Congressional Record, Volume 144 Issue 64 (Tuesday, May 19, 1998)

[Congressional Record Volume 144, Number 64 (Tuesday, May 19, 1998)]
[Senate]
[Pages S5034-S5097]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

NATIONAL TOBACCO POLICY AND YOUTH SMOKING REDUCTION ACT

The PRESIDING OFFICER. Under the previous order, the Senate will now
resume consideration of S. 1415, which the clerk will report.
The legislative clerk read as follows:

A bill (S. 1415) to reform and restructure the processes by
which tobacco products are manufactured, marketed, and
distributed, to prevent the use of tobacco products by
minors, to redress the adverse health effects of tobacco use,
and for other purposes.

The Senate resumed consideration of the bill.

modified committee substitute

(The text of the committee substitute, as modified to incorporate the
text of amendment No. 2420, submitted on May 18, 1998, reads as
follows:)

Strike out all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``National
Tobacco Policy and Youth Smoking Reduction Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Purpose.
Sec. 4. Scope and effect.
Sec. 5. Relationship to other, related Federal, State, local, and
Tribal laws.
Sec. 6. Definitions.
Sec. 7. Notification if youthful cigarette smoking restrictions
increase youthful pipe and cigar smoking.
Sec. 8. FTC jurisdiction not affected.
Sec. 9. Congressional review provisions.

TITLE I--REGULATION OF THE TOBACCO INDUSTRY

Sec. 101. Amendment of Federal Food, Drug, and Cosmetic Act of 1938.
Sec. 102. Conforming and other amendments to general provisions.
Sec. 103. Construction of current regulations.

TITLE II--REDUCTIONS IN UNDERAGE TOBACCO USE

Subtitle A--Underage Use

Sec. 201. Findings.
Sec. 202. Purpose.
Sec. 203. Goals for reducing underage tobacco use.
Sec. 204. Look-back assessment.
Sec. 205. Definitions.

Subtitle B--State Retail Licensing and Enforcement Incentives

Sec. 231. State retail licensing and enforcement block grants.
Sec. 232. Block grants for compliance bonuses.
Sec. 233. Conforming change.

Subtitle C--Tobacco Use Prevention and Cessation Initiatives

Sec. 261. Tobacco use prevention and cessation initiatives.

TITLE III--TOBACCO PRODUCT WARNINGS AND SMOKE CONSTITUENT DISCLOSURE

Subtitle A--Product Warnings, Labeling and Packaging

Sec. 301. Cigarette label and advertising warnings.
Sec. 302. Authority to revise cigarette warning label Statements.
Sec. 303. Smokeless tobacco labels and advertising warnings.
Sec. 304. Authority to revise smokeless tobacco product warning label
statements.
Sec. 305. Tar, nicotine, and other smoke constituent disclosure to the
public.

Subtitle B--Testing and Reporting of Tobacco Product Smoke Constituents

Sec. 311. Regulation requirement.

TITLE IV--NATIONAL TOBACCO TRUST FUND

Sec. 401. Establishment of trust fund.
Sec. 402. Payments by industry.
Sec. 403. Adjustments.
Sec. 404. Payments to be passed through to consumers.
Sec. 405. Tax treatment of payments.
Sec. 406. Enforcement for nonpayment.

Subtitle B--General Spending Provisions

Sec. 451. Allocation accounts.
Sec. 452. Grants to States.
Sec. 453. Indian health service.
Sec. 454. Research at the National Science Foundation.
Sec. 455. Medicare cancer patient demonstration project; evaluation and
report to Congress.

TITLE V--STANDARDS TO REDUCE INVOLUNTARY EXPOSURE TO TOBACCO SMOKE

Sec. 501. Definitions.
Sec. 502. Smoke-free environment policy.
Sec. 503. Citizen actions.
Sec. 504. Preemption.
Sec. 505. Regulations.
Sec. 506. Effective date.
Sec. 507. State choice.

TITLE VI--APPLICATION TO INDIAN TRIBES

Sec. 601. Short title.
Sec. 602. Findings and purposes.
Sec. 603. Application of title to Indian lands and to Native Americans.

TITLE VII--TOBACCO CLAIMS

Sec. 701. Definitions.
Sec. 702. Application; preemption.
Sec. 703. Rules governing tobacco claims.

TITLE VIII--TOBACCO INDUSTRY ACCOUNTABILITY REQUIREMENTS AND EMPLOYEE
PROTECTION FROM REPRISALS

Sec. 801. Accountability requirements and oversight of the tobacco
industry.
Sec. 802. Tobacco product manufacturer employee protection.

TITLE IX--PUBLIC DISCLOSURE OF TOBACCO INDUSTRY DOCUMENTS

Sec. 901. Findings.
Sec. 902. Applicability.
Sec. 903. Document disclosure.
Sec. 904. Document review.
Sec. 905. Resolution of disputed privilege and trade secret claims.
Sec. 906. Appeal of panel decision.
Sec. 907. Miscellaneous.
Sec. 908. Penalties.
Sec. 909. Definitions.

TITLE X--LONG-TERM ECONOMIC ASSISTANCE FOR FARMERS

Sec. 1001. Short title.
Sec. 1002. Definitions.

Subtitle A--Tobacco Community Revitalization

Sec. 1011. Authorization of appropriations.
Sec. 1012. Expenditures.
Sec. 1013. Budgetary treatment.

Subtitle B--Tobacco Market Transition Assistance

Sec. 1021. Payments for lost tobacco quota.
Sec. 1022. Industry payments for all department costs associated with
tobacco production.
Sec. 1023. Tobacco community economic development grants.
Sec. 1024. Flue-cured tobacco production permits.
Sec. 1025. Modifications in Federal tobacco programs.

Subtitle C--Farmer and Worker Transition Assistance

Sec. 1031. Tobacco worker transition program.
Sec. 1032. Farmer opportunity grants.

Subtitle D--Immunity

Sec. 1041. General immunity for tobacco producers and tobacco warehouse
owners.

TITLE XI--MISCELLANEOUS PROVISIONS

Subtitle A--International Provisions

Sec. 1101. Policy.
Sec. 1102. Tobacco control negotiations.
Sec. 1103. Report to Congress.
Sec. 1104. Funding.
Sec. 1105. Prohibition of funds to facilitate the exportation or
promotion of tobacco.
Sec. 1106. Health labeling of tobacco products for export.
Sec. 1107. International tobacco control awareness.

Subtitle B--Anti-smuggling Provisions

Sec. 1131. Definitions.
Sec. 1132. Tobacco product labeling requirements.
Sec. 1133. Tobacco product licenses.
Sec. 1134. Prohibitions.
Sec. 1135. Labeling of products sold by Native Americans.
Sec. 1136. Limitation on activities involving tobacco products in
foreign trade zones.
Sec. 1137. Jurisdiction; penalties; compromise of liability.
Sec. 1138. Amendments to the Contraband Cigarette Trafficking Act.
Sec. 1139. Funding.
Sec. 1140. Rules and regulations.

Subtitle C--Other Provisions

Sec. 1161. Improving child care and early childhood development.
Sec. 1162. Ban of sale of tobacco products through the use of vending
machines.
Sec. 1163. Amendments to the Employee Retirement Income Security Act of
1974.

TITLE XII--ASBESTOS-RELATED TOBACCO CLAIMS

Sec. 1201. National tobacco trust funds available under future
legislation.

TITLE XIII--VETERANS' BENEFITS

Sec. 1301. Recovery by Secretary of Veterans' Affairs.

TITLE XIV--EXCHANGE OF BENEFITS FOR AGREEMENT

Sec. 1401. Conferral of benefits on participating tobacco product
manufacturers in return for their assumption of specific
obligations.

[[Page S5035]]

Sec. 1402. Participating tobacco product manufacturer.
Sec. 1403. General provisions of protocol.
Sec. 1404. Tobacco product labeling and advertising requirements of
protocol.
Sec. 1405. Point-of-sale requirements.
Sec. 1406. Application of title.
Sec. 1407. Governmental claims.
Sec. 1408. Addiction and dependency claims; Castano Civil Actions.
Sec. 1409. Substantial non-attainment of required reductions.
Sec. 1410. Public health emergency.
Sec. 1411. Tobacco claims brought against participating tobacco product
manufacturers.
Sec. 1412. Payment of tobacco claim settlements and judgments.
Sec. 1413. Attorneys' fees and expenses.
Sec. 1414. Effect of court decisions.
Sec. 1415. Criminal laws not affected.
Sec. 1416. Congress reserves the right to enact laws in the future.
Sec. 1417. Definitions.

SEC. 2. FINDINGS.

The Congress finds the following:
(1) The use of tobacco products by the Nation's children is
a pediatric disease of epic and worsening proportions that
results in new generations of tobacco-dependent children and
adults.
(2) A consensus exists within the scientific and medical
communities that tobacco products are inherently dangerous
and cause cancer, heart disease, and other serious adverse
health effects.
(3) Nicotine is an addictive drug.
(4) Virtually all new users of tobacco products are under
the minimum legal age to purchase such products.
(5) Tobacco advertising and marketing contribute
significantly to the use of nicotine-containing tobacco
products by adolescents.
(6) Because past efforts to restrict advertising and
marketing of tobacco products have failed adequately to curb
tobacco use by adolescents, comprehensive restrictions on the
sale, promotion, and distribution of such products are
needed.
(7) Federal and State governments have lacked the legal and
regulatory authority and resources they need to address
comprehensively the public health and societal problems
caused by the use of tobacco products.
(8) Federal and State public health officials, the public
health community, and the public at large recognize that the
tobacco industry should be subject to ongoing oversight.
(9) Under Article I, Section 8 of the Constitution, the
Congress is vested with the responsibility for regulating
interstate commerce and commerce with Indian tribes.
(10) The sale, distribution, marketing, advertising, and
use of tobacco products are activities in and substantially
affecting interstate commerce because they are sold,
marketed, advertised, and distributed in interstate commerce
on a nationwide basis, and have a substantial effect on the
Nation's economy.
(11) The sale, distribution, marketing, advertising, and
use of such products substantially affect interstate commerce
through the health care and other costs attributable to the
use of tobacco products.
(12) The citizens of the several States are exposed to, and
adversely affected by, environmental smoke in public
buildings and other facilities which imposes a burden on
interstate commerce.
(13) Civil actions against tobacco product manufacturers
and others are pending in Federal and State courts arising
from the use, marketing, and sale of tobacco products. Among
these actions are cases brought by the attorneys general of
more than 40 States, certain cities and counties, and the
Commonwealth of Puerto Rico, and other parties, including
Indian tribes, and class actions brought by private claimants
(such as in the Castano Civil Actions), seeking to recover
monies expended to treat tobacco-related diseases and for the
protection of minors and consumers, as well as penalties and
other relief for violations of antitrust, health, consumer
protection, and other laws.
(14) Civil actions have been filed throughout the United
States against tobacco product manufacturers and their
distributors, trade associations, law firms, and consultants
on behalf of individuals or classes of individuals claiming
to be dependent upon and injured by tobacco products.
(15) These civil actions are complex, time-consuming,
expensive, and burdensome for both the litigants and Federal
and State courts. To date, these civil actions have not
resulted in sufficient redress for smokers or non-
governmental third-party payers. To the extent that
governmental entities have been or may in the future be
compensated for tobacco-related claims they have brought, it
is not now possible to identify what portions of such past or
future recoveries can be attributed to their various
antitrust, health, consumer protection, or other causes of
action.
(16) It is in the public interest for Congress to adopt
comprehensive public health legislation because of tobacco's
unique position in the Nation's history and economy; the need
to prevent the sale, distribution, marketing and advertising
of tobacco products to persons under the minimum legal age to
purchase such products; and the need to educate the public,
especially young people, regarding the health effects of
using tobacco products.
(17) The public interest requires a timely, fair,
equitable, and consistent result that will serve the public
interest by (A) providing that a portion of the costs of
treatment for diseases and adverse health effects associated
with the use of tobacco products is borne by the
manufacturers of these products, and (B) restricting
throughout the Nation the sale, distribution, marketing, and
advertising of tobacco products only to persons of legal age
to purchase such products.
(18) Public health authorities estimate that the benefits
to the Nation of enacting Federal legislation to accomplish
these goals would be significant in human and economic terms.
(19) Reducing the use of tobacco by minors by 50 percent
would prevent well over 60,000 early deaths each year and
save up to $43 billion each year in reduced medical costs,
improved productivity, and the avoidance of premature deaths.
(20) Advertising, marketing, and promotion of tobacco
products have been especially directed to attract young
persons to use tobacco products and these efforts have
resulted in increased use of such products by youth. Past
efforts to oversee these activities have not been successful
in adequately preventing such increased use.
(21) In 1995, the tobacco industry spent close to
$4,900,000,000 to attract new users, retain current users,
increase current consumption, and generate favorable long-
term attitudes toward smoking and tobacco use.
(22) Tobacco product advertising often misleadingly
portrays the use of tobacco as socially acceptable and
healthful to minors.
(23) Tobacco product advertising is regularly seen by
persons under the age of 18, and persons under the age of 18
are regularly exposed to tobacco product promotional efforts.
(24) Through advertisements during and sponsorship of
sporting events, tobacco has become strongly associated with
sports and has become portrayed as an integral part of sports
and the healthy lifestyle associated with rigorous sporting
activity.
(25) Children are exposed to substantial and unavoidable
tobacco advertising that leads to favorable beliefs about
tobacco use, plays a role in leading young people to
overestimate the prevalence of tobacco use, and increases the
number of young people who begin to use tobacco.
(26) Tobacco advertising increases the size of the tobacco
market by increasing consumption of tobacco products
including increasing tobacco use by young people.
(27) Children are more influenced by tobacco advertising
than adults, they smoke the most advertised brands, and
children as young as 3 to 6 years old can recognize a
character associated with smoking at the same rate as they
recognize cartoons and fast food characters.
(28) Tobacco company documents indicate that young people
are an important and often crucial segment of the tobacco
market.
(29) Comprehensive advertising restrictions will have a
positive effect on the smoking rates of young people.
(30) Restrictions on advertising are necessary to prevent
unrestricted tobacco advertising from undermining legislation
prohibiting access to young people and providing for
education about tobacco use.
(31) International experience shows that advertising
regulations that are stringent and comprehensive have a
greater impact on overall tobacco use and young people's use
than weaker or less comprehensive ones. Text-only
requirements, while not as stringent as a ban, will help
reduce underage use of tobacco products while preserving the
informational function of advertising.
(32) It is in the public interest for Congress to adopt
legislation to address the public health crisis created by
actions of the tobacco industry.
(33) If, as a direct or indirect result of this Act, the
consumption of tobacco products in the United States is
reduced significantly, then tobacco farmers, their families,
and their communities may suffer economic hardship and
displacement, notwithstanding their lack of involvement in
the manufacturing and marketing of tobacco products.
(34) The use of tobacco products in motion pictures and
other mass media glamorizes its use for young people and
encourages them to use tobacco products.

SEC. 3. PURPOSE.

The purposes of this Act are--
(1) to clarify the authority of the Food and Drug
Administration to regulate tobacco products under the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), by
recognizing it as the primary Federal regulatory authority
with respect to the manufacture, marketing, and distribution
of tobacco products;
(2) to require the tobacco industry to fund both Federal
and State oversight of the tobacco industry from on-going
payments by tobacco product manufacturers;
(3) to require tobacco product manufacturers to provide
ongoing funding to be used for an aggressive Federal, State,
and local enforcement program and for a nationwide licensing
system to prevent minors from obtaining tobacco products and
to prevent the unlawful distribution of tobacco products,
while expressly permitting the States to adopt additional
measures that further restrict or eliminate the products'
use;
(4) to ensure that the Food and Drug Administration and the
States may continue to address issues of particular concern
to public

[[Page S5036]]

health officials, especially the use of tobacco by young
people and dependence on tobacco;
(5) to impose financial surcharges on tobacco product
manufacturers if tobacco use by young people does not
substantially decline;
(6) to authorize appropriate agencies of the Federal
government to set national standards controlling the
manufacture of tobacco products and the identity, public
disclosure, and amount of ingredients used in such products;
(7) to provide new and flexible enforcement authority to
ensure that the tobacco industry makes efforts to develop and
introduce less harmful tobacco products;
(8) to confirm the Food and Drug Administration's authority
to regulate the levels of tar, nicotine, and other harmful
components of tobacco products;
(9) in order to ensure that adults are better informed, to
require tobacco product manufacturers to disclose research
which has not previously been made available, as well as
research generated in the future, relating to the health and
dependency effects or safety of tobacco products;
(10) to impose on tobacco product manufacturers the
obligation to provide funding for a variety of public health
initiatives;
(11) to establish a minimum Federal standard for stringent
restrictions on smoking in public places, while also to
permit State, Tribal, and local governments to enact
additional and more stringent standards or elect not to be
covered by the Federal standard if that State's standard is
as protective, or more protective, of the public health;
(12) to authorize and fund from payments by tobacco product
manufacturers a continuing national counter-advertising and
tobacco control campaign which seeks to educate consumers and
discourage children and adolescents from beginning to use
tobacco products, and which encourages current users of
tobacco products to discontinue using such products;
(13) to establish a mechanism to compensate the States in
settlement of their various claims against tobacco product
manufacturers;
(14) to authorize and to fund from payments by tobacco
product manufacturers a nationwide program of smoking
cessation administered through State and Tribal governments
and the private sector;
(15) to establish and fund from payments by tobacco product
manufacturers a National Tobacco Fund;
(16) to affirm the rights of individuals to access to the
courts, to civil trial by jury, and to damages to compensate
them for harm caused by tobacco products;
(17) to continue to permit the sale of tobacco products to
adults in conjunction with measures to ensure that they are
not sold or accessible to underage purchasers;
(18) to impose appropriate regulatory controls on the
tobacco industry; and
(19) to protect tobacco farmers and their communities from
the economic impact of this Act by providing full funding for
and the continuation of the Federal tobacco program and by
providing funds for farmers and communities to develop new
opportunities in tobacco-dependent communities.

SEC. 4. SCOPE AND EFFECT.

(a) Intended Effect.--This Act is not intended to--
(1) establish a precedent with regard to any other
industry, situation, circumstance, or legal action; or
(2) except as provided in this Act, affect any action
pending in State, Tribal, or Federal court, or any agreement,
consent decree, or contract of any kind.
(b) Taxation.--Notwithstanding any other provision of law,
this Act and the amendments made by this Act shall not affect
any authority of the Secretary of the Treasury (including any
authority assigned to the Bureau of Alcohol, Tobacco and
Firearms) or of State or local governments with regard to
taxation for tobacco or tobacco products.
(c) Agricultural Activities.--The provisions of this Act
which authorize the Secretary to take certain actions with
regard to tobacco and tobacco products shall not be construed
to affect any authority of the Secretary of Agriculture under
existing law regarding the growing, cultivation, or curing of
raw tobacco.

SEC. 5. RELATIONSHIP TO OTHER, RELATED FEDERAL, STATE, LOCAL,
AND TRIBAL LAWS.

(a) Age Restrictions.--Nothing in this Act or the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), as
amended by this Act, shall prevent a Federal agency
(including the Armed Forces), a State or its political
subdivisions, or the government of an Indian tribe from
adopting and enforcing additional measures that further
restrict or prohibit tobacco product sale to, use by, and
accessibility to persons under the legal age of purchase
established by such agency, State, subdivision, or government
of an Indian tribe.
(b) Additional Measures.--Except as otherwise expressly
provided in this Act, nothing in this Act, the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), or rules
promulgated under such Acts, shall limit the authority of a
Federal agency (including the Armed Forces), a State or its
political subdivisions, or the government of an Indian tribe
to enact, adopt, promulgate, and enforce any law, rule,
regulation, or other measure with respect to tobacco
products, including laws, rules, regulations, or other
measures relating to or prohibiting the sale, distribution,
possession, exposure to, or use of tobacco products by
persons of any age that are in addition to the provisions of
this Act and the amendments made by this Act. No provision of
this Act or amendment made by this Act shall limit or
otherwise affect any State, Tribal, or local taxation of
tobacco products.
(c) No Less Stringent.--Nothing in this Act or the
amendments made by this Act is intended to supersede any
State, local, or Tribal law that is not less stringent than
this Act, or other Acts as amended by this Act.
(d) State Law Not Affected.--Except as otherwise expressly
provided in this Act, nothing in this Act, the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), or rules
promulgated under such Acts, shall supersede the authority of
the States, pursuant to State law, to expend funds provided
by this Act.

SEC. 6. DEFINITIONS.

In this Act:
(1) Brand.--The term ``brand'' means a variety of tobacco
product distinguished by the tobacco used, tar content,
nicotine content, flavoring used, size, filtration, or
packaging, logo, registered trademark or brand name,
identifiable pattern of colors, or any combination of such
attributes.
(2) Cigarette.--The term ``cigarette'' has the meaning
given that term by section 3(1) of the Federal Cigarette
Labeling and Advertising Act (15 U.S.C. 1332(1)), but also
includes tobacco, in any form, that is functional in the
product, which, because of its appearance, the type of
tobacco used in the filler, or its packaging and labeling, is
likely to be offered to, or purchased by, consumers as a
cigarette or as roll-your-own tobacco.
(3) Cigarette tobacco.--The term ``cigarette tobacco''
means any product that consists of loose tobacco that is
intended for use by consumers in a cigarette. Unless
otherwise stated, the requirements for cigarettes shall also
apply to cigarette tobacco.
(4) Commerce.--The term ``commerce'' has the meaning given
that term by section 3(2) of the Federal Cigarette Labeling
and Advertising Act (15 U.S.C. 1332(2)).
(5) Distributor.--The term ``distributor'' as regards a
tobacco product means any person who furthers the
distribution of cigarette or smokeless tobacco, whether
domestic or imported, at any point from the original place of
manufacture to the person who sells or distributes the
product to individuals for personal consumption. Common
carriers are not considered distributors for purposes of this
Act.
(6) Indian country; Indian lands.--The terms ``Indian
country'' and ``Indian lands'' have the meaning given the
term ``Indian country'' by section 1151 of title 18, United
States Code, and includes lands owned by an Indian tribe or a
member thereof over which the United States exercises
jurisdiction on behalf of the tribe or tribal member.
(7) Indian tribe.--The term ``Indian tribe'' has the
meaning given such term in section 4(e) of the Indian Self
Determination and Education Assistance Act (25 U.S.C.
450b(e)).
(8) Little cigar.--The term ``little cigar'' has the
meaning given that term by section 3(7) of the Federal
Cigarette Labeling and Advertising Act (15 U.S.C. 1332(7)).
(9) Nicotine.--The term ``nicotine'' means the chemical
substance named 3-(1-Methyl-2-pyrrolidinyl) pyridine or
C[10]H[14]N[2], including any salt or complex of nicotine.
(10) Package.--The term ``package'' means a pack, box,
carton, or container of any kind or, if no other container,
any wrapping (including cellophane), in which cigarettes or
smokeless tobacco are offered for sale, sold, or otherwise
distributed to consumers.
(11) Point-of-sale.--The term ``point-of-sale'' means any
location at which a consumer can purchase or otherwise obtain
cigarettes or smokeless tobacco for personal consumption.
(12) Retailer.--The term ``retailer'' means any person who
sells cigarettes or smokeless tobacco to individuals for
personal consumption, or who operates a facility where self-
service displays of tobacco products are permitted.
(13) Roll-your-own tobacco.--The term ``roll-your-own
tobacco'' means any tobacco which, because of its appearance,
type, packaging, or labeling, is suitable for use and likely
to be offered to, or purchased by, consumers as tobacco for
making cigarettes.
(14) Secretary.--Except in title VII and where the context
otherwise requires, the term ``Secretary'' means the
Secretary of Health and Human Services.
(15) Smokeless tobacco.--The term ``smokeless tobacco''
means any product that consists of cut, ground, powdered, or
leaf tobacco and that is intended to be placed in the oral or
nasal cavity.
(16) State.--The term ``State'' means any State of the
United States and, for purposes of this Act, includes the
District of Columbia, the Commonwealth of Puerto Rico, Guam,
the Virgin Islands, American Samoa, Wake Island, Midway
Islands, Kingman Reef, Johnston Atoll, the Northern Mariana
Islands, and any other trust territory or possession of the
United States.
(17) Tobacco product.--The term ``tobacco product'' means
cigarettes, cigarette tobacco, smokeless tobacco, little
cigars, roll-your-own tobacco, and fine cut products.
(18) Tobacco product manufacturer.--Except in titles VII,
X, and XIV, the term ``tobacco product manufacturer'' means
any person, including any repacker or relabeler, who--

[[Page S5037]]

(A) manufactures, fabricates, assembles, processes, or
labels a finished cigarette or smokeless tobacco product; or
(B) imports a finished cigarette or smokeless tobacco
product for sale or distribution in the United States.
(19) United States.--The term ``United States'' means the
50 States of the United States of America and the District of
Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin
Islands, American Samoa, Wake Island, Midway Islands, Kingman
Reef, Johnston Atoll, the Northern Mariana Islands, and any
other trust territory or possession of the United States.

SEC. 7. NOTIFICATION IF YOUTHFUL CIGARETTE SMOKING
RESTRICTIONS INCREASE YOUTHFUL PIPE AND CIGAR
SMOKING.

The Secretary shall notify the Congress if the Secretary
determines that underage use of pipe tobacco and cigars is
increasing.

SEC. 8. FTC JURISDICTION NOT AFFECTED.

(a) In General.--Except where expressly provided in this
Act, nothing in this Act shall be construed as limiting or
diminishing the authority of the Federal Trade Commission to
enforce the laws under its jurisdiction with respect to the
advertising, sale, or distribution of tobacco products.
(b) Enforcement by FTC.--Any advertising that violates this
Act or part 897 of title 21, Code of Federal Regulations, is
an unfair or deceptive act or practice under section 5(a) of
the Federal Trade Commission Act (15 U.S.C. 45(a)) and shall
be considered a violation of a rule promulgated under section
18 of that Act (15 U.S.C. 57a).

SEC. 9. CONGRESSIONAL REVIEW PROVISIONS.

In accordance with section 801 of title 5, United States
Code, the Congress shall review, and may disapprove, any rule
under this Act that is subject to section 801. This section
does not apply to the rule set forth in part 897 of title 21,
Code of Federal Regulations.

TITLE I--REGULATION OF THE TOBACCO INDUSTRY

SEC. 101. AMENDMENT OF FEDERAL FOOD, DRUG, AND COSMETIC ACT
OF 1938.

(a) Definition of Tobacco Products.--Section 201 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) is
amended by adding at the end the following:
``(kk) The term `tobacco product' means any product made or
derived from tobacco that is intended for human consumption,
including any component, part, or accessory of a tobacco
product (except for raw materials other than tobacco used in
manufacturing a component, part, or accessory of a tobacco
product).''.
(b) FDA Authority over Tobacco Products.--The Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) is amended--
(1) by redesignating chapter IX as chapter X;
(2) by redesignating sections 901 through 907 as sections
1001 through 1007; and
(3) by inserting after section 803 the following:

``CHAPTER IX--TOBACCO PRODUCTS

``SEC. 901. FDA AUTHORITY OVER TOBACCO PRODUCTS

``(a) In General.--Tobacco products shall be regulated by
the Secretary under this chapter and shall not be subject to
the provisions of chapter V, unless--
``(1) such products are intended for use in the diagnosis,
cure, mitigation, treatment, or prevention of disease (within
the meaning of section 201(g)(1)(B) or section 201(h)(2)); or
``(2) a health claim is made for such products under
section 201(g)(1)(C) or 201(h)(3).
``(b) Applicability.--This chapter shall apply to all
tobacco products subject to the provisions of part 897 of
title 21, Code of Federal Regulations, and to any other
tobacco products that the Secretary by regulation deems to be
subject to this chapter.
``(c) Scope.--
``(1) Nothing in this chapter, any policy issued or
regulation promulgated thereunder, or the National Tobacco
Policy and Youth Smoking Reduction Act, shall be construed to
affect the Secretary's authority over, or the regulation of,
products under this Act that are not tobacco products under
chapter V of the Federal Food, Drug and Cosmetic Act or any
other chapter of that Act.
``(2) The provisions of this chapter shall not apply to
tobacco leaf that is not in the possession of the
manufacturer, or to the producers of tobacco leaf, including
tobacco growers, tobacco warehouses, and tobacco grower
cooperatives, nor shall any employee of the Food and Drug
Administration have any authority whatsoever to enter onto a
farm owned by a producer of tobacco leaf without the written
consent of such producer. Notwithstanding any other provision
of this subparagraph, if a producer of tobacco leaf is also a
tobacco product manufacturer or controlled by a tobacco
product manufacturer, the producer shall be subject to this
chapter in the producer's capacity as a manufacturer. Nothing
in this chapter shall be construed to grant the Secretary
authority to promulgate regulations on any matter that
involves the production of tobacco leaf or a producer
thereof, other than activities by a manufacturer affecting
production. For purposes of the preceding sentence, the term
`controlled by' means a member of the same controlled group
of corporations as that term is used in section 52(a) of the
Internal Revenue Code of 1986, or under common control within
the meaning of the regulations promulgated under section
52(b) of such Code.

``SEC. 902. ADULTERATED TOBACCO PRODUCTS.

``A tobacco product shall be deemed to be adulterated if--
``(1) it consists in whole or in part of any filthy,
putrid, or decomposed substance, or is otherwise contaminated
by any poisonous or deleterious substance that may render the
product injurious to health;
``(2) it has been prepared, packed, or held under
insanitary conditions whereby it may have been contaminated
with filth, or whereby it may have been rendered injurious to
health;
``(3) its container is composed, in whole or in part, of
any poisonous or deleterious substance which may render the
contents injurious to health;
``(4) it is, or purports to be or is represented as, a
tobacco product which is subject to a performance standard
established under section 907 unless such tobacco product is
in all respects in conformity with such standard;
``(5) it is required by section 910(a) to have premarket
approval, is not exempt under section 906(f), and does not
have an approved application in effect;
``(6) the methods used in, or the facilities or controls
used for, its manufacture, packing or storage are not in
conformity with applicable requirements under section
906(e)(1) or an applicable condition prescribed by an order
under section 906(e)(2); or
``(7) it is a tobacco product for which an exemption has
been granted under section 906(f) for investigational use and
the person who was granted such exemption or any investigator
who uses such tobacco product under such exemption fails to
comply with a requirement prescribed by or under such
section.

``SEC. 903. MISBRANDED TOBACCO PRODUCTS.

``(a) In General.--A tobacco product shall be deemed to be
misbranded--
``(1) if its labeling is false or misleading in any
particular;
``(2) if in package form unless it bears a label
containing--
``(A) the name and place of business of the tobacco product
manufacturer, packer, or distributor; and
``(B) an accurate statement of the quantity of the contents
in terms of weight, measure, or numerical count,

except that under subparagraph (B) of this paragraph
reasonable variations shall be permitted, and exemptions as
to small packages shall be established, by regulations
prescribed by the Secretary;
``(3) if any word, statement, or other information required
by or under authority of this chapter to appear on the label
or labeling is not prominently placed thereon with such
conspicuousness (as compared with other words, statements or
designs in the labeling) and in such terms as to render it
likely to be read and understood by the ordinary individual
under customary conditions of purchase and use;
``(4) if it has an established name, unless its label
bears, to the exclusion of any other nonproprietary name, its
established name prominently printed in type as required by
the Secretary by regulation;
``(5) if the Secretary has issued regulations requiring
that its labeling bear adequate directions for use, or
adequate warnings against use by children, that are necessary
for the protection of users unless its labeling conforms in
all respects to such regulations;
``(6) if it was manufactured, prepared, propagated,
compounded, or processed in any State in an establishment not
duly registered under section 905(b), if it was not included
in a list required by section 905(i), if a notice or other
information respecting it was not provided as required by
such section or section 905(j), or if it does not bear such
symbols from the uniform system for identification of tobacco
products prescribed under section 905(e) as the Secretary by
regulation requires;
``(7) if, in the case of any tobacco product distributed or
offered for sale in any State--
``(A) its advertising is false or misleading in any
particular; or
``(B) it is sold, distributed, or used in violation of
regulations prescribed under section 906(d);
``(8) unless, in the case of any tobacco product
distributed or offered for sale in any State, the
manufacturer, packer, or distributor thereof includes in all
advertisements and other descriptive printed matter issued or
caused to be issued by the manufacturer, packer, or
distributor with respect to that tobacco product--
``(A) a true statement of the tobacco product's established
name as defined in paragraph (4) of this subsection, printed
prominently; and
``(B) a brief statement of--
``(i) the uses of the tobacco product and relevant
warnings, precautions, side effects, and contraindications;
and
``(ii) in the case of specific tobacco products made
subject to a finding by the Secretary after notice and
opportunity for comment that such action is necessary to
protect the public health, a full description of the
components of such tobacco product or the formula showing
quantitatively each ingredient of such tobacco product to the
extent required in regulations which shall be issued by the
Secretary after an opportunity for a hearing;
``(9) if it is a tobacco product subject to a performance
standard established under section 907, unless it bears such
labeling as may be prescribed in such performance standard;
or

[[Page S5038]]

``(10) if there was a failure or refusal--
``(A) to comply with any requirement prescribed under
section 904 or 908;
``(B) to furnish any material or information required by or
under section 909; or
``(C) to comply with a requirement under section 912.
``(b) Prior Approval of Statements on Label.--The Secretary
may, by regulation, require prior approval of statements made
on the label of a tobacco product. No regulation issued under
this subsection may require prior approval by the Secretary
of the content of any advertisement and no advertisement of a
tobacco product, published after the date of enactment of the
National Tobacco Policy and Youth Smoking Reduction Act
shall, with respect to the matters specified in this section
or covered by regulations issued hereunder, be subject to the
provisions of sections 12 through 15 of the Federal Trade
Commission Act (15 U.S.C. 52 through 55). This subsection
does not apply to any printed matter which the Secretary
determines to be labeling as defined in section 201(m).

``SEC. 904. SUBMISSION OF HEALTH INFORMATION TO THE
SECRETARY.

``(a) Requirement.--Not later than 6 months after the date
of enactment of the National Tobacco Policy and Youth Smoking
Reduction Act, each tobacco product manufacturer or importer
of tobacco products, or agents thereof, shall submit to the
Secretary the following information:
``(1) A listing of all tobacco ingredients, substances and
compounds that are, on such date, added by the manufacturer
to the tobacco, paper, filter, or other component of each
tobacco product by brand and by quantity in each brand and
subbrand.
``(2) A description of the content, delivery, and form of
nicotine in each tobacco product measured in milligrams of
nicotine.
``(3) All documents (including underlying scientific
information) relating to research activities, and research
findings, conducted, supported, or possessed by the
manufacturer (or agents thereof) on the health, behavioral,
or physiologic effects of tobacco products, their
constituents, ingredients, and components, and tobacco
additives, described in paragraph (1).
``(4) All documents (including underlying scientific
information) relating to research activities, and research
findings, conducted, supported, or possessed by the
manufacturer (or agents thereof) that relate to the issue of
whether a reduction in risk to health from tobacco products
can occur upon the employment of technology available or
known to the manufacturer.
``(5) All documents (including underlying scientific
information) relating to marketing research involving the use
of tobacco products.

An importer of a tobacco product not manufactured in the
United States shall supply the information required of a
tobacco product manufacturer under this subsection.
``(b) Annual Submission.--A tobacco product manufacturer or
importer that is required to submit information under
subsection (a) shall update such information on an annual
basis under a schedule determined by the Secretary.
``(c) Time for Submission.--
``(1) New products.--At least 90 days prior to the delivery
for introduction into interstate commerce of a tobacco
product not on the market on the date of enactment of this
chapter, the manufacturer of such product shall provide the
information required under subsection (a) and such product
shall be subject to the annual submission under subsection
(b).
``(2) Modification of existing products.--If at any time a
tobacco product manufacturer adds to its tobacco products a
new tobacco additive, increases or decreases the quantity of
an existing tobacco additive or the nicotine content,
delivery, or form, or eliminates a tobacco additive from any
tobacco product, the manufacturer shall within 60 days of
such action so advise the Secretary in writing and reference
such modification in submissions made under subsection (b).

``SEC. 905. ANNUAL REGISTRATION.

``(a) Definitions.--As used in this section--
``(1) the term `manufacture, preparation, compounding, or
processing' shall include repackaging or otherwise changing
the container, wrapper, or labeling of any tobacco product
package in furtherance of the distribution of the tobacco
product from the original place of manufacture to the person
who makes final delivery or sale to the ultimate consumer or
user; and
``(2) the term `name' shall include in the case of a
partnership the name of each partner and, in the case of a
corporation, the name of each corporate officer and director,
and the State of incorporation.
``(b) Registration by Owners and Operators.--On or before
December 31 of each year every person who owns or operates
any establishment in any State engaged in the manufacture,
preparation, compounding, or processing of a tobacco product
or tobacco products shall register with the Secretary the
name, places of business, and all such establishments of that
person.
``(c) Registration of New Owners and Operators.--Every
person upon first engaging in the manufacture, preparation,
compounding, or processing of a tobacco product or tobacco
products in any establishment owned or operated in any State
by that person shall immediately register with the Secretary
that person's name, place of business, and such
establishment.
``(d) Registration of Added Establishments.--Every person
required to register under subsection (b) or (c) shall
immediately register with the Secretary any additional
establishment which that person owns or operates in any State
and in which that person begins the manufacture, preparation,
compounding, or processing of a tobacco product or tobacco
products.
``(e) Uniform Product Identification System.--The Secretary
may by regulation prescribe a uniform system for the
identification of tobacco products and may require that
persons who are required to list such tobacco products under
subsection (i) of this section shall list such tobacco
products in accordance with such system.
``(f) Public Access to Registration Information.--The
Secretary shall make available for inspection, to any person
so requesting, any registration filed under this section.
``(g) Biennial Inspection of Registered Establishments.--
Every establishment in any State registered with the
Secretary under this section shall be subject to inspection
under section 704, and every such establishment engaged in
the manufacture, compounding, or processing of a tobacco
product or tobacco products shall be so inspected by one or
more officers or employees duly designated by the Secretary
at least once in the 2-year period beginning with the date of
registration of such establishment under this section and at
least once in every successive 2-year period thereafter.
``(h) Foreign Establishments May Register.--Any
establishment within any foreign country engaged in the
manufacture, preparation, compounding, or processing of a
tobacco product or tobacco products, may register under this
section under regulations promulgated by the Secretary. Such
regulations shall require such establishment to provide the
information required by subsection (i) of this section and
shall include provisions for registration of any such
establishment upon condition that adequate and effective
means are available, by arrangement with the government of
such foreign country or otherwise, to enable the Secretary to
determine from time to time whether tobacco products
manufactured, prepared, compounded, or processed in such
establishment, if imported or offered for import into the
United States, shall be refused admission on any of the
grounds set forth in section 801(a).
``(i) Registration Information.--
``(1) Product list.--Every person who registers with the
Secretary under subsection (b), (c), or (d) of this section
shall, at the time of registration under any such subsection,
file with the Secretary a list of all tobacco products which
are being manufactured, prepared, compounded, or processed by
that person for commercial distribution and which has not
been included in any list of tobacco products filed by that
person with the Secretary under this paragraph or paragraph
(2) before such time of registration. Such list shall be
prepared in such form and manner as the Secretary may
prescribe and shall be accompanied by--
``(A) in the case of a tobacco product contained in the
applicable list with respect to which a performance standard
has been established under section 907 or which is subject to
section 910, a reference to the authority for the marketing
of such tobacco product and a copy of all labeling for such
tobacco product;
``(B) in the case of any other tobacco product contained in
an applicable list, a copy of all consumer information and
other labeling for such tobacco product, a representative
sampling of advertisements for such tobacco product, and,
upon request made by the Secretary for good cause, a copy of
all advertisements for a particular tobacco product; and
``(C) if the registrant filing a list has determined that a
tobacco product contained in such list is not subject to a
performance standard established under section 907, a brief
statement of the basis upon which the registrant made such
determination if the Secretary requests such a statement with
respect to that particular tobacco product.
``(2) Biannual Report of Any Change in Product List.--Each
person who registers with the Secretary under this section
shall report to the Secretary once during the month of June
of each year and once during the month of December of each
year the following:
``(A) A list of each tobacco product introduced by the
registrant for commercial distribution which has not been
included in any list previously filed by that person with the
Secretary under this subparagraph or paragraph (1) of this
subsection. A list under this subparagraph shall list a
tobacco product by its established name and shall be
accompanied by the other information required by paragraph
(1).
``(B) If since the date the registrant last made a report
under this paragraph that person has discontinued the
manufacture, preparation, compounding, or processing for
commercial distribution of a tobacco product included in a
list filed under subparagraph (A) or paragraph (1), notice of
such discontinuance, the date of such discontinuance, and the
identity of its established name.
``(C) If since the date the registrant reported under
subparagraph (B) a notice of discontinuance that person has
resumed the manufacture, preparation, compounding, or
processing for commercial distribution of the tobacco product
with respect to which such notice of discontinuance was
reported, notice of such resumption, the date of such

[[Page S5039]]

resumption, the identity of such tobacco product by
established name, and other information required by paragraph
(1), unless the registrant has previously reported such
resumption to the Secretary under this subparagraph.
``(D) Any material change in any information previously
submitted under this paragraph or paragraph (1).
``(j) Report Preceding Introduction of Certain
Substantially-equivalent Products into Interstate Commerce.--
``(1) In general.--Each person who is required to register
under this section and who proposes to begin the introduction
or delivery for introduction into interstate commerce for
commercial distribution of a tobacco product intended for
human use that was not commercially marketed (other than for
test marketing) in the United States as of August 11, 1995,
as defined by the Secretary by regulation shall, at least 90
days before making such introduction or delivery, report to
the Secretary (in such form and manner as the Secretary shall
by regulation prescribe)--
``(A) the basis for such person's determination that the
tobacco product is substantially equivalent, within the
meaning of section 910, to a tobacco product commercially
marketed (other than for test marketing) in the United States
as of August 11, 1995, that is in compliance with the
requirements of this Act; and
``(B) action taken by such person to comply with the
requirements under section 907 that are applicable to the
tobacco product.
``(2) Application to certain post-August 11th products.--A
report under this subsection for a tobacco product that was
first introduced or delivered for introduction into
interstate commerce for commercial distribution in the United
States after August 11, 1995, and before the date of
enactment of the National Tobacco Policy and Youth Smoking
Reduction Act shall be submitted to the Secretary within 6
months after the date of enactment of that Act.

``SEC. 906. GENERAL PROVISIONS RESPECTING CONTROL OF TOBACCO
PRODUCTS.

``(a) In General.--Any requirement established by or under
section 902, 903, 905, or 909 applicable to a tobacco product
shall apply to such tobacco product until the applicability
of the requirement to the tobacco product has been changed by
action taken under section 907, section 910, or subsection
(d) of this section, and any requirement established by or
under section 902, 903, 905, or 909 which is inconsistent
with a requirement imposed on such tobacco product under
section 907, section 910, or subsection (d) of this section
shall not apply to such tobacco product.
``(b) Information on Public Access and Comment.--Each
notice of proposed rulemaking under section 907, 908, 909, or
910, or under this section, any other notice which is
published in the Federal Register with respect to any other
action taken under any such section and which states the
reasons for such action, and each publication of findings
required to be made in connection with rulemaking under any
such section shall set forth--
``(1) the manner in which interested persons may examine
data and other information on which the notice or findings is
based; and
``(2) the period within which interested persons may
present their comments on the notice or findings (including
the need therefor) orally or in writing, which period shall
be at least 60 days but may not exceed 90 days unless the
time is extended by the Secretary by a notice published in
the Federal Register stating good cause therefor.
``(c) Limited Confidentiality of Information.--Any
information reported to or otherwise obtained by the
Secretary or the Secretary's representative under section
904, 907, 908, 909, or 910 or 704, or under subsection (e) or
(f) of this section, which is exempt from disclosure under
subsection (a) of section 552 of title 5, United States Code,
by reason of subsection (b)(4) of that section shall be
considered confidential and shall not be disclosed, except
that the information may be disclosed to other officers or
employees concerned with carrying out this chapter, or when
relevant in any proceeding under this chapter.
``(d) Restrictions.--
``(1) The Secretary may by regulation require that a
tobacco product be restricted to sale, distribution, or use
upon such conditions, including restrictions on the access
to, and the advertising and promotion of, the tobacco
product, as the Secretary may prescribe in such regulation
if, because of its potentiality for harmful effect or the
collateral measures necessary to its use, the Secretary
determines that such regulation would be appropriate for the
protection of the public health. The finding as to whether
such regulation would be appropriate for the protection of
the public health shall be determined with respect to the
risks and benefits to the population as a whole, including
users and non-users of the tobacco product, and taking into
account--
``(A) the increased or decreased likelihood that existing
users of tobacco products will stop using such products; and
``(B) the increased or decreased likelihood that those who
do not use tobacco products will start using such products.

No such condition may require that the sale or distribution
of a tobacco product be limited to the written or oral
authorization of a practitioner licensed by law to prescribe
medical products.
``(2) The label of a tobacco product shall bear such
appropriate statements of the restrictions required by a
regulation under subsection (a) as the Secretary may in such
regulation prescribe.
``(3) No restriction under paragraph (1) may prohibit the
sale of any tobacco product in face-to face transactions by a
specific category of retail outlets.
``(e) Good Manufacturing Practice Requirements.--
``(1) Methods, facilities, and controls to conform.--
``(A) The Secretary may, in accordance with subparagraph
(B), prescribe regulations requiring that the methods used
in, and the facilities and controls used for, the
manufacture, pre-production design validation (including a
process to assess the performance of a tobacco product),
packing and storage of a tobacco product, conform to current
good manufacturing practice, as prescribed in such
regulations, to assure that the public health is protected
and that the tobacco product is in compliance with this
chapter.
``(B) The Secretary shall--
``(i) before promulgating any regulation under subparagraph
(A), afford an advisory committee an opportunity to submit
recommendations with respect to the regulation proposed to be
promulgated;
``(ii) before promulgating any regulation under
subparagraph (A), afford opportunity for an oral hearing;
``(iii) provide the advisory committee a reasonable time to
make its recommendation with respect to proposed regulations
under subparagraph (A); and
``(iv) in establishing the effective date of a regulation
promulgated under this subsection, take into account the
differences in the manner in which the different types of
tobacco products have historically been produced, the
financial resources of the different tobacco product
manufacturers, and the state of their existing manufacturing
facilities; and shall provide for a reasonable period of time
for such manufacturers to conform to good manufacturing
practices.
``(2) Exemptions; variances.--
``(A) Any person subject to any requirement prescribed
under paragraph (1) may petition the Secretary for a
permanent or temporary exemption or variance from such
requirement. Such a petition shall be submitted to the
Secretary in such form and manner as the Secretary shall
prescribe and shall--
``(i) in the case of a petition for an exemption from a
requirement, set forth the basis for the petitioner's
determination that compliance with the requirement is not
required to assure that the tobacco product will be in
compliance with this chapter;
``(ii) in the case of a petition for a variance from a
requirement, set forth the methods proposed to be used in,
and the facilities and controls proposed to be used for, the
manufacture, packing, and storage of the tobacco product in
lieu of the methods, facilities, and controls prescribed by
the requirement; and
``(iii) contain such other information as the Secretary
shall prescribe.
``(B) The Secretary may refer to an advisory committee any
petition submitted under subparagraph (A). The advisory
committee shall report its recommendations to the Secretary
with respect to a petition referred to it within 60 days
after the date of the petition's referral. Within 60 days
after--
``(i) the date the petition was submitted to the Secretary
under subparagraph (A); or
``(ii) the day after the petition was referred to an
advisory committee,

whichever occurs later, the Secretary shall by order either
deny the petition or approve it.
``(C) The Secretary may approve--
``(i) a petition for an exemption for a tobacco product
from a requirement if the Secretary determines that
compliance with such requirement is not required to assure
that the tobacco product will be in compliance with this
chapter; and
``(ii) a petition for a variance for a tobacco product from
a requirement if the Secretary determines that the methods to
be used in, and the facilities and controls to be used for,
the manufacture, packing, and storage of the tobacco product
in lieu of the methods, controls, and facilities prescribed
by the requirement are sufficient to assure that the tobacco
product will be in compliance with this chapter.
``(D) An order of the Secretary approving a petition for a
variance shall prescribe such conditions respecting the
methods used in, and the facilities and controls used for,
the manufacture, packing, and storage of the tobacco product
to be granted the variance under the petition as may be
necessary to assure that the tobacco product will be in
compliance with this chapter.
``(E) After the issuance of an order under subparagraph (B)
respecting a petition, the petitioner shall have an
opportunity for an informal hearing on such order.
``(3) Compliance with requirements under this subsection
shall not be required before the period ending 3 years after
the date of enactment of the National Tobacco Policy and
Youth Smoking Reduction Act.
``(f) Exemption for Investigational Use.--The Secretary may
exempt tobacco products intended for investigational use from
this chapter under such conditions as the Secretary may
prescribe by regulation .
``(g) Research and Development.--The Secretary may enter
into contracts for research, testing, and demonstrations
respecting tobacco products and may obtain tobacco

[[Page S5040]]

products for research, testing, and demonstration purposes
without regard to section 3324(a) and (b) of title 31, United
States Code, and section 5 of title 41, United States Code.

``SEC. 907. PERFORMANCE STANDARDS.

``(a) In General.--
``(1) Finding required.--The Secretary may adopt
performance standards for a tobacco product if the Secretary
finds that a performance standard is appropriate for the
protection of the public health. This finding shall be
determined with respect to the risks and benefits to the
population as a whole, including users and non-users of the
tobacco product, and taking into account--
``(A) the increased or decreased likelihood that existing
users of tobacco products will stop using such products; and
``(B) the increased or decreased likelihood that those who
do not use tobacco products will start using such products.
``(2) Content of performance standards.--A performance
standard established under this section for a tobacco
product--
``(A) shall include provisions to provide performance that
is appropriate for the protection of the public health,
including provisions, where appropriate--
``(i) for the reduction or elimination of nicotine yields
of the product;
``(ii) for the reduction or elimination of other
constituents or harmful components of the product; or
``(iii) relating to any other requirement under (B);
``(B) shall, where necessary to be appropriate for the
protection of the public health, include--
``(i) provisions respecting the construction, components,
ingredients, and properties of the tobacco product;
``(ii) provisions for the testing (on a sample basis or, if
necessary, on an individual basis) of the tobacco product;
``(iii) provisions for the measurement of the performance
characteristics of the tobacco product;
``(iv) provisions requiring that the results of each or of
certain of the tests of the tobacco product required to be
made under clause (ii) show that the tobacco product is in
conformity with the portions of the standard for which the
test or tests were required; and
``(v) a provision requiring that the sale and distribution
of the tobacco product be restricted but only to the extent
that the sale and distribution of a tobacco product may be
restricted under a regulation under section 906(d); and
``(C) shall, where appropriate, require the use and
prescribe the form and content of labeling for the proper use
of the tobacco product.
``(3) Periodic re-evaluation of performance standards.--The
Secretary shall provide for periodic evaluation of
performance standards established under this section to
determine whether such standards should be changed to reflect
new medical, scientific, or other technological data. The
Secretary may provide for testing under paragraph (2) by any
person.
``(4) Involvement of other agencies; informed persons.--In
carrying out duties under this section, the Secretary shall,
to the maximum extent practicable--
``(A) use personnel, facilities, and other technical
support available in other Federal agencies;
``(B) consult with other Federal agencies concerned with
standard-setting and other nationally or internationally
recognized standard-setting entities; and
``(C) invite appropriate participation, through joint or
other conferences, workshops, or other means, by informed
persons representative of scientific, professional, industry,
or consumer organizations who in the Secretary's judgment can
make a significant contribution.
``(b) Establishment of Standards.--
``(1) Notice.--
(A) The Secretary shall publish in the Federal Register a
notice of proposed rulemaking for the establishment,
amendment, or revocation of any performance standard for a
tobacco product.
``(B) A notice of proposed rulemaking for the establishment
or amendment of a performance standard for a tobacco product
shall--
``(i) set forth a finding with supporting justification
that the performance standard is appropriate for the
protection of the public health;
``(ii) set forth proposed findings with respect to the risk
of illness or injury that the performance standard is
intended to reduce or eliminate; and
``(iii) invite interested persons to submit an existing
performance standard for the tobacco product, including a
draft or proposed performance standard, for consideration by
the Secretary.
``(C) A notice of proposed rulemaking for the revocation of
a performance standard shall set forth a finding with
supporting justification that the performance standard is no
longer necessary to be appropriate for the protection of the
public health.
``(D) The Secretary shall consider all information
submitted in connection with a proposed standard, including
information concerning the countervailing effects of the
performance standard on the health of adolescent tobacco
users, adult tobacco users, or non-tobacco users, such as the
creation of a significant demand for contraband or other
tobacco products that do not meet the requirements of this
chapter and the significance of such demand, and shall issue
the standard if the Secretary determines that the standard
would be appropriate for the protection of the public health.
``(E) The Secretary shall provide for a comment period of
not less than 60 days.
``(2) Promulgation.--
``(A) After the expiration of the period for comment on a
notice of proposed rulemaking published under paragraph (1)
respecting a performance standard and after consideration of
such comments and any report from an advisory committee, the
Secretary shall--
``(i) promulgate a regulation establishing a performance
standard and publish in the Federal Register findings on the
matters referred to in paragraph (1); or
``(ii) publish a notice terminating the proceeding for the
development of the standard together with the reasons for
such termination.
``(B) A regulation establishing a performance standard
shall set forth the date or dates upon which the standard
shall take effect, but no such regulation may take effect
before one year after the date of its publication unless the
Secretary determines that an earlier effective date is
necessary for the protection of the public health. Such date
or dates shall be established so as to minimize, consistent
with the public health, economic loss to, and disruption or
dislocation of, domestic and international trade.
``(3) Special rule for standard banning class of product or
eliminating nicotine content.--Because of the importance of a
decision of the Secretary to issue a regulation establishing
a performance standard--
``(A) eliminating all cigarettes, all smokeless tobacco
products, or any similar class of tobacco products, or
``(B) requiring the reduction of nicotine yields of a
tobacco product to zero,

it is appropriate for the Congress to have the opportunity to
review such a decision. Therefore, any such standard may not
take effect before a date that is 2 years after the President
notifies the Congress that a final regulation imposing the
restriction has been issued.
``(4) Amendment; revocation.--
``(A) The Secretary, upon the Secretary's own initiative or
upon petition of an interested person may by a regulation,
promulgated in accordance with the requirements of paragraphs
(1) and (2)(B) of this subsection, amend or revoke a
performance standard.
``(B) The Secretary may declare a proposed amendment of a
performance standard to be effective on and after its
publication in the Federal Register and until the effective
date of any final action taken on such amendment if the
Secretary determines that making it so effective is in the
public interest.
``(5) Reference to Advisory Committee.--The Secretary--
``(A) may, on the Secretary's own initiative, refer a
proposed regulation for the establishment, amendment, or
revocation of a performance standard; or
``(B) shall, upon the request of an interested person which
demonstrates good cause for referral and which is made before
the expiration of the period for submission of comments on
such proposed regulation,

refer such proposed regulation to an advisory committee, for
a report and recommendation with respect to any matter
involved in the proposed regulation which requires the
exercise of scientific judgment. If a proposed regulation is
referred under this subparagraph to the advisory committee,
the Secretary shall provide the advisory committee with the
data and information on which such proposed regulation is
based. The advisory committee shall, within 60 days after the
referral of a proposed regulation and after independent study
of the data and information furnished to it by the Secretary
and other data and information before it, submit to the
Secretary a report and recommendation respecting such
regulation, together with all underlying data and information
and a statement of the reason or basis for the
recommendation. A copy of such report and recommendation
shall be made public by the Secretary.

``SEC. 908. NOTIFICATION AND OTHER REMEDIES

``(a) Notification.--If the Secretary determines that--
``(1) a tobacco product which is introduced or delivered
for introduction into interstate commerce for commercial
distribution presents an unreasonable risk of substantial
harm to the public health; and
``(2) notification under this subsection is necessary to
eliminate the unreasonable risk of such harm and no more
practicable means is available under the provisions of this
chapter (other than this section) to eliminate such risk,

the Secretary may issue such order as may be necessary to
assure that adequate notification is provided in an
appropriate form, by the persons and means best suited under
the circumstances involved, to all persons who should
properly receive such notification in order to eliminate such
risk. The Secretary may order notification by any appropriate
means, including public service announcements. Before issuing
an order under this subsection, the Secretary shall consult
with the persons who are to give notice under the order.
``(b) No Exemption from Other Liability.--Compliance with
an order issued under this section shall not relieve any
person from liability under Federal or State law. In awarding
damages for economic loss in an action brought for the
enforcement of any such liability, the value to the plaintiff
in

[[Page S5041]]

such action of any remedy provided under such order shall be
taken into account.
``(c) Recall Authority.--
``(1) In general.--If the Secretary finds that there is a
reasonable probability that a tobacco product contains a
manufacturing or other defect not ordinarily contained in
tobacco products on the market that would cause serious,
adverse health consequences or death, the Secretary shall
issue an order requiring the appropriate person (including
the manufacturers, importers, distributors, or retailers of
the tobacco product) to immediately cease distribution of
such tobacco product. The order shall provide the person
subject to the order with an opportunity for an informal
hearing, to be held not later than 10 days after the date of
the issuance of the order, on the actions required by the
order and on whether the order should be amended to require a
recall of such tobacco product. If, after providing an
opportunity for such a hearing, the Secretary determines that
inadequate grounds exist to support the actions required by
the order, the Secretary shall vacate the order.
``(2) Amendment of order to require recall.--
``(A) If, after providing an opportunity for an informal
hearing under paragraph (1), the Secretary determines that
the order should be amended to include a recall of the
tobacco product with respect to which the order was issued,
the Secretary shall, except as provided in subparagraph (B),
amend the order to require a recall. The Secretary shall
specify a timetable in which the tobacco product recall will
occur and shall require periodic reports to the Secretary
describing the progress of the recall.
``(B) An amended order under subparagraph (A)--
``(i) shall not include recall of a tobacco product from
individuals; and
``(ii) shall provide for notice to persons subject to the
risks associated with the use of such tobacco product.

In providing the notice required by clause (ii), the
Secretary may use the assistance of retailers and other
persons who distributed such tobacco product. If a
significant number of such persons cannot be identified, the
Secretary shall notify such persons under section 705(b).
``(3) Remedy not exclusive.--The remedy provided by this
subsection shall be in addition to remedies provided by
subsection (a) of this section.

``SEC. 909. RECORDS AND REPORTS ON TOBACCO PRODUCTS.

``(a) In General.--Every person who is a tobacco product
manufacturer or importer of a tobacco product shall establish
and maintain such records, make such reports, and provide
such information, as the Secretary may by regulation
reasonably require to assure that such tobacco product is not
adulterated or misbranded and to otherwise protect public
health. Regulations prescribed under the preceding sentence--
``(1) may require a tobacco product manufacturer or
importer to report to the Secretary whenever the manufacturer
or importer receives or otherwise becomes aware of
information that reasonably suggests that one of its marketed
tobacco products may have caused or contributed to a serious
unexpected adverse experience associated with the use of the
product or any significant increase in the frequency of a
serious, expected adverse product experience;
``(2) shall require reporting of other significant adverse
tobacco product experiences as determined by the Secretary to
be necessary to be reported;
``(3) shall not impose requirements unduly burdensome to a
tobacco product manufacturer or importer, taking into account
the cost of complying with such requirements and the need for
the protection of the public health and the implementation of
this chapter;
``(4) when prescribing the procedure for making requests
for reports or information, shall require that each request
made under such regulations for submission of a report or
information to the Secretary state the reason or purpose for
such request and identify to the fullest extent practicable
such report or information;
``(5) when requiring submission of a report or information
to the Secretary, shall state the reason or purpose for the
submission of such report or information and identify to the
fullest extent practicable such report or information; and
``(6) may not require that the identity of any patient or
user be disclosed in records, reports, or information
required under this subsection unless required for the
medical welfare of an individual, to determine risks to
public health of a tobacco product, or to verify a record,
report, or information submitted under this chapter.

In prescribing regulations under this subsection, the
Secretary shall have due regard for the professional ethics
of the medical profession and the interests of patients. The
prohibitions of paragraph (6) of this subsection continue to
apply to records, reports, and information concerning any
individual who has been a patient, irrespective of whether or
when he ceases to be a patient.
``(b) Reports of Removals and Corrections.--
(1) Except as provided in paragraph (3), the Secretary
shall by regulation require a tobacco product manufacturer or
importer of a tobacco product to report promptly to the
Secretary any corrective action taken or removal from the
market of a tobacco product undertaken by such manufacturer
or importer if the removal or correction was undertaken--
``(A) to reduce a risk to health posed by the tobacco
product; or
``(B) to remedy a violation of this chapter caused by the
tobacco product which may present a risk to health.

A tobacco product manufacturer or importer of a tobacco
product who undertakes a corrective action or removal from
the market of a tobacco product which is not required to be
reported under this subsection shall keep a record of such
correction or removal.
``(2) No report of the corrective action or removal of a
tobacco product may be required under paragraph (1) if a
report of the corrective action or removal is required and
has been submitted under subsection (a) of this section.

``SEC. 910. PREMARKET REVIEW OF CERTAIN TOBACCO PRODUCTS.

