[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1177 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                S. 1177

    To ensure the collection of all cigarette taxes, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              June 3, 2003

  Mr. Hatch (for himself and Mr. Kohl) introduced the following bill; 
  which was read twice and referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
    To ensure the collection of all cigarette taxes, 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.

    This Act may be cited as the ``Prevent All Cigarette Trafficking 
Act'' or ``PACT Act''.

SEC. 2. COLLECTION OF STATE CIGARETTE TAXES.

    (a) Definitions.--Section 1 of the Act of October 19, 1949 (15 
U.S.C. 375; commonly referred to as the ``Jenkins Act''), is amended--
            (1) in paragraph (1), by inserting ``and other legal 
        entities'' after ``individuals'';
            (2) by striking paragraph (3);
            (3) by redesignating paragraphs (4) through (7) as 
        paragraphs (3) through (6), respectively; and
            (4) by adding at the end the following new paragraphs:
            ``(7) The term `delivery sale' means any sale of cigarettes 
        to a consumer if--
                    ``(A) the consumer submits the order for such sale 
                by means of a telephone or other method of voice 
                transmission, the mails, or the Internet or other 
                online service; or
                    ``(B) the cigarettes are delivered by use of a 
                common carrier.
            ``(8) The term `common carrier' means any person (other 
        than a local messenger service or the United States Postal 
        Service (as defined in section 102 of title 39, United States 
        Code)) that holds itself out to the general public as a 
        provider for hire of the transportation by water, land, or air 
        of merchandise, whether or not the person actually operates the 
        vessel, vehicle, or aircraft by which the transportation is 
        provided, between a port or place and a port or place in the 
        United States.''.
    (b) Reports to State Tobacco Tax Administrators.--Section 2 of that 
Act (15 U.S.C. 376) is amended--
            (1) in subsection (a)--
                    (A) by striking ``or transfers'' and inserting ``, 
                transfers, or ships''; and
                    (B) by striking ``to other than a distributor 
                licensed by or located in such State,''; and
            (2) in subsection (b)--
                    (A) by striking ``(1)''; and
                    (B) by striking ``, and (2)'' and all that follows 
                and inserting a period.
    (c) Requirements for Delivery Sales.--That Act is further amended 
by inserting after section 2 the following new section:
    ``Sec. 2A. (a) Each person making a delivery sale into a State 
shall comply with--
            ``(1) the shipping requirements set forth in subsection 
        (b);
            ``(2) the recordkeeping requirements set forth in 
        subsection (c); and
            ``(3) all laws of the State generally applicable to sales 
        of cigarettes that occur entirely within the State, including 
        laws imposing--
                    ``(A) excise taxes;
                    ``(B) sales taxes;
                    ``(C) licensing and tax-stamping requirements; and
                    ``(D) other payment obligations.
    ``(b)(1) Each person who takes a delivery sale order shall include 
on the bill of lading included with the shipping package containing 
cigarettes sold pursuant to such order a clear and conspicuous 
statement providing as follows: `CIGARETTES: FEDERAL LAW REQUIRES THE 
PAYMENT OF ALL APPLICABLE EXCISE AND SALES TAXES, AND COMPLIANCE WITH 
APPLICABLE LICENSING AND TAX-STAMPING OBLIGATIONS'.
    ``(2) Any shipping package described in paragraph (1) that is not 
labeled in accordance with that paragraph shall be treated as non-
deliverable matter by common carriers.
    ``(c)(1) Each person making delivery sales into a State shall keep 
a record of all delivery sales so made, organized by State into which 
such delivery sales are so made.
    ``(2) Records of delivery sales shall be kept under paragraph (1) 
in the year in which made and for the next four years.
    ``(3) Records kept under paragraph (1) shall be made available to 
tobacco tax administrators of the States in order to ensure the 
compliance of persons making delivery sales with the requirements of 
this Act.
    ``(d) Each State shall have the authority to require any person 
making a delivery sale of cigarettes into such State--
            ``(1) to collect or pay the taxes referred to in subsection 
        (a)(3); and
            ``(2) to provide evidence that the manufacturer of the 
        cigarettes sold in such State is in compliance with all 
        Federal, State, or local laws generally applicable to the sale 
        or distribution of cigarettes.''.
    (d) Penalties.--Section 3 of that Act (15 U.S.C. 377) is amended--
            (1) by inserting ``(a)'' before ``Whoever'';
            (2) in subsection (a), as so designated, by striking 
        ``shall be guilty of a misdemeanor and shall be fined not more 
        than $1,000, or imprisoned not more than 6 months'' and 
        inserting ``shall be fined not more than $100,000, imprisoned 
        not more than 2 years''; and
            (3) by adding at the end the following new subsection:
    ``(b)(1) Whoever violates any provision of this Act shall be 
subject to a civil penalty in an amount not to exceed 2 percent of the 
gross sales of cigarettes of such person during the one-year period 
ending on the date of the violation.
    ``(2) A civil penalty under paragraph (1) for a violation of this 
Act is in addition to any criminal penalty under subsection (a) for the 
violation.''.
    (e) Injunctions.--Section 4 of that Act (15 U.S.C. 378) is 
amended--
            (1) by inserting ``(a)'' before ``The United States 
        district courts''; and
            (2) by adding at the end the following new subsections:
    ``(b)(1) A State, through its attorney general, or any person who 
holds a permit under section 5712 of the Internal Revenue Code of 1986, 
may bring an action in the United States district courts to prevent and 
restrain violations of this Act by any person (or by any person 
controlling such person).
    ``(2) Nothing in this section shall be construed to prohibit an 
authorized State official from proceeding in State court on the basis 
of an alleged violation of State law.
    ``(c) The Attorney General, acting through the Director of the 
Bureau of Alcohol, Tobacco, Firearms, and Explosives, shall administer 
and enforce the provisions of this Act.''.

