I
106TH CONGRESS
1ST SESSION
H. R. 2503
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 HOUSE OF REPRESENTATIVES
JULY 14, 1999
Mr. DOGGETT (for himself, Mr. WAXMAN, Mr. MATSUI, Mr. HANSEN, Mr.
MEEHAN, Mr. PALLONE, Ms. PELOSI, Mrs. LOWEY, Mr. BROWN of Ohio,
Mr. LAFALCE, Ms. DEGETTE, and Ms. JACKSON-LEE of Texas) intro-
duced the following bill; which was referred to the Committee on Ways
and Means, and in addition to the Committee on the Judiciary, for a pe-
riod to be subsequently determined by the Speaker, in each case for con-
sideration of such provisions as fall within the jurisdiction of the com-
mittee concerned
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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Tobacco Smuggling Eradication Act of 1999’’.
TITLE I—AMENDMENTS TO IN-
TERNAL REVENUE CODE OF
1986
SEC. 101. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this title an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
SEC. 102. IMPROVED MARKING AND LABELING.
(a) IN GENERAL.—Subsection (b) of section 5723
(relating to marks, labels, and notices) is amended—
(1) by striking ‘‘, if any,’’ and
(2) by adding at the end the following: ‘‘Such
marks, labels, and notices shall include marks and
notices relating to the following:
‘‘(1) IDENTIFICATION.—The Secretary shall
promulgate regulations that require each manufac-
turer or importer of tobacco products to legibly print
a unique serial number on all packages of tobacco
products manufactured or imported for sale or dis-
tribution. Such serial number shall be designed to
enable the Secretary to identify the manufacturer or
importer of the product, and the location and date
of manufacture or importation. The Secretary shall
determine the size and location of the serial number.
‘‘(2) 
MARKING
REQUIREMENTS
FOR
EX-
PORTS.—Each package of a tobacco product that is
exported shall be marked for export from the United
States. The Secretary shall promulgate regulations
to determine the size and location of the mark and
under what circumstances a waiver of this para-
graph shall be granted.’’.
(b) SALES
ON
INDIAN
RESERVATIONS.—Section
5723 is amended by adding at the end the following new
subsections:
‘‘(f) SALES ON INDIAN RESERVATIONS.—The Sec-
retary, in consultation with the Secretary of the Interior,
shall promulgate regulations that require that each pack-
age of a tobacco product that is sold on an Indian reserva-
tion (as defined in section 403(9) of the Indian Child Pro-
tection and Family Violence Prevention Act (25 U.S.C.
3202(9)) be labeled as such. Such regulations shall include
requirements for the size and location of the label.
‘‘(g) DEFINITION OF PACKAGE.—For purposes of
this section, the term ‘package’ means the innermost
sealed container irrespective of the material from which
such container is made, in which a tobacco product is
placed by the manufacturer and in which such tobacco
product is offered for sale to a member of the general pub-
lic.’’.
SEC. 103. WHOLESALERS REQUIRED TO HAVE PERMIT.
Section 5712 (relating to application for permit) is
amended by inserting ‘‘, wholesaler,’’ after ‘‘manufac-
turer’’.
SEC. 104. CONDITIONS OF PERMIT.
Subsection (a) of section 5713 (relating to issuance
of permit) is amended to read as follows:
‘‘(a) ISSUANCE.—
‘‘(1) IN GENERAL.—A person shall not engage
in business as a manufacturer, wholesaler, or im-
porter of tobacco products or as an export ware-
house proprietor without a permit to engage in such
business. Such permit shall be issued in such form
and in such manner as the Secretary shall by regula-
tion prescribe, to every person properly qualified
under sections 5711 and 5712. A new permit may
be required at such other time as the Secretary shall
by regulation prescribe.
‘‘(2) CONDITIONS.—The issuance of a permit
under this section shall be conditioned upon the
compliance with the requirements of this chapter
and the Contraband Cigarette Trafficking Act (28
U.S.C. chapter 114), and any regulations issued
pursuant to such statutes.’’.
