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






                                                       Calendar No. 241
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, Mr. Kohl, Mr. Grassley, Mr. Sessions, Mr. 
Chambliss, Mr. Leahy, Mr. Kennedy, Mr. DeWine, and Mr. Reid) introduced 
the following bill; which was read twice and referred to the Committee 
                            on the Judiciary

                July 31 (legislative day, July 21), 2003

 Reported by Mr. Hatch, with an amendment and an amendment to the title
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 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,

<DELETED>SECTION 1. SHORT TITLE.</DELETED>

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

<DELETED>SEC. 2. COLLECTION OF STATE CIGARETTE TAXES.</DELETED>

<DELETED>    (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--</DELETED>
        <DELETED>    (1) in paragraph (1), by inserting ``and other 
        legal entities'' after ``individuals'';</DELETED>
        <DELETED>    (2) by striking paragraph (3);</DELETED>
        <DELETED>    (3) by redesignating paragraphs (4) through (7) as 
        paragraphs (3) through (6), respectively; and</DELETED>
        <DELETED>    (4) by adding at the end the following new 
        paragraphs:</DELETED>
        <DELETED>    ``(7) The term `delivery sale' means any sale of 
        cigarettes to a consumer if--</DELETED>
                <DELETED>    ``(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</DELETED>
                <DELETED>    ``(B) the cigarettes are delivered by use 
                of a common carrier.</DELETED>
        <DELETED>    ``(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.''.</DELETED>
<DELETED>    (b) Reports to State Tobacco Tax Administrators.--Section 
2 of that Act (15 U.S.C. 376) is amended--</DELETED>
        <DELETED>    (1) in subsection (a)--</DELETED>
                <DELETED>    (A) by striking ``or transfers'' and 
                inserting ``, transfers, or ships''; and</DELETED>
                <DELETED>    (B) by striking ``to other than a 
                distributor licensed by or located in such State,''; 
                and</DELETED>
        <DELETED>    (2) in subsection (b)--</DELETED>
                <DELETED>    (A) by striking ``(1)''; and</DELETED>
                <DELETED>    (B) by striking ``, and (2)'' and all that 
                follows and inserting a period.</DELETED>
<DELETED>    (c) Requirements for Delivery Sales.--That Act is further 
amended by inserting after section 2 the following new 
section:</DELETED>
<DELETED>    ``Sec. 2A. (a) Each person making a delivery sale into a 
State shall comply with--</DELETED>
        <DELETED>    ``(1) the shipping requirements set forth in 
        subsection (b);</DELETED>
        <DELETED>    ``(2) the recordkeeping requirements set forth in 
        subsection (c); and</DELETED>
        <DELETED>    ``(3) all laws of the State generally applicable 
        to sales of cigarettes that occur entirely within the State, 
        including laws imposing--</DELETED>
                <DELETED>    ``(A) excise taxes;</DELETED>
                <DELETED>    ``(B) sales taxes;</DELETED>
                <DELETED>    ``(C) licensing and tax-stamping 
                requirements; and</DELETED>
                <DELETED>    ``(D) other payment obligations.</DELETED>
<DELETED>    ``(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'.</DELETED>
<DELETED>    ``(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.</DELETED>
<DELETED>    ``(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.</DELETED>
<DELETED>    ``(2) Records of delivery sales shall be kept under 
paragraph (1) in the year in which made and for the next four 
years.</DELETED>
<DELETED>    ``(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.</DELETED>
<DELETED>    ``(d) Each State shall have the authority to require any 
person making a delivery sale of cigarettes into such State--</DELETED>
        <DELETED>    ``(1) to collect or pay the taxes referred to in 
        subsection (a)(3); and</DELETED>
        <DELETED>    ``(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.''.</DELETED>
<DELETED>    (d) Penalties.--Section 3 of that Act (15 U.S.C. 377) is 
amended--</DELETED>
        <DELETED>    (1) by inserting ``(a)'' before 
        ``Whoever'';</DELETED>
        <DELETED>    (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</DELETED>
        <DELETED>    (3) by adding at the end the following new 
        subsection:</DELETED>
<DELETED>    ``(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.</DELETED>
<DELETED>    ``(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.''.</DELETED>
<DELETED>    (e) Injunctions.--Section 4 of that Act (15 U.S.C. 378) is 
amended--</DELETED>
        <DELETED>    (1) by inserting ``(a)'' before ``The United 
        States district courts''; and</DELETED>
        <DELETED>    (2) by adding at the end the following new 
        subsections:</DELETED>
<DELETED>    ``(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).</DELETED>
<DELETED>    ``(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.</DELETED>
<DELETED>    ``(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.''.</DELETED>