SEC. 3. TREATMENT OF CIGARETTES AS NONMAILABLE MATTER.

    Section 1716 of title 18, United States Code, is amended--
            (1) by redesignating subsection (j) as subsection (k); and
            (2) by inserting after subsection (i) the following new 
        subsection (j):
    ``(j) The transmission in the mails of cigarettes (as that term is 
defined in section 2341(1) of this title) for purposes of sale is 
prohibited, and cigarettes for such purposes are nonmailable and shall 
not be deposited in or carried through the mails.''.

SEC. 4. PENAL PROVISIONS REGARDING TRAFFICKING IN CONTRABAND 
              CIGARETTES.

    (a) Threshold Quantity for Treatment as Contraband.--(1) Section 
2341(2) of title 18, United States Code, is amended by striking 
``60,000 cigarettes'' and inserting ``10,000 cigarettes''.
    (2) Section 2342(b) of that title is amended by striking ``60,000'' 
and inserting ``10,000''.
    (3) Section 2343 of that title is amended--
            (A) in subsection (a), by striking ``60,000'' and inserting 
        ``10,000''; and
            (B) in subsection (b), by striking ``60,000'' and inserting 
        ``10,000''.
    (b) Recordkeeping, Reporting, and Inspection.--Section 2343 of that 
title, as amended by subsection (a)(3) of this section, is further 
amended--
            (1) in subsection (a)--
                    (A) in the matter preceding paragraph (1), by 
                striking ``only--'' and inserting ``such information as 
                the Attorney General considers appropriate for purposes 
                of enforcement of this chapter, including--''; and
                    (B) in the flush matter following paragraph (3), by 
                striking the second sentence;
            (2) by redesignating subsection (b) as subsection (c);
            (3) by inserting after subsection (a) the following new 
        subsection (b):
    ``(b) Any person who engages in a delivery sale, and who ships, 
sells, distributes, or receives any quantity in excess of 10,000 
cigarettes within a single month, shall submit to the Attorney General, 
pursuant to rules or regulations prescribed by the Attorney General, a 
report that sets forth the following:
            ``(1) The person's beginning and ending inventory of 
        cigarettes (in total) for such month.
            ``(2) The total quantity of cigarettes that the person 
        received within such month from each other person (itemized by 
        name and address).
            ``(3) The total quantity of cigarettes that the person 
        distributed within such month to each person (itemized by name 
        and address) other than a retail purchaser.''; and
            (4) by adding at the end the following new subsections:
    ``(d) Any report required to be submitted under this chapter to the 
Attorney General shall also be submitted to the Secretary of the 
Treasury.
    ``(e) In this section:
            ``(1) The term `delivery sale' means any sale of cigarettes 
        to a consumer if--
                    ``(A) the consumer submits the order for such sale 
                by means of a telephone or other method of voice 
                transmission, the mails, or the Internet or other 
                online service; or
                    ``(B) the cigarettes are delivered by use of a 
                common carrier.
            ``(2) The term `common carrier' means any person (other 
        than a local messenger service or the United States Postal 
        Service (as defined in section 102 of title 39, United States 
        Code)) that holds itself out to the general public as a 
        provider for hire of the transportation by water, land, or air 
        of merchandise, whether or not the person actually operates the 
        vessel, vehicle, or aircraft by which the transportation is 
        provided, between a port or place and a port or place in the 
        United States.''.
    (c) Disposal or Use of Forfeited Cigarettes.--Section 2344(c) of 