``(a) In General.--
``(1) Premarket approval required.--
``(A) New products.--Approval under this section of an
application for premarket approval for any tobacco product
that is not commercially marketed (other than for test
marketing) in the United States as of August 11, 1995, is
required unless the manufacturer has submitted a report under
section 905(j), and the Secretary has issued an order that
the tobacco product is substantially equivalent to a tobacco
product commercially marketed (other than for test marketing)
in the United States as of August 11, 1995, that is in
compliance with the requirements of this Act.
``(B) Products introduced between August 11, 1995, and
enactment of this chapter.--Subparagraph (A) does not apply
to a tobacco product that--
``(i) was first introduced or delivered for introduction
into interstate commerce for commerce for commercial
distribution in the United States after August 11, 1995, and
before the date of enactment of the National Tobacco Policy
and Youth Smoking Reduction Act; and
``(ii) for which a report was submitted under section
905(j) within 6 months after such date,

until the Secretary issues an order that the tobacco product
is substantially equivalent for purposes of this section or
requires premarket approval.
``(2) Substantially equivalent defined.--
``(A) For purposes of this section and section 905(j), the
term `substantially equivalent' or `substantial equivalence'
mean, with respect to the tobacco product being compared to
the predicate tobacco product, that the Secretary by order
has found that the tobacco product--
``(i) has the same characteristics as the predicate tobacco
product; or
``(ii) has different characteristics and the information
submitted contains information, including clinical data if
deemed necessary by the Secretary, that demonstrates that it
is not appropriate to regulate the product under this section
because the product does not raise different questions of
public health.
``(B) For purposes of subparagraph (A), the term
`characteristics' means the materials, ingredients, design,
composition, heating source, or other features of a tobacco
product.
``(C) A tobacco product may not be found to be
substantially equivalent to a predicate tobacco product that
has been removed from the market at the initiative of the
Secretary or that has been determined by a judicial order to
be misbranded or adulterated.
``(3) Health Information.--
``(A) As part of a submission under section 905(j)
respecting a tobacco product, the person required to file a
premarket notification under such section shall provide an
adequate summary of any health information related to the
tobacco product or state that such information will be made
available upon request by any person.
``(B) Any summary under subparagraph (A) respecting a
tobacco product shall contain detailed information regarding
data concerning adverse health effects and shall be made
available to the public by the Secretary within 30 days of
the issuance of a determination that such tobacco product is
substantially equivalent to another tobacco product.
``(b) Application.--
``(1) Contents.--An application for premarket approval
shall contain--
``(A) full reports of all information, published or known
to or which should reasonably be known to the applicant,
concerning investigations which have been made to show the
health risks of such tobacco product and whether such tobacco
product presents less risk than other tobacco products;
``(B) a full statement of the components, ingredients, and
properties, and of the principle or principles of operation,
of such tobacco product;
``(C) a full description of the methods used in, and the
facilities and controls used for, the manufacture,
processing, and, when relevant, packing and installation of,
such tobacco product;
``(D) an identifying reference to any performance standard
under section 907 which would be applicable to any aspect of
such tobacco product, and either adequate information to show
that such aspect of such tobacco product fully meets such
performance standard or adequate information to justify any
deviation from such standard;
``(E) such samples of such tobacco product and of
components thereof as the Secretary may reasonably require;

[[Page S5042]]

``(F) specimens of the labeling proposed to be used for
such tobacco product; and
``(G) such other information relevant to the subject matter
of the application as the Secretary may require.
``(2) Reference to Advisory Committee.--Upon receipt of an
application meeting the requirements set forth in paragraph
(1), the Secretary--
``(A) may, on the Secretary's own initiative; or
``(B) shall, upon the request of an applicant,

refer such application to an advisory committee and for
submission (within such period as the Secretary may
establish) of a report and recommendation respecting approval
of the application, together with all underlying data and the
reasons or basis for the recommendation.
``(c) Action on Application.--
``(1) Deadline.--
``(A) As promptly as possible, but in no event later than
180 days after the receipt of an application under subsection
(b) of this section, the Secretary, after considering the
report and recommendation submitted under paragraph (2) of
such subsection, shall--
``(i) issue an order approving the application if the
Secretary finds that none of the grounds for denying approval
specified in paragraph (2) of this subsection applies; or
``(ii) deny approval of the application if the Secretary
finds (and sets forth the basis for such finding as part of
or accompanying such denial) that one or more grounds for
denial specified in paragraph (2) of this subsection apply.
``(B) An order approving an application for a tobacco
product may require as a condition to such approval that the
sale and distribution of the tobacco product be restricted
but only to the extent that the sale and distribution of a
tobacco product may be restricted under a regulation under
section 906(d).
``(2) Denial of approval.--The Secretary shall deny
approval of an application for a tobacco product if, upon the
basis of the information submitted to the Secretary as part
of the application and any other information before the
Secretary with respect to such tobacco product, the Secretary
finds that--
``(A) there is a lack of a showing that permitting such
tobacco product to be marketed would be appropriate for the
protection of the public health;
``(B) the methods used in, or the facilities or controls
used for, the manufacture, processing, or packing of such
tobacco product do not conform to the requirements of section
906(e);
``(C) based on a fair evaluation of all material facts, the
proposed labeling is false or misleading in any particular;
or
``(D) such tobacco product is not shown to conform in all
respects to a performance standard in effect under section
907, compliance with which is a condition to approval of the
application, and there is a lack of adequate information to
justify the deviation from such standard.
``(3) Denial Information.--Any denial of an application
shall, insofar as the Secretary determines to be practicable,
be accompanied by a statement informing the applicant of the
measures required to place such application in approvable
form (which measures may include further research by the
applicant in accordance with one or more protocols prescribed
by the Secretary).
``(4) Basis for finding.--For purposes of this section, the
finding as to whether approval of a tobacco product is
appropriate for the protection of the public health shall be
determined with respect to the risks and benefits to the
population as a whole, including users and non-users of the
tobacco product, and taking into account--
``(A) the increased or decreased likelihood that existing
users of tobacco products will stop using such products; and
``(B) the increased or decreased likelihood that those who
do not use tobacco products will start using such products.
``(5) Basis for action.--
``(A) For purposes of paragraph (2)(A), whether permitting
a tobacco product to be marketed would be appropriate for the
protection of the public health shall, when appropriate, be
determined on the basis of well-controlled investigations,
which may include one or more clinical investigations by
experts qualified by training and experience to evaluate the
tobacco product.
``(B) If the Secretary determines that there exists valid
scientific evidence (other than evidence derived from
investigations described in subparagraph (A)) which is
sufficient to evaluate the tobacco product the Secretary may
authorize that the determination for purposes of paragraph
(2)(A) be made on the basis of such evidence.
``(d) Withdrawal and Temporary Suspension.--
``(1) In general.--The Secretary shall, upon obtaining,
where appropriate, advice on scientific matters from an
advisory committee, and after due notice and opportunity for
informal hearing to the holder of an approved application for
a tobacco product, issue an order withdrawing approval of the
application if the Secretary finds--
``(A) that the continued marketing of such tobacco product
no longer is appropriate for the protection of the public
health;
``(B) that the application contained or was accompanied by
an untrue statement of a material fact;
``(C) that the applicant--
``(i) has failed to establish a system for maintaining
records, or has repeatedly or deliberately failed to maintain
records or to make reports, required by an applicable
regulation under section 909;
``(ii) has refused to permit access to, or copying or
verification of, such records as required by section 704; or
``(iii) has not complied with the requirements of section
905;
``(D) on the basis of new information before the Secretary
with respect to such tobacco product, evaluated together with
the evidence before the Secretary when the application was
approved, that the methods used in, or the facilities and
controls used for, the manufacture, processing, packing, or
installation of such tobacco product do not conform with the
requirements of section 906(e) and were not brought into
conformity with such requirements within a reasonable time
after receipt of written notice from the Secretary of
nonconformity;
``(E) on the basis of new information before the Secretary,
evaluated together with the evidence before the Secretary
when the application was approved, that the labeling of such
tobacco product, based on a fair evaluation of all material
facts, is false or misleading in any particular and was not
corrected within a reasonable time after receipt of written
notice from the Secretary of such fact; or
``(F) on the basis of new information before the Secretary,
evaluated together with the evidence before the Secretary
when the application was approved, that such tobacco product
is not shown to conform in all respects to a performance
standard which is in effect under section 907, compliance
with which was a condition to approval of the application,
and that there is a lack of adequate information to justify
the deviation from such standard.
``(2) Appeal.--The holder of an application subject to an
order issued under paragraph (1) withdrawing approval of the
application may, by petition filed on or before the thirtieth
day after the date upon which he receives notice of such
withdrawal, obtain review thereof in accordance with
subsection (e) of this section.
``(3) Temporary suspension.--If, after providing an
opportunity for an informal hearing, the Secretary determines
there is reasonable probability that the continuation of
distribution of a tobacco product under an approved
application would cause serious, adverse health consequences
or death, that is greater than ordinarily caused by tobacco
products on the market, the Secretary shall by order
temporarily suspend the approval of the application approved
under this section. If the Secretary issues such an order,
the Secretary shall proceed expeditiously under paragraph (1)
to withdraw such application.
``(e) Service of Order.--An order issued by the Secretary
under this section shall be served--
``(1) in person by any officer or employee of the
department designated by the Secretary; or
``(2) by mailing the order by registered mail or certified
mail addressed to the applicant at the applicant's last known
address in the records of the Secretary.

``SEC. 911. JUDICIAL REVIEW.

``(a) In General.--Not later than 30 days after--
``(1) the promulgation of a regulation under section 907
establishing, amending, or revoking a performance standard
for a tobacco product; or
``(2) a denial of an application for approval under section
910(c),

any person adversely affected by such regulation or order may
file a petition with the United States Court of Appeals for
the District of Columbia or for the circuit wherein such
person resides or has his principal place of business for
judicial review of such regulation or order. A copy of the
petition shall be transmitted by the clerk of the court to
the Secretary or other officer designated by the Secretary
for that purpose. The Secretary shall file in the court the
record of the proceedings on which the Secretary based the
Secretary's regulation or order and each record or order
shall contain a statement of the reasons for its issuance and
the basis, on the record, for its issuance. For purposes of
this section, the term `record' means all notices and other
matter published in the Federal Register with respect to the
regulation or order reviewed, all information submitted to
the Secretary with respect to such regulation or order,
proceedings of any panel or advisory committee with respect
to such regulation or order, any hearing held with respect to
such regulation or order, and any other information
identified by the Secretary, in the administrative proceeding
held with respect to such regulation or order, as being
relevant to such regulation or order.
``(b) Court May Order Secretary to Make Additional
Findings.--If the petitioner applies to the court for leave
to adduce additional data, views, or arguments respecting the
regulation or order being reviewed and shows to the
satisfaction of the court that such additional data, views,
or arguments are material and that there were reasonable
grounds for the petitioner's failure to adduce such data,
views, or arguments in the proceedings before the Secretary,
the court may order the Secretary to provide additional
opportunity for the oral presentation of data, views, or
arguments and for written submissions. The Secretary may
modify the Secretary's findings, or make new findings by
reason of the additional

[[Page S5043]]

data, views, or arguments so taken and shall file with the
court such modified or new findings, and the Secretary's
recommendation, if any, for the modification or setting aside
of the regulation or order being reviewed, with the return of
such additional data, views, or arguments.
``(c) Standard of Review.--Upon the filing of the petition
under subsection (a) of this section for judicial review of a
regulation or order, the court shall have jurisdiction to
review the regulation or order in accordance with chapter 7
of title 5, United States Code, and to grant appropriate
relief, including interim relief, as provided in such
chapter. A regulation or order described in paragraph (1) or
(2) of subsection (a) of this section shall not be affirmed
if it is found to be unsupported by substantial evidence on
the record taken as a whole.
``(d) Finality of Judgment.--The judgment of the court
affirming or setting aside, in whole or in part, any
regulation or order shall be final, subject to review by the
Supreme Court of the United States upon certiorari or
certification, as provided in section 1254 of title 28,
United States Code.
``(e) Other Remedies.--The remedies provided for in this
section shall be in addition to and not in lieu of any other
remedies provided by law.
``(f) Regulations and Orders Must Recite Basis in Record.--
To facilitate judicial review under this section or under any
other provision of law of a regulation or order issued under
section 906, 907, 908, 909, 910, or 914, each such regulation
or order shall contain a statement of the reasons for its
issuance and the basis, in the record of the proceedings held
in connection with its issuance, for its issuance.

``SEC. 912. POSTMARKET SURVEILLANCE

``(a) Discretionary Surveillance.--The Secretary may
require a tobacco product manufacturer to conduct postmarket
surveillance for a tobacco product of the manufacturer if the
Secretary determines that postmarket surveillance of the
tobacco product is necessary to protect the public health or
is necessary to provide information regarding the health
risks and other safety issues involving the tobacco product.
``(b) Surveillance Approval.--Each tobacco product
manufacturer required to conduct a surveillance of a tobacco
product under subsection (a) of this section shall, within 30
days after receiving notice that the manufacturer is required
to conduct such surveillance, submit, for the approval of the
Secretary, a protocol for the required surveillance. The
Secretary, within 60 days of the receipt of such protocol,
shall determine if the principal investigator proposed to be
used in the surveillance has sufficient qualifications and
experience to conduct such surveillance and if such protocol
will result in collection of useful data or other information
necessary to protect the public health. The Secretary may not
approve such a protocol until it has been reviewed by an
appropriately qualified scientific and technical review
committee established by the Secretary.

``SEC. 913. REDUCED RISK TOBACCO PRODUCTS.

``(a) Requirements.--
``(1) In general.--For purposes of this section, the term
`reduced risk tobacco product' means a tobacco product
designated by the Secretary under paragraph (2).
``(2) Designation.--
``(A) In general.--A product may be designated by the
Secretary as a reduced risk tobacco product if the Secretary
finds that the product will significantly reduce harm to
individuals caused by a tobacco product and is otherwise
appropriate to protect public health, based on an application
submitted by the manufacturer of the product (or other
responsible person) that--
``(i) demonstrates through testing on animals and short-
term human testing that use of such product results in
ingestion or inhalation of a substantially lower yield of
toxic substances than use of conventional tobacco products in
the same category as the proposed reduced risk product; and
``(ii) if required by the Secretary, includes studies of
the long-term health effects of the product.

If such studies are required, the manufacturer may consult
with the Secretary regarding protocols for conducting the
studies.
``(B) Basis for finding.--In making the finding under
subparagraph (A), the Secretary shall take into account--
``(i) the risks and benefits to the population as a whole,
including both users of tobacco products and non-users of
tobacco products;
``(ii) the increased or decreased likelihood that existing
users of tobacco products will stop using such products
including reduced risk tobacco products;
``(iii) the increased or decreased likelihood that those
who do not use tobacco products will start to use such
products, including reduced risk tobacco products; and
``(iv) the risks and benefits to consumers from the use of
a reduced risk tobacco product as compared to the use of
products approved under chapter V to reduce exposure to
tobacco.
``(3) Marketing requirements.--A tobacco product may be
marketed and labeled as a reduced risk tobacco product if
it--
``(A) has been designated as a reduced risk tobacco product
by the Secretary under paragraph (2);
``(B) bears a label prescribed by the Secretary concerning
the product's contribution to reducing harm to health; and
``(C) complies with requirements prescribed by the
Secretary relating to marketing and advertising of the
product, and other provisions of this chapter as prescribed
by the Secretary.
``(b) Revocation of Designation.--At any time after the
date on which a tobacco product is designated as a reduced
risk tobacco product under this section the Secretary may,
after providing an opportunity for an informal hearing,
revoke such designation if the Secretary determines, based on
information not available at the time of the designation,
that--
``(1) the finding made under subsection (a)(2) is no longer
valid; or
``(2) the product is being marketed in violation of
subsection (a)(3).
``(c) Limitation.--A tobacco product that is designated as
a reduced risk tobacco product that is in compliance with
subsection (a) shall not be regulated as a drug or device.
``(d) Development of reduced risk tobacco product
Technology.--A tobacco product manufacturer shall provide
written notice to the Secretary upon the development or
acquisition by the manufacturer of any technology that would
reduce the risk of a tobacco product to the health of the
user for which the manufacturer is not seeking designation as
a `reduced risk tobacco product' under subsection (a).

``SEC. 914. PRESERVATION OF STATE AND LOCAL AUTHORITY.

``(a) Additional Requirements.--
``(1) In general.--Except as provided in paragraph (2),
nothing in this Act shall be construed as prohibiting a State
or political subdivision thereof from adopting or enforcing a
requirement applicable to a tobacco product that is in
addition to, or more stringent than, requirements established
under this chapter.
``(2) Preemption of certain state and local requirements.--
``(A) Except as provided in subparagraph (B), no State or
political subdivision of a State may establish or continue in
effect with respect to a tobacco product any requirement
which is different from, or in addition to, any requirement
applicable under the provisions of this chapter relating to
performance standards, premarket approval, adulteration,
misbranding, registration, reporting, good manufacturing
standards, or reduced risk products.
``(B) Subparagraph (A) does not apply to requirements
relating to the sale, use, or distribution of a tobacco
product including requirements related to the access to, and
the advertising and promotion of, a tobacco product.
``(b) Rule of Construction Regarding Product Liability.--No
provision of this chapter relating to a tobacco product shall
be construed to modify or otherwise affect any action or the
liability of any person under the product liability law of
any State.
``(c) Waivers.--Upon the application of a State or
political subdivision thereof, the Secretary may, by
regulation promulgated after notice and an opportunity for an
oral hearing, exempt from subsection (a), under such
conditions as may be prescribed in such regulation, a
requirement of such State or political subdivision applicable
to a tobacco product if--
``(1) the requirement is more stringent than a requirement
applicable under the provisions described in subsection
(a)(3) which would be applicable to the tobacco product if an
exemption were not in effect under this subsection; or
``(2) the requirement--
``(A) is required by compelling local conditions; and
``(B) compliance with the requirement would not cause the
tobacco product to be in violation of any applicable
requirement of this chapter.

``SEC. 915. EQUAL TREATMENT OF RETAIL OUTLETS.

-``The Secretary shall issue regulations to require that
retail establishments for which the predominant business is
the sale of tobacco products comply with any advertising
restrictions applicable to retail establishments accessible
to individuals under the age of 18.''.

SEC. 102. CONFORMING AND OTHER AMENDMENTS TO GENERAL
PROVISIONS.

(a) Amendment of Federal Food, Drug, and Cosmetic Act.--
Except as otherwise expressly provided, whenever in this
section an amendment is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
is to a section or other provision of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 301 et seq.).
(b) Section 301.--Section 301 (21 U.S.C. 331) is amended--
(1) by inserting ``tobacco product,'' in subsection (a)
after ``device,'';
(2) by inserting ``tobacco product,'' in subsection (b)
after ``device,'';
(3) by inserting ``tobacco product,'' in subsection (c)
after ``device,'';
(4) by striking ``515(f), or 519'' in subsection (e) and
inserting ``515(f), 519, or 909'';
(5) by inserting ``tobacco product,'' in subsection (g)
after ``device,'';
(6) by inserting ``tobacco product,'' in subsection (h)
after ``device,'';
(7) by striking ``708, or 721'' in subsection (j) and
inserting ``708, 721, 904, 905, 906, 907, 908, or 909'';
(8) by inserting ``tobacco product,'' in subsection (k)
after ``device,'';
(9) by striking subsection (p) and inserting the following:

[[Page S5044]]

``(p) The failure to register in accordance with section
510 or 905, the failure to provide any information required
by section 510(j), 510(k), 905(i), or 905(j), or the failure
to provide a notice required by section 510(j)(2) or
905(J)(2).'';
(10) by striking subsection (q)(1) and inserting the
following:
``(q)(1) The failure or refusal--
``(A) to comply with any requirement prescribed under
section 518, 520(g), 906(f), or 908;
``(B) to furnish any notification or other material or
information required by or under section 519, 520(g), 904,
906(f), or 909; or
``(C) to comply with a requirement under section 522 or
912.'';
(11) by striking ``device,'' in subsection (q)(2) and
inserting ``device or tobacco product,'';
(12) by inserting ``or tobacco product'' in subsection (r)
after ``device'' each time that it appears; and
(13) by adding at the end thereof the following:
``(aa) The sale of tobacco products in violation of a no-
tobacco-sale order issued under section 303(f).''.
(c) Section 303.--Section 303(f) (21 U.S.C. 333(f)) is
amended--
(1) by amending the caption to read as follows:
``(f) Civil Penalties; No-tobacco-sale Orders.--'';
(2) by inserting ``or tobacco products'' after ``devices''
in paragraph (1)(A);
(3) by redesignating paragraphs (3), (4), and (5) as
paragraphs (4), (5), and (6), and inserting after paragraph
(2) the following:
``(3) If the Secretary finds that a person has committed
repeated violations of restrictions promulgated under section
906(d) at a particular retail outlet then the Secretary may
impose a no-tobacco-sale order on that person prohibiting the
sale of tobacco products in that outlet. A no-tobacco-sale
order may be imposed with a civil penalty under paragraph
(1).'';
(4) by striking ``assessed'' the first time it appears in
subparagraph (A) of paragraph (4), as redesignated, and
inserting ``assessed, or a no-tobacco-sale order may be
imposed,'';
(5) by striking ``penalty'' in such subparagraph and
inserting ``penalty, or upon whom a no-tobacco-order is to be
imposed,'';
(6) by inserting after ``penalty,'' in subparagraph (B) of
paragraph (4), as redesignated, the following: ``or the
period to be covered by a no-tobacco-sale order,'';
(7) by adding at the end of such subparagraph the
following: ``A no-tobacco-sale order permanently prohibiting
an individual retail outlet from selling tobacco products
shall include provisions that allow the outlet, after a
specified period of time, to request that the Secretary
compromise, modify, or terminate the order.'';
(8) by adding at the end of paragraph (4), as redesignated,
the following:
``(D) The Secretary may compromise, modify, or terminate,
with or without conditions, any no-tobacco-sale order.'';
(9) by striking ``(3)(A)'' in paragraph (5), as
resdesignated, and inserting ``(4)(A)'';
(10) by inserting ``or the imposition of a no-tobacco-sale
order'' after ``penalty'' the first 2 places it appears in
such paragraph;
(11) by striking ``issued.'' in such paragraph and
inserting ``issued, or on which the no-tobacco-sale order was
imposed, as the case may be.''; and
(12) by striking ``paragraph (4)'' each place it appears in
paragraph (6), as redesignated, and inserting ``paragraph
(5)''.
(d) Section 304.--Section 304 (21 U.S.C. 334) is amended--
(1) by striking ``and'' before ``(D)'' in subsection
(a)(2);
(2) by striking ``device.'' in subsection (a)(2) and
inserting a comma and ``(E) Any adulterated or misbranded
tobacco product.'';
(3) by inserting ``tobacco product,'' in subsection (d)(1)
after ``device,'';
(4) by inserting ``or tobacco product'' in subsection
(g)(1) after ``device'' each place it appears; and
(5) by inserting ``or tobacco product'' in subsection
(g)(2)(A) after ``device'' each place it appears.
(e) Section 702.--Section 702(a) (21 U.S.C. 372(a)) is
amended--
(1) by inserting ``(1)'' after ``(a)''; and
(2) by adding at the end thereof the following:
``(2) For a tobacco product, to the extent feasible, the
Secretary shall contract with the States in accordance with
paragraph (1) to carry out inspections of retailers in
connection with the enforcement of this Act.''.
(f) Section 703.--Section 703 (21 U.S.C. 373) is amended--
(1) by inserting ``tobacco product,'' after ``device,''
each place it appears; and
(2) by inserting ``tobacco products,'' after ``devices,''
each place it appears.
(g) Section 704.--Section 704 (21 U.S.C. 374) is amended--
(1) by inserting ``tobacco products,'' in subsection
(a)(1)(A) after ``devices,'' each place it appears;
(2) by inserting ``or tobacco products'' in subsection
(a)(1)(B) after ``restricted devices'' each place it appears;
and
(3) by inserting ``tobacco product,'' in subsection (b)
after ``device,''.
(h) Section 705.--Section 705(b) (21 U.S.C. 375(b)) is
amended by inserting ``tobacco products,'' after
``devices,''.
(i) Section 709.--Section 709 (21 U.S. C. 379) is amended
by inserting ``or tobacco product'' after ``device''.
(j) Section 801.--Section 801 (21 U.S.C. 381) is amended--
(1) by inserting ``tobacco products,'' after ``devices,''
in subsection (a) the first time it appears;
(2) by inserting ``or subsection (j) of section 905'' in
subsection (a) after ``section 510''; and
(3) by striking ``drugs or devices'' each time it appears
in subsection (a) and inserting ``drugs, devices, or tobacco
products'';
(4) by inserting ``tobacco product,'' in subsection (e)(1)
after ``device,'';
(2) by redesignating paragraph (4) of subsection (e) as
paragraph (5) and inserting after paragraph (3), the
following:
``(4) Paragraph (1) does not apply to any tobacco product--
``(A) which does not comply with an applicable requirement
of section 907 or 910; or
``(B) which under section 906(f) is exempt from either such
section.

This paragraph does not apply if the Secretary has determined
that the exportation of the tobacco product is not contrary
to the public health and safety and has the approval of the
country to which it is intended for export or the tobacco
product is eligible for export under section 802.''.
(k) Section 802.--Section 802 (21 U.S.C. 382) is amended--
(1) by striking ``device--'' in subsection (a) and
inserting ``device or tobacco product--'';
(2) by striking ``and'' after the semicolon in subsection
(a)(1)(C);
(3) by striking subparagraph (C) of subsection (a)(2) and
all that follows in that subsection and inserting the
following:
``(C) is a banned device under section 516; or
``(3) which, in the case of a tobacco product--
``(A) does not comply with an applicable requirement of
section 907 or 910; or
``(B) under section 906(f) is exempt from either such
section,

is adulterated, misbranded, and in violation of such sections
or Act unless the export of the drug, device, or tobacco
product is, except as provided in subsection (f), authorized
under subsection (b), (c), (d), or (e) of this section or
section 801(e)(2) or 801(e)(4). If a drug, device, or tobacco
product described in paragraph (1), (2), or (3) may be
exported under subsection (b) and if an application for such
drug or device under section 505, 515, or 910 of this Act or
section 351 of the Public Health Service Act (42 U.S.C. 262)
was disapproved, the Secretary shall notify the appropriate
public health official of the country to which such drug,
device, or tobacco product will be exported of such
disapproval.'';
(4) by inserting ``or tobacco product'' in subsection
(b)(1)(A) after ``device'' each time it appears;
(5) by inserting ``or tobacco product'' in subsection (c)
after ``device'' and inserting ``or section 906(f)'' after
``520(g).'';
(6) by inserting ``or tobacco product'' in subsection (f)
after ``device'' each time it appears; and
(7) by inserting ``or tobacco product'' in subsection (g)
after ``device'' each time it appears.
(l) Section 1003.--Section 1003(d)(2)(C) (as redesignated
by section 101(a)) is amended--
(1) by striking ``and'' after ``cosmetics,''; and
(2) inserting a comma and ``and tobacco products'' after
``devices''.
(m) Effective Date for no-tobacco-sale order amendments.--
The amendments made by subsection (c), other than the
amendment made by paragraph (2) thereof, shall take effect
only upon the promulgation of final regulations by the
Secretary--
(1) defining the term ``repeated violation'', as used in
section 303(f) of the Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 333(f)) as amended by subsection (c), by
identifying the number of violations of particular
requirements over a specified period of time that constitute
a repeated violation;
(2) providing for notice to the retailer of each violation
at a particular retail outlet;
(3) providing that a person may not be charged with a
violation at a particular retail outlet unless the Secretary
has provided notice to the retailer of all previous
violations at that outlet;
(4) establishing a period of time during which, if there
are no violations by a particular retail outlet, that outlet
will not considered to have been the site of repeated
violations when the next violation occurs; and
(5) providing that good faith reliance on false
identification does not constitute a violation of any minimum
age requirement for the sale of tobacco products.

SEC. 103. CONSTRUCTION OF CURRENT REGULATIONS.

(a) In General.--The final regulations promulgated by the
Secretary in the August 28, 1996, issue of the Federal
Register (62 Red. Reg. 44615-44618) and codified at part 897
of title 21, Code of Federal Regulations, are hereby deemed
to be lawful and to have been lawfully promulgated by the
Secretary under chapter IX and section 701 of the Federal
Food, Drug, and Cosmetic Act, as amended by this Act, and not
under chapter V of the Federal Food, Drug, and Cosmetic Act.
The provisions of part 897 that are not in effect on the date
of enactment of this Act shall take effect as in such part or
upon such later date as determined by the Secretary by order.
The Secretary shall amend the designation of authority in
such regulations in accordance with this subsection.

[[Page S5045]]

(b) Limitation on Advisory Opinions.--As of the date of
enactment of this Act, the following documents issued by the
Food and Drug Administration shall not constitute advisory
opinions under section 10.85(d)(1) of title 21, Code of
Federal Regulations, except as they apply to tobacco
products, and shall not be cited by the Secretary or the Food
and Drug Administration as binding precedent.
(1) The preamble to the proposed rule in the document
entitled ``Regulations Restricting the Sale and Distribution
of Cigarettes and Smokeless Tobacco Products to Protect
Children and Adolescents'' (60 Fed. Reg. 41314-41372 (August
11, 1995)).
(2) The document entitled ``Nicotine in Cigarettes and
Smokeless Tobacco Products is a Drug and These Products Are
Nicotine Delivery Devices Under the Federal Food, Drug, and
Cosmetic Act;; (60 Fed. Reg. 41453-41787 (August 11, 1995)).
(3) The preamble to the final rule in the document entitled
``Regulations Restricting the Sale and Distribution of
Cigarettes and Smokeless Tobacco to Protect Children and
Adolescents'' (61 Fed. Reg. 44396-44615 (August 28, 1996)).
(4) The document entitled ``Nicotine in Cigarettes and
Smokeless Tobacco is a Drug and These Products are Nicotine
Delivery Devices Under the Federal Food, Drug, and Cosmetic
Act; Jurisdictional Determination;; (61 Fed. Reg. 44619-45318
(August 28, 1996)).

TITLE II--REDUCTIONS IN UNDERAGE TOBACCO USE

Subtitle A--Underage Use

SEC. 201. FINDINGS.

The Congress finds the following:
(1) Reductions in the underage use of tobacco products are
critically important to the public health.
(2) Achieving this critical public health goal can be
substantially furthered by increasing the price of tobacco
products to discourage underage use if reduction targets are
not achieved and by creating financial incentives for
manufacturers to discourage youth from using their tobacco
products.
(3) When reduction targets in underage use are not achieved
on an industry-wide basis, the price increases that will
result from an industry-wide assessment will provide an
additional deterrence to youth tobacco use.
(4) Manufacturer-specific incentives that will be imposed
if reduction targets are not met by a manufacturer provide a
strong incentive for each manufacturer to make all efforts to
discourage youth use of its brands and ensure the
effectiveness of the industry-wide assessments.

SEC. 202. PURPOSE.

This title is intended to ensure that, in the event that
other measures contained in this Act prove to be inadequate
to produce substantial reductions in tobacco use by minors,
tobacco companies will pay additional assessments. These
additional assessments are designed to lower youth tobacco
consumption in a variety of ways: by triggering further
increases in the price of tobacco products, by encouraging
tobacco companies to work to meet statutory targets for
reductions in youth tobacco consumption, and providing
support for further reduction efforts.

SEC. 203. GOALS FOR REDUCING UNDERAGE TOBACCO USE.

(a) Goals.--As part of a comprehensive national tobacco
control policy, the Secretary, working in cooperation with
State, Tribal, and local governments and the private sector,
shall take all actions under this Act necessary to ensure
that the required percentage reductions in underage use of
tobacco products set forth in this title are achieved.
(b) Required Reductions for Cigarettes.--With respect to
cigarettes, the required percentage reduction in underage
use, as set forth in section 204, means--

----------------------------------------------------------------------------------------------------------------
Required Percentage Reduction as a Percentage
Calendar Year After Date of Enactment of Base Incidence Percentage in Underage
Cigarette Use
----------------------------------------------------------------------------------------------------------------
Years 3 and 4 15 percent
Years 5 and 6 30 percent
Years 7, 8, and 9 50 percent
Year 10 and thereafter 60 percent
----------------------------------------------------------------------------------------------------------------

(c) Required Reductions for Smokeless Tobacco.--With
respect to smokeless tobacco products, the required
percentage reduction in underage use, as set forth in section
204, means--

----------------------------------------------------------------------------------------------------------------
Required Percentage Reduction as a Percentage
Calendar Year After Date of Enactment of Base Incidence Percentage in Underage
Smokeless Tobacco Use
----------------------------------------------------------------------------------------------------------------
Years 3 and 4 12.5 percent
Years 5 and 6 25 percent
Years 7, 8, and 9 35 percent
Year 10 and thereafter 45 percent
----------------------------------------------------------------------------------------------------------------

SEC. 204. LOOK-BACK ASSESSMENT.

(a) Annual Performance Survey.--Beginning no later than
1999 and annually thereafter the Secretary shall conduct a
survey, in accordance with the methodology in subsection
(d)(1), to determine--
(1) the percentage of all young individuals who used a type
of tobacco product within the past 30 days; and
(2) the percentage of young individuals who identify each
brand of each type of tobacco product as the usual brand of
that type smoked or used within the past 30 days.
(b) Annual Determination.--The Secretary shall make an
annual determination, based on the annual performance survey
conducted under subsection (a), of whether the required
percentage reductions in underage use of tobacco products for
a year have been achieved for the year involved. The
determination shall be based on the annual percent prevalence
of the use of tobacco products, for the industry as a whole
and of particular manufacturers, by young individuals (as
determined by the surveys conducted by the Secretary) for the
year involved as compared to the base incidence percentages.
(c) Confidentiality of Data.--The Secretary may conduct a
survey relating to tobacco use involving minors. If the
information collected in the course of conducting the annual
performance survey results in the individual supplying the
information or described in it to be identifiable, the
information may not be used for any purpose other than the
purpose for which it was supplied unless that individual (or
that individual's guardian) consents to its use for such
other purpose. The information may not be published or
released in any other form if the individual supplying the
information or described in it is identifiable unless that
individual (or that individual's guardian) consents to its
publication or release in other form.
(d) Methodolgy.--
(1) In general.--The survey required by subsection (a)
shall--
(A) be based on a nationally representative sample of young
individuals;
(B) be a household-based, in person survey (which may
include computer-assisted technology);
(C) measure use of each type of tobacco product within the
past 30 days;
(D) identify the usual brand of each type of tobacco
product used within the past 30 days; and
(E) permit the calculation of the actual percentage
reductions in underage use of a type of tobacco product (or,
in the case of the manufacturer-specific surcharge, the use
of a type of tobacco product of a manufacturer) based on the
point estimates of the percentage of young individuals
reporting use of a type of tobacco product (or, in the case
of the manufacturer-specific surcharge, the use of a type of
tobacco product of a manufacturer) from the annual
performance survey.
(2) Criteria for deeming point estimates correct.--Point
estimates under paragraph (1)(E) are deemed conclusively to
be correct and accurate for calculating actual percentage
reductions in underage use of a type of tobacco product (or,
in the case of the manufacturer-specific surcharge, the use
of a type of tobacco product of a particular manufacturer)
for the purpose of measuring compliance with percent
reduction targets and calculating surcharges provided that
the precision of estimates (based on sampling error) of the
percentage of young individuals reporting use of a type of
tobacco product (or, in the case of the manufacturer-specific
surcharge, the use of a type of tobacco product of a
manufacturer) is such that the 95-percent confidence interval
around such point estimates is no more than plus or minus 1
percent.
(3) Survey deemed correct, proper, and accurate.--A survey
using the methodology required by this subsection is deemed
conclusively to be proper, correct, and accurate for purposes
of this Act.
(4) Secretary may adopt different methodology.--The
Secretary by notice and comment rulemaking may adopt a survey
methodology that is different than the methodology described
in paragraph (1) if the different methodology is at least as
statistically precise as that methodology.
(e) Industry-wide Non-attainment Surcharges.--
(1) Secretary to determine industry-wide non-attainment
percentage.--The Secretary shall determine the industry-wide
non-attainment percentage for cigarettes and for smokeless
tobacco for each calendar year.
(2) Non-attainment surcharge for cigarettes.--For each
calendar year in which the percentage reduction in underage
use required by section 203b) is not attained, the Secretary
shall assess a surcharge on cigarette manufacturers as
follows:

----------------------------------------------------------------------------------------------------------------
If the non-attainment percentage is: The surcharge is:
----------------------------------------------------------------------------------------------------------------
Not more than 5 percent $80,000,000 multiplied by the non-attainment
percentage
More than 5% but not more than 10% $400,000,000, plus $160,000,000 multiplied by
the non-attainment percentage in excess of 5%
but not in excess of 10%
More than 10% $1,200,000,000, plus $240,000,000 multiplied
by the non-attainment percentage in excess of
10%
More than 21.6% $4,000,000,000
----------------------------------------------------------------------------------------------------------------

(3) Non-attainment surcharge for smokeless tobacco.--For
each year in which the percentage reduction in underage use
required by section 203c) is not attained, the Secretary
shall assess a surcharge on smokeless tobacco product
manufacturers as follows:

----------------------------------------------------------------------------------------------------------------
If the non-attainment percentage is: The surcharge is:
----------------------------------------------------------------------------------------------------------------
Not more than 5 percent $8,000,000 multiplied by the non-attainment
percentage
More than 5% but not more than 10% $40,000,000, plus $16,000,000 multiplied by
the non-attainment percentage in excess of 5%
but not in excess of 10%
More than 10% $120,000,000, plus $24,000,000 multiplied by
the non-attainment percentage in excess of
10%
More than 21.6% $400,000,000
----------------------------------------------------------------------------------------------------------------

(4) Strict liability; joint and several liability.--
Liability for any surcharge imposed under subsection (e)
shall be--
(A) strict liability; and
(B) joint and several liability--

[[Page S5046]]

(i) among all cigarette manufacturers for surcharges
imposed under subsection (e)(2); and
(ii) among all smokeless tobacco manufacturers for
surcharges imposed under subsection (e)(3).
(5) Surcharge liability among manufacturers.--A tobacco
product manufacturer shall be liable under this subsection to
one or more other manufacturers if the plaintiff tobacco
product manufacturer establishes by a preponderance of the
evidence that the defendant tobacco product manufacturer,
through its acts or omissions, was responsible for a
disproportionate share of the non-attainment surcharge as
compared to the responsibility of the plaintiff manufacturer.
(6) Exemptions for small manufacturers.--
(A) Allocation by market share.--The Secretary shall make
such allocations according to each manufacturer's share of
the domestic cigarette or domestic smokeless tobacco market,
as appropriate, in the year for which the surcharge is being
assessed, based on actual Federal excise tax payments.
(B) Exemption.--In any year in which a surcharge is being
assessed, the Secretary shall exempt from payment any tobacco
product manufacturer with less than 1 percent of the domestic
market share for a specific category of tobacco product
unless the Secretary finds that the manufacturer's products
are used by underage individuals at a rate equal to or
greater than the manufacturer's total market share for the
type of tobacco product.
(f) Manufacturer-specific Surcharges.--
(1) Required percentage reductions.--Each manufacturer
which manufactured a brand or brands of tobacco product on or
before the date of the enactment of this Act shall reduce the
percentage of young individuals who use such manufacturer's
brand or brands as their usual brand in accordance with the
required percentage reductions described under subsections
(b) (with respect to cigarettes) and (c ) (with respect to
smokeless tobacco).
(2) Application to less popular brands.--Each manufacturer
which manufactured a brand or brands of tobacco product on or
before the date of the enactment of this Act for which the
base incidence percentage is equal to or less than the de
minimis level shall ensure that the percent prevalence of
young individuals who use the manufacturer's tobacco products
as their usual brand remains equal to or less than the de
minimis level described in paragraph (4).
(3) New entrants.--Each manufacturer of a tobacco product
which begins to manufacture a tobacco product after the date
of the enactment of this Act shall ensure that the percent
prevalence of young individuals who use the manufacturer's
tobacco products as their usual brand is equal to or less
than the de minimis level.
(4) De minimis level defined.--The de minimis level is
equal to 1 percent prevalence of the use of each
manufacturer's brands of tobacco product by young individuals
(as determined on the basis of the annual performance survey
conducted by the Secretary) for a year.
(5) Target reduction levels.--
(A) Existing manufacturers.-- For purposes of this section,
the target reduction level for each type of tobacco product
for a year for a manufacturer is the product of the required
percentage reduction for a type of tobacco product for a year
and the manufacturers base incidence percentage for such
tobacco product.
(B) New manufacturers; manufacturers with low base
incidence percentages.--With respect to a manufacturer which
begins to manufacture a tobacco product after the date of the
enactment of this Act or a manufacturer for which the
baseline level as measured by the annual performance survey
is equal to or less than the de minimis level described in
paragraph (4), the base incidence percentage is the de
minimis level, and the required percentage reduction in
underage use for a type of tobacco product with respect to a
manufacturer for a year shall be deemed to be the number of
percentage points necessary to reduce the actual percent
prevalence of young individuals identifying a brand of such
tobacco product of such manufacturer as the usual brand
smoked or used for such year to the de minimis level.
(6) Surcharge amount.--
(A) In general.--If the Secretary determines that the
required percentage reduction in use of a type of tobacco
product has not been achieved by such manufacturer for a
year, the Secretary shall impose a surcharge on such
manufacturer under this paragraph.
(B) Amount.--The amount of the manufacturer-specific
surcharge for a type of tobacco product for a year under this
paragraph is $1,000, multiplied by the number of young
individuals for which such firm is in noncompliance with
respect to its target reduction level.
(C) Determination of number of young individuals.--For
purposes of subparagraph (B) the number of young individuals
for which a manufacturer is in noncompliance for a year shall
be determined by the Secretary from the annual performance
survey and shall be calculated based on the estimated total
number of young individuals in such year and the actual
percentage prevalence of young individuals identifying a
brand of such tobacco product of such manufacturer as the
usual brand smoked or used in such year as compared to such
manufacturer's target reduction level for the year.
(7) De minimis rule.--The Secretary may not impose a
surcharge on a manufacturer for a type of tobacco product for
a year if the Secretary determines that actual percent
prevalence of young individuals identifying that
manufacturer's brands of such tobacco product as the usual
products smoked or used for such year is less than 1 percent.
(g) Surcharges To Be Adjusted for Inflation.--
(1) In general.--Beginning with the fourth calendar year
after the date of enactment of this Act, each dollar amount
in the tables in subsections (e)(2), (e)(3), and (f)(6)(B)
shall be increased by the inflation adjustment.
(2) Inflation adjustment.--For purposes of paragraph (1),
the inflation adjustment for any calendar year is the
percentage (if any) by which--
(A) the CPI for the preceding calendar year, exceeds
(B) the CPI for the calendar year 1998.
(3) CPI.--For purposes of paragraph (2), the CPI for any
calendar year is the average of the Consumer Price Index for
all-urban consumers published by the Department of Labor.
(4) Rounding.--If any increase determined under paragraph
(1) is not a multiple of $1,000, the increase shall be
rounded to the nearest multiple of $1,000.
(h) Method of Surcharge Assessment.--The Secretary shall
assess a surcharge for a specific calendar year on or before
May 1 of the subsequent calendar year. Surcharge payments
shall be paid on or before July 1 of the year in which they
are assessed. The Secretary may establish, by regulation,
interest at a rate up to 3 times the prevailing prime rate at
the time the surcharge is assessed, and additional charges in
an amount up to 3 times the surcharge, for late payment of
the surcharge.
(i) Business Expense Deduction.--Any surcharge paid by a
tobacco product manufacturer under this section shall not be
deductible as an ordinary and necessary business expense or
otherwise under the Internal Revenue Code of 1986.
(j) Appeal Rights.--The amount of any surcharge is
committed to the sound discretion of the Secretary and shall
be subject to judicial review by the United States Court of
Appeals for the District of Columbia Circuit, based on the
arbitrary and capricious standard of section 706(2)(A) of
title 5, United States Code. Notwithstanding any other
provisions of law, no court shall have authority to stay any
surcharge payments due the Secretary under this Act pending
judicial review.
(k) Responsibility for Agents.--In any action brought under
this subsection, a tobacco product manufacturer shall be held
responsible for any act or omission of its attorneys,
advertising agencies, or other agents that contributed to
that manufacturer's responsibility for the surcharge assessed
under this section.

SEC. 205. DEFINITIONS.

In this subtitle:
(1) Base incidence percentage.--The term ``base incidence
percentage'' means, with respect to each type of tobacco
product, the percentage of young individuals determined to
have used such tobacco product in the first annual
performance survey for 1999.
(2) Manufacturers base incidence percentage.--The term
``manufacturers base incidence percentage'' is, with respect
to each type of tobacco product, the percentage of young
individuals determined to have identified a brand of such
tobacco product of such manufacturer as the usual brand
smoked or used in the first annual performance survey for
1999.
(3) Young individuals.--The term ``young individuals''
means individuals who are over 11 years of age and under 18
years of age.
(4) Cigarette manufacturers.--The term ``cigarette
manufacturers'' means manufacturers of cigarettes sold in the
United States.
(5) Non-attainment percentage for cigarettes.--The term
``non-attainment percentage for cigarettes'' means the number
of percentage points yielded--
(A) for a calendar year in which the percent incidence of
underage use of cigarettes is less than the base incidence
percentage, by subtracting--
(i) the percentage by which the percent incidence of
underage use of cigarettes in that year is less than the base
incidence percentage, from
(ii) the required percentage reduction applicable in that
year; and
(B) for a calendar year in which the percent incidence of
underage use of cigarettes is greater than the base incidence
percentage, adding--
(i) the percentage by which the percent incidence of
underage use of cigarettes in that year is greater than the
base incidence percentage; and
(ii) the required percentage reduction applicable in that
year.
(6) Non-attainment percentage for smokeless tobacco
products.--The term ``non-attainment percentage for smokeless
tobacco products'' means the number of percentage points
yielded--
(A) for a calendar year in which the percent incidence of
underage use of smokeless tobacco products is less than the
base incidence percentage, by subtracting--
(i) the percentage by which the percent incidence of
underage use of smokeless tobacco products in that year is
less than the base incidence percentage, from

[[Page S5047]]

(ii) the required percentage reduction applicable in that
year; and
(B) for a calendar year in which the percent incidence of
underage use of smokeless tobacco products is greater than
the base incidence percentage, by adding--
(i) the percentage by which the percent incidence of
underage use of smokeless tobacco products in that year is
greater than the base incidence percentage; and
(ii) the required percentage reduction applicable in that
year.
(7) Smokeless tobacco product manufacturers.--The term
``smokeless tobacco product manufacturers'' means
manufacturers of smokeless tobacco products sold in the
United States.

Subtitle B--State Retail Licensing and Enforcement Incentives

SEC. 231. STATE RETAIL LICENSING AND ENFORCEMENT BLOCK
GRANTS.

(a) In General.--The Secretary shall make State retail
licensing and enforcement block grants in accordance with the
provisions of this section. There are authorized to be
appropriated to the Secretary from the National Tobacco Trust
Fund $200,000,000 for each fiscal year to carry out the
provisions of this section.
(b) Requirements.--
(1) Establishment.--The Secretary shall provide a block
grant, based on population, under this subtitle to each State
that has in effect a law that--
(A) provides for the licensing of entities engaged in the
sale or distribution of tobacco products directly to
consumers;
(B) makes it illegal to sell or distribute tobacco products
to individuals under 18 years of age; and
(C) meets the standards described in this section.
(2) State agreement required.--In order to receive a block
grant under this section, a State--
(A) shall enter into an agreement with the Secretary to
assume responsibilities for the implementation and
enforcement of a tobacco retailer licensing program;
(B) shall prohibit retailers from selling or otherwise
distributing tobacco products to individuals under 18 years
of age in accordance with the Youth Access Restrictions
regulations promulgated by the Secretary (21 C.F.R. 897.14(a)
and (b));
(C) shall make available to appropriate Federal agencies
designated by the Secretary requested information concerning
retail establishments involved in the sale or distribution of
tobacco products to consumers; and
(D) shall establish to the satisfaction of the Secretary
that it has a law or regulation that includes the following:
(i) Licensure; sources; and notice.--A requirement for a
State license for each retail establishment involved in the
sale or distribution of tobacco products to consumers. A
requirement that a retail establishment may purchase tobacco
products only from Federally-licensed manufacturers,
importers, or wholesalers. A program under which notice is
provided to such establishments and their employees of all
licensing requirements and responsibilities under State and
Federal law relating to the retail distribution of tobacco
products.
(ii) Penalties.--

(I) Criminal.--Criminal penalties for the sale or
distribution of tobacco products to a consumer without a
license.
(II) Civil.--Civil penalties for the sale or distribution
of tobacco products in violation of State law, including
graduated fines and suspension or revocation of licenses for
repeated violations.
(III) Other.--Other programs, including such measures as
fines, suspension of driver's license privileges, or
community service requirements, for underage youths who
possess, purchase, or attempt to purchase tobacco products.

(iii) Judicial review.--Judicial review procedures for an
action of the State suspending, revoking, denying, or
refusing to renew any license under its program.
(c) Enforcement.--
(1) Undertaking.--Each State that receives a grant under
this subtitle shall undertake to enforce compliance with its
tobacco retailing licensing program in a manner that can
reasonably be expected to reduce the sale and distribution of
tobacco products to individuals under 18 years of age. If the
Secretary determines that a State is not enforcing the law in
accordance with such an undertaking, the Secretary may
withhold a portion of any unobligated funds under this
section otherwise payable to that State.
(2) Activities and reports regarding enforcement.--A State
that receives a grant under this subtitle shall--
(A) conduct monthly random, unannounced inspections of
sales or distribution outlets in the State to ensure
compliance with a law prohibiting sales of tobacco products
to individuals under 18 years of age;
(B) annually submit to the Secretary a report describing in
detail--
(i) the activities carried out by the State to enforce
underage access laws during the fiscal year;
(ii) the extent of success the State has achieved in
reducing the availability of tobacco products to individuals
under the age of 18 years;
(iii) how the inspections described in subparagraph (A)
were conducted and the methods used to identify outlets, with
appropriate protection for the confidentiality of information
regarding the timing of inspections and other investigative
techniques whose effectiveness depends on continued
confidentiality; and
(iv) the identity of the single State agency designated by
the Governor of the State to be responsible for the
implementation of the requirements of this section.
(3) Minimum inspection standards.--Inspections conducted by
the State shall be conducted by the State in such a way as to
ensure a scientifically sound estimate (with a 95 percent
confidence interval that such estimates are accurate to
within plus or minus 3 percentage points), using an accurate
list of retail establishments throughout the State. Such
inspections shall cover a range of outlets (not preselected
on the basis of prior violations) to measure overall levels
of compliance as well as to identify violations. The sample
must reflect the distribution of the population under the age
of 18 years throughout the State and the distribution of the
outlets throughout the State accessible to youth. Except as
provided in this paragraph, any reports required by this
paragraph shall be made public. As used in this paragraph,
the term ``outlet'' refers to any location that sells at
retail or otherwise distributes tobacco products to
consumers, including to locations that sell such products
over-the-counter.
(d) Noncompliance.--
(1) Inspections.--The Secretary shall withhold from any
State that fails to meet the requirements of subsection (b)
in any calendar year an amount equal to 5 percent of the
amount otherwise payable under this subtitle to that State
for the next fiscal year.
(2) Compliance rate.--The Secretary shall withhold from any
State that fails to demonstrate a compliance rate of--
(A) at least the annual compliance targets that were
negotiated with the Secretary under section 1926 of the
Public Health Service Act (42 U.S.C. 300x--26) as such
section was in effect before its repeal by this Act through
the third fiscal year after the date of enactment of this
Act;
(B) at least 80 percent in the fourth fiscal year after
such date;
(C) at least 85 percent in the fifth and sixth fiscal years
after such date; and
(D) at least 90 percent in every fiscal year beginning with
the seventh fiscal year after such date,

an amount equal to one percentage point for each percentage
point by which the State failed to meet the percentage set
forth in this subsection for that year from the amount
otherwise payable under this subtitle for that fiscal year.
(e) Release and Disbursement.--
(1) Upon notice from the Secretary that an amount payable
under this section has been ordered withheld under subsection
(d), a State may petition the Secretary for a release and
disbursement of up to 75 percent of the amount withheld, and
shall give timely written notice of such petition to the
attorney general of that State and to all tobacco product
manufacturers.
(2) The agency shall conduct a hearing on such a petition,
in which the attorney general of the State may participate
and be heard.
(3) The burden shall be on the State to prove, by a
preponderance of the evidence, that the release and
disbursement should be made. The Secretary's decision on
whether to grant such a release, and the amount of any such
disbursement, shall be based on whether--
(A) the State presents scientifically sound survey data
showing that the State is making significant progress toward
reducing the use of tobacco products by individuals who have
not attained the age of 18 years;
(B) the State presents scientifically-based data showing
that it has progressively decreased the availability of
tobacco products to such individuals;
(C) the State has acted in good faith and in full
compliance with this Act, and any rules or regulations
promulgated under this Act;
(D) the State provides evidence that it plans to improve
enforcement of these laws in the next fiscal year; and
(E) any other relevant evidence.
(4) A State is entitled to interest on any withheld amount
released at the average United States 52-Week Treasury Bill
rate for the period between the withholding of the amount and
its release.
(5) Any State attorney general or tobacco product
manufacturer aggrieved by a final decision on a petition
filed under this subsection may seek judicial review of such
decision within 30 days in the United States Court of Appeals
for the District of Columbia Circuit. Unless otherwise
specified in this Act, judicial review under this section
shall be governed by sections 701 through 706 of title 5,
United States Code.
(6) No stay or other injunctive relief enjoining a
reduction in a State's allotment pending appeal or otherwise
may be granted by the Secretary or any court.
(f) Non-participating States Licensing Requirements.--For
retailers in States which have not established a licensing
program under subsection (a), the Secretary shall promulgate
regulations establishing Federal retail licensing for
retailers engaged in tobacco sales to consumers in those
States. The Secretary may enter into agreements with States
for the enforcement of those regulations. A State that enters
into such an agreement shall receive a grant under this
section to reimburse it for costs incurred in carrying out
that agreement.

[[Page S5048]]

(g) Definition.--For the purposes of this section, the term
``first applicable fiscal year'' means the first fiscal year
beginning after the fiscal year in which funding is made
available to the States under this section.

SEC. 232. BLOCK GRANTS FOR COMPLIANCE BONUSES.

(a) In General.--The Secretary shall make block grants to
States determined to be eligible under subsection (b) in
accordance with the provisions of this section. There are
authorized to be appropriated to the Secretary from the
National Tobacco Trust Fund $100,000,000 for each fiscal year
to carry out the provisions of this section.
(b) Eligible States.--To be eligible to receive a grant
under subsection (a), a State shall--
(1) prepare and submit to the Secretary an application, at
such time, in such manner, and containing such information as
the Secretary may require; and
(2) with respect to the year involved, demonstrate to the
satisfaction of the Secretary that fewer than 5 percent of
all individuals under 18 years of age who attempt to purchase
tobacco products in the State in such year are successful in
such purchase.
(c) Payout.--
(1) Payment to State.--If one or more States are eligible
to receive a grant under this section for any fiscal year,
the amount payable for that fiscal year shall be apportioned
among such eligible States on the basis of population.
(2) Year in which no State receives grant.--If in any
fiscal year no State is eligible to receive a grant under
this section, then the Secretary may use not more than 25
percent of the amount appropriated to carry out this section
for that fiscal year to support efforts to improve State and
local enforcement of laws regulating the use, sale, and
distribution of tobacco products to individuals under the age
of 18 years.
(3) Amounts available without fiscal year limitation.--Any
amount appropriated under this section remaining unexpended
and unobligated at the end of a fiscal year shall remain
available for obligation and expenditure in the following
fiscal year.

SEC. 233. CONFORMING CHANGE.

Section 1926 of the Public Health Service Act (42 U.S.C.
300x--26) is hereby repealed.

Subtitle C--Tobacco Use Prevention and Cessation Initiatives

SEC. 261. TOBACCO USE PREVENTION AND CESSATION INITIATIVES.

Title XIX of the Public Health Service Act (42 U.S.C. 300w
et seq.) is amended by adding at the end the following:

``Part D--Tobacco Use Prevention and Cessation Initiatives

``Subpart I--Cessation and Community-Based Prevention Block Grants

``SEC. 1981. FUNDING FROM TOBACCO SETTLEMENT TRUST FUND.

``(a) In General.--From amounts contained in the Public
Health Allocation Account under section 451(b)(2)(A) and (C)
of the National Tobacco Policy and Youth Smoking Reduction
Act for a fiscal year, there are authorized to be
appropriated (under subsection (d) of such section) to carry
out this subpart--
(1) for cessation activities, the amounts appropriated
under section 451 (b)(2)(A); and
(2) for prevention and education activities, the amounts
appropriated under section 451 (b)(2)(C).
``(b) National Activities.--
``(1)Not more than 10 percent of the amount made available
for any fiscal year under subsection (a) shall be made
available to the Secretary to carry out activities under
section 1981B and 1981D(d).
``(2) Not more than 10 percent of the amount available for
any fiscal year under subsection (a)(1) shall be available to
the Secretary to carry out activities under section 1981D(d).

``SEC. 1981A. ALLOTMENTS.

``(a) Amount.--
``(1) In general.--From the amount made available under
section 1981 for any fiscal year the Secretary, acting
through the Director of the Centers for Disease Control and
Prevention (referred to in this subpart as the `Director'),
shall allot to each State an amount based on a formula to be
developed by the Secretary that is based on the tobacco
prevention and cessation needs of each State including the
needs of the State's minority populations.
``(2) Minimum amount.--In determining the amount of
allotments under paragraph (1), the Secretary shall ensure
that no State receives less than \1/2\ of 1 percent of the
amount available under section 1981(a) for the fiscal year
involved.
``(b) Reallotment.--To the extent that amounts made
available under section 1981 for a fiscal year are not
otherwise allotted to States because--
``(1) 1 or more States have not submitted an application or
description of activities in accordance with section 1981D
for the fiscal year;
``(2) 1 or more States have notified the Secretary that
they do not intend to use the full amount of their allotment;
or
``(3) the Secretary has determined that the State is not in
compliance with this subpart, and therefore is subject to
penalties under section 1981D(g);

such excess amount shall be reallotted among each of the
remaining States in proportion to the amount otherwise
allotted to such States for the fiscal year involved without
regard to this subsection.
``(c) Payments.--
``(1) In general.--The Secretary, acting through the
Director of the Centers for Disease Control and Prevention,
shall utilize the funds made available under this section to
make payments to States under allotments under this subpart
as provided for under section 203 of the Intergovernmental
Cooperation Act of 1968.
``(2) Federal grantees.--From amounts available under
section 1981(b)(2), the Secretary may make grants, or
supplement existing grants, to entities eligible for funds
under the programs described in section 1981C(d)(1) and (10)
to enable such entities to carry out smoking cessation
activities under this subpart, except not less than 25
percent of this amount shall be used for the program
described in 1981C(d)(6).
``(3) Availability of funds.--Any amount paid to a State
for a fiscal year under this subpart and remaining
unobligated at the end of such year shall remain available to
such State for the next fiscal year for the purposes for
which such payment was made.
``(d) Regulations.--Not later than 9 months after the date
of enactment of this part, the Secretary shall promulgate
regulations to implement this subpart. This subpart shall
take effect regardless of the date on which such regulations
are promulgated.

``SEC. 1981B. TECHNICAL ASSISTANCE AND PROVISION OF SUPPLIES
AND SERVICES IN LIEU OF FUNDS.

``(a) Technical Assistance.--The Secretary, acting through
the Director of the Centers for Disease Control and
Prevention, shall, without charge to a State receiving an
allotment under section 1981A, provide to such State (or to
any public or nonprofit private entity within the State)
technical assistance and training with respect to the
planning, development, operation, and evaluation of any
program or service carried out pursuant to the program
involved. The Secretary may provide such technical assistance
or training directly, through contract, or through grants.
``(b) Provision of Supplies and Service in Lieu of Grant
Funds.--The Secretary, at the request of a State, may reduce
the amount of payments to the State under section 1981A(c)
by--
``(1) the fair market value of any supplies or equipment
furnished by the Secretary to the State; and
``(2) the amount of the pay, allowances, and travel
expenses of any officer or employee of the Federal Government
when detailed to the State and the amount of any other costs
incurred in connection with the detail of such officer or
employee;

when the furnishing of such supplies or equipment or the
detail of such an officer or employee is for the convenience
of and at the request of the State and for the purpose of
conducting activities described in section 1981C. The amount
by which any payment is so reduced shall be available for
payment by the Secretary of the costs incurred in furnishing
the supplies or equipment or in detailing the personnel, on
which reduction of the payment is based, and the amount shall
be deemed to be part of the payment and shall be deemed to
have been paid to the State.

``SEC. 1981C. PERMITTED USERS OF CESSATION BLOCK GRANTS AND
OF COMMUNITY-BASED PREVENTION BLOCK GRANTS.

``(a) Tobacco Use Cessation Activities.--Except as provided
in subsections (d) and (e), amounts described in subsection
(a)(1) may be used for the following:
``(1) Evidence-based cessation activities described in the
plan of the State, submitted in accordance with section
1981D, including--
``(A) evidence-based programs designed to assist
individuals, especially young people and minorities who have
been targeted by tobacco product manufacturers, to quit their
use of tobacco products;
``(B) training in cessation intervention methods for health
plans and health professionals, including physicians, nurses,
dentists, health educators, public health professionals, and
other health care providers;
``(C) programs to encourage health insurers and health
plans to provide coverage for evidence-based tobacco use
cessation interventions and therapies, except that the use of
any funds under this clause to offset the cost of providing a
smoking cessation benefit shall be on a temporary
demonstration basis only;
``(D) culturally and linguistically appropriate programs
targeted toward minority and low-income individuals,
individuals residing in medically underserved areas,
uninsured individuals, and pregnant women;
``(E) programs to encourage employer-based wellness
programs to provide evidence-based tobacco use cessation
intervention and therapies; and
``(F) programs that target populations whose smoking rate
is disproportionately high in comparison to the smoking rate
population-wide in the State.
``(2) Planning, administration, and educational activities
related to the activities described in paragraph (1).
``(3) The monitoring and evaluation of activities carried
out under paragraphs (1) and (2), and reporting and
disseminating resulting information to health professionals
and the public.
``(4) Targeted pilot programs with evaluation components to
encourage innovation and experimentation with new
methodologies.

[[Page S5049]]

``(b) State and Community Action Activities.--Except as
provided in subsections (d) and (e), amounts described in
subsection (a)(2) may be used for the following:
``(1) Evidence-based activities for tobacco use prevention
and control described in the plan of the State, submitted in
accordance with section 1981D, including--
``(A) State and community initiatives;
``(B) community-based prevention programs, similar to
programs currently funded by NIH;
``(C) programs focused on those populations within the
community that are most at risk to use tobacco products or
that have been targeted by tobacco advertising or marketing;
``(D) school programs to prevent and reduce tobacco use and
addiction, including school programs focused in those regions
of the State with high smoking rates and targeted at
populations most at risk to start smoking;
``(E) culturally and linguistically appropriate initiatives
targeted towards minority and low-income individuals,
individuals residing in medically underserved areas, and
women of child-bearing age;
``(F) the development and implementation of tobacco-related
public health and health promotion campaigns and public
policy initiatives;
``(G) assistance to local governmental entities within the
State to conduct appropriate anti-tobacco activities.
``(H) strategies to ensure that the State's smoking
prevention activities include minority, low-income, and other
undeserved populations; and
``(I) programs that target populations whose smoking rate
is disproportionately high in comparison to the smoking rate
population-wide in the State.
``(2) Planning, administration, and educational activities
related to the activities described in paragraph (1).
``(3) The monitoring and evaluation of activities carried
out under paragraphs (1) and (2), and reporting and
disseminating resulting information to health professionals
and the public.
``(4) Targeted pilot programs with evaluation components to
encourage innovation and experimentation with new
methodologies.
``(c) Coordination.--Tobacco use cessation and community-
based prevention activities permitted under subsections (b)
and (c) may be conducted in conjunction with recipients of
other Federally--funded programs within the State,
including--
``(1) the special supplemental food program under section
17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786);
``(2) the Maternal and Child Health Services Block Grant
program under title V of the Social Security Act (42 U.S.C.
701 et seq.);
``(3) the State Children's Health Insurance Program of the
State under title XXI of the Social Security Act (42 U.S.C.
13397aa et seq.);
``(4) the school lunch program under the National School
Lunch Act (42 U.S.C. 1751 et seq.);
``(5) an Indian Health Service Program;
``(6) the community, migrant, and homeless health centers
program under section 330 of the Public Health Service Act
(42 U.S.C. 254b);
``(7) state-initiated smoking cessation programs that
include provisions for reimbursing individuals for
medications or therapeutic techniques;
``(8) the substance abuse and mental health services block
grant program, and the preventive health services block grant
program, under title XIX of the Public Health Service Act (42
U.S.C. 300w et seq.);
``(9) the Medicaid program under title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.); and
``(10) programs administered by the Department of Defense
and the Department of Veterans Affairs.
``(d) Limitation.--A State may not use amounts paid to the
State under section 1981A(c) to--
``(1) make cash payments except with appropriate
documentation to intended recipients of tobacco use cessation
services;
``(2) fund educational, recreational, or health activities
not based on scientific evidence that the activity will
prevent smoking or lead to success of cessation efforts
``(3) purchase or improve land, purchase, construct, or
permanently improve (other than minor remodeling) any
building or other facility, or purchase major medical
equipment;
``(4) satisfy any requirement for the expenditure of non-
Federal funds as a condition of the receipt of Federal funds;
or
``(5) provide financial assistance to any entity other than
a public or nonprofit private entity or a private entity
consistent with subsection (b)(1)(C).