<DELETED>SEC. 3. TREATMENT OF CIGARETTES AS NONMAILABLE 
              MATTER.</DELETED>

<DELETED>    Section 1716 of title 18, United States Code, is amended--
</DELETED>
        <DELETED>    (1) by redesignating subsection (j) as subsection 
        (k); and</DELETED>
        <DELETED>    (2) by inserting after subsection (i) the 
        following new subsection (j):</DELETED>
<DELETED>    ``(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.''.</DELETED>

<DELETED>SEC. 4. PENAL PROVISIONS REGARDING TRAFFICKING IN CONTRABAND 
              CIGARETTES.</DELETED>

<DELETED>    (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''.</DELETED>
<DELETED>    (2) Section 2342(b) of that title is amended by striking 
``60,000'' and inserting ``10,000''.</DELETED>
<DELETED>    (3) Section 2343 of that title is amended--</DELETED>
        <DELETED>    (A) in subsection (a), by striking ``60,000'' and 
        inserting ``10,000''; and</DELETED>
        <DELETED>    (B) in subsection (b), by striking ``60,000'' and 
        inserting ``10,000''.</DELETED>
<DELETED>    (b) Recordkeeping, Reporting, and Inspection.--Section 
2343 of that title, as amended by subsection (a)(3) of this section, is 
further amended--</DELETED>
        <DELETED>    (1) in subsection (a)--</DELETED>
                <DELETED>    (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</DELETED>
                <DELETED>    (B) in the flush matter following 
                paragraph (3), by striking the second 
                sentence;</DELETED>
        <DELETED>    (2) by redesignating subsection (b) as subsection 
        (c);</DELETED>
        <DELETED>    (3) by inserting after subsection (a) the 
        following new subsection (b):</DELETED>
<DELETED>    ``(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:</DELETED>
        <DELETED>    ``(1) The person's beginning and ending inventory 
        of cigarettes (in total) for such month.</DELETED>
        <DELETED>    ``(2) The total quantity of cigarettes that the 
        person received within such month from each other person 
        (itemized by name and address).</DELETED>
        <DELETED>    ``(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</DELETED>
        <DELETED>    (4) by adding at the end the following new 
        subsections:</DELETED>
<DELETED>    ``(d) Any report required to be submitted under this 
chapter to the Attorney General shall also be submitted to the 
Secretary of the Treasury.</DELETED>
<DELETED>    ``(e) In this section:</DELETED>
        <DELETED>    ``(1) The term `delivery sale' means any sale of 
        cigarettes to a consumer if--</DELETED>
                <DELETED>    ``(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</DELETED>
                <DELETED>    ``(B) the cigarettes are delivered by use 
                of a common carrier.</DELETED>
        <DELETED>    ``(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.''.</DELETED>
<DELETED>    (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--</DELETED>
        <DELETED>    ``(1) destroyed and not resold; or</DELETED>
        <DELETED>    ``(2) used for undercover investigative operations 
        for the detection and prosecution of crimes, and then destroyed 
        and not resold.''.</DELETED>
<DELETED>    (d) Enforcement.--Section 2346 of that title is amended--
</DELETED>
        <DELETED>    (1) by inserting ``(a)'' before ``The Attorney 
        General''; and</DELETED>
        <DELETED>    (2) by adding at the end the following new 
        subsection:</DELETED>
<DELETED>    ``(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).''.</DELETED>
<DELETED>    (e) Conforming and Clerical Amendments.--(1) The section 
heading for section 2343 of that title is amended to read as 
follows:</DELETED>
<DELETED>``Sec. 2343. Recordkeeping, reporting, and 
              inspection''.</DELETED>
<DELETED>    (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:</DELETED>

<DELETED>``2343. Recordkeeping, reporting, and inspection.''.

