3,000 or fewer of cigarettes, or an equivalent quantity of 


jbell on DSKDVH8Z91PROD with BILLS
26 

•S 3288 IS

1 other tobacco products as the Secretary shall by regulation 

2 prescribe. 

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

4 any person engaged in the business of purchasing tobacco 

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

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

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

8 SEC. 111. CONFORMING AMENDMENTS. 

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

10 amended— 

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

12 taxes, wherever found, or’’ after ‘‘payment of appli13 cable’’; and 

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

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

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

17 Code, are each amended— 

18 (1) by striking ‘‘STATE’’ in the heading there19 of; and 

20 (2) by striking ‘‘tax stamps’’ each place it ap21 pears and inserting ‘‘tax stamps or markings’’. 

22 SEC. 112. EFFECTIVE DATE. 

23 Except as otherwise provided in this title, the amend24 ments made by this title shall take effect 1 year after the 

25 date of the enactment of this Act. 


jbell on DSKDVH8Z91PROD with BILLS
27 

•S 3288 IS

1 TITLE II—IMPORT FRAUD 

2 SEC. 201. MAXIMUM PENALTY FOR IMPORTATION OF TO3 BACCO PRODUCTS AND CIGARETTE PAPERS 

4 AND TUBES BY FRAUDULENT MEANS. 

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

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

7 (1) by striking ‘‘A fraudulent violation of sub8 section (a)’’ and inserting the following: 

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

10 subparagraph (B), a fraudulent violation of 

11 subsection (a)’’; and 

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

13 ‘‘(B) TOBACCO PRODUCTS AND CIGARETTE

14 PAPERS AND TUBES.—In the case of importa15 tion of tobacco products and cigarette papers 

16 and tubes subject to tax under chapter 52 of 

17 the Internal Revenue Code of 1986, a fraudu18 lent violation of subsection (a) is punishable by 

19 a civil penalty in an amount not to exceed the 

20 sum of— 

21 ‘‘(i) the domestic value of the mer22 chandise, and 

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

24 excise tax that could be imposed on the 

25 merchandise, if applicable.’’. 


jbell on DSKDVH8Z91PROD with BILLS
28 

•S 3288 IS

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

2 subsection (a) shall take effect on January 1, 2011, and 

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

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

5 that date. 

Æ 


jbell on DSKDVH8Z91PROD with BILLS