[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5264 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 5264

 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 26, 2002

  Mr. Doggett (for himself, Mr. Waxman, Mr. Hansen, Mr. Becerra, Mr. 
  Cardin, Mr. Coyne, Mr. Levin, Mr. Lewis of Georgia, Mr. Matsui, Mr. 
 McDermott, Mr. McNulty, Mr. Stark, Mr. Abercrombie, Mr. Ackerman, Mr. 
     Allen, Mr. Andrews, Ms. Baldwin, Mr. Bentsen, Mr. Berman, Mr. 
 Blumenauer, Mr. Brown of Ohio, Mrs. Capps, Mr. Capuano, Mr. Carson of 
Oklahoma, Mr. Crowley, Mr. Davis of Illinois, Mr. DeFazio, Ms. DeGette, 
Mr. Delahunt, Ms. Eshoo, Mr. Evans, Mr. Farr of California, Mr. Filner, 
  Mr. Gutierrez, Mr. Hinojosa, Mr. Hoeffel, Mr. Holt, Mr. Honda, Ms. 
Jackson-Lee of Texas, Mr. Jackson of Illinois, Ms. Kaptur, Mr. Kennedy 
 of Rhode Island, Mr. Kildee, Mr. Kind, Mr. Kucinich, Mr. LaFalce, Mr. 
  Lampson, Mr. Langevin, Mr. Lantos, Ms. Lee, Ms. Lofgren, Mr. Lynch, 
Mrs. McCarthy of New York, Ms. McCarthy of Missouri, Mr. McGovern, Mrs. 
 Maloney of New York, Mr. Matheson, Mr. Meehan, Mr. Meeks of New York, 
Mr. George Miller of California, Mrs. Mink of Hawaii, Mr. Nadler, Mrs. 
   Napolitano, Mr. Oberstar, Mr. Olver, Mr. Owens, Mr. Pallone, Mr. 
 Pascrell, Ms. Pelosi, Mr. Rodriguez, Mr. Rothman, Ms. Roybal-Allard, 
  Mr. Rush, Ms. Sanchez, Mr. Sanders, Ms. Schakowsky, Mr. Schiff, Mr. 
Serrano, Mr. Sherman, Ms. Slaughter, Ms. Solis, Mr. Tierney, Mr. Udall 
 of Colorado, Mr. Udall of New Mexico, Ms. Velazquez, Ms. Waters, Ms. 
    Watson of California, Mr. Weiner, Ms. Woolsey, Mr. Wu, and Ms. 
 Millender-McDonald) introduced the following bill; which was referred 
to the Committee on Ways and Means, and in addition to the Committee on 
   the Judiciary, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee 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 Representatives 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 2002''.

          TITLE I--AMENDMENTS TO INTERNAL 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 provision, 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 manufacturer or importer of 
        tobacco products to legibly print a unique serial number on all 
        packages of tobacco products manufactured or imported for sale 
        or distribution. 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 exports.--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 paragraph 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 Secretary, in consultation 
with the Secretary of the Interior, shall promulgate regulations that 
require that each package of a tobacco product that is sold on an 
Indian reservation (as defined in section 403(9) of the Indian Child 
Protection 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 public.''.

SEC. 103. WHOLESALERS REQUIRED TO HAVE PERMIT.

    Section 5712 (relating to application for permit) is amended by 
inserting ``, wholesaler,'' after ``manufacturer''.

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 importer of tobacco products or 
        as an export warehouse 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 regulation 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 (18 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 tobacco products and 
        such other records'', and
            (4) by adding at the end the following new subsection:
    ``(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 ordinary commercial record or invoice 
shall satisfy the requirements 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 subsection:
    ``(b) Reports By Export Warehouse Proprietors.--
            ``(1) In general.--Prior to exportation of tobacco products 
        from the United States, the export warehouse proprietor shall 
        submit a report (in such manner and form as the Secretary may 
        by regulation prescribe) to enable the Secretary to identify 
        the shipment and assure that it reaches its intended 
        destination.
            ``(2) Agreements with foreign governments.--Notwithstanding 
        section 6103 of this title, the Secretary is authorized to 
        enter into agreements with foreign governments to exchange or 
        share information 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 
                        provisions of this chapter or regulations 
                        promulgated thereunder, or
                            ``(ii) preventing or detecting violations 
                        of the provisions of this chapter or 
                        regulations promulgated thereunder, and
                    ``(B) the Secretary obtains assurances from such 
                government that the information will be held in 
                confidence and used only for the purposes specified in 
                clauses (i) and (ii) of subparagraph (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 Tobacco Products.--Section 
5762 is amended--
            (1) by redesignating subsection (b) as subsection (c),
            (2) in subsection (c) (as so redesignated), by inserting 
        ``or (b)'' after ``(a)'', and
            (3) by inserting after subsection (a) the following new 
        subsection:
    ``(b) Offenses Relating to Distribution of Tobacco 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 proprietor, without filing the bond and 
        obtaining the permit where required by this chapter or 
        regulations thereunder;
            ``(2) for a manufacturer, importer, or wholesaler permitted 
        under this chapter intentionally to ship, transport, deliver, 
        or receive any tobacco products from or to any person other 
        than a person permitted under this chapter or a retailer, 
        except a permitted importer may receive foreign tobacco 
        products from a foreign manufacturer or a foreign distributor 
        that have not previously entered the United States;
            ``(3) for any person (other than the original manufacturer 
        of such tobacco products or an export warehouse proprietor 
        authorized to receive any tobacco products that have previously 
        been exported and returned to the United States) to receive any 
        tobacco products that have previously been exported and 
        returned to the United States;
            ``(4) for any export warehouse proprietor intentionally to 
        ship, transport, sell, or deliver for sale any tobacco products 
        to any person other than the original manufacturer of such 
        tobacco products, another export warehouse proprietor, or a 
        foreign purchaser;
            ``(5) for any person (other than a manufacturer or an 
        export warehouse proprietor permitted under this chapter) 
        intentionally 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 for repacking or for re-
        exportation or to an export warehouse proprietor for re-
        exportation;
            ``(6) for any manufacturer, importer, export warehouse 
        proprietor, 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 report 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 subsection shall, 
upon conviction, be fined as provided in section 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 purposes of this section 
and section 5761, the term `intentionally' means doing an act, or 
omitting to do an act, deliberately, and not due to accident, 
inadvertence, or mistake, 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 penalties) is 
amended--
            (1) by striking ``willfully'' and inserting 
        ``intentionally'', and
            (2) by striking ``$1,000'' and inserting ``$10,000''.

