I
106TH CONGRESS
2D SESSION
H. R. 4598
To prevent evasion of United States excise taxes on cigarettes, and for
other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 7, 2000
Mr. SHAW (for himself, Mrs. THURMAN, Mr. FOLEY, Mr. TANNER, Mr. CAMP,
Mr. RAMSTAD, Mr. MCCRERY, and Mr. LEWIS of Kentucky) introduced
the following bill; which was referred to the Committee on Ways and
Means
A BILL
To prevent evasion of United States excise taxes on
cigarettes, 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.
This Act may be cited as the ‘‘Gray Market Ciga-
rettes Abolition Act of 2000’’.
SEC. 2. FINDINGS.
Congress finds that additional legislation is necessary
to prevent evasion of United States taxes on cigarettes,
to ensure that the packages of all cigarettes sold or dis-
tributed in the United States bear the health warnings re-
quired by Federal law, to ensure compliance with applica-
ble Federal ingredient reporting requirements, and to im-
prove the enforcement of existing United States trade-
mark laws so as to prevent consumer confusion and decep-
tion. In support of this finding, Congress has determined
that:
(1) PREVENTION OF FEDERAL TAX EVASION.—
(A) Cigarettes manufactured in the United
States that are labeled and shipped for export
are not subject to the excise taxes that other-
wise would be payable with respect to such
products when removed from the premises of
the manufacturer.
(B) Enforcement difficulties are created
for the authorities charged with ensuring that
proper taxes are paid whenever export-labeled
cigarettes are sold or distributed in the United
States.
(C) The Balanced Budget Act of 1997 im-
posed restrictions on the domestic sale or dis-
tribution of export-labeled cigarettes, but such
provisions have not been adequate to prevent
continued evasion of United States taxes on
cigarettes.
(D) Enforcement of Federal cigarette tax
laws will be enhanced substantially if cigarettes
manufactured in the United States and labeled
for export are not sold or distributed in the
United States.
(2) ENSURING
COMPLIANCE
WITH
FEDERAL
HEALTH
WARNINGS
AND
INGREDIENT
REPORTING
REQUIREMENTS.—
(A) Congress has required that specified
warnings appear on the packages of all ciga-
rettes manufactured, packaged, or imported for
sale or distribution in the United States.
(B) Congress has required that each per-
son who manufactures, packages, or imports
cigarettes for sale or distribution in the United
States annually provide the Secretary of Health
and Human Services with a list of the ingredi-
ents added to tobacco in the manufacture of
such cigarettes.
(C) The public health objectives of the
foregoing requirements will be advanced by
adopting additional mechanisms for ensuring
that these requirements are met with respect to
all cigarettes for sale or distribution in the
United States.
(3) ENFORCEMENT OF FEDERAL TRADEMARK
LAWS.—
(A) Cigarettes manufactured for sale
abroad have characteristics that differentiate
them in material respects from cigarettes that
bear the same trademarks but that are manu-
factured for sale in the United States.
(B) Such material differences may include
tar and nicotine yields, incentive programs, and
quality assurances with respect to distribution
and storage.
(C) When cigarettes bearing trademarks
registered in the United States are manufac-
tured for sale or distribution outside the United
States but are diverted or reimported for sale
or distribution in the United States, there is a
substantial risk of consumer confusion and de-
ception. Stickers and other similar devices are
inadequate to prevent such confusion and de-
ception.
(D) In order to effectuate the purposes of
the United States trademark laws, including the
prevention of consumer confusion and decep-
tion, additional legislation is necessary to allow
United States trademark holders to enforce
fully their rights against infringing cigarettes
whether such cigarettes were manufactured in
the United States or abroad.
SEC. 3. RESTRICTIONS ON TOBACCO PRODUCTS INTENDED
FOR EXPORT.
