[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2642 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2642

 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 SENATE OF THE UNITED STATES

                             July 13, 2004

   Mr. Wyden introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 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 ``Smuggled Tobacco 
Prevention Act of 2004''.

          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; EXPORT BONDS.

    (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.--Each person who is a manufacturer or 
        importer of tobacco products shall (in accordance with 
        regulations prescribed by the Secretary) legibly print a unique 
        serial number on all packages of tobacco products manufactured 
        or imported by such person for sale or distribution. Such 
        serial number shall be designed to enable the Secretary to 
        identify the manufacturer of the product (and, in the case of 
        importation, the manufacturer and importer of the product), the 
        location and date of manufacture (and, if imported, the 
        location and date of importation), and any other information 
        the Secretary determines necessary or appropriate for the 
        proper administration of the chapter. 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 and shall be marked as to the foreign 
        country which is to be the final destination of such product. 
        Such marking shall be visible and prominent and shall be in 
        English and in the primary language of such foreign country. 
        The Secretary shall promulgate regulations to determine the 
        size and location of the mark.''.
    (b) Sales on Indian Reservations; Package Defined.--Section 5723 is 
amended by adding at the end the following new subsections:
    ``(f) Sales on Indian Reservations.--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)) shall be visibly and prominently labeled as 
such. The Secretary, in consultation with the Secretary of the 
Interior, shall promulgate regulations with respect to such labeling, 
including 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 visible from the 
outside of the individual 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.''.
    (c) Requirements for Tracking of Tobacco Products.--
            (1) In general.--Subchapter B of chapter 52 is amended by 
        adding at the end the following new section:

``SEC. 5714. EXPORT BONDS.

    ``(a) Posting of Bond.--
            ``(1) In general.--It shall be unlawful for any person to 
        export any tobacco product unless such person--
                    ``(A) has posted with the Secretary a tobacco 
                product bond in accordance with this section for such 
                product that contains a disclosure of the country to 
                which such product will be exported; and
                    ``(B) receives a written statement from the 
                recipient of the tobacco products involved that such 
                person--
                            ``(i) will not knowingly and willfully 
                        violate or cause to be violated any law or 
                        regulation of such country, the United States, 
                        any State, the District of Columbia, or any 
                        possession of the United States with respect to 
                        such products; and
                            ``(ii) has never been convicted of any 
                        offense with respect to tobacco products.
            ``(2) Regulations.--The Secretary shall promulgate 
        regulations that determine the frequency and the amount of each 
        bond that must be posted under paragraph (1), but in no case 
        shall such amount be less than an amount equal to the tax 
        imposed under this chapter on the value of the shipment of the 
        products involved if such products were consumed within the 
        United States.
            ``(3) Export.--For purposes of this subsection, property 
        shall be treated as exported if it is shipped to a foreign 
        country, Puerto Rico, the Virgin Islands, or a possession of 
        the United States, or for consumption beyond the jurisdiction 
        of the internal revenue laws of the United States.
    ``(b) Return of Bond.--The Secretary shall return a bond posted 
under subsection (a)--
            ``(1) upon a determination by the Secretary (based on 
        documentation provided by the person who posted the bond in 
        accordance with regulations promulgated by the Secretary) that 
        the items to which the bond applies have been received in the 
        country of final destination as designated in the bond, or
            ``(2) under such other circumstance as the Secretary may 
        specify.''.
            (2) Clerical amendment.--The table of sections for such 
        subchapter B is amended by adding at the end the following new 
        item:

                              ``Sec. 5714. Export bonds.''.

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--
                    ``(A) this chapter,
                    ``(B) the Contraband Cigarette Trafficking Act (18 
                U.S.C. chapter 114),
                    ``(C) the Act of October 19, 1949 (15 U.S.C. 
                chapter 10A),
                    ``(D) any regulations issued pursuant to such 
                statutes, and
                    ``(E) any other federal laws or regulations 
                relating to the taxation, sale, or transportation of 
                tobacco products.''.

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 
        (including the foreign country of final destination for 
        packages marked for export) 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. The preceding provisions of this 
subsection shall not be construed to limit or preclude other 
recordkeeping requirements imposed on any retailer.''.

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;
            ``(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; and
            ``(8) for any person to sell at retail more than 5,000 
        cigarettes 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.
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 fewer packages of 
cigarettes, 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, 
2005.

