I 

112TH CONGRESS 

1ST SESSION H. R. 3186 

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

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 13, 2011 

Mr. DOGGETT (for himself, Mr. BLUMENAUER, Mr. DEFAZIO, Ms. DEGETTE, 

Ms. DELAURO, Mr. ELLISON, Mr. FRANK of Massachusetts, Mr. GENE

GREEN of Texas, Mr. GRIJALVA, Mr. HIMES, Mr. HINCHEY, Mr. HINOJOSA, Ms. HIRONO, Mr. HOLT, Mr. HONDA, Mr. JACKSON of Illinois, Ms. 

JACKSON LEE of Texas, Mr. LIPINSKI, Mr. LOEBSACK, Mrs. LOWEY, 

Mrs. MALONEY, Mrs. MCCARTHY of New York, Mr. MCGOVERN, Mr. 

MORAN, Ms. NORTON, Mr. OLVER, Ms. RICHARDSON, Ms. LINDA T. 

SA ́NCHEZ of California, Ms. LORETTA SANCHEZ of California, Ms. SCHAKOWSKY, Mr. SHERMAN, Ms. SLAUGHTER, Mr. STARK, Mr. THOMPSON

of California, Mr. TONKO, Ms. TSONGAS, and Mr. WAXMAN) introduced 

the following bill; which was referred to the Committee on Ways and 

Means 

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, 

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1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

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

4 ‘‘STOP Act’’. 

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

6 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 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. 

7 TITLE I—AMENDMENTS TO IN8 TERNAL REVENUE CODE OF 

9 1986 

10 SEC. 101. AMENDMENT OF 1986 CODE. 

11 Except as otherwise expressly provided, whenever in 

12 this title an amendment or repeal is expressed in terms 

13 of an amendment to, or repeal of, a section or other provimstockstill on DSK4VPTVN1PROD with BILLS

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1 sion, the reference shall be considered to be made to a 

2 section or other provision of the Internal Revenue Code 

3 of 1986. 

4 SEC. 102. MACHINES USED TO MANUFACTURE OR PACKAGE 

5 TOBACCO PRODUCTS OR PROCESSED TO6 BACCO. 

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

8 (1) by redesignating subsection (b) as sub9 section (c), and 

10 (2) by inserting after subsection (a) the fol11 lowing new subsection: 

12 ‘‘(b) MACHINES USED TO MANUFACTURE OR PACK13 AGE TOBACCO PRODUCTS OR PROCESSED TOBACCO.— 

14 ‘‘(1) TRANSFER OF MANUFACTURING MACHINES

15 TO LICENSED PERSONS.—Any tobacco production 

16 machine may be sold, leased, imported, exported, de17 livered, or otherwise made available only to per18 sons— 

19 ‘‘(A) lawfully engaged in— 

20 ‘‘(i) the sale, lease, importation, ex21 portation, or delivery of such machines, 

22 ‘‘(ii) the manufacture or packaging of 

23 tobacco products or processed tobacco, or 

24 ‘‘(iii) the application of unique identi25 fication markings onto tobacco product or 

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1 processed tobacco packages pursuant to 

2 section 5723, and 

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

4 and Indian tribal government permits, registra5 tions, and licenses required to engage in such 

6 activities. 

7 ‘‘(2) TRANSFER OF MACHINES TO PERSONS EN8 GAGED IN ILLEGAL MANUFACTURE OF CONTRA9 BAND.—No tobacco production machine shall know10 ingly be manufactured for or be (directly or indi11 rectly) sold, leased, imported, exported, delivered, or 

12 otherwise made available to any person engaged in 

13 the illegal manufacture, distribution, or sale of coun14 terfeit or contraband tobacco products or processed 

15 tobacco, unique identification markings, or other 

16 tax-payment indicia. 

17 ‘‘(3) RENDERING UNUSED MACHINES INOPER18 ABLE.—Any tobacco production machine that is no 

19 longer being used as such shall be made irreparably 

20 inoperable for such use before being disposed of or 

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

22 to any such machines being kept solely for display 

23 or for historical purposes. 

24 ‘‘(4) RECORDS.— 

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

2 leasing, importing, exporting, delivering, or oth3 erwise making available a tobacco production 

4 machine shall maintain and keep records relat5 ing to any transfers of the machine, including 

6 the name, address, other contact information, 

7 and any permit, registration, or license number 

8 of the person receiving delivery of the machine, 

9 or to whom the machine is otherwise trans10 ferred, as the case may be. 

11 ‘‘(B) 5-YEAR HOLDING PERIOD FOR

12 RECORDS.—Any record required to be main13 tained and kept under subparagraph (A) shall 

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

15 first date such record is required to be so main16 tained and kept. 