<DELETED>SEC. 5. COMPLIANCE WITH MODEL STATUTE OR QUALIFYING 
              STATUTE.</DELETED>

<DELETED>    (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.</DELETED>
<DELETED>    (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.</DELETED>
<DELETED>    (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.</DELETED>
<DELETED>    (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.</DELETED>
<DELETED>    (c) Jurisdiction To Prevent and Restrain Violations.--(1) 
The United States district courts shall have jurisdiction to prevent 
and restrain violations of subsection (a).</DELETED>
<DELETED>    (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).</DELETED>
<DELETED>    (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.</DELETED>
<DELETED>    (4) The Attorney General, acting through the Director of 
the Bureau of Alcohol, Tobacco, Firearms, and Explosives, shall 
administer and enforce subsection (a).</DELETED>
<DELETED>    (d) Definitions.--In this section:</DELETED>
        <DELETED>    (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.</DELETED>
        <DELETED>    (2) Tobacco product manufacturer.--The term 
        ``Tobacco Product Manufacturer'' has the meaning given that 
        term in section II(uu) of the Master Settlement 
        Agreement.</DELETED>
        <DELETED>    (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.</DELETED>

<DELETED>SEC. 6. UNDERCOVER CRIMINAL INVESTIGATIONS OF THE BUREAU OF 
              ALCOHOL, TOBACCO, FIREARMS, AND EXPLOSIVES.</DELETED>

<DELETED>    (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.</DELETED>
<DELETED>    (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.</DELETED>
<DELETED>    (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.</DELETED>

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

<DELETED>    (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--</DELETED>
        <DELETED>    (1) any records or information required to be 
        maintained by such person under the provisions of law referred 
        to in subsection (c); or</DELETED>
        <DELETED>    (2) any cigarettes kept or stored by such person 
        at such premises.</DELETED>
<DELETED>    (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.</DELETED>
<DELETED>    (c) Covered Provisions of Law.--The provisions of law 
referred to in this subsection are as follows:</DELETED>
        <DELETED>    (1) The Act of October 19, 1949 (15 U.S.C. 375; 
        commonly referred to as the ``Jenkins Act'').</DELETED>
        <DELETED>    (2) Chapter 114 of title 18, United States 
        Code.</DELETED>
        <DELETED>    (3) This Act.</DELETED>
<DELETED>    (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.</DELETED>

<DELETED>SEC. 8. EFFECTIVE DATE.</DELETED>

<DELETED>    (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.</DELETED>
<DELETED>    (b) ATFE Authority.--</DELETED>
        <DELETED>    (1) In general.--Sections 6 and 7 shall take 
        effect on the date of the enactment of this Act.</DELETED>
        <DELETED>    (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.</DELETED>