This subsection shall not apply to the support of targeted
pilot programs that use innovative and experimental new
methodologies and include an evaluation component.
``(e) Administration.--Not more than 5 percent of the
allotment of a State for a fiscal year under this subpart may
be used by the State to administer the funds paid to the
State under section 1981A(c). The State shall pay from non-
Federal sources the remaining costs of administering such
funds.

``SEC. 1981D. ADMINISTRATIVE PROVISIONS.

``(a) Application.--The Secretary may make payments under
section 1981A(c) to a State for a fiscal year only if--
``(1) the State submits to the Secretary an application, in
such form and by such date as the Secretary may require, for
such payments;
``(2) the application contains a State plan prepared in a
manner consistent with section 1905(b) and in accordance with
tobacco-related guidelines promulgated by the Secretary;
``(3) the application contains a certification that is
consistent with the certification required under section
1905(c); and
``(4) the application contains such assurances as the
Secretary may require regarding the compliance of the State
with the requirements of this subpart (including assurances
regarding compliance with the agreements described in
subsection (c)).
``(b) State Plan.--A State plan under subsection (a)(2)
shall be developed in a manner consistent with the plan
developed under section 1905(b) except that such plan--
``(1) with respect to activities described in section
1981C(b)--
``(A) shall provide for tobacco use cessation intervention
and treatment consistent with the tobacco use cessation
guidelines issued by the Agency for Health Care Policy and
Research, or another evidence-based guideline approved by the
Secretary, or treatments using drugs, human biological
products, or medical devices approved by the Food and Drug
Administration, or otherwise legally marketed under the
Federal Food, Drug and Cosmetic Act for use as tobacco use
cessation therapies or aids;
``(B) may, to encourage innovation and experimentation with
new methodologies, provide for or may include a targeted
pilot program with an evaluation component;
``(C) shall provide for training in tobacco use cessation
intervention methods for health plans and health
professionals, including physicians, nurses, dentists, health
educators, public health professionals, and other health care
providers;
``(D) shall ensure access to tobacco use cessation programs
for rural and underserved populations;
``(E) shall recognize that some individuals may require
more than one attempt for successful cessation; and
``(F) shall be tailored to the needs of specific
populations, including minority populations; and
``(2) with respect to State and community-based prevention
activities described in section 1981C(c), shall specify the
activities authorized under such section that the State
intends to carry out.
``(c) Certification.--The certification referred to in
subsection (a)(3) shall be consistent with the certification
required under section 1905(c), except that
``(1) the State shall agree to expend payments under
section 1981A(c) only for the activities authorized in
section 1981C;
``(2) paragraphs (9) and (10) of such section shall not
apply; and
``(3) the State is encouraged to establish an advisory
committee in accordance with section 1981E.
``(d) Reports, Data, and Audits.--The provisions of section
1906 shall apply with respect to a State that receives
payments under section 1981A(c) and be applied in a manner
consistent with the manner in which such provisions are
applied to a State under part, except that the data sets
referred to in section 1905(a)(2) shall be developed for
uniformly defining levels of youth and adult use of tobacco
products, including uniform data for racial and ethnic
groups, for use in the reports required under this subpart.
``(e) Withholding.--The provisions of 1907 shall apply with
respect to a State that receives payments under section
1981A(c) and be applied in a manner consistent with the
manner in which such provisions are applied to a State under
part A.
``(f) Nondiscrimination.--The provisions of 1908 shall
apply with respect to a State that receives payments under
section 1981A(c) and be applied in a manner consistent with
the manner in which such provisions are applied to a State
under part A.
``(g) Criminal Penalties.--The provisions of 1909 shall
apply with respect to a State that receives payments under
section 1981A(c) and be applied in a manner consistent with
the manner in which such provisions are applied to a State
under part A.

``SEC. 1981E. STATE ADVISORY COMMITTEE.

``(a) In General.--For purposes of sections 1981D(c)(3), an
advisory committee is in accordance with this section if such
committee meets the conditions described in this subsection.
``(b) Duties.--The recommended duties of the committee
are--
``(1) to hold public hearings on the State plans required
under sections 1981D; and
``(2) to make recommendations under this subpart regarding
the development and implementation of such plans, including
recommendations on--
``(A) the conduct of assessments under the plans;
``(B) which of the activities authorized in section 1981C
should be carried out in the State;
``(C) the allocation of payments made to the State under
section 1981A(c);
``(D) the coordination of activities carried out under such
plans with relevant programs of other entities; and
``(E) the collection and reporting of data in accordance
with section 1981D.
``(c) Composition.--
``(1) In general.--The recommended composition of the
advisory committee is members of the general public, such
officials of

[[Page S5050]]

the health departments of political subdivisions of the
State, public health professionals, teenagers, minorities,
and such experts in tobacco product research as may be
necessary to provide adequate representation of the general
public and of such health departments, and that members of
the committee shall be subject to the provisions of sections
201, 202, and 203 of title 18, United States Code.
``(2) Representatives.--With respect to compliance with
paragraph (1), the membership of the advisory committee may
include representatives of community-based organizations
(including minority community-based organizations), schools
of public health, and entities to which the State involved
awards grants or contracts to carry out activities authorized
under section 1981C.

``Subpart II--Tobacco-Free Counter-Advertising Programs

``SEC. 1982. FEDERAL-STATE COUNTER-ADVERTISING PROGRAMS.

``(a) National Campaign.--
``(1) In general.--The Secretary shall conduct a national
campaign to reduce tobacco usage through media-based (such as
counter-advertising campaigns) and nonmedia-based education,
prevention and cessation campaigns designed to discourage the
use of tobacco products by individuals, to encourage those
who use such products to quit, and to educate the public
about the hazards of exposure to environmental tobacco smoke.
``(2) Requirements.--The national campaign under paragraph
(1) shall--
``(A) target those populations that have been targeted by
tobacco industry advertising using culturally and
linguistically appropriate means;
``(B) include a research and evaluation component; and
``(C) be designed in a manner that permits the campaign to
be modified for use at the State or local level.
``(b) Establishment of an Advisory Board.--
``(1) In general.--The Secretary shall establish a board to
be known as the `National Tobacco Free Education Advisory
Board' (referred to in this section as the `Board') to
evaluate and provide long range planning for the development
and effective dissemination of public informational and
educational campaigns and other activities that are part of
the campaign under subsection (a).
``(2) Composition.--The Board shall be composed of--
``(A) 9 non-Federal members to be appointed by the
President, after consultation and agreement with the Majority
and Minority Leaders of the Senate and the Speaker and
Minority Leader of the Health or Representatives, of which--
``(i) at least 3 such members shall be individuals who are
widely recognized by the general public for cultural,
educational, behavioral science or medical achievement;
``(ii) at least 3 of whom shall be individuals who hold
positions of leadership in major public health organizations,
including minority public health organizations; and
``(iii) at least 3 of whom shall be individuals recognized
as experts in the field of advertising and marketing, of
which--

``(I) 1 member shall have specific expertise in advertising
and marketing to children and teens; and
``(II) 1 member shall have expertise in marketing research
and evaluation; and

``(B) the Surgeon General, the Director of the Centers for
Disease Control and Prevention, or their designees, shall
serve as an ex officio members of the Board.
``(3) Terms and vacancies.--The members of the Board shall
serve for a term of 3 years. Such terms shall be staggered as
determined appropriate at the time of appointment by the
Secretary. Any vacancy in the Board shall not affect its
powers, but shall be filled in the same manner as the
original appointment.
``(4) Travel expenses.--The members of the Board shall be
allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized for employees of agencies
under subchapter I of chapter 57 of title 5, United States
Code, while away from their homes or regular places of
business in the performance of services for the Board.
``(5) Awards.--In carrying out subsection (a), the
Secretary may--
``(A) enter into contracts with or award grants to eligible
entities to develop messages and campaigns designed to
prevent and reduce the use of tobacco products that are based
on effective strategies to affect behavioral changes in
children and other targeted populations, including minority
populations;
``(B) enter into contracts with or award grants to eligible
entities to carry out public informational and educational
activities designed to reduce the use of tobacco products;
``(6) Powers and duties.--The Board may--
``(A) hold such hearings, sit and act at such times and
places, take such testimony, and receive such evidence as the
Board considers advisable to carry out the purposes of this
section; and
``(B) secure directly from any Federal department or agency
such information as the Board considers necessary to carry
out the provisions of this section.
``(c) Eligibility.--To be eligible to receive funding under
this section an entity shall--
``(1) be a--
``(A) public entity or a State health department; or
``(B) private or nonprofit private entity that--
``(i)(I) is not affiliated with a tobacco product
manufacturer or importer;
``(II) has a demonstrated record of working effectively to
reduce tobacco product use; or
``(III) has expertise in conducting a multi-media
communications campaign; and
``(ii) has expertise in developing strategies that affect
behavioral changes in children and other targeted
populations, including minority populations;
``(2) prepare and submit to the Secretary an application at
such time, in such manner, and containing such information as
the Secretary may require, including a description of the
activities to be conducted using amounts received under the
grant or contract;
``(3) provide assurances that amounts received under this
section will be used in accordance with subsection (c); and
``(4) meet any other requirements determined appropriate by
the Secretary.
``(d) Use of Funds.--An entity that receives funds under
this section shall use amounts provided under the grant or
contract to conduct multi-media and non-media public
educational, informational, marketing and promotional
campaigns that are designed to discourage and de-glamorize
the use of tobacco products, encourage those using such
products to quit, and educate the public about the hazards of
exposure to environmental tobacco smoke. Such amounts may be
used to design and implement such activities and shall be
used to conduct research concerning the effectiveness of such
programs.
``(e) Needs of Certain Populations.--In awarding grants and
contracts under this section, the Secretary shall take into
consideration the needs of particular populations, including
minority populations, and use methods that are culturally and
linguistically appropriate.
``(f) Coordination.--The Secretary shall ensure that
programs and activities under this section are coordinated
with programs and activities carried out under this title.
``(g) Allocation of Funds.--Not to exceed--
``(1) 25 percent of the amount made available under
subsection (h) for each fiscal year shall be provided to
States for State and local media-based and nonmedia-based
education, prevention and cessation campaigns;
``(2) no more than 20 percent of the amount made available
under subsection (h) for each fiscal year shall be used
specifically for the development of new messages and
campaigns;
``(3) the remainder shall be used specifically to place
media messages and carry out other dissemination activities
described in subsection (d); and
``(4) half of 1 percent for administrative costs and
expenses.
``(h) Trigger.--No expenditures shall be made under this
section during any fiscal year in which the annual amount
appropriated for the Centers for Disease Control and
Prevention is less than the amount so appropriated for the
prior fiscal year.''.

``Part E--Reducing Youth Smoking and Tobacco-Related Diseases Through
Research

``SEC. 1991. FUNDING FROM TOBACCO SETTLEMENT TRUST FUND.

No expenditures shall be made under sections 451(b) or
(c)--
``(1) for the National Institutes of Health during any
fiscal year in which the annual amount appropriated for such
Institutes is less than the amount so appropriated for the
prior fiscal year;
``(2) for the Centers for Disease Control and Prevention
during any fiscal year in which the annual amount
appropriated for such Centers is less than the amount so
appropriated for the prior fiscal year; or
``(3) for the Agency for Health Care Policy and Research
during any fiscal year in which the annual amount
appropriated for such Agency is less than the amount so
appropriated for the prior fiscal year.

``SEC. 1991A. STUDY BY THE INSTITUTE OF MEDICINE.

``(a) Contract.--Not later than 60 days after the date of
enactment of this title, the Secretary shall enter into a
contract with the Institute of Medicine for the conduct of a
study on the framework for a research agenda and research
priorities to be used under this part.
``(b) Considerations.--
``(1) In general.--In developing the framework for the
research agenda and research priorities under subsection (a)
the Institute of Medicine shall focus on increasing knowledge
concerning the biological, social, behavioral, public health,
and community factors involved in the prevention of tobacco
use, reduction of tobacco use, and health consequences of
tobacco use.
``(2) Specific considerations.--In the study conducted
under subsection (a), the Institute of Medicine shall
specifically include research on--
``(A) public health and community research relating to
tobacco use prevention methods, including public education,
media, community strategies;
``(B) behavioral research relating to addiction, tobacco
use, and patterns of smoking, including risk factors for
tobacco use by children, women, and racial and ethnic
minorities;
``(C) health services research relating to tobacco product
prevention and cessation treatment methodologies;
``(D) surveillance and epidemiology research relating to
tobacco;

[[Page S5051]]

``(E) biomedical, including clinical, research relating to
prevention and treatment of tobacco-related diseases,
including a focus on minorities, including racial and ethnic
minorities;
``(F) the effects of tobacco products, ingredients of
tobacco products, and tobacco smoke on the human body and
methods of reducing any negative effects, including the
development of non-addictive, reduced risk tobacco products;
``(G) differentials between brands of tobacco products with
respect to health effects or addiction;
``(H) risks associated with environmental exposure to
tobacco smoke, including a focus on children and infants;
``(I) effects of tobacco use by pregnant women; and
``(J) other matters determined appropriate by the
Institute.
``(c) Report.--Not later than 10 months after the date on
which the Secretary enters into the contract under subsection
(a), the Institute of Medicine shall prepare and submit to
the Secretary, the Committee on Labor and Human Resources,
and the Committee on Appropriations of the Senate, and the
Committee on Commerce of the House of Representatives, a
report that shall contain the findings and recommendations of
the Institute for the purposes described in subsection (b).

``SEC. 1991B. RESEARCH COORDINATION.

``(a) In General.--The Secretary shall foster coordination
among Federal research agencies, public health agencies,
academic bodies, and community groups that conduct or support
tobacco-related biomedical, clinical, behavioral, health
services, public health and community, and surveillance and
epidemiology research activities.
``(b) Report.--The Secretary shall prepare and submit a
report on a biennial basis to the Committee on Labor and
Human Resources, and the Committee on Appropriations of the
Senate, and the Committee on Commerce of the House of
Representatives on the current and planned tobacco-related
research activities of participating Federal agencies.

``SEC. 1991C. RESEARCH ACTIVITIES OF THE CENTERS FOR DISEASE
CONTROL AND PREVENTION.

``(a) Duties.--The Director of the Centers for Disease
Control and Prevention shall, from amounts provided under
section 451(c), and after review of the study of the
Institute of Medicine, carry out tobacco-related surveillance
and epidemiologic studies and develop tobacco control and
prevention strategies; and
``(b) Youth Surveillance Systems.--From amounts provided
under section 451(b), the Director of the Centers for Disease
Control and Prevention shall provide for the use of youth
surveillance systems to monitor the use of all tobacco
products by individuals under the age of 18, including
brands-used to enable determinations to be made of company-
specific youth market share.

``SEC. 1991D. RESEARCH ACTIVITIES OF THE NATIONAL INSTITUTES
OF HEALTH.

``(a) Funding.--There are authorized to be appropriated,
from amounts in the National Tobacco Settlement Trust Fund
established by section 401 of the National Tobacco Policy and
Youth Smoking Reduction Act.
``(b) Expenditure of Funds.--The Director of the National
Institutes of Health shall provide funds to conduct or
support epidemiological, behavioral, biomedical, and social
science research, including research related to the
prevention and treatment of tobacco addiction, and the
prevention and treatment of diseases associated with tobacco
use.
``(c) Guaranteed Minimum.--Of the funds made available to
the National Institutes of Health under this section, such
sums as may be necessary, may be used to support
epidemiological, behavioral, and social science research
related to the prevention and treatment of tobacco addiction.
``(d) Nature of Research.--Funds made available under
subsection (d) may be used to conduct or support research
with respect to one or more of the following--
``(1) the epidemiology of tobacco use;
``(2) the etiology of tobacco use;
``(3) risk factors for tobacco use by children;
``(4) prevention of tobacco use by children, including
school and community-based programs, and alternative
activities;
``(5) the relationship between tobacco use, alcohol abuse
and illicit drug abuse;
``(6) behavioral and pharmacological smoking cessation
methods and technologies, including relapse prevention;
``(7) the toxicity of tobacco products and their
ingredients;
``(8) the relative harmfulness of different tobacco
products;
``(9) environmental exposure to tobacco smoke;
``(10) the impact of tobacco use by pregnant women on their
fetuses;
``(11) the redesign of tobacco products to reduce risks to
public health and safety; and
``(12) other appropriate epidemiological, behavioral, and
social science research.
``(e) Coordination.--In carrying out tobacco-related
research under this section, the Director of the National
Institutes of Health shall ensure appropriate coordination
with the research of other agencies, and shall avoid
duplicative efforts through all appropriate means.
``(h) Administration.--The director of the NIH Office of
Behavioral and Social Sciences Research may--
``(1) identify tobacco-related research initiatives that
should be conducted or supported by the research institutes,
and develop such projects in cooperation with such
institutes;
``(2) coordinate tobacco-related research that is conducted
or supported by the National Institutes of Health;
``(3) annually recommend to Congress the allocation of
anti-tobacco research funds among the national research
institutes; and
``(4) establish a clearinghouse for information about
tobacco-related research conducted by governmental and non-
governmental bodies.
``(f) Trigger.--No expenditure shall be made under
subsection (a) during any fiscal year in which the annual
amount appropriated for the National Institutes of Health is
less than the amount so appropriated for the prior fiscal
year.
``(g) Report.--The Director of the NIH shall every 2 years
prepare and submit to the Congress a report -------- research
activities, including funding levels, for research made
available under subsection (c).
(b) Medicaid Coverage of Outpatient Smoking Cessation
Agents.--Paragraph (2) of section 1927(d) of the Public
Health Service Act (42 U.S.C. 1396r-8(d)) is amended--
(1) by striking subparagraph (E) and redesignating
subparagraphs (F) through (J) as subparagraphs (E) through
(I); and
(2) by striking ``drugs.'' in subparagraph (F), as
redesignated, and inserting ``drugs, except agents, approved
by the Food and Drug Administration, when used to promote
smoking cessation.''.

``SEC. 1991E. RESEARCH ACTIVITIES OF THE AGENCY FOR HEALTH
CARE POLICY AND RESEARCH.

``(a) In General.--The Administrator of the Agency for
Health Care Policy and Research shall carry out outcomes,
effectiveness, cost-effectiveness, and other health services
research related to effective interventions for the
prevention and cessation of tobacco use and appropriate
strategies for implementing those services, the outcomes and
delivery of care for diseases related to tobacco use, and the
development of quality measures for evaluating the provision
of those services.
``(b) Analyses and Special Programs.--The Secretary, acting
through the Administrator of the Agency for Health Care
Policy and Research, shall support--
``(1) and conduct periodic analyses and evaluations of the
best scientific information in the area of smoking and other
tobacco product use cessation; and
``(2) the development and dissemination of special programs
in cessation intervention for health plans and national
health professional societies.''.

TITLE III--TOBACCO PRODUCT WARNINGS AND SMOKE CONSTITUENT DISCLOSURE

Subtitle A--Product Warnings, Labeling and Packaging

SEC. 301. CIGARETTE LABEL AND ADVERTISING WARNINGS.

(a) In General.--Section 4 of the Federal Cigarette
Labeling and Advertising Act (15 U.S.C. 1333) is amended to
read as follows:

``SEC. 4. LABELING.

``(a) Label Requirements.--
``(1) In general.--It shall be unlawful for any person to
manufacture, package, or import for sale or distribution
within the United States any cigarettes the package of which
fails to bear, in accordance with the requirements of this
section, one of the following labels:
``WARNING: Cigarettes are addictive''
``WARNING: Tobacco smoke can harm your children''
``WARNING: Cigarettes cause fatal lung disease''
``WARNING: Cigarettes cause cancer''
``WARNING: Cigarettes cause strokes and heart disease''
``WARNING: Smoking during pregnancy can harm your baby''
``WARNING: Smoking can kill you''
``WARNING: Tobacco smoke causes fatal lung disease in non-
smokers''
``WARNING: Quitting smoking now greatly reduces serious risks
to your health''
``(2) Placement; typography; etc..--
``(A) In general.--Each label statement required by
paragraph (1) shall be located in the upper portion of the
front and rear panels of the package, directly on the package
underneath the cellophane or other clear wrapping. Except as
provided in subparagraph (B), each label statement shall
comprise at least the top 25 percent of the front and rear
panels of the package. The word ``WARNING'' shall appear in
capital letters and all text shall be in conspicuous and
legible 17-point type, unless the text of the label statement
would occupy more than 70 percent of such area, in which case
the text may be in a smaller conspicuous and legible type
size, provided that at least 60 percent of such area is
occupied by required text. The text shall be black on a white
background, or white on a black background, in a manner that
contrasts, by typography, layout, or color, with all other
printed material on the package, in an alternating fashion
under the plan submitted under subsection (b)(4).
``(B) Flip-top boxes.--For any cigarette brand package
manufactured or distributed before January 1, 2000, which
employs a flip-top style (if such packaging was used for that
brand in commerce prior to June 21, 1997), the label
statement required by paragraph (1) shall be located on the
flip-top area of the package, even if such area is less than

[[Page S5052]]

25 percent of the area of the front panel. Except as provided
in this paragraph, the provisions of this subsection shall
apply to such packages.
``(3) Does not apply to foreign distribution.--The
provisions of this subsection do not apply to a tobacco
product manufacturer or distributor of cigarettes which does
not manufacture, package, or import cigarettes for sale or
distribution within the United States.
``(b) Advertising Requirements.--
``(1) In general.--It shall be unlawful for any tobacco
product manufacturer, importer, distributor, or retailer of
cigarettes to advertise or cause to be advertised within the
United States any cigarette unless its advertising bears, in
accordance with the requirements of this section, one of the
labels specified in subsection (a) of this section.
``(2) Typography, etc..--Each label statement required by
subsection (a) of this section in cigarette advertising shall
comply with the standards set forth in this paragraph. For
press and poster advertisements, each such statement and
(where applicable) any required statement relating to tar,
nicotine, or other constituent yield shall comprise at least
20 percent of the area of the advertisement and shall appear
in a conspicuous and prominent format and location at the top
of each advertisement within the trim area. The Secretary may
revise the required type sizes in such area in such manner as
the Secretary determines appropriate. The word ``WARNING''
shall appear in capital letters, and each label statement
shall appear in conspicuous and legible type. The text of the
label statement shall be black if the background is white and
white if the background is black, under the plan submitted
under paragraph (4) of this subsection. The label statements
shall be enclosed by a rectangular border that is the same
color as the letters of the statements and that is the width
of the first downstroke of the capital ``W'' of the word
``WARNING'' in the label statements. The text of such label
statements shall be in a typeface pro rata to the following
requirements: 45-point type for a whole-page broadsheet
newspaper advertisement; 39-point type for a half-page
broadsheet newspaper advertisement; 39-point type for a
whole-page tabloid newspaper advertisement; 27-point type for
a half-page tabloid newspaper advertisement; 31.5-point type
for a double page spread magazine or whole-page magazine
advertisement; 22.5-point type for a 28 centimeter by 3
column advertisement; and 15-point type for a 20 centimeter
by 2 column advertisement. The label statements shall be in
English, except that in the case of--
``(A) an advertisement that appears in a newspaper,
magazine, periodical, or other publication that is not in
English, the statements shall appear in the predominant
language of the publication; and
``(B) in the case of any other advertisement that is not in
English, the statements shall appear in the same language as
that principally used in the advertisement.
``(3) Adjustment by secretary.--The Secretary may, through
a rulemaking under section 553 of title 5, United States
Code, adjust the format and type sizes for the label
statements required by this section or the text, format, and
type sizes of any required tar, nicotine yield, or other
constituent disclosures, or to establish the text, format,
and type sizes for any other disclosures required under the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et.
seq.). The text of any such label statements or disclosures
shall be required to appear only within the 20 percent area
of cigarette advertisements provided by paragraph (2) of this
subsection. The Secretary shall promulgate regulations which
provide for adjustments in the format and type sizes of any
text required to appear in such area to ensure that the total
text required to appear by law will fit within such area.
``(4) Marketing requirements.--
``(A) The label statements specified in subsection (a)(1)
shall be randomly displayed in each 12-month period, in as
equal a number of times as is possible on each brand of the
product and be randomly distributed in all areas of the
United States in which the product is marketed in accordance
with a plan submitted by the tobacco product manufacturer,
importer, distributor, or retailer and approved by the
Secretary.
``(B) The label statements specified in subsection (a)(1)
shall be rotated quarterly in alternating sequence in
advertisements for each brand of cigarettes in accordance
with a plan submitted by the tobacco product manufacturer,
importer, distributor, or retailer to, and approved by, the
Secretary.
``(C) The Secretary shall review each plan submitted under
subparagraph (B) and approve it if the plan--
``(i) will provide for the equal distribution and display
on packaging and the rotation required in advertising under
this subsection; and
``(ii) assures that all of the labels required under this
section will be displayed by the tobacco product
manufacturer, importer, distributor, or retailer at the same
time.''.
(b) Repeal of Prohibition on State Restriction.--Section 5
of the Federal Cigarette Labeling and Advertising Act (15
U.S.C. 1334) is amended--
(1) by striking ``(a) Additional statements.--'' in
subsection (a); and
(2) by striking subsection (b).

SEC. 302. AUTHORITY TO REVISE CIGARETTE WARNING LABEL
STATEMENTS.

Section 4 of the Federal Cigarette Labeling and Advertising
Act ( 15 U.S.C. 1333), as amended by section 301 of this
title, is further amended by adding at the end the following:
``(c) Change in Required Statements.--The Secretary may, by
a rulemaking conducted under section 553 of title 5, United
States Code, adjust the format, type size, and text of any of
the warning label statements required by subsection (a) of
this section, or establish the format, type size, and text of
any other disclosures required under the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 301 et seq.), if the Secretary
finds that such a change would promote greater public
understanding of the risks associated with the use of
smokeless tobacco products.''.

SEC. 303. SMOKELESS TOBACCO LABELS AND ADVERTISING WARNINGS.

Section 3 of the Comprehensive Smokeless Tobacco Health
Education Act of 1986 (15 U.S.C. 4402) is amended to read as
follows:

``SEC. 3. SMOKELESS TOBACCO WARNING.

``(a) General Rule.--
``(1) It shall be unlawful for any person to manufacture,
package, or import for sale or distribution within the United
States any smokeless tobacco product unless the product
package bears, in accordance with the requirements of this
Act, one of the following labels:
``WARNING: This product can cause mouth cancer''
``WARNING: This product can cause gum disease and tooth
loss''
``WARNING: This product is not a safe alternative to
cigarettes''
``WARNING: Smokeless tobacco is addictive''
``(2) Each label statement required by paragraph (1) shall
be--
``(A) located on the 2 principal display panels of the
package, and each label statement shall comprise at least 25
percent of each such display panel; and
``(B) in 17-point conspicuous and legible type and in black
text on a white background, or white text on a black
background, in a manner that contrasts by typography, layout,
or color, with all other printed material on the package, in
an alternating fashion under the plan submitted under
subsection (b)(3), except that if the text of a label
statement would occupy more than 70 percent of the area
specified by subparagraph (A), such text may appear in a
smaller type size, so long as at least 60 percent of such
warning area is occupied by the label statement.
``(3) The label statements required by paragraph (1) shall
be introduced by each tobacco product manufacturer, packager,
importer, distributor, or retailer of smokeless tobacco
products concurrently into the distribution chain of such
products.
``(4) The provisions of this subsection do not apply to a
tobacco product manufacturer or distributor of any smokeless
tobacco product that does not manufacture, package, or import
smokeless tobacco products for sale or distribution within
the United States.
``(b) Required Labels.--
``(1) It shall be unlawful for any tobacco product
manufacturer, packager, importer, distributor, or retailer of
smokeless tobacco products to advertise or cause to be
advertised within the United States any smokeless tobacco
product unless its advertising bears, in accordance with the
requirements of this section, one of the labels specified in
subsection (a).
``(2) Each label statement required by subsection (a) in
smokeless tobacco advertising shall comply with the standards
set forth in this paragraph. For press and poster
advertisements, each such statement and (where applicable)
any required statement relating to tar, nicotine, or other
constituent yield shall--
``(A) comprise at least 20 percent of the area of the
advertisement, and the warning area shall be delineated by a
dividing line of contrasting color from the advertisement;
and
``(B) the word ``WARNING'' shall appear in capital letters
and each label statement shall appear in conspicuous and
legible type. The text of the label statement shall be black
on a white background, or white on a black background, in an
alternating fashion under the plan submitted under paragraph
(3).
``(3)(A) The label statements specified in subsection
(a)(1) shall be randomly displayed in each 12-month period,
in as equal a number of times as is possible on each brand of
the product and be randomly distributed in all areas of the
United States in which the product is marketed in accordance
with a plan submitted by the tobacco product manufacturer,
importer, distributor, or retailer and approved by the
Secretary.
``(B) The label statements specified in subsection (a)(1)
shall be rotated quarterly in alternating sequence in
advertisements for each brand of smokeless tobacco product in
accordance with a plan submitted by the tobacco product
manufacturer, importer, distributor, or retailer to, and
approved by, the Secretary.
``(C) The Secretary shall review each plan submitted under
subparagraph (B) and approve it if the plan--
``(i) will provide for the equal distribution and display
on packaging and the rotation required in advertising under
this subsection; and
``(ii) assures that all of the labels required under this
section will be displayed by the

[[Page S5053]]

tobacco product manufacturer, importer, distributor, or
retailer at the same time.
``(c) Television and radio advertising.--It is unlawful to
advertise smokeless tobacco on any medium of electronic
communications subject to the jurisdiction of the Federal
Communications Commission.''.

SEC. 304. AUTHORITY TO REVISE SMOKELESS TOBACCO PRODUCT
WARNING LABEL STATEMENTS.

Section 3 of the Comprehensive Smokeless Tobacco Health
Education Act of 1986 (15 U.S.C. 4402), as amended by section
303 of this title, is further amended by adding at the end
the following:
``(d) Authority to Revise Warning Label Statements.--The
Secretary may, by a rulemaking conducted under section 553 of
title 5, United States Code, adjust the format, type size,
and text of any of the warning label statements required by
subsection (a) of this section, or establish the format, type
size, and text of any other disclosures required under the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.),
if the Secretary finds that such a change would promote
greater public understanding of the risks associated with the
use of smokeless tobacco products.''.

SEC. 305. TAR, NICOTINE, AND OTHER SMOKE CONSTITUENT
DISCLOSURE TO THE PUBLIC.

Section 4(a) of the Federal Cigarette Labeling and
Advertising Act (15 U.S.C. 1333 (a)), as amended by section
301 of this title, is further amended by adding at the end
the following:
``(4)(A) The Secretary shall, by a rulemaking conducted
under section 553 of title 5, United States Code, determine
(in the Secretary's sole discretion) whether cigarette and
other tobacco product manufacturers shall be required to
include in the area of each cigarette advertisement specified
by subsection (b) of this section, or on the package label,
or both, the tar and nicotine yields of the advertised or
packaged brand. Any such disclosure shall be in accordance
with the methodology established under such regulations,
shall conform to the type size requirements of subsection (b)
of this section, and shall appear within the area specified
in subsection (b) of this section.
``(B) Any differences between the requirements established
by the Secretary under subparagraph (A) and tar and nicotine
yield reporting requirements established by the Federal Trade
Commission shall be resolved by a memorandum of understanding
between the Secretary and the Federal Trade Commission.
``(C) In addition to the disclosures required by
subparagraph (A) of this paragraph, the Secretary may, under
a rulemaking conducted under section 553 of title 5, United
States Code, prescribe disclosure requirements regarding the
level of any cigarette or other tobacco product smoke
constituent. Any such disclosure may be required if the
Secretary determines that disclosure would be of benefit to
the public health, or otherwise would increase consumer
awareness of the health consequences of the use of tobacco
products, except that no such prescribed disclosure shall be
required on the face of any cigarette package or
advertisement. Nothing in this section shall prohibit the
Secretary from requiring such prescribed disclosure through a
cigarette or other tobacco product package or advertisement
insert, or by any other means under the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 301 et seq.).''.

Subtitle B--Testing and Reporting of Tobacco Product Smoke Constituents

SEC. 311. REGULATION REQUIREMENT.

(a) Testing, Reporting, and Disclosure.--Not later than 24
months after the date of enactment of this Act, the
Secretary, through the Commissioner of the Food and Drug
Administration, shall promulgate regulations under the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.)
that meet the requirements of subsection (b) of this section.
(b) Contents of Rules.--The rules promulgated under
subsection (a) of this section shall require the testing,
reporting, and disclosure of tobacco product smoke
constituents and ingredients that the Secretary determines
should be disclosed to the public in order to protect the
public health. Such constituents shall include tar, nicotine,
carbon monoxide, and such other smoke constituents or
ingredients as the Secretary may determine to be appropriate.
The rule may require that tobacco product manufacturers,
packagers, or importers make such disclosures relating to tar
and nicotine through labels or advertising, and make such
disclosures regarding other smoke constituents or ingredients
as the Secretary determines are necessary to protect the
public health.
(c) Authority.--The Food and Drug Administration shall have
authority to conduct or to require the testing, reporting, or
disclosure of tobacco product smoke constituents.

TITLE IV--NATIONAL TOBACCO TRUST FUND

SEC. 401. ESTABLISHMENT OF TRUST FUND.

(a) Creation.--There is established in the Treasury of the
United States a trust fund to be known as the ``National
Tobacco Trust Fund'', consisting of such amounts as may be
appropriated or credited to the trust fund.
(b) Transfers to National Tobacco Trust Fund.--There shall
be credited to the trust fund the net revenues resulting from
the following amounts:
(1) Amounts paid under section 402.
(2) Amounts equal to the fines or penalties paid under
section 402, 403, or 405, including interest thereon.
(3) Amounts equal to penalties paid under section 202,
including interest thereon.
(c) Net Revenues.--For purposes of subsection (b), the term
``net revenues'' means the amount estimated by the Secretary
of the Treasury based on the excess of--
(1) the amounts received in the Treasury under subsection
(b), over
(2) the decrease in the taxes imposed by chapter 1 and
chapter 52 of the Internal Revenue Code of 1986, and other
offsets, resulting from the amounts received under subsection
(b).
(d) Expenditures from the Trust Fund.--Amounts in the Trust
Fund shall be available in each fiscal year, as provided in
appropriation Acts. The authority to allocate net revenues as
provided in this title and to obligate any amounts so
allocated is contingent upon actual receipt of net revenues.
(e) Budgetary Treatment.--The amount of net receipts in
excess of that amount which is required to offset the direct
spending in this Act under section 252 of the Balanced Budget
and Emergency Deficit Control Act of 1985 (2 U.S.C. 902)
shall be available exclusively to offset the appropriations
required to fund the authorizations of appropriations in this
Act (including the amendments made by this Act), and the
amount of such appropriations shall not be included in the
estimates required under section 251 of that Act (2 U.S.C.
901).
(f) Administrative Provisions.--Section 9602 of the
Internal Revenue Code of 1986 shall apply to the trust fund
to the same extent as if it were established by subchapter A
of chapter 98 of such Code, except that, for purposes of
section 9602(b)(3), any interest or proceeds shall be covered
into the Treasury as miscellaneous receipts.

SEC. 402. PAYMENTS BY INDUSTRY.

(a) Initial Payment.--
(1) Certain tobacco product manufacturers.--The following
participating tobacco product manufacturers, subject to the
provisions of title XIV, shall deposit into the National
Tobacco Trust Fund an aggregate payment of $10,000,000,000,
apportioned as follows:
(A) Phillip Morris Incorporated--65.8 percent.
(B) Brown and Williamson Tobacco Corporation--17.3 percent.
(C) Lorillard Tobacco Company--7.1 percent.
(D) R.J. Reynolds Tobacco Company--6.6 percent.
(E) United States Tobacco Company--3.2 percent.
(2) No contribution from other tobacco product
manufacturers.--No other tobacco product manufacturer shall
be required to contribute to the payment required by this
subsection.
(3) Payment date; interest.--Each tobacco product
manufacturer required to make a payment under paragraph (1)
of this subsection shall make such payment within 30 days
after the date of compliance with this Act and shall owe
interest on such payment at the prime rate plus 10 percent
per annum, as published in the Wall Street Journal on the
latest publication date on or before the date of enactment of
this Act, for payments made after the required payment date.
(b) Annual Payments.--Each calendar year beginning after
the required payment date under subsection (a)(3) the tobacco
product manufacturers shall make total payments into the Fund
for each calendar year in the following applicable base
amounts, subject to adjustment as provided in section 403:
(1) year 1--$14,400,000,000.
(2) year 2--$15,400,000,000.
(3) year 3--$17,700,000,000.
(4) year 4--$21,400,000,000.
(5) year 5--$23,600,000,000.
(6) year 6 and thereafter--the adjusted applicable base
amount under section 403.
(c) Payment Schedule; Reconciliation.--
(1) Estimated payments.--Deposits toward the annual payment
liability for each calendar year under subsection (d)(2)
shall be made in 3 equal installments due on March 1st, on
June 1st, and on August 1st of each year. Each installment
shall be equal to one-third of the estimated annual payment
liability for that calendar year. Deposits of installments
paid after the due date shall accrue interest at the prime
rate plus 10 percent per annum, as published in the Wall
Street Journal on the latest publication date on or before
the payment date.
(2) Reconciliation.--If the liability for a calendar year
under subsection (d)(2) exceeds the deposits made during that
calendar year, the manufacturer shall pay the unpaid
liability on March 1st of the succeeding calendar year, along
with the first deposit for that succeeding year. If the
deposits during a calendar year exceed the liability for the
calendar year under subsection (d)(2), the manufacturer shall
subtract the amount of the excess deposits from its deposit
on March 1st of the succeeding calendar year.
(d) Apportionment of Annual Payment.--
(1) In general.--Each tobacco product manufacturer is
liable for its share of the applicable base amount payment
due each year under subsection (b). The annual payment is the
obligation and responsibility of only those tobacco product
manufacturers and their affiliates that directly sell tobacco

[[Page S5054]]

products in the domestic market to wholesalers, retailers, or
consumers, their successors and assigns, and any subsequent
fraudulent transferee (but only to the extent of the interest
or obligation fraudulently transferred).
(2) Determination of amount of payment due.--Each tobacco
product manufacturer is liable for its share of each
installment in proportion to its share of tobacco products
sold in the domestic market for the calendar year. One month
after the end of the calendar year, the Secretary shall make
a final determination of each tobacco product manufacturer's
applicable base amount payment obligation.
(3) Calculation of tobacco product manufacturer's share of
annual payment.--The share of the annual payment apportioned
to a tobacco product manufacturer shall be equal to that
manufacturer's share of adjusted units, taking into account
the manufacturer's total production of such units sold in the
domestic market. A tobacco product manufacturer's share of
adjusted units shall be determined as follows:
(A) Units.--A tobacco product manufacturer's number of
units shall be determined by counting each--
(i) pack of 20 cigarettes as 1 adjusted unit;
(ii) 1.2 ounces of moist snuff as 0.75 adjusted unit; and
(iii) 3 ounces of other smokeless tobacco product as 0.35
adjusted units.
(B) Determination of adjusted units.--Except as provided in
subparagraph (C), a smokeless tobacco product manufacturer's
number of adjusted units shall be determined under the
following table:

----------------------------------------------------------------------------------------------------------------
For units: Each unit shall be treated as:
----------------------------------------------------------------------------------------------------------------
Not exceeding 150 million 70% of a unit
Exceeding 150 million 100% of a unit
----------------------------------------------------------------------------------------------------------------

(C) Adjusted units determined on total domestic
production.--For purposes of determining a manufacturer's
number of adjusted units under subparagraph (B), a
manufacturer's total production of units, whether intended
for domestic consumption or export, shall be taken into
account.
(D) Special rule for large manufacturers.--If a tobacco
product manufacturer has more than 200 million units under
subparagraph (A), then that manufacturer's number of adjusted
units shall be equal to the total number of units, and not
determined under subparagraph (B).
(E) Smokeless equivalency study.--Not later than January 1,
2003, the Secretary shall submit to the Congress a report
detailing the extent to which youths are substituting
smokeless tobacco products for cigarettes. If the Secretary
determines that significant substitution is occurring, the
Secretary shall include in the report recommendations to
address substitution, including consideration of modification
of the provisions of subparagraph (A).
(e) Computations.--The determinations required by
subsection (d) shall be made and certified by the Secretary
of Treasury. The parties shall promptly provide the Treasury
Department with information sufficient for it to make such
determinations.
(f) Nonapplication to Certain Manufacturers.--
(1) Exemption .--A manufacturer described in paragraph (3)
is exempt from the payments required by subsection (b).
(2) Limitation.--Paragraph (1) applies only to assessments
on cigarettes to the extent that those cigarettes constitute
less than 3 percent of all cigarettes manufactured and
distributed to consumers in any calendar year.
(3) Tobacco product manufacturers to which subsection
applies.--A tobacco product manufacturer is described in this
paragraph if it--
(A) resolved tobacco-related civil actions with more than
25 States before January 1, 1998, through written settlement
agreements signed by the attorneys general (or the equivalent
chief legal officer if there is no office of attorney
general) of those States; and
(B) provides to all other States, not later than December
31, 1998, the opportunity to enter into written settlement
agreements that--
(i) are substantially similar to the agreements entered
into with those 25 States; and
(ii) provide the other States with annual payment terms
that are equivalent to the most favorable annual payment
terms of its written settlement agreements with those 25
States.

SEC. 403. ADJUSTMENTS.

The applicable base amount under section 402(b) for a given
calendar year shall be adjusted as follows in determining the
annual payment for that year:
(1) Inflation adjustment.--
(A) In general.--Beginning with the sixth calendar year
after the date of enactment of this Act, the adjusted
applicable base amount under section 402(b)(6) is the amount
of the annual payment made for the preceding year increased
by the greater of 3 percent or the annual increase in the
CPI, adjusted (for calendar year 2002 and later years) by the
volume adjustment under paragraph (2).
(B) CPI.--For purposes of subparagraph (A), the CPI for any
calendar year is the average of the Consumer Price Index for
all-urban consumers published by the Department of Labor.
(C) Rounding.--If any increase determined under
subparagraph (A) is not a multiple of $1,000, the increase
shall be rounded to the nearest multiple of $1,000.
(2) Volume adjustment.--Beginning with calendar year 2002,
the applicable base amount (as adjusted for inflation under
paragraph (1)) shall be adjusted for changes in volume of
domestic sales by multiplying the applicable base amount by
the ratio of the actual volume for the calendar year to the
base volume. For purposes of this paragraph, the term ``base
volume'' means 80 percent of the number of units of taxable
domestic removals and taxed imports of cigarettes in calendar
year 1997, as reported to the Secretary of the Treasury. For
purposes of this subsection, the term ``actual volume'' means
the number of adjusted unites as defined in section
402(d)(3)(A).

SEC. 404. PAYMENTS TO BE PASSED THROUGH TO CONSUMERS.

Each tobacco product manufacturer shall use its best
efforts to adjust the price at which it sells each unit of
tobacco products in the domestic market or to an importer for
resale in the domestic market by an amount sufficient to pass
through to each purchaser on a per-unit basis an equal share
of the annual payments to be made by such tobacco product
manufacturer under this Act for the year in which the sale
occurs.

SEC. 405. TAX TREATMENT OF PAYMENTS.

All payments made under section 402 are ordinary and
necessary business expenses for purposes of chapter 1 of the
Internal Revenue Code of 1986 for the year in which such
payments are made, and no part thereof is either in
settlement of an actual or potential liability for a fine or
penalty (civil or criminal) or the cost of a tangible or
intangible asset or other future benefit.

SEC. 406. ENFORCEMENT FOR NONPAYMENT.

(a) Penalty.--Any tobacco product manufacturer that fails
to make any payment required under section 402 or 404 within
60 days after the date on which such fee is due is liable for
a civil penalty computed on the unpaid balance at a rate of
prime plus 10 percent per annum, as published in the Wall
Street Journal on the latest publication date on or before
the payment date, during the period the payment remains
unmade.
(b) Noncompliance Period.--For purposes of this section,
the term ``noncompliance period'' means, with respect to any
failure to make a payment required under section 402 or 404,
the period--
(1) beginning on the due date for such payment; and
(2) ending on the date on which such payment is paid in
full.
(c) Limitations.--
(1) In general.--No penalty shall be imposed by subsection
(a) on any failure to make a payment under section 402 during
any period for which it is established to the satisfaction of
the Secretary of the Treasury that none of the persons
responsible for such failure knew or, exercising reasonable
diligence, should have known, that such failure existed.
(2) Corrections.--No penalty shall be imposed under
subsection (a) on any failure to make a payment under section
402 if--
(A) such failure was due to reasonable cause and not to
willful neglect; and
(B) such failure is corrected during the 30-day period
beginning on the 1st date that any of the persons responsible
for such failure knew or, exercising reasonable diligence,
should have known, that such failure existed.
(3) Waiver.--In the case of any failure to make a payment
under section 402 that is due to reasonable cause and not to
willful neglect, the Secretary of the Treasury may waive all
or part of the penalty imposed under subsection (a) to the
extent that the Secretary determines that the payment of such
penalty would be excessive relative to the failure involved.

Subtitle B--General Spending Provisions

SEC. 451. ALLOCATION ACCOUNTS.

(a) State Litigation Settlement Account.--
(1) In general.--There is established within the Trust Fund
a separate account, to be known as the State Litigation
Settlement Account. Of the net revenues credited to the Trust
Fund under section 401(b)(1) for each fiscal year, 40 percent
of the amounts designated for allocation under the settlement
payments shall be allocated to this account. Such amounts
shall be reduced by the additional estimated Federal
expenditures that will be incurred as a result of State
expenditures under section 452, which amounts shall be
transferred to the miscellaneous receipts of the Treasury.
If, after 10 years, the estimated 25-year total amount
projected to received in this account will be different than
amount than $196,500,000,000, then beginning with the
eleventh year the 40 percent share will be adjusted as
necessary, to a percentage not in excees of 50 percent and
not less than 30 percent, to achieve that 25-year total
amount.
(2) Appropriation.--Amounts so calculated are hereby
appropriated and available until expended and shall be
available to States for grants authorized under this Act.
(3) Distribution formula.--The Secretary of the Treasury
shall consult with the National Governors Association, the
National Association of Attorneys General, and the National
Conference of State Legislators on a formula for the
distribution of amounts in the State Litigation Settlement
Account and report to the Congress within 90 days after the
date of enactment of this Act with recommendations for
implementing a distribution formula.

[[Page S5055]]

(4) Use of funds.--A State may use amounts received under
this subsection as the State determines appropriate,
consistent with the other provisions of this Act.
(5) Funds not available as Medicaid reimbursement.--Funds
in the account shall not be available to the Secretary as
reimbursement of Medicaid expenditures or considered as
Medicaid overpayments for purposes of recoupment.
(b) Public Health Allocation Account.--
(1) In general.-- There is established within the trust
fund a separate account, to be known as the Public Health
Account. Twenty-two percent of the net revenues credited to
the trust fund under section 401(b)(1) and all the net
revenues credited to the trust fund under section 401(b)(3)
shall be allocated to this account.
(2) Authorization of appropriations.--Amounts in the Public
Health Account shall be available to the extent and only in
the amounts provided in advance in appropriations Acts, to
remain available until expended, only for the purposes of:
(A) Cessation and other treatments.--Of the total amounts
allocated to this account, not less than 25 percent, but not
more than 35 percent are to be used to carry out smoking
cessation activities under part D of title XIX of the Public
Health Service Act, as added by title II of this Act.
(B) Indian health service.--Of the total amounts allocated
to this account, not less than 3 percent, but not more than 7
percent are to be used to carry out activities under section
453.
(C) Education and prevention.--Of the total amounts
allocated to this account, not less than 50 percent, but not
more than 65 percent are to be used to carry out--
(i) counter-advertising activities under section 1982 of
the Public Health Service Act as amended by this Act;
(ii) smoking prevention activities under section 223;
(iii) surveys under section 1991C of the Public Health
Service Act, as added by this Act (but, in no fiscal year may
the amounts used to carry out such surveys be less than 10
percent of the amounts available under this subsection); and
(iv) international activities under section 1132.
(D) Enforcement.--Of the total amounts allocated to this
account, not less than 17.5 percent nor more than 22.5
percent are to be used to carry out the following:
(i) Food and Drug Administration activities.

(I) The Food and Drug Administration shall receive not less
than 15 percent of the funds provided in subparagraph (D) in
the first fiscal year beginning after the date of enactment
of this Act, 35 percent of such funds in the second year
beginning after the date of enactment, and 50 percent of such
funds for each fiscal year beginning after the date of
enactment, as reimbursements for the costs incurred by the
Food and Drug Administration in implementing and enforcing
requirements relating to tobacco products.
(II) No expenditures shall be made under subparagraph (D)
during any fiscal year in which the annual amount
appropriated for the Food and Drug Administration is less
than the amount so appropriated for the prior fiscal year.

(ii) State retail licensing activities under section 251.
(iii) Anti-Smuggling activities under section 1141.
(c) Health and Health-related Research Allocation
Account.--
(1) In general.-- There is established within the trust
fund a separate account, to be known as the Health and
Health-Related Research Account. Of the net revenues credited
to the trust fund under section 401(b)(1), 22 percent shall
be allocated to this account.
(2) Authorization of appropriations.--Amounts in the Health
and Health-Related Research Account shall be available to the
extent and in the amounts provided in advance in
appropriations acts, to remain available until expended, only
for the following purposes:
(A) $750,000 shall be made vailable in fiscal year 1999 for
the study to be conducted under section 1991 of the Public
Health Service Act.
(B) National Institutes of Health Research under section
1991D of the Public Health Service Act, as added by this Act.
Of the total amounts allocated to this account, not less than
75 percent, but not more than 87 percent shall be used for
this purpose.
(C) Centers for Disease Control under section 1991C of the
Public Health Service Act, as added by this Act, and Agency
for Health Care Policy and Research under section 1991E of
the Public Health Service Act, as added by this Act.
authorized under sections 2803 of that Act, as so added. Of
the total amounts allocated to this account, not less than 12
percent, but not more than 18 percent shall be used for this
purpose.
(D) National Science Foundation Research under section 454.
Of the total amounts allocated to this account, not less than
1 percent, but not more than 1 percent shall be used for this
purpose.
(E) Cancer Clinical Trials under section 455. Of the total
amounts allocated to this account, $750,000,000 shall be used
for the first 3 fiscal years for this purpose.
(d) Farmers Assistance Allocation Account.--
(1) In general.-- There is established within the trust
fund a separate account, to be known as the Farmers
Assistance Account. Of the net revenues credited to the trust
fund under section 401(b)(1) in each fiscal year--
(A) 16 percent shall be allocated to this account for the
first 10 years after the date of enactment of this Act; and
(B) 4 percent shall be allocated to this account for each
subsequent year until the account has received a total of
$28,500,000,000.
(2) Appropriation.--Amounts allocated to this account are
hereby appropriated and shall be available until expended for
the purposes of section 1012.
(e) Medicare Preservation Account.--There is established
within the trust fund a separate account, to be known as the
Medicare Preservation Account. If, in any year, the net
amounts credited to the trust fund for payments under section
402(b) are greater than the net revenues originally estimated
under section 401(b), the amount of any such excess shall be
credited to the Medicare Preservation Account. Beginning in
the eleventh year beginning after the date of enactment of
this Act, 12 percent of the net revenues credited to the
trust fund under seciton 401(b)(1) shall be allocated to this
account. Funds credited to this account shall be transferred
to the Medicare Hospital Insurance Trust Fund.

SEC. 452. GRANTS TO STATES.

(a) Amounts.--From the amount made available under section
402(a) for each fiscal year, each State shall receive a grant
on a quarterly basis according to a formula.
(b) Use of Funds.--
(1) Unrestricted funds.--A State may use funds, not to
exceed 50 percent of the amount received under this section
in a fiscal year, for any activities determined appropriate
by the State.
(2) Restricted funds.--A State shall use not less than 50
percent of the amount received under this section in a fiscal
year to carry out additional activities or provide additional
services under--
(A) the State program under the maternal and child health
services block grant under title V of the Social Security Act
(42 U.S.C. 701 et seq.);
(B) funding for child care under section 418 of the Social
Security Act, notwithstanding subsection (b)(2) of that
section;
(C) federally funded child welfare and abuse programs under
title IV-B of the Social Security Act;
(D) programs administered within the State under the
authority of the Substance Abuse and Mental Health Services
Administration under title XIX, part B of the Public Health
Service Act;
(E) Safe and Drug-Free Schools Program under title IV, part
A, of the Elementary and Secondary Education Act of 1965 (20
U.S.C. 7111 et seq.);
(F) the Department of Education's Dwight D. Eisenhower
Professional Development program under title II of the
Elementary and Secondary Education Act of 1965 (20 U.S.C.
6601 et seq.); and
(G) The State Children's Health Insurance Program
authorized under title XXI of the Social Security Act (42
U.S.C. 1397aa et seq.), provided that the amount expended on
this program does not exceed 6 percent of the total amount of
restricted funds available to the State each fiscal year.
(c) No Substitution of Spending.--Amounts referred to in
subsection (b)(2) shall be used to supplement and not
supplant other Federal, State, or local funds provided for
any of the programs described in subparagraphs (A) through
(G) of subsection (b)(2). Restricted funds, except as
provided for in subsection (b)(2)(G), shall not be used as
State matching funds. Amounts provided to the State under any
of the provisions of law referred to in such subparagraph
shall not be reduced solely as a result of the availability
of funds under this section.
(d) Federal-State Match Rates.--Current (1998) matching
requirements apply to each program listed under subsection
(b)(2), except for the program described under subsection
(b)(2)(B). For the program described under subsection
(b)(2)(B), after an individual State has expended resources
sufficient to receive its full Federal amount under section
418(a)(2)(B) of the Social Security Act (subject to the
matching requirements in section 418(a)(2)(C) of such Act),
the Federal share of expenditures shall be 80 percent.
(e) Maintenance of Effort.--To receive funds under this
subsection, States must demonstrate a maintenance of effort.
This maintenance of effort is defined as the sum of--
(1) an amount equal to 95 percent of Federal fiscal year
1997 State spending on the programs under subsections
(b)(2)(B), (c), and (d); and
(2) an amount equal to the product of the amount described
in paragraph (1) and--
(A) for fiscal year 1999, the lower of--
(i) general inflation as measured by the consumer price
index for the previous year; or
(ii) the annual growth in the Federal appropriation for the
program in the previous fiscal year; and
(B) for subsequent fiscal years, the lower of--
(i) the cumulative general inflation as measured by the
consumer price index for the period between 1997 and the
previous year; or
(ii) the cumulative growth in the Federal appropriation for
the program for the period between fiscal year 1997 and the
previous fiscal year.

[[Page S5056]]

The 95-percent maintenance-of-effort requirement in paragraph
(1), and the adjustments in paragraph (2), apply to each
program identified in paragraph (1) on an individual basis.
(f) Options for Children's Health Outreach.--In addition to
the options for the use of grants described in this section,
the following are new options to be added to States' choices
for conducting children's health outreach:
(1) Expansion of presumptive eligibility option for
children.--
(A) In general.--Section 1920A(b)(3)(A)(I) of the Social
Security Act (42 U.S.C. 1396r-1a(b)(3)(A)(I)) is amended--
(i) by striking ``described in subsection (a) or (II) is
authorized'' and inserting ``described in subsection (a),
(II) is authorized''; and
(ii) by inserting before the semicolon ``, eligibility for
benefits under part A of title IV, eligibility of a child to
receive benefits under the State plan under this title or
title XXI, (III) is a staff member of a public school, child
care resource and referral center, or agency administering a
plan under part D of title IV, or (IV) is so designated by
the State''.
(B) Technical amendments.--Section 1920A of that Act (42
U.S.C. 1396r-1a) is amended--
(i) in subsection (b)(3)(A)(ii), by striking ``paragraph
(1)(A)'' and inserting ``paragraph (2)(A)''; and
(ii) in subsection (c)(2), in the matter preceding
subparagraph (A), by striking ``subsection (b)(1)(A)'' and
inserting ``subsection (b)(2)(A)''.
(2) Removal of requirement that children's health insurance
program allotments be reduced by costs related to presumptive
eligibility determinations.--
(A) In general.--Section 2104(d) of the Social Security Act
(42 U.S.C. 1397dd(d)) is amended by striking ``the sum of--''
and all that follows through the paragraph designation
``(2)'' and merging all that remains of subsection (d) into a
single sentence.
(B) Effective date.--The amendment made by subsection (a)
shall be deemed to have taken effect on August 5, 1997.
(3) Increased funding for administrative costs related to
outreach and eligibility determinations for children.--
Section 1931(h) of the Social Security Act (42 U.S.C. 1396u-
1(h)) is amended--
(A) by striking the subsection caption and inserting ``(h)
Increased federal matching rate for administrative costs
related to outreach and eligibility determinations for
children.--'';
(B) in paragraph (2), by striking ``eligibility
determinations'' and all that follows and inserting
``determinations of the eligibility of children for benefits
under the State plan under this title or title XXI, outreach
to children likely to be eligible for such benefits, and such
other outreach- and eligibility-related activities as the
Secretary may approve.'';
(C) in paragraph (3), by striking ``and ending with fiscal
year 2000 shall not exceed $500,000,000'' and inserting
``shall not exceed $525,000,000''; and
(D) by striking paragraph (4).
(g) Periodic reassessment of spending options.--Spending
options under subsection (b)(2) will be reassessed jointly by
the States and Federal government every 5 years and be
reported to the Secretary.

SEC. 453. INDIAN HEALTH SERVICE.

Amounts available under section 451(b)(2)(B) shall be
provided to the Indian Health Service to be used for anti-
tobacco-related consumption and cessation activities
including--
(1) clinic and facility design, construction, repair,
renovation, maintenance and improvement;
(2) provider services and equipment;
(3) domestic and community sanitation associated with
clinic and facility construction and improvement; and
(4) other programs and service provided through the Indian
Health Service or through tribal contracts, compacts, grants,
or cooperative agreements with the Indian Health Service and
which are deemed appropriate to raising the health status of
Indians.

SEC. 454. RESEARCH AT THE NATIONAL SCIENCE FOUNDATION.

Amounts available under section 451(c)(2)(C) shall be made
available for necessary expenses in carry out the National
Science Foundation Act of 1950 (U.S.C. 1861-1875), and the
Act to establish a National Medal of Science (42 U.S.C. 1880-
1881).

SEC. 455. MEDICARE CANCER PATIENT DEMONSTRATION PROJECT;
EVALUATION AND REPORT TO CONGRESS.

(a) Establishment.--The Secretary shall establish a 3-year
demonstration project which provides for payment under the
Medicare program under title XVIII of the Social Security Act
(42 U.S.C. 1395 et seq.) of routine patient care costs--
(1) which are provided to an individual diagnosed with
cancer and enrolled in the Medicare program under such title
as part of the individual's participation in an approved
clinical trial program; and
(2) which are not otherwise eligible for payment under such
title for individuals who are entitled to benefits under such
title.
(b) Application.--The beneficiary cost sharing provisions
under the Medicare program, such as deductibles, coinsurance,
and copayment amounts, shall apply to any individual in a
demonstration project conducted under this section.
(c) Approved Clinical Trial Program.--
(1) In general.--For purposes of this section, the term
``approved clinical trial program'' means a clinical trial
program which is approved by--
(A) the National Institutes of Health;
(B) a National Institutes of Health cooperative group or a
National Institutes of Health center; and
(C) the National Cancer Institute,

with respect to programs that oversee and coordinate
extramural clinical cancer research, trials sponsored by such
Institute and conducted at designated cancer centers,
clinical trials, and Institute grants that support clinical
investigators.
(2) Modifications in approved trials.--Beginning 1 year
after the date of enactment of this Act, the Secretary, in
consultation with the Cancer Policy Board of the Institute of
Medicine, may modify or add to the requirements of paragraph
(1) with respect to an approved clinical trial program.
(d) Routine Patient Care Costs.--
(1) In general.--For purposes of this section, the term
``routine patient care costs'' include the costs associated
with the provision of items and services that--
(A) would otherwise be covered under the Medicare program
if such items and services were not provided in connection
with an approved clinical trial program; and
(B) are furnished according to the design of an approved
clinical trial program.
(2) Exclusion.--For purposes of this section, the term
``routine patient care costs'' does not include the costs
associated with the provision of--
(A) an investigational drug or device, unless the Secretary
has authorized the manufacturer of such drug or device to
charge for such drug or device; or
(B) any item or service supplied without charge by the
sponsor of the approved clinical trial program.
(e) Study.--The Secretary shall study the impact on the
Medicare program under title XVIII of the Social Security Act
of covering routine patient care costs for individuals with a
diagnosis of cancer and other diagnoses, who are entitled to
benefits under such title and who are enrolled in an approved
clinical trial program.
(f) Report to congress.--Not later than 30 months after the
date of enactment of this Act, the Secretary shall submit a
report to Congress that contains a detailed description of
the results of the study conducted under subsection (e)
including recommendations regarding the extension and
expansion of the demonstration project conducted under this
section.

TITLE V--STANDARDS TO REDUCE INVOLUNTARY EXPOSURE TO TOBACCO SMOKE

SEC. 501. DEFINITIONS.

In this title:
(1) Assistant secretary.--The term ``Assistant Secretary''
means the Assistant Secretary of the Occupational Safety and
Health Administration of the Department of Labor.
(2) Public facility.--
(A) In general.--The term ``public facility'' means any
building used for purposes that affect interstate or foreign
commerce that is regularly entered by 10 or more individuals
at least 1 day per week including any building owned by or
leased to an agency, independent establishment, department,
or the executive, legislative, or judicial branch of the
United States Government.
(B) Exclusions.--The term ``public facility'' does not
include a building or portion thereof which is used for
residential purposes or as a restaurant (other than a fast
food restaurant), bar, private club, hotel guest room or
common area, casino, bingo parlor, tobacconist's shop, or
prison.
(C) Fast food restaurant defined.--The term ``fast food
restaurant'' means any restaurant or chain of restaurants
that primarily distributes food through a customer pick-up
(either at a counter or drive-through window). The Assistant
Secretary may promulgate regulations to clarify this
subparagraph to ensure that the intended inclusion of
establishments catering to individuals under 18 years of age
is achieved.
(3) Responsible entity.--The term ``responsible entity''
means, with respect to any public facility, the owner of such
facility except that, in the case of any such facility or
portion thereof which is leased, such term means the lessee
if the lessee is actively engaged in supervising day-to-day
activity in the leased space.

SEC. 502. SMOKE-FREE ENVIRONMENT POLICY.