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

18 records shall be available for inspection by any 

19 internal revenue officer during business hours. 

20 ‘‘(D) SAFE HARBOR.—An ordinary com21 mercial record or invoice shall satisfy the re22 quirements of this paragraph if such record or 

23 invoice contains all of the information required 

24 under subparagraph (A). 

25 ‘‘(5) 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) TOBACCO PRODUCTION MACHINE.—Section 5702 

12 is amended by adding at the end the following new sub13 section: 

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

15 ‘tobacco production machine’ means any machine (or com16 ponent integral to the operation of such a machine) used 

17 to manufacture or package tobacco products or processed 

18 tobacco or to apply unique identification markings or 

19 other tax-payment indicia to packages of tobacco products 

20 or processed tobacco. Such term includes any machine 

21 used to produce tobacco products for compensation, lease, 

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

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

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

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

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

2 this section shall apply to transfers more than 6 months 

3 after the date of the enactment of this Act. 

4 SEC. 103. IMPROVED MARKING AND LABELING. 

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

6 amended to read as follows: 

7 ‘‘(b) MARKS, LABELS, AND NOTICES.— 

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

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

10 processed tobacco, or cigarette papers or tubes shall, 

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

12 that the Secretary by regulation prescribes. 

13 ‘‘(2) MARKING REQUIREMENTS FOR DOMESTIC

14 MARKET.— 

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

16 manufacturer or importer of tobacco products 

17 or processed tobacco shall (in accordance with 

18 regulations prescribed by the Secretary) ensure 

19 that, before any product intended for sale or 

20 distribution within the United States is re21 moved, a unique identification marking is af22 fixed to or forms part of each package of to23 bacco product or processed tobacco manufac24 tured or imported by such person for sale or 

25 distribution. 

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1 ‘‘(B) MARKINGS ON INDIVIDUAL PACK2 AGES.—Any markings required to be placed on 

3 a tobacco product or processed tobacco package 

4 by this subsection shall be placed on the inner5 most sealed container visible from the outside 

6 of the individual package. For any tobacco 

7 product or processed tobacco package that con8 tains multiple smaller packages of tobacco prod9 ucts or processed tobacco, any markings re10 quired to be so placed on tobacco product or 

11 processed tobacco packages shall be placed on 

12 all the individual tobacco product or processed 

13 tobacco packages. 

14 ‘‘(C) MARKINGS ON AGGREGATE PACKING

15 MODES.—To facilitate efficient tracking and 

16 tracing of tobacco products or processed to17 bacco through the distribution system, all man18 ufacturers or importers of tobacco products or 

19 processed tobacco shall, in addition to such 

20 unique identification marking, also, in accord21 ance with regulations prescribed by the Sec22 retary, ensure that unique identification mark23 ings are affixed to or form part of aggregate 

24 packing modes (such as cartons, cases, and 

25 master cases for cigarettes). The Secretary 

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1 shall determine the size, location, and methods 

2 for such markings. The Secretary shall estab3 lish regulations requiring that all persons with4 in the distribution chain, up to but not includ5 ing the ultimate retailer, utilize the unique 

6 identification markings on aggregate packing 

7 modes to facilitate the tracking and tracing of 

8 tobacco products or processed tobacco through 

9 the distribution system. 

10 ‘‘(3) MARKING REQUIREMENTS FOR EX11 PORTS.—A unique identification marking shall be af12 fixed to or form part of each package of tobacco 

13 product or processed tobacco that is exported, or 

14 sold for export, that distinguishes it from those 

15 products or processed tobacco intended for sale or 

16 distribution within the United States. The Secretary 

17 shall by regulation prescribe the size, location, and 

18 other characteristics of such marking, and it may 

19 contain a serial number that is assigned to the coun20 try of export, except that no such serial number 

21 shall be required on tobacco products or processed 

22 tobacco sold at retail to consumers by duty free 

23 stores for consumption beyond the jurisdiction of the 

24 internal revenue laws of the United States. Such to25 bacco products or processed tobacco shall instead 

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1 bear markings indicating the tobacco product or 

2 processed tobacco is only for duty-free sale to con3 sumers, as prescribed through regulation by the Sec4 retary, before the product or processed tobacco is re5 moved. 

6 ‘‘(4) AUTHORIZATION OF FEDERAL UNIQUE

7 IDENTIFICATION MARKING.—Not later than 3 years 

8 after the date of the enactment of the Smuggled To9 bacco Prevention Act of 2011, the Secretary shall by 

10 regulation require the use of a unique identification 

11 marking on all products subject to tax under this 

12 chapter.’’. 