    TITLE II--AMENDMENTS TO THE CONTRABAND CIGARETTE TRAFFICKING ACT

SEC. 201. AMENDMENTS TO THE CONTRABAND CIGARETTE TRAFFICKING ACT.

    (a) Expansion of Act To Cover Other Tobacco Products.--
            (1) Paragraphs (1) through (2) of section 2341 of title 18, 
        United States Code, are amended to read as follows:
            ``(1) the term `tobacco product' has the meaning given to 
        such term by section 5702 of the Internal Revenue Code of 1986;
            ``(2) the term `contraband tobacco product' means any 
        tobacco product if--
                    ``(A)(i) in the case of cigarettes, such cigarettes 
                are in a quantity in excess of 2,000 cigarettes; or
                    ``(ii) in the case of a tobacco product other than 
                a cigarette, such product is in a quantity in excess of 
                the equivalent of 2,000 cigarettes as determined under 
                rules made by the Attorney General;
                    ``(B)(i) if the State in which such tobacco product 
                is found requires a stamp, impression, or other 
                indication to be placed on packages or other containers 
                of product to evidence payment of tobacco taxes, such 
                tobacco product bears no evidence of such payment; or
                    ``(ii) if such State has no such requirement, 
                applicable tobacco taxes are found to be not paid; and
                    ``(C) such tobacco product is in the possession of 
                any person other than--
                            ``(i) a person holding a permit issued 
                        pursuant to chapter 52 of the Internal Revenue 
                        Code of 1986 as a manufacturer or importer of 
                        tobacco products or as an export warehouse 
                        proprietor, or a person operating a customs 
                        bonded warehouse pursuant to section 311 or 555 
                        of the Tariff Act of 1930 (19 U.S.C. 1311 or 
                        1555) or an agent of such person;
                            ``(ii) a common or contract carrier 
                        transporting the tobacco product involved under 
                        a proper bill of lading or freight bill which 
                        states the quantity, source, and destination of 
                        such product;
                            ``(iii) a person--
                                    ``(I) who is licensed or otherwise 
                                authorized by the State where the 
                                tobacco product is found to account for 
                                and pay tobacco taxes imposed by such 
                                State; and
                                    ``(II) who has complied with the 
                                accounting and payment requirements 
                                relating to such license or 
                                authorization with respect to the 
                                tobacco product involved; or
                            ``(iv) an officer, employee, or other 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 tobacco product in 
                        connection with the performance of official 
                        duties;''.
            (2) Section 2345 of title 18, United States Code, is 
        amended--
                    (A) by striking ``cigarette tax laws'' each place 
                it appears and inserting ``tobacco tax laws'', and
                    (B) by striking ``cigarettes'' and inserting 
                ``tobacco products''.
    (b) Unlawful Acts.--Section 2342 of title 18, United States Code, 
is amended to read as follows:
``Sec. 2342. Unlawful acts
    ``(a) It shall be unlawful for any person knowingly to ship, 
transport, receive, possess, sell, distribute, or purchase contraband 
tobacco products.
    ``(b)(1) It shall be unlawful for any person knowingly--
            ``(A) 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 (in a single transaction or in a series of related 
        transactions) any quantity of tobacco product in excess of the 
        quantity specified in or pursuant to section 2341(2)(A) with 
        respect to such product, or
            ``(B) 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 
        tobacco product.
    ``(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) Conforming Amendments Relating to Recordkeeping.--
            (1) Subsections (a) and (b) of section 2343 of title 18, 
        United States Code, are each amended by striking ``any quantity 
        of cigarettes in excess of 60,000 in a single transaction'' and 
        inserting ``(in a single transaction or in a series of related 
        transactions) any quantity of tobacco product in excess of the 
        quantity specified in or pursuant to section 2341(2)(A) with 
        respect to such product''.
    (d) Penalties.--Section 2344 of title 18, United States Code, is 
amended--
            (1) in subsection (b), by inserting ``or (c)'' after 
        ``section 2342(b)''; and
            (2) by striking subsection (c) and inserting the following 
        new subsection:
    ``(c) Any contraband tobacco products involved in any violation 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 this 
chapter.''.
    (e) Jenkins Act Amendments.--
            (1) Section 4 of the Act of October 19, 1949 (15 U.S.C. 
        378) is amended by adding at the end the following: ``A State 
        tobacco tax authority may commence a civil action to obtain 
        appropriate relief with respect to a violation of this Act.''.
            (2) Paragraph (2) of section 1 of such Act is amended to 
        read as follows:
            ``(2) The term `tobacco product' has the meaning given to 
        such term by section 5702 of the Internal Revenue Code of 
        1986.''.
            (3) Such Act is further amended by striking ``cigarette'' 
        and ``cigarettes'' each place either appears and inserting 
        ``tobacco product'' and ``tobacco products'' respectively.
    (f) Non-Preemption.--Nothing in this title or the amendments made 
by this title shall be construed to prohibit an authorized State 
official from proceeding in State court on the basis of an alleged 
violation of State law.