(a) Policy Required.--In order to protect children and
adults from cancer, respiratory disease, heart disease, and
other adverse health effects from breathing environmental
tobacco smoke, the responsible entity for each public
facility shall adopt and implement at such facility a smoke-
free environment policy which meets the requirements of
subsection (b).
(b) Elements of Policy.--
(1) In general.--The responsible entity for a public
facility shall--
(A) prohibit the smoking of cigarettes, cigars, and pipes,
and any other combustion of tobacco within the facility and
on facility property within the immediate vicinity of the
entrance to the facility; and
(B) post a clear and prominent notice of the smoking
prohibition in appropriate and visible locations at the
public facility.
(2) Exception.--The responsible entity for a public
facility may provide an exception to

[[Page S5057]]

the prohibition specified in paragraph (1) for 1 or more
specially designated smoking areas within a public facility
if such area or areas meet the requirements of subsection
(c).
(c) Specially Designated Smoking Areas.--A specially
designated smoking area meets the requirements of this
subsection if--
(1) the area is ventilated in accordance with
specifications promulgated by the Assistant Secretary that
ensure that air from the area is directly exhausted to the
outside and does not recirculate or drift to other areas
within the public facility;
(2) the area is maintained at negative pressure, as
compared to adjoining nonsmoking areas, as determined under
regulations promulgated by the Assistant Secretary;
(3) nonsmoking individuals do not have to enter the area
for any purpose while smoking is occurring in such area; and
(4) cleaning and maintenance work are conducted in such
area only when no smoking is occurring in the area.

SEC. 503. CITIZEN ACTIONS.

(a) In General.--An action may be brought to enforce the
requirements of this title by any aggrieved person, any State
or local government agency, or the Assistant Secretary.
(b) Venue.--Any action to enforce this title may be brought
in any United States district court for the district in which
the defendant resides or is doing business to enjoin any
violation of this title or to impose a civil penalty for any
such violation in the amount of not more than $5,000 per day
of violation. The district courts shall have jurisdiction,
without regard to the amount in controversy or the
citizenship of the parties, to enforce this title and to
impose civil penalties under this title.
(c) Notice.--An aggrieved person shall give any alleged
violator notice at least 60 days prior to commencing an
action under this section. No action may be commenced by an
aggrieved person under this section if such alleged violator
complies with the requirements of this title within such 60-
day period and thereafter.
(d) Costs.--The court, in issuing any final order in any
action brought under this section, may award costs of
litigation (including reasonable attorney and expert witness
fees) to any prevailing plaintiff, whenever the court
determines such award is appropriate.
(e) Penalties.--The court, in any action under this section
to apply civil penalties, shall have discretion to order that
such civil penalties be used for projects which further the
policies of this title. The court shall obtain the view of
the Assistant Secretary in exercising such discretion and
selecting any such projects.
(f) Application with OSHA.--Nothing in this section affects
enforcement of the Occupational Safety and Health Act of
1970.

SEC. 504. PREEMPTION.

Nothing in this title shall preempt or otherwise affect any
other Federal, State, or local law which provides greater
protection from health hazards from environmental tobacco
smoke.

SEC. 505. REGULATIONS.

The Assistant Secretary is authorized to promulgate such
regulations, after consulting with the Administrator of the
Environmental Protection Agency, as the Assistant Secretary
deems necessary to carry out this title.

SEC. 506. EFFECTIVE DATE.

Except as provided in section 507, the provisions of this
title shall take effect on the first day of January next
following the next regularly scheduled meeting of the State
legislature occurring after the date of enactment of this Act
at which, under the procedural rules of that legislature, a
measure under section 507 may be considered.

SEC. 507. STATE CHOICE.

Any State or local government may opt out of this title by
promulgating a State or local law, subject to certification
by the Assistant Secretary that the law is as or more
protective of the public's health as this title, based on the
best available science. Any State or local government may opt
to enforce this title itself, subject to certification by the
Assistant Secretary that the enforcement mechanism will
effectively protect the public health.

TITLE VI--APPLICATION TO INDIAN TRIBES

SEC. 601. SHORT TITLE.

This title may be cited as the ``Reduction in Tobacco Use
and Regulation of Tobacco Products in Indian Country Act of
1998''.

SEC. 602. FINDINGS AND PURPOSES.

(a) Findings.--Congress finds that Native Americans have
used tobacco products for recreational, ceremonial, and
traditional purposes for centuries.
(b) Purpose.--It is the purpose of this title to--
(1) provide for the implementation of this Act with respect
to the regulation of tobacco products, and other tobacco-
related activities on Indian lands;
(2) recognize the historic Native American traditional and
ceremonial use of tobacco products, and to preserve and
protect the cultural, religious, and ceremonial uses of
tobacco by members of Indian tribes;
(3) recognize and respect Indian tribal sovereignty and
tribal authority to make and enforce laws regarding the
regulation of tobacco distributors and tobacco products on
Indian lands; and
(4) ensure that the necessary funding is made available to
tribal governments for licensing and enforcement of tobacco
distributors and tobacco products on Indian lands.

SEC. 603. APPLICATION OF TITLE TO INDIAN LANDS AND TO NATIVE
AMERICANS.

(a) In general.--The provisions of this Act shall apply to
the manufacture, distribution, and sale of tobacco or tobacco
products on Indian lands, including such activities of an
Indian tribe or member of such tribe.
(b) Traditional Use Exception.--
(1) In general.--In recognition of the religious,
ceremonial, and traditional uses of tobacco and tobacco
products by Indian tribes and the members of such tribes,
nothing in this Act shall be construed to permit an
infringement upon upon the right of such tribes or members of
such tribes to acquire, possess, use, or transfer any tobacco
or tobacco product for such purposes, or to infringe upon the
ability of minors to participate and use tobacco products for
such religious, ceremonial, or traditional purposes.
(2) Application of provisions.--Paragraph (1) shall apply
only to those quantities of tobacco or tobacco products
necessary to fulfill the religious, ceremonial, or
traditional purposes of an Indian tribe or the members of
such tribe, and shall not be construed to permit the general
manufacture, distribution, sale or use of tobacco or tobacco
products in a manner that is not in compliance with this Act
or the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et
seq.)
(c) Limitation.--Nothing in this Act shall be construed to
permit an Indian tribe or member of such a tribe to acquire,
possess, use, or transfer any tobacco or tobacco product in
violation of section 2341 of title 18, United States Code,
with respect to the transportation of contraband cigarettes.
(d) Application on Indian Lands.--
(1) In general.--The Secretary, in consultation with the
Secretary of Interior, shall promulgate regulations to
implement this section as necessary to apply this Act and the
Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) with
respect to tobacco products manufactured, distributed, or
sold on Indian lands.
(2) Scope.--This Act and the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 301 et seq.) shall apply to the
manufacture, distribution and sale of tobacco products on
Indian lands, including such activities by Indian tribes and
members of such tribes.
(3) Tribal Tobacco Retailer Licensing Program.--
(A) In general.--The requirements of this Act with respect
to the licensing of tobacco retailers shall apply to all
retailers that sell tobacco or tobacco products on Indian
lands, including Indian tribes, and members thereof.
(B) Implementation.--
(i) In general.--An Indian tribe may implement and enforce
a tobacco retailer licensing and enforcement program on its
Indian lands consistent with the provisions of section 231 if
the tribe is eligible under subparagraph (D). For purposes of
this clause, section 231 shall be applied to an Indian tribe
by substituting ``Indian tribe'' for ``State'' each place it
appears, and an Indian tribe shall not be ineligible for
grants under that section if the Secretary applies that
section to the tribe by modifying it to address tribal
population, land base, and jurisdictional factors.
(ii) Cooperation.--An Indian tribe and State with tobacco
retailer licensing programs within adjacent jurisdictions
should consult and confer to ensure effective implementation
of their respective programs.
(C) Enforcement.--The Secretary may vest the responsibility
for implementation and enforcement of a tobacco retailer
licensing program in--
(i) the Indian tribe involved;
(ii) the State within which the lands of the Indian tribe
are located pursuant to a voluntary cooperative agreement
entered into by the State and the Indian tribe; or
(iii) the Secretary pursuant to subparagraph (F).
(D) Eligibility.--To be eligible to implement and enforce a
tobacco retailer licensing program under section 231, the
Secretary, in consultation with the Secretary of Interior,
must find that--
(i) the Indian tribe has a governing body that has powers
and carries out duties that are similar to the powers and
duties of State or local governments;
(ii) the functions to be exercised relate to activities
conducted on its Indian lands; and
(iii) the Indian tribe is reasonably expected to be capable
of carrying out the functions required by the Secretary.
(E) Determinations.--Not later than 90 days after the date
on which an Indian tribe submits an application for authority
under subparagraph (D), the Secretary shall make a
determination concerning the eligibility of such tribe for
such authority. Each tribe found eligible under subparagraph
(D) shall be eligible to enter into agreements for block
grants under section 231, to conduct a licensing and
enforcement program pursuant to section 231, and for bonuses
under section 232.
(F) Implementation by the secretary.--If the Secretary
determines that the Indian tribe is not willing or not
qualified to administer a retail licensing and enforcement
program, the Secretary, in consultation with the Secretary of
Interior, shall promulgate regulations for a program for such
tribes in the same manner as for States which have not
established a tobacco retailer licensing program under
section 231(f).

[[Page S5058]]

(G) Deficient applications; opportunity to cure.--
(i) If the Secretary determines under subparagraph (F) that
a Indian tribe is not eligible to establish a tobacco
retailer licensing program, the Secretary shall--

(I) submit to such tribe, in writing, a statement of the
reasons for such determination of ineligibility; and
(II) shall assist such tribe in overcoming any deficiencies
that resulted in the determination of ineligibility.

(ii) After an opportunity to review and cure such
deficiencies, the tribe may re-apply to the Secretary for
assistance under this subsection.
(H) Secretarial review.--The Secretary may periodically
review the tribal tobacco retailer licensing program of a
tribe approved pursuant to subparagraph (E), including the
effectiveness of the program, the tribe's enforcement
thereof, and the compatibility of the tribe's program with
the program of the State in which the tribe is located. The
program shall be subject to all applicable requirements of
section 231.
(e) Eligibility for Public Heath Funds.--
(1) Eligibility for grants.--
(A) For each fiscal year the Secretary may award grants to
Indian tribes from the federal Account or other federal
funds, except a tribe that is not a participating tobacco
product manufacturer (as defined in section 1402(a), for the
same purposes as States and local governments are eligible to
receive grants from the Federal Account as provided for in
this Act. Indian tribes shall have the flexibility to utilize
such grants to meet the unique health care needs of their
service populations consistent with the goals and purposes of
Federal Indian health care law and policy.
(B) In promulgating regulations for the approval and
funding of smoking cessation programs under section 221 the
Secretary shall ensure that adequate funding is available to
address the high rate of smoking among Native Americans.
(2) Health care funding.--
(A) Indian health service.--Each fiscal year the Secretary
shall disburse to the Indian Health Service from the National
Tobacco Settlement Trust Fund an amount determined by the
Secretary in consultation with the Secretary of the Interior
equal to the product of--
(i) the ratio of the total Indian health care service
population relative to the total population of the United
States; and
(ii) the amount allocated to the States each year from the
State Litigation Trust Account.
(B) Funding.--The trustees of the Trust Fund shall for each
fiscal year transfer to the Secretary from the State
Litigation Trust Account the amount determined pursuant to
paragraph (A).
(C) Use of health care trust funds.--Amounts made available
to the Indian Health Service under this paragraph shall be
made available to Indian tribes pursuant to the provisions of
the Indian Self Determination and Education Assistance Act
(25 U.S.C. 450b et seq.), shall be used to reduce tobacco
consumption, promote smoking cessation, and shall be used to
fund health care activities including--
(i) clinic and facility design, construction, repair,
renovation, maintenance, and improvement;
(ii) health care provider services and equipment;
(iii) domestic and community sanitation associated with
clinic and facility construction and improvement;
(iv) inpatient and outpatient services; and
(v) other programs and services which have as their goal
raising the health status of Indians.
(f) Preemption.--
(1) In general.--Except as otherwise provided in this
section, nothing in this Act shall be construed to prohibit
an Indian tribe from imposing requirements, prohibitions,
penalties, or other measures to further the purposes of this
Act that are in addition to the requirements, prohibitions,
or penalties required by this Act.
(2) Public exposure to smoke.--Nothing in this title shall
be construed to preempt or otherwise affect any Indian tribe
rule or practice that provides greater protections from the
health hazard of environmental tobacco smoke.
(g) Disclaimer.--Nothing in this Act shall be construed to
increase or diminish tribal or State jurisdiction on Indian
lands with respect to tobacco-related activities.

TITLE VII--TOBACCO CLAIMS

SEC. 701. DEFINITIONS.

In this title:
(1) Affiliate.--The term ``affiliate'' means a person who
directly or indirectly owns or controls, is owned or
controlled by, or is under common ownership or control with,
another person. For purposes of this definition, ownership
means ownership of an equity interest, or the equivalent
thereof, of ten percent or more, and person means an
individual, partnership, committee, association, corporation,
or any other organization or group of persons.
(2) Civil action.--The term ``civil action'' means any
action, lawsuit, or proceeding that is not a criminal action.
(3) Court.--The term ``court'' means any judicial or agency
court, forum, or tribunal within the United States, including
without limitation any Federal, State, or tribal court.
(4) Final judgment.--The term ``final judgment'' means a
judgment on which all rights of appeal or discretionary
review have been exhausted or waived or for which the time to
appeal or seek such discretionary review has expired.
(5) Final settlement.--The term ``final settlement'' means
a settlement agreement that is executed and approved as
necessary to be fully binding on all relevant parties.
(6) Individual.--The term ``individual'' means a human
being and does not include a corporation, partnership,
unincorporated association, trust, estate, or any other
public or private entity, State or local government, or
Indian tribe.
(7) Tobacco claim.--The term ``tobacco claim'' means a
claim directly or indirectly arising out of, based on, or
related to the health-related effects of tobacco products,
including without limitation a claim arising out of, based on
or related to allegations regarding any conduct, statement,
or omission respecting the health-related effects of such
products.
(8) Tobacco product manufacturer.--The term ``tobacco
product manufacturer'' means a person who--
(A) manufactures tobacco products for sale in the United
States after the date of enactment of this Act, including
tobacco products for sale in the United States through an
importer;
(B) is, after the date of enactment of this Act, the first
purchaser for resale in the United States of tobacco products
manufactured for sale outside of the United States;
(C) engaged in activities described in subparagraph (A) or
(B) prior to the date of enactment of this Act, has not
engaged in such activities after the date of enactment of
this Act, and was not as of June 20, 1997, an affiliate of a
tobacco product manufacturer in which the tobacco product
manufacturer or its other affiliates owned a 50 percent or
greater interest;
(D) is a successor or assign of any of the foregoing;
(E) is an entity to which any of the foregoing directly or
indirectly makes, after the date of enactment of this Act, a
fraudulent conveyance or a transfer that would otherwise be
voidable under part 5 of title 11 of the United States Code,
but only to the extent of the interest or obligation
transferred; or
(F) is an affiliate of a tobacco product manufacturer.
(9) Castano civil actions.--The term ``Castano Civil
Actions'' means the following civil actions: Gloria Wilkinson
Lyons et al. v. American Tobacco Co., et al. (USDC Alabama
96-0881-BH; Agnes McGinty, et al. v. American Tobacco Co., et
al. (USDC Arkansas LR-C-96-881); Willard R. Brown, et al. v.
R.J. Reynolds Co., et al. (San Diego, California-00711400);
Gray Davis & James Ellis, et al. R.J. Reynolds Tobacco Co.,
et al. (San Diego, California-00706458); Chester Lyons, et
al. v. Brown & Williamson Tobacco Corp., et al. (Fulton
County, Georgia-E-59346); Rosalyn Peterson, et al. v.
American Tobacco Co., et al. (USDC Hawaii-97-00233-HG); Jean
Clay , et al. v. American Tobacco Co., et al. (USDC Illinois
Benton Division-97-4167-JPG); William J. Norton, et al. v.
RJR Nabisco Holdings Corp., et al. (Madison County, Indiana
48D01-9605-CP-0271); Alga Emig, et al. v. American Tobacco
Co., et al. (USDC Kansas-97-1121-MLB); Gloria Scott, et al.
v. American Tobacco Co., et al. (Orleans Parish, Louisiana-
97-1178); Vern Masepohl, et al. v. American Tobacco Co., et
al. (USDC Minnesota-3-96-CV-888); Matthew Tepper, et al. v.
Philip Morris Incorporated, et al (Bergen County, New Jersey-
BER-L-4983-97-E); Carol A. Connor, et al. v. American Tobacco
Co., et al. (Bernalillo County, New Mexico-CV96-8464); Edwin
Paul Hoskins, et al. v. R.J. Reynolds Tobacco Co., et al.;
Josephine Stewart-Lomantz v. Brown & Williamson Tobacco, et
al.; Rose Frosina, et al. v. Philip Morris Incorporated, et
al.; Catherine Zito, et al. v. American Tobacco Co., et al.;
Kevin Mroczkowski, et al. v. Lorillard Tobacco Company, et
al. (Supreme Court, New York County, New York-110949 thru
110953); Judith E. Chamberlain, et al. v. American Tobacco
Co., et al. (USDC Ohio-1:96CV2005); Brian walls, et al. v.
American Tobacco Co., et al. (USDC Oklahoma-97-CV-218-H);
Steven R. Arch, et al. v. American Tobacco Co., et al. (USDC
Pennsylvania-96-5903-CN); Barreras-Ruiz, et al. v. American
Tobacco Co., et al. (USDC Puerto Rico-96-2300-JAF); Joanne
Anderson, et al. v. American Tobacco Co., et al. (Know
County, Tennessee); Carlis Cole, et al. v. The Tobacco
institute, Inc., et al. (USDC Beaumont Texas Division-
1:97CV0256); Carrol Jackson, et al. v. Philip Morris
Incorporated, et al. (Salt Lake County, Utah-CV No. 98-
0901634PI).

SEC. 702. APPLICATION; PREEMPTION.

(a) Application.--The provisions of this title govern any
tobacco claim in any civil action brought in an State,
Tribal, or Federal court, including any such claim that has
not reached final judgment or final settlement as of the date
of enactment of this Act.
(b) Preemption.--This title supersedes State law only to
the extent that State law applies to a matter covered by this
title. Any matter that is not governed by this title,
including any standard of liability applicable to a
manufacturer, shall be governed by any applicable State,
Tribal, or Federal law.
(c) Criminal Liability Untouched.--Nothing in this title
shall be construed to limit the criminal liability of tobacco
product manufacturers, retailers, or distributors, or

[[Page S5059]]

their officers, directors, employees, successors, or assigns.

SEC. 703. RULES GOVERNING TOBACCO CLAIMS.

(a) General Causation Presumption.--In any civil action to
which this title applies brought involving a tobacco claim,
there shall be an evidentiary presumption that nicotine is
addictive and that the diseases identified as being caused by
use of tobacco products in the Center for Disease Control and
Prevention Reducing the Health Consequences of Smoking: 25
Years of Progress: A Report of the Surgeon General (United
States Public Health Service 1989), The Health Consequences
of Smoking: Involuntary Smoking, (USPHS 1986); and The Health
Consequences of Using Smokeless Tobacco, (USPHS 1986), are
caused in whole or in part by the use of tobacco products,
(hereinafter referred to as the ``general causation
presumption''), and a jury empaneled to hear a tobacco claim
shall be so instructed. In all other respects, the burden of
proof as to the issue of whether a plaintiff's specific
disease or injury was caused by smoking shall be governed by
the law of the State or Tribe in which the tobacco claim was
brought. This general causation presumption shall in no way
affect the ability of the defendant to introduce evidence or
argument which the defendant would otherwise be entitled to
present under the law of the State or Tribe in which the
tobacco claim was brought to rebut the general causation
presumption, or with respect to general causation, specific
causation, or alternative causation, or to introduce any
other evidence or argument which the defendant would
otherwise be entitled to make.
(b) Actions Against Participating Tobacco Product
Manufacturers.--In any civil action brought involving a
tobacco claim against participating tobacco product
manufacturers, as that term is defined in title XIV, the
provisions of title XIV apply in conjunction with the
provisions of this title.

TITLE VIII--TOBACCO INDUSTRY ACCOUNTABILITY REQUIREMENTS AND EMPLOYEE
PROTECTION FROM REPRISALS

SEC. 801. ACCOUNTABILITY REQUIREMENTS AND OVERSIGHT OF THE
TOBACCO INDUSTRY.

(a) Accountability.--The Secretary, following regular
consultation with the Commissioner of Food and Drugs, the
Surgeon General, the Director of the Center for Disease
Control or the Director's delegate, and the Director of the
Health and Human Services Office of Minority Health shall
annually issue a report as provided for in subsection (c).
(b) Tobacco Company Plan.--Within a year after the date of
enactment of this Act, each participating tobacco product
manufacturer shall adopt and submit to the Secretary a plan
to achieve the required percentage reductions in underage use
of tobacco products set forth in section 201, and thereafter
shall update its plan no less frequently than annually. The
annual report of the Secretary may recommend amendment of any
plan to incorporate additional measures to reduce underage
tobacco use that are consistent with the provisions of this
Act.
(c) Annual Report.--The Secretary shall submit a report to
the Congress by January 31 of each year, which shall be
published in the Federal Register. The report shall--
(1) describe in detail each tobacco product manufacturer's
compliance with the provisions of this Act and its plan
submitted under subsection (b);
(2) report on whether each tobacco product manufacturer's
efforts to reduce underage smoking are likely to result in
attainment of smoking reduction targets under section 201;
(3) recommend, where necessary, additional measures
individual tobacco companies should undertake to meet those
targets; and
(4) include, where applicable, the extent to which prior
panel recommendations have been adopted by each tobacco
product manufacturer.

SEC. 802. TOBACCO PRODUCT MANUFACTURER EMPLOYEE PROTECTION.

(a) Prohibited Acts.--No tobacco product manufacturer may
discharge, demote, or otherwise discriminate against any
employee with respect to compensation, terms, conditions,
benefits, or privileges of employment because the employee
(or any person acting under a request of the employee)--
(1) notified the manufacturer, the Commissioner of Food and
Drugs, the Attorney General, or any Federal, State, or local
public health or law enforcement authority of an alleged
violation of this or any other Act;
(2) refused to engage in any practice made unlawful by such
Acts, if the employee has identified the alleged illegality
to the manufacturer;
(3) testified before Congress or at any Federal or State
proceeding regarding any provision (or proposed provision) of
such Acts;
(4) commenced, caused to be commenced, or is about to
commence or cause to be commenced a proceeding under such
Acts, or a proceeding for the administration or enforcement
of any requirement imposed under such Acts;
(5) testified or is about to testify in any such
proceeding; or
(6) assisted or participated, or is about to assist or
participate, in any manner in such a proceeding or in any
other manner in such a proceeding or in any other action to
carry out the purposes of such Acts.
(b) Employee Complaint.--
(1) Any employee of a tobacco product manufacturer who
believes that he or she has been discharged, demoted, or
otherwise discriminated against by any person in violation of
subsection (a) of this section may, within 180 days after
such violation occurs, file (or have any person file on his
or her behalf) a complaint with the Secretary alleging such
discharge, demotion, or discrimination. Upon receipt of such
a complaint, the Secretary shall notify the person named in
the complaint of its filing.
(2)(A) Upon receipt of a complaint under paragraph (1) of
this subsection, the Secretary shall conduct an investigation
of the violation alleged in the complaint. Within 30 days
after the receipt of such complaint, the Secretary shall
complete such investigation and shall notify in writing the
complainant (and any such person acting in his or her behalf)
and the person alleged to have committed such violation of
the results of the investigation conducted under this
paragraph. Within 90 days after the receipt of such
complaint, the Secretary shall (unless the proceeding on the
complaint is terminated by the Secretary on the basis of a
settlement entered into by the Secretary and the person
alleged to have committed such violation) issue an order
either providing the relief prescribed in subparagraph (B) of
this paragraph or denying the complaint. An order of the
Secretary shall be made on the record after notice and the
opportunity for a hearing in accordance with sections 554 and
556 of title 5, United States Code. Upon the conclusion of
such a hearing and the issuance of a recommended decision
that the complaint has merit, the Secretary shall issue a
preliminary order providing the relief prescribed in
subparagraph (B) of this paragraph, but may not order
compensatory damages pending a final order. The Secretary may
not enter into a settlement terminating a proceeding on a
complaint without the participation and consent of the
complainant.
(B) If, in response to a complaint under paragraph (1) of
this subsection, the Secretary determines that a violation of
this paragraph has occurred, the Secretary shall order the
person who committed such violation to (i) take affirmative
action to abate the violation, and (ii) reinstate the
complainant to his or her former position together with
compensation (including back pay), terms, conditions, and
privileges of his or her employment. The Secretary may order
such person to provide compensatory damages to the
complainant. If an order is issued under this subparagraph,
the Secretary, at the request of the complainant, shall
assess the person against whom the order is issued a sum
equal to the aggregate amount of all costs and expenses
(including attorneys' and expert witness fees) reasonably
incurred (as determined by the Secretary), by the complainant
for, or in connection with, the bringing of the complaint
upon which the order is issued.
(3)(A) The Secretary shall dismiss a complaint filed under
paragraph (1) of this subsection, and shall not conduct the
investigation required under paragraph (2) of this
subsection, unless the complainant has made a prima facie
showing that any behavior described in subsection (a) of this
section was a contributing factor in the unfavorable
personnel action alleged in the complaint.
(B) Notwithstanding a finding by the Secretary that the
complainant has made the showing required by subparagraph (A)
of this paragraph, no investigation required under paragraph
(2) of this subsection shall be conducted if the manufacturer
demonstrates by clear and convincing evidence that it would
have taken the same unfavorable personnel action in the
absence of such behavior. Relief may not be ordered under
paragraph (1) of this subsection if the manufacturer
demonstrates by clear and convincing evidence that it would
have taken the same unfavorable personnel action in the
absence of such behavior.
(C) The Secretary may determine that a violation of
subsection (a) of this section has occurred only if the
complainant has demonstrated that any behavior described in
subsection (a) of this section was a contributing factor in
unfavorable personnel action alleged in the complaint.
(c) Judicial Review.--
(1) Any person adversely affected or aggrieved by an order
issued under subsection (a) of this section may obtain review
of the order in the United States court of appeals for the
circuit in which the violation, with respect to which the
order was issued, allegedly occurred. The petition for review
must be filed within 60 days after the issuance of the
Secretary's order. Judicial review shall be available as
provided in chapter 7 of title 5, United States Code. The
commencement of proceedings under this subsection shall not,
unless ordered by the court, operate as a stay of the
Secretary's order.
(2) An order of the Secretary with respect to which review
could have been obtained under paragraph (1) of this
subsection shall not be subject to judicial review in any
criminal or civil proceeding.
(d) Noncompliance.--Whenever a person has failed to comply
with an order issued under subsection (b)(2) of this section,
the Secretary may file a civil action in the United States
district court for the district in which the violation
occurred to enforce such order. In actions brought under this
subsection, the district courts shall have jurisdiction to
grant all appropriate relief, including injunctive relief and
compensatory and exemplary damages.
(e) Action to Ensure Compliance.--

[[Page S5060]]

(1) Any person on whose behalf an order was issued under
subsection (b)(2) of this section may commence a civil action
to require compliance with such order against the person to
whom such order was issued. The appropriate United States
district court shall have jurisdiction to enforce such order,
without regard to the amount in controversy or the
citizenship of the parties.
(2) The court, in issuing any final order under this
subsection, may award costs of litigation (including
reasonable attorneys' and expert witness fees) to any party
whenever the court determines such award is appropriate.
(f) Enforcement.--Any non-discretionary duty imposed by
this section shall be enforceable in a mandamus proceeding
brought under section 1361 of title 28, United States Code.
(g) Applicability to Certain Employees.--Subsection (a) of
this section shall not apply with respect to any employee
who, acting without direction from the manufacturer (or the
agent of the manufacturer) deliberately causes a violation of
any requirement of this Act, the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 301 et seq), or any other law or
regulation relating to tobacco products.
(h) Effect on Other Laws.--This section shall not be
construed to expand, diminish, or otherwise affect any right
otherwise available to an employee under Federal or State law
to redress the employee's discharge or other discriminatory
action taken by a tobacco product manufacturer against the
employee.
(i) Posting.--The provisions of this section shall be
prominently posted in any place of employment to which this
section applies.

TITLE IX--PUBLIC DISCLOSURE OF TOBACCO INDUSTRY DOCUMENTS

SEC. 901. FINDINGS.

The Congress finds that--
(1) the American tobacco industry has made claims of
attorney-client privilege, attorney work product, and trade
secrets to protect from public disclosure thousands of
internal documents sought by civil litigants;
(2) a number of courts have found that these claims of
privilege were not made in good faith; and
(3) a prompt and full exposition of tobacco documents
will--
(A) promote understanding by the public of the tobacco
industry's research and practices; and
(B) further the purposes of this Act.

SEC. 902. APPLICABILITY.

This title applies to all tobacco product manufacturers.

SEC. 903. DOCUMENT DISCLOSURE.

(a) Disclosure to the Food and Drug Administration.--
(1) Within 60 days after the date of enactment of this Act,
each tobacco product manufacturer shall submit to the Food
and Drug Administration the documents identified in
subsection (c), including documents for which trade secret
protection is claimed, with the exception of any document for
which privilege is claimed, and identified in accordance with
subsection (b). Each such manufacturer shall provide the
Administration with the privilege and trade secret logs
identified under subsection (b).
(2) With respect to documents that are claimed to contain
trade secret material, unless and until it is finally
determined under this title, either through judicial review
or because time for judicial review has expired, that such a
document does not constitute or contain trade secret
material, the Administration shall treat the document as a
trade secret in accordance with section 708 of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 379) and the
regulations promulgated thereunder. Nothing herein shall
limit the authority of the Administration to obtain and use,
in accordance with any provision of the Federal Food, Drug,
and Cosmetic Act and the regulations promulgated thereunder,
any document constituting or containing trade secret
material. Documents and materials received by the
Administration under this provision shall not be obtainable
by or releasable to the public through section 552 of title
5, United States Code, or any other provision of law, and the
only recourse to obtain these documents shall be through the
process established by section 905.
(3) If a document depository is not established under title
XIV, the Secretary shall establish by regulation a procedure
for making public all documents submitted under paragraph (1)
except documents for which trade secret protection has been
claimed and for which there has not been a final judicial
determination that the document does not contain a trade
secret.
(b) Separate Submission of Documents.--
(1) (1) Privileged Trade Secret Documents.--Any document
required to be submitted under subsection (c) or (d) that is
subject to a claim by a tobacco product manufacturer of
attorney-client privilege, attorney work product, or trade
secret protection shall be so marked and shall be submitted
to the panel under section 904 within 30 days after its
appointment. Compliance with this subsection shall not be
deemed to be a waiver of any applicable claim of privilege or
trade secret protection.
(2) Privilege and trade secret logs.--
(A) In general.--Within 15 days after submitting documents
under paragraph (1), each tobacco product manufacturer shall
submit a comprehensive log which identifies on a document-by-
document basis all documents produced for which the
manufacturer asserts attorney-client privilege, attorney
work-product, or trade secrecy. With respect to documents for
which the manufacturer previously has asserted one or more of
the aforementioned privileges or trade secret protection, the
manufacturer shall conduct a good faith de novo review of
such documents to determine whether such privilege or trade
secret protection is appropriate.
(B) Organization of log.--The log shall be organized in
numerical order based upon the document identifier assigned
to each document. For each document, the log shall contain--
(i) a description of the document, including type of
document, title of document, name and position or title of
each author, addressee, and other recipient who was intended
to receive a copy, document date, document purpose, and
general subject matter;
(ii) an explanation why the document or a portion of the
document is privileged or subject to trade secret protection;
and
(iii) a statement whether any previous claim of privilege
or trade secret was denied and, if so, in what proceeding.
(C) Public inspection.--Within 5 days of receipt of such a
log, the Depository shall make it available for public
inspection and review.
(3) Declaration of compliance.--Each tobacco product
manufacturer shall submit to the Depository a declaration, in
accordance with the requirements of section 1746 of title 28,
United States Code, by an individual with responsibility for
the de novo review of documents, preparation of the privilege
log, and knowledge of its contents. The declarant shall
attest to the manufacturer's compliance with the requirements
of this subsection pertaining to the review of documents and
preparation of a privilege log.
(c) Document Categories.--Each tobacco product manufacturer
shall submit--
(1) every existing document (including any document subject
to a claim of attorney-client privilege, attorney work
product, or trade secret protection) in the manufacturer's
possession, custody, or control relating, referring, or
pertaining to--
(A) any studies, research, or analysis of any possible
health or pharmacological effects in humans or animals,
including addiction, associated with the use of tobacco
products or components of tobacco products;
(B) the engineering, manipulation, or control of nicotine
in tobacco products;
(C) the sale or marketing of tobacco products;
(D) any research involving safer or less hazardous tobacco
products;
(E) tobacco use by minors; or
(F) the relationship between advertising or promotion and
the use of tobacco products;
(2) all documents produced by any tobacco product
manufacturer, the Center of Tobacco Research or Tobacco
Institute to the Attorney General of any State during
discovery in any action brought on behalf of any State and
commenced after January 1, 1994;
(3) all documents produced by any tobacco product
manufacturer, Center for Tobacco Research or Tobacco
Institute to the Federal Trade Commission in connection with
its investigation into the ``Joe Camel'' advertising campaign
and any underage marketing of tobacco products to minors;
(4) all documents produced by any tobacco product
manufacturers, the Center for Tobacco Research or the Tobacco
Institute to litigation adversaries during discovery in any
private litigation matters;
(5) all documents produced by any tobacco product
manufacturer, the Center for Tobacco Research, or the Tobacco
Institute in any of the following private litigation matters:
(A) Philip Morris v. American Broadcasting Co., Law No.
7609CL94x00181-00 (Cir. Ct. Va. filed Mar. 26, 1994);
(B) Estate of Butler v. R.J. Reynolds Tobacco Co., Civ. A.
No. 94-5-53 (Cir. Ct. Miss., filed May 12, 1994);
(C) Haines v. Liggett Group, No. 84-CV-678 (D.N.J., filed
Feb. 22, 1984); and
(D) Cipollone v. Liggett Group, No. 83-CV-284 (D.N.J.,
filed Aug. 1, 1983);
(6) any document produced as evidence or potential evidence
or submitted to the Depository by tobacco product
manufacturers in any of the actions described in paragraph
(5), including briefs and other pleadings, memoranda,
interrogatories, transcripts of depositions, and expert
witnesses and consultants materials, including
correspondence, reports, and testimony;
(7) any additional documents that any tobacco product
manufacturer, the Center for Tobacco Research, or the Tobacco
Institute have agreed or been required by any court to
produce to litigation adversaries as part of discovery in any
action listed in paragraph (2), (3), (4), or (5) but have not
yet completed producing as of the date of enactment of this
Act;
(8) all indices of documents relating to tobacco products
and health, with any such indices that are maintained in
computerized form placed into the depository in both a
computerized and hard-copy form;
(9) a privilege log describing each document or portion of
a document otherwise subject to production in the actions
enumerated in this subsection that any tobacco product
manufacturer, the Center for Tobacco Research, or the Tobacco
Institute maintains, based upon a good faith de novo re-
review conducted after the date of enactment of this Act is
exempt from public disclosure under this title; and

[[Page S5061]]

(10) a trade secrecy log describing each document or
portion of a document that any tobacco product manufacturer,
the Center for Tobacco Research, or the Tobacco Institute
maintains is exempt from public disclosure under this title.
(d) Future Documents.--With respect to documents created
after the date of enactment of this Act, the tobacco product
manufacturers and their trade associations shall--
(1) place the documents in the depository; and
(2) provide a copy of the documents to the Food and Drug
Administration (with the exception of documents subject to a
claim of attorney-client privilege or attorney work product).
(1) Every existing document (including any document subject
to a claim of attorney-client privilege, attorney work
product, or trade secret protection) in the manufacturer's
possession, custody, or control relating, referring, or
pertaining to--
(A) any studies, research, or analysis of any possible
health or pharmacological effects in humans or animals,
including addiction, associated with the use of tobacco
products or components of tobacco products;
(B) the engineering, manipulation, or control of nicotine
in tobacco products;
(C) the sale or marketing of tobacco products;
(D) any research involving safer or less hazardous tobacco
products;
(E) tobacco use by minors; or
(F) the relationship between advertising or promotion and
the use of tobacco products;
(2) Every existing document (including any document subject
to a claim of attorney-client privilege, attorney work
product, or trade secret protection) in the manufacturer's
possession, custody, or control--
(A) produced, or ordered to be produced, by the tobacco
product manufacturer in any health-related civil or criminal
proceeding, judicial or administrative; and
(B) that the panel established under section 906 determines
is appropriate for submission.
(3) All studies conducted or funded, directly or
indirectly, by any tobacco product manufacturer, relating to
tobacco product use by minors.
(4) All documents discussing or referring to the
relationship, if any, between advertising and promotion and
the use of tobacco products by minors.
(5) A privilege log describing each document or each
portion of a document otherwise subject to public disclosure
under this subsection that any tobacco product manufacturer
maintains is exempt from public disclosure under this title.
(6) A trade secrecy log describing each document or each
portion of a document otherwise subject to public disclosure
under this subsection that any tobacco product manufacturer,
the Center for Tobacco Research, or the Tobacco Institute
maintains is exempt from public disclosure under this Act.
(e) Document Identification and Index.--Documents submitted
under this section shall be sequentially numbered and marked
to identify the tobacco product manufacturer. Within 15 days
after submission of documents, each tobacco product
manufacturer shall supply the panel with a comprehensive
document index which references the applicable document
categories contained in subsection (b).

SEC. 904. DOCUMENT REVIEW.

(a) Ajudication of Privilege Claims.--An claim of attorney-
client privilege, trade secret protection, or other claim of
privilege with respect to a document required to be submitted
by this title shall be heard by a 3-judge panel of the United
States District Court for the District of Columbia under
section 2284 of title 28, United States Code. The panel may
appoint special masters, employ such personnel, and establish
such procedures as it deems necessary to carry out its
functions under this title.
(b) Privilege.--The panel shall apply the attorney-client
privilege, the attorney work-product doctrine, and the trade
secret doctrine in a manner consistent with Federal law.

SEC. 905. RESOLUTION OF DISPUTED PRIVILEGE AND TRADE SECRET
CLAIMS.

(a) In General.--The panel shall determine whether to
uphold or reject disputed claims of attorney client
privilege, attorney work product, or trade secret protection
with respect to documents submitted. Any person may petition
the panel to resolve a claim that a document submitted may
not be disclosed to the public. Such a determination shall be
made by a majority of the panel, in writing, and shall be
subject to judicial review as specified in this title. All
such determinations shall be made solely on consideration of
the subject document and written submissions from the person
claiming that the document is privileged or protected by
trade secrecy and from any person seeking disclosure of the
document. The panel shall cause notice of the petition and
the panel's decision to be published in the Federal Register.
(b) Final Decision.--The panel may uphold a claim of
privilege or protection in its entirety or, in its sole
discretion, it may redact that portion of a document that it
determines is protected from public disclosure under
subsection (a). Any decision of the panel shall be final
unless judicial review is sought under section 906. In the
event that judicial review is so sought, the panel's decision
shall be stayed pending a final judicial decision.

SEC. 906. APPEAL OF PANEL DECISION.

(a) Petition; Right of Appeal.--Any person may obtain
judicial review of a final decision of the panel by filing a
petition for review with the United States Court of Appeals
for the Federal Circuit within 60 days after the publication
of such decision in the Federal Register. A copy of the
petition shall be transmitted by the Clerk of the Court to
the panel. The panel shall file in the court the record of
the proceedings on which the panel based its decision
(including any documents reviewed by the panel in camera) as
provided in section 2112 of title 28, United States Code.
Upon the filing of such petition, the court shall have
exclusive jurisdiction to affirm or set aside the panel's
decision, except that until the filing of the record the
panel may modify or set aside its decision.
(b) Additional Evidence and Arguments.--If the any party
applies to the court for leave to adduce additional evidence
respecting the decision being reviewed and shows to the
satisfaction of the court that such additional evidence or
arguments are material and that there were reasonable grounds
for the failure to adduce such evidence or arguments in the
proceedings before the panel, the court may order the panel
to provide additional opportunity for the presentation of
evidence or arguments in such manner and upon such terms as
the court deems proper. The panel may modify its findings or
make new findings by reason of the additional evidence or
arguments and shall file with the court such modified or new
findings, and its recommendation, if any, for the
modification or setting aside of the decision being reviewed.
(c) Standard of Review; Finality of Judgments.--The panel's
findings of fact, if supported by substantial evidence on the
record taken as a whole, shall be conclusive. The court shall
review the panel's legal conclusions de novo. The judgment of
the court affirming or setting aside the panel's decision
shall be final, subject to review by the Supreme Court of the
United States upon certiorari or certification, as provided
in section 1254 of title 28, United States Code.
(d) Public Disclosure After Final Decision.--Within 30 days
after a final decision that a document, as redacted by the
panel or in its entirety, is not protected from disclosure by
a claim of attorney-client privilege, attorney work product,
or trade secret protection, the panel shall direct that the
document be made available to the Commissioner of Food and
Drugs under section 903(a). No Federal, Tribal, or State
court shall have jurisdiction to review a claim of attorney-
client privilege, attorney work product, or trade secret
protection for a document that has lawfully been made
available to the public under this subsection.
(e) Effect of Non-disclosure Decision on Judicial
Proceedings.--The panel's decision that a document is
protected by attorney-client privilege, attorney work
product, or trade secret protection is binding only for the
purpose of protecting the document from disclosure by the
Depository. The decision by the panel shall not be construed
to prevent a document from being disclosed in a judicial
proceeding or interfere with the authority of a court to
determine whether a document is admissible or whether its
production may be compelled.

SEC. 907. MISCELLANEOUS.

The disclosure process in this title is not intended to
affect the Federal Rules of Civil or Criminal Procedure or
any Federal law which requires the disclosure of documents or
which deals with attorney-client privilege, attorney work
product, or trade secret protection.

SEC. 908. PENALTIES.

(a) Good Faith Requirement.--Each tobacco product
manufacturer shall act in good faith in asserting claims of
privilege or trade secret protection based on fact and law.
If the panel determines that a tobacco product manufacturer
has not acted in good faith with full knowledge of the truth
of the facts asserted and with a reasonable basis under
existing law, the manufacturer shall be assessed costs, which
shall include the full administrative costs of handling the
claim of privilege, and all attorneys' fees incurred by the
panel and any party contesting the privilege. The panel may
also impose civil penalties of up to $50,000 per violation if
it determines that the manufacturer acted in bad faith in
asserting a privilege, or knowingly acted with the intent to
delay, frustrate, defraud, or obstruct the panel's
determination of privilege, attorney work product, or trade
secret protection claims.
(b) Failure to Produce Document.--A failure by a tobacco
product manufacturer to produce indexes and documents in
compliance with the schedule set forth in this title, or with
such extension as may be granted by the panel, shall be
punished by a civil penalty of up to $50,000 per violation. A
separate violation occurs for each document the manufacturer
has failed to produce in a timely manner. The maximum penalty
under this subsection for a related series of violations is
$5,000,000. In determining the amount of any civil penalty,
the panel shall consider the number of documents, length of
delay, any history of prior violations, the ability to pay,
and such other matters as justice requires. Nothing in this
title shall replace or supersede any criminal sanction under
title 18, United States Code, or any other provision of law.

SEC. 909. DEFINITIONS.

For the purposes of this title--

[[Page S5062]]

(1) Document.--The term ``document'' includes originals and
drafts of any kind of written or graphic matter, regardless
of the manner of production or reproduction, of any kind or
description, whether sent or received or neither, and all
copies thereof that are different in any way from the
original (whether by interlineation, receipt stamp, notation,
indication of copies sent or received or otherwise)
regardless of whether confidential, privileged, or otherwise,
including any paper, book, account, photograph, blueprint,
drawing, agreement, contract, memorandum, advertising
material, letter, telegram, object, report, record,
transcript, study, note, notation, working paper, intra-
office communication, intra-department communication, chart,
minute, index sheet, routing sheet, computer software,
computer data, delivery ticket, flow sheet, price list,
quotation, bulletin, circular, manual, summary, recording of
telephone or other conversation or of interviews, or of
conferences, or any other written, recorded, transcribed,
punched, taped, filmed, or graphic matter, regardless of the
manner produced or reproduced. Such term also includes any
tape, recording, videotape, computerization, or other
electronic recording, whether digital or analog or a
combination thereof.
(2) Trade secret.--The term ``trade secret'' means any
commercially valuable plan, formula, process, or device that
is used for making, compounding, processing, or preparing
trade commodities and that can be said to be the end-product
of either innovation or substantial effort, for which there
is a direct relationship between the plan, formula, process,
or device and the productive process.
(3) Certain actions deemed to be proceedings.--Any action
undertaken under this title, including the search, indexing,
and production of documents, is deemed to be a ``proceeding''
before the executive branch of the United States.
(4) Other terms.--Any term used in this title that is
defined in section 701 has the meaning given to it by that
section.

TITLE X--LONG-TERM ECONOMIC ASSISTANCE FOR FARMERS

SEC. 1001. SHORT TITLE.

This title may be cited as the ``Long-Term Economic
Assistance for Farmers Act'' or the ``LEAF Act''.

SEC. 1002. DEFINITIONS.

In this title:
(1) Participating tobacco producer.--The term
``participating tobacco producer'' means a quota holder,
quota lessee, or quota tenant.
(2) Quota holder.--The term ``quota holder'' means an owner
of a farm on January 1, 1998, for which a tobacco farm
marketing quota or farm acreage allotment was established
under the Agricultural Adjustment Act of 1938 (7 U.S.C. 1281
et seq.).
(3) Quota lessee.--The term ``quota lessee'' means--
(A) a producer that owns a farm that produced tobacco
pursuant to a lease and transfer to that farm of all or part
of a tobacco farm marketing quota or farm acreage allotment
established under the Agricultural Adjustment Act of 1938 (7
U.S.C. 1281 et seq.) for any of the 1995, 1996, or 1997 crop
years; or
(B) a producer that rented land from a farm operator to
produce tobacco under a tobacco farm marketing quota or farm
acreage allotment established under the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1281 et seq.) for any of the
1995, 1996, or 1997 crop years.
(4) Quota tenant.--The term ``quota tenant'' means a
producer that--
(A) is the principal producer, as determined by the
Secretary, of tobacco on a farm where tobacco is produced
pursuant to a tobacco farm marketing quota or farm acreage
allotment established under the Agricultural Adjustment Act
of 1938 (7 U.S.C. 1281 et seq.) for any of the 1995, 1996, or
1997 crop years; and
(B) is not a quota holder or quota lessee.
(5) Secretary.--The term ``Secretary'' means--
(A) in subtitles A and B, the Secretary of Agriculture; and
(B) in section 1031, the Secretary of Labor.
(6) Tobacco product importer.--The term ``tobacco product
importer'' has the meaning given the term ``importer'' in
section 5702 of the Internal Revenue Code of 1986.
(7) Tobacco product manufacturer.--
(A) In general.--The term ``tobacco product manufacturer''
has the meaning given the term ``manufacturer of tobacco
products'' in section 5702 of the Internal Revenue Code of
1986.
(B) Exclusion.--The term ``tobacco product manufacturer''
does not include a person that manufactures cigars or pipe
tobacco.
(8) Tobacco warehouse owner.--The term ``tobacco warehouse
owner'' means a warehouseman that participated in an auction
market (as defined in the first section of the Tobacco
Inspection Act (7 U.S.C. 511)) during the 1998 marketing
year.
(9) Flue-cured tobacco.--The term ``flue-cured tobacco''
includes type 21 and type 37 tobacco.

Subtitle A--Tobacco Community Revitalization

SEC. 1011. AUTHORIZATION OF APPROPRIATIONS.

There are appropriated and transferred to the Secretary for
each fiscal year such amounts from the National Tobacco Trust
Fund established by section 401, other than from amounts in
the State Litigation Settlement Account, as may be necessary
to carry out the provisions of this title.

SEC. 1012. EXPENDITURES.

The Secretary is authorized, subject to appropriations, to
make payments under--
(1) section 1021 for payments for lost tobacco quota for
each of fiscal years 1999 through 2023, but not to exceed
$1,650,000,000 for any fiscal year except to the extent the
payments are made in accordance with subsection (d)(12) or
(e)(9) of section 1021;
(2) section 1022 for industry payments for all costs of the
Department of Agriculture associated with the production of
tobacco;
(3) section 1023 for tobacco community economic development
grants, but not to exceed--
(A) $375,000,000 for each of fiscal years 1999 through
2008, less any amount required to be paid under section 1022
for the fiscal year; and
(B) $450,000,000 for each of fiscal year 2009 through 2023,
less any amount required to be paid under section 1022 during
the fiscal year;
(4) section 1031 for assistance provided under the tobacco
worker transition program, but not to exceed $25,000,000 for
any fiscal year; and
(5) subpart 9 of part A of title IV of the Higher Education
Act of 1965 for farmer opportunity grants, but not to
exceed--
(A) $42,500,000 for each of the academic years 1999-2000
through 2003-2004;
(B) $50,000,000 for each of the academic years 2004-2005
through 2008-2009;
(C) $57,500,000 for each of the academic years 2009-2010
through 2013-2014;
(D) $65,000,000 for each of the academic years 2014-2015
through 2018-2019; and
(E) $72,500,000 for each of the academic years 2019-2020
through 2023-2024.

SEC. 1013. BUDGETARY TREATMENT.

This subtitle constitutes budget authority in advance of
appropriations Acts and represents the obligation of the
Federal Government to provide payments to States and eligible
persons in accordance with this title.

Subtitle B--Tobacco Market Transition Assistance

SEC. 1021. PAYMENTS FOR LOST TOBACCO QUOTA.

(a) In General.--Beginning with the 1999 marketing year,
the Secretary shall make payments for lost tobacco quota to
eligible quota holders, quota lessees, and quota tenants as
reimbursement for lost tobacco quota.
(b) Eligibility.--To be eligible to receive payments under
this section, a quota holder, quota lessee, or quota tenant
shall--
(1) prepare and submit to the Secretary an application at
such time, in such manner, and containing such information as
the Secretary may require, including information sufficient
to make the demonstration required under paragraph (2); and
(2) demonstrate to the satisfaction of the Secretary that,
with respect to the 1997 marketing year--
(A) the producer was a quota holder and realized income (or
would have realized income, as determined by the Secretary,
but for a medical hardship or crop disaster during the 1997
marketing year) from the production of tobacco through--
(i) the active production of tobacco;
(ii) the lease and transfer of tobacco quota to another
farm;
(iii) the rental of all or part of the farm of the quota
holder, including the right to produce tobacco, to another
tobacco producer; or
(iv) the hiring of a quota tenant to produce tobacco;
(B) the producer was a quota lessee; or
(C) the producer was a quota tenant.
(c) Base Quota Level.--
(1) In general.--The Secretary shall determine, for each
quota holder, quota lessee, and quota tenant, the base quota
level for the 1995 through 1997 marketing years.
(2) Quota holders.--The base quota level for a quota holder
shall be equal to the average tobacco farm marketing quota
established for the farm owned by the quota holder for the
1995 through 1997 marketing years.
(3) Quota lessees.--The base quota level for a quota lessee
shall be equal to--
(A) 50 percent of the average number of pounds of tobacco
quota established for the farm for the 1995 through 1997
marketing years--
(i) that was leased and transferred to a farm owned by the
quota lessee; or
(ii) that was rented to the quota lessee for the right to
produce the tobacco; less
(B) 25 percent of the average number of pounds of tobacco
quota described in subparagraph (A) for which a quota tenant
was the principal producer of the tobacco quota.
(4) Quota tenants.--The base quota level for a quota tenant
shall be equal to the sum of--
(A) 50 percent of the average number of pounds of tobacco
quota established for a farm for the 1995 through 1997
marketing years--
(i) that was owned by a quota holder; and
(ii) for which the quota tenant was the principal producer
of the tobacco on the farm; and
(B) 25 percent of the average number of pounds of tobacco
quota for the 1995 through 1997 marketing years--
(i)(I) that was leased and transferred to a farm owned by
the quota lessee; or
(II) for which the rights to produce the tobacco were
rented to the quota lessee; and
(ii) for which the quota tenant was the principal producer
of the tobacco on the farm.
(5) Marketing quotas other than poundage quotas.--

[[Page S5063]]

(A) In general.--For each type of tobacco for which there
is a marketing quota or allotment (on an acreage basis), the
base quota level for each quota holder, quota lessee, or
quota tenant shall be determined in accordance with this
subsection (based on a poundage conversion) by multiplying--
(i) the average tobacco farm marketing quota or allotment
for the 1995 through 1997 marketing years; and
(ii) the average yield per acre for the farm for the type
of tobacco for the marketing years.
(B) Yields not available.--If the average yield per acre is
not available for a farm, the Secretary shall calculate the
base quota for the quota holder, quota lessee, or quota
tenant (based on a poundage conversion) by determining the
amount equal to the product obtained by multiplying--
(i) the average tobacco farm marketing quota or allotment
for the 1995 through 1997 marketing years; and
(ii) the average county yield per acre for the county in
which the farm is located for the type of tobacco for the
marketing years.
(d) Payments for Lost Tobacco Quota for Types of Tobacco
Other Than Flue-Cured Tobacco.--
(1) Allocation of funds.--Of the amounts made available
under section 1011(d)(1) for payments for lost tobacco quota,
the Secretary shall make available for payments under this
subsection an amount that bears the same ratio to the amounts
made available as--
(A) the sum of all national marketing quotas for all types
of tobacco other than flue-cured tobacco during the 1995
through 1997 marketing years; bears to
(B) the sum of all national marketing quotas for all types
of tobacco during the 1995 through 1997 marketing years.
(2) Option to relinquish quota.--
(A) In general.--Each quota holder, for types of tobacco
other than flue-cured tobacco, shall be given the option to
relinquish the farm marketing quota or farm acreage allotment
of the quota holder in exchange for a payment made under
paragraph (3).
(B) Notification.--A quota holder shall give notification
of the intention of the quota holder to exercise the option
at such time and in such manner as the Secretary may require,
but not later than January 15, 1999.
(3) Payments for lost tobacco quota to quota holders
exercising options to relinquish quota.--
(A) In general.--Subject to subparagraph (E), for each of
fiscal years 1999 through 2008, the Secretary shall make
annual payments for lost tobacco quota to each quota holder
that has relinquished the farm marketing quota or farm
acreage allotment of the quota holder under paragraph (2).
(B) Amount.--The amount of a payment made to a quota holder
described in subparagraph (A) for a marketing year shall
equal \1/10\ of the lifetime limitation established under
subparagraph (E).
(C) Timing.--The Secretary shall begin making annual
payments under this paragraph for the marketing year in which
the farm marketing quota or farm acreage allotment is
relinquished.
(D) Additional payments.--The Secretary may increase annual
payments under this paragraph in accordance with paragraph
(7)(E) to the extent that funding is available.
(E) Lifetime limitation on payments.--The total amount of
payments made under this paragraph to a quota holder shall
not exceed the product obtained by multiplying the base quota
level for the quota holder by $8 per pound.
(4) Reissuance of quota.--
(A) Reallocation to lessee or tenant.--If a quota holder
exercises an option to relinquish a tobacco farm marketing
quota or farm acreage allotment under paragraph (2), a quota
lessee or quota tenant that was the primary producer during
the 1997 marketing year of tobacco pursuant to the farm
marketing quota or farm acreage allotment, as determined by
the Secretary, shall be given the option of having an
allotment of the farm marketing quota or farm acreage
allotment reallocated to a farm owned by the quota lessee or
quota tenant.
(B) Conditions for reallocation.--
(i) Timing.--A quota lessee or quota tenant that is given
the option of having an allotment of a farm marketing quota
or farm acreage allotment reallocated to a farm owned by the
quota lessee or quota tenant under subparagraph (A) shall
have 1 year from the date on which a farm marketing quota or
farm acreage allotment is relinquished under paragraph (2) to
exercise the option.
(ii) Limitation on acreage allotment.--In the case of a
farm acreage allotment, the acreage allotment determined for
any farm subsequent to any reallocation under subparagraph
(A) shall not exceed 50 percent of the acreage of cropland of
the farm owned by the quota lessee or quota tenant.
(iii) Limitation on marketing quota.--In the case of a farm
marketing quota, the marketing quota determined for any farm
subsequent to any reallocation under subparagraph (A) shall
not exceed an amount determined by multiplying--

(I) the average county farm yield, as determined by the
Secretary; and
(II) 50 percent of the acreage of cropland of the farm
owned by the quota lessee or quota tenant.

(C) Eligibility of lessee or tenant for payments.--If a
farm marketing quota or farm acreage allotment is reallocated
to a quota lessee or quota tenant under subparagraph (A)--
(i) the quota lessee or quota tenant shall not be eligible
for any additional payments under paragraph (5) or (6) as a
result of the reallocation; and
(ii) the base quota level for the quota lessee or quota
tenant shall not be increased as a result of the
reallocation.
(D) Reallocation to quota holders within same county or
state.--
(i) In general.--Except as provided in clause (ii), if
there was no quota lessee or quota tenant for the farm
marketing quota or farm acreage allotment for a type of
tobacco, or if no quota lessee or quota tenant exercises an
option of having an allotment of the farm marketing quota or
farm acreage allotment for a type of tobacco reallocated, the
Secretary shall reapportion the farm marketing quota or farm
acreage allotment among the remaining quota holders for the
type of tobacco within the same county.
(ii) Cross-county leasing.--In a State in which cross-
county leasing is authorized pursuant to section 319(l) of
the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314e(l)),
the Secretary shall reapportion the farm marketing quota
among the remaining quota holders for the type of tobacco
within the same State.
(iii) Eligibility of quota holder for payments.--If a farm
marketing quota is reapportioned to a quota holder under this
subparagraph--

(I) the quota holder shall not be eligible for any
additional payments under paragraph (5) or (6) as a result of
the reapportionment; and
(II) the base quota level for the quota holder shall not be
increased as a result of the reapportionment.

(E) Special rule for tenant of leased tobacco.--If a quota
holder exercises an option to relinquish a tobacco farm
marketing quota or farm acreage allotment under paragraph
(2), the farm marketing quota or farm acreage allotment shall
be divided evenly between, and the option of reallocating the
farm marketing quota or farm acreage allotment shall be
offered in equal portions to, the quota lessee and to the
quota tenant, if--
(i) during the 1997 marketing year, the farm marketing
quota or farm acreage allotment was leased and transferred to
a farm owned by the quota lessee; and
(ii) the quota tenant was the primary producer, as
determined by the Secretary, of tobacco pursuant to the farm
marketing quota or farm acreage allotment.
(5) Payments for lost tobacco quota to quota holders.--
(A) In general.--Except as otherwise provided in this
subsection, during any marketing year in which the national
marketing quota for a type of tobacco is less than the
average national marketing quota for the 1995 through 1997
marketing years, the Secretary shall make payments for lost
tobacco quota to each quota holder, for types of tobacco
other than flue-cured tobacco, that is eligible under
subsection (b), and has not exercised an option to relinquish
a tobacco farm marketing quota or farm acreage allotment
under paragraph (2), in an amount that is equal to the
product obtained by multiplying--
(i) the number of pounds by which the basic farm marketing
quota (or poundage conversion) is less than the base quota
level for the quota holder; and
(ii) $4 per pound.
(B) Poundage conversion for marketing quotas other than
poundage quotas.--
(i) In general.--For each type of tobacco for which there
is a marketing quota or allotment (on an acreage basis), the
poundage conversion for each quota holder during a marketing
year shall be determined by multiplying--

(I) the basic farm acreage allotment for the farm for the
marketing year; and
(II) the average yield per acre for the farm for the type
of tobacco.

(ii) Yield not available.--If the average yield per acre is
not available for a farm, the Secretary shall calculate the
poundage conversion for each quota holder during a marketing
year by multiplying--

(I) the basic farm acreage allotment for the farm for the
marketing year; and
(II) the average county yield per acre for the county in
which the farm is located for the type of tobacco.

(6) Payments for lost tobacco quota to quota lessees and
quota tenants.--Except as otherwise provided in this
subsection, during any marketing year in which the national
marketing quota for a type of tobacco is less than the
average national marketing quota for the type of tobacco for
the 1995 through 1997 marketing years, the Secretary shall
make payments for lost tobacco quota to each quota lessee and
quota tenant, for types of tobacco other than flue-cured
tobacco, that is eligible under subsection (b) in an amount
that is equal to the product obtained by multiplying--
(A) the percentage by which the national marketing quota
for the type of tobacco is less than the average national
marketing quota for the type of tobacco for the 1995 through
1997 marketing years;
(B) the base quota level for the quota lessee or quota
tenant; and
(C) $4 per pound.
(7) Lifetime limitation on payments.--Except as otherwise
provided in this subsection, the total amount of payments
made under this subsection to a quota holder, quota lessee,
or quota tenant during the lifetime of the quota holder,
quota lessee, or

[[Page S5064]]

quota tenant shall not exceed the product obtained by
multiplying--
(A) the base quota level for the quota holder, quota
lessee, or quota tenant; and
(B) $8 per pound.
(8) Limitations on aggregate annual payments.--
(A) In general.--Except as otherwise provided in this
paragraph, the total amount payable under this subsection for
any marketing year shall not exceed the amount made available
under paragraph (1).
(B) Accelerated payments.--Paragraph (1) shall not apply if
accelerated payments for lost tobacco quota are made in
accordance with paragraph (12).
(C) Reductions.--If the sum of the amounts determined under
paragraphs (3), (5), and (6) for a marketing year exceeds the
amount made available under paragraph (1), the Secretary
shall make a pro rata reduction in the amounts payable under
paragraphs (5) and (6) to quota holders, quota lessees, and
quota tenants under this subsection to ensure that the total
amount of payments for lost tobacco quota does not exceed the
amount made available under paragraph (1).
(D) Rollover of payments for lost tobacco quota.--Subject
to subparagraph (A), if the Secretary makes a reduction in
accordance with subparagraph (C), the amount of the reduction
shall be applied to the next marketing year and added to the
payments for lost tobacco quota for the marketing year.
(E) Additional payments to quota holders exercising option
to relinquish quota.--If the amount made available under
paragraph (1) exceeds the sum of the amounts determined under
paragraphs (3), (5), and (6) for a marketing year, the
Secretary shall distribute the amount of the excess pro rata
to quota holders that have exercised an option to relinquish
a tobacco farm marketing quota or farm acreage allotment
under paragraph (2) by increasing the amount payable to each
such holder under paragraph (3).
(9) Subsequent sale and transfer of quota.--Effective
beginning with the 1999 marketing year, on the sale and
transfer of a farm marketing quota or farm acreage allotment
under section 316(g) or 319(g) of the Agricultural Adjustment
Act of 1938 (7 U.S.C. 1314b(g), 1314e(g))--
(A) the person that sold and transferred the quota or
allotment shall have--
(i) the base quota level attributable to the person reduced
by the base quota level attributable to the quota that is
sold and transferred; and
(ii) the lifetime limitation on payments established under
paragraph (7) attributable to the person reduced by the
product obtained by multiplying--

(I) the base quota level attributable to the quota; and
(II) $8 per pound; and

(B) if the quota or allotment has never been relinquished
by a previous quota holder under paragraph (2), the person
that acquired the quota shall have--
(i) the base quota level attributable to the person
increased by the base quota level attributable to the quota
that is sold and transferred; and
(ii) the lifetime limitation on payments established under
paragraph (7) attributable to the person--

(I) increased by the product obtained by multiplying--

(aa) the base quota level attributable to the quota; and
(bb) $8 per pound; but

(II) decreased by any payments under paragraph (5) for lost
tobacco quota previously made that are attributable to the
quota that is sold and transferred.