(a) RESTRICTIONS
ON TOBACCO PRODUCTS IN-
TENDED FOR EXPORT.—Section 5754 of the Internal Rev-
enue Code of 1986 is amended to read as follows:
‘‘§ 5754. Restrictions on tobacco products intended
for export
‘‘(a) EXPORT-LABELED TOBACCO PRODUCTS.—To-
bacco products and cigarette papers and tubes manufac-
tured in the United States and labeled or shipped for ex-
portation under this chapter—
‘‘(1) may be transferred to or removed from the
premises of a manufacturer or an export warehouse
proprietor only if such articles are being transferred
or removed without tax in accordance with section
5704;
‘‘(2) except as provided in subsection (b), may
be imported or brought into the United States, after
their exportation, only if—
‘‘(A) the requirements of section 4 of the
Prevent the Evasion of United States Laws by
Gray Market Cigarettes Act of 2000 are satis-
fied; and
‘‘(B) such articles either are eligible to be
released from customs custody with the partial
duty exemption provided in section 5704(d) or
are returned to the original manufacturer of
such product as provided in section 5704(c);
and
‘‘(3) may be sold or held for sale for domestic
consumption in the United States only if such arti-
cles are removed from their export packaging and
repackaged by the original manufacturer or its au-
thorized agent into new packaging that does not
contain the mark, label, or notice required by section
5704(b) and complies with all other domestic law
applicable to such product.
This section shall apply to articles labeled for export by
the original manufacturer even if the packaging or the ap-
pearance of such packaging to the consumer of such arti-
cles has been modified or altered by a person other than
the original manufacturer or its authorized agent so as
to remove or conceal or attempt to remove or conceal (in-
cluding by the placement of a sticker over) any mark,
label, or notice required by section 5704(b). For purposes
of this section, sections 5704(d) and 5761, and such other
provisions as the Secretary may specify by regulations,
references to exportation shall be treated as including a
reference to shipment to the Commonwealth of Puerto
Rico.
‘‘(b) EXCEPTIONS FOR EXPORT-LABELED TOBACCO
PRODUCTS FOR PERSONAL USE.—The restrictions of sub-
section (a)(2) and the penalty and forfeiture provisions in
section 5761(c) shall not apply to personal use quantities
of tobacco products and cigarette papers and tubes, as de-
fined in section 555(b)(8)(G) of the Tariff Act of 1930
(91 U.S.C. 1555(b)(8)(G)).
‘‘(c) CROSS REFERENCE.—Section 5761(c) contains
civil penalties related to violations of this section. Section
5762(b) contains a criminal penalty applicable to any vio-
lation of this section. Section 5763(a)(3) contains for-
feiture provisions related to violations of this section.’’.
(b) CLARIFICATION OF REIMPORTATION RULES.—
Section 5704(d) of the Internal Revenue Code of 1986 (re-
lating to tobacco products and cigarette papers and tubes
exported and returned) is amended by—
(1) striking ‘‘a manufacturer of’’ and inserting
‘‘the original manufacturer, or its authorized agent,
of such’’; and
(2) inserting ‘‘authorized by such manufacturer
to receive such articles’’ after ‘‘proprietor of an ex-
port warehouse’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 5761(e) is amended by adding at
the end the following: ‘‘For an exception to the ap-
plication of the penalty under subsection (c), see sec-
tion 5754(b).’’.
(2) Section 5763(a) of the Internal Revenue
Code of 1986 is amended by adding at the end the
following new paragraph:
‘‘(3) EXPORT-LABELED TOBACCO PRODUCTS OR
CIGARETTE PAPERS OR TUBES.—Any tobacco prod-
uct, cigarette paper, or tube that was imported or
brought into the United States, or is sought to be
imported or brought into the United States in viola-
tion of section 5754(a)(2), or that is sold or being
held for sale in violation of section 5754(a)(3), shall
be forfeited to the United States. Notwithstanding
any other provision of law, any product forfeited to
the United States pursuant to this section shall be
destroyed.’’.
SEC. 4 REQUIREMENTS APPLICABLE TO CIGARETTE IM-
PORTS.
(a) DEFINITIONS.—As used in this section:
(1) SECRETARY.—Except as otherwise indi-
cated, the term ‘‘Secretary’’ means the Secretary of
the Treasury.
