[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.

       (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 (6); less
       (ii) any payments for lost flue-cured 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 flue-cured tobacco that results in the 
     national marketing quota or national acreage allotment not 
     being in effect for flue-cured tobacco shall not be 
     considered a triggering event under this paragraph.

     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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