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 AND SMOKELESS TOBACCO 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) by striking paragraphs (1), (2), and (3) and inserting 
        the following new paragraphs:
            ``(1) The term `attorney general', with respect to a State, 
        means the attorney general or other chief law enforcement 
        officer of the State, or the designee of that officer.
            ``(2) The term `cigarette' means--
                    ``(A) any roll of tobacco wrapped in paper or in 
                any substance not containing tobacco which is to be 
                heated or burned;
                    ``(B) any roll of tobacco wrapped in any substance 
                containing tobacco that, because of its appearance, the 
                type of tobacco used in the filler, or its packaging or 
                labeling, is likely to be offered to, or purchased by, 
                consumers as a cigarette described in subparagraph (A);
                    ``(C) any roll of tobacco wrapped in any substance 
                that because of its appearance, the type of tobacco 
                used in the filler, or its packaging or labeling, is 
                likely to be offered to, or purchased by, consumers as 
                a cigarette; or
                    ``(D) loose rolling tobacco that, because of its 
                appearance, type, packaging, or labeling, is likely to 
                be offered to, or purchased by, consumers as tobacco 
                for making cigarettes.
            ``(3) The term `smokeless tobacco' means any finely cut, 
        ground, powdered, or leaf tobacco that is intended to be placed 
        in the oral or nasal cavity or otherwise consumed without being 
        combusted.'';
            (2) by striking paragraph (6) and inserting the following 
        new paragraph (6):
            ``(6) The term `delivery sale' means any sale of cigarettes 
        or smokeless tobacco in interstate commerce 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 the seller is otherwise not in the 
                physical presence of the buyer when the request for 
                purchase or order is made; or
                    ``(B) the cigarettes or smokeless tobacco are 
                delivered by use of a common carrier, private delivery 
                service, or the mails, or the seller is not in the 
                physical presence of the buyer when the buyer obtains 
                personal possession of the delivered cigarettes or 
                smokeless tobacco.''; and
            (3) by adding at the end the following new paragraphs:
            ``(8) The term `delivery seller' means a person who makes a 
        delivery sale.
            ``(9) 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.
            ``(10) The term `interstate commerce' means commerce 
        between a State and any place outside the State, commerce 
        between a State and any Indian lands in the State, or commerce 
        between points in the same State but though any place outside 
        the State or through any Indian lands.
            ``(11) The term `person' means an individual, corporation, 
        company, association, firm, partnership, society, State 
        government, local government, Indian tribal government, 
        governmental organization of such government, or joint stock 
        company.
            ``(12) The term `State' means a State of the United States, 
        the District of Columbia, the Commonwealth of Puerto Rico, or 
        any territory or possession of the United States.''.
    (b) Reports to State Tobacco Tax Administrators.--Section 2 of that 
Act (15 U.S.C. 376) is amended--
            (1) by striking ``cigarettes'' each place it appears and 
        inserting ``cigarettes or smokeless tobacco'';
            (2) in subsection (a)--
                    (A) in the matter preceding paragraph (1)--
                            (i) by striking ``or transfers'' and 
                        inserting ``, transfers, or ships''; and
                            (ii) by striking ``to other than a 
                        distributor licensed by or located in such 
                        State,'';
                    (B) in paragraph (1), by inserting before the 
                semicolon the following: ``, as well as telephone 
                numbers for each place of business, a principal 
                electronic mail address, any website addresses, and the 
                name, address, and telephone number of an agent in the 
                State authorized to accept service on behalf of such 
                person''; and
                    (C) in paragraph (2), by striking ``and the 
                quantity thereof'' and inserting ``the quantity 
                thereof, and the name, address, and phone number of the 
                person delivering the shipment to the recipient on 
                behalf of the delivery seller''; and
            (3) 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 delivery seller shall comply with--
            ``(1) the shipping requirements set forth in subsection 
        (b);
            ``(2) the recordkeeping requirements set forth in 
        subsection (c);
            ``(3) all State and other laws generally applicable to 
        sales of cigarettes or smokeless tobacco 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 or legal 
                requirements relating to the sale, distribution, or 
                delivery of cigarettes or smokeless tobacco; and
            ``(4) the tax collection requirements set forth in 