that title is amended by striking ``seizure and forfeiture,'' and all 
that follows and inserting ``seizure and forfeiture, and any cigarettes 
so seized and forfeited shall be either--
            ``(1) destroyed and not resold; or
            ``(2) used for undercover investigative operations for the 
        detection and prosecution of crimes, and then destroyed and not 
        resold.''.
    (d) Enforcement.--Section 2346 of that title is amended--
            (1) by inserting ``(a)'' before ``The Attorney General''; 
        and
            (2) by adding at the end the following new subsection:
    ``(b) A State, through its attorney general, or any person who 
holds a permit under section 5712 of the Internal Revenue Code of 1986, 
may bring an action in the United States district courts to prevent and 
restrain violations of this chapter by any person (or by any person 
controlling such person).''.
    (e) Conforming and Clerical Amendments.--(1) The section heading 
for section 2343 of that title is amended to read as follows:
``Sec. 2343. Recordkeeping, reporting, and inspection''.
    (2) The table of sections at the beginning of chapter 114 of that 
title is amended by striking the item relating to section 2343 and 
inserting the following new item:

``2343. Recordkeeping, reporting, and inspection.''.

SEC. 5. COMPLIANCE WITH MODEL STATUTE OR QUALIFYING STATUTE.

    (a) In General.--An interstate tobacco seller may not sell in, 
deliver to, or place for delivery to a State that is a party to the 
Master Settlement Agreement any cigarette manufactured by a Tobacco 
Product Manufacturer that is not in full compliance with the terms of 
the Model Statute or Qualifying Statute enacted by such State requiring 
funds to be placed into a qualified escrow account under specified 
conditions, or any regulations promulgated pursuant to such statute.
    (b) Penalties.--(1) Whoever shall knowingly and willfully violate 
subsection (a) shall be fined not more than $100,000, imprisoned not 
more than 2 years, or both.
    (2) Whoever shall violate subsection (a) shall be subject to a 
civil penalty in an amount not to exceed 2 percent of the gross sales 
of cigarettes of such person during the one-year period ending on the 
date of the violation.
    (3) A civil penalty under paragraph (2) for a violation of 
subsection (a) is in addition to any criminal penalty under paragraph 
(1) for the violation.
    (c) Jurisdiction To Prevent and Restrain Violations.--(1) The 
United States district courts shall have jurisdiction to prevent and 
restrain violations of subsection (a).
    (2) A State, through its attorney general, or any person who holds 
a permit under section 5712 of the Internal Revenue Code of 1986, may 
bring an action in the United States district courts to prevent and 
restrain violations of subsection (a) by any person (or by any person 
controlling such person).
    (3) Nothing in this subsection shall be construed to prohibit an 
authorized State official from proceeding in State court on the basis 
of an alleged violation of State law.
    (4) The Attorney General, acting through the Director of the Bureau 
of Alcohol, Tobacco, Firearms, and Explosives, shall administer and 
enforce subsection (a).
    (d) Definitions.--In this section:
            (1) Master settlement agreement.-- The term ``Master 
        Settlement Agreement'' means the agreement executed November 
        23, 1998, by the Attorneys General of 46 States, the District 
        of Columbia, the Commonwealth of Puerto Rico, and four 
        Territories of the United States, on the one hand, and certain 
        tobacco manufacturers on the other hand.
            (2) Tobacco product manufacturer.--The term ``Tobacco 
        Product Manufacturer'' has the meaning given that term in 
        section II(uu) of the Master Settlement Agreement.
            (3) Model statute; qualifying statute.--The terms ``Model 
        Statute'' and ``Qualifying Statute'' means a statute as defined 
        in section IX(d)(2)(e) of the Master Settlement Agreement.