(2) PRIMARY PACKAGING.—The term ‘‘primary
packaging’’ refers to the permanent packaging inside
of the innermost cellophane or other transparent
wrapping and labels, if any. Warnings or other
statements shall be deemed ‘‘permanently im-
printed’’ only if printed directly on such primary
packaging and not by way of stickers or other simi-
lar devices.
(b) REQUIREMENTS FOR ENTRY OF CIGARETTES.—
(1) GENERAL
RULE.—Except as provided in
paragraph (2), cigarettes (whether originally manu-
factured in the United States or in a foreign coun-
try) may be imported or brought into the United
States only if—
(A) the manufacturer of those cigarettes
has timely submitted, or has certified that it
will timely submit to the Secretary of Health
and Human Services the lists of the ingredients
added to the tobacco in the manufacture of
such cigarettes as described in section 7 of the
Federal Cigarette Labeling and Advertising Act
(15 U.S.C. 1335a);
(B) the precise warning statements in the
precise format specified in section 4 of the Fed-
eral Cigarette Labeling and Advertising Act (15
U.S.C. 1333) are permanently imprinted on
both—
(i) the primary packaging of all those
cigarettes; and
(ii) any other pack, box, carton, or
container of any kind in which those ciga-
rettes are to be offered for sale or other-
wise distributed to consumers;
(C) the manufacturer or importer of those
cigarettes is in compliance as to those cigarettes
being imported or brought into the United
States with a rotation plan approved by the
Federal Trade Commission pursuant to section
4(c) of the Federal Cigarette Labeling and Ad-
vertising Act (15 U.S.C. 1333(c));
(D) those cigarettes do not bear a trade-
mark registered in the United States for ciga-
rettes, or if those cigarettes do bear a trade-
mark registered in the United States for ciga-
rettes, the owner of such United States trade-
mark registration for cigarettes (or a person
authorized to act on behalf of such owner) has
consented to the importation of such cigarettes
into the United States; and
(E) the importer has submitted at the time
of entry all of the certificates described in para-
graph (3).
(2) EXEMPTIONS.—Cigarettes satisfying the
conditions of any of the following subparagraphs
shall not be subject to the requirements of para-
graph (1)—
(A) PERSONAL-USE
CIGARETTES.—Ciga-
rettes that are imported or brought into the
United States in personal use quantities as de-
fined in section 555(b)(8)(G) of the Tariff Act
of 1930 (91 U.S.C. 1555(b)(8)(G));
(B) CIGARETTES
BROUGHT
INTO
THE
UNITED
STATES
FOR
ANALYSIS.—Cigarettes
that are imported or brought into the United
States solely for the purpose of analysis in
quantities suitable for such purpose, but only if
the importer submits at the time of entry a cer-
tificate signed, under penalties of perjury, by
the consignee (or a person authorized by such
consignee) providing such facts as may be re-
quired by the Secretary to establish that such
consignee is a manufacturer of cigarettes, a
Federal or State government agency, a univer-
sity, or is otherwise engaged in bona fide re-
search and stating that such cigarettes will be
used solely for analysis and will not be sold in
domestic commerce in the United States; or
(C) CIGARETTES
INTENDED
FOR
NON-
COMMERCIAL
USE, REEXPORT, OR
REPACK-
AGING.—Cigarettes—
(i) that are being imported or brought
into the United States for delivery to the
original manufacturer of such cigarettes,
or to a cigarette manufacturer or an ex-
port warehouse authorized by such original
manufacturer;
(ii) that do not bear a trademark reg-
istered in the United States for cigarettes,
or if those cigarettes do bear a trademark
registered in the United States for ciga-
rettes, cigarettes for which the owner of
such United States trademark registration
for cigarettes (or a person authorized to
act on behalf of such owner) has consented
to the importation of such cigarettes into
the United States; and
(iii) for which the importer submits a
certificate signed by the manufacturer or
export warehouse (or a person authorized
by such manufacturer or export ware-
house) to which such cigarettes are to be
delivered (as provided in clause (i)) stat-
ing, under penalties of perjury, with re-
spect to those cigarettes, that it will not
distribute those cigarettes into domestic
commerce unless prior to such distribution
all steps have been taken to comply with
subparagraphs (A), (B), and (C) of para-
graph (1), and, to the extent applicable,
section 5754(a)(3) of the Internal Revenue
Code of 1986.