        subsection (d).
    ``(b)(1) Each delivery seller shall include on the bill of lading 
included with the shipping package containing cigarettes or smokeless 
tobacco sold pursuant to such order a clear and conspicuous statement 
providing as follows: `CIGARETTES/SMOKELESS TOBACCO: 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 a common carrier or the United States Postal 
Service if the common carrier or the United States Postal Service, as 
the case may be, knows or should know the contents of the package.
    ``(c)(1) Each delivery seller shall keep a record of all delivery 
sales so made, including all of the information described in section 
2(a)(2), 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, attorneys general of the 
States, and the Attorney General of the United States in order to 
ensure the compliance of persons making delivery sales with the 
requirements of this Act.
    ``(d) Unless the law of the State and place in which cigarettes or 
smokeless tobacco are delivered pursuant to a delivery sale in 
interstate commerce requires otherwise for the payment to the 
government of an excise tax imposed on the delivery sale, or provides, 
for delivery sales of smokeless tobacco, for the delivery seller to 
collect the excise tax from the consumer and remit the excise tax to 
the government, the cigarettes or smokeless tobacco may not be 
delivered to the buyer unless in advance of the delivery--
            ``(1) the excise tax has been paid to the government; and
            ``(2) any required stamps or other indicia that the excise 
        tax has been paid are properly affixed or applied to the 
        cigarettes or smokeless tobacco.
    ``(e)(1) Each State may compile a list of delivery sellers who are 
in compliance with this Act with respect to such State. If a State 
posts a list pursuant to this subsection that specifically refers to 
this subsection, no common carrier or other person may knowingly 
deliver cigarettes or smokeless tobacco to consumers in such State 
unless the delivery seller is on the list at the time of delivery.
    ``(2)(A) Each State may compile a list of delivery sellers who are 
not in compliance with this Act with respect to such State.
    ``(B) A State may provide such a list to a common carrier, the 
United States Postal Service, or other person. Such a list shall be 
confidential, and a common carrier, the United States Postal Service, 
or other person that receives such a list shall maintain the 
confidentiality of such list.
    ``(C) If a State provides such a list pursuant to this subsection 
that specifically refers to this subsection, no common carrier, the 
United States Postal Service, or other person may knowingly deliver any 
item to a consumer in such State for a delivery seller on such list 
unless the common carrier, the United States Postal Service, or person 
in good faith determines that the item does not include cigarettes or 
smokeless tobacco.
    ``(f) For purposes of this Act, a delivery sale shall be deemed to 
have occurred in the State and place where the buyer obtains personal 
possession of the cigarettes or smokeless tobacco, and a delivery 
pursuant to a delivery sale is deemed to have been initiated or ordered 
by the delivery seller.''.
    (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 guilty of a felony, fined under subchapter 
        C of chapter 227 of title 18, imprisoned not more than three 
        years, or both''; 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 the greater of--
            ``(A) $5,000 in the case of the first violation, or $10,000 
        for any other violation; or
            ``(B) for any violation, 2 percent of the gross sales of 
        cigarettes or smokeless tobacco 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) Enforcement.--Section 4 of that Act (15 U.S.C. 378) is 
amended--
            (1) by inserting ``(a)'' before ``The United States 
        district courts'';
            (2) in subsection (a), as so designated, by inserting 
        before the period the following: ``, and to provide other 
        appropriate injunctive or equitable relief, including money 
        damages, for such violations''; and
            (3) 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) A State, through its attorney general, may in a civil action 
under this Act obtain any other appropriate relief for violations of 
this Act by any person (or from any person controlling such person), 
including civil penalties, money damages, and injunctive or other 
equitable relief.
    ``(3) The remedies available under paragraphs (1) and (2) are in 
addition to any other remedies available under Federal, State, or other 
law.
    ``(4) Nothing in this Act shall be construed to prohibit an 
authorized State official from proceeding in State court, or taking 
other enforcement actions, on the basis of an alleged violation of 
State or other law.
    ``(c) The Attorney General shall administer and enforce the 
provisions of this Act.
    ``(d)(1) Any person who holds a permit under section 5712 of the 
Internal Revenue Code of 1986 who commences a civil action under 
paragraph (1) shall inform the Attorney General of the United States of 
the action.
    ``(2) It is the sense of Congress that any attorney general of a 
State who commences a civil action under paragraph (1) or (2) should 
inform the Attorney General of the United States of the action.
    ``(e) The Attorney General of the United States shall make 
available to the public information about all actions under subsection 
(a), and the resolution of such actions, including by posting such 
information on the Internet and by other means.''.