13 (b) UNIQUE IDENTIFICATION MARKING.—Section 

14 5723 is amended by adding at the end the following new 

15 subsection: 

16 ‘‘(f) UNIQUE IDENTIFICATION MARKING.— 

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

18 processed tobacco may be sold, offered for sale, dis19 tributed, mailed, or otherwise delivered for final sale 

20 to any consumer in the United States unless the 

21 unique identification marking that meets the re22 quirements of this section (and any regulations pre23 scribed thereunder) is affixed to or forms part of the 

24 package in which it is contained. 

25 ‘‘(2) SYSTEM SPECIFICATIONS.— 

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1 ‘‘(A) The Secretary shall design such sys2 tem to coordinate and avoid interference with 

3 State, local, and Indian tribal tax stamps and 

4 markings, facilitate collection of the tax im5 posed by this chapter, impede contraband to6 bacco trafficking, minimize counterfeit marking, 

7 allow for more effective tracking and tracing of 

8 tobacco products and processed tobacco, facili9 tate the enforcement of related Federal laws, 

10 and utilize such available technology as may 

11 promote the purposes of this chapter. 

12 ‘‘(B) The Secretary shall prescribe the 

13 method and manner in which such unique iden14 tification markings are to be distributed, pur15 chased, and applied to or made part of tobacco 

16 product and processed tobacco packages, and 

17 may provide for the cancellation of such mark18 ings. 

19 ‘‘(C) The unique identification marking 

20 must provide the following information: 

21 ‘‘(i) The denominated value of the 

22 marking. 

23 ‘‘(ii) A unique serial number or track24 ing code for each tobacco product or procmstockstill on DSK4VPTVN1PROD with BILLS

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1 essed tobacco package or aggregate pack2 age. 

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

4 person purchasing the marking (and, if dif5 ferent, of the person ensuring the marking 

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

7 ‘‘(iv) The date the marking was pur8 chased and when it was affixed to or made 

9 part of the package. 

10 ‘‘(v) The name and address of the 

11 first unrelated person purchasing or other12 wise receiving the tobacco product or proc13 essed tobacco from the person who ensures 

14 the marking is affixed to or made part of 

15 the package and the date of such purchase 

16 or receipt. 

17 ‘‘(vi) Such other information as the 

18 Secretary may prescribe to carry out the 

19 purposes of this chapter. 

20 ‘‘(D) The information described in sub21 paragraph (C) shall, to the extent practicable— 

22 ‘‘(i) be cryptographically encrypted, 

23 and 

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

25 scanning device (or similar device) to be 

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1 utilized by regulatory and law enforcement 

2 officials at the time and place of inspec3 tion, or 

4 ‘‘(II) be otherwise accessible re5 motely at such time and place. 

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

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

8 person other than a related person within the mean9 ing of section 267(b) or 707(b)(1).’’. 

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

11 subsection (b), is amended by adding at the end the fol12 lowing new subsections: 

13 ‘‘(g) PACKAGE DEFINED.—For purposes of this sec14 tion, the term ‘package’ means a pack, box, carton, or con15 tainer of any kind or, if no other container, any wrapping 

16 (including cellophane), in which a tobacco product or proc17 essed tobacco is sold, offered for sale, distributed, or oth18 erwise delivered for final sale to any consumer. 

19 ‘‘(h) UNIQUE IDENTIFICATION MARKING DE20 FINED.—For purposes of this section, the term ‘unique 

21 identification marking’ means a device in such design and 

22 denomination as the Secretary authorizes by regulation 

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

24 product or processed tobacco. Such markings shall contain 

25 overt security features for public authentication and covert 

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1 security features embedding a unique, secure, encrypted 

2 identifier onto the marking, enabling law enforcement au3 thentication, production control, and tracking and tracing 

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

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

6 shall consult with the Secretary of Health and Human 

7 Services as may be appropriate to carry out the purposes 

8 of subsection (f), and paragraphs (2), (3), and (4) of sub9 section (b), of section 5723 of the Internal Revenue Code 

10 of 1986 (as added by this section). 

11 SEC. 104. WHOLESALERS AND MANUFACTURERS, IMPORT12 ERS, AND SELLERS OF TOBACCO PRODUC13 TION MACHINES REQUIRED TO HAVE PER14 MIT. 

15 (a) WHOLESALERS.—Section 5712 is amended by in16 serting ‘‘, wholesaler,’’ after ‘‘manufacturer’’. 