(10) Sale or transfer of farm.--On the sale or transfer of
ownership of a farm that is owned by a quota holder, the base
quota level established under subsection (c), the right to
payments under paragraph (5), and the lifetime limitation on
payments established under paragraph (7) shall transfer to
the new owner of the farm to the same extent and in the same
manner as those provisions applied to the previous quota
holder.
(11) Death of quota lessee or quota tenant.--If a quota
lessee or quota tenant that is entitled to payments under
this subsection dies and is survived by a spouse or 1 or more
dependents, the right to receive the payments shall transfer
to the surviving spouse or, if there is no surviving spouse,
to the surviving dependents in equal shares.
(12) Acceleration of payments.--
(A) In general.--On the occurrence of any of the events
described in subparagraph (B), the Secretary shall make an
accelerated lump sum payment for lost tobacco quota as
established under paragraphs (5) and (6) to each quota
holder, quota lessee, and quota tenant for any affected type
of tobacco in accordance with subparagraph (C).
(B) Triggering events.--The Secretary shall make
accelerated payments under subparagraph (A) if after the date
of enactment of this Act--
(i) subject to subparagraph (D), for 3 consecutive
marketing years, the national marketing quota or national
acreage allotment for a type of tobacco is less than 50
percent of the national marketing quota or national acreage
allotment for the type of tobacco for the 1998 marketing
year; or
(ii) Congress repeals or makes ineffective, directly or
indirectly, any provision of--

(I) section 316 of the Agricultural Adjustment Act of 1938
(7 U.S.C. 1314b);
(II) section 319 of the Agricultural Adjustment Act of 1938
(7 U.S.C. 1314e);
(III) section 106 of the Agricultural Act of 1949 (7 U.S.C.
1445);
(IV) section 106A of the Agricultural Act of 1949 (7 U.S.C.
1445-1); or
(V) section 106B of the Agricultural Act of 1949 (7 U.S.C.
1445-2).

(C) Amount.--The amount of the accelerated payments made to
each quota holder, quota lessee, and quota tenant under this
subsection shall be equal to--
(i) the amount of the lifetime limitation established for
the quota holder, quota lessee, or quota tenant under
paragraph (7); less
(ii) any payments for lost tobacco quota received by the
quota holder, quota lessee, or quota tenant before the
occurrence of any of the events described in subparagraph
(B).
(D) Referendum vote not a triggering event.--A referendum
vote of producers for any type of tobacco that results in the
national marketing quota or national acreage allotment not
being in effect for the type of tobacco shall not be
considered a triggering event under this paragraph.
(13) Ban on subsequent sale or leasing of farm marketing
quota or farm acreage allotment to quota holders exercising
option to relinquish quota.--No quota holder that exercises
the option to relinquish a farm marketing quota or farm
acreage allotment for any type of tobacco under paragraph (2)
shall be eligible to acquire a farm marketing quota or farm
acreage allotment for the type of tobacco, or to obtain the
lease or transfer of a farm marketing quota or farm acreage
allotment for the type of tobacco, for a period of 25 crop
years after the date on which the quota or allotment was
relinquished.
(e) Payments for Lost Tobacco Quota for Flue-Cured
Tobacco.--
(1) Allocation of funds.--Of the amounts made available
under section 1011(d)(1) for payments for lost tobacco quota,
the Secretary shall make available for payments under this
subsection an amount that bears the same ratio to the amounts
made available as--
(A) the sum of all national marketing quotas for flue-cured
tobacco during the 1995 through 1997 marketing years; bears
to
(B) the sum of all national marketing quotas for all types
of tobacco during the 1995 through 1997 marketing years.
(2) Relinquishment of quota.--
(A) In general.--Each quota holder of flue-cured tobacco
shall relinquish the farm marketing quota or farm acreage
allotment in exchange for a payment made under paragraph (3)
due to the transition from farm marketing quotas as provided
under section 317 of the Agricultural Adjustment Act of 1938
for flue-cured tobacco to individual tobacco production
permits as provided under section 317A of the Agricultural
Adjustment Act of 1938 for flue-cured tobacco.
(B) Notification.--The Secretary shall notify the quota
holders of the relinquishment of their quota or allotment at
such time and in such manner as the Secretary may require,
but not later than November 15, 1998.
(3) Payments for lost flue-cured tobacco quota to quota
holders that relinquish quota.--
(A) In general.--For each of fiscal years 1999 through
2008, the Secretary shall make annual payments for lost flue-
cured tobacco to each quota holder that has relinquished the
farm marketing quota or farm acreage allotment of the quota
holder under paragraph (2).
(B) Amount.--The amount of a payment made to a quota holder
described in subparagraph (A) for a marketing year shall
equal \1/10\ of the lifetime limitation established under
paragraph (6).
(C) Timing.--The Secretary shall begin making annual
payments under this paragraph for the marketing year in which
the farm marketing quota or farm acreage allotment is
relinquished.
(D) Additional payments.--The Secretary may increase annual
payments under this paragraph in accordance with paragraph
(7)(E) to the extent that funding is available.
(4) Payments for lost flue-cured tobacco quota to quota
lessees and quota tenants that have not relinquished
permits.--
(A) In general.--Except as otherwise provided in this
subsection, during any marketing year in which the national
marketing quota for flue-cured tobacco is less than the
average national marketing quota for the 1995 through 1997
marketing years, the Secretary shall make payments for lost
tobacco quota to each quota lessee or quota tenant that--
(i) is eligible under subsection (b);
(ii) has been issued an individual tobacco production
permit under section 317A(b) of the Agricultural Adjustment
Act of 1938; and
(iii) has not exercised an option to relinquish the permit.
(B) Amount.--The amount of a payment made to a quota lessee
or quota tenant described in subparagraph (A) for a marketing
year shall be equal to the product obtained by multiplying--
(i) the number of pounds by which the individual marketing
limitation established for the permit is less than twice the
base quota level for the quota lessee or quota tenant; and
(ii) $2 per pound.
(5) Payments for lost flue-cured tobacco quota to quota
lessees and quota tenants that have relinquished permits.--

[[Page S5065]]

(A) In general.--For each of fiscal years 1999 through
2008, the Secretary shall make annual payments for lost flue-
cured tobacco quota to each quota lessee and quota tenant
that has relinquished an individual tobacco production permit
under section 317A(b)(5) of the Agricultural Adjustment Act
of 1938.
(B) Amount.--The amount of a payment made to a quota lessee
or quota tenant described in subparagraph (A) for a marketing
year shall be equal to \1/10\ of the lifetime limitation
established under paragraph (6).
(C) Timing.--The Secretary shall begin making annual
payments under this paragraph for the marketing year in which
the individual tobacco production permit is relinquished.
(D) Additional payments.--The Secretary may increase annual
payments under this paragraph in accordance with paragraph
(7)(E) to the extent that funding is available.
(E) Prohibition against permit expansion.--A quota lessee
or quota tenant that receives a payment under this paragraph
shall be ineligible to receive any new or increased tobacco
production permit from the county production pool established
under section 317A(b)(8) of the Agricultural Adjustment Act
of 1938.
(6) Lifetime limitation on payments.--Except as otherwise
provided in this subsection, the total amount of payments
made under this subsection to a quota holder, quota lessee,
or quota tenant during the lifetime of the quota holder,
quota lessee, or quota tenant shall not exceed the product
obtained by multiplying--
(A) the base quota level for the quota holder, quota
lessee, or quota tenant; and
(B) $8 per pound.
(7) Limitations on aggregate annual payments.--
(A) In general.--Except as otherwise provided in this
paragraph, the total amount payable under this subsection for
any marketing year shall not exceed the amount made available
under paragraph (1).
(B) Accelerated payments.--Paragraph (1) shall not apply if
accelerated payments for lost flue-cured tobacco quota are
made in accordance with paragraph (9).
(C) Reductions.--If the sum of the amounts determined under
paragraphs (3), (4), and (5) for a marketing year exceeds the
amount made available under paragraph (1), the Secretary
shall make a pro rata reduction in the amounts payable under
paragraph (4) to quota lessees and quota tenants under this
subsection to ensure that the total amount of payments for
lost flue-cured tobacco quota does not exceed the amount made
available under paragraph (1).
(D) Rollover of payments for lost flue-cured tobacco
quota.--Subject to subparagraph (A), if the Secretary makes a
reduction in accordance with subparagraph (C), the amount of
the reduction shall be applied to the next marketing year and
added to the payments for lost flue-cured tobacco quota for
the marketing year.
(E) Additional payments to quota holders exercising option
to relinquish quotas or permits, or to quota lessees or quota
tenants relinquishing permits.--If the amount made available
under paragraph (1) exceeds the sum of the amounts determined
under paragraphs (3), (4), and (5) for a marketing year, the
Secretary shall distribute the amount of the excess pro rata
to quota holders by increasing the amount payable to each
such holder under paragraphs (3) and (5).
(8) Death of quota holder, quota lessee, or quota tenant.--
If a quota holder, quota lessee or quota tenant that is
entitled to payments under paragraph (4) or (5) dies and is
survived by a spouse or 1 or more descendants, the right to
receive the payments shall transfer to the surviving spouse
or, if there is no surviving spouse, to the surviving
descendants in equal shares.
(9) Acceleration of payments.--
(A) In general.--On the occurrence of any of the events
described in subparagraph (B), the Secretary shall make an
accelerated lump sum payment for lost flue-cured tobacco
quota as established under paragraphs (3), (4), and (5) to
each quota holder, quota lessee, and quota tenant for flue-
cured tobacco in accordance with subparagraph (C).
(B) Triggering events.--The Secretary shall make
accelerated payments under subparagraph (A) if after the date
of enactment of this Act--
(i) subject to subparagraph (D), for 3 consecutive
marketing years, the national marketing quota or national
acreage allotment for flue-cured tobacco is less than 50
percent of the national marketing quota or national acreage
allotment for flue-cured tobacco for the 1998 marketing year;
or
(ii) Congress repeals or makes ineffective, directly or
indirectly, any provision of--

(I) section 316 of the Agricultural Adjustment Act of 1938
(7 U.S.C. 1314b);
(II) section 319 of the Agricultural Adjustment Act of 1938
(7 U.S.C. 1314e);
(III) section 106 of the Agricultural Act of 1949 (7 U.S.C.
1445);
(IV) section 106A of the Agricultural Act of 1949 (7 U.S.C.
1445-1);
(V) section 106B of the Agricultural Act of 1949 (7 U.S.C.
1445-2); or
(VI) section 317A of the Agricultural Adjustment Act of
1938.

SEC. 1022. INDUSTRY PAYMENTS FOR ALL DEPARTMENT COSTS
ASSOCIATED WITH TOBACCO PRODUCTION.

(a) In General.--The Secretary shall use such amounts
remaining unspent and obligated at the end of each fiscal
year to reimburse the Secretary for--
(1) costs associated with the administration of programs
established under this title and amendments made by this
title;
(2) costs associated with the administration of the tobacco
quota and price support programs administered by the
Secretary;
(3) costs to the Federal Government of carrying out crop
insurance programs for tobacco;
(4) costs associated with all agricultural research,
extension, or education activities associated with tobacco;
(5) costs associated with the administration of loan
association and cooperative programs for tobacco producers,
as approved by the Secretary; and
(6) any other costs incurred by the Department of
Agriculture associated with the production of tobacco.
(b) Limitations.--Amounts made available under subsection
(a) may not be used--
(1) to provide direct benefits to quota holders, quota
lessees, or quota tenants; or
(2) in a manner that results in a decrease, or an increase
relative to other crops, in the amount of the crop insurance
premiums assessed to participating tobacco producers under
the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.).
(c) Determinations.--Not later than September 30, 1998, and
each fiscal year thereafter, the Secretary shall determine--
(1) the amount of costs described in subsection (a); and
(2) the amount that will be provided under this section as
reimbursement for the costs.

SEC. 1023. TOBACCO COMMUNITY ECONOMIC DEVELOPMENT GRANTS.

(a) Authority.--The Secretary shall make grants to tobacco-
growing States in accordance with this section to enable the
States to carry out economic development initiatives in
tobacco-growing communities.
(b) Application.--To be eligible to receive payments under
this section, a State shall prepare and submit to the
Secretary an application at such time, in such manner, and
containing such information as the Secretary may require,
including--
(1) a description of the activities that the State will
carry out using amounts received under the grant;
(2) a designation of an appropriate State agency to
administer amounts received under the grant; and
(3) a description of the steps to be taken to ensure that
the funds are distributed in accordance with subsection (e).
(c) Amount of Grant.--
(1) In general.--From the amounts available to carry out
this section for a fiscal year, the Secretary shall allot to
each State an amount that bears the same ratio to the amounts
available as the total farm income of the State derived from
the production of tobacco during the 1995 through 1997
marketing years (as determined under paragraph (2)) bears to
the total farm income of all States derived from the
production of tobacco during the 1995 through 1997 marketing
years.
(2) Tobacco income.--For the 1995 through 1997 marketing
years, the Secretary shall determine the amount of farm
income derived from the production of tobacco in each State
and in all States.
(d) Payments.--
(1) In general.--A State that has an application approved
by the Secretary under subsection (b) shall be entitled to a
payment under this section in an amount that is equal to its
allotment under subsection (c).
(2) Form of payments.--The Secretary may make payments
under this section to a State in installments, and in advance
or by way of reimbursement, with necessary adjustments on
account of overpayments or underpayments, as the Secretary
may determine.
(3) Reallotments.--Any portion of the allotment of a State
under subsection (c) that the Secretary determines will not
be used to carry out this section in accordance with an
approved State application required under subsection (b),
shall be reallotted by the Secretary to other States in
proportion to the original allotments to the other States.
(e) Use and Distribution of Funds.--
(1) In general.--Amounts received by a State under this
section shall be used to carry out economic development
activities, including--
(A) rural business enterprise activities described in
subsections (c) and (e) of section 310B of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1932);
(B) down payment loan assistance programs that are similar
to the program described in section 310E of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1935);
(C) activities designed to help create productive farm or
off-farm employment in

[[Page S5066]]

rural areas to provide a more viable economic base and
enhance opportunities for improved incomes, living standards,
and contributions by rural individuals to the economic and
social development of tobacco communities;
(D) activities that expand existing infrastructure,
facilities, and services to capitalize on opportunities to
diversify economies in tobacco communities and that support
the development of new industries or commercial ventures;
(E) activities by agricultural organizations that provide
assistance directly to participating tobacco producers to
assist in developing other agricultural activities that
supplement tobacco-producing activities;
(F) initiatives designed to create or expand locally owned
value-added processing and marketing operations in tobacco
communities;
(G) technical assistance activities by persons to support
farmer-owned enterprises, or agriculture-based rural
development enterprises, of the type described in section 252
or 253 of the Trade Act of 1974 (19 U.S.C. 2342, 2343); and
(H) initiatives designed to partially compensate tobacco
warehouse owners for lost revenues and assist the tobacco
warehouse owners in establishing successful business
enterprises.
(2) Tobacco-growing counties.--Assistance may be provided
by a State under this section only to assist a county in the
State that has been determined by the Secretary to have in
excess of $100,000 in income derived from the production of
tobacco during 1 or more of the 1995 through 1997 marketing
years. For purposes of this section, the term ``tobacco-
growing county'' includes a political subdivision surrounded
within a State by a county that has been determined by the
Secretary to have in excess of $100,000 in income derived
from the production of tobacco during 1 or more of the 1995
through 1997 marketing years.
(3) Distribution.--
(A) Economic development activities.--Not less than 20
percent of the amounts received by a State under this section
shall be used to carry out--
(i) economic development activities described in
subparagraph (E) or (F) of paragraph (1); or
(ii) agriculture-based rural development activities
described in paragraph (1)(G).
(B) Technical assistance activities.--Not less than 4
percent of the amounts received by a State under this section
shall be used to carry out technical assistance activities
described in paragraph (1)(G).
(C) Tobacco warehouse owner initiatives.--Not less than 6
percent of the amounts received by a State under this section
during each of fiscal years 1999 through 2008 shall be used
to carry out initiatives described in paragraph (1)(H).
(D) Tobacco-growing counties.--To be eligible to receive
payments under this section, a State shall demonstrate to the
Secretary that funding will be provided, during each 5-year
period for which funding is provided under this section, for
activities in each county in the State that has been
determined under paragraph (2) to have in excess of $100,000
in income derived from the production of tobacco, in amounts
that are at least equal to the product obtained by
multiplying--
(i) the ratio that the tobacco production income in the
county determined under paragraph (2) bears to the total
tobacco production income for the State determined under
subsection (c); and
(ii) 50 percent of the total amounts received by a State
under this section during the 5-year period.
(f) Preferences in Hiring.--A State may require recipients
of funds under this section to provide a preference in
employment to--
(1) an individual who--
(A) during the 1998 calendar year, was employed in the
manufacture, processing, or warehousing of tobacco or tobacco
products, or resided, in a county described in subsection
(e)(2); and
(B) is eligible for assistance under the tobacco worker
transition program established under section 1031; or
(2) an individual who--
(A) during the 1998 marketing year, carried out tobacco
quota or relevant tobacco production activities in a county
described in subsection (e)(2);
(B) is eligible for a farmer opportunity grant under
subpart 9 of part A of title IV of the Higher Education Act
of 1965; and
(C) has successfully completed a course of study at an
institution of higher education.
(g) Maintenance of Effort.--
(1) In general.--Subject to paragraph (2), a State shall
provide an assurance to the Secretary that the amount of
funds expended by the State and all counties in the State
described in subsection (e)(2) for any activities funded
under this section for a fiscal year is not less than 90
percent of the amount of funds expended by the State and
counties for the activities for the preceding fiscal year.
(2) Reduction of grant amount.--If a State does not provide
an assurance described in paragraph (1), the Secretary shall
reduce the amount of the grant determined under subsection
(c) by an amount equal to the amount by which the amount of
funds expended by the State and counties for the activities
is less than 90 percent of the amount of funds expended by
the State and counties for the activities for the preceding
fiscal year, as determined by the Secretary.
(3) Federal funds.--For purposes of this subsection, the
amount of funds expended by a State or county shall not
include any amounts made available by the Federal Government.

SEC. 1024. FLUE-CURED TOBACCO PRODUCTION PERMITS.

The Agricultural Adjustment Act of 1938 is amended by
inserting after section 317 (7 U.S.C. 1314c) the following:

``SEC. 317A. FLUE-CURED TOBACCO PRODUCTION PERMITS.

``(a) Definitions.--In this section:
``(1) Individual acreage limitation.--The term `individual
acreage limitation' means the number of acres of flue-cured
tobacco that may be planted by the holder of a permit during
a marketing year, calculated--
``(A) prior to--
``(i) any increase or decrease in the number due to
undermarketings or overmarketings; and
``(ii) any reduction under subsection (i); and
``(B) in a manner that ensures that--
``(i) the total of all individual acreage limitations is
equal to the national acreage allotment, less the reserve
provided under subsection (h); and
``(ii) the individual acreage limitation for a marketing
year bears the same ratio to the individual acreage
limitation for the previous marketing year as the ratio that
the national acreage allotment for the marketing year bears
to the national acreage allotment for the previous marketing
year, subject to adjustments by the Secretary to account for
any reserve provided under subsection (h).
``(2) Individual marketing limitation.--The term
`individual marketing limitation' means the number of pounds
of flue-cured tobacco that may be marketed by the holder of a
permit during a marketing year, calculated--
``(A) prior to--
``(i) any increase or decrease in the number due to
undermarketings or overmarketings; and
``(ii) any reduction under subsection (i); and
``(B) in a manner that ensures that--
``(i) the total of all individual marketing limitations is
equal to the national marketing quota, less the reserve
provided under subsection (h); and
``(ii) the individual marketing limitation for a marketing
year is obtained by multiplying the individual acreage
limitation by the permit yield, prior to any adjustment for
undermarketings or overmarketings.
``(3) Individual tobacco production permit.--The term
`individual tobacco production permit' means a permit issued
by the Secretary to a person authorizing the production of
flue-cured tobacco for any marketing year during which this
section is effective.
``(4) National acreage allotment.--The term `national
acreage allotment' means the quantity determined by
dividing--
``(A) the national marketing quota; by
``(B) the national average yield goal.
``(5) National average yield goal.--The term `national
average yield goal' means the national average yield for
flue-cured tobacco during the 5 marketing years immediately
preceding the marketing year for which the determination is
being made.
``(6) National marketing quota.--For the 1999 and each
subsequent crop of flue-cured tobacco, the term `national
marketing quota' for a marketing year means the quantity of
flue-cured tobacco, as determined by the Secretary, that is
not more than 103 percent nor less than 97 percent of the
total of--
``(A) the aggregate of the quantities of flue-cured tobacco
that domestic manufacturers of cigarettes estimate that the
manufacturers intend to purchase on the United States auction
markets or from producers during the marketing year, as
compiled and determined under section 320A;
``(B) the average annual quantity of flue-cured tobacco
exported from the United States during the 3 marketing years
immediately preceding the marketing year for which the
determination is being made; and
``(C) the quantity, if any, of flue-cured tobacco that the
Secretary, in the discretion of the Secretary, determines is
necessary to increase or decrease the inventory of the
producer-owned cooperative marketing association that has
entered into a loan agreement with the Commodity Credit
Corporation to make price support available to producers of
flue-cured tobacco to establish or maintain the inventory at
the reserve stock level for flue-cured tobacco.
``(7) Permit yield.--The term `permit yield' means the
yield of tobacco per acre for an individual tobacco
production permit holder that is--
``(A) based on a preliminary permit yield that is equal to
the average yield during the 5 marketing years immediately
preceding the marketing year for which the determination is
made in the county where the holder of the permit is
authorized to plant flue-cured tobacco, as determined by the
Secretary, on the basis of actual yields of farms in the
county; and
``(B) adjusted by a weighted national yield factor
calculated by--
``(i) multiplying each preliminary permit yield by the
individual acreage limitation, prior to adjustments for
overmarketings, undermarketings, or reductions required under
subsection (i); and
``(ii) dividing the sum of the products under clause (i)
for all flue-cured individual tobacco production permit
holders by the national acreage allotment.

[[Page S5067]]

``(b) Initial Issuance of Permits.--
``(1) Termination of flue-cured marketing quotas.--On the
date of enactment of the National Tobacco Policy and Youth
Smoking Reduction Act, farm marketing quotas as provided
under section 317 shall no longer be in effect for flue-cured
tobacco.
``(2) Issuance of permits to quota holders that were
principal producers.--
``(A) In general.--By January 15, 1999, each individual
quota holder under section 317 that was a principal producer
of flue-cured tobacco during the 1998 marketing year, as
determined by the Secretary, shall be issued an individual
tobacco production permit under this section.
``(B) Notification.--The Secretary shall notify the holder
of each permit of the individual acreage limitation and the
individual marketing limitation applicable to the holder for
each marketing year.
``(C) Individual acreage limitation for 1999 marketing
year.--In establishing the individual acreage limitation for
the 1999 marketing year under this section, the farm acreage
allotment that was allotted to a farm owned by the quota
holder for the 1997 marketing year shall be considered the
individual acreage limitation for the previous marketing
year.
``(D) Individual marketing limitation for 1999 marketing
year.--In establishing the individual marketing limitation
for the 1999 marketing year under this section, the farm
marketing quota that was allotted to a farm owned by the
quota holder for the 1997 marketing year shall be considered
the individual marketing limitation for the previous
marketing year.
``(3) Quota holders that were not principal producers.--
``(A) In general.--Except as provided in subparagraph (B),
on approval through a referendum under subsection (c)--
``(i) each person that was a quota holder under section 317
but that was not a principal producer of flue-cured tobacco
during the 1997 marketing year, as determined by the
Secretary, shall not be eligible to own a permit; and
``(ii) the Secretary shall not issue any permit during the
25-year period beginning on the date of enactment of this Act
to any person that was a quota holder and was not the
principal producer of flue-cured tobacco during the 1997
marketing year.
``(B) Medical hardships and crop disasters.--Subparagraph
(A) shall not apply to a person that would have been the
principal producer of flue-cured tobacco during the 1997
marketing year but for a medical hardship or crop disaster
that occurred during the 1997 marketing year.
``(C) Administration.--The Secretary shall issue
regulations--
``(i) defining the term `person' for the purpose of this
paragraph; and
``(ii) prescribing such rules as the Secretary determines
are necessary to ensure a fair and reasonable application of
the prohibition established under this paragraph.
``(4) Issuance of permits to principal producers of flue-
cured tobacco.--
``(A) In general.--By January 15, 1999, each individual
quota lessee or quota tenant (as defined in section 1002 of
the LEAF Act) that was the principal producer of flue-cured
tobacco during the 1997 marketing year, as determined by the
Secretary, shall be issued an individual tobacco production
permit under this section.
``(B) Individual acreage limitations.--In establishing the
individual acreage limitation for the 1999 marketing year
under this section, the farm acreage allotment that was
allotted to a farm owned by a quota holder for whom the quota
lessee or quota tenant was the principal producer of flue-
cured tobacco during the 1997 marketing year shall be
considered the individual acreage limitation for the previous
marketing year.
``(C) Individual marketing limitations.--In establishing
the individual marketing limitation for the 1999 marketing
year under this section, the individual marketing limitation
for the previous year for an individual described in this
paragraph shall be calculated by multiplying--
``(i) the farm marketing quota that was allotted to a farm
owned by a quota holder for whom the quota lessee or quota
holder was the principal producer of flue-cured tobacco
during the 1997 marketing year, by
``(ii) the ratio that--

``(I) the sum of all flue-cured tobacco farm marketing
quotas for the 1997 marketing year prior to adjusting for
undermarketing and overmarketing; bears to
``(II) the sum of all flue-cured tobacco farm marketing
quotas for the 1998 marketing year, after adjusting for
undermarketing and overmarketing.

``(D) Special rule for tenant of leased flue-cured
tobacco.--If the farm marketing quota or farm acreage
allotment of a quota holder was produced pursuant to an
agreement under which a quota lessee rented land from a quota
holder and a quota tenant was the primary producer, as
determined by the Secretary, of flue-cured tobacco pursuant
to the farm marketing quota or farm acreage allotment, the
farm marketing quota or farm acreage allotment shall be
divided proportionately between the quota lessee and quota
tenant for purposes of issuing individual tobacco production
permits under this paragraph.
``(5) Option of quota lessee or quota tenant to relinquish
permit.--
``(A) In general.--Each quota lessee or quota tenant that
is issued an individual tobacco production permit under
paragraph (4) shall be given the option of relinquishing the
permit in exchange for payments made under section 1021(e)(5)
of the LEAF Act.
``(B) Notification.--A quota lessee or quota tenant that is
issued an individual tobacco production permit shall give
notification of the intention to exercise the option at such
time and in such manner as the Secretary may require, but not
later than 45 days after the permit is issued.
``(C) Reallocation of permit.--The Secretary shall add the
authority to produce flue-cured tobacco under the individual
tobacco production permit relinquished under this paragraph
to the county production pool established under paragraph (8)
for reallocation by the appropriate county committee.
``(6) Active producer requirement.--
``(A) Requirement for sharing risk.--No individual tobacco
production permit shall be issued to, or maintained by, a
person that does not fully share in the risk of producing a
crop of flue-cured tobacco.
``(B) Criteria for sharing risk.--For purposes of this
paragraph, a person shall be considered to have fully shared
in the risk of production of a crop if--
``(i) the investment of the person in the production of the
crop is not less than 100 percent of the costs of production
associated with the crop;
``(ii) the amount of the person's return on the investment
is dependent solely on the sale price of the crop; and
``(iii) the person may not receive any of the return before
the sale of the crop.
``(C) Persons not sharing risk.--
``(i) Forfeiture.--Any person that fails to fully share in
the risks of production under this paragraph shall forfeit an
individual tobacco production permit if, after notice and
opportunity for a hearing, the appropriate county committee
determines that the conditions for forfeiture exist.
``(ii) Reallocation.--The Secretary shall add the authority
to produce flue-cured tobacco under the individual tobacco
production permit forfeited under this subparagraph to the
county production pool established under paragraph (8) for
reallocation by the appropriate county committee.
``(D) Notice.--Notice of any determination made by a county
committee under subparagraph (C) shall be mailed, as soon as
practicable, to the person involved.
``(E) Review.--If the person is dissatisfied with the
determination, the person may request, not later than 15 days
after notice of the determination is received, a review of
the determination by a local review committee under the
procedures established under section 363 for farm marketing
quotas.
``(7) County of origin requirement.--For the 1999 and each
subsequent crop of flue-cured tobacco, all tobacco produced
pursuant to an individual tobacco production permit shall be
produced in the same county in which was produced the tobacco
produced during the 1997 marketing year pursuant to the farm
marketing quota or farm acreage allotment on which the
individual tobacco production permit is based.
``(8) County production pool.--
``(A) In general.--The authority to produce flue-cured
tobacco under an individual tobacco production permit that is
forfeited, relinquished, or surrendered within a county may
be reallocated by the appropriate county committee to tobacco
producers located in the same county that apply to the
committee to produce flue-cured tobacco under the authority.
``(B) Priority.--In reallocating individual tobacco
production permits under this paragraph, a county committee
shall provide a priority to--
``(i) an active tobacco producer that controls the
authority to produce a quantity of flue-cured tobacco under
an individual tobacco production permit that is equal to or
less than the average number of pounds of flue-cured tobacco
that was produced by the producer during each of the 1995
through 1997 marketing years, as determined by the Secretary;
and
``(ii) a new tobacco producer.
``(C) Criteria.--Individual tobacco production permits
shall be reallocated by the appropriate county committee
under this paragraph in a fair and equitable manner after
taking into consideration--
``(i) the experience of the producer;
``(ii) the availability of land, labor, and equipment for
the production of tobacco;
``(iii) crop rotation practices; and
``(iv) the soil and other physical factors affecting the
production of tobacco.
``(D) Medical hardships and crop disasters.--
Notwithstanding any other provision of this Act, the
Secretary may issue an individual tobacco production permit
under this paragraph to a producer that is otherwise
ineligible for the permit due to a medical hardship or crop
disaster that occurred during the 1997 marketing year.
``(c) Referendum.--
``(1) Announcement of quota and allotment.--Not later than
December 15, 1998, the Secretary pursuant to subsection (b)
shall determine and announce--
``(A) the quantity of the national marketing quota for
flue-cured tobacco for the 1999 marketing year; and
``(B) the national acreage allotment and national average
yield goal for the 1999 crop of flue-cured tobacco.
``(2) Special referendum.--Not later than 30 days after the
announcement of the quantity of the national marketing quota
in 2001, the Secretary shall conduct a special referendum of
the tobacco production permit holders that were the principal
producers of

[[Page S5068]]

flue-cured tobacco of the 1997 crop to determine whether the
producers approve or oppose the continuation of individual
tobacco production permits on an acreage-poundage basis as
provided in this section for the 2002 through 2004 marketing
years.
``(3) Approval of permits.--If the Secretary determines
that more than 66\2/3\ percent of the producers voting in the
special referendum approve the establishment of individual
tobacco production permits on an acreage-poundage basis--
``(A) individual tobacco production permits on an acreage-
poundage basis as provided in this section shall be in effect
for the 2002 through 2004 marketing years; and
``(B) marketing quotas on an acreage-poundage basis shall
cease to be in effect for the 2002 through 2004 marketing
years.
``(4) Disapproval of permits.--If individual tobacco
production permits on an acreage-poundage basis are not
approved by more than 66\2/3\ percent of the producers voting
in the referendum, no marketing quotas on an acreage-poundage
basis shall continue in effect that were proclaimed under
section 317 prior to the referendum.
``(5) Applicable marketing years.--If individual tobacco
production permits have been made effective for flue-cured
tobacco on an acreage-poundage basis pursuant to this
subsection, the Secretary shall, not later than December 15
of any future marketing year, announce a national marketing
quota for that type of tobacco for the next 3 succeeding
marketing years if the marketing year is the last year of 3
consecutive years for which individual tobacco production
permits previously proclaimed will be in effect.
``(d) Annual Announcement of National Marketing Quota.--The
Secretary shall determine and announce the national marketing
quota, national acreage allotment, and national average yield
goal for the second and third marketing years of any 3-year
period for which individual tobacco production permits are in
effect on or before the December 15 immediately preceding the
beginning of the marketing year to which the quota,
allotment, and goal apply.
``(e) Annual Announcement of Individual Tobacco Production
Permits.--If a national marketing quota, national acreage
allotment, and national average yield goal are determined and
announced, the Secretary shall provide for the determination
of individual tobacco production permits, individual acreage
limitations, and individual marketing limitations under this
section for the crop and marketing year covered by the
determinations.
``(f) Assignment of Tobacco Production Permits.--
``(1) Limitation to same county.--Each individual tobacco
production permit holder shall assign the individual acreage
limitation and individual marketing limitation to 1 or more
farms located within the county of origin of the individual
tobacco production permit.
``(2) Filing with county committee.--The assignment of an
individual acreage limitation and individual marketing
limitation shall not be effective until evidence of the
assignment, in such form as required by the Secretary, is
filed with and determined by the county committee for the
county in which the farm involved is located.
``(3) Limitation on tillable cropland.--The total acreage
assigned to any farm under this subsection shall not exceed
the acreage of cropland on the farm.
``(g) Prohibition on Sale or Leasing of Individual Tobacco
Production Permits.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the Secretary shall not permit the sale and transfer, or
lease and transfer, of an individual tobacco production
permit issued under this section.
``(2) Transfer to descendants.--
``(A) Death.--In the case of the death of a person to whom
an individual tobacco production permit has been issued under
this section, the permit shall transfer to the surviving
spouse of the person or, if there is no surviving spouse, to
surviving direct descendants of the person.
``(B) Temporary inability to farm.--In the case of the
death of a person to whom an individual tobacco production
permit has been issued under this section and whose
descendants are temporarily unable to produce a crop of
tobacco, the Secretary may hold the license in the name of
the descendants for a period of not more than 18 months.
``(3) Voluntary transfers.--A person that is eligible to
obtain an individual tobacco production permit under this
section may at any time transfer all or part of the permit to
the person's spouse or direct descendants that are actively
engaged in the production of tobacco.
``(h) Reserve.--
``(1) In general.--For each marketing year for which
individual tobacco production permits are in effect under
this section, the Secretary may establish a reserve from the
national marketing quota in a quantity equal to not more than
1 percent of the national marketing quota to be available
for--
``(A) making corrections of errors in individual acreage
limitations and individual marketing limitations;
``(B) adjusting inequities; and
``(C) establishing individual tobacco production permits
for new tobacco producers (except that not less than two-
thirds of the reserve shall be for establishing such permits
for new tobacco producers).
``(2) Eligible persons.--To be eligible for a new
individual tobacco production permit, a producer must not
have been the principal producer of tobacco during the
immediately preceding 5 years.
``(3) Apportionment for new producers.--The part of the
reserve held for apportionment to new individual tobacco
producers shall be allotted on the basis of--
``(A) land, labor, and equipment available for the
production of tobacco;
``(B) crop rotation practices;
``(C) soil and other physical factors affecting the
production of tobacco; and
``(D) the past tobacco-producing experience of the
producer.
``(4) Permit yield.--The permit yield for any producer for
which a new individual tobacco production permit is
established shall be determined on the basis of available
productivity data for the land involved and yields for
similar farms in the same county.
``(i) Penalties.--
``(1) Production on other farms.--If any quantity of
tobacco is marketed as having been produced under an
individual acreage limitation or individual marketing
limitation assigned to a farm but was produced on a different
farm, the individual acreage limitation or individual
marketing limitation for the following marketing year shall
be forfeited.
``(2) False report.--If a person to which an individual
tobacco production permit is issued files, or aids or
acquiesces in the filing of, a false report with respect to
the assignment of an individual acreage limitation or
individual marketing limitation for a quantity of tobacco,
the individual acreage limitation or individual marketing
limitation for the following marketing year shall be
forfeited.
``(j) Marketing Penalties.--
``(1) In general.--When individual tobacco production
permits under this section are in effect, provisions with
respect to penalties for the marketing of excess tobacco and
the other provisions contained in section 314 shall apply in
the same manner and to the same extent as they would apply
under section 317(g) if farm marketing quotas were in effect.
``(2) Production on other farms.--If a producer falsely
identifies tobacco as having been produced on or marketed
from a farm to which an individual acreage limitation or
individual marketing limitation has been assigned, future
individual acreage limitations and individual marketing
limitations shall be forfeited.''.

SEC. 1025. MODIFICATIONS IN FEDERAL TOBACCO PROGRAMS.

(a) Program Referenda.--Section 312(c) of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1312(c)) is amended--
(1) by striking ``(c) Within thirty'' and inserting the
following:
``(c) Referenda on Quotas.--
``(1) In general.--Not later than 30''; and
(2) by adding at the end the following:
``(2) Referenda on program changes.--
``(A) In general.--In the case of any type of tobacco for
which marketing quotas are in effect, on the receipt of a
petition from more than 5 percent of the producers of that
type of tobacco in a State, the Secretary shall conduct a
statewide referendum on any proposal related to the lease and
transfer of tobacco quota within a State requested by the
petition that is authorized under this part.
``(B) Approval of proposals.--If a majority of producers of
the type of tobacco in the State approve a proposal in a
referendum conducted under subparagraph (A), the Secretary
shall implement the proposal in a manner that applies to all
producers and quota holders of that type of tobacco in the
State.''.
(b) Purchase Requirements.--Section 320B of the
Agricultural Adjustment Act of 1938 (7 U.S.C. 1314h) is
amended--
(1) in subsection (c)--
(A) by striking ``(c) The amount'' and inserting ``(c)
Amount of Penalty.--For the 1998 and subsequent marketing
years, the amount''; and
(B) by striking paragraph (1) and inserting the following:
``(1) 105 percent of the average market price for the type
of tobacco involved during the preceding marketing year;
and''.
(c) Elimination of Tobacco Marketing Assessment.--
(1) In general.--Section 106 of the Agricultural Act of
1949 (7 U.S.C. 1445) is amended by striking subsection (g).
(2) Conforming amendment.--Section 422(c) of the Uruguay
Round Agreements Act (Public Law 103-465; 7 U.S.C. 1445 note)
is amended by striking ``section 106(g), 106A, or 106B of the
Agricultural Act of 1949 (7 U.S.C. 1445(g), 1445-1, or 1445-
2)'' and inserting ``section 106A or 106B of the Agricultural
Act of 1949 (7 U.S.C. 1445-1, 1445-2)''.
(d) Adjustment for Land Rental Costs.--Section 106 of the
Agricultural Act of 1949 (7 U.S.C. 1445) is amended by adding
at the end the following:
``(h) Adjustment for Land Rental Costs.--For each of the
1999 and 2000 marketing years for flue-cured tobacco, after
consultation with producers, State farm organizations and
cooperative associations, the Secretary shall make an
adjustment in the price support level for flue-cured tobacco
equal to the annual change in the average cost per pound to
flue-cured producers, as determined by the Secretary, under
agreements through which producers rent land to produce flue-
cured tobacco.''.
(e) Fire-Cured and Dark Air-Cured Tobacco Programs.--
(1) Limitation on transfers.--Section 318(g) of the
Agricultural Adjustment Act of 1938 (7 U.S.C. 13l4d(g)) is
amended--

[[Page S5069]]

(A) by striking ``ten'' and inserting ``30''; and
(B) by inserting ``during any crop year'' after
``transferred to any farm''.
(2) Loss of allotment or quota through underplanting.--
Section 318 of the Agricultural Adjustment Act of 1938 (7
U.S.C. 1314d) is amended by adding at the end the following:
``(k) Loss of Allotment or Quota Through Underplanting.--
Effective for the 1999 and subsequent marketing years, no
acreage allotment or acreage-poundage quota, other than a new
marketing quota, shall be established for a farm on which no
fire-cured or dark air-cured tobacco was planted or
considered planted during at least 2 of the 3 crop years
immediately preceding the crop year for which the acreage
allotment or acreage-poundage quota would otherwise be
established.''.
(f) Expansion of Types of Tobacco Subject to No Net Cost
Assessment.--
(1) No net cost tobacco fund.--Section 106A(d)(1)(A) of the
Agricultural Act of 1949 (7 U.S.C. 1445-1(d)(1)(A)) is
amended--
(A) in clause (ii), by inserting after ``Burley quota
tobacco'' the following: ``and fire-cured and dark air-cured
quota tobacco''; and
(B) in clause (iii)--
(i) in the matter preceding subclause (I), by striking
``Flue-cured or Burley tobacco'' and inserting ``each kind of
tobacco for which price support is made available under this
Act, and each kind of like tobacco,''; and
(ii) by striking subclause (II) and inserting the
following:

``(II) the sum of the amount of the per pound producer
contribution and purchaser assessment (if any) for the kind
of tobacco payable under clauses (i) and (ii); and''.

(2) No net cost tobacco account.--Section 106B(d)(1) of the
Agricultural Act of 1949 (7 U.S.C. 1445-2(d)(1)) is amended--
(A) in subparagraph (B), by inserting after ``Burley quota
tobacco'' the following: ``and fire-cured and dark air-cured
tobacco''; and
(B) in subparagraph (C), by striking ``Flue-cured and
Burley tobacco'' and inserting ``each kind of tobacco for
which price support is made available under this Act, and
each kind of like tobacco,''.

Subtitle C--Farmer and Worker Transition Assistance

SEC. 1031. TOBACCO WORKER TRANSITION PROGRAM.

(a) Group Eligibility Requirements.--
(1) Criteria.--A group of workers (including workers in any
firm or subdivision of a firm involved in the manufacture,
processing, or warehousing of tobacco or tobacco products)
shall be certified as eligible to apply for adjustment
assistance under this section pursuant to a petition filed
under subsection (b) if the Secretary of Labor determines
that a significant number or proportion of the workers in the
workers' firm or an appropriate subdivision of the firm have
become totally or partially separated, or are threatened to
become totally or partially separated, and--
(A) the sales or production, or both, of the firm or
subdivision have decreased absolutely; and
(B) the implementation of the national tobacco settlement
contributed importantly to the workers' separation or threat
of separation and to the decline in the sales or production
of the firm or subdivision.
(2) Definition of contributed importantly.--In paragraph
(1)(B), the term ``contributed importantly'' means a cause
that is important but not necessarily more important than any
other cause.
(3) Regulations.--The Secretary shall issue regulations
relating to the application of the criteria described in
paragraph (1) in making preliminary findings under subsection
(b) and determinations under subsection (c).
(b) Preliminary Findings and Basic Assistance.--
(1) Filing of petitions.--A petition for certification of
eligibility to apply for adjustment assistance under this
section may be filed by a group of workers (including workers
in any firm or subdivision of a firm involved in the
manufacture, processing, or warehousing of tobacco or tobacco
products) or by their certified or recognized union or other
duly authorized representative with the Governor of the State
in which the workers' firm or subdivision thereof is located.
(2) Findings and assistance.--On receipt of a petition
under paragraph (1), the Governor shall--
(A) notify the Secretary that the Governor has received the
petition;
(B) within 10 days after receiving the petition--
(i) make a preliminary finding as to whether the petition
meets the criteria described in subsection (a)(1); and
(ii) transmit the petition, together with a statement of
the finding under clause (i) and reasons for the finding, to
the Secretary for action under subsection (c); and
(C) if the preliminary finding under subparagraph (B)(i) is
affirmative, ensure that rapid response and basic
readjustment services authorized under other Federal laws are
made available to the workers.
(c) Review of Petitions by Secretary; Certifications.--
(1) In general.--The Secretary, within 30 days after
receiving a petition under subsection (b)(2)(B)(ii), shall
determine whether the petition meets the criteria described
in subsection (a)(1). On a determination that the petition
meets the criteria, the Secretary shall issue to workers
covered by the petition a certification of eligibility to
apply for the assistance described in subsection (d).
(2) Denial of certification.--On the denial of a
certification with respect to a petition under paragraph (1),
the Secretary shall review the petition in accordance with
the requirements of other applicable assistance programs to
determine if the workers may be certified under the other
programs.
(d) Comprehensive Assistance.--
(1) In general.--Workers covered by a certification issued
by the Secretary under subsection (c)(1) shall be provided
with benefits and services described in paragraph (2) in the
same manner and to the same extent as workers covered under a
certification under subchapter A of title II of the Trade Act
of 1974 (19 U.S.C. 2271 et seq.), except that the total
amount of payments under this section for any fiscal year
shall not exceed $25,000,000.
(2) Benefits and services.--The benefits and services
described in this paragraph are the following:
(A) Employment services of the type described in section
235 of the Trade Act of 1974 (19 U.S.C. 2295).
(B) Training described in section 236 of the Trade Act of
1974 (19 U.S.C. 2296), except that notwithstanding the
provisions of section 236(a)(2)(A) of that Act, the total
amount of payments for training under this section for any
fiscal year shall not exceed $12,500,000.
(C) Tobacco worker readjustment allowances, which shall be
provided in the same manner as trade readjustment allowances
are provided under part I of subchapter B of chapter 2 of
title II of the Trade Act of 1974 (19 U.S.C. 2291 et seq.),
except that--
(i) the provisions of sections 231(a)(5)(C) and 231(c) of
that Act (19 U.S.C. 2291(a)(5)(C), 2291(c)), authorizing the
payment of trade readjustment allowances on a finding that it
is not feasible or appropriate to approve a training program
for a worker, shall not be applicable to payment of
allowances under this section; and
(ii) notwithstanding the provisions of section 233(b) of
that Act (19 U.S.C. 2293(b)), in order for a worker to
qualify for tobacco readjustment allowances under this
section, the worker shall be enrolled in a training program
approved by the Secretary of the type described in section
236(a) of that Act (19 U.S.C. 2296(a)) by the later of--

(I) the last day of the 16th week of the worker's initial
unemployment compensation benefit period; or
(II) the last day of the 6th week after the week in which
the Secretary issues a certification covering the worker.

In cases of extenuating circumstances relating to enrollment
of a worker in a training program under this section, the
Secretary may extend the time for enrollment for a period of
not to exceed 30 days.
(D) Job search allowances of the type described in section
237 of the Trade Act of 1974 (19 U.S.C. 2297).
(E) Relocation allowances of the type described in section
238 of the Trade Act of 1974 (19 U.S.C. 2298).
(e) Ineligibility of Individuals Receiving Payments for
Lost Tobacco Quota.--No benefits or services may be provided
under this section to any individual who has received
payments for lost tobacco quota under section 1021.
(f) Funding.--Of the amounts appropriated to carry out this
title, the Secretary may use not to exceed $25,000,000 for
each of fiscal years 1999 through 2008 to provide assistance
under this section.
(g) Effective Date.--This section shall take effect on the
date that is the later of--
(1) October l, 1998; or
(2) the date of enactment of this Act.
(h) Termination Date.--No assistance, vouchers, allowances,
or other payments may be provided under this section after
the date that is the earlier of--
(1) the date that is 10 years after the effective date of
this section under subsection (g); or
(2) the date on which legislation establishing a program
providing dislocated workers with comprehensive assistance
substantially similar to the assistance provided by this
section becomes effective.

SEC. 1032. FARMER OPPORTUNITY GRANTS.

Part A of title IV of the Higher Education Act of 1965 (20
U.S.C. 1070 et seq.) is amended by adding at the end the
following:

``Subpart 9--Farmer Opportunity Grants

``SEC. 420D. STATEMENT OF PURPOSE.

``It is the purpose of this subpart to assist in making
available the benefits of postsecondary education to eligible
students (determined in accordance with section 420F) in
institutions of higher education by providing farmer
opportunity grants to all eligible students.

``SEC. 420E. PROGRAM AUTHORITY; AMOUNT AND DETERMINATIONS;
APPLICATIONS.

``(a) Program Authority and Method of Distribution.--
``(1) Program authority.--From amounts made available under
section 1011(d)(5) of the LEAF Act, the Secretary, during the
period beginning July 1, 1999, and ending September 30, 2024,
shall pay to each eligible institution such sums as may be
necessary to pay to each eligible student (determined in
accordance with section 420F) for each academic year during
which that student is in attendance at an institution of
higher education, as an undergraduate, a farmer opportunity
grant in the amount for which that student is eligible, as
determined pursuant to subsection (b). Not less than 85
percent of the

[[Page S5070]]

sums shall be advanced to eligible institutions prior to the
start of each payment period and shall be based on an amount
requested by the institution as needed to pay eligible
students, except that this sentence shall not be construed to
limit the authority of the Secretary to place an institution
on a reimbursement system of payment.
``(2) Construction.--Nothing in this section shall be
construed to prohibit the Secretary from paying directly to
students, in advance of the beginning of the academic term,
an amount for which the students are eligible, in cases where
the eligible institution elects not to participate in the
disbursement system required by paragraph (1).
``(3) Designation.--Grants made under this subpart shall be
known as `farmer opportunity grants'.
``(b) Amount of Grants.--
``(1) Amounts.--
``(A) In general.--The amount of the grant for a student
eligible under this subpart shall be--
``(i) $1,700 for each of the academic years 1999-2000
through 2003-2004;
``(ii) $2,000 for each of the academic years 2004-2005
through 2008-2009;
``(iii) $2,300 for each of the academic years 2009-2010
through 2013-2014;
``(iv) $2,600 for each of the academic years 2014-2015
through 2018-2019; and
``(v) $2,900 for each of the academic years 2019-2020
through 2023-2024.
``(B) Part-time rule.--In any case where a student attends
an institution of higher education on less than a full-time
basis (including a student who attends an institution of
higher education on less than a half-time basis) during any
academic year, the amount of the grant for which that student
is eligible shall be reduced in proportion to the degree to
which that student is not so attending on a full-time basis,
in accordance with a schedule of reductions established by
the Secretary for the purposes of this subparagraph, computed
in accordance with this subpart. The schedule of reductions
shall be established by regulation and published in the
Federal Register.
``(2) Maximum.--No grant under this subpart shall exceed
the cost of attendance (as described in section 472) at the
institution at which that student is in attendance. If, with
respect to any student, it is determined that the amount of a
grant exceeds the cost of attendance for that year, the
amount of the grant shall be reduced to an amount equal to
the cost of attendance at the institution.
``(3) Prohibition.--No grant shall be awarded under this
subpart to any individual who is incarcerated in any Federal,
State, or local penal institution.
``(c) Period of Eligibility for Grants.--
``(1) In general.--The period during which a student may
receive grants shall be the period required for the
completion of the first undergraduate baccalaureate course of
study being pursued by that student at the institution at
which the student is in attendance, except that any period
during which the student is enrolled in a noncredit or
remedial course of study as described in paragraph (2) shall
not be counted for the purpose of this paragraph.
``(2) Construction.--Nothing in this section shall be
construed to--
``(A) exclude from eligibility courses of study that are
noncredit or remedial in nature and that are determined by
the institution to be necessary to help the student be
prepared for the pursuit of a first undergraduate
baccalaureate degree or certificate or, in the case of
courses in English language instruction, to be necessary to
enable the student to utilize already existing knowledge,
training, or skills; and
``(B) exclude from eligibility programs of study abroad
that are approved for credit by the home institution at which
the student is enrolled.
``(3) Prohibition.--No student is entitled to receive
farmer opportunity grant payments concurrently from more than
1 institution or from the Secretary and an institution.
``(d) Applications for Grants.--
``(1) In general.--The Secretary shall from time to time
set dates by which students shall file applications for
grants under this subpart. The filing of applications under
this subpart shall be coordinated with the filing of
applications under section 401(c).
``(2) Information and assurances.--Each student desiring a
grant for any year shall file with the Secretary an
application for the grant containing such information and
assurances as the Secretary may deem necessary to enable the
Secretary to carry out the Secretary's functions and
responsibilities under this subpart.
``(e) Distribution of Grants to Students.--Payments under
this section shall be made in accordance with regulations
promulgated by the Secretary for such purpose, in such manner
as will best accomplish the purpose of this section. Any
disbursement allowed to be made by crediting the student's
account shall be limited to tuition and fees and, in the case
of institutionally owned housing, room and board. The student
may elect to have the institution provide other such goods
and services by crediting the student's account.
``(f) Insufficient Funding.--If, for any fiscal year, the
funds made available to carry out this subpart are
insufficient to satisfy fully all grants for students
determined to be eligible under section 420F, the amount of
the grant provided under subsection (b) shall be reduced on a
pro rata basis among all eligible students.
``(g) Treatment of Institutions and Students Under Other
Laws.--Any institution of higher education that enters into
an agreement with the Secretary to disburse to students
attending that institution the amounts those students are
eligible to receive under this subpart shall not be deemed,
by virtue of the agreement, to be a contractor maintaining a
system of records to accomplish a function of the Secretary.
Recipients of farmer opportunity grants shall not be
considered to be individual grantees for purposes of the
Drug-Free Workplace Act of 1988 (41 U.S.C. 701 et seq.).

``SEC. 420F. STUDENT ELIGIBILITY.

``(a) In General.--In order to receive any grant under this
subpart, a student shall--
``(1) be a member of a tobacco farm family in accordance
with subsection (b);
``(2) be enrolled or accepted for enrollment in a degree,
certificate, or other program (including a program of study
abroad approved for credit by the eligible institution at
which the student is enrolled) leading to a recognized
educational credential at an institution of higher education
that is an eligible institution in accordance with section
487, and not be enrolled in an elementary or secondary
school;
``(3) if the student is presently enrolled at an
institution of higher education, be maintaining satisfactory
progress in the course of study the student is pursuing in
accordance with subsection (c);
``(4) not owe a refund on grants previously received at any
institution of higher education under this title, or be in
default on any loan from a student loan fund at any
institution provided for in part D, or a loan made, insured,
or guaranteed by the Secretary under this title for
attendance at any institution;
``(5) file with the institution of higher education that
the student intends to attend, or is attending, a document,
that need not be notarized, but that shall include--
``(A) a statement of educational purpose stating that the
money attributable to the grant will be used solely for
expenses related to attendance or continued attendance at the
institution; and
``(B) the student's social security number; and
``(6) be a citizen of the United States.
``(b) Tobacco Farm Families.--
``(1) In general.--For the purpose of subsection (a)(1), a
student is a member of a tobacco farm family if during
calendar year 1998 the student was--
``(A) an individual who--
``(i) is a participating tobacco producer (as defined in
section 1002 of the LEAF Act); or
``(ii) is otherwise actively engaged in the production of
tobacco;
``(B) a spouse, son, daughter, stepson, or stepdaughter of
an individual described in subparagraph (A);
``(C) an individual--
``(i) who was a brother, sister, stepbrother, stepsister,
son-in-law, or daughter-in-law of an individual described in
subparagraph (A); and
``(ii) whose principal place of residence was the home of
the individual described in subparagraph (A); or
``(D) an individual who was a dependent (within the meaning
of section 152 of the Internal Revenue Code of 1986) of an
individual described in subparagraph (A).
``(2) Administration.--On request, the Secretary of
Agriculture shall provide to the Secretary such information
as is necessary to carry out this subsection.
``(c) Satisfactory Progress.--
``(1) In general.--For the purpose of subsection (a)(3), a
student is maintaining satisfactory progress if--
``(A) the institution at which the student is in attendance
reviews the progress of the student at the end of each
academic year, or its equivalent, as determined by the
institution; and
``(B) the student has at least a cumulative C average or
its equivalent, or academic standing consistent with the
requirements for graduation, as determined by the
institution, at the end of the second such academic year.
``(2) Special rule.--Whenever a student fails to meet the
eligibility requirements of subsection (a)(3) as a result of
the application of this subsection and subsequent to that
failure the student has academic standing consistent with the
requirements for graduation, as determined by the
institution, for any grading period, the student may, subject
to this subsection, again be eligible under subsection (a)(3)
for a grant under this subpart.
``(3) Waiver.--Any institution of higher education at which
the student is in attendance may waive paragraph (1) or (2)
for undue hardship based on--
``(A) the death of a relative of the student;
``(B) the personal injury or illness of the student; or
``(C) special circumstances as determined by the
institution.
``(d) Students Who Are Not Secondary School Graduates.--In
order for a student who does not have a certificate of
graduation from a school providing secondary education, or
the recognized equivalent of the certificate, to be eligible
for any assistance under this subpart, the student shall meet
either 1 of the following standards:
``(1) Examination.--The student shall take an independently
administered examination and shall achieve a score, specified
by the Secretary, demonstrating that the student can benefit
from the education or training

[[Page S5071]]

being offered. The examination shall be approved by the
Secretary on the basis of compliance with such standards for
development, administration, and scoring as the Secretary may
prescribe in regulations.
``(2) Determination.--The student shall be determined as
having the ability to benefit from the education or training
in accordance with such process as the State shall prescribe.
Any such process described or approved by a State for the
purposes of this section shall be effective 6 months after
the date of submission to the Secretary unless the Secretary
disapproves the process. In determining whether to approve or
disapprove the process, the Secretary shall take into account
the effectiveness of the process in enabling students without
secondary school diplomas or the recognized equivalent to
benefit from the instruction offered by institutions
utilizing the process, and shall also take into account the
cultural diversity, economic circumstances, and educational
preparation of the populations served by the institutions.
``(e) Special Rule for Correspondence Courses.--A student
shall not be eligible to receive a grant under this subpart
for a correspondence course unless the course is part of a
program leading to an associate, bachelor, or graduate
degree.
``(f) Courses Offered Through Telecommunications.--
``(1) Relation to correspondence courses.--A student
enrolled in a course of instruction at an eligible
institution of higher education (other than an institute or
school that meets the definition in section 521(4)(C) of the
Carl D. Perkins Vocational and Applied Technology Education
Act (20 U.S.C. 2471(4)(C))) that is offered in whole or in
part through telecommunications and leads to a recognized
associate, bachelor, or graduate degree conferred by the
institution shall not be considered to be enrolled in
correspondence courses unless the total amount of
telecommunications and correspondence courses at the
institution equals or exceeds 50 percent of the courses.
``(2) Restriction or reductions of financial aid.--A
student's eligibility to receive a grant under this subpart
may be reduced if a financial aid officer determines under
the discretionary authority provided in section 479A that
telecommunications instruction results in a substantially
reduced cost of attendance to the student.
``(3) Definition.--For the purposes of this subsection, the
term `telecommunications' means the use of television, audio,
or computer transmission, including open broadcast, closed
circuit, cable, microwave, or satellite, audio conferencing,
computer conferencing, or video cassettes or discs, except
that the term does not include a course that is delivered
using video cassette or disc recordings at the institution
and that is not delivered in person to other students of that
institution.
``(g) Study Abroad.--Nothing in this subpart shall be
construed to limit or otherwise prohibit access to study
abroad programs approved by the home institution at which a
student is enrolled. An otherwise eligible student who is
engaged in a program of study abroad approved for academic
credit by the home institution at which the student is
enrolled shall be eligible to receive a grant under this
subpart, without regard to whether the study abroad program
is required as part of the student's degree program.
``(h) Verification of Social Security Number.--The
Secretary, in cooperation with the Commissioner of Social
Security, shall verify any social security number provided by
a student to an eligible institution under subsection
(a)(5)(B) and shall enforce the following conditions:
``(1) Pending verification.--Except as provided in
paragraphs (2) and (3), an institution shall not deny,
reduce, delay, or terminate a student's eligibility for
assistance under this subpart because social security number
verification is pending.
``(2) Denial or termination.--If there is a determination
by the Secretary that the social security number provided to
an eligible institution by a student is incorrect, the
institution shall deny or terminate the student's eligibility
for any grant under this subpart until such time as the
student provides documented evidence of a social security
number that is determined by the institution to be correct.
``(3) Construction.--Nothing in this subsection shall be
construed to permit the Secretary to take any compliance,
disallowance, penalty, or other regulatory action against--
``(A) any institution of higher education with respect to
any error in a social security number, unless the error was a
result of fraud on the part of the institution; or
``(B) any student with respect to any error in a social
security number, unless the error was a result of fraud on
the part of the student.''.

Subtitle D--Immunity

SEC. 1041. GENERAL IMMUNITY FOR TOBACCO PRODUCERS AND TOBACCO
WAREHOUSE OWNERS.

Notwithstanding any other provision of this title, a
participating tobacco producer, tobacco-related growers
association, or tobacco warehouse owner or employee may not
be subject to liability in any Federal or State court for any
cause of action resulting from the failure of any tobacco
product manufacturer, distributor, or retailer to comply with
the National Tobacco Policy and Youth Smoking Reduction Act.

TITLE XI--MISCELLANEOUS PROVISIONS

Subtitle A--International Provisions

SEC. 1101. POLICY.

It shall be the policy of the United States government to
pursue bilateral and multilateral agreements that include
measures designed to--
(1) restrict or eliminate tobacco advertising and promotion
aimed at children;
(2) require effective warning labels on packages and
advertisements of tobacco products;
(3) require disclosure of tobacco ingredient information to
the public;
(4) limit access to tobacco products by young people;
(5) reduce smuggling of tobacco and tobacco products;
(6) ensure public protection from environmental tobacco
smoke; and
(7) promote tobacco product policy and program information
sharing between or among the parties to those agreements.

SEC. 1102. TOBACCO CONTROL NEGOTIATIONS.

The President, in consultation with the Secretary of State,
the Secretary of Health and Human Services, and the United
States Trade Representative, shall--
(1) act as the lead negotiator for the United States in the
area of international tobacco control;
(2) coordinate among U.S. foreign policy and trade
negotiators in the area of effective international tobacco
control policy;
(3) work closely with non-governmental groups, including
public health groups; and
(4) report annually to the Congress on the progress of
negotiations to achieve effective international tobacco
control policy.

SEC. 1103. REPORT TO CONGRESS.

Not later than 150 days after the enactment of this Act and
annually thereafter, the Secretary of Health and Human
Services shall transmit to the Congress a report identifying
the international fora wherein international tobacco control
efforts may be negotiated.

SEC. 1104. FUNDING.

There are authorized such sums as are necessary to carry
out the provisions of this subtitle.

SEC. 1105. PROHIBITION OF FUNDS TO FACILITATE THE EXPORTATION
OR PROMOTION OF TOBACCO.

(a) In General.--No officer, employee, department, or
agency of the United States may promote the sale or export of
tobacco or tobacco products, or seek the reduction or removal
by any foreign country of restrictions on the marketing of
tobacco or tobacco products, unless such restrictions are not
applied equally to all tobacco and tobacco products. The
United States Trade Representative shall consult with the
Secretary regarding inquiries, negotiations, and
representations with respect to tobacco and tobacco products,
including whether proposed restrictions are reasonable
protections of public health.
(b) Notification.--Whenever such inquiries, negotiations,
or representations are made, the United States Trade
Representative shall notify the Congress within 10 days
afterwards regarding the nature of the inquiry, negotiation,
or representation.

SEC. 1106. HEALTH LABELING OF TOBACCO PRODUCTS FOR EXPORT.

(a) In General.--
(1) Exports must be labeled.--It shall be unlawful for any
United States person, directly or through approval or
facilitation of a transaction by a foreign person, to make
use of the United States mail or of any instrument of
interstate commerce to authorize or contribute to the export
from the United States any tobacco product unless the tobacco
product packaging contains a warning label that--
(A) complies with Federal requirements for labeling of
similar tobacco products manufactured, imported, or packaged
for sale or distribution in the United States; or
(B) complies with the specific health hazard warning
labeling requirements of the foreign country to which the
product is exported.
(2) U.S. requirements apply if the destination country does
not require specific health hazard warning labels.--
Subparagraph (B) of paragraph (1) does not apply to exports
to a foreign country that does not have any specific health
hazard warning label requirements for the tobacco product
being exported.
(b) United States Person Defined.--For purposes of this
section, the term ``United States person'' means--
(1) an individual who is a citizen, national, or resident
of the United States; and
(2) a corporation, partnership, association, joint-stock
company, business trust, unincorporated organization, or sole
proprietorship which has its principal place of business in
the United States.
(c) Report to Congress on Enforcement; Feasibility
Regulations.--
(1) The president.--The President shall--
(A) report to the Congress within 90 days after the date of
enactment of this Act--
(i) regarding methods to ensure compliance with subsection
(a); and
(ii) listing countries whose health warnings related to
tobacco products are substantially similar to those in the
United States; and
(B) promulgate regulations within 1 year after the date of
enactment of this Act that will ensure compliance with
subsection (a).
(2) The secretary.--The Secretary shall determine through
regulation the feasibility and practicability of requiring
health warning labeling in the language of the country

[[Page S5072]]

of destination weighing the health and other benefits and
economic and other costs. To the greatest extent practicable,
the Secretary should design a system that requires the
language of the country of destination while minimizing the
dislocative effects of such a system.