SEC. 105. RECORDS TO BE MAINTAINED.
Section 5741 (relating to records to be maintained)
is amended—
(1) by inserting ‘‘(a) IN GENERAL.—’’ before
‘‘Every manufacturer’’,
(2) by inserting ‘‘every wholesaler,’’ after
‘‘every importer,’’,
(3) by striking ‘‘such records’’ and inserting
‘‘records concerning the chain of custody of the to-
bacco products and such other records’’, and
(4) by adding at the end the following new sub-
section:
‘‘(b) RETAILERS.—Retailers shall maintain records
of receipt of tobacco products, and such records shall be
available to the Secretary for inspection and audit. An or-
dinary commercial record or invoice shall satisfy the re-
quirements of this subsection if such record shows the date
of receipt, from whom tobacco products were received, and
the quantity of tobacco products received.’’.
SEC. 106. REPORTS.
Section 5722 (relating to reports) is amended—
(1) by inserting ‘‘(a) IN GENERAL.—’’ before
‘‘Every manufacturer’’, and
(2) by adding at the end the following new sub-
section:
‘‘(b) REPORTS BY EXPORT WAREHOUSE PROPRI-
ETORS.—
‘‘(1) IN GENERAL.—Prior to exportation of to-
bacco products from the United States, the export
warehouse proprietor shall submit a report (in such
manner and form as the Secretary may by regula-
tion prescribe) to enable the Secretary to identify
the shipment and assure that it reaches its intended
destination.
‘‘(2) AGREEMENTS
WITH
FOREIGN
GOVERN-
MENTS.—Notwithstanding section 6103 of this title,
the Secretary is authorized to enter into agreements
with foreign governments to exchange or share infor-
mation contained in reports received from export
warehouse proprietors of tobacco products if—
‘‘(A) the Secretary believes that such
agreement will assist in—
‘‘(i) ensuring compliance with the pro-
visions of this chapter or regulations pro-
mulgated thereunder, or
‘‘(ii) preventing or detecting violations
of the provisions of this chapter or regula-
tions promulgated thereunder, and
‘‘(B) the Secretary obtains assurances
from such government that the information will
be held in confidence and used only for the pur-
poses specified in clauses (i) and (ii) of sub-
paragraph (A).
No information may be exchanged or shared with
any government that has violated such assurances.’’.
SEC. 107. FRAUDULENT OFFENSES.
(a) IN GENERAL.—Subsection (a) of section 5762
(relating to fraudulent offenses) is amended by striking
paragraph (1) and redesignating paragraphs (2) through
(6) as paragraphs (1) through (5), respectively.
(b) OFFENSES RELATING TO DISTRIBUTION OF TO-
BACCO PRODUCTS.—Section 5762 is amended—
(1) by redesignating subsection (b) as sub-
section (c),
(2) in subsection (c) (as so redesignated), by in-
serting ‘‘or (b)’’ after ‘‘(a)’’, and
(3) by inserting after subsection (a) the fol-
lowing new subsection:
‘‘(b) OFFENSES RELATING TO DISTRIBUTION OF TO-
BACCO PRODUCTS.—It shall be unlawful—
‘‘(1) for any person to engage in the business
as a manufacturer or importer of tobacco products
or cigarette papers and tubes, or to engage in the
business as a wholesaler or an export warehouse pro-
prietor, without filing the bond and obtaining the
permit where required by this chapter or regulations
thereunder;
‘‘(2) for an importer, manufacturer, or whole-
saler permitted under this chapter intentionally to
ship, transport, deliver, or receive any tobacco prod-
ucts from or to any person other than a person per-
mitted under this chapter or a retailer, except a per-
mitted importer may receive foreign tobacco prod-
ucts from a foreign manufacturer or a foreign dis-
tributor that have not previously entered the United
States;
‘‘(3) for any person, except a manufacturer or
an export warehouse proprietor permitted under this