             TITLE III--WHISTLEBLOWER PROTECTION PROVISIONS

SEC. 301. WHISTLEBLOWER PROTECTION.

    (a) In General.--Chapter 73 of title 18, United States Code, is 
amended by inserting after section 1514 the following:
``Sec. 1514B. Civil action to protect against retaliation in contraband 
              tobacco cases
    ``(a) Whistleblower Protection for Contraband Tobacco.--No person 
may discharge, demote, suspend, threaten, harass, or in any other 
manner discriminate against an employee in the terms and conditions of 
employment because of any lawful act done by the employee--
            ``(1) to provide information, cause information to be 
        provided, or otherwise assist in an investigation regarding any 
        conduct which the employee reasonably believes constitutes a 
        violation of section 2342 or any other provision of Federal law 
        relating to contraband tobacco, when the information or 
        assistance is provided to or the investigation is conducted 
        by--
                    ``(A) a Federal regulatory or law enforcement 
                agency;
                    ``(B) any Member of Congress or any committee of 
                Congress; or
                    ``(C) a person with supervisory authority over the 
                employee (or such other person working for the employer 
                who has the authority to investigate, discover, or 
                terminate misconduct); or
            ``(2) to file, cause to be filed, testify, participate in, 
        or otherwise assist in a proceeding filed or about to be filed 
        (with any knowledge of the employer) relating to an alleged 
        violation of section 2342, or any provision of Federal law 
        relating to contraband tobacco.
    ``(b) Enforcement Action.--
            ``(1) In general.--A person who alleges discharge or other 
        discrimination by any person in violation of subsection (a) may 
        seek relief under subsection (c), by--
                    ``(A) filing a complaint with the Secretary of 
                Labor; or
                    ``(B) if the Secretary has not issued a final 
                decision within 180 days of the filing of the complaint 
                and there is no showing that such delay is due to the 
                bad faith of the claimant, bringing an action at law or 
                equity for de novo review in the appropriate district 
                court of the United States, which shall have 
                jurisdiction over such an action without regard to the 
                amount in controversy.
            ``(2) Procedure.--
                    ``(A) In general.--An action under paragraph (1)(A) 
                shall be governed under the rules and procedures set 
                forth in section 42121(b) of title 49, United States 
                Code.
                    ``(B) Exception.--Notification made under section 
                42121(b)(1) of title 49, United States Code, shall be 
                made to the person named in the complaint and to the 
                employer.
                    ``(C) Burdens of proof.--An action brought under 
                paragraph (1)(B) shall be governed by the legal burdens 
                of proof set forth in section 42121(b) of title 49, 
                United States Code.
                    ``(D) Statute of limitations.--An action under 
                paragraph (1) shall be commenced not later than 90 days 
                after the date on which the violation occurs.
    ``(c) Remedies.--
            ``(1) In general.--An employee prevailing in any action 
        under subsection (b)(1) shall be entitled to all relief 
        necessary to make the employee whole.
            ``(2) Compensatory damages.--Relief for any action under 
        paragraph (1) shall include--
                    ``(A) reinstatement with the same seniority status 
                that the employee would have had, but for the 
                discrimination;
                    ``(B) the amount of back pay, with interest; and
                    ``(C) compensation for any special damages 
                sustained as a result of the discrimination, including 
                litigation costs, expert witness fees, and reasonable 
                attorney fees.
    ``(d) Rights Retained by Employee.--Nothing in this section shall 
be deemed to diminish the rights, privileges, or remedies of any 
employee under any Federal or State law, or under any collective 
bargaining agreement.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by inserting 
after the item relating to section 1514 the following new item:

``1514B. Civil action to protect against retaliation in contraband 
                            tobacco cases.''.
                                 <all>