SEC. 1107. INTERNATIONAL TOBACCO CONTROL AWARENESS.

(a) Establishment of International Tobacco Control
Awareness.--The Secretary is authorized to establish an
international tobacco control awareness effort. The Secretary
shall--
(1) promote efforts to share information and provide
education internationally about the health, economic, social,
and other costs of tobacco use, including scientific and
epidemiological data related to tobacco and tobacco use and
enhancing countries' capacity to collect, analyze, and
disseminating such data;
(2) promote policies and support and coordinate
international efforts, including international agreements or
arrangements, that seek to enhance the awareness and
understanding of the costs associated with tobacco use;
(3) support the development of appropriate governmental
control activities in foreign countries, such as assisting
countries to design, implement, and evaluate programs and
policies used in the United States or other countries;
including the training of United States diplomatic and
commercial representatives outside the United States;
(4) undertake other activities as appropriate in foreign
countries that help achieve a reduction of tobacco use;
(5) permit United States participation in annual meetings
of government and non-government representatives concerning
international tobacco use and efforts to reduce tobacco use;
(6) promote mass media campaigns, including paid counter-
tobacco advertisements to reverse the image appeal of pro-
tobacco messages, especially those that glamorize and
``Westernize'' tobacco use to young people; and
(7) create capacity and global commitment to reduce
international tobacco use and prevent youth smoking,
including the use of models of previous public health efforts
to address global health problems.
(b) Activities.--
(1) In general.--The activities under subsection (a) shall
include--
(A) public health and education programs;
(B) technical assistance;
(C) cooperative efforts and support for related activities
of multilateral organization and international organizations;
(D) training; and
(E) such other activities that support the objectives of
this section as may be appropriate.
(2) Grants and contracts.--In carrying out this section,
the Secretary shall make grants to, enter into and carry out
agreements with, and enter into other transactions with any
individual, corporation, or other entity, whether within or
outside the United States, including governmental and
nongovernmental organizations, international organizations,
and multilateral organizations.
(3) Transfer of funds to agencies.--The Secretary may
transfer to any agency of the United States any part of any
funds appropriated for the purpose of carrying out this
section. Funds authorized to be appropriated by this section
shall be available for obligation and expenditure in
accordance with the provisions of this section or in
accordance with the authority governing the activities of the
agency to which such funds are transferred.
(c) Authorization of Appropriations.--There are authorized
to be appropriated, from the National Tobacco Trust Fund, to
carry out the provisions of this section, including the
administrative costs incurred by any agency of the United
States in carrying out this section, $350,000,000 for each of
the fiscal years 1999 through 2004, and such sums as may be
necessary for each fiscal year thereafter. A substantial
amount of such funds shall be granted to non-governmental
organizations. Any amount appropriated pursuant to this
authorization shall remain available without fiscal year
limitation until expended.

Subtitle B--Anti-smuggling Provisions

SEC. 1131. DEFINITIONS.

(a) Incorporation of Certain Definitions.--In this
subtitle, the terms ``cigar'', ``cigarette'', ``person'',
``pipe tobacco'', ``roll-your-own tobacco'', ``smokeless
tobacco'', ``State'', ``tobacco product'', and ``United
States ``, shall have the meanings given such terms in
sections 5702(a), 5702(b), 7701(a)(1), 5702(o), 5702(n)(1),
5702(p), 3306(j)(1), 5702(c), and 3306(j)(2) respectively of
the Internal Revenue Code of 1986.
(b) Other Definitions.--In this subtitle:
(1) Affiliate.--The term ``affiliate'' means any one of 2
or more persons if 1 of such persons has actual or legal
control, directly or indirectly, whether by stock ownership
or otherwise, of other or others of such persons, and any 2
or more of such persons subject to common control, actual or
legal, directly or indirectly, whether by stock ownership or
otherwise.
(2) Interstate or Foreign Commerce.--The term ``interstate
or foreign commerce'' means any commerce between any State
and any place outside thereof, or commerce within any
Territory or the District of Columbia, or between points
within the same State but through any place outside thereof.
(3) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(4) Package.--The term ``package'' means the innermost
sealed container irrespective of the material from which such
container is made, in which a tobacco product is placed by
the manufacturer and in which such tobacco product is offered
for sale to a member of the general public.
(5) Retailer.--The term ``retailer'' means any dealer who
sells, or offers for sale, any tobacco product at retail. The
term ``retailer'' includes any duty free store that sells,
offers for sale, or otherwise distributes at retail in any
single transaction 30 or less packages, or it equivalent for
other tobacco products.
(6) Exporter.--The term ``exporter'' means any person
engaged in the business of exporting tobacco products from
the United States for purposes of sale or distribution; and
the term ``licensed exporter'' means any such person licensed
under the provisions of this subtitle. 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 ``exporter'' under this subtitle.
(7) Importer.--The term ``importer'' means any person
engaged in the business of importing tobacco products into
the United States for purposes of sale or distribution; and
the term ``licensed importer'' means any such person licensed
under the provisions of this subtitle.
(8) Intentionally.--The term ``intentionally'' means doing
an act, or omitting to do an act, deliberately, and not due
to accident, inadvertence, or mistake. An intentional act
does not require that a person knew that his act constituted
an offense.
(9) Manufacturer.-- The term ``manufacturer'' means any
person engaged in the business of manufacturing a tobacco
product for purposes of sale or distribution, except that
such term shall not include a person who manufactures less
than 30,000 cigarettes, or its equivalent as determined by
regulations, in any twelve month period;; and the term
``licensed manufacturer'' means any such person licensed
under the provisions of this subtitle, except that such term
shall not include a person who produces cigars, cigarettes,
smokeless tobacco, or pipe tobacco solely for his own
personal consumption or use.
(10) 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, and the term
``licensed wholesaler'' means any such person licensed under
the provisions of this subtitle.

SEC. 1132. TOBACCO PRODUCT LABELING REQUIREMENTS.

(a) In General.--It is unlawful for any person to sell, or
ship or deliver for sale or shipment, or otherwise introduce
in interstate or foreign commerce, or to receive therein, or
to remove from Customs custody for use, any tobacco product
unless such product is packaged and labeled in conformity
with this section.
(b) Labeling.--
(1) Identification.--Not later than 1 year after the date
of enactment of this Act, the Secretary shall promulgate
regulations that require each manufacturer or importer of
tobacco products to legibly print a unique serial number on
all packages of tobacco products manufactured or imported for
sale or distribution. The serial number shall be designed to
enable the Secretary to identify the manufacturer or importer
of the product, and the location and date of manufacture or
importation. The Secretary shall determine the size and
location of the serial number.
(2) Marking requirements for exports.--Each package of a
tobacco product that is exported shall be marked for export
from the United States. The Secretary shall promulgate
regulations to determine the size and location of the mark
and under what circumstances a waiver of this paragraph shall
be granted.
(c) Prohibition on Alteration.--It is unlawful for any
person to alter, mutilate, destroy, obliterate, or remove any
mark or label required under this subtitle upon a tobacco
product in or affecting commerce, except pursuant to
regulations of the Secretary authorizing relabeling for
purposes of compliance with the requirements of this section
or of State law.

SEC. 1133. TOBACCO PRODUCT LICENSES.

(a) In General.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall establish a
program under which tobacco product licenses are issued to
manufacturers, importers, exporters, and wholesalers of
tobacco products.
(b)(1) Eligibility.--A person is entitled to a license
unless the Secretary finds--
(A) that such person has been previously convicted of a
Federal crime relating to tobacco, including the taxation
thereof;
(B) that such person has, within 5 years prior to the date
of application, been previously convicted of any felony under
Federal or State law; or
(C) that such person is, by virtue of his business
experience, financial standing, or trade connections, not
likely to maintain such operations in conformity with Federal
law.
(2) Conditions.--The issuance of a license under this
section shall be conditioned upon

[[Page S5073]]

the compliance with the requirements of this subtitle, all
Federal laws relating to the taxation of tobacco products,
chapter 114 of title 18, United States Code, and any
regulations issued pursuant to such statutes.
(c) Revocation, Suspension, and Annulment.--The program
established under subsection (a) shall permit the Secretary
to revoke, suspend, or annul a license issued under this
section if the Secretary determines that the terms or
conditions of the license have not been complied with. Prior
to any action under this subsection, the Secretary shall
provide the licensee with due notice and the opportunity for
a hearing.
(d) Records and Audits.--The Secretary shall, under the
program established under subsection (a), require all license
holders to keep records concerning the chain of custody of
the tobacco products that are the subject of the license and
make such records available to the Secretary for inspection
and audit.
(e) Retailers.--This section does not apply to retailers of
tobacco products, except that retailers shall maintain
records of receipt, and such records shall be available to
the Secretary for inspection and audit. An ordinary
commercial record or invoice will satisfy this requirement
provided such record shows the date of receipt, from whom
such products were received and the quantity of tobacco
products received.

SEC. 1134. PROHIBITIONS.

(a) Importation and Sale.--It is unlawful, except pursuant
to a license issued by the Secretary under this subtitle--
(1) to engage in the business of importing tobacco products
into the United States; or
(2) for any person so engaged to sell, offer, or deliver
for sale, contract to sell, or ship, in or affecting
commerce, directly or indirectly or through an affiliate,
tobacco products so imported.
(b) Manufacture and sale.--It is unlawful, except pursuant
to a license issued by the Secretary under this subtitle--
(1) to engage in the business of manufacturing, packaging
or warehousing tobacco products; or
(2) for any person so engaged to sell, offer, or deliver
for sale, contract to sell, or ship, in or affecting
commerce, directly or indirectly or through an affiliate,
tobacco products so manufactured, packaged, or warehoused.
(c) Wholesale.--It is unlawful, except pursuant to a
license issued by the Secretary under this subtitle--
(1) to engage in the business of purchasing for resale at
wholesale tobacco products, or, as a principal or agent, to
sell, offer for sale, negotiate for, or hold out by
solicitation, advertisement, or otherwise as selling,
providing, or arranging for, the purchase for resale at
wholesale of tobacco products; or
(2) for any person so engaged to receive or sell, offer or
deliver for sale, contract to sell, or ship, in or affecting
commerce, directly or indirectly or through an affiliate,
tobacco products so purchased.
(d) Exportation.--
(1) In general.--It is unlawful, except pursuant to a
license issued by the Secretary under this subtitle--
(A) to engage in the business of exporting tobacco products
from the United States; or
(B) for any person so engaged to sell, offer, or deliver
for sale, contract to sell, or ship, in or affecting
commerce, directly or indirectly or through an affiliate,
tobacco products received for export.
(2) Report.--Prior to exportation of tobacco products from
the United States, the exporter 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.
(3) Agreements with foreign governments.--The Secretary is
authorized to enter into agreements with foreign governments
to exchange or share information contained in reports
received from exporters of tobacco products if the Secretary
believes that such an agreement will assist in--
(A) insuring compliance with any law or regulation enforced
or administered by an agency of the United States; or
(B) preventing or detecting violation of the laws or
regulations of a foreign government with which the Secretary
has entered into an agreement.

Such information may be exchanged or shared with a foreign
government only if the Secretary obtains assurances from such
government that the information will be held in confidence
and used only for the purpose of preventing or detecting
violations of the laws or regulations of such government or
the United States and, provided further that no information
may be exchanged or shared with any government that has
violated such assurances.
(e) Unlawful Acts.--
(1) Unlicensed receipt or delivery.--It is unlawful for any
licensed importer, licensed manufacturer, or licensed
wholesaler intentionally to ship, transport, deliver or
receive any tobacco products from or to any person other than
a person licensed under this chapter or a retailer licensed
under the provisions of this Act, except a licensed importer
may receive foreign tobacco products from a foreign
manufacturer or a foreign distributor that have not
previously entered the United States.
(2) Receipt of re-imported goods.--It is unlawful for any
person, except a licensed manufacturer or a licensed exporter
to receive any tobacco products that have previously been
exported and returned to the United States.
(3) Delivery by exporter.--It is unlawful for any licensed
exporter intentionally to ship, transport, sell or deliver
for sale any tobacco products to any person other than a
licensed manufacturer or foreign purchaser.
(4) Shipment of export-only goods.--It is unlawful for any
person other than a licensed exporter intentionally to ship,
transport, receive or possess, for purposes of resale, any
tobacco product in packages marked ``FOR EXPORT FROM THE
UNITED STATES,'' other than for direct return to the
manufacturer or exporter for re-packing or for re-
exportation.
(5) False statements.--It is unlawful for any licensed
manufacturer, licensed exporter, licensed importer, or
licensed wholesaler 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 he
is required to keep as required by this chapter or the
regulations promulgated thereunder.
(h) Effective date.--The provisions of this section shall
become effective on the date that is 365 days after the date
of enactment of this Act.

SEC. 1135. LABELING OF PRODUCTS SOLD BY NATIVE AMERICANS.

The Secretary, in consultation with the Secretary of the
Interior, shall promulgate regulations that require that each
package of a tobacco product that is sold on an Indian
reservation (as defined in section 403(9) of the Indian Child
Protection and Family Violence Prevention Act (25 U.S.C.
3202(9)) be labeled as such. Such regulations shall include
requirements for the size and location of the label.

SEC. 1136. LIMITATION ON ACTIVITIES INVOLVING TOBACCO
PRODUCTS IN FOREIGN TRADE ZONES.

(a) Manufacture of tobacco products in Foreign Trade
Zones.--No person shall manufacture a tobacco product in any
foreign trade zone, as defined for purposes of the Act of
June 18, 1934 (19 U.S.C. 81a et seq.).
(b) Exporting or importing from or into a Foreign Trade
Zone.--Any person exporting or importing tobacco products
from or into a foreign trade zone, as defined for purposes of
the Act of June 18, 1934 (19 U.S.C. 81a et seq.), shall
comply with the requirements provided in this subtitle. In
any case where the person operating in a foreign trade zone
is acting on behalf of a person licensed under this subtitle,
qualification as an importer or exporter will not be
required, if such person complies with the requirements set
forth in section 1134(d)(2) and (3) of this subtitle.

SEC. 1137. JURISDICTION; PENALTIES; COMPROMISE OF LIABILITY.

(a) Jurisdiction.--The District Courts of the United
States, and the United States Court for any Territory, of the
District where the offense is committed or of which the
offender is an inhabitant or has its principal place of
business, are vested with jurisdiction of any suit brought by
the Attorney General in the name of the United States, to
prevent and restrain violations of any of the provisions of
this subtitle.
(b) Penalties.--Any person violating any of the provisions
of this subtitle 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) Civil Penalties.--The Secretary may, in lieu of
referring violations of this subtitle for criminal
prosecution, impose a civil penalty of not more than $10,000
for each offense.
(d) Compromise of Liability.--The Secretary is authorized,
with respect to any violation of this subtitle, to compromise
the liability arising with respect to a violation of this
subtitle--
(1) upon payment of a sum not in excess of $10,000 for each
offense, to be collected by the Secretary and to be paid into
the Treasury as miscellaneous receipts; and
(2) in the case of repetitious violations and in order to
avoid multiplicity of criminal proceedings, upon agreement to
a stipulation, that the United States may, on its own motion
upon 5 days notice to the violator, cause a consent decree to
be entered by any court of competent jurisdiction enjoining
the repetition of such violation.
(e) Forfeiture.--
(1) The Secretary may seize and forfeit any conveyance,
tobacco products, or monetary instrument (as defined in
section 5312 of title 31, United States Code) involved in a
violation of this subtitle, or any property, real or
personal, which constitutes or is derived from proceeds
traceable to a violation of this chapter. For purposes of
this paragraph, the provisions of subsections (a)(2), (b)(2),
and (c) through (j) of section 981 of title 18, United States
Code, apply to seizures and forfeitures under this paragraph
insofar as they are applicable and not inconsistent with the
provisions of this subtitle.
(2) The court, in imposing sentence upon a person convicted
of an offense under this subtitle, shall order that the
person forfeit to the United States any property described in
paragraph (1). The seizure and forfeiture of such property
shall be governed by subsections (b), (c), and (e) through
(p) of section 853 of title 21, United States Code, insofar
as they are applicable and not inconsistent with the
provisions of this subtitle.

SEC. 1138. AMENDMENTS TO THE CONTRABAND CIGARETTE TRAFFICKING
ACT.

(a) Definitions.--Section 2341 of title 18, United States
Code, is amended--

[[Page S5074]]

(1) by striking ``60,000'' and inserting ``30,000'' in
paragraph (2);
(2) by inserting after ``payment of cigarette taxes,'' in
paragraph (2) the following: ``or in the case of a State that
does not require any such indication of tax payment, if the
person in possession of the cigarettes is unable to provide
any evidence that the cigarettes are moving legally in
interstate commerce,'';
(3) by striking ``and'' at the end of paragraph (4);
(4) by striking ``Treasury.'' in paragraph (5) and
inserting ``Treasury;''; and
(5) by adding at the end thereof the following:
``(6) the term `tobacco product' means cigars, cigarettes,
smokeless tobacco, roll your own and pipe tobacco (as such
terms are defined in section 5701 of the Internal Revenue
Code of 1986); and
``(7) the term `contraband tobacco product' means--
``(A) a quantity in excess of 30,000 of any tobacco product
that is manufactured, sold, shipped, delivered, transferred,
or possessed in violation of Federal laws relating to the
distribution of tobacco products; and
``(B) a quantity of tobacco product that is equivalent to
an excess of 30,000 cigarettes, as determined by regulation,
which bears no evidence of the payment of applicable State
tobacco taxes in the State where such tobacco products are
found, if such State requires a stamp, impression, or other
indication to be placed on packages or other containers of
product to evidence payment of tobacco taxes, or in the case
of a State that does not require any such indication of tax
payment, if the person in possession of the tobacco product
is unable to provide any evidence that the tobacco products
are moving legally in interstate commerce and which are in
the possession of any person other than a person defined in
paragraph (2) of this section.''.
(b) Unlawful Acts.--Section 2342 of title 18, United States
Code, is amended--
(1) by inserting ``or contraband tobacco products'' before
the period in subsection (a); and
(2) by adding at the end thereof the following:
``(c) It is unlawful for any person--
``(1) knowingly to make any false statement or
representation with respect to the information required by
this chapter to be kept in the records or reports of any
person who ships, sells, or distributes any quantity of
cigarettes in excess of 30,000 in a single transaction, or
tobacco products in such equivalent quantities as shall be
determined by regulation; or
``(2) knowingly to fail or knowingly to fail to maintain
distribution records or reports, alter or obliterate required
markings, or interfere with any inspection as required with
respect to such quantity of cigarettes or other tobacco
products.
``(d) It shall be unlawful for any person knowingly to
transport cigarettes or other tobacco products under a false
bill of lading or without any bill of lading.''.
(d) Recordkeeping.--Section 2343 of title 18, United States
Code, is amended--
(1) by striking ``60,000'' in subsection (a) and inserting
``30,000'';
(2) by inserting after ``transaction'' in subsection (a)
the following: ``or, in the case of other tobacco products an
equivalent quantity as determined by regulation,'' ;
(3) by striking the last sentence of subsection (a) and
inserting the following:

``Except as provided in subsection (c) of this section,
nothing contained herein shall authorize the Secretary to
require reporting under this section.'';
(4) by striking ``60,000'' in subsection (b) and inserting
``30,000'';
(5) by inserting after ``transaction'' in subsection (b)
the following: ``or, in the case of other tobacco products an
equivalent quantity as determined by regulation,''; and
(6) by adding at the end thereof the following:
``(c)(1) Any person who ships, sells, or distributes for
resale tobacco products in interstate commerce, whereby such
tobacco products are shipped into a State taxing the sale or
use of such tobacco products or who advertises or offers
tobacco products for such sale or transfer and shipment
shall--
``(A) first file with the tobacco tax administrator of the
State into which such shipment is made or in which such
advertisement or offer is disseminated, a statement setting
for the persons name, and trade name (if any), and the
address of the persons principal place of business and of any
other place of business; and
``(B) not later than the 10th day of each month, file with
the tobacco tax administrator of the State into which such
shipment is made a memorandum or a copy of the invoice
covering each and every shipment of tobacco products made
during the previous month into such State; the memorandum or
invoice in each case to include the name and address of the
person to whom the shipment was made, the brand, and the
quantity thereof.
``(2) The fact that any person ships or delivers for
shipment any tobacco products shall, if such shipment is into
a State in which such person has filed a statement with the
tobacco tax administrator under paragraph (1)(A) of this
subsection, be presumptive evidence that such tobacco
products were sold, shipped, or distributed for resale by
such person.
``(3) For purposes of this subsection--
``(A) the term `use' includes consumption, storage,
handling, or disposal of tobacco products; and
``(B) the term `tobacco tax administrator' means the State
official authorized to administer tobacco tax laws of the
State.''.
(e) Penalties.--Section 2344 of title 18, United States
Code, is amended--
(1) by inserting ``or (c)'' in subsection (b) after
``section 2344(b)'';
(2) by inserting ``or contraband tobacco products'' after
``cigarettes'' in subsection (c); and
(3) by adding at the end thereof the following:
``(d) Any proceeds from the unlawful distribution of
tobacco shall be subject to seizure and forfeiture under
section 981(a)(1)(C).''.
(f) Repeal of Federal Law Relating to Collection of State
Cigarette Taxes.--The Act of October 19, 1949, (63 Stat. 884;
15 U.S.C. 375-378) is hereby repealed.

SEC. 1139. FUNDING.

(a) License Fees.--The Secretary may, in the Secretary's
sole discretion, set the fees for licenses required by this
chapter, in such amounts as are necessary to recover the
costs of administering the provisions of this chapter,
including preventing trafficking in contraband tobacco
products.
(b) Disposition of Fees.--Fees collected by the Secretary
under this chapter shall be deposited in an account with the
Treasury of the United States that is specially designated
for paying the costs associated with the administration or
enforcement of this chapter or any other Federal law relating
to the unlawful trafficking of tobacco products. The
Secretary is authorized and directed to pay out of any funds
available in such account any expenses incurred by the
Federal Government in administering and enforcing this
chapter or any other Federal law relating to the unlawful
trafficking in tobacco products (including expenses incurred
for the salaries and expenses of individuals employed to
provide such services). None of the funds deposited into such
account shall be available for any purpose other than making
payments authorized under the preceding sentence.

SEC. 1140. RULES AND REGULATIONS.

The Secretary shall prescribe all needful rules and
regulations for the enforcement of this chapter, including
all rules and regulations that are necessary to ensure the
lawful distribution of tobacco products in interstate or
foreign commerce.

Subtitle C--Other Provisions

SEC. 1161. IMPROVING CHILD CARE AND EARLY CHILDHOOD
DEVELOPMENT.

(a) In General.--There are authorized to be appropriated to
the Secretary from the National Tobacco Trust Fund such sums
as may be necessary for each fiscal year to be used by the
Secretary for the following purposes:
(1) Improving the affordability of child care through
increased appropriations for child care under the Child Care
and Development Block Grant Act of 1990 (42 U.S.C. 9859 et
seq.).
(2) Enhancing the quality of child care and early childhood
development through the provision of grants to States under
the Child Care and Development Block Grant Act of 1990 (42
U.S.C. 9859 et seq.).
(3) Expanding the availability and quality of school-age
care through the provision of grants to States under the
Child Care and Development Block Grant Act of 1990 (42 U.S.C.
9859 et seq.).
(4) Assisting young children by providing grants to local
collaboratives under the Child Care and Development Block
Grant Act of 1990 (42 U.S.C. 9859 et seq.) for the purpose of
improving parent education and supportive services,
strengthening the quality of child care, improving health
services, and improving services for children with
disabilities.
(b) Supplement not Supplant.--Amounts made available to a
State under this section shall be used to supplement and not
supplant other Federal, State, and local funds provided for
programs that serve the health and developmental needs of
children. Amounts provided to the State under any of the
provisions of law referred to in this section shall not be
reduced solely as a result of the availability of funds under
this section.

SEC. 1162. BAN OF SALE OF TOBACCO PRODUCTS THROUGH THE USE OF
VENDING MACHINES.

(a) Ban of Sale of Tobacco Products Through the Use of
Vending Machines.--Effective 12 months after the date of
enactment of this Act, it shall be unlawful to sell tobacco
products through the use of a vending machine.
(b) Compensation for Banned Vending Machines.--
(1) In general.--The owners and operators of tobacco
vending machines shall be reimbursed, subject to the
availability of appropriations under subsection (d), for the
fair market value of their tobacco vending machines.
(2) Tobacco vending reimburment corporation.--
(A) Corporation.--Reimbursment shall be directed through a
private, nonprofit corporation established in the District of
Columbia, known as the Tobacco Vending Reimburment
Corporation (in this section referred to as the
``Corporation''). Except as otherwise provided in this
section, the Corporation is subject to, and has all the
powers conferred upon a nonprofit corporation by

[[Page S5075]]

the District of Columbia Nonprofit Corporation Act (D.C. Code
section 29-501 et seq.).
(B) Duties.--The Corporation shall--
(i) disburse compensation funds to vending companies under
this section;
(ii) verify operational machines; and
(iii) maintain complete records of machine verification and
accountings of disbursements and administration of the
compensation fund established under paragraph (4).
(3) Management of corporation.--
(A) Board of directors.--The Corporation shall be managed
by a Board of Directors that--
(i) consists of distinguished Americans with experience in
finance, public policy, or fund management;
(ii) includes at least 1 member of the United States
tobacco vending machine industry;
(iii) shall be paid an annual salary in an amount
determined by the President of the Corporation not to exceed
$40,000 individually, out of amounts transferred to the
Corporation under paragraph (4)(A);
(iv) shall appoint a President to manage the day-to-day
activities of the Corporation;
(v) shall develop guidelines by which the President shall
direct the Corporation;
(vi) shall retain a national accounting firm to verify the
distribution of funds and audit the compensation fund
established under paragraph (4);
(vii) shall retain such legal, management, or consulting
assistance as is necessary and reasonable; and
(viii) shall periodically report to Congress regarding the
activities of the Corporation.
(B) Duties of the president of the corporation.--The
President of the Corporation shall--
(i) hire appropriate staff;
(ii) prepare the report of the Board of Directors of the
Corporation required under subparagraph (A)(viii); and
(iii) oversee Corporation functions, including verification
of machines, administration and disbursement of funds,
maintenance of complete records, operation of appeals
procedures, and other directed functions.
(4) Compensation Fund.--
(A) Rules for disbursement of funds.--
(i) Payments to owners and operators.--The Corporation
shall disburse funds to compensate the owners and operators
of tobacco vending machines in accordance with the following:

(I) The fair market value of each tobacco vending machine
verified by the Corporation President in accordance with
subparagraph (C), and proven to have been in operation before
August 10, 1995, shall be disbursed to the owner of the
machine seeking compensation.
(II) No compensation shall be made for a spiral glass front
vending machine.

(ii) Other payments.--Funds appropriated to the Corporation
under subsection (d) may be used to pay the administrative
costs of the Corporation that are necessary and proper or
required by law. The total amount paid by the Corporation for
administrative and overhead costs, including accounting fees,
legal fees, consultant fees, and associated administrative
costs shall not exceed 1 percent of the total amount
appropriated to the Corporation under subsection (d).
(B) Verification of vending machines.--Verification of
vending machines shall be based on copies of official State
vending licenses, company computerized or handwritten sales
records, or physical inspection by the Corporation President
or by an inspection agent designated by the President. The
Corporation President and the Board of Directors of the
Corporation shall work vigorously to prevent and prosecute
any fraudulent claims submitted for compensation.
(C) Return of account funds not distributed to vendors.--
The Corporation shall be dissolved on the date that is 4
years after the date of enactment of this Act. Any funds not
dispersed or allocated to claims pending as of that date
shall be transferred to a public anti-smoking trust, or used
for such other purposes as Congress may designate.
(c) Settlement of Legal Claims Pending Against the United
States.--Acceptance of a compensation payment from the
Corporation by a vending machine owner or operator shall
settle all pending and future claims of the owner or operator
against the United States that are based on, or related to,
the ban of the use of tobacco vending machines imposed under
this section and any other laws or regulations that limit the
use of tobacco vending machines.
(d) Authorization of Appropriations.--There are authorized
to be appropriated to the Corporation from funds not
otherwise obligated in the Treasury or out of the National
Tobacco Trust Fund, such sums as may be necessary to carry
out this section.

SEC. 1163. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974.

(a) In General.--Subpart B of part 7 of subtitle B of title
I of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1185 et seq.) is amended by adding at the end the
following new section:

``SEC. 713. REQUIRED COVERAGE FOR MINIMUM HOSPITAL STAY FOR
MASTECTOMIES AND LYMPH NODE DISSECTIONS FOR THE
TREATMENT OF BREAST CANCER AND COVERAGE FOR
RECONSTRUCTIVE SURGERY FOLLOWING MASTECTOMIES.

``(a) Inpatient Care.--
``(1) In general.--A group health plan, and a health
insurance issuer providing health insurance coverage in
connection with a group health plan, that provides medical
and surgical benefits shall ensure that inpatient coverage
with respect to the surgical treatment of breast cancer
(including a mastectomy, lumpectomy, or lymph node dissection
for the treatment of breast cancer) is provided for a period
of time as is determined by the attending physician, in his
or her professional judgment consistent with generally
accepted medical standards, in consultation with the patient,
and subject to subsection (d), to be medically appropriate.
``(2) Exception.--Nothing in this section shall be
construed as requiring the provision of inpatient coverage if
the attending physician in consultation with the patient
determine that a shorter period of hospital stay is medically
appropriate.
``(b) Reconstructive Surgery.--A group health plan, and a
health insurance issuer providing health insurance coverage
in connection with a group health plan, that provides medical
and surgical benefits with respect to a mastectomy shall
ensure that, in a case in which a mastectomy patient elects
breast reconstruction, coverage is provided for--
``(1) all stages of reconstruction of the breast on which
the mastectomy has been performed;
``(2) surgery and reconstruction of the other breast to
produce a symmetrical appearance; and
``(3) the costs of prostheses and complications of
mastectomy including lymphedemas;

in the manner determined by the attending physician and the
patient to be appropriate. Such coverage may be subject to
annual deductibles and coinsurance provisions as may be
deemed appropriate and as are consistent with those
established for other benefits under the plan or coverage.
Written notice of the availability of such coverage shall be
delivered to the participant upon enrollment and annually
thereafter.
``(c) Notice.--A group health plan, and a health insurance
issuer providing health insurance coverage in connection with
a group health plan shall provide notice to each participant
and beneficiary under such plan regarding the coverage
required by this section in accordance with regulations
promulgated by the Secretary. Such notice shall be in writing
and prominently positioned in any literature or
correspondence made available or distributed by the plan or
issuer and shall be transmitted--
``(1) in the next mailing made by the plan or issuer to the
participant or beneficiary;
``(2) as part of any yearly informational packet sent to
the participant or beneficiary; or
``(3) not later than January 1, 1998;
whichever is earlier.
``(d) No Authorization Required.--
``(1) In general.--An attending physician shall not be
required to obtain authorization from the plan or issuer for
prescribing any length of stay in connection with a
mastectomy, a lumpectomy, or a lymph node dissection for the
treatment of breast cancer.
``(2) Prenotification.--Nothing in this section shall be
construed as preventing a group health plan from requiring
prenotification of an inpatient stay referred to in this
section if such requirement is consistent with terms and
conditions applicable to other inpatient benefits under the
plan, except that the provision of such inpatient stay
benefits shall not be contingent upon such notification.
``(e) Prohibitions.--A group health plan, and a health
insurance issuer offering group health insurance coverage in
connection with a group health plan, may not--
``(1) deny to a patient eligibility, or continued
eligibility, to enroll or to renew coverage under the terms
of the plan, solely for the purpose of avoiding the
requirements of this section;
``(2) provide monetary payments or rebates to individuals
to encourage such individuals to accept less than the minimum
protections available under this section;
``(3) penalize or otherwise reduce or limit the
reimbursement of an attending provider because such provider
provided care to an individual participant or beneficiary in
accordance with this section;
``(4) provide incentives (monetary or otherwise) to an
attending provider to induce such provider to provide care to
an individual participant or beneficiary in a manner
inconsistent with this section; and
``(5) subject to subsection (f)(3), restrict benefits for
any portion of a period within a hospital length of stay
required under subsection (a) in a manner which is less
favorable than the benefits provided for any preceding
portion of such stay.
``(f) Rules of Construction.--
``(1) In general.--Nothing in this section shall be
construed to require a patient who is a participant or
beneficiary--
``(A) to undergo a mastectomy or lymph node dissection in a
hospital; or
``(B) to stay in the hospital for a fixed period of time
following a mastectomy or lymph node dissection.
``(2) Limitation.--This section shall not apply with
respect to any group health plan, or any group health
insurance coverage offered by a health insurance issuer,
which does not provide benefits for hospital lengths of stay
in connection with a mastectomy or lymph node dissection for
the treatment of breast cancer.
``(3) Cost sharing.--Nothing in this section shall be
construed as preventing a group health plan or issuer from
imposing deductibles, coinsurance, or other cost-sharing in
relation to benefits for hospital

[[Page S5076]]

lengths of stay in connection with a mastectomy or lymph node
dissection for the treatment of breast cancer under the plan
(or under health insurance coverage offered in connection
with a group health plan), except that such coinsurance or
other cost-sharing for any portion of a period within a
hospital length of stay required under subsection (a) may not
be greater than such coinsurance or cost-sharing for any
preceding portion of such stay.
``(4) Level and type of reimbursements.--Nothing in this
section shall be construed to prevent a group health plan or
a health insurance issuer offering group health insurance
coverage from negotiating the level and type of reimbursement
with a provider for care provided in accordance with this
section.
``(g) Preemption, Relation to State Laws.--
``(1) In general.--Nothing in this section shall be
construed to preempt any State law in effect on the date of
enactment of this section with respect to health insurance
coverage that--
``(A) such State law requires such coverage to provide for
at least a 48-hour hospital length of stay following a
mastectomy performed for treatment of breast cancer and at
least a 24-hour hospital length of stay following a lymph
node dissection of breast cancer;
``(B) requires coverage of at least the coverage of
reconstructive breast surgery otherwise required under this
section; or
``(C) requires coverage for breast cancer treatments
(including breast reconstruction) in accordance with
scientific evidence-based practices or guidelines recommended
by established medical associations.
``(2) Application of section.--With respect to a State
law--
``(A) described in paragraph (1)(A), the provisions of this
section relating to breast reconstruction shall apply in such
State; and
``(B) described in paragraph (1)(B), the provisions of this
section relating to length of stays for surgical breast
treatment shall apply in such State.
``(3) Erisa.--Nothing in this section shall be construed to
affect or modify the provisions of section 514 with respect
to group health plans.''.
(b) Clerical Amendment.--The table of contents in section 1
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001 note) is amended by inserting after the item
relating to section 712 the following new item:

``Sec. 713. Required coverage for minimum hospital stay for
mastectomies and lymph node dissections for the treatment
of breast cancer and coverage for reconstructive surgery
following mastectomies.''.

(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply with respect to plan years beginning on or after the
date of enactment of this Act.
(2) Special rule for collective bargaining agreements.--In
the case of a group health plan maintained pursuant to 1 or
more collective bargaining agreements between employee
representatives and 1 or more employers, any plan amendment
made pursuant to a collective bargaining agreement relating
to the plan which amends the plan solely to conform to any
requirement added by this section shall not be treated as a
termination of such collective bargaining agreement.

TITLE XII--ASBESTOS-RELATED TOBACCO CLAIMS

SEC. 1201. NATIONAL TOBACCO TRUST FUNDS AVAILABLE UNDER
FUTURE LEGISLATION.

If the Congress enacts qualifying legislation after the
date of enactment of this Act to provide for the payment of
asbestos claims, then amounts in the National Tobacco Trust
Fund established by title IV of this Act set aside for public
health expenditures shall be available, as provided by
appropriation Acts, to make those payments. For purposes of
this section, the term ``qualifying legislation'' means a
public law that amends this Act and changes the
suballocations of funds set aside for public health
expenditures under title IV of this Act to provide for the
payment of those claims.

TITLE XIII--VETERANS' BENEFITS

SEC. 1301. RECOVERY BY SECRETARY OF VETERANS AFFAIRS.

Title 38, United States Code, is amended by adding after
part VI the following:

``PART VII--RECOVERY OF COSTS FOR TOBACCO-RELATED DISABILITY OR DEATH

``Chapter 91--Tort liability for disability, injury, disease, or death
due to tobacco use

``Sec.
``9101. Recovery by Secretary of Veterans Affairs
``9102. Regulations
``9103. Limitation or repeal of other provisions for recovery of
compensation
``9104. Exemption from annual limitation on damages

``Sec. 9101. RECOVERY BY SECRETARY OF VETERANS AFFAIRS

``(a) Conditions; exceptions; persons liable; amount of
recovery; subrogation.--In any case in which the Secretary is
authorized or required by law to provide compensation and
medical care services under this title for disability or
death from injury or disease attributable in whole or in part
to the use of tobacco products by a veteran during the
veterans active military, naval, or air service under
circumstances creating a tort liability upon a tobacco
product manufacturer (other than or in addition to the United
States) to pay damages therefor, the Secretary shall have a
right to recover (independent of the rights of the injured or
diseased veteran) from said tobacco product manufacturer the
cost of the compensation paid or to be paid and the costs of
medical care services provided, and shall, as to this right,
be subrogated to any right or claim that the injured or
diseased veteran, his or her guardian, personal
representative, estate, dependents, or survivors has against
such third person to the extent of the cost of the
compensation paid or to be paid and the costs of medical
services provided.
``(b) Enforcement procedure; intervention; joinder of
parties; State or Federal court proceedings.--The Secretary
may, to enforce such right under subsection (a) of this
section--
``(1) intervene or join in any action or proceeding brought
by the injured or diseased veteran, his or her guardian,
personal representative, estate, dependents, or survivors,
against the tobacco product manufacturer who is liable for
the injury or disease; or
``(2) if such action or proceeding is not commenced within
6 months after the first day on which compensation is paid,
or the medical care services are provided, by the Secretary
in connection with the injury or disease involved, institute
and prosecute legal proceedings against the tobacco product
manufacturer who is liable for the injury or disease, in a
State or Federal court, either alone (in its own name or in
the name of the injured veteran, his or her guardian,
personal representative, estate, dependents, or survivors) or
in conjunction with the injured or diseased veteran, his or
her guardian, personal representative, estate, dependents, or
survivors.
``(c) Credits to appropriations.--Any amount recovered or
collected under this section for compensation paid, and
medical care services provided, by the Secretary shall be
credited to a revolving fund established in the Treasury of
the United States known as the Department of Veterans Affairs
Tobacco Recovery Fund (hereafter called the Fund). The Fund
shall be available to the Secretary without fiscal year
limitation for purposes of veterans programs, including
administrative costs. The Secretary may transfer such funds
as deemed necessary to the various Department of Veterans
Affairs appropriations, which shall remain available until
expended.

``Sec. 9102. REGULATIONS

``(a) Determination and establishment of present value of
compensation and medical care services to be paid.--The
Secretary may prescribe regulations to carry out this
chapter, including regulations with respect to the
determination and establishment of the present value of
compensation to be paid to an injured or diseased veteran or
his or her surviving spouse, child, or parent, and medical
care services provided to a veteran.
``(b) Settlement, release and waiver of claims.--To the
extent prescribed by regulations under subsection (a) of this
section, the Secretary may--
``(1) compromise, or settle and execute a release of, any
claim which the Secretary has by virtue of the right
established by section 9101 of this title; or
``(2) waive any such claim, in whole or in part, for the
convenience of the Government, or if he or she determines
that collection would result in undue hardship upon the
veteran who suffered the injury or disease or his or her
surviving spouse, child or parent resulting in payment of
compensation, or receipt of medical care services.
``(c) Damages recoverable for personal injury unaffected.--
No action taken by the Secretary in connection with the
rights afforded under this chapter shall operate to deny to
the injured veteran or his or her surviving spouse, child or
parent the recovery for that portion of his or her damage not
covered hereunder.

``Sec. 9103. LIMITATION OR REPEAL OF OTHER PROVISIONS FOR
RECOVERY OF COMPENSATION AND MEDICAL CARE
SERVICES

``This chapter does not limit or repeal any other provision
of law providing for recovery by the Secretary of the cost of
compensation and medical care services described in section
9101 of this title.

``Sec. 9104. EXEMPTION FROM ANNUAL LIMITATION ON DAMAGES

``Any amount recovered under section 9101 of this title for
compensation paid or to be paid, and the cost of medical care
services provided, by the Secretary for disability or death
from injury or disease attributable in whole or in part to
the use of tobacco products by a veteran during the veterans
active military, naval, or air service shall not be subject
to the limitation on the annual amount of damages for which
the tobacco product manufacturers may be found liable as
provided in the National Tobacco Policy and Youth Smoking
Reduction Act and shall not be counted in computing the
annual amount of damages for purposes of that section.''.

[[Page S5077]]

TITLE XIV--EXCHANGE OF BENEFITS FOR AGREEMENT TO TAKE ADDITIONAL
MEASURES TO REDUCE YOUTH SMOKING

SEC. 1401. CONFERRAL OF BENEFITS ON PARTICIPATING TOBACCO
PRODUCT MANUFACTURERS IN RETURN FOR THEIR
ASSUMPTION OF SPECIFIC OBLIGATIONS.

Participating tobacco product manufacturers shall receive
the benefits, and assume the obligations, set forth in this
title.

SEC. 1402. PARTICIPATING TOBACCO PRODUCT MANUFACTURER.

(a) In General.--Except as provided in subsection (b), a
tobacco product manufacturer that--
(1) executes a protocol with the Secretary of Health and
Human Services that meets the requirements of sections 1403,
1404, and 1405; and
(2) makes the payment required under section 402(a)(1),
is, for purposes of this title, a participating tobacco
products manufacturer.
(b) Disqualification.--
(1) Ineligibility.--Notwithstanding subsection (a), a
tobacco product manufacturer may not become a participating
tobacco products manufacturer if--
(A) the tobacco product manufacturer or any of its
principal officers (acting in that official's corporate
capacity), is convicted of--
(i) manufacturing or distributing misbranded tobacco
products in violation of the criminal prohibitions on such
misbranding established under section 301 or 303 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331 or 333);
(ii) violating reporting requirements established under
section 5762(a)(4) of the Internal Revenue Code of 1986 (26
U.S.C. 5762(a)(4));
(iii) violating, or aiding and abetting the violation of
chapter 114 of title 18, United States Code; or
(iv) violating Federal prohibitions on mail fraud, wire
fraud, or the making of false statements to Federal officials
in the course of making reports or disclosures required by
this Act; or
(B) the tobacco product manufacturer, at the end of the 1-
year period beginning on the date on which such manufacturer
fails to make a required assessment payment under title IV of
this Act, has not fully made such payment.
(2) Disqualification.--A tobacco product manufacturer that
has become a participating tobacco product manufacturer shall
cease to be treated as a participating tobacco product
manufacturer if--
(A) it, or any of its principal officers (acting in that
official's corporate capacity) is convicted of an offense
described in paragraph (1)(A); or
(B) it fails to make such a payment within the time period
described in paragraph (1)(B).
(c) Non-participating Tobacco Manufacturers.--Any tobacco
product manufacturer that--
(1) does not execute a protocol in accordance with
subsection (a);
(2) fails to make the payment required by section 402(a)(1)
(if applicable to that manufacturer);
(3) is not eligible, under subsection (b)(1), to become a
participating tobacco product manufacturer; or
(4) ceases to be treated as a participating tobacco product
manufacturer under subsection (b)(2),
is, for purposes of this title, a non-participating tobacco
product manufacturer.

SEC. 1403. GENERAL PROVISIONS OF PROTOCOL.

(a) In General.--For purposes of section 1402, a protocol
meets the requirements of this section if it--
(1) contains the provisions described in subsection (b);
and
(2) is enforceable at law.
(b) Required Provisions.--The protocol shall include the
following provisions:
(1) The tobacco product manufacturer executing the protocol
will not engage in any conduct that was, either on the date
of enactment of this Act, or at any time after the date of
enactment of this Act--
(A) prohibited by this Act;
(B) prohibited by any regulation promulgated by the Food
and Drug Administration that applies to tobacco products; or
(C) prohibited by any other statute.
(2) The tobacco product manufacturer executing the protocol
will contract with only such distributors and retailers who
have operated in compliance with the applicable provisions of
Federal, State, or local law regarding the marketing and sale
of tobacco products and who agree to comply with advertising
and marketing provisions in paragraph (3).
(3) The tobacco product manufacturer executing the protocol
will be bound in marketing tobacco products by the following
provisions, whether or not these provisions have legal force
and effect against manufacturers who are not signatories to
the protocol--
(A) the advertising and marketing provisions of part 897 of
title 21, Code of Federal Regulations, that were published in
the Federal Register on August 28, 1996, and which shall be
adopted and incorporated as independent terms of the
protocol;
(B) the requirements of section 1404; and
(C) the requirements of section 1405.
(4) The tobacco product manufacturer executing the protocol
will make any payments to the National Tobacco Trust Fund in
title IV that are required to be made under that title or in
any other title of this Act.
(5) The tobacco product manufacturer executing the protocol
will be bound by the provisions of title IV, and any other
title of this Act with respect to payments required under
title IV, without regard to whether those provisions have
legal force and effect against manufacturers who have not
become signatories.
(6) The tobacco product manufacturer executing the protocol
will make the industry-wide and manufacturer-specific look-
back assessment payments that may be required under title II.
(7) The tobacco product manufacturer executing the protocol
will be bound by the provisions of title II that require a
manufacturer to make look-back assessments, and any other
title of this Act with respect to such assessments, without
regard to whether such terms have legal force and effect
against manufacturers who have not become signatories.
(8) The tobacco product manufacturer executing the protocol
will, within 180 days after the date of enactment of this Act
and in conjunction with other participating tobacco product
manufacturers, establish a National Tobacco Document
Depository in the Washington, D.C. area--
(A) that is not affiliated with, or controlled by, any
tobacco product manufacturer;
(B) the establishment and operational costs of which are
allocated among participating tobacco product manufacturers;
and
(C) that will make any document submitted to it under title
IX of this Act and finally determined not to be subject to
attorney-client privilege, attorney work product, or trade
secret exclusions, available to the public using the Internet
or other means within 30 days after receiving the document.
(c) Provisions Applicable to Documents.--The provisions of
section 2116(a) and (b) of title 44, United States Code,
apply to records and documents submitted to the Depository
(or, to the alternative depository, if any, established by
the Secretary by regulation under title IX of this Act) in
the same manner and to the same extent as if they were
records submitted to the National Archives of the United
States required by statute to be retained indefinitely.

SEC. 1404. TOBACCO PRODUCT LABELING AND ADVERTISING
REQUIREMENTS OF PROTOCOL.

(a) In General.--For purposes of section 1402, a protocol
meets the requirements of this section if it requires that--
(1) no tobacco product will be sold or distributed in the
United States unless its advertising and labeling (including
the package)--
(A) contain no human image, animal image, or cartoon
character;
(B) are not outdoor advertising, including advertising in
enclosed stadia and on mass transit vehicles, and advertising
from within a retail establishment that is directed toward or
visible from the outside of the establishment;
(C) at the time the advertising or labeling is first used
are submitted to the Secretary so that the Secretary may
conduct regular review of the advertising and labeling;
(D) comply with any applicable requirement of the Federal
Food, Drug, and Cosmetic Act, the Federal Cigarette Labeling
and Advertising Act, and any regulation promulgated under
either of those Acts;
(E) do not appear on the international computer network of
both Federal and non-Federal interoperable packet switches
data networks (the ``Internet''), unless such advertising is
designed to be inaccessible in or from the United States to
all individuals under the age of 18 years;
(F) use only black text on white background, other than--
(i) those locations other than retail stores where no
person under the age of 18 is permitted or present at any
time, if the advertising is not visible from outside the
establishment and is affixed to a wall or fixture in the
establishment; and
(ii) advertisements appearing in any publication which the
tobacco product manufacturer, distributor, or retailer
demonstrates to the Secretary is a newspaper, magazine,
periodical, or other publication whose readers under the age
of 18 years constitute 15 percent or less of the total
readership as measured by competent and reliable survey
evidence, and that is read by less than 2 million persons
under the age of 18 years as measured by competent and
reliable survey evidence;
(G) for video formats, use only static black text on a
white background, and any accompanying audio uses only words
without music or sound effects;
(8) for audio formats, use only words without music or
sound effects;
(2) if a logo, symbol, motto, selling message, recognizable
color or pattern of colors, or any other indicia of brand-
name product identification of the tobacco product is
contained in a movie, program, or video game for which a
direct or indirect payment has been made to ensure its
placement;
(3) if a direct or indirect payment has been made by any
tobacco product manufacturer, distributor, or retailer to any
entity for the purpose of promoting use of the tobacco
product through print or film media that appeals to
individuals under the age of 18 years or through a live
performance by an entertainment artist that appeals to such
individuals;
(4) if a logo, symbol, motto, selling message, recognizable
color or pattern of colors, or any other indicia or product
identification identical to, similar to, or identifiable with

[[Page S5078]]

the tobacco product is used for any item (other than a
tobacco product) or service marketed, licensed, distributed
or sold or caused to be marketed, licensed, distributed, or
sold by the tobacco product manufacturer or distributor of
the tobacco product; and
(5)(A) except as provided in subparagraph (B), if
advertising or labeling for such product that is otherwise in
accordance with the requirements of this section bears a
tobacco product brand name (alone or in conjunction with any
other word) or any other indicia of tobacco product
identification and is disseminated in a medium other than
newspapers, magazines, periodicals or other publications
(whether periodic or limited distribution), nonpoint-of-sale
promotional material (including direct mail), point-of-sale
promotional material, or audio or video formats delivered at
a point-of-sale; but
(B) notwithstanding subparagraph (A), advertising or
labeling for cigarettes or smokeless tobacco may be
disseminated in a medium that is not specified in paragraph
(1) if the tobacco product manufacturer, distributor, or
retailer notifies the Secretary not later than 30 days prior
to the use of such medium, and the notice describes the
medium and the extent to which the advertising or labeling
may be seen by persons under the age of 18 years.
(b) Color Print Ads on Magazines.--The protocol shall also
provide that no tobacco product may be sold or distributed in
the United States if any advertising for that product on the
outside back cover of a magazine appears in any color or
combination of colors.

SEC. 1405. POINT-OF-SALE REQUIREMENTS.

(a) In General.--For purposes of section 1402, a protocol
meets the requirements of this section if it provides that,
except as provided in subsection (b), point-of-sale
advertising of any tobacco product in any retail
establishment is prohibited.
(b) Permitted POS Locations.--
(1) Placement.--One point-of-sale advertisement may be
placed in or at each retail establishment for its brand or
the contracted house retailer or private label brand of its
wholesaler.
(2) Size.--The display area of any such point-of-sale
advertisement (either individually or in the aggregate) shall
not be larger than 576 square inches and shall consist of
black letters on white background or another recognized
typography.
(3) Proximity to candy.--Any such point-of-sale
advertisement shall not be attached to or located within 2
feet of any display fixture on which candy is displayed for
sale.
(c) Audio or Video.--Any audio or video format permitted
under regulations promulgated by the Secretary may be played
or shown in, but not distributed, at any location where
tobacco products are offered for sale.
(d) No Restrictive Covenants.--No tobacco product
manufacturer or distributor of tobacco products may enter
into any arrangement with a retailer that limits the
retailer's ability to display any form of advertising or
promotional material originating with another supplier and
permitted by law to be displayed in a retail establishment.
(e) Definitions.--As used in this section, the terms
``point-of-sale advertisement'' and ``point-of-sale
advertising'' mean all printed or graphical materials (other
than a pack, box, carton, or container of any kind in which
cigarettes or smokeless tobacco is offered for sale, sold, or
otherwise distributed to consumers) bearing the brand name
(alone or in conjunction with any other word), logo, symbol,
motto, selling message, or any other indicia of product
identification identical or similar to, or identifiable with,
those used for any brand of cigarettes or smokeless tobacco,
which, when used for its intended purpose, can reasonably be
anticipated to be seen by customers at a location where
tobacco products are offered for sale.

SEC. 1406. APPLICATION OF TITLE.

(a) In General.--The provisions of this title apply to any
civil action involving a tobacco claim brought pursuant to
title VII of this Act, including any such claim that has not
reached final judgment or final settlement as of the date of
enactment of this Act, only if such claim is brought or
maintained against--
(1) a participating tobacco product manufacturer or its
predecessors;
(2) an importer, distributor, wholesaler, or retailer of
tobacco products--
(A) that, after the date of enactment of this Act, does not
import, distribute, or sell tobacco products made or sold by
a non-participating tobacco manufacturer;
(B) whose business practices with respect to sales or
operations occurring within the United States, conform to the
applicable requirements of the protocol; and
(C) that is not itself a non-participating tobacco product
manufacturer;
(3) a supplier of component or constituent parts of tobacco
products--
(A) whose business practices with respect to sales or
operations occurring within the United States, conform to the
applicable requirements of the protocol; and
(B) that is not itself a non-participating tobacco product
manufacturer;
(4) a grower of tobacco products, unless such person is
itself a non-participating tobacco product manufacturer; or
(5) an insurer of any person described in paragraph (1),
(2), (3), or (4) based on, arising out of, or related to
tobacco products manufactured, imported, distributed, or sold
(or tobacco grown) by such person (other than an action
brought by the insured person), unless such insurer is itself
a non-participating tobacco product manufacturer.
(b) Exceptions.--The provisions of this title shall not
apply to any tobacco claim--
(1) brought against any person other than those described
in subsection (a) or to any tobacco claim that reached final
judgment or final settlement prior to the date of enactment
of this Act;
(2) against an employer under valid workers' compensation
laws;
(3) arising under the securities laws of a State or the
United State;
(4) brought by the United States;
(5) brought under this title by a State or a participating
tobacco product manufacturer to enforce this Act;
(6) asserting damage to the environment from exposures
other than environmental smoke or second-hand smoke; or
(7) brought against a supplier of a component or
constituent part of a tobacco product, if the component or
constituent part was sold after the date of enactment of this
Act, and the supplier knew that the tobacco product giving
rise to the claim would be manufactured in the United States
by a nonparticipating tobacco product manufacturer.

SEC. 1407. GOVERNMENTAL CLAIMS.

(a) In General.--Except as provided in subsection (b) and
(c), no State, political subdivision of a State, municipal
corporation, governmental entity or corporation, Indian
tribe, or agency or subdivision thereof, or other entity
acting in parens patriae, may file or maintain any civil
action involving a tobacco claim against a participating
tobacco product manufacturer.
(b) Effect on Existing State Suits of Settlement Agreement
or Consent Decree.--Within 30 days after the date of
enactment of this Act, any State that has filed a civil
action involving a tobacco claim against a participating
tobacco product manufacturer may elect to settle such action
against said tobacco product manufacturer. If a State makes
such an election to enter into a settlement or a consent
decree, it may maintain a civil action involving a tobacco
claim only to the extent necessary to permit continuing court
jurisdiction over the settlement or consent decree. Nothing
herein shall preclude any State from bringing suit or seeking
a court order to enforce the terms of such settlement or
decree.
(c) State Option for One-Time Opt Out.--Any State that does
not make the election described in subsection (b) may
continue its lawsuit, notwithstanding subsection (a) of this
section. A State that does not make such an election shall
not be eligible to receive payments from the trust fund in
title IV.
(d) 30-day Delay.--No settlement or consent decree entered
into under subsection (b) may take effect until 30 days after
the date of enactment of this Act.
(f) Preservation of Insurance Claims.--
(1) In general.--If all participating tobacco product
manufacturers fail to make the payments required by title IV
for any calendar year, then--
(A) beginning on the first day of the next calendar year,
subsection (a) does not apply to any insurance claim
(including a direct action claim) that is a tobacco claim,
regardless of when that claim arose;
(B) any statute of limitations or doctrine of laches under
applicable law shall be tolled for the period--
(i) beginning on the date of enactment of this Act; and
(ii) ending on the last day of that calendar year; and
(C) an insurance claim (including a direct action claim)
that is a tobacco claim and that is pending on the date of
enactment of this Act shall be preserved.
(2) Application of title 11, United States Code.--For
purposes of this subsection, nothing in this Act shall be
construed to modify, suspend, or otherwise affect the
application of title 11, United States Code, to participating
tobacco manufacturers that fail to make such payments.
(3) State law not affected.--Nothing in this subsection
shall be construed to expand or abridge State law.

SEC. 1408. ADDICTION AND DEPENDENCY CLAIMS; CASTANO CIVIL
ACTIONS.

(a) Addiction and Dependence Claims Barred.--In any civil
action to which this title applies, no addiction claim or
dependence claim may be filed or maintained against a
participating tobacco product manufacturer.
(b) Castano Civil Actions.--
(1) The rights and benefits afforded in this Act, and the
various research activities envisioned by this Act, are
provided in settlement of, and shall constitute the exclusive
remedy for the purpose of determining civil liability as to
those claims asserted in the Castano Civil Actions, and all
bases for any such claim under the laws of any State are
preempted (including State substantive, procedural, remedial,
and evidentiary provisions) and settled. The Castano Civil
Actions shall be dismissed with full reservation of the
rights of individual class members to pursue claims not based
on addiction or dependency in civil actions, as defined in
section 1417(2), in accordance with this Act. For purposes of
determining application of statutes of limitation or repose,
individual actions filed within one year after the effective
date of this Act by those who were included within a Castano
Civil Action shall be considered to have been filed as of the
date of the Castano Civil Action applicable to said
individual.

[[Page S5079]]

(2) For purposes of awarding attorneys fees and expenses
for those actions subject to this subsection, the matter at
issue shall be submitted to arbitration before one panel of
arbitrators. In any such arbitration, the arbitration panel
shall consist of 3 persons, one of whom shall be chosen by
the attorneys of the Castano Plaintiffs' Litigation Committee
who were signatories to the Memorandum of Understanding dated
June 20, 1997, by and between tobacco product manufacturers,
the Attorneys General, and private attorneys, one of whom
shall be chosen by the participating tobacco product
manufacturers, and one of whom shall be chosen jointly by
those 2 arbitrators.
(3) The participating tobacco product manufacturers shall
pay the arbitration award.

SEC. 1409. SUBSTANTIAL NON-ATTAINMENT OF REQUIRED REDUCTIONS.

(a) Action by Secretary.--If the Secretary determines under
title II that the non-attainment percentage for any year is
greater than 20 percentage points for cigarettes or smokeless
tobacco, then the Secretary shall determine, on a brand-by-
brand basis, using data that reflects a 1999 baseline, which
tobacco product manufacturers are responsible within the 2
categories of tobacco products for the excess. The Secretary
may commence an action under this section against the tobacco
product manufacturer or manufacturers of the brand or brands
of cigarettes or smokeless tobacco products for which the
non-attainment percentage exceeded 20 percentage points.
(b) Procedures.--Any action under this section shall be
commenced by the Secretary in the United States District
Court for the District of Columbia within 90 days after
publication in the Federal Register of the determination that
the non-attainment percentage for the tobacco product in
question is greater than 20 percentage points. Any such
action shall be heard and determined by a 3-judge court under
section 2284 of title 28, United States Code.
(c) Determination by Court.--In any action under this
section, the court shall determine whether a tobacco product
manufacturer has shown, by a preponderance of the evidence
that it--
(1) has complied substantially with the provisions of this
Act regarding underage tobacco use, of any rules or
regulations promulgated thereunder, or of any Federal or
State laws regarding underage tobacco use;
(2) has not taken any material action to undermine the
achievement of the required percentage reduction for the
tobacco product in question; and
(3) has used its best efforts to reduce underage tobacco
use to a degree at least equal to the required percentage
reductions.
(d) Removal of Annual Aggregate Payment Limitation.--Except
as provided in subsections (e) and (g), if the court
determines that a tobacco product manufacturer has failed to
make the showing described in subsection (c) then sections
1411 and 1412 of this Act do not apply to the enforcement
against, or the payment by, such tobacco product manufacturer
of any judgment or settlement that becomes final after that
determination is made.
(e) Defense.--An action under this section shall be
dismissed, and subsection (d) shall not apply, if the court
finds that the Secretary's determination under subsection (a)
was unlawful under subparagraph (A), (B), (C), or (D) of
section 706(2) of title 5, United States Code. Any judgments
paid under section 1412 of this Act prior to a final judgment
determining that the Secretary's determination was erroneous
shall be fully credited, with interest, under section 1412 of
this Act.
(f) Review.--Decisions of the court under this section are
reviewable only by the Supreme Court by writ of certiorari
granted upon the petition of any party. The applicability of
subsection (d) shall be stayed during the pendency of any
such petition or review.
(g) Continuing Effect.--Subsection (d) shall cease to apply
to a tobacco product manufacturer found to have engaged in
conduct described in subsection (c) upon the later of--
(1) a determination by the Secretary under section 201
after the commencement of action under subsection (a) that
the non-attainment percentage for the tobacco product in
question is 20 or fewer percentage points; or
(2) a finding by the court in an action filed against the
Secretary by the manufacturer, not earlier than 2 years after
the determination described in subsection (c) becomes final,
that the manufacturer has shown by a preponderance of the
evidence that, in the period since that determination, the
manufacturer--
(A) has complied with the provisions of this Act regarding
underage tobacco use, of any rules or regulations promulgated
thereunder, and of any other applicable Federal, State, or
local laws, rules, or regulations;
(B) has not taken any action to undermine the achievement
of the required percentage reduction for the tobacco product
in question; and
(C) has used its best efforts to attain the required
percentage reduction for the tobacco product in question.

A judgment or settlement against the tobacco product
manufacturer that becomes final after a determination or
finding described in paragraph (1) or (2) of this subsection
is not subject to subsection (d). An action under paragraph
(2) of this subsection shall be commenced in the United
States District Court for the District of Columbia, and shall
be heard and determined by a 3-judge court under section 2284
of title 28, United States Code. A decision by the court
under paragraph (2) of this subsection is reviewable only by
the Supreme Court by writ of certiorari granted upon the
petition of any party, and the decision shall be stayed
during the pendency of the petition or review. A
determination or finding described in paragraph (1) or (2) of
this subsection does not limit the Secretary's authority to
bring a subsequent action under this section against any
tobacco product manufacturer or the applicability of
subsection (d) with respect to any such subsequent action.

SEC. 1410. PUBLIC HEALTH EMERGENCY.

If the Secretary, in consultation with the Commissioner of
Food and Drugs, the Surgeon General, the Director of the
Center for Disease Control or the Director's delegate, and
the Director of the Health and Human Services Office of
Minority Health determines at any time that a tobacco product
manufacturer's actions or inactions with respect to its
compliance with the Act are of such a nature as to create a
clear and present danger that the manufacturer will not
attain the targets for underage smoking reduction, the
Secretary may bring an action under section 1409 seeking the
immediate suspension of the tobacco product manufacturer's
annual limitation cap on civil judgments. If the court
determines that the Secretary has proved by clear and
convincing evidence that the subject manufacturer's actions
or inactions are of such a nature that they present a clear
and present danger that the manufacturer will not attain the
targets for underage smoking reduction, the court may suspend
the subject manufacturer's annual limitation cap on civil
judgments.