chapter to receive any tobacco products that have
previously been exported and returned to the United
States;
‘‘(4) for any export warehouse proprietor inten-
tionally to ship, transport, sell, or deliver for sale
any tobacco products to any person other than a
permitted manufacturer or foreign purchaser;
‘‘(5) for any person other than an export ware-
house proprietor permitted under this chapter inten-
tionally to ship, transport, receive, or possess, for
purposes of resale, any tobacco product in packages
marked pursuant to regulations issued under section
5723, other than for direct return to a manufacturer
or export warehouse proprietor for repacking or for
re-exportation;
‘‘(6) for any manufacturer, export warehouse
proprietor, importer, or wholesaler permitted under
this chapter to make intentionally any false entry in,
to fail willfully to make appropriate entry in, or to
fail willfully to maintain properly any record or re-
port that such person is required to keep as required
by this chapter or the regulations promulgated
thereunder; and
‘‘(7) for any person to alter, mutilate, destroy,
obliterate, or remove any mark or label required
under this chapter upon a tobacco product held for
sale, except pursuant to regulations of the Secretary
authorizing relabeling for purposes of compliance
with the requirements of this section or of State law.
Any person violating any of the provisions of this sub-
section shall, upon conviction, be fined as provided in sec-
tion 3571 of title 18, United States Code, imprisoned for
not more than 5 years, or both.’’.
(c) INTENTIONALLY
DEFINED.—Section 5762 is
amended by adding at the end the following:
‘‘(d) DEFINITION
OF INTENTIONALLY.—For pur-
poses of this section and section 5761, the term ‘inten-
tionally’ means doing an act, or omitting to do an act,
deliberately, and not due to accident, inadvertence, or mis-
take, regardless of whether the person knew that the act
or omission constituted an offense.’’.
SEC. 108. CIVIL PENALTIES.
Subsection (a) of section 5761 (relating to civil pen-
alties) is amended—
(1) by striking ‘‘willfully’’ and inserting ‘‘inten-
tionally’’, and
(2) 
by 
striking 
‘‘$1,000’’ 
and 
inserting
‘‘$10,000’’.
SEC. 109. DEFINITIONS.
(a) EXPORT WAREHOUSE PROPRIETOR.—Subsection
(j) of section 5702 (relating to definition of export ware-
house proprietor) is amended by inserting before the pe-
riod the following: ‘‘or any person engaged in the business
of exporting tobacco products from the United States for
purposes of sale or distribution. Any duty free store that
sells, offers for sale, or otherwise distributes to any person
in any single transaction more than 30 packages of ciga-
rettes, or its equivalent for other tobacco products as the
Secretary shall by regulation prescribe, shall be deemed
an export warehouse proprietor under this chapter’’.
(b) RETAILER; WHOLESALER.—Section 5702 is
amended by adding at the end the following:
‘‘(q) RETAILER.—The term ‘retailer’ means any deal-
er who sells, or offers for sale, any tobacco product at re-
tail. The term ‘retailer’ includes any duty-free store that
sells, offers for sale, or otherwise distributes at retail in
any single transaction 30 or less packages, or its equiva-
lent for other tobacco products.
‘‘(r) WHOLESALER.—The term ‘wholesaler’ means
any person engaged in the business of purchasing tobacco
products for resale at wholesale, or any person acting as
an agent or broker for any person engaged in the business
of purchasing tobacco products for resale at wholesale.’’.
SEC. 110. EFFECTIVE DATE.
The amendments made by this title shall take effect
on January 1, 2000.
TITLE II—AMENDMENTS TO THE
CONTRABAND 
CIGARETTE
TRAFFICKING ACT
SEC. 201. AMENDMENTS TO THE CONTRABAND CIGARETTE
TRAFFICKING ACT.