For purposes of this subsection, a trademark is reg-
istered in the United States if it is registered in the
Patent and Trademark Office under the provisions
of title I of the Act of July 5, 1946 (popularly
known as the Trademark Act of 1946), and a copy
of the certificate of registration of such mark has
been filed with the Secretary. The Secretary shall
make available to interested parties a current list of
the marks so filed.
(3) CUSTOMS CERTIFICATIONS REQUIRED FOR
CIGARETTE IMPORTS.—The certificates that must be
submitted by the importer of cigarettes at the time
of entry in order to comply with paragraph (1)(E)
are—
(A) a certificate signed by the manufac-
turer of such cigarettes or an authorized official
of such manufacturer stating under penalties of
perjury with respect to those cigarettes, that
such manufacturer has timely submitted, and
will continue to submit timely, to the Secretary
of Health and Human Services the ingredient
reporting information required by section 7 of
the Federal Cigarette Labeling and Advertising
Act (15 U.S.C. 1335a);
(B) a certificate signed by such importer
or an authorized official of such importer stat-
ing under penalties of perjury that—
(i) the precise warning statements in
the precise format required by section 4 of
the Federal Cigarette Labeling and Adver-
tising Act (15 U.S.C. 1333) are perma-
nently imprinted on both—
(I) the primary packaging of all
those cigarettes; and
(II) any other pack, box, carton,
or container of any kind in which
those cigarettes are to be offered for
sale or otherwise distributed to con-
sumers; and
(ii) with respect to those cigarettes
being imported or brought into the United
States, such importer has complied, and
will continue to comply, with a rotation
plan approved by the Federal Trade Com-
mission pursuant to section 4(c) of the
Federal Cigarette Labeling and Adver-
tising Act (15 U.S.C. 1333(c)); and
(C) either—
(i) a certificate signed by such im-
porter or an authorized official of such im-
porter stating under penalties of perjury
that those cigarettes and the packages con-
taining those cigarettes do not bear a
trademark registered in the United States
for cigarettes; or
(ii) if those cigarettes do bear a trade-
mark registered in the United States for
cigarettes—
(I) a certificate signed by the
owner of such United States trade-
mark registration for cigarettes (or a
person authorized to act on behalf of
such owner) stating under penalties of
perjury that such owner (or author-
ized person) consents to the importa-
tion of such cigarettes into the United
States; and
(II) a certificate signed by such
importer or an authorized official of
such importer stating under penalties
of perjury that the consent referred to
in clause (i) is accurate, remains in
effect, and has not been withdrawn.
The Secretary may provide by regulation for the
submission of certifications under this subsection in
electronic form if prior to the entry of any cigarettes
into the United States, the person required to pro-
vide such certifications submits to the Secretary a
written statement, signed under penalties of perjury,
verifying the accuracy and completeness of all infor-
mation contained in such electronic submissions.
(c) ENFORCEMENT.—
(1) CIVIL PENALTY.—Any person who violates
a provision of subsection (b) shall, in addition to the
tax and any other penalty provided by law, be liable
for a civil penalty for each violation equal to the
greater of $1,000 or 5 times the amount of the tax
imposed by chapter 52 of the Internal Revenue Code
of 1986 on all cigarettes that are the subject of such
violation.
(2) FORFEITURES.—Any tobacco product, ciga-
rette papers, or tube that was imported or brought
into the United States or is sought to be imported
or brought into the United States in violation of, or
without meeting the requirements of, subsection (b)
shall be forfeited to the United States. Notwith-
standing any other provision of law, any product for-
feited to the United States pursuant to this section
shall be destroyed.
(3) CROSS REFERENCE.—Section 1621 of title
18 of the United States Code contains criminal pen-
alties applicable to the commission of perjury under
this section.