SEC. 1411. TOBACCO CLAIMS BROUGHT AGAINST PARTICIPATING
TOBACCO PRODUCT MANUFACTURERS.

(a) Permissible Defendants.--In any civil action to which
this title applies, tobacco claims may be filed or maintained
only against--
(1) a participating tobacco product manufacturer; or
(2) a surviving entity established by a participating
tobacco product manufacturer.
(b) Actions involving participating and non-participating
manufacturers.--In any civil action involving both a tobacco
claim against a participating tobacco product manufacturer
based in whole or in part upon conduct occurring prior to the
date of enactment of this Act and a claim against 1 or more
non-participating tobacco product manufacturers, the court,
upon application of a participating tobacco product
manufacturer, shall require the jury to or shall itself
apportion liability as between the participating tobacco
product manufacturer and non-participating tobacco product
manufacturers.

SEC. 1412. PAYMENT OF TOBACCO CLAIM SETTLEMENTS AND
JUDGMENTS.

(a) In General.--Except as provided in this section, any
judgment or settlement in any civil action to which this
subtitle applies shall be subject to the process for payment
of judgments and settlements set forth in this section. No
participating tobacco product manufacturer shall be obligated
to pay a judgment or settlement on a tobacco claim in any
civil action to which this title applies except in accordance
with this section. This section shall not apply to the
portion, if any, of a judgment that imposes punitive damages
based on any conduct that--
(1) occurs after the date of enactment of this Act; and
(2) is other than the manufacture, development,
advertising, marketing, or sale of tobacco products in
compliance with this Act and any agreement incident thereto.
(b) Registration with the Secretary of the Treasury.--
(1) The Secretary shall maintain a record of settlements,
judgments, and payments in civil actions to which this title
applies.
(2) Any party claiming entitlement to a monetary payment
under a final judgment or final settlement on a tobacco claim
shall register such claim with the Secretary by filing a true
and correct copy of the final judgment or final settlement
agreement with the Secretary and providing a copy of such
filing to all other parties to the judgment or settlement.
(3) Any participating tobacco product manufacturer making a
payment on any final judgment or final settlement to which
this section applies shall certify such payment to the
Secretary by filing a true and correct copy of the proof of
payment and a statement of the remaining unpaid portion, if
any, of such final judgment or final settlement with the
Secretary and shall provide a copy of such filing to all
other parties to the judgment or settlement.
(c) Liability Cap.--
(1) In general.--The aggregate payments made by all
participating tobacco product manufacturers in any calendar
year may not exceed $8,000,000,000.
(2) Implementation.--The Secretary shall initiate a
rulemaking within 30 days after the date of enactment of this
Act to establish a mechanism for implementing this subsection
in such a way to ensure the fair and equitable payment of
final judgments or final settlements on tobacco claims under
this title. Amounts not payable because of the application of
this subsection, shall be carried forward and paid in the
next year, subject to the provisions of this subsection.
(3) Inflation adjustment.--
(A) In general.--The amount in paragraph (1) shall be
increased annually, beginning with the second calendar year
beginning after the date of enactment of this Act, by

[[Page S5080]]

the greater of 3 percent or the annual increase in the CPI.
(B) CPI.--For purposes of subparagraph (A), the CPI for any
calendar year is the average of the Consumer Price Index for
all-urban consumers published by the Department of Labor.
(C) Rounding.--If any increase determined under
subparagraph (A) is not a multiple of $1,000, the increase
shall be rounded to the nearest multiple of $1,000.
(d) Injunctive Relief.--A participating tobacco product
manufacturer may commence an action to enjoin any State court
proceeding to enforce or execute any judgment or settlement
where payment has not been authorized under this section.
Such an action shall arise under the laws of the United
States and may be commenced in the district court of the
United States for the district in which the State court
proceeding is pending.
(e) Joint and Several Liability.--All participating tobacco
product manufacturers shall be jointly and severally liable
for, and shall enter into an agreement to apportion among
them, any amounts payable under judgments and settlements
governed by this section arising in whole or in part from
conduct occurring prior to the date of enactment of this Act.
(f) Bankruptcy of Participating Manufacturer.--No
participating tobacco product manufacturer shall cease
operations without establishing a surviving entity against
which a tobacco claim may be brought. Any obligation ,
interest, or debt of a participating, tobacco product
manufacturer arising under such liability apportionment
agreement shall be given priority and shall not be rejected,
avoided, discharged, or otherwise modified or diminished in a
proceeding, under title 11, United States Code, or in any
liquidation, reorganization, receivership, or other
insolvency proceeding under State law. A trustee or receiver
in any proceeding under title 11, United States Code, or in
liquidation, reorganization, receivership, or other
insolvency proceeding under State law, may avoid any transfer
of an interest of the participating tobacco product
manufacturer, or any obligation incurred by such
manufacturer, that was made or incurred on or within 2 years
before the date of the filing of a bankruptcy petition, if
such manufacturer made such transfer or incurred such
obligation to hinder or defeat in any fashion the payment of
any obligation, interest, or debt of the manufacturer arising
under the liability apportionment agreement. Any property
vesting in the participating tobacco product manufacturer
following such a proceeding shall be subject to all claims
and interest of creditors arising under the liability
apportionment agreement.
(f) Limitation on State Courts.--No court of any State,
Tribe, or political subdivision of a State may take any
action to inhibit the effective operation of subsection (c).

SEC. 1413. ATTORNEYS' FEES AND EXPENSES.

(a) Arbitration Panel.--
(1) Right to Establish .--For the purpose of awarding of
attorneys' fees and expenses relating to litigation affected
by, or legal services that, in whole or in part, resulted in
or created a model for programs in, this Act, and with
respect to which litigation or services the attorney involved
is unable to agree with the plaintiff who employed that
attorney with respect to any dispute that may arise between
them regarding the fee agreement, the matter at issue shall
be submitted to arbitration. In any such arbitration, the
arbitration panel shall consist of 3 persons, one of whom
shall be chosen by the plaintiff, one of whom shall be chosen
by the attorney, and one of whom shall be chosen jointly by
those 2 arbitrators.
(2) Operation.--Not later than 30 days after the date on
which all members of an arbitration panel are appointed under
paragraph (1), the panel shall establish the procedures under
which the panel will operate which shall include--
(A) a requirement that any finding by the arbitration panel
must be in writing and supported by written reasons;
(B) procedures for the exchanging of exhibits and witness
lists by the various claimants for awards;
(C) to the maximum extent practicable, requirements that
proceedings before the panel be based on affidavits rather
than live testimony; and
(D) a requirement that all claims be submitted to an
arbitration panel not later than 3 months after the date of
this Act and a determination made by the panel with respect
to such claims not later than 7 months after such date of
enactment.
(3) Right to petition.--Any individual attorney or group of
attorneys involved in litigation affected by this Act shall
have the right to petition an arbitration panel for
attorneys' fees and expenses.
(4) Criteria.--In making any award under this section, an
arbitration panel shall consider the following criteria:
(A) The time and labor required by the claimant.
(B) The novelty and difficulty of the questions involved in
the action for which the claimant is making a claim.
(C) The skill requisite to perform the legal service
involved properly.
(D) The preclusion of other employment by the attorney due
to acceptance of the action involved.
(E) Whether the fee is fixed or a percentage.
(F) Time limitations imposed by the client or the
circumstances.
(G) The amount involved and the results obtained.
(H) The experience, reputation, and ability of the
attorneys involved.
(I) The undesirability of the action.
(J) Such other factors as justice may require.
(5) Appeal and enforcement.--The findings of an arbitration
panel shall be final, binding, nonappealable, and payable
within 30 days after the date on which the finding is made
public, except that if an award is to be paid in
installments, the first installment shall be payable within
such 30 day period and succeeding installments shall be paid
annually thereafter.
(b) Validity and Enforceability of Private Agreements.--
Notwithstanding any other provision of this Act, nothing in
this section shall be construed to abrogate or restrict in
any way the rights of any parties to mediate, negotiate, or
settle any fee or expense disputes or issues to which this
section applies, or to enter into private agreements with
respect to the allocation or division of fees among the
attorneys party to any such agreement.
(c) Offset for Amounts Already Paid.--In making a
determination under this section with regard to a dispute
between a State that pursued independent civil action against
tobacco product manufacturers and its attorney, the
arbitration panel shall take into account any amounts already
paid by the State under the agreement in dispute.

SEC. 1414. EFFECT OF COURT DECISIONS.

(a) Severability.--If any provision of titles I through
XIII, or the application thereof to any person, manufacturer
or circumstance, is held invalid, the remainder of the
provisions of those titles, and the application of such
provision to other persons or circumstances, shall not be
affected thereby.
(b) Nonseverability.--If a court of competent jurisdiction
enters a final decision substantially limiting or impairing
the essential elements of title XIV, specifically the
requirements of sections 1404 and 1405, then the provisions
of section 1412 are null and void and of no effect.

SEC. 1415. CRIMINAL LAWS NOT AFFECTED.

Nothing in this title shall be construed to limit the
criminal liability of tobacco product manufacturers,
retailers, or distributors or their directors, officers,
employees, successors, or assigns.

SEC. 1416. CONGRESS RESERVES THE RIGHT TO ENACT LAWS IN THE
FUTURE.

The right to alter, amend, or repeal any provision of this
Act is hereby reserved to the Congress in accordance with the
provisions of Article I of the Constitution of the United
States and more than 200 years of history.

SEC. 1417. DEFINITIONS.

In this title:
(1) Terms defined in title VII.--Any term used in this
title that is defined in title VII has the meaning given to
it in title VII.
(2) Additional definitions.--
(A) Addiction claim; dependence claim.--The term
``addiction claim'' or ``dependence claim'' refers only to
any cause of action to the extent that the prayer for relief
seeks a cessation program, or other public health program
that is to be available to members of the general public and
is designed to reduce or eliminate the users' addiction to,
or dependence on, tobacco products, and as used herein is
brought by those who claim the need for nicotine reduction
assistance. Neither addiction or dependence claims include
claims related to or involving manifestation of illness or
tobacco-related diseases.
(B) Compensatory damages.--The term ``compensatory
damages'' refers to those damages necessary to reimburse an
injured party, and includes actual, general, and special
damages.
(C) Protocol.--The term ``protocol'' means the agreement to
be entered into by the Secretary of Health and Human Services
with a participating tobacco product manufacturers under this
title.
(D) Punitive damages.--The term ``punitive damages'' means
damages in addition to compensatory damages having the
character of punishment or penalty.
(E) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury, except where the context otherwise requires.

TITLE XV--TOBACCO TRANSITION

SEC. 1501. SHORT TITLE.

This title may be cited as the ``Tobacco Transition Act''.

SEC. 1502. PURPOSES.

The purposes of this title are--
(1) to authorize the use of binding contracts between the
United States and tobacco quota owners and tobacco producers
to compensate them for the termination of Federal programs
that support the production of tobacco in the United States;
(2) to make available to States funds for economic
assistance initiatives in counties of States that are
dependent on the production of tobacco; and
(3) to terminate Federal programs that support the
production of tobacco in the United States.

SEC. 1503. DEFINITIONS.

In this title:
(1) Association.--The term ``association'' means a
producer-owned cooperative marketing association that has
entered into a loan agreement with the Commodity Credit
Corporation to make price support available to producers.
(2) Buyout payment.--The term ``buyout payment'' means a
payment made to a quota

[[Page S5081]]

owner under section 1514 for each of the 1999 through 2001
marketing years.
(3) Contract.--The term ``contract'' or ``tobacco
transition contract'' means a contract entered into under
section 1512.
(4) Governor.--The term ``Governor'' means the chief
executive officer of a State.
(5) Lease.--The term ``lease'' means--
(A) the rental of quota on either a cash rent or crop share
basis;
(B) the rental of farmland to produce tobacco under a farm
marketing quota; or
(C) the lease and transfer of quota for the marketing of
tobacco produced on the farm of a lessor.
(6) Marketing year.--The term ``marketing year'' means--
(A) in the case of Flue-cured tobacco, the period beginning
July 1 and ending the following June 30; and
(B) in the case of each other kind of tobacco, the period
beginning October 1 and ending the following September 30.
(7) Owner.--The term ``owner'' means a person that, at the
time of entering into a tobacco transition contract, owns
quota provided by the Secretary.
(8) Price support.--The term ``price support'' means a
nonrecourse loan provided by the Commodity Credit Corporation
through an association for a kind of tobacco.
(9) Producer.--The term ``producer'' means a person that
for each of the 1995 through 1997 crops of tobacco (as
determined by the Secretary) that were subject to quota--
(A) leased quota or farmland;
(B) shared in the risk of producing a crop of tobacco; and
(C) marketed the tobacco subject to quota.
(10) Quota.--The term ``quota'' means the right to market
tobacco under a basic marketing quota or acreage allotment
allotted to a person under the Agricultural Adjustment Act of
1938 (7 U.S.C. 1281 et seq.).
(11) Secretary.--The term ``Secretary'' means the Secretary
of Agriculture.
(12) State.--The term ``State'' means each of the several
States of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, and any other territory or
possession of the United States.
(13) Tobacco.--The term ``tobacco'' means any kind of
tobacco for which--
(A) a marketing quota is in effect;
(B) a marketing quota is not disapproved by producers; or
(C) price support is available.
(14) Tobacco product manufacturer.--The term ``tobacco
product manufacturer'' has the meaning given the term
``manufacturer of tobacco products'' in section 5702 of the
Internal Revenue Code of 1986.
(15) Transition payment.--The term ``transition payment''
means a payment made to a producer under section 1515 for
each of the 1999 through 2001 marketing years.
(16) Trust fund.--The term ``Trust Fund'' means the Tobacco
Community Revitalization Trust Fund established by section
1511.
(17) United states.--The term ``United States'', when used
in a geographical sense, means all of the States.

Subtitle A--Tobacco Production Transition

CHAPTER 1--TOBACCO TRANSITION CONTRACTS

SEC. 1511. TOBACCO COMMUNITY REVITALIZATION TRUST FUND.

(a) Establishment.--There is established in the Treasury of
the United States a trust fund to be known as the ``Tobacco
Community Revitalization Trust Fund'', consisting of amounts
paid into the Trust Fund under subsection (d).
(b) Administration.--The Trust Fund shall be administered
by the Secretary of the Treasury.
(c) Use.--Funds in the Trust Fund shall be available for
making--
(1) buyout payments;
(2) transition payments; and
(3) rural economic assistance block grants under section
1521.
(d) Transfer from National Tobacco Settlement Trust Fund.--
The Secretary of the Treasury shall transfer from the
National Tobacco Settlement Trust Fund to the Trust Fund such
amounts as the Secretary of Agriculture determines are
necessary to carry out this title.
(e) Termination.--The Trust Fund shall terminate effective
September 30, 2003.

SEC. 1512. OFFER AND TERMS OF TOBACCO TRANSITION CONTRACTS.

(a) Offer.--The Secretary shall offer to enter into a
tobacco transition contract with each owner and producer.
(b) Terms.--
(1) Owners.--In exchange for a payment made under section
1514, an owner shall agree to relinquish the quota owned by
the owner.
(2) Producers.--In exchange for a payment made under
section 1515, a producer shall agree to relinquish the value
of the quota leased by the producer.
(c) Right To Grow Tobacco.--Each owner or producer that
enters into a contract shall have the right to continue the
production of tobacco for each of the 1999 and subsequent
crops of tobacco.

SEC. 1513. ELEMENTS OF CONTRACTS.

(a) Deadlines for Contracting.--
(1) Commencement.--To the maximum extent practicable, the
Secretary shall commence entering into contracts under this
chapter not later than 90 days after the date of enactment of
this Act.
(2) Deadline.--The Secretary may not enter into a contract
under this chapter after June 30, 1999.
(b) Duration of Contract.--The term of a contract shall--
(1) begin on the date that is the beginning of the 1999
marketing year for a kind of tobacco; and
(2) terminate on the date that is the end of the 2001
marketing year for the kind of tobacco.
(c) Time for Payment.--A buyout payment or transition
payment shall be made not later than the date that is the
beginning of the marketing year for a kind of tobacco for
each year of the term of a tobacco transition contract of an
owner or producer.

SEC. 1514. BUYOUT PAYMENTS TO OWNERS.

(a) In General.--The Secretary shall make buyout payments
in 3 equal installments, 1 installment for each of the 1999
through 2001 marketing years for each kind of tobacco
involved, to an owner that owns quota at the time of entering
into a tobacco transition contract.
(b) Compensation for Lost Value.--The payment shall
constitute compensation for the lost value to the owner of
the quota.
(c) Payment Calculation.--Under this section, the total
amount of the buyout payment made to an owner shall be
determined by multiplying--
(1) $8.00; by
(2) the average annual quantity of quota owned by the owner
during the 1995 through 1997 crop years.

SEC. 1515. TRANSITION PAYMENTS TO PRODUCERS.

(a) In General.--The Secretary shall make transition
payments in 3 equal installments, 1 installment for each of
the 1999 through 2001 marketing years for each kind of
tobacco produced, to a producer that--
(1) produced the kind of tobacco for each of the 1995
through 1997 crops; and
(2) entered into a tobacco transition contract.
(b) Transition Payments Limited to Leased Quota.--A
producer shall be eligible for transition payments only for
the portion of the production of the producer that is subject
to quota that is leased (as defined in section 1503(5) of
this Act) during the 3 crop years described in subsection
(a)(1).
(c) Compensation for Lost Revenue.--The payments shall
constitute compensation for the lost revenue incurred by a
tobacco producer for a kind of tobacco.
(d) Production History; Production.--
(1) Production history.--The Secretary shall base a
transition payment made to a producer on the average quantity
of tobacco subject to a marketing quota that is produced by
the producer for each of the 1995 through 1997 crops.
(2) Production.--The producer shall have the burden of
demonstrating to the Secretary the production of tobacco for
each of the 1995 through 1997 crops.
(e) Payment Calculation.--Under this section, the total
amount of the transition payment made to a producer shall be
determined by multiplying--
(1) $4.00; by
(2) the average quantity of the kind of tobacco produced by
the producer for each of the 1995 through 1997 crops.

CHAPTER 2--RURAL ECONOMIC ASSISTANCE BLOCK GRANTS

SEC. 1521. RURAL ECONOMIC ASSISTANCE BLOCK GRANTS.

(a) In General.--From funds transferred from the Trust
Fund, the Secretary shall use $200,000,000 for each of fiscal
years 1999 through 2003 to provide block grants to tobacco-
growing States to assist areas of such a State that are
economically dependent on the production of tobacco.
(b) Payments by Secretary to Tobacco-Growing States.--
(1) In general.--The Secretary shall use the amount
available for a fiscal year under subsection (a) to make
block grant payments to the Governors of tobacco-growing
States.
(2) Amount.--The amount of a block grant paid to a tobacco-
growing State shall be based on, as determined by the
Secretary--
(A) the number of counties in the State in which tobacco
production is a significant part of the county's economy; and
(B) the level of economic dependence of the counties on
tobacco production.
(c) Grants by States To Assist Tobacco-Growing Areas.--
(1) In general.--A Governor of a tobacco-growing State
shall use the amount of the block grant to the State under
subsection (b) to make grants to counties or other public or
private entities in the State to assist areas that are
dependent on the production of tobacco, as determined by the
Governor.
(2) Amount.--The amount of a grant paid to a county or
other entity to assist an area shall be based on--
(A) the ratio of gross tobacco sales receipts in the area
to the total farm income in the area; and
(B) the ratio of all tobacco related receipts in the area
to the total income in the area.
(3) Use of grants.--A county or other entity that receives
a grant under this subsection may use the grant in a manner
determined appropriate by the county or entity (with the
approval of the State) to assist producers and other persons
that are economically dependent on the production of tobacco,
including use for--
(A) on-farm diversification, alternatives to the production
of tobacco, and risk management;
(B) off-farm activities such as education, retraining, and
development of non-tobacco related jobs; and
(C) assistance to tobacco warehouse owners or operators.

[[Page S5082]]

(d) Termination of Authority.--The authority provided by
this section terminates September 30, 2003.

Subtitle B--Tobacco Price Support and Production Adjustment Programs

CHAPTER 1--TOBACCO PRICE SUPPORT PROGRAM

SEC. 1531. INTERIM REFORM OF TOBACCO PRICE SUPPORT PROGRAM.

(a) Price Support Rates.--Section 106(f) of the
Agricultural Act of 1949 (7 U.S.C. 1445(f)) is amended by
adding at the end the following:
``(9) Tobacco price support rates.--Notwithstanding any
other provision of this subsection, the price support rate
for each kind of tobacco for which quotas were approved for
the 1998 crop shall be reduced by--
``(A) for the 1999 crop, 25 percent from the 1998 support
rate for a kind of tobacco;
``(B) for the 2000 crop, 10 percent from the 1999 support
rate for a kind of tobacco; and
``(C) for the 2001 crop, 10 percent from the 2000 support
rate for a kind of tobacco.''.
(b) No Net Cost Tobacco Fund.--Section 106A of the
Agricultural Act of 1949 (7 U.S.C. 1445-1) is amended--
(1) by striking ``quota tobacco'' each place it appears and
inserting ``tobacco'';
(2) in subsection (a), by striking paragraph (7) and
inserting the following:
``(7) the term `tobacco' means any kind of tobacco for
which--
``(A) a marketing quota is in effect;
``(B) a marketing quota is not disapproved by producers; or
``(C) price support is available.'';
(3) in the second sentence of subsection (c), by striking
``contributed by producer-members or'';
(4) in subsection (d)--
(A) in paragraph (1)--
(i) in subparagraph (A)--

(I) by striking clause (i);
(II) by redesignating clauses (ii) and (iii) as clauses (i)
and (ii), respectively; and
(III) in clause (ii) (as so redesignated), by striking
subclause (II) and inserting the following:
``(II) the amount of per pound purchaser assessments that
are payable by domestic purchasers of Flue-cured and Burley
tobacco under clause (i); and''; and

(ii) in subparagraph (B)--

(I) by striking ``that, upon'' and all that follows through
``In making'' and inserting ``in making''; and
(II) in the last sentence, by striking ``contributions
and'';

(B) in paragraph (2)--
(i) by striking ``producer contribution or''; and
(ii) by striking subparagraphs (A) and (B) and inserting
the following:
``(A) from the person that acquired the tobacco involved
from the producer;
``(B) if the tobacco involved is marketed by a producer
through a warehouseman or agent, from the warehouseman or
agent, who may add an amount equal to the purchaser
assessment to the price paid by the purchaser;'';
(C) in paragraph (3), by striking ``, and use of'' and all
that follows through ``of the Fund''; and
(D) in paragraph (7), by striking ``contributions and'';
and
(5) in subsection (h), by striking ``contribution or'' each
place it appears.
(c) No Net Cost Tobacco Account.--Section 106B of the
Agricultural Act of 1949 (7 U.S.C. 1445-2) is amended--
(1) by striking ``quota tobacco'' each place it appears and
inserting ``tobacco'';
(2) in subsection (a), by striking paragraph (5) and
inserting the following:
``(5) the term `tobacco' means any kind of tobacco for
which--
``(A) a marketing quota is in effect;
``(B) a marketing quota is not disapproved by producers; or
``(C) price support is available;'';
(3) in subsection (c)(1), by striking ``producers,
purchasers,'' and inserting ``purchasers''; and
(4) in subsection (d)--
(A) in paragraph (1)--
(i) by striking subparagraph (A);
(ii) by redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively; and
(iii) in subparagraph (A) (as redesignated), by striking
``also'';
(B) in paragraph (2)--
(i) in subparagraph (A)--

(I) in the first sentence, by striking ``the amount of the
marketing assessment'' through ``association's area and'';
and
(II) by striking the second sentence;

(ii) in subparagraph (C)(ii)--

(I) by striking ``sum of the'';
(II) by striking ``producer and''; and
(III) by striking ``producers and''; and

(C) in paragraph (3)--
(i) by striking ``(3)(A)'' and all that follows through the
end of subparagraph (B) and inserting the following:
``(3) Collection of assessments.--
``(A) Purchasers.--Except as provided in subparagraphs (B)
and (C), an assessment to be paid by a purchaser under
paragraph (1) shall be collected from the person who acquired
the tobacco involved from the producer.
``(B) Warehouseman or agent.--If tobacco of the kind for
which an account is established is marketed by a producer
through a warehouseman or agent, the purchaser assessment
shall be collected from the warehouseman or agent, who may
add an amount equal to the purchaser assessment to the price
paid by the purchaser.''; and
(ii) in subparagraph (C), by striking ``both the producer
and''.
(d) Administrative Costs.--Section 1109 of the Agriculture
and Food Act of 1981 (Public Law 97-98; 7 U.S.C. 1445 note)
is repealed.
(e) Crops.--This section and the amendments made by this
section shall apply with respect to the 1999 through 2001
marketing years.

SEC. 1532. TERMINATION OF TOBACCO PRICE SUPPORT PROGRAM.

(a) Parity Price Support.--Section 101 of the Agricultural
Act of 1949 (7 U.S.C. 1441) is amended--
(1) in the first sentence of subsection (a), by striking
``tobacco (except as otherwise provided herein), corn,'' and
inserting ``corn'';
(2) by striking subsections (c), (g), (h), and (i);
(3) in subsection (d)(3)--
(A) by striking ``, except tobacco,''; and
(B) by striking ``and no price support shall be made
available for any crop of tobacco for which marketing quotas
have been disapproved by producers;''; and
(4) by redesignating subsections (d) and (e) as subsections
(c) and (d), respectively.
(b) Termination of Tobacco Price Support.--Sections 106 of
the Agricultural Act of 1949 (7 U.S.C. 1445) is amended by
striking subsections (a) through (f).
(c) Definition of Basic Agricultural Commodity.--Section
408(c) of the Agricultural Act of 1949 (7 U.S.C. 1428(c)) is
amended by striking ``tobacco,''.
(d) Review of Burley Tobacco Imports.--Section 3 of Public
Law 98-59 (7 U.S.C. 625) is repealed.
(e) Powers of Commodity Credit Corporation.--Section 5 of
the Commodity Credit Corporation Charter Act (15 U.S.C. 714c)
is amended by inserting ``(other than tobacco)'' after
``agricultural commodities'' each place it appears.
(f) Transition Provisions.--
(1) Liability.--The amendments made by this section shall
not affect the liability of any person under any provision of
law as in effect before the effective date of this section.
(2) Tobacco inventories.--The Secretary shall issue
regulations that require the orderly sale of tobacco
inventories held by associations.
(3) No net cost tobacco fund.--
(A) In general.--Section 106A of the Agricultural Act of
1949 (7 U.S.C. 1445-1) is amended by adding at the end the
following:
``(i) Assessments To Cover Net Losses After 2001 Marketing
Year.--
``(1) In general.--Effective the day after the last day of
the 2001 marketing year for the kind of tobacco involved,
purchasers and importers of tobacco shall pay no net cost
assessments as determined by an association, with the
approval of Secretary, and as provided in this subsection.
``(2) Basis.--The amount of the assessment shall be based
on any unpaid past losses, and anticipated future losses,
from sales of tobacco inventory.
``(3) Collection.--Assessments shall be collected as
provided in subsection (d)(2).
``(4) Penalty for failure to pay assessment.--Penalties for
failure to pay assessments shall be calculated as provided in
subsection (h).
``(5) Duration of assessments.--Assessments required under
this subsection shall be required until--
``(A) all tobacco price support loans, including interest,
are repaid to the Commodity Credit Corporation; and
``(B) the Commodity Credit Corporation has been reimbursed
for all net losses sustained as a result of price support
loans provided through the 2001 crop of the kind of tobacco
involved.''.
(B) Conforming amendments.--Section 106A of the
Agricultural Act of 1949 (7 U.S.C. 1445-1) (as amended by
section 1531(b)) is amended--
(i) in subsection (a)--

(I) in paragraph (5), by inserting ``and'' after the
semicolon;
(II) in paragraph (6), by striking ``; and'' and inserting
a period; and
(III) by striking paragraph (7);

(ii) by striking subsection (b);
(iii) in subsection (d)--

(I) in the last sentence of paragraph (1), by striking
``the amounts which the Corporation will lend to the
association under such agreements and'';
(II) by striking paragraph (2) and inserting the following:

``(2) collect the assessment due under paragraph (1) by
directly notifying the purchaser or importer of the amount of
the assessment and how payment should be made;''; and

(III) in paragraph (3), by striking ``: Provided, That,''
and all that follows and inserting ``, except that,
notwithstanding any other provision of law, the association
may use amounts in the Fund (including interest and other
earnings) for the purposes of reducing the association's
outstanding indebtedness to the Corporation associated with
1982 and subsequent crops of tobacco;'';

(iv) in subsection (e)--

(I) in the first sentence, by striking ``or provide'' and
all that follows through ``the association''; and
(II) by striking the second sentence; and

(v) in subsection (h), by striking ``(h)(1)(A)'' and all
that follows through the end of subparagraph (B) and
inserting the following:
``(h) Failure To Pay Contributions or Assessments.--
``(1) In general.--

[[Page S5083]]

``(A) Purchasers.--Each purchaser that fails to pay an
assessment as required by subsection (d)(2) at such time and
in such manner as may be prescribed by the Secretary, shall
be liable, in addition to any amount due, to a marketing
penalty at a rate equal to 75 percent of the average market
price (calculated to the nearest whole cent) for the kind of
tobacco involved for the 2001 marketing year on the quantity
of tobacco as to which the failure occurs.
``(B) Importers.--Each importer that fails to pay an
assessment as required by subsection (d)(2) at such time and
in such manner as may be prescribed by the Secretary, shall
be liable, in addition to any amount due, for a marketing
penalty at a rate equal to 75 percent of the average market
price (calculated to the nearest whole cent) for the
respective kind of tobacco for the 2001 marketing year on the
quantity of tobacco as to which the failure occurs.''.
(4) No net cost tobacco account.--
(A) In general.--Section 106B of the Agricultural Act of
1949 (7 U.S.C. 1445-2) is amended by adding at the end the
following:
``(k) Assessments To Cover Net Losses After 2001 Marketing
Year.--
``(1) In general.--Subject to subsection (b), effective the
day after the last day of the 2001 marketing year for the
kind of tobacco involved, purchasers and importers of tobacco
shall pay no net cost assessments as determined by an
association, with the approval of Secretary, and as provided
in this subsection.
``(2) Basis.--The amount of the assessment shall be based
on any unpaid past losses, and anticipated future losses,
from sales of tobacco inventory.
``(3) Collection.--Assessments shall be collected as
provided in subsection (d)(3).
``(4) Penalty for failure to pay assessment.--Penalties for
failure to pay assessments shall be calculated as provided in
subsection (j).
``(5) Duration of assessments.--Assessments required under
this subsection shall be required until--
``(A) all tobacco price support loans, including interest,
are repaid to the Commodity Credit Corporation; and
``(B) the Commodity Credit Corporation has been reimbursed
for all net losses sustained as a result of price support
loans provided through the 2001 crop of the kind of tobacco
involved.''.
(B) Conforming amendments.--Section 106B of the
Agricultural Act of 1949 (7 U.S.C. 1445-2) (as amended by
section 1531(c)) is amended--
(i) in subsection (a)--

(I) by striking paragraph (5); and
(II) by redesignating paragraphs (6) through (8) as
paragraphs (5) through (7), respectively;

(ii) by striking subsection (b) and inserting the
following:
``(b) Establishment.--Notwithstanding section 106A, the
Secretary shall, on the request of any association, and may,
if the Secretary determines, after consultation with the
association, that the accumulation of the No Net Cost Tobacco
Fund for the association under section 106A is, and is likely
to remain, inadequate to reimburse the Corporation for net
losses that the Corporation sustains under its loan agreement
with the association, establish and maintain in accordance
with this section a No Net Cost Tobacco Account for the
association in lieu of the No Net Cost Tobacco Fund
established within the association under section 106A.'';
(iii) in subsection (d)--

(I) in the third sentence of paragraph (2)(A), by striking
``the amounts which the Corporation will lend to such
association under such agreements and''; and
(II) by striking paragraph (3) and inserting the following:

``(3) Collection.--Any assessment to be paid by a purchaser
or importer under paragraph (1) shall be collected from the
purchaser or importer by the Secretary.''; and
(iv) in subsection (j), by striking ``(j)(1)(A)'' and all
that follows through the end of subparagraph (B) and
inserting the following:
``(j) Failure To Pay Contributions or Assessments.--
``(1) In general.--
``(A) Purchasers.--Each purchaser that fails to pay to the
Secretary an assessment as required by subsection (d)(3) at
such time and in such manner as may be prescribed by the
Secretary, shall be liable, in addition to any amount due, to
a marketing penalty at a rate equal to 75 percent of the
average market price (calculated to the nearest whole cent)
for the kind of tobacco involved for the 2001 marketing year
on the quantity of tobacco as to which the failure occurs.
``(B) Importers.--Each importer that fails to pay to the
Secretary an assessment as required by subsection (d)(3) at
such time and in such manner as may be prescribed by the
Secretary, shall be liable, in addition to any amount due,
for a marketing penalty at a rate equal to 75 percent of the
average market price (calculated to the nearest whole cent)
for the respective kind of tobacco for the 2001 marketing
year on the quantity of tobacco as to which the failure
occurs.''.
(g) Net Gains Held by Commodity Credit Corporation.--The
Secretary shall ensure that the net gains in the No Net Cost
Tobacco Account of the Commodity Credit Corporation as of
September 30, 2002, equal or exceed the balance in the
Account that existed on September 30, 1998.
(h) Crops.--
(1) In general.--Except as provided in paragraph (2), this
section and the amendments made by this section shall apply
the day after the last day of the 2001 marketing year for the
kind of tobacco involved.
(2) Net losses to the commodity credit corporation.--
Sections 106A and 106B of the Agricultural Act of 1949 (7
U.S.C. 1445-1, 1445-2) are repealed effective on the date on
which the Secretary--
(A) determines that--
(i) all tobacco price support loans, plus interest, have
been repaid by associations; and
(ii) the Commodity Credit Corporation has been reimbursed
for all net losses sustained as a result of price support
loans provided through the 2001 crop of the kind of tobacco
involved; and
(B) publishes a notice of the determination in the Federal
Register.

CHAPTER 2--TOBACCO PRODUCTION ADJUSTMENT PROGRAMS

SEC. 1541. TERMINATION OF TOBACCO PRODUCTION ADJUSTMENT
PROGRAMS.

(a) Declaration of Policy.--Section 2 of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1282) is amended by striking
``tobacco,''.
(b) Definitions.--Section 301(b) of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1301(b)) is amended--
(1) in paragraph (3)--
(A) by striking subparagraph (C); and
(B) by redesignating subparagraph (D) as subparagraph (C);
(2) in paragraph (6)(A), by striking ``tobacco,'';
(3) in paragraph (7), by striking the following:
``tobacco (flue-cured), July 1--June 30;
``tobacco (other than flue-cured), October 1-September
30;'';
(4) in paragraph (10)--
(A) by striking subparagraph (B); and
(B) by redesignating subparagraph (C) as subparagraph (B);
(5) in paragraph (11)(B), by striking ``and tobacco'';
(6) in paragraph (12), by striking ``tobacco,'';
(7) in paragraph (14)--
(A) in subparagraph (A), by striking ``(A)''; and
(B) by striking subparagraphs (B), (C), and (D);
(8) by striking paragraph (15);
(9) in paragraph (16)--
(A) by striking subparagraph (B); and
(B) by redesignating subparagraph (C) as subparagraph (B);
and
(10) by redesignating paragraphs (16) and (17) as
paragraphs (15) and (16), respectively.
(c) Parity Payments.--Section 303 of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1303) is amended in the
first sentence by striking ``rice, or tobacco,'' and
inserting ``or rice,''.
(d) Marketing Quotas.--Part I of subtitle B of title III of
the Agricultural Adjustment Act of 1938 (7 U.S.C. 1311 et
seq.) is repealed.
(e) Administrative Provisions.--Section 361 of the
Agricultural Adjustment Act of 1938 (7 U.S.C. 1361) is
amended by striking ``tobacco,''.
(f) Adjustment of Quotas.--Section 371 of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1371) is amended--
(1) in the first sentence of subsection (a), by striking
``peanuts, or tobacco'' and inserting ``or peanuts''; and
(2) in the first sentence of subsection (b), by striking
``peanuts or tobacco'' and inserting ``or peanuts''.
(g) Reports and Records.--Section 373 of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1373) is amended--
(1) by striking ``peanuts, or tobacco'' each place it
appears in subsections (a) and (b) and inserting ``or
peanuts''; and
(2) in subsection (a)--
(A) in the first sentence, by striking ``all persons
engaged in the business of redrying, prizing, or stemming
tobacco for producers,''; and
(B) in the last sentence, by striking ``$500;'' and all
that follows through the period at the end of the sentence
and inserting ``$500.''.
(h) Regulations.--Section 375(a) of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1375(a)) is amended by
striking ``peanuts, or tobacco'' and inserting ``or
peanuts''.
(i) Eminent Domain.--Section 378 of the Agricultural
Adjustment Act of 1938 (7 U.S.C. 1378) is amended--
(1) in the first sentence of subsection (c), by striking
``cotton, tobacco, and peanuts'' and inserting ``cotton and
peanuts''; and
(2) by striking subsections (d), (e), and (f).
(j) Burley Tobacco Farm Reconstitution.--Section 379 of the
Agricultural Adjustment Act of 1938 (7 U.S.C. 1379) is
amended--
(1) in subsection (a)--
(A) by striking ``(a)''; and
(B) in paragraph (6), by striking ``, but this clause (6)
shall not be applicable in the case of burley tobacco''; and
(2) by striking subsections (b) and (c).
(k) Acreage-Poundage Quotas.--Section 4 of the Act entitled
``An Act to amend the Agricultural Adjustment Act of 1938, as
amended, to provide for acreage-poundage marketing quotas for
tobacco, to amend the tobacco price support provisions of the
Agricultural Act of 1949, as amended, and for other
purposes'', approved April 16, 1965 (Public Law 89-12; 7
U.S.C. 1314c note), is repealed.
(l) Burley Tobacco Acreage Allotments.--The Act entitled
``An Act relating to burley tobacco farm acreage allotments
under the Agricultural Adjustment Act of 1938, as amended'',
approved July 12, 1952 (7 U.S.C. 1315), is repealed.

[[Page S5084]]

(m) Transfer of Allotments.--Section 703 of the Food and
Agriculture Act of 1965 (7 U.S.C. 1316) is repealed.
(n) Advance Recourse Loans.--Section 13(a)(2)(B) of the
Food Security Improvements Act of 1986 (7 U.S.C. 1433c-
1(a)(2)(B)) is amended by striking ``tobacco and''.
(o) Tobacco Field Measurement.--Section 1112 of the Omnibus
Budget Reconciliation Act of 1987 (Public Law 100-203) is
amended by striking subsection (c).
(p) Liability.--The amendments made by this section shall
not affect the liability of any person under any provision of
law as in effect before the effective date under subsection
(q).
(q) Crops.--This section and the amendments made by this
section shall apply with respect to the 1999 and subsequent
crops of the kind of tobacco involved.

Subtitle C--Funding

SEC. 1551. TRUST FUND.

(a) Request.--The Secretary of Agriculture shall request
the Secretary of the Treasury to transfer from the Trust Fund
amounts authorized under sections 1514, 1515, and 1521 to the
account of the Commodity Credit Corporation.
(b) Transfer.--On receipt of such a request, the Secretary
of the Treasury shall transfer amounts requested under
subsection (a).
(c) Use.--The Secretary of Agriculture shall use the
amounts transferred under subsection (b) to carry out the
activities described in subsection (a).
(d) Termination of Authority.--The authority provided under
this section shall expire on September 30, 2003.

SEC. 1552. TOBACCO RELATED ADMINISTRATIVE COSTS AND
SUBSIDIES.

(a) In General.--The Secretary shall provide, by
regulation, for a nonrefundable marketing assessment paid by
purchasers of tobacco during each of the 1999 through 2024
fiscal years.
(b) Basis.--The assessment shall be--
(1) on a per pound basis, as determined by the Secretary;
and
(2) based on estimated annual costs to the Federal
Government of tobacco related administrative costs and
subsidies in accordance with this section.
(c) Aggregate Assessment Amount.--For each fiscal year, the
Secretary shall estimate the costs to the Federal Government
relating to tobacco that involve--
(1) agricultural extension;
(2) handling, sampling, grading, inspecting, and weighing;
(3) administering and providing subsidies for crop
insurance; and
(4) administering the tobacco price support program for
each of the 1999 through 2001 fiscal years.
(d) Assessment Amount For Each Kind of Tobacco.--For each
fiscal year, the Secretary shall determine the amount of the
total costs determined under subsection (c) that benefit each
kind of tobacco.
(e) Estimated Marketings.--For each fiscal year, the
Secretary shall estimate the pounds marketed during the
fiscal year for each kind of tobacco.
(f) Assessment Rate.--For each kind of tobacco for each
fiscal year, the Secretary shall calculate an assessment rate
per pound by dividing--
(1) the amount determined under subsection (d); by
(2) the estimated pounds marketed as estimated under (e).
(g) Remittance by Purchaser.--For each fiscal year, each
purchaser of tobacco shall remit to the Commodity Credit
Corporation a nonrefundable marketing assessment equal to the
amount obtained by multiplying--
(1) the assessment rate for the kind of tobacco purchased;
by
(2) the number of pounds of the kind of tobacco purchased.
(h) Penalties.--If any purchaser fails to remit the
assessment required by this section or fails to comply with
such requirements for recordkeeping as are established by the
Secretary to carry out this section, the purchaser shall be
liable to the Secretary for a civil penalty in an amount
determined by the Secretary that does not exceed the amount
obtained by multiplying--
(1) the quantity of the kind of tobacco involved in the
violation; by
(2) the assessment rate for the kind of tobacco.
(i) Enforcement.--The Secretary may enforce this section in
the courts of the United States.

SEC. 1553. COMMODITY CREDIT CORPORATION.

The Secretary may use the funds, facilities, and
authorities of the Commodity Credit Corporation to carry out
this title and the amendments made by this title.

Subtitle D--Miscellaneous

SEC. 1561. LIABILITY FOR OBLIGATIONS OF TOBACCO PRODUCT
MANUFACTURERS.

A person that owns or produces tobacco, or owns or operates
a tobacco warehouse, shall not be liable for--
(1) any action or legal penalty or obligation of a
manufacturer of a tobacco product under this Act; or
(2) any financial penalty or payment owed by a manufacturer
of a tobacco product under this Act.

SEC. 1562. FDA REGULATION OF TOBACCO PRODUCTION AND FARMS.

Notwithstanding any other provision of law, an officer,
employee, or agent of the Food and Drug Administration shall
not--
(1) regulate the production of a crop of tobacco by a
person; or
(2) enter the farm of a person that owns or produces
tobacco without the consent of the person.

Mr. McCAIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Roberts). The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. McCAIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. McCAIN addressed the Chair.
The PRESIDING OFFICER. The distinguished Senator from Arizona is
recognized.
Mr. McCAIN. Mr. President, I have reached an understanding with the
Senator from South Carolina and the Senator from Kentucky and the
Senator from Massachusetts that the Senator from Kentucky would like to
speak for half an hour. Senator Faircloth will be recognized for his
first-degree amendment following the statement by the Senator from
Kentucky. Following that it is our understanding there will either be a
second-degree amendment to the Faircloth amendment, or, if not, the
Faircloth amendment will be disposed of, and following that it was our
understanding that the other side of the aisle would have the next
amendment, and go back and forth as is the tradition of this body, from
one side to the other with amendments. All amendments which are in the
first degree will be open, obviously, to second-degree amendments. As
the Faircloth amendment would be open to second-degree amendment, so
will the next Democrat amendment be open to second-degree amendments.
I expect shortly the Senator from Kentucky to come to speak for
approximately half an hour. The Senator from North Carolina is
agreeable. I yield the floor.
Mr. KERRY addressed the Chair.
The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
Mr. KERRY. Mr. President, if I could simply clarify that, also I
think we would put it in the context of the unanimous consent request
that first recognition be for the half hour to the Senator from
Kentucky. But if I could clarify it, we would request that the second-
degree amendments would be the right of the Democrat leader, and,
likewise, the first-degree amendment placed on the Democrat side would
be subject to a second-degree amendment by the Republican side. With
that understanding, we ask unanimous consent the Senate accept that as
the procedure for the first two amendments.
Mr. McCAIN. Will the Senator yield? I am afraid at this time we just
have to have an understanding because it has not been cleared on either
side. I am confident that understanding would be honored. But I don't
think we can lock it in as a unanimous consent agreement at this time.
I would like to have the Senator from Kentucky, if it is agreeable to
my friends from South Carolina and Massachusetts, to have the Senator
from Kentucky recognized for his statement.
I yield the floor.
Mr. FORD addressed the Chair.
The PRESIDING OFFICER. The Senator from Kentucky is recognized.
Mr. FORD. Mr. President, we are going into probably what can be
called a frustrating period. It is difficult for me to in 30 minutes
say what is in my heart and on my mind as it relates to the tobacco
legislation.
The PRESIDING OFFICER. If the Senator will suspend, we need order in
the Senate please. If Senators and staff will take their audible
conversations to the cloakroom, it would be appreciated. The Senator
from Kentucky is recognized.
Mr. FORD. I thank the Chair for his courtesies. He is a gentleman and
a scholar.
Mr. President, today the Senate begins what I hope is a productive
debate on S. 1415, the National Tobacco Policy and Youth Smoking
Reduction Act. We have come a long way in this debate. But in the 15
weeks left in this session we also have a long way to go.
Nothing surprises me anymore concerning tobacco legislation.
Yesterday afternoon they asked me if I was surprised. I said no. I was
angry. So, therefore, I wasn't surprised. Last year, I would not have
believed the tobacco manufacturers, attorneys general, and public
health groups would

[[Page S5085]]

have agreed on a comprehensive settlement. But on June 20, 1997, a
national settlement was announced. I would not have believed that the
Senate Commerce Committee could have reported a bill of this magnitude,
and to do so in only one day of markup. But on April 1st, under the
leadership of the Senator from Arizona, the Commerce Committee did just
that by a vote of 19 to 1. Last Thursday, the Finance Committee
modified the bill again in only one day.
But part of the explanation for the success of the chairman of the
Commerce Committee was his ability to get Senators to wait to debate
many issues. A lot of them were left to the Senate floor. This bill
raises hundreds of billions of dollars. Estimates of the Commerce
Committee product range from $516 billion to almost $1 trillion. This
is a tremendous amount of money by any standard. The Finance Committee
increased the taxes raised by this bill even further.
But not surprisingly, there is no shortage of ideas around here on
what to do with the money. Some want to use it to offset tax cuts. Some
want to expand existing spending programs. Some want to fund new
spending programs. The one thing nearly all of these ideas have in
common is that they have nothing to do with youth smoking. We have
taken our eye off the problem of youth smoking. It is how can we raise
more money and spend it on other programs.

Somehow, almost miraculously, the two committee chairmen were able to
get members of their committee to defer the debate on how to spend all
of this money. But that debate cannot be deferred any longer, Mr.
President--not if the Senate is actually going to pass a bill. With the
confusion that was expressed here yesterday, there are some who are
beginning to wonder if a bill can be passed.
How all of this money is used goes to the very heart of the bill, and
until we answer these fundamental questions, it is impossible to say
with any certainty what kind of bill we have. Mr. President, there is
an equally important issue that goes to the heart of the bill as well.
It will define what this legislation is really all about. There is no
more important issue to me personally than how we treat tobacco farmers
and rural and tobacco-growing communities under this bill.
In many ways, tobacco farmers and tobacco-growing communities are the
innocent victims in this whole debate. They have not been sued. They
have not been accused of withholding documents or information. They
have not been accused of manipulating the tobacco grown on their farms.
Mr. President, tobacco farmers and tobacco-growing communities are
scared about what is going on in Washington, DC. They are bewildered at
the almost daily barrage of hostile comments coming from various
sources in this city. Most tobacco farmers are engaged in the same
livelihood as their fathers, their grandfathers, and in some cases
their great grandfathers on the same farm and on the same ground.
Just like most Americans, tobacco farmers also don't want to see
young people smoke. The poll in my State was something over 90 percent
that opposed youth smoking. But they are having a hard time figuring
out what some of the difficulties in Congress have to do with youth
smoking. To most tobacco farmers much of the discussion in Congress
sounds like an attempt to punish an industry with the youth smoking
issue finishing a distant second. Tobacco farmers are being lumped in
with tobacco manufacturers.
A recent Congressional Quarterly article about the plight of tobacco
farmers quoted one farmer from King, NC, about the tobacco debate in
Congress. He said, and I quote:

They are making us feel like drug dealers. That just burns
me up. They put us in the tobacco industry when all we are
doing is growing a legal crop.

Tobacco farmers have been on a roller coaster ride for several years.
But that ride has been almost out of control for the last year. Among
the greatest disappointments was the June 20th settlement agreement
itself. That agreement, which threatens to throw the lives of tobacco
farmers into turmoil, did not provide one thin dime for tobacco
farmers. Zero. Zip.
The tobacco companies, attorneys general, and public health groups
who were huddled in hotel rooms putting the deal together did not even
invite tobacco farmers to the table. They would not let them in the
door. It is tough to find words to express how insulting I found this.
The June 20th tobacco settlement included money for event sponsors
who would lose tobacco sponsorship under the settlement. The settlement
had money for teams or entries in such events. They had money for
NASCAR races. They had money for rodeos. Somehow, they found $750
million for these people. But there was nothing for tobacco farmers.

Mr. President, tobacco farmers in my state were at first shocked by
news of the settlement. Then they became angry. I encouraged them not
to get mad, but to get to work. I urged them to come up with a plan for
themselves, to help tobacco farmers and tobacco growing communities
deal with the settlement. And Mr. President, tobacco farmers did go to
work. I pledged to them last summer that I would do everything in my
power to represent their interests, and to see to it that a proposal
drafted by tobacco farmers would be included in any legislation
considered by Congress. I'm here today to keep my word.
Mr. President, there are 124,000 tobacco farm families producing the
crop across 20 states in this country. That represents 6 percent of the
farms in the United States. Most of these farms are in the southeast.
On average, these tobacco farms are 126 acres--about one-third the size
of the average U.S. farm. So we're talking about small, family farm
operations.
In Kentucky, tobacco is produced in 119 of 120 counties. Two-thirds
of the farmers in my state produce tobacco. They average about 4 acres
of tobacco. It is less than 3 percent of their cropland, yet it brings
about 25 percent of their farm income. Most tobacco farmers in my state
have family incomes of less than $35,000--including non-farm income.
Make no mistake, we're talking about middle to low-income families.
The tobacco settlement will have a significant negative impact on the
family farms in my state, and this impact must be considered in any
tobacco legislation.
Tobacco farmers started meeting last summer to deal with the impact
of the settlement. They came up with three general principles for
tobacco settlement legislation: (1) the legislation must preserve the
federal tobacco program; (2) fair compensation should be provided to
tobacco farmers should their ability to produce the crop be diminished;
and (3) the impact on tobacco farming communities should be taken into
account.
Mr. President, farms in my State and other States are valued with the
quota. If the quota under the so-called Lugar-McConnell bill is
implemented, from $2 billion to $4 billion in reduction of farmland
value will occur in the fourth year because we lose the quota. What
does that do? It has a rippling effect on local taxes, the tax base,
the income for the cities and the counties, our school systems, to say
nothing of the business community of these small communities.
After countless meetings among tobacco farming groups from states
like Kentucky, North Carolina, South Carolina, Tennessee, Virginia, and
Georgia, an outline of a tobacco farmer proposal came together. We
worked hard to iron out details and put ``meat on the bones.''
I daresay, Mr. President, there are not many Senators who have sat on
the porch of many grocery stores and talked to farmers. There are not
many Senators in this body who have sat in the kitchen and had a cup of
coffee with farm families, talking about what is about to happen to
them and their future. I think I understand and feel what they say
because I grew up on a farm and I raised tobacco until I was drafted
into World War II.
Finally, last October, I introduced the Long-term Economic Assistance
for Farmers Act, or one we refer to as the LEAF Act. It was cosponsored
by 9 tobacco state Senators.
But our work didn't stop there. We continued to work through the
winter and spring to improve the proposal. Finally, after nine months
of work, a consensus proposal was developed to assist tobacco farmers
and their communities.
We have provided direct payments to farmers in the event their
ability to

[[Page S5086]]

produce declines. This is the very heart of the LEAF Act. It is
designed to make farmers whole as the value of their assets decline.
We also made changes to make tobacco companies pay for any possible
administrative provisions associated with the tobacco program. Mr.
President, I have been working for 16 years to eliminate any
opportunity for critics to claim that there is a tobacco ``subsidy.''
In 1982, we started requiring tobacco farmers to pay for the tobacco
loan program. I worked closely with Senator Helms to achieve these
changes. Senators Thurmond, Hollings, and Warner were all in the Senate
at that time, and will remember these changes.
In 1986, we required tobacco companies to share in these costs. The
tobacco loan program has operated at no net cost to taxpayers since
that time. Still, there were criticisms. Salaries at USDA, crop
insurance, and extension services all are partially attributable to
tobacco. Mr. President, under the LEAF Act, all of these costs--and any
other conceivable USDA cost associated with tobacco--will now be paid
by tobacco companies. There will no longer be any basis, directly or
indirectly, to allege that there is a tobacco subsidy. All possible
taxpayer costs have been eliminated under the LEAF Act.
And you know something, Mr. President. Our tobacco farmers make an
extra payment, a deficit reduction payment that is taken out of their
check before they get it from the warehouse and it goes to the general
fund. Last year, it was almost $32 million. And not another farmer in
this country--maybe the peanuts--makes a payment out of their check
called a budget reduction payment. It was over $32 million last year.
Mr. President, we have wanted to look beyond the tobacco farmer and
the tobacco program. The LEAF Act attempts to take a broader view and
deal with the entire impact on tobacco communities and the next
generation.
Why is it so important? We had to have some financial underwriting of
the 13 colonies--and that was tobacco through Virginia. They underwrote
the debt of the colonies. It has been around a long time. ``Mr. Jones
came in to buy his spring planting and paid for it with some of the
finest tobacco I have seen''--a quote from history. That was before we
became colonies. The pages of Virginia history are splattered with
tobacco juice. Just think about it. And they want to do away with it
overnight. It cannot be done.
We've included economic development assistance. We've included grants
for higher education for the children of tobacco farm families. And we
have included assistance for displaced workers who have jobs in
warehousing, processing, and manufacturing tobacco. We understand
things are changing for tobacco and we want to prepare these
communities.
Mr. President, I'm grateful to Senator McCain for his leadership in
including the LEAF Act as Title Ten of S.1415. It's an essential part
of the overall picture. It must be included in any tobacco settlement
legislation. The LEAF Act has broad support among tobacco farming
groups. It's supported by the public health community. President
Clinton, who visited Kentucky in April, announced that the LEAF Act
satisfies his fifth principle for tobacco legislation of providing
assistance to tobacco farmers and tobacco growing communities.
But let me provide fair warning, Mr. President. I will keep my pledge
to my tobacco farmers. I will do everything in my power to oppose
attempts to undermine the LEAF Act, or attack the federal tobacco
program, or threaten the ability of tobacco farmers in my state to deal
with the impact of the national tobacco settlement.
How many farmers out there have 98 percent of their product
controlled by four companies? There is no leverage. The tobacco farmers
have no leverage if we don't have a tobacco program. We have four
companies that handle 98 percent of all the product, so if we don't
have that, we are at their mercy.
I don't know how many farmers around here have heard of ``farm buy.''
They just go directly to the farm and buy it from big farmers, and the
small farmer is gone, has no leverage whatsoever. And, as we see,
people attack the farm program. A proposal has been made which is
nothing short of a thinly veiled bribe to offer larger tobacco farmers
a promised lump-sum payment in exchange for eliminating the tobacco
program. We found out yesterday it is not a lump sum payment, it is 3
years. And if you look at the bill that was introduced, that is before
the Senate, 50 percent of all the money goes to the States and 40
percent of that money will be taken up by the McConnell-Lugar bill.
That leaves 10 percent for everybody else. But in the bill it says only
16 percent of the money can go to the farmer.
Where are we on this--40 percent we would have to take in order to
pay for it, yet the bill says only 16 percent? We are going to try to
correct that if we can, because it is talking out of both sides of the
mouth, and you can't do that around here--only for awhile.
This is a classic example of Washington telling people, ``We are
smarter than you.'' But it simply won't work. Tobacco farmers want to
keep a supply management program. For 3 years, every 3 years, farmers
vote on whether to keep the tobacco program. Earlier this year, farmers
of flue-cured and burley tobacco, the two largest types of tobacco,
voted overwhelmingly to keep the program. In a referendum conducted by
USDA for both types of tobacco, almost 98 percent of tobacco farmers
voted to keep the program. But now some in Congress want to tell
farmers that, ``We are smarter than you.'' That is what is wrong with
this place. That is why people don't like us. There are 98 percent of a
group saying, ``This is what we would like to have and what we would
like to keep.'' And what do we say up here? ``You don't know what you
are talking about. This is what is good for you. This is what is good
for you. So you don't know what you are talking about, and we are going
to take care of it for you.''
So, 98 percent of those down there who voted, it doesn't make any
difference what you do. This is typical Washington, DC, arrogance. I
have already discussed how my small, average tobacco farmer--there are
124,000 of those, but there are only 4 large manufacturers, controlling
over 98 percent of the cigarette market. This disparity in bargaining
power could not be greater. Unless tobacco farmers have some mechanism
to bargain together jointly, they are helpless; they are helpless in
dealing with the large tobacco manufacturers. The tobacco program
provides that mechanism, and it must not be tampered with as a part of
this legislation.
The focus of the bill should be, must be, youth smoking. I voted for
smoke-free schools. I have voted, tried every way I can, to stop youth
smoking. So I have no apologies to make, because I want to stop it.
Over 90 percent of the people polled in my State want to stop it. But
the focus of this bill must be on youth smoking, which is to focus on
what will work to reduce youth smoking.
Youth smoking rates peaked in the 1970s. Starting in about 1979,
youth smoking rates began to decline and continued to decline through
the 1980s. Then, about 1991 or 1992, they started to climb again. No
one knows exactly why. And guess what; youth alcohol use started to go
up at the same time, binge drinking started to go up, marijuana use
started to go back up. In fact, youth usage of marijuana has been
increasing faster than cigarette smoking during the 1990s. So far,
Congress has failed to look broadly at all these trends. Surely this is
more than a coincidence. When we look at the causes of youth smoking
increases, we should also look at drinking and illegal drug use.