(a) DEFINITIONS.—Section 2341 of title 18, United
States Code, is amended—
(1) in paragraph (2), by striking ‘‘60,000’’ and
inserting ‘‘30,000’’;
(2) in paragraph (4), by striking ‘‘and’’ at the
end;
(3) in paragraph (5), by striking the period and
inserting a semicolon; and
(4) by adding at the end the following:
‘‘(6) the term ‘tobacco product’ means cigars,
cigarettes, smokeless tobacco, and pipe tobacco (as
such terms are defined in section 5701 of the Inter-
nal Revenue Code of 1986); and
‘‘(7) the term ‘contraband tobacco product’
means a quantity of tobacco product that is equiva-
lent to or more than 30,000 cigarettes as determined
by regulation, which bear no evidence of the pay-
ment of applicable State tobacco taxes in the State
where such tobacco products are found, if such State
requires a stamp, impression, or other indication to
be placed on packages or other containers of product
to evidence payment of tobacco taxes.
(b) UNLAWFUL ACTS.—Section 2342 of title 18,
United States Code, is amended—
(1) in subsection (a), by inserting ‘‘or contra-
band tobacco products’’ before the period;
(2) by amending subsection (b) to read as fol-
lows:
‘‘(b)(1) It shall be unlawful for any person—
(3) by amending the last sentence of subsection
(a) to read as follows: ‘‘Except as provided in sub-
section (c) of this section, nothing contained herein
shall authorize the Secretary to require reporting
under this section.’’;
(4) in subsection (b), by striking ‘‘60,000’’ and
inserting ‘‘30,000’’; and
(5) in subsection (b), by inserting after ‘‘trans-
action’’ the following: ‘‘, or, in the case of other to-
bacco products an equivalent quantity as determined
by regulation,’’;
(6) by adding at the end the following:
‘‘(c)(1) Any person who ships, sells, or distributes
cigarettes or tobacco products for resale in interstate com-
merce, whereby such cigarettes or tobacco products are
shipped into a State taxing the sale or use of such ciga-
rettes or tobacco products or who advertises or offers ciga-
rettes or tobacco products for such sale or transfer and
shipment shall—
‘‘(A) first file with the tobacco tax adminis-
trator of the State into which such shipment is made
or in which such advertisement or offer is dissemi-
nated, a statement setting for the person’s name,
and trade name (if any), and the address of the per-
son’s principal place of business and of any other
place of business; and
‘‘(B) not later than the 10th of each calendar
month, file with the tobacco tax administrator of the
State into which such shipment is made a memo-
randum or a copy of the invoice covering each and
every shipment of cigarettes or tobacco products
made during the previous calendar month into such
State; the memorandum or invoice in each case to
include the name and address of the person to whom
the shipment was made, the brand, and the quantity
thereof.
‘‘(2) The fact that any person ships or delivers for
shipment any cigarettes or tobacco products shall, if such
shipment is into a State in which such person has filed
a statement with the tobacco tax administrator under
paragraph (1)(A) of this subsection, be presumptive evi-
dence that such cigarettes or tobacco products were sold,
shipped, or distributed for resale by such person.
‘‘(3) For purposes of this subsection—
‘‘(A) the term ‘use’ in addition to its ordinary
meaning, means consumption, storage, handling, or
disposal of cigarettes or tobacco products; and
‘‘(B) the term ‘tobacco tax administrator’
means the State official authorized to administer to-
bacco tax laws of the State.’’.
(d) PENALTIES.—Section 2344 of title 18, United
States Code, is amended—
(1) in subsection (b), by inserting ‘‘or (c)’’ after
‘‘section 2342(b)’’; and
(2) in subsection (c), by inserting ‘‘or contra-
band tobacco products’’ after ‘‘cigarettes’’.
(e) REPEAL.—Chapter 10A of title 15, United States
Code, is repealed.
(f) CIVIL FORFEITURE.—Section 981(a)(1)(C) is
amended by striking ‘‘or 1344’’ and inserting ‘‘1344, or
2344’’.
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