SEC. 109. DEFINITIONS.

    (a) Export Warehouse Proprietor.--Subsection (i) of section 5702 
(relating to definition of export warehouse proprietor) is amended by 
inserting before the period 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 cigarettes, 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:
    ``(p) Retailer.--The term `retailer' means any dealer who sells, or 
offers for sale, any tobacco product at retail. 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 equivalent for other tobacco products.
    ``(q) 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, 
2003.

    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)--
                    (A) by striking ``60,000'' and inserting 
                ``30,000'', and
                    (B) by inserting ``or importer'' after ``as a 
                manufacturer'';
            (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 Internal Revenue Code of 1986); and
            ``(7) the term `contraband tobacco product' means a 
        quantity of tobacco product that is equivalent to or more than 
        30,000 cigarettes as determined by regulation, which bear no 
        evidence of the payment 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 contraband tobacco 
        products'' before the period;
            (2) by amending subsection (b) to read as follows:
    ``(b)(1) It shall be unlawful for any person--
            ``(A) knowingly to make any false statement or 
        representation with respect to the information required by this 
        chapter to be kept in the records or reports of any person who 
        ships, sells, or distributes--
                    ``(i) any quantity of cigarettes in excess of 
                30,000 in a single transaction or in a series of 
                related transactions, or
                    ``(ii) tobacco products in such equivalent 
                quantities as shall be determined by regulation, or
            ``(B) knowingly to fail to maintain records or reports, 
        alter or obliterate required markings, or interfere with any 
        inspection, required under this chapter, with respect to such 
        quantity of cigarettes or other tobacco products.''; and
            (3) by adding at the end the following:
    ``(c) It shall be unlawful for any person knowingly to transport 
tobacco products under a false bill of lading or without any bill of 
lading.''.
    (c) Recordkeeping.--Section 2343 of title 18, United States Code, 
is amended--
            (1) in subsection (a), by striking ``60,000 in a single 
        transaction'' and inserting ``30,000 in a single transaction or 
        in a series of related transactions, or, in the case of other 
        tobacco products an equivalent quantity as determined by 
        regulation,'';
            (2) by amending the last sentence of subsection (a) to read 
        as follows: ``Except as provided in subsection (c) of this 
        section, nothing contained herein shall authorize the Secretary 
        to require reporting under this section.'';
            (3) in subsection (b), by striking ``60,000 in a single 
        transaction'' and inserting ``30,000 in a single transaction or 
        in a series of related transactions, or, in the case of other 
        tobacco products an equivalent quantity as determined by 
        regulation,''; and
            (4) by adding at the end the following:
    ``(c)(1) Any person who ships, sells, or distributes tobacco 
products for resale in interstate commerce, whereby such tobacco 
products are shipped into a State taxing the sale or use of such 
tobacco products or who advertises or offers tobacco products for such 
sale or transfer and shipment shall--
            ``(A) first file with the tobacco tax administrator of the 
        State into which such shipment is made or in which such 
        advertisement or offer is disseminated, a statement setting for 
        the person's name, and trade name (if any), and the address of 
        the person'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 memorandum or a copy of the invoice covering 
        each and every shipment of 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 
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 evidence that such 
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 tobacco 
        products; and
            ``(B) the term `tobacco tax administrator' means the State 
        official authorized to administer tobacco 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 by inserting ``or (c)'' after section 
        2343(a)''; and
            (2) by striking subsection (c) and inserting the following 
        new subsection:
    ``(c) Any contraband cigarettes or contraband tobacco products 
involved in any violation of the provisions of this chapter shall be 
subject to seizure and forfeiture, and all provisions of section 
9703(o) of title 31, United States Code, shall, so far as applicable, 
extend to seizures and forfeitures under the provisions of this 
chapter.''
    (e) Repeal.--The Act of October 19, 1949, entitled ``An Act to 
assist States in collecting sales and use taxes on cigarettes'', 63 
Stat. 884 (chapter 10A of title 15, U.S.C.), is hereby repealed.
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