SEC. 3. TREATMENT OF CIGARETTES AND SMOKELESS TOBACCO AS NONMAILABLE 
              MATTER.

    Section 1716 of title 18, United States Code, is amended--
            (1) by redesignating subsections (j) and (k) as subsections 
        (k) and (l), respectively; and
            (2) by inserting after subsection (i) the following new 
        subsection (j):
    ``(j) The transmission in the mails of any tobacco product, 
including cigarettes (as that term is defined in section 1(2) of the 
Act of October 19, 1949 (15 U.S.C. 375; commonly referred to as the 
`Jenkins Act')) and smokeless tobacco (as that term is defined in 
section 1(3) of that Act), is prohibited, and tobacco products are 
nonmailable and shall not be deposited in or carried through the 
mails.''.

SEC. 4. PENAL PROVISIONS REGARDING TRAFFICKING IN CONTRABAND CIGARETTES 
              OR SMOKELESS TOBACCO.

    (a) Threshold Quantity for Treatment as Contraband Cigarettes.--(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) Contraband Smokeless Tobacco.--(1) Section 2341 of that title 
is amended--
            (A) in paragraph (4), by striking ``and'' at the end;
            (B) in paragraph (5), by striking the period at the end and 
        inserting a semicolon; and
            (C) by adding at the end the following new paragraphs:
            ``(6) the term `smokeless tobacco' means any finely cut, 
        ground, powdered, or leaf tobacco that is intended to be placed 
        in the oral or nasal cavity or otherwise consumed without being 
        combusted; and
            ``(7) the term `contraband smokeless tobacco' means a 
        quantity in excess of 500 single-unit consumer-sized cans or 
        packages of smokeless tobacco, or their equivalent, that are in 
        the possession of any person other than--
                    ``(A) a person holding a permit issued pursuant to 
                chapter 52 of the Internal Revenue Code of 1986 as 
                manufacturer of tobacco products or as an export 
                warehouse proprietor, a person operating a customs 
                bonded warehouse pursuant to section 311 or 555 of the 
                Tariff Act of 1930 (19 U.S.C. 1311, 1555), or an agent 
                of such person;
                    ``(B) a common carrier transporting such smokeless 
                tobacco under a proper bill of lading or freight bill 
                which states the quantity, source, and designation of 
                such smokeless tobacco;
                    ``(C) a person who--
                            ``(i) is licensed or otherwise authorized 
                        by the State where such smokeless tobacco is 
                        found to engage in the business of selling or 
                        distributing tobacco products; and
                            ``(ii) has complied with the accounting, 
                        tax, and payment requirements relating to such 
                        license or authorization with respect to such 
                        smokeless tobacco; or
                    ``(D) an officer, employee, or agent of the United 
                States or a State, or any department, agency, or 
                instrumentality of the United States or a State 
                (including any political subdivision of a State), 
                having possession of such smokeless tobacco in 
                connection with the performance of official duties.''.
    (2) Section 2342(a) of that title is amended by inserting ``or 
contraband smokeless tobacco'' after ``contraband cigarettes''.
    (3) Section 2343(a) of that title is amended by inserting ``, or 
any quantity of smokeless tobacco in excess of 500 single-unit 
consumer-sized cans or packages,'' before ``in a single transaction''.
    (4) Section 2344(c) of that title is amended by inserting ``or 
contraband smokeless tobacco'' after ``contraband cigarettes''.
    (5) Section 2345 of that title is amended by inserting ``or 
smokeless tobacco'' after ``cigarettes'' each place it appears.
    (c) Recordkeeping, Reporting, and Inspection.--Section 2343 of that 
title, as amended by 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, or distributes any quantity in excess of 10,000 cigarettes, or 
any quantity in excess of 500 single-unit consumer-sized cans or 
packages of smokeless tobacco, or their equivalent, 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 and cans or packages of smokeless tobacco (in total) 
        for such month.
            ``(2) The total quantity of cigarettes and cans or packages 
        of smokeless tobacco that the person received within such month 
        from each other person (itemized by name and address).
            ``(3) The total quantity of cigarettes and cans or packages 
        of smokeless tobacco 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 and to the attorneys general and the tax administrators of the 
States from where the shipments, deliveries, or distributions both 
originated and concluded.
    ``(e) In this section, the term `delivery sale' means any sale of 
cigarettes or smokeless tobacco in interstate commerce 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 by any other means where the 
                consumer is not in the same physical location as the 
                seller when the purchase or offer of sale is made; or
                    ``(B) the cigarettes or smokeless tobacco are 
                delivered by use of the mails, common carrier, private 
                delivery service, or any other means where the consumer 
                is not in the same physical location as the seller when 
                the consumer obtains physical possession of the 
                cigarettes or smokeless tobacco.
    ``(f) In this section, the term `interstate commerce' means 
commerce between a State and any place outside the State, commerce 
between a State and any Indian lands in the State, or commerce between 
points in the same State but through any place outside the State or 
though any Indian lands.''.
    (d) Disposal or Use of Forfeited Cigarettes and Smokeless 
Tobacco.--Section 2344(c) of that title, as amended by this section, is 
further amended by striking ``seizure and forfeiture,'' and all that 
follows and inserting ``seizure and forfeiture, and any cigarettes or 
smokeless tobacco 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.''.
    (e) 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)(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 chapter by any person (or by any person 
controlling such person).
    ``(2) A State, through its attorney general, may in a civil action 
under paragraph (1) also obtain any other appropriate relief for 
violations of this chapter from any person (or by any person 
controlling such person), including civil penalties, money damages, and 
injunctive or other equitable relief.
    ``(3) The remedies under paragraphs (1) and (2) are an addition to 
any other remedies under Federal, State, or other law.
    ``(4) Nothing in this subsection shall be construed to prohibit an 
authorized State official from proceeding in State court, or taking 
other enforcement actions, on the basis of an alleged violation of 
State or other law.''.
    (f) 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.''.
    (3)(A) The heading for chapter 114 of that title is amended to read 
as follows:

   ``CHAPTER 114--TRAFFICKING IN CONTRABAND CIGARETTES AND SMOKELESS 
                               TOBACCO''.

    (B) The table of chapters at the beginning of part I of that title 
is amended by striking the item relating to section 114 and inserting 
the following new item:

``114. Trafficking in contraband cigarettes and smokeless       2341''.
                            tobacco.

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 sale in 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 terms.
    (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 and in addition to any other damages or relief 
available under law.
    (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) A State, through its attorney general, may in a civil action 
against any person violating subsection (a) obtain any appropriate 
relief for violations of this section from any person (or by any person 
controlling such person), including civil penalties, money damages, and 
injunctive or other equitable relief.
    (4) The remedies available under paragraphs (2) and (3) are in 
addition to any other remedies available under Federal, State, or other 
law.
    (5) Nothing in this subsection shall be construed to prohibit an 
authorized State official from proceeding in State court or taking 
other enforcement actions on the basis of an alleged violation of State 
or other law.
    (6) The Attorney General 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.
            (4) Delivery sale.--The term ``delivery sale'' means any 
        sale of cigarettes or smokeless tobacco in interstate commerce 
        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 the seller is otherwise not in the 
                physical presence of the buyer when the request for 
                purchase or order is made; or
                    (B) the cigarettes or smokeless tobacco are 
                delivered by use of a common carrier, private delivery 
                service, or the mails, or the seller is not in the 
                physical presence of the buyer when the buyer obtains 
                personal possession of the delivered cigarettes or 
                smokeless tobacco.
            (5) Interstate commerce.--The term ``interstate commerce'' 
        means commerce between a State and any place outside the State, 
        commerce between a State and any Indian lands in the State, or 
        commerce between points in the same State but through any place 
        outside the State or through any Indian lands.

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 AND SMOKELESS 
              TOBACCO 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 (d); or
            (2) any cigarettes or smokeless tobacco 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, 
or any quantity in excess of 500 single-unit consumer-sized cans or 
packages of smokeless tobacco, within a single month.
    (c) Relief.--(1) The district courts of the United States shall 
have the authority in a civil action under this subsection to compel 
inspections authorized by subsection (a).
    (2) Whoever violates subsection (a) or an order issued pursuant to 
paragraph (1) shall be subject to a civil penalty in an amount not to 
exceed $10,000 for each violation.
    (d) 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.
    (e) 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) BATFE 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.
            Amend the title so as to read: ``A bill to prevent tobacco 
        smuggling, to ensure the collection of all tobacco taxes, and 
        for other purposes.''.




                                                       Calendar No. 241

108th CONGRESS

  1st Session

                                S. 1177

_______________________________________________________________________

                                 A BILL

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

_______________________________________________________________________

                July 31 (legislative day, July 21), 2003

        Reported with an amendment and an amendment to the title