17 (b) MANUFACTURERS, IMPORTERS, AND SELLERS OF

18 TOBACCO PRODUCTION MACHINES.—Section 5712 is 

19 amended by striking ‘‘or as an export warehouse propri20 etor’’ and inserting ‘‘, as an export warehouse proprietor, 

21 or as a manufacturer, seller, or importer of tobacco pro22 duction machines’’. 

23 SEC. 105. CONDITIONS OF PERMIT. 

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

25 amended to read as follows: 

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1 ‘‘(a) ISSUANCE.— 

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

3 in business as a manufacturer, wholesaler, or im4 porter of tobacco products or processed tobacco, as 

5 an export warehouse proprietor, or as a manufac6 turer, seller, or importer of tobacco production ma7 chines without a permit to engage in such business. 

8 Such permit, conditioned upon compliance with this 

9 chapter and regulations issued thereunder, shall be 

10 issued in such form and in such manner as the Sec11 retary shall by regulation prescribe, to every person 

12 properly qualified under sections 5711 and 5712. 

13 Any entity granted such a permit is not eligible to 

14 provide any services the Secretary may elect to pro15 cure to facilitate the purposes of section 5723. Per16 mit holders shall automatically count output and 

17 register, record, and transmit the quantities meas18 ured, in the form, conditions, and time limits estab19 lished by the Secretary. A new permit may be re20 quired at such other time as the Secretary shall by 

21 regulation prescribe. 

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

23 issue a permit under this section unless— 

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

25 the requirements of— 

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1 ‘‘(i) this chapter, 

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

3 States Code, 

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

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

6 as the ‘Jenkins Act’), 

7 ‘‘(iv) the Fair and Equitable Tobacco 

8 Reform Act of 2004, and any amendments 

9 made thereby, 

10 ‘‘(v) the Family Smoking Prevention 

11 and Tobacco Control Act, and any amend12 ments made thereby, 

13 ‘‘(vi) the Prevent All Cigarette Traf14 ficking Act of 2009, and any amendments 

15 made thereby, and 

16 ‘‘(vii) any related regulations there17 under, 

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

19 permit, 

20 ‘‘(B) the applicant certifies that the appli21 cant is in compliance with all other Federal, 

22 State, local, and Indian tribal laws relating to 

23 the taxation, manufacture, importation, expor24 tation, distribution, marketing, sale, or trans25 portation of tobacco products, processed tomstockstill on DSK4VPTVN1PROD with BILLS

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1 bacco, or tobacco production machines, as in ef2 fect on the date of the issuance of the permit, 

3 and 

4 ‘‘(C) the applicant identifies in the applica5 tion any violation of a law described in subpara6 graph (A) or (B) by the applicant resulting in 

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

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

9 (b) SUSPENSION OR REVOCATION.—Subparagraph 

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

11 other law described in subparagraph (A) or (B) of sub12 section (a)(2)’’ after ‘‘this chapter’’. 

13 SEC. 106. RECORDS TO BE MAINTAINED. 

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

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

16 ‘‘Every manufacturer’’, 

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

18 ‘‘every importer,’’, 

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

20 ‘‘records concerning the chain of custody of the to21 bacco products and processed tobacco (including the 

22 foreign country of final destination for packages 

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

24 labels, and notices required under section 5723, and 

25 such other records’’, and 

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1 (4) by adding at the end the following new sub2 sections: 

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

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

5 products and processed tobacco. Such records shall be 

6 available to the Secretary for inspection and audit. An or7 dinary commercial record or invoice shall satisfy the re8 quirements of this subsection if such record shows the date 

9 of receipt, from whom tobacco products or processed to10 bacco were received, and the quantity of tobacco products 

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

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

13 tobacco products or processed tobacco were sold or deliv14 ered, and the quantity of the tobacco products or proc15 essed tobacco sold or delivered). To the extent the Sec16 retary determines that the records maintained by retail 

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

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

19 requirements of this section, no additional records shall 

20 be required for such entities under this section. The pre21 ceding provisions of this subsection shall not be construed 

22 to limit or preclude other recordkeeping requirements im23 posed on 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 available for inspection by any internal revenue 

3 officer during business hours.’’. 

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 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.—Prior to exportation of tobacco products or proc17 essed tobacco from the United States, the export ware18 house proprietor shall submit a report (in such manner 

19 and form as the Secretary may by regulation prescribe) 

20 to enable the Secretary to identify the shipment and as21 sure that it reaches its intended destination.’’. 

22 SEC. 108. FRAUDULENT OFFENSES. 

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

24 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 

23 a manufacturer, seller, or importer of tobacco pro24 duction machines without filing the bond and obtainmstockstill on DSK4VPTVN1PROD with BILLS

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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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