SEC. 6. UNDERCOVER CRIMINAL INVESTIGATIONS OF THE BUREAU OF ALCOHOL, 
              TOBACCO, FIREARMS, AND EXPLOSIVES.

    (a) In General.--(1) Commencing as of the date of the enactment of 
this Act and without fiscal year limitation, the authorities in section 
102(b) of the Department of Justice and Related Agencies Appropriations 
Act, 1993 (title I of Public Law 102-395; 106 Stat. 1838) shall be 
available to the Bureau of Alcohol, Tobacco, Firearms, and Explosives 
for undercover investigative operations of the Bureau which are 
necessary for the detection and prosecution of crimes against the 
United States.
    (2) For purposes of the exercise of the authorities referred to in 
paragraph (1) by the Bureau, a reference in such section 102(b) to the 
Federal Bureau of Investigation shall be deemed to be a reference to 
the Bureau of Alcohol, Tobacco, Firearms, and Explosives, and a 
reference to the Director of the Federal Bureau of Investigation shall 
be deemed to be a reference to the Director of the Bureau of Alcohol, 
Tobacco, Firearms, and Explosives.
    (b) Limitations in Appropriations Acts.--The exercise of the 
authorities referred to in subsection (a)(1) by the Bureau of Alcohol, 
Tobacco, Firearms, and Explosives shall be subject to the provisions of 
appropriations Acts.

SEC. 7. INSPECTION BY BUREAU OF ALCOHOL, TOBACCO, FIREARMS, AND 
              EXPLOSIVES OF RECORDS OF CERTAIN CIGARETTE SELLERS.

    (a) In General.--Any officer of the Bureau of Alcohol, Tobacco, 
Firearms and Explosives may, during normal business hours, enter the 
premises of any person described in subsection (b) for the purposes of 
inspecting--
            (1) any records or information required to be maintained by 
        such person under the provisions of law referred to in 
        subsection (c); or
            (2) any cigarettes kept or stored by such person at such 
        premises.
    (b) Covered Persons.--A person described in this subsection is any 
person who engages in a delivery sale, and who ships, sells, 
distributes, or receives any quantity in excess of 10,000 cigarettes 
within a single month.
    (c) Covered Provisions of Law.--The provisions of law referred to 
in this subsection are as follows:
            (1) The Act of October 19, 1949 (15 U.S.C. 375; commonly 
        referred to as the ``Jenkins Act'').
            (2) Chapter 114 of title 18, United States Code.
            (3) This Act.
    (d) Delivery Sale Defined.--In this section, the term ``delivery 
sale'' has the meaning given that term in 2343(e)(1) of title 18, 
United States Code, as amended by section 4(b)(3) of this Act.

SEC. 8. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this Act 
shall take effect 90 days after the date of the enactment of this Act.
    (b) ATFE Authority.--
            (1) In general.--Sections 6 and 7 shall take effect on the 
        date of the enactment of this Act.
            (2) Definition.--For purposes of section 7, the definition 
        of delivery sale in section 2343(e)(1) of title 18, United 
        States Code, as amended by section 4(b)(3) of this Act, shall 
        take effect on the date of the enactment of this Act.

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