[Congressional Record Volume 146, Number 52 (Tuesday, May 2, 2000)]
[Senate]
[Pages S3258-S3260]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LAUTENBERG:
  S. 2493. A bill to amend the Internal Revenue Code of 1986 to deter 
the smuggling of tobacco products into the United States, and for other 
purposes; to the Committee on Finance.


               TOBACCO SMUGGLING ERADICATION ACT OF 2000

  Mr. LAUTENBERG. Mr. President, I rise today to introduce the Tobacco 
Smuggling Eradication Act.
  When Congress last debated tobacco legislation, Big Tobacco raised 
the specter of rampant smuggling to defeat the legislation. Of course, 
the public only found out recently that Big Tobacco itself is a major 
player in the smuggling game. A tobacco company executive recently 
pleaded guilty to money laundering charges in a case involving nearly 
$700 million worth of cigarettes on the Canadian black market. Although 
the company denies knowledge of the scheme, they clearly profited from 
it.
  The best way to address smuggling concerns is to prevent any large-
scale smuggling problem from arising in the first place. The Tobacco 
Smuggling Eradication Act contains several common-sense provisions to 
combat smuggling of tobacco products, and associated tax evasion.
  The bill will require unique serial numbers on all tobacco product 
packages manufactured or imported into the United States, and will 
require all packages bound for export to be marked for export. Under 
current law, export-bound products that re-enter the U.S. too often 
avoid tax assessment, and are sold at discount, in competition with 
products on which taxes have been paid. Likewise, re-imported products 
under current law often evade counting for purposes of the multi-state 
settlement, and thus cheat Americans twice--once in avoidance of tax, 
and again in avoidance of MSA assessment.
  The bill would require retailers to maintain tobacco-related records, 
which may consist simply of ordinary business records. This provision 
would ensure that invoices for tax-paid tobacco products match sales, 
and that the retailer is not an outlet for product on which tax has not 
been paid.
  The bill also would require wholesalers to keep records on the chain 
of custody of tobacco products. This requirement already exists for 
manufacturers, exporters, and importers. This requirement needs to be 
strengthened in order to ensure that product marked for export is not 
diverted back into the domestic market without appropriate taxes having 
been collected.
  In addition, the bill would amend the Contraband Cigarette 
Trafficking Act, which assists states in enforcing and collecting their 
excise taxes, by lowering the threshold of jurisdiction to 30,000 
cigarettes (from 60,000) and expanding it to cover other tobacco 
products. Federal law should ensure that states have the necessary 
tools to stop interstate bootleggers who routinely move tons of tobacco 
products from low-tax states to higher-tax states.
  Mr. President, this is important legislation which would crack down 
on bootleggers and black marketeers. I urge my colleagues to support 
this bill. I ask unanimous consent that the text of the bill be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2493

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Tobacco Smuggling 
     Eradication Act of 2000''.
          TITLE I--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

     SEC. 101. AMENDMENT OF 1986 CODE.

       Whenever in this title an amendment or repeal is expressed 
     in terms of an amendment to, or repeal of, a section or other 
     provision, the reference shall be considered to be made to a 
     section or other provision of the Internal Revenue Code of 
     1986.

     SEC. 102. IMPROVED MARKING AND LABELING.

       (a) In General.--Subsection (b) of section 5723 (relating 
     to marks, labels, and notices) is amended--
       (1) by striking ``, if any,'' and
       (2) by adding at the end the following: ``Such marks, 
     labels, and notices shall include marks and notices relating 
     to the following:
       ``(1) Identification.--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. Such 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.''.
       (b) Sales on Indian Reservations.--Section 5723 is amended 
     by adding at the end the following new subsections:
       ``(f) Sales on Indian Reservations.--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.
       ``(g) Definition of Package.--For purposes of this section, 
     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.''.

     SEC. 103. WHOLESALERS REQUIRED TO HAVE PERMIT.

       Section 5712 (relating to application for permit) is 
     amended by inserting ``, wholesaler,'' after 
     ``manufacturer''.

     SEC. 104. CONDITIONS OF PERMIT.

       Subsection (a) of section 5713 (relating to issuance of 
     permit) is amended to read as follows:
       ``(a) Issuance.--
       ``(1) In general.--A person shall not engage in business as 
     a manufacturer, wholesaler, or importer of tobacco products 
     or as an export warehouse proprietor without a permit to 
     engage in such business. Such permit shall be issued in such 
     form and in such manner as the Secretary shall by regulation 
     prescribe, to every person properly qualified under sections 
     5711 and 5712. A new permit may be required at such other 
     time as the Secretary shall by regulation prescribe.
       ``(2) Conditions.--The issuance of a permit under this 
     section shall be conditioned upon the compliance with the 
     requirements of this chapter and the Contraband Cigarette 
     Trafficking Act (28 U.S.C. chapter 114), and any regulations 
     issued pursuant to such statutes.''.

     SEC. 105. RECORDS TO BE MAINTAINED.

       Section 5741 (relating to records to be maintained) is 
     amended--
       (1) by inserting ``(a) In General.--'' before ``Every 
     manufacturer'',
       (