SEC. 5. PENALTIES APPLICABLE TO THE SALE OF CIGA-
RETTES NOT IN COMPLIANCE WITH LABEL-
ING REQUIREMENTS.
(a) CIVIL PENALTY.—Any person who sells or holds
for sale for domestic consumption any cigarettes for which
the precise warning statements in the precise format re-
quired by section 4 of the Cigarette Labeling and Adver-
tising Act (15 U.S.C. 1333) are not permanently im-
printed on both—
(1) the primary packaging of all those ciga-
rettes, and
(2) any other pack, box, carton, or container of
any kind in which those cigarettes are offered for
sale, sold, or otherwise distributed to consumers,
shall, in addition to the tax and any other penalty provided
in this title, be liable for a penalty for each violation equal
to the greater of $1,000 or 5 times the amount of the
tax imposed by chapter 52 of the Internal Revenue Code
of 1986 on all cigarettes that are the subject of such viola-
tion.
(b) FORFEITURES.—Cigarettes that are sold, or are
being held for domestic sale, in the United States (and
not for export or duty-free sale) shall be forfeited to the
United States if the precise warning statements in the pre-
cise format required by section 4 of the Federal Cigarette
Labeling and Advertising Act (15 U.S.C. 1333) are not
permanently imprinted on both—
(1) the primary packaging of all those ciga-
rettes; and
(2) any other pack, box, carton, or container of
any kind in which those cigarettes are offered for
sale, sold, or otherwise distributed to consumers.
(c) ENFORCEMENT.—The provisions of this section
shall be enforced by the Secretary of the Treasury through
the Bureau of Alcohol, Tobacco, and Firearms and such
other agencies within the Department of the Treasury as
the Secretary may determine.
(1) TRANSFERS.—Transfers of cigarettes that
meet the requirements for transfer or removal free
of tax under section 5704 of the Internal Revenue
Code of 1986 and transfers of cigarettes pursuant to
section 4(b) of this Act shall not be treated as sales
for domestic consumption under this section.
(2) Notwithstanding any other provision of law,
any product forfeited to the United States pursuant
to this section shall be destroyed.
(3) For purposes of this section, the term ‘‘pri-
mary packaging’’ shall refer to the permanent pack-
aging inside of the innermost cellophane or other
transparent wrapping and labels, if any. Warnings
or other statements shall be deemed ‘‘permanently
imprinted’’ only if printed directly on such primary
packaging and not by way of stickers or other simi-
lar devices.
SEC. 6. EFFECTIVE DATES.
(a) Except as provided in subsection (b), this Act,
and the amendments made by this Act, shall take effect
upon the date of enactment of this Act. Nothing in this
subsection shall be construed to affect the effective date
of the provisions of section 9302 of the Balanced Budget
Act of 1997 (Public Law 105–33).
(b) The amendments to sections 5754(a)(3) and
5763(a)(3) of the Internal Revenue Code of 1986, and the
provisions of sections 4 and 5 of this Act shall take effect
after the date 60 days from the date of enactment of this
Act.
SEC. 7. STUDY.
The Director of the Bureau of Alcohol, Tobacco, and
Firearms shall study whether the penalties imposed under
sections 5761, 5762, and 5763 of the Internal Revenue
Code of 1986 are adequate to enforce the provisions of
sections 5704(d) and 5754 of such Code and report the
results of such study to the Committee on Ways and
Means of the House of Representatives and the Committee
on Finance of the Senate within 1 year of the date of the
enactment of this Act.
SEC. 8. SEVERABILITY.
If any provision of this section is struck down as it
relates to any particular circumstance, such provision shall
remain valid under all other circumstances, and all other
provisions of this section shall remain in full force and
effect. If any provision of this section is struck down in
its entirety, all other provisions of this section shall remain
in full force and effect.
SEC. 9. SAVINGS.
The civil or criminal penalties and remedies provided
by this Act and any other civil or criminal penalty and
remedy provided by chapter 52 of the Internal Revenue
Code of 1986 and section 4 of this Act that are applicable
to any violation shall not be exclusive, but shall be in addi-
tion to any other remedy provided by law.
Æ