The American people seem to have a better sense of that than
Congress. They seem to realize that teenage behavioral changes are more
complex than just tobacco, and the youth tobacco rates have been
influenced by more than just slick advertising by the tobacco industry.
In fact, one recent poll verified these opinions. A Tarrance Group/KRC
research poll conducted earlier this month asked people why they
thought youth smoking rates had been going up. Mr. President, 58
percent said the influence of peers and friends was the main reason; 18
percent said the parents' example was the main reason; 12 percent said
Hollywood, television, and popular culture were the main reasons; and
only 6 percent said the tobacco industry and advertising

[[Page S5087]]

were the main reasons--only 6 percent. So we have a lot more to learn
about this issue, and I think, really, how little we do know should
have an influence on how broad we make this legislation.
I have serious concerns about the size of the legislation. These
concerns existed even before the Finance Committee took its action to
increase the size of the bill. First, the bill as reported by the
Commerce Committee appears to contain language never considered by the
committee on April 1. I am specifically referring to the annual
payments made by the industry. In the McCain committee amendment
adopted by the committee, the annual payment starting in the sixth year
was set at $21 billion, plus an adjustment up for inflation and down
for volume. However, in the reported bill, the sixth-year payment is
the ``adjusted applicable base amount,'' which it defined as the amount
of the preceding year, which appears to be $23.6 billion. I do not know
where the language came from. I do not recall it ever being approved by
the committee. However, it appears they add $2.6 billion per year for
20 years to the cost of the bill. In other words, it appears that $52
billion has been added to the cost of the bill. I hope we can clear up
some of these things.
Mr. President, OMB proceeded to take a number of misleading steps to
achieve competing objectives. They totally omitted the bill's revenue
impact on prices in several respects. They ignored any costs from
future legislation and attorneys' fees. They ignored additional
regulatory costs of complying with the bill. They ignored price
increases resulting from higher sales taxes, State excise taxes,
wholesale and retail margin increases, manufacturers' future price
increases, and they ignored the new licensing fee in title XI.
But perhaps the most offensive manipulation by OMB involved their
conflicting projected volume declines. OMB projected youth smoking
would decline by 60 percent when calculating the look-back penalties,
but they projected youth smoking to decline by only 29 percent when
calculating the price-per-pack increase.
As we say down in Kentucky, there is something about that that ain't
right. But you need a small consumption decline to make the price-per-
pack increase smaller. OMB just had it both ways. They changed the
projections to say the bill costs $516 billion and raises the price by
$1.10.
Mr. President, I have Wall Street Journal analyses, I have all these
things I could read here this morning. I don't know how much time I
have left. It is probably getting close to the time.
The PRESIDING OFFICER. The Senator has approximately 4 minutes
remaining.
Mr. FORD. Good. I thank the Chair.
Let me also outline several other concerns I have with S. 1415 which
I hope can be corrected or improved during the debate.
First, we have continuing concerns about the potential for a black
market. We say we can stop that, but Mexico sells cigarettes that I
smoke for 90 cents to $1 a pack at retail. Indian reservations are
selling cigarettes at a retail of around $1.20. If these new estimates
are correct, we are creating a disparity in price of up to $4 a pack.
This is well above the level experts say will cause black market
activity. In fact, we already have a considerable amount of smuggling
in this country because of the large State excise tax increases in
recent years. A disparity in price of only 50 to 60 cents per pack has
already proven to be enough to create black market incentives, and they
are going on right now within our own country. Canada fussed at us, you
know, when they raised their prices. Now we have two borders.
We raised prices that come from Canada and from Mexico, the Caribbean
and wherever. These fellows do pretty good out there. They are called
cartels. We have had a hard time stopping drugs from coming in. What
are we going to do when cigarettes are added to that? When you go down
to the skid, ``You want some cheap cigarettes or I have another menu on
the other side over here starting with marijuana.'' It is interesting
how we are going to provide for that and are playing into the hands of
those people.
The international provisions of title XI sets dangerous precedents,
Mr. President. If it were any other product, this would not even be
tolerated. I hope title XI can be eliminated or substantially improved.
I have concerns that the bill gives the FDA excessive authority to do
what I suspect they wanted to do for the last several years--ban the
product. It is my hope that we can place reasonable limits on the
unbridled authority.
Several serious constitutional concerns have been identified,
particularly since the tobacco manufacturers are unlikely to sign on to
this legislation. Late last month, four State attorneys general sent a
letter to Senator Hatch outlining these concerns. Constitutional
concerns throw into jeopardy the advertising and marketing
restrictions, the upfront payment, the look-back provisions, the
document disclosure section, and the so-called corporate culture
language.
These are legitimate concerns. Each one will have a suit filed. It
will be completed. They will file another suit. It will be completed,
and we will be in court under these provisions for a long, long time. I
hope these concerns can be addressed as well.
Mr. President, a recent Wall Street Journal poll showed that
Americans have serious doubt about the motives behind this debate. By a
nearly 2-to-1 margin, a majority of the people thought the current
debate was more about raising taxes to pay for new programs than it was
about reducing youth smoking. We have a chance to change some views
with the way this debate on the bill is conducted and the final
product.
I have two overriding tests for the final product produced on this
floor: No. 1, does the bill adequately compensate and protect farmers
and farming communities? And No. 2, is the bill more about reducing
youth smoking or punishing an industry?
I look forward to the debate and the opportunity to find the answers
to many of these problems. I say to the Chair and to my colleagues in
the Senate that I am going to do whatever I can to be sure that the
farming community is protected in this bill. With the procedure that
occurred late yesterday, to undo all of the work for 10 long months
that many of us have put into this legislation, to undo it in a motion
is a serious thing. I think it rubbed some of us a little bit the wrong
way, as we say. There will be some scorched-Earth approach as we
develop this. If we can work out something, I would love to do it. But
I will not work out anything that does not compensate and take care of
the farmers who I am here to represent, and I intend to represent them
as long as I can stand and as long as people will listen to me. I yield
the floor.
Mr. GRAMM addressed the Chair.
The PRESIDING OFFICER. The Senator from Texas is recognized.
Mr. KERRY. Mr. President, if I can just inquire, it was my
understanding--if I can just inquire----
Mr. GRAMM. I yield without losing my right to the floor, Mr.
President.
Mr. KERRY. I understand. I ask the Senator from Texas how long he
will be speaking, because I understood the Senator from North Carolina
was going to offer an amendment.
Mr. GRAMM. Mr. President, I want to make an opening statement on the
bill. I want to cover quite a few areas. I always try to be brief but
it is going to take me a reasonable amount of time to complete my
statement. What I would like to suggest is that I go ahead and make my
opening statement--and I will try to do it as briefly as I can--and
then I will yield the floor and allow the normal process to continue.
Mr. KERRY. I thank the Senator.
The PRESIDING OFFICER (Mr. Brownback). The Senator is recognized.
Mr. GRAMM. Mr. President, I begin by congratulating our dear
colleague, Senator McCain, for the leadership he has provided on this
bill. Senator McCain was asked to report a bill out of the Commerce
Committee. He didn't get an opportunity to choose who was on the
committee. He didn't get the opportunity to write the bill as he would
have chosen to write it. But his mission, as assigned him by the
majority leader, was to report a bill from the Commerce Committee.
Serving as a member of the Finance Committee which got sequential
referral of this bill and, in the process,

[[Page S5088]]

made the bill worse, I begin by saying that no matter where I end up on
this bill, I congratulate Senator McCain for the work he has done in
bringing the best bill he could, given the committee he had to work
with and the many interests competing against each other on this bill.
While we are not on the same side today, I hope that at the end of
the process, after conference, perhaps we will be on the same side, but
I want to make it clear that, in my opinion, it is unfortunate that
when we debate a big issue--and this is a very big issue--often we
stand on the floor of the Senate and talk about things that not only
don't mean very much to the American public, but often don't mean very
much to us.
Today we are debating a very big issue: hundreds of billions of
dollars of taxes, hundreds of billions of dollars of spending, a high
and noble purpose trying to prevent children from smoking and, in the
process, affecting their health. So this is a big issue.
I simply lament that so much of the debate is tainted by trying to
impugn the motives of people who are engaged in the debate. We have all
seen ads run in the paper that refer to this as the McCain bill which
is aimed at raising taxes and increasing spending. The bill does raise
taxes, it does increase spending, but that is not the intent of the
Senator from Arizona. There is no doubt in my mind that he has brought
us the best bill that his committee was capable of writing.
Let me also say that anyone who opposes the bill knows that they are
immediately going to be tarred as being the spokesman for the tobacco
industry, which in this debate has become the embodiment of all evil on
this Earth. I just lament, going into the debate, that we cannot simply
debate the issues without getting into impugning the motives of the
people who are involved in the debate.
While it may sound trite to many people who might watch this debate,
let me say that I believe that for all practical purposes, everyone
involved in this debate in the Senate is trying to do what they believe
is right, and they are neither the servant, in their own minds, at
least, of those who want a massive increase in taxes and spending, nor
are they the servant of the tobacco industry.
It is a shame that when you debate a really important issue, that
rather than being able to simply focus on the substance of the issue,
you end up being pigeonholed, with the debate focused around whose
interest you supposedly speak for.
Obviously, the first question we have to ask on this bill is, What is
the primary effect of the bill? This bill, obviously, raises taxes by
hundreds of billions of dollars. Depending on the estimates you look
at--they vary greatly--there is as much as a $200 billion difference in
the estimates as to how much money this bill raises. But once you get
to $500 or $600 billion, arguing about another $100 or $200 billion
does not really add much to the debate.

The bottom line is this bill is a huge tax bill by any definition of
``tax bill.'' It is also a massive spending bill. In fact, we will have
never passed a bill--let me state it as my opinion. In trying to look
back and attempt to fit this bill into the broad range of legislation
dealt with by Congress, it is hard for me to find an initiative that is
this big in terms of its fiscal impact since Lyndon Johnson was
President in the first year after the Kennedy assassination. So this is
a big bill--big taxes, big spending, and a big and noble objective.
The first point I would like to comment on is, Is this about tax and
spend, or is this about children smoking? We have ads in the newspapers
every day arguing one point or another. We have ads running in many of
the States urging our colleagues to not band together with the
cigarette companies against our children. We have ads in the paper
urging other colleagues to not participate in tax or spend. How can you
ferret out what the truth is? Well, obviously, it is a very difficult
task. But let me tell you what I think are some of the hallmarks we
ought to look at in trying to ferret out the truth.
Let me try first to define the question more precisely. Are we
raising tobacco taxes to prevent children from smoking or to fund new
spending programs? It seems to me that is a fair question to begin with
in this debate. And let me tell you what I think would be some of the
hallmarks you would find if the tax increase were to deter smoking
rather than to fund programs and the hallmarks you would find if it had
instead become a piggy bank for massive new spending.
If the objective of the tax increase was simply to discourage
smoking, then I think what we would find would be an effort to give the
money back in tax cuts because the objective would be to affect the
price of cigarettes, not--Mr. President, could we have order?
The PRESIDING OFFICER. The Senator is correct. If we could take
audible conversations from the floor to the cloakroom.
Mr. FORD. I am glad it is audible.
The PRESIDING OFFICER. If we could take the less audible
conversations to the cloakroom, it would be appreciated.
Mr. GRAMM. I thank the Chair.
The PRESIDING OFFICER. The distinguished Senator from Texas is
recognized.
Mr. GRAMM. Mr. President, I think if you were looking at a rational
policy to deter the consumption of an item by raising its price, but
your objective was not to collect a huge amount of money to spend and
your objective was solely to get people to reduce their consumption of
that product, it seems to me that one of the hallmarks of such a
program, one of the outward and visible signs of that objective, would
be the imposition of an excise tax to raise the price of that product.
But you would try to offset the bulk of that with a tax cut that was
more or less aimed at giving tax cuts to people in the same income
groups as those who would be paying the higher taxes so that you would
not be lowering their real income.
But in this case, I simply note, Mr. President, in looking at this
bill we do not see that happening. In this bill, we are seeing hundreds
of billions of dollars of new taxes, but we are seeing none of this
money given back to the people who are paying these taxes. So I would
think that is evidence that raising revenues to fund new spending plays
a significant role in this bill and in the final outcome of the bill,
whether or not that is the stated objective of the legislation.
I think a second hallmark of a bill that has turned into a giant
piggy bank would be the kind of spending which occurs--have you ever
noticed when you are spending your own money you tend to spend it
pretty prudently, but when suddenly you have an opportunity, a
financial bonanza to spend someone else's money, the spending becomes
very, very careless?
Well, I would pose as a question, in trying to determine if this is
about children or about money--what evidence is there in this bill of
careless spending? I want to just present two pieces of evidence. The
first has to do with payments to attorneys. I know many Members of this
body are attorneys, and I am not going to get into all this business
about ``some of my best friends are attorneys,'' and I am not trying to
bash attorneys, but I am trying to make a point about spending at a
level that could only suggest this bill has become a piggy bank for
massive new spending.
Let me begin by looking at the amount of money going to attorneys out
of this bill.
By almost anybody's measure, this bill will, if adopted, set out a
procedure where attorneys who have been involved in these cases will
get a payment of at least $4 billion. Now, nobody knows what $1 billion
is. Maybe Ross Perot does, but few others know what $1 billion is, so
let me try to convert it down to English.
In the lawsuits which have been settled and where billings have been
submitted lawyers are said to be seeking $5.7 billion.
Now, let me try to convert that into something which people can
understand. If the lawyers who have worked on these cases were paid
$1,000 an hour for an estimated total of 200,000 hours they have spent
on the lawsuits which have occurred to date, they would be owed $200
million, but they are reported to be seeking $5.7 billion or close to
an average of $30,000 an hour and the effective rate of compensation in
this bill could be--let me swallow before I say the number--$100,000 an
hour. Now, I ask my colleagues, what kind of legislation would we ever
pass,

[[Page S5089]]

in representing the 260 million people who live in this country, that
would pay anybody $100,000 an hour to do anything? The plain answer, we
all know, is that we would never, ever, pass an appropriations bill
that compensated somebody at $100,000 an hour. In fact, we would be
very much challenged and probably criticized--and probably justly--if
we were compensating people $1,000 an hour.

Now, what does it suggest about this bill? Let me make it clear, we
are going to have a debate about lawyers' fees, and I will have a lot
to say when we have the debate, but my purpose here is not to mock the
fact that we could be paying $100,000 an hour to lawyers under this
bill. My point is a far more important point, and that is, how could
you have a bill that paid $100,000 an hour? The only way you could have
a bill that paid $100,000 an hour is if you had put together a bill
that had massive amounts of money that are not viewed as money that has
come from real taxpayers and, therefore, you have sort of a ``slam it
up against the wall'' kind of approach to distribute the money. Only in
a bill where the objective was to raise revenue and spend it without
any regard for the priorities of spending it could you possibly end up
with a bill that would compensate attorneys at $100,000 an hour--
especially a bill that is sanctioned by the Federal Government and
especially a bill where the money is coming not from tobacco companies
but from people who are in families, 73 percent of them, that make less
than $50,000.
A look at the lawyer fees in this bill is an important piece of
evidence, it seems to me, that needs to be looked at in this debate as
to whether this is about smoking or whether it is about money.
The next issue is equally controversial, and I am not going to debate
it here. I will probably get into the debate when we have amendments
about compensation to tobacco growers, but I want to make the same
point about the tobacco settlement with farmers that I made about the
lawyers. Let me give a little short course on the history of American
tobacco policy. Again, my purpose is not to criticize the policy of the
settlement but to make the point about how careless we have been in
spending the hundreds of billions of dollars that are entailed in this
bill.
The tobacco program started in 1938 as a way of trying to raise the
price of tobacco. It was a program instituted by the Government to
benefit the tobacco grower, and it was a program where we provided a
production quota where the people who were growing tobacco in 1938
received quota based on the number of acres they were growing. The idea
was to limit production, to keep people out of the tobacco-growing
industry, and to make the price of tobacco products higher than they
would be in a competitive market. Not singling out tobacco here, we did
it for virtually every other crop, but that is how the program started.
The program was an effort to use Government power to benefit tobacco
farmers, something not uncommon. We use Government power all the time
to promote the interests of many groups, generally at the expense of
the consumer.
Now, what has happened over time is that more and more of the people
who own these quotas have moved off to the big cities, and when we are
talking about compensating tobacco farmers, you get the idea that we
are talking about compensating people who are actually growing tobacco.
The great bulk of every proposal that has been made--from the Ford
proposal to the Lugar proposal, to the Kennedy proposal, to the Robb
proposal--a lot of proposals, but virtually all of these proposals are
focused fairly narrowly on compensating people who own the quotas, not
the people who grow the tobacco.
Now, why is this important? It is important because 63 percent of the
quotas that the Government gave away in the first place are owned by
people who don't grow tobacco. So when we are going to compensate under
this program in the name of helping tobacco farmers, the truth is that
the great bulk of the money is going to people who don't grow tobacco
but they have often become very wealthy people by owning a benefit
which the Government gave them, and they then leased that quota to grow
tobacco to farmers who actually get out and farm tobacco, which is a
tough, backbreaking business.

Now, getting to my point. What do you think would be a reasonable
compensation for us to give to the holders of these quotas to, in
essence, end the program? Let me remind my colleagues that unless the
bill has been changed and it has been rewritten--and I am eager to hear
what the new provisions are--but unless they have been changed, we are
not talking about taking the land when we pay people. We are not
talking about barring them from growing tobacco. We are simply
compensating them for an effect that we believe this bill will have on
demand. And while we throw around numbers, the plain truth is, nobody
knows what effect the bill will have on the demand for tobacco.
We are in the midst of a program where we are phasing out Government
price supports in the broad base of American agriculture through a bill
referred to as Freedom to Farm. Under this bill, we set up a 7-year
program where we provide transition payments to farmers so that at the
end of the 7 years they have the freedom to farm, the freedom to
succeed, and the freedom to fail. Let me say, it is one of the most
enlightened policies we have instituted.
Here is my point: We have evidence for seven crops as to how much we
have paid people who grow those crops in return for phasing out the
Government program. Let me just run through some of these costs. For
wheat growers, we are paying them $125 an acre. That is to phase out
the wheat program. We pay it over 7 years, $125 an acre. For corn, we
pay $200 an acre, paid out over 7 years. For grain sorghum, we pay $131
an acre. For barley, we pay $70 an acre. For oats, we are paying $8.38
an acre. For upland cotton, we are paying $245.99 an acre. For rice, we
are paying $714.09 an acre.
Now, how much do you think we are paying per acre in the least costly
tobacco bill which has been proposed? Let me give you a hint. It is
about $18,000 an acre. Let me repeat that number. If we paid tobacco
quota owners--not tobacco farmers; we are paying the people that own
the Government license; relatively little of the money is going to the
farmer--if we paid them the total of the amount per acre that we paid
all of the other seven crops combined--in other words, we paid them
every penny we pay corn, wheat, grain sorghum, barley, oats, upland
cotton, and rice combined--we would pay them $1,495.78 per acre. If we
paid them the combined amount for all 7 crops, it would be that amount,
but yet we are paying almost 18 times the amount we paid every other
crop combined to buy out tobacco producers.
And the final incredible paradox is that we have a market for tobacco
quotas. In other words, I could go out this afternoon--I do not know if
I could do it this afternoon because this bill is on the floor and I
guess people think it might pass. But last week, I could have bought a
quota to grow tobacco for $3,784. I could have bought a quota to grow
tobacco for $3,784. That was the average cost of a quota, at least the
only number I could find last week. If people have other numbers, I
would be happy to be educated.
But we are getting ready to pay somebody who went out on Friday and
bought that quota five times what they paid for the quota, and then we
are still going to let them grow tobacco, and we are still going to let
them own the land.
I am not here today to criticize the tobacco program. I am here to
raise the question, Is this bill about smoking or is it about money?
When we are paying lawyers $100,000 an hour and when we are paying
tobacco growers, or at least the people who own the right to grow
tobacco under a Federal licensing program, 18 times what we paid all 7
major crops combined to phase out their program, does it not suggest
that this bill is about money, and not only the use of money, the
vulgar use of money? How can we justify these kind of numbers?
Let me make it clear. I have many colleagues from tobacco-producing
States. I don't have tobacco in my State. It is easy to pile on some
State when you don't have the product grown in your State. I
experienced that with sheep and goat raisers. I am willing to support a
buy out of tobacco growers and the people who hold quotas. But I cannot
justify the kind of figures we

[[Page S5090]]

are talking about--18 times the combined buy out of all 7 other basic
agricultural products when added together.
What does all of this suggest? It suggests that this bill is not only
about money and quantities of money, the likes of which we have seldom
seen here, but it is also about the perilous use of this money where we
are taking money and collecting taxes and we are distributing it to
various interest groups and the lack of care with which we are
distributing it is clearly indicted by the amounts of money that we are
giving people.
We are going to get a chance to vote on both of these issues. I do
not want to enter into a debate about them here. I will debate both of
them when we get to them.
But the point I want to make is this: This is evidence that this bill
is about money and not about teenage smoking. It is clear evidence, it
seems to me, that in distributing this money the totals are so big that
there has not been great care taken with the distribution. Please
recognize that if working people got to keep the money, they would
spend it wisely. Even if it were in the appropriations process in
Congress, much of it might be thrown away but some of it might be used
for some good or objective effort.
I simply say this bill stands indicted in how careless we have spent
hundreds of billions of dollars in dividing up this windfall, this
winning of the lottery, by the designation of this industry as the
enemy of the people and thereby creating a right and a public demand
that we seize this money.
The next issue I want to talk about is the tax itself. On this issue,
I think we have one of the greatest gulfs between the rhetoric of the
bill and the reality of the bill that exists. The rhetoric of the bill
is that we are taxing these tobacco companies. The rhetoric of the bill
is these tobacco companies have conspired to deceive; these tobacco
companies have conspired to induce children to smoke. I don't dispute
that. I think it is true. I think there is increasing evidence that is
true. But the rhetoric is that somehow we are penalizing the tobacco
companies and the tobacco industry with this massive bone-crushing tax
of hundreds of billions of dollars. That is the rhetoric.
But what is the cold, hard reality? The cold, hard reality is that
virtually none of these taxes are being paid for by tobacco companies,
and, in fact, we have an incredible provision in the committee bill to
make it a crime if the tobacco company absorbs any of the tax and does
not pass it through to the consumer. So not only does the tobacco
company not pay these hundreds of billions of dollars of taxes, but we
have in this bill a provision--almost unimaginable--that makes it a
crime for the companies not to force the consumer to pay the tax. So
not only do we not tax the tobacco companies but we protect them in
case any of them would say, ``Well, look, I do not want to pass the
whole thing through but I would like more of the market.''

Who pays this tax? I would like to suggest that my colleagues ought
to go out in Washington, DC, and walk the streets and try to take a
look at who is smoking. What they are going to find when they do that
is that basically smoking in America, while there are exceptions to
every rule, smoking today is basically a blue-collar phenomenon. When
you look at the distribution of the tax burden, you see it as clearly
as anything that is visible. The tax that this bill imposes, hundreds
of billions of dollars of taxes, will be borne overwhelmingly by blue-
collar workers.
According to the Joint Tax Committee, 74 percent of the taxes that
will be collected under this bill will be paid for by Americans who are
in families who have incomes of less than $50,000 a year.
So the rhetoric is we are taxing these big, evil, conspiring tobacco
companies. But the cold reality is that not only are we not taxing
these tobacco companies, but we have provisions in the bill that
protect the tobacco companies from anyone not passing the tax through
to the consumer.
So every penny, for all practical purposes, of hundreds of billions
of dollars we are going to collect is coming from real honest to
goodness people who are buying tobacco products, the very victims of
the conspiracy that this bill is said to rectify. The very victims of
the conspiracy that this bill is aimed at rectifying are the people who
will pay these taxes. And 74 percent of them are members of families
who earn less than $50,000 a year.
I don't have any intention, with all due respect, of hurrying up my
statement. I intend to cover each of these issues, and I am not going
to delay them. I am certainly not filibustering.
Mr. McCAIN. Will the Senator from Texas yield for a comment?
Mr. GRAMM. I would be happy to yield without losing my right to the
floor.
Mr. McCAIN. The Senator from Texas was not on the floor but we did
have an understanding that we would move forward with an amendment. I
ask the Senator not to deprive us of any information or knowledge that
we need from him. But we did have an understanding before the Senator
came to the floor. I could have blocked the Senator from taking the
floor. But I didn't choose to.
So I would appreciate it, if at least at some point we could move
forward. I thank my dear friend from Texas.
Mr. GRAMM. Let me say, I understand the Senator from Arizona wanting
to move the bill forward. There are some key points that need, I
believe, to be made before we start voting on amendments. I am not
going to be in any way dilatory. I have several other issues I want to
cover. But I will move with all due speed in covering them.
But I do want to say that we have a bill that has come to the floor
without objection. We are debating it and I want to make it clear that
we are going to debate this bill. We are going to have a full airing of
views. It is imperative that we all understand what is in the bill. I
intend to object to the unanimous consent requests that would limit my
right or the right of other Senators. This is the Senate.
I remind my colleagues that when Jefferson came back from France
where he had been Minister to France when the Constitution was written
and he asked Washington what the Senate was for--and many of you know
the story--Washington, being a southerner, often cooled his tea in a
saucer before he drank it. Jefferson asked him what the Senate was for.
If you had the House, what did you need the Senate for? And Washington
explained to Jefferson that in moments of heated public passion, the
heat of public opinion would overwhelm the House but the Senate would
be like this saucer, as he poured his tea into his saucer to cool, and
it will cool passions before it acts.

So I do not intend to delay, but I do not intend to be hurried
either, nor do I intend to have my rights limited even by my dearest of
all friends, Senator McCain.
Now, 74 percent of the taxes that are collected under this bill are
collected from Americans who are in families that have incomes of less
than $50,000 a year. Far from taxing the evil tobacco companies, the
cold reality is, as much as we would like it to be otherwise, as much
as we would like to convince ourselves and others that it is otherwise,
this is a massive, regressive, crushing tax on blue-collar America.
Let me give you a figure which is astounding to me, and if it weren't
from the Joint Tax Committee I would question its validity. But listen
to this number. Of Americans who make $10,000 a year or less--very-low-
income Americans--if we pass this bill, we will raise the percentage of
their income coming to the Federal Government by 41.2 percent.
Let me give you that number again. For people in America who earn
$10,000 or less, so substantial is the impact of this cigarette tax on
the amount of their income coming to the Federal Government that the
percentage of their income going in Federal taxes will increase by 41.2
percent from this cigarette tax increase alone.
Who is paying this tax? Americans who make less than $10,000 a year
are seeing their Federal taxes rise by 40 percent as a result of this
bill. Those who make between $10,000 and $20,000 will see their Federal
taxes rise by 9.8 percent. Those who make between $20,000 and $30,000
will see their Federal taxes rise by 4.4 percent. Needless to say, by
the time you get down to us, Members of the Senate, we see our Federal
taxes--relatively few of us smoke, but on average people who make more
than $100,000 will see their Federal taxes rise by only .1 percent.
So I think we are going to have to come to grips with one clear fact
about

[[Page S5091]]

taxes: We are not taxing tobacco companies. We are not taxing
evildoers. We are not taxing conspirers. We are taxing victims.
I hate pulling my mama into the debate, but it is such a beautiful
example, I can't resist. My mother is 85 years old. She smokes
Marlboros. I have spent my 55 years of life trying to get her to quit
smoking, and I have failed. And now the doctors tell me that one part
of her that is still in relatively good shape is her lungs. So I have
quit trying to get my mother to stop smoking. I still believe it would
be good for her not to smoke, but I can't get her to stop.
But here is the point. The whole logic of this bill is saying to
Florence Gramm, ``Florence, you have been exploited. Joe Camel has made
you smoke for 65 years. The tobacco companies, through their
advertising, have forced you to smoke. And in doing so, they have
affected your health. They have perpetrated a terrible evil, and we are
going to do something about it.''
So Florence asks, ``Well, what are you going to do about it?'' Well,
what are we going to do about it? We are going to make my 85-year-old
mother pay higher taxes. So we tell her she is exploited. We are
outraged about it. The President is outraged about it. We are outraged
about it. So what do we do to her to show her how outraged we are? We
raise her taxes.
Now, please forgive me if I seem to be struck by the incredible
paradox that under this bill the victim is penalized and the
perpetrator of the fraud is not only not penalized, not taxed, but
protected by an incredible provision that forces those who might not
pass through all of the tax to my mother to do so.
One final point before I leave taxes in my effort to get on and
finish my opening comment goes back to this evidence. What is the
evidence that this is about getting people to quit smoking, and what is
the evidence that this is about money? Well, let me give you a clear-
cut piece of evidence. If the objective of the bill was to get people
to quit smoking, you would put the tax on full tilt on day 1. When an
amendment was offered in the Finance Committee to raise the tax to
$1.50 a pack, the proponent of the amendment offered it phased in over
a 10-year period so as to prevent a consumer backlash.

What is a consumer backlash? Why would you phase a tax in if the
objective is to get people to respond to the tax? Well, we all know.
Many of us have served on the Finance Committee. All of us have been
involved in debates that entailed tax increases. The reason you phase a
tax in is to try to hide it from the taxpayer and to try to reduce the
backlash to it or the economic or political response to it, and the way
you do it is, you start it out small and then each year you make it
bigger, hoping nobody notices. But isn't it an incredible paradox that
a tax which is supposed to be a tax to shock people into stopping
smoking is phased in so as to minimize the ``consumer backlash'' to it?
If the purpose of the tax was to get people to stop smoking, you would
hit people with a tax at its highest level on day 1. Consumer backlash
would be what you want. But if the purpose was to raise money, then you
would phase in the tax.
I submit that the proposal before us, the amendment to raise the tax
to $1.50, and every proposal save the one in Finance where I raised
this point, each of these proposals phases in the tax, and you would
never phase in the tax if the purpose of the tax was to get people to
respond to it and stop smoking. You would phase in the tax only if you
wanted to minimize their response to it and their awareness of it. I
think that is additional evidence that the objective of this bill, or
at least the likely result of it, is to raise hundreds of billions of
dollars and spend the money. The bill is not structured in a way one
would believe it would be if its sole objective was to get people to
quit smoking.
I have three final issues I want to talk about. The first issue is
one that weighs heavily on my mind. Maybe I am the only Member of the
Senate who is concerned about this, but it is an issue that I am
greatly concerned about. We are setting a precedent for America's
future with this bill. There are many elements of the bill that I am
sympathetic to, but there is one element I am very frightened
about. Here is that element. It is stated in a clear form--maybe
overstated, but I don't think so. What has happened in this bill is we
have picked, in this case an industry, and it has been so vilified that
it is popular to tax the product it produces, even though the tax is on
blue collar workers and not the tobacco companies. And the logic of
this is, because of the negative impact on people's health of consuming
this product, that tobacco, nicotine, is addictive, and the people who
sell the product know that and market it in such a way as to get people
to consume the product. So as a result, we are getting ready to impose
one of history's larger tax increases on the consumers of this product.

This is a view which basically says my mother is not to blame for
having smoked for 65 years, it is not her fault; she was induced to
smoke by an industry which conspired to attract her as a customer, and
to hold her as a customer. Now, if we take that view in this bill,
there is no way you can look at this bill without reaching the
conclusion that we have decided my mother and the millions of other
people who smoke are victims and they have, against their will, made a
decision--if we divorce them from responsibility for their own
decisions, where does this end? Does anybody here who has ever known an
alcoholic not believe that spirits, whiskey, alcohol is addictive? Is
there anyone listening to this debate anywhere, who has ever known
someone who was an alcoholic, who doesn't believe you can get addicted
to whiskey?
Next month, are we going to have this same--or next year--are we
going to have the same process with regard to hard whiskey and beer and
wine? Are we going to discover somewhere in the deep files of the
liquor companies 10 years from now that they targeted their ads to
today's 15 year olds?
Are we going to discover that the beer brewers have figured out what
ads to run to get us to go to the refrigerator and get a cool one? And
are we going to start this process next year on alcohol? I don't see
how it can be otherwise. Does it end there?
When I go to McDonald's, attracted, as our President is attracted,
against my will--I would like to be as thin as the Senator from South
Carolina. But McDonald's and every other fast food producer in America
conspire against me. They fill up the television with ads that attract
me to go and to eat. They do studies to try to determine my weakness.
Am I not victimized by McDonald's and Burger King? And, if I am
victimized, are they not liable? If I am not responsible, are they not
responsible?
Here is my point. I hope my colleagues will not take it as a trivial
point because I don't mean it as a trivial point. Where does this end?
If we don't hold people accountable for decisions they make, does it
end with tobacco? Does it end with alcohol? Does it end with fattening
foods? Where does this debate end?
Let me submit the plain truth is everybody who has thought for a
millisecond about this issue has thought about this and nobody knows
the answer to it. And I submit this is a profound question we need to
pray over for an extended period of time before we set a precedent
which says people are not responsible for the decisions they make and,
therefore, somebody else is responsible, and they can be made liable.
Two final points: Nobody is looking at black markets. We have a bunch
of people who are talking as if they are economists and they know what
they are talking about. You know, we have all seen--many have repeated
the study--if you raise the price of tobacco by 10 percent, you are
going to have a 6-percent decline in consumption. If you think about
that, everybody knows that is nonsense. So you could, by doubling the
price of cigarettes, eliminate smoking in America? Does anybody really
believe that? But yet ads run every day with that figure in it. People
repeat it. Somebody made it up. It makes no sense whatsoever.
Europe has imposed very, very high taxes on tobacco. Has it stopped
teenage smoking? No. Has it stopped adult smoking? No. Will raising the
price of cigarettes--other things being the same--have some marginal
impact on tobacco use? Yes. But can we say for

[[Page S5092]]

every 10 percent we raise prices, consumption will decline by 6
percent? Absolutely not. Any good freshman student in economics would
laugh at such an assertion.

But even more laughable is the arrogance of government. Let me just
give you some facts. Great Britain has imposed a very high price on
tobacco. But have they been able to enforce the tax? The answer is no.
Fifty percent of the British market for cigarettes today, according to
an article by Bruce Bartlett in the Wall Street Journal, and a fairly
comprehensive study he has done at the National Center for Policy
Analysis and the De Tocqueville Institute--what he has found is that
countries that have imposed high tobacco taxes have seen an explosion
in black market sales of cigarettes and, as a result, the cigarettes
sell at substantially below the price with the tax, and in some cases
they sell at less than they sold for before the new tax.
When Britain has 50 percent of its cigarettes that are bought on the
black market and smuggled into the country, or are produced illegally
there, when Italy has 20 percent, when Spain has 23 percent, when even
States in our country at the low level we now tax relative to the
levels we are talking about here have experienced that, when there is
more money in smuggling cigarettes in Great Britain than in smuggling
20 pounds of marijuana--should not we at least look and make some
objective judgment as to whether or not we are taking an action which
will fill our country up with illegal cigarettes, and so we will have
some hood on the corner who is saying to our children: Look, I can sell
you these cigarettes, these brands at this price; I can sell you
marijuana for this price; a little crack cocaine for this price. But
you know the response you get when you raise this issue? The response
is that people who wouldn't know economics from ethnic studies say:
There is nothing to this.
There is everything to this. It is a cold reality that in Europe
black markets in cigarettes are now a way of life. I think in setting
out a policy that is aimed at, at least nominally, getting our children
not to smoke, we need some hard evidence about black markets. If we
have black markets in Canada, if we have black markets all over Europe,
if we have black markets in Asia, what is the reason to believe that we
are not going to have black markets in the United States of America? I
believe this is an issue which needs to be dealt with.
A final point and I will be through with my opening statement. I am
loathe to do this because I know when I do it my telephones are going
to ring off the wall, so people who work for me please forgive me. But
you get the idea in reading the newspaper in Washington, DC and in
working in the Senate that this issue is the all-consuming issue in
America; that this is an issue the whole world, at least our part of
it, our constituencies, are focused on and nothing else. One of the
things I try to do is to find out what exists within the beltway and
what exists in America, and try to determine what the public really
thinks and what is it they want us to do.
So last month I got my office to keep pretty meticulous records about
the amount of information we were getting in our office about this bill
and the tobacco issue. And, as of that period, ads had been run in the
Dallas Morning News and the Houston Chronicle--those are the two
biggest papers in my State. Some television ads, I believe, had been
run. So the question was, over a 30-day period, how many of the 19
million people in my State thought this was a big enough issue to pick
up the telephone and call my office?
Let me give you the results. We had about 1,400 people call our
Washington office and say, ``Don't raise taxes on cigarettes.'' Every
one of them was generated, as best we could tell--everyone called in on
a WATTS number and they had been triggered to do so.
Three hundred people called in and said, ``Raise taxes on cigarettes;
save our children.'' But as best we can determine, almost every one of
them was triggered with the use of a WATS line and by an organized
group.
Here is the most revealing and important thing. Last month, in my
seven offices in the State, so far as I am aware, virtually no one
called on this issue. It is the No. 1 issue in Washington, DC. Ads are
being run here, there, and everywhere. And in 30 days, virtually nobody
who actually had to pick up their phone and call, as they normally
would call an office--not triggered by a special interest group--called
my office on this issue.
Why is that relevant? Why it is relevant is, I think the Senate, as
the greatest deliberative body in the world, needs to take a step back
and not stop considering the bill--far from it. But we need to not let
the special interests that are opposed to the bill or the special
interests that are for the bill dominate our thinking on this bill.
We need a broader perspective, and the plain truth is, this is not
the be all and end all of America. My view is, we need to be sure we
know what we are doing, and we need to do the right thing, because the
truth is, obviously we have all been told--every time I raise this
issue in one of our closed meetings, people say, ``Yeah, but they
haven't run the TV commercial yet attacking you,'' or whomever. Let's
not underestimate the American people. My urging here is that we take a
long, hard look at this thing and we try to figure out what the right
thing is and that we do it.
This is a very important issue. There is a lot of money involved
here. A lot of hard-working, blue-collar people are going to suffer, as
a result of this tax, a lower standard of living. A lot of people are
going to get huge quantities of money.
Let me say that I don't have any doubt that the 1,400 people who
called me against this bill on the WATS line were triggered by the
tobacco companies, but I also don't have any doubt that almost all of
the 300 people who called me for it were triggered by the groups that
hope to get billions of dollars from this bill.
As I see this thing, the only two clearly defined constituencies here
are people who have a direct interest in the bill. I think we ought to
listen to them to see if they have anything to say, but I don't believe
we should be frightened of them. I believe we should try to ferret out
what are the facts. I think we need to look at each and every one of
these issues: Who is paying the taxes? Who is hurt? Who is helped? How
is the money being spent? Is the money being spent wisely? Are we going
to affect teenage smoking? Is this the best way to do it? Is there a
better way to do it? Do we do it without reallocating hundreds of
billions of dollars from blue-collar workers to basically bureaucrats
and public interest advocates who--I don't know how they determine what
the public interest is to advocate it, and I am always suspicious of
anybody who advocates the public interest, other than myself.
These are the things that I urge my colleagues to look at. Let's not
delay, but let's take the time to know what we are doing. Let's give
some prayerful thought about where we are going to be next year if the
same thing is happening to alcohol. Where are we going to be the next
year if the same thing is happening to the fast food industry? Where
does all this end once you start it? I don't know the answer to this,
but I think we ought to know the answer before we start down this road.
Let me conclude by simply repeating the remark I made earlier, and
that is, I congratulate Senator McCain for his work in the Commerce
Committee. Having had a little opportunity to try to have a positive
impact in the Finance Committee, I have a greater appreciation of the
difficulty he faced. I think it is clear the Finance Committee made the
bill worse in every respect than if they had never touched it. The
question is, Given that we now have the bill on the floor, what can we
do to make it better?
I hope at the end of the process that I might be on the same side as
the Senator from Arizona. I think the better we understand the bill,
the better the chances are that we will serve the public interest and
that that will happen.

I yield the floor.
Several Senators addressed the Chair.
The PRESIDING OFFICER (Mr. Sessions). The Senator from Arizona.
Mr. McCAIN. Mr. President, very briefly, I thank the Senator from
Texas, as always, for his thoughtful and insightful views. Obviously, I
am not in agreement on a number of the things he said, but his and my
disagreements have always been very

[[Page S5093]]

agreeable. I believe he has contributed an enormous amount. I do agree
with him, I don't know what would have happened if we had given the
Finance Committee another 24 hours, which I think is, as he mentioned,
a cautionary lesson as to what we have had to go through and what we
will go through on the floor and what might have happened if it had
gone to other committees.
Just one other point I want to make for my friend from Texas. Yes,
the attacks have started. Millions of dollars have been directed at me,
so I do know what it is like. You say you don't know what it is like. I
know what it is like. I am a big boy, and I can take it, but I have
been rather interested at the ferocity of these attacks and how
personal they have been. Obviously, I will not respond in kind. I would
have liked to have seen the tobacco companies spend some of this money
on trying to stop kids from smoking and other worthwhile efforts. But
it is their right as corporate citizens to do so.
I mention to my colleagues, Senator Hollings has remarks that he
would like to make, and it is my understanding, after that, I say to
Senator Faircloth, that we will propound a unanimous consent request
which will make his amendment in order, with a motion to table at a
time certain after that. That will be at the completion of Senator
Hollings' remarks, so we can move forward with the amending process.
I thank Senator Faircloth for his patience and good humor throughout
this delay this morning. I yield the floor.
Mr. HOLLINGS addressed the Chair.
The PRESIDING OFFICER. The Senator from South Carolina is recognized.
Mr. HOLLINGS. Mr. President, the distinguished Senator from Texas
reminds me of that youngster who went to the psychiatrist. The
psychiatrist drew some circles on the blackboard and said, ``Now what
do you think of?''
He said, ``Sex.''
He drew lines up and down. The youngster said, ``Sex.''
He drew some crosses. He said, ``Sex.''
The psychiatrist said, ``Young man, you're the most oversexed
person.''
The youngster said, ``Doc, you're the one drawing the dirty
pictures.''
The Senator from Texas is the one drawing the dirty pictures. I have
never heard so many extreme nonsensicals in my life. We want to keep
his dear mother here. No one is victimizing her. What we are going to
try to do is help the doctors to counsel her to stop smoking.
Let's get back to last June, almost a year ago, to show you how far
out of kilter this thing has gotten.
What happened was, to the surprise of many--I did not know, and I do
not know of any Congressman or Senator who participated. I do not think
there was a Congressman at the table. I do not think there was a
Senator at the table. But the tobacco companies, together with the
States attorneys general and the White House and the health community,
announced a dramatic settlement of $368 billion. That is without a
Congressman or Senator even thinking in these terms.
I have been up here 30 years. And I have worked with the Cancer
Institute, Dr. Koop and Dr. Kessler and others. Thirty-some years ago,
yes, we put notification on a pack of cigarettes. And we have
admonished--I have seen demonstrations by the Cancer Institute that
stopped me from smoking. But we have not done near what was announced
last June.
Last June, the communities got together on the basis of the companies
stating, in essence, ``Look, we're tired of winning these cases.'' As
we speak on the floor of the Congress today, no one has won a jury
verdict against a tobacco company, period. I think it is in the main,
on account of the publicity and the health and the notification of the
assumption of risk, that smoking is dangerous to your health. The
companies themselves are engaged in advertising Miller High Life Beer,
Kraft Foods; different other things of that kind, Ritz Crackers, what
have you.
They are good businessmen. They are not a bunch of crooks, as they
are trying to be depicted here once the politicians got this particular
issue. They have run a touchdown in all the directions and in all
extremes. But what happened was the companies said, ``Look, rather than
paying out all these costs to lawyers and winning every case after
case, why don't we get together and continue in an orderly fashion.''
We are not going to have prohibition. Even I heard Dr. Koop testify
to that before our committee that no, he was not attesting to having
prohibition. We are not going to have prohibition of tobacco. Tobacco
was here. The Indians were smoking it when we arrived.
Just the other day we had a celebration with our role model, the
former distinguished majority leader, Mike Mansfield, whom when you go
to the Mansfield Room, he is very proud of that portrait of himself
smoking that pipe. And he is 95 years of age.
So we live in the world of reality. Hopefully, this Congress will get
back to reality and not the nonsense that we have just heard of about
taxes and what the idea was and everything else of that kind.
The idea was to get an arrangement whereby the companies who could
win every advertising case about Joe Camel and everything else of that
kind says, ``We'll stop advertising in this manner. We'll stop spending
that money on advertising. We'll stop spending this money on lawyers.
And we'll make an agreement with you to pay in so much of our profits.
Necessarily, you say that you want to raise the price because that is
the best control of tobacco consumption, so we'll go along with raising
the price.''
We live in the real world. I think it is $4 or $5 or something in
downtown London. I was visiting with a friend not long ago from Canada.
He picked out of his pocket and lit up a cigarette. And I said, ``How
much, by the way, was that pack?'' He said, ``This one is $7, but in
Canada it is $6 to $10.'' You see, that shocks us who really have not
paid that close attention.
I never heard of any $360 billion, and I have been working on the
defense budget for years on end. That is only $245 billion. Here we
come with an amount that they agreed to pay themselves with an increase
in the cost. The politicians coming around hollering, tax, tax, tax--
tax and spend, tax and spend, and everything else, including the
companies. Under the whole cloth, the tobacco companies are the ones
who thought of the idea of taxing $368 billion. And this just carries
it up to $500 billion.
So they are the ones who gave us the idea that let us go ahead and
see how much, if you please, Mr. President, you could charge on
cigarettes, as much as possible, to try to stop the smoking, pay for
the advertising, pay the States back for their Medicaid costs, start
some children's programs. Yes, they talk about it--tax and spend. The
spending is on children, on helping to get children to stop smoking.
The distinguished Senator from Texas knows that. We are doing that, and
we are going to use that money to try to stop children from smoking.

And, you know, Mr. President, they went even further than I would
have gone if I had been their lawyer or I had been the CEO, and that is
take some kind of pledge and penalty for what they call ``look back.''
It took me a long time--they said, ``We're going to be responsible for
stopping smoking in America.''
Now, whoever heard of that? We have been trying to do it with
notification on the packages. The health community has been trying it.
Every doctor now will counsel you. So there is nothing new. But the
tobacco companies are supposed to advertise in an adverse fashion and
pay a penalty that goes up, up and away if, as a company, they do not
comply or accomplish it.
Now, that was a pretty solid agreement that has been distorted in
every fashion here which does not seem to get any understanding because
the jackals have taken over now, cackling up here about tax and spend
and everything else of that kind, going into $18,000 an acre, $100,000-
an-hour lawyers' fees, and all these other things.
Mr. President, my distinguished colleague from North Carolina has an
amendment that he wants to put in--and I want to yield to him just as
promptly as I can--relative to legal fees. And we will debate that and
the contribution made by trial lawyers.
Let me just state ahead of time, categorically--and I am looking over
here at a chart that says ``Minimal Ethics.'' Not at all, absolutely
not at all. I have

[[Page S5094]]

to say something about that chart. I cannot resist the temptation. I
have been at the trial bar, and if they think it is anything unethical,
we could go to the company lawyers who are now being investigated for
conspiring with the company executives on how to avoid these charges
and everything else of that kind.
Man, oh, man, talk about being unethical, after the abuse and the
challenge they have been through. There is a little attorney general
down there in Mississippi. I was just watching it the other night. I
was not that familiar with him--Mike Moore. He literally was sued by
his own Governor trying to bring tobacco to the bar of justice. But he
stuck to his guns. Maybe they call that unethical bringing that case
against the industry, or a contingent fee is unethical. But it goes for
the ``every mother's son'' the best of counsel. And corporate America
and the Chamber of Commerce does not like that.
Billable hours, good Lord have mercy, we are going to get into a good
debate on billable hours. And there are 60,000 of them registered to
practice in the District of Columbia, 60,000--oh, they got all lawyers
in Japan right here in the District--59,000 will never see a courtroom
or know anything about law. It's fixing me and fixing this one and that
one. It's fixing the jury. Unethical? Unethical? I want to hear what is
unethical about trial lawyers compared to the billable hour crowd.

But back to the Senator from Texas, and he was talking about the
amount of money, the billions here, to buy out the farmers. At least we
are paying the farmers who have been making a good living to get out of
that, not for those who didn't make a living, went broke, and we came
and gave them food stamps to the tune of 431 billion bucks, Resolution
Trust Company. Half of it was in the State of Texas. We bought every
swimming pool, every tennis court, every golf course, every country
club that you could possibly imagine. It was improperly financed. You
and I know it. Over $200 billion to one State. But they want to talk
about honest, hard-working tobacco farmers out there at the sweat of
their brow being bought out of this particular business, coming up here
with all these fanciful figures; $18,000 an acre--that takes care of
the warehouse, that takes care of the bank on the loan, that takes care
of the equipment, that takes care of the community, that takes care of
his children.
When he is out of the business, how do you send them to college? So
you let them come in on Pell grants. Yes, it is a comprehensive
approach. The LEAF Act is intended, because we saw last fall that the
chairman of the Agriculture Committee wanted to just put them out of
business, and not take care of the communities.
I have I don't know how many farmers in South Carolina, I think about
2,000 tobacco farms, over $200 million, a big cash crop. So when we saw
that, we moved. I want to say this categorically and just
dispassionately, how shocked and dismayed I am to get into this
particular situation. The record ought to reflect it. When we saw the
chairman of the Agriculture Committee who said he had seen polls and
everybody in tobacco farming wanted to get out of it, which is out of
the whole cloth. I have been traveling to tobacco farmers, campaigning,
crisscrossing all over the State. I never saw the tobacco farmers
trying to get out of the business, but that is what he said.
I said we are really in trouble. The distinguished Senator from
Kentucky, Senator Ford, and I, we have the LEAF Act and, yes, we
positioned it. We knew what we were doing because the distinguished
chairman of the Commerce Committee came to me and said, ``Evidently,
they are going to have a tough time getting a bill out of any
committee, and the majority leader asked if we can get one out of our
committee. I would like to have it bipartisan,'' the chairman said. I
said, ``I would like to have it bipartisan, too, but we have to take
care of the farmers.''
He hesitated a few days and came back and said, ``All right, we will
take care of the farmers.'' And we went all the way down to Florence
and said the LEAF Act was taken care of, taking care of the farmers.
The President of the United States went out to Kentucky and said the
LEAF Act is taking care of farmers. We had five conferences trying to
get this bill finalized with the White House, with the Republican
majority and with the Democratic minority to work out what we could, to
get a comprehensive policy and get it over to the House side. Each time
we checked, the LEAF Act was there, undisturbed.
Now, last night, out of the clear blue--which is one of the reasons I
wanted the floor--we get Senator Lugar's bill which had one hearing
last fall, I think last September, according to the record, never a
markup, and get this whining out here about equal treatment. Why we
have to give him--the Agriculture Committee likes the bill, had been
marked up and reported, like ours had been worked upon. No, we have
been hedging against that nonsense of the Lugar approach since last
fall and working around the clock, locking down everything, and they
come and tell us that they couldn't avoid it. They had to get a
majority of the Commerce Committee members. I am dismayed the chairman
voted with that majority. After all our work trying to work together.
That explains my statement yesterday about the bipartisanship.

Now, back to just exactly what we have here with respect to being
victimized and everything else of that kind. I think that agreement,
having been worked out within the Commerce Committee and all of these
conferences and everything else, was a pretty judicious instrument in
that you cannot have tobacco farmers, Senator, unless there are tobacco
companies. You can put the companies out of business. We have a mob
scene here, a lynch mob coming forward; get rid of the company.
Every time we agreed on something, Senator McCain and I heard from
different groups, ``more, more, more, they are liars,'' they are this,
they are that. Let's agree on all of that, you can put them out of
business. Then McCain and Hollings can start their own tobacco company
or maybe it would be Sessions and Hollings. It would be a pretty good
business. All we have to do is get the tobacco from Turkey. We don't
have any false records they can go and embarrass us with--juries and
everything else of that kind. We can go back and get old Joe Camel and
start advertising again. Ain't nothing wrong with that. They tried end
on end before the courts to kick out their advertising, constitutional
right, first amendment, and we can go make a living, and what has
happened? Nothing for the children.
So that is a pretty good political charade to come out on the floor
of the Senate and say, now, is it tax or is it for the children, and
analyze it in this tricky mind as being just a tax. It is an increase
in price. You don't have to pay it. It is voluntary. I quit smoking.
They say more than half of the people could quit smoking. Yes, it is
addictive to some, just like alcohol. We could say get rid of Ronald
McDonald, advertising fat for the children. Go after that. With that, I
can agree with the Senator from Texas.
When you come right down to it, it is a balancing act that we are
engaged in, and nobody wants to acknowledge it. We can get rid of the
tobacco companies, but that does nothing for us at all. It doesn't do
anything for the health community. It doesn't do anything for the
children. It doesn't do anything for the payments to be made. This is
money going back to the States. It doesn't do anything for the
programs. It doesn't do anything for the look back. It doesn't do
anything to anything.
So these people that run around and want $1.50 and more and more and
more, don't even understand the problem, don't even understand what we
are trying to do on the floor of the Senate with the tobacco bill.
We are trying to go along with respectable companies--yes, they did
stand up and falsely state that they didn't think it was addicting and
everything, but those folks are gone. If you don't think they have
exactly, just tell the truth. Go over to the Defense Department and get
their civil and criminal docket and you will find true blue chip
corporations of America trying to defraud the government at every turn.
It is a sad thing.
Then I have to look up here at minimal ethics in the business crowd.
I talked to my friend, Tom Donohue, yesterday and I worked with him. I

[[Page S5095]]

have every chamber of commerce award that you could possibly get.
But to get up here and let this legalistic crowd take over and start
controlling--here is the Republican movement that doesn't want to have
price controls, wants to deregulate, wants to get rid of the
Government, and now wants to fix prices, wants to fix fees. How can you
tell when these lawyers have really made the case? It isn't an hourly
thing. Until last June, there wasn't any case. Nobody has made any--
they have gotten some settlements. I know the best of the best from my
hometown tried one for ancillary smoke--what do you call it? Voluntary
smoke? Involuntary smoke? Whatever it is--up in Indiana during the
months of February and March, and even he lost that.
We are saying that you are not going to have any more immunity, or
have a limit on the immunity. They can still bring individuals. They
can still bring class actions. Everything is still in the commerce
bill.
I would like to have given what they promised last June--the
immunity. But we did put an $8 billion cap on it. But the reason for
giving any immunity is that the juries of America have given them
immunity, period. They know the assumption of risk and everything else
of that kind. It has been out there 30 some years. By the time we get
along with some petitions before the court and everything, it will be
40 to 50 years, and everybody will have known about it; you won't be
able to get a verdict against the companies.
So we who are responsible for public policy are also at a crossroads.
There is a pool of opportunity draining out on us. We ought to be
acting this year. We ought to be acting this week. We ought to get with
this thing on a realistic basis and how we brought this bill out, and
not engage in trickery and come back in and take a bill that never was
reported out of the committee, never onto the floor, never in debate,
and say, ``Stick it in, because we can fix the majority on the Commerce
Committee.'' I am saddened to see that. I never have seen that happen
before. I checked with the Parliamentarian. They said yes, it could
happen. But I never have seen that and it was sad to see.
I have a lot of other things here that we could touch upon, but the
distinguished Senator from North Carolina has been waiting. I hope when
he does present his amendment, that he amends the words ``minimal
ethics.'' I don't know that any trial lawyer--they win some cases, but
they lose a lot of cases.
As between the billable hour crowd and those working for the client
rather than for themselves, because the clock keeps running, that is
the most vicious thing that ever happened to my profession--this
billable hour group. That is the worst thing I have ever seen occur,
because I practiced law--never with billable hours; I got results for
that client. Then he understood that was the charge, because we won.
When we lost, we assumed all the costs. Everybody knows just that. What
has been unethical, according to the testimony made to that attorney
general down there, is the companies have been unethically engaged and
the Chamber of Commerce has been supporting them.
I hope the Senator from North Carolina will amend the words there on
``minimal ethics.''
I yield the floor.
Mr. McCAIN addressed the Chair.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. McCAIN. Mr. President, I ask at this time unanimous consent that
Senator Faircloth be recognized to offer an amendment.
Mr. President, we still have one Member on our side who needs to be
contacted.
I seek at this time that Senator Faircloth be recognized to offer an
amendment, and that we proceed under the understanding that no second-
degree amendment be in order to the amendment until the motion to table
is made at 4 p.m.; that, if the amendment is not tabled, the Senator
from South Carolina, Senator Hollings, be recognized to offer a
relevant second-degree amendment; and the time between now and 4 be
equally divided.
Mr. President, this body proceeds on comity. I would like to proceed
under that understanding, and as soon as we contact one Member, then we
will put this into a formal unanimous consent agreement.
At the moment, I would like to ask for my colleagues' indulgence so
that Senator Faircloth can be recognized to offer his amendment.
Mr. HOLLINGS. If the distinguished leader will yield, I understand we
are coming back at 2:15. I was trying to get an hour on our side.
Mr. McCAIN. We will proceed under that understanding, and we will
attempt to put it into a unanimous consent agreement between now and
the next 5 or 10 minutes, and, if not, to try to have it between now
and by 2:15 when we return.
I yield the floor.
Mr. FAIRCLOTH addressed the Chair.
The PRESIDING OFFICER. The Senator from North Carolina.
Mr. FAIRCLOTH. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. FAIRCLOTH. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 2421 to Modified Committee Amendment

(Purpose: To limit attorneys' fees)

Mr. FAIRCLOTH. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:

The Senator from North Carolina (Mr. Faircloth), for
himself, Mr. Sessions, and Mr. McConnell, proposes an
amendment numbered 2421 to the modified committee amendment.

Mr. FAIRCLOTH. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place, insert the following:

SEC. . LIMIT ON ATTORNEY'S FEES.

(a) Fee Arrangements.--Subsection (f) shall apply to
attorneys' fees provided for or in connection with an action
of the type described in such subsection under any--
(1) court order;
(2) settlement agreement;
(3) contingency fee arrangement;
(4) arbitration procedure;
(5) alternative dispute resolution procedure (including
mediation);
(6) retainer agreements; or
(7) other arrangement providing for the payment of
attorneys' fees.
(b) Requirements.--No award of attorneys' fees under any
action to which this Act applies shall be made under this Act
until the attorneys involved have--
(1) provided to the Congress a detailed time accounting
with respect to the work performed in relation to the legal
action involved; and
(2) made public disclosure of the time accounting under
paragraph (1) and any fee arrangements entered into, or fee
arrangements made, with respect to the legal action involved.
(c) Application.--This section shall apply to fees paid or
to be paid to attorneys under any arrangement described in
subsection (a)--
(1) who acted on behalf of a State or political subdivision
of a State in connection with any past litigation of an
action maintained by a State against one or more tobacco
companies to recover tobacco-related medicaid expenditures;
(2) who acted on behalf of a State or political subdivision
of a State in connection with any future litigation of an
action maintained by a State against one or more tobacco
companies to recover tobacco-related medicaid expenditures;
(3) who act at some future time on behalf of a State or
political subdivision of a State in connection with any past
litigation of an action maintained by a State against one or
more tobacco companies to recover tobacco-related medicaid
expenditures;
(4) who act at some future time on behalf of a State or
political subdivision of a State in connection with any
future litigation of an action maintained by a State against
one or more tobacco companies to recover tobacco-related
medicaid expenditures;
(5) who acted on behalf of a plaintiff class in civil
actions to which this Act applies that are brought against
participating or nonparticipating tobacco manufacturers;
(6) who act at some future time on behalf of a plaintiff
class in civil actions to which this Act applies that are
brought against participating or nonparticipating tobacco
manufacturers;
(7) who acted on behalf of a plaintiff in civil actions to
which this Act applies that are brought against participating
or nonparticipating tobacco manufacturers;
(8) who act at some future time on behalf of a plaintiff in
civil actions to which this Act applies that are brought
against participating or nonparticipating tobacco
manufacturers;

[[Page S5096]]

(9) who expended efforts that in whole or in part resulted
in or created a model for programs in this Act;
(10) who acted on behalf of a defendant in any of the
matters set forth in paragraphs (1) through (9) of this
subsection; or
(11) who act at some future time on behalf of a defendant
in any of the matters set forth in paragraphs (1) through (9)
of this subsection.
(d) Report.--
(1) Each attorney whose fees for services already rendered
are subject to subsection (a) shall, within 60 days of the
date of the enactment of this Act, submit to Committees on
the Judiciary of the House of Representatives and the Senate
a comprehensive record of the time and expenses for which the
fees are to be paid. Such record shall be subject to section
1001(a) of title 18, United States Code.
(2) Each attorney whose fees for services rendered in the
future are subject to subsection (a) shall, within 60 days of
the completion of the attorney's services, submit to
Committees on the Judiciary of the House of Representatives
and the Senate a comprehensive record of the time and
expenses for which the fees are to be paid. Such record shall
be subject to section 1001(a) of title 18, United States
Code.
(e) Severability.--If any provision of this section or the
application of such provision to any person or circumstances
is held to be unconstitutional, the remainder of this section
and the application of the provisions of such to any person
or circumstance shall not be affected thereby.
(f) General Limitation.--Notwithstanding any other
provision of law, for each hour spent productively and at
risk, separate from the reimbursement of actual out-of-pocket
expenses as approved by the court in such action, any
attorneys' fees or expenses paid to attorneys for matters
described in subsection (c) shall not exceed $250 per hour.

Mr. FAIRCLOTH. Mr. President, I am offering this important amendment
because we cannot allow this tobacco bill to turn into ``Wheel of
Fortune'' for trial lawyers. That is why my amendment caps attorney
fees at $250 per hour.
Under the current bill, trial lawyers will get some $4 billion per
year. Billion--with a ``b''. And this is a conservative estimate--
assuming a 15 percent contingent fee. The Medicaid cases will generate
$1.2 billion per year. The tort cases will yield some $2.8 billion per
year.
A Florida circuit court judge, Harold Cohen, estimated their fees at
$185,186 per hour.
Let's see how this compares to regular Americans.
The average physician earns $96.15 per hour, the average lawyer makes
$48.07 per hour, pharmacists make $25.98 per hour, police officers earn
$16.65 per hour, carpenters make $13.03 per hour, automobile mechanics
earn $12.35 per hour, barbers make $8.37 per hour, and bakers earn
$7.65 per hour.
The PRESIDING OFFICER. Under the previous order, the Senate is to
recess at 12:30. That hour having arrived----
Mr. HOLLINGS. Mr. President, I ask unanimous consent it be extended
until 12:45.
The PRESIDING OFFICER. Is there objection?
Mr. FAIRCLOTH. I do not object.
The PRESIDING OFFICER. The Senator is recognized until 12:45.
Mr. FAIRCLOTH. So, Mr. President, who are these ``superman'' lawyers
who deserve to be paid more than 20,000 times the salary of a working
American?
Well, one of them is Hugh Rodham, the President's brother-in-law. He
is on line to get $50 million as a Castano group lawyer. Let me tell
you about the hard work that he has done to get this big fee. Let me
tell you about his background that made him so important to this group
of trial lawyers.
Well, actually, let me just read a couple of quotes from major
newspapers to describe his work.
``And just for good measure, the state of Florida has hired Hugh
Rodham (Hillary Clinton's brother) to be a part of their litigation
team, despite his complete lack of experience in these types of
cases.'' That's from the Knoxville News-Sentinel on July 20, 1997.
Here is another choice description of the fifty-million-dollar man
and his invaluable work.
Hugh Rodham ``spen[t] the last hours of the June 20th settlement
talks in a corner reading a paperback by Jack Higgins, `Drink with the
Devil.' '' That's from the Washington Post on June 23, 1997.
Mr. President, I don't believe that this amendment needs much more
justification than that. Fifty million dollars to sit there reading a
book.
But, if that isn't enough, let me talk about the Texas trial lawyers.
These fine lawyers will get $88,000 per hour. This means $88 million
per lawyer. What more can I say?
Well, here's something. The money will be paid from money that was
supposed to go for Medicare. Who do we pay--the sick and elderly or the
greedy lawyers?
Mr. President, there is a major political force at work behind the
scenes in this tobacco legislative effort. I'm not talking about so-
called ``big tobacco.'' What I'm talking about is the trial lawyers.
They negotiate settlements in the millions of dollars, and they take
fees in the millions of dollars, dwarfing what their clients get. They
also stand to be the biggest winners if the tobacco settlement is
enacted--a fact that appears to have become obscured in this debate.
Now, with this national tobacco litigation settlement before us,
we're not just talking about millions of dollars, or tens of millions
of dollars, or even hundreds of millions of dollars.
We are talking about tens of billions--with a ``b''--of dollars that
will be transferred from the pockets of average smokers in this country
into the coffers of a handful of trial lawyers.
I have read published reports that the trial lawyers are estimating
that they will make upwards of $15 billion to $20 billion. That is hard
to fathom.
To illustrate, in the two biggest individual State settlements that
have taken place so far, take a wild guess at what the major issue of
controversy has been?
For those of you who have not been paying attention, it has been
attorneys' fees for the private plaintiffs' attorneys who were brought
in to help the states sue the tobacco companies.
In the State of Texas, for example, their $15 billion settlement is
tied up because the Texas trial lawyers demanded over $2.3 billion for
their work. These demands are ridiculous, and if we approve the McCain
bill, we will be approving such billion dollar deals for these trial
lawyers.
Yes, the McCain bill provides the option for attorneys to use an
arbitration panel to determine reasonable fees, but what attorney would
be foolish enough to seek reasonable fees if they can get $2.8 billion.
And, what is considered ``reasonable'' in this climate?
It is ironic that these trial lawyers were brought in by the various
States to pursue claims on behalf of the taxpayers in those States.
That is, they have been brought in to stand in the shoes of our State
governments and their taxpayers. But I ask you: who ultimately will be
the greatest beneficiaries--the taxpayers or the lawyers? Experience
has already provided us with an answer.
We should not forget how the deck has been stacked with respect to
these State lawsuits. It was only when State governments decided to use
their weight, leverage, and resources to go toe-to-toe with the tobacco
companies that these companies decided to settle the cases.
States legislatures have even changed the laws mid-stream and
retroactively to tilt the balance in their favor.
The most recent example of this was in April when the Maryland
General Assembly voted to change the law to permit the State of
Maryland to seek compensation for taxpayer money paid for smoking-
related illnesses.
They first sued the companies, then realized winning the lawsuit
perhaps was not going to be quite as easy as they first thought. They
then went to the Maryland legislature and had the law changed
retroactively so that their lawsuit against tobacco companies would be
considerably easier.
You can be sure that the Maryland plaintiffs' attorneys who stand to
have a huge pay day as a result of this lawsuit were closely involved
in lobbying the legislature on changing the liability law.
I'm not saying that the attorneys' should not be reasonably
compensated for the hours and energy they have spent in helping the
States reach these settlements.
All I am saying is that it is outrageous to say that a group of
plaintiffs' attorneys should be allowed to enrich themselves under the
guise of claims on behalf of taxpayers. These are the same taxpayers on
whose back the spending in the McCain bill will fall.

[[Page S5097]]

Let's also look at how this relates to our past debates over tort
reform. The motivation behind national tort reform is that our system
of justice has been distorted by a group of trial lawyers who caused
the litigation explosion in this country.
At a minimum, it is highly ironic that we are now talking about
passing a national tobacco settlement bill that will handsomely reward
the very same trial lawyers who have so badly corrupted our justice
system.
None of us should turn a blind eye to the fact that the debate on
tobacco settlement legislation, under the guise of protecting youth, is
really a debate about the pot of gold that potentially awaits the trial
bar.
And that's not to mention the ``tax and spenders'' who want to fund a
host of social programs unrelated to tobacco. Not only are we standing
here debating a huge tax increase on working men and women, we are
simultaneously opening a can of worms.
We're talking about sanctioning a handful of attorneys' attempts to
enrich themselves at the expense of the clients--in this case,
taxpayers--they purport to represent. I urge all my colleagues to give
this serious thought.
This tobacco bill is not a lottery. This is not ``jackpot justice''
for trial lawyers. The trial lawyers are playing ``Wheel of Fortune''
with the taxpayers money and it must be stopped.
I urge you to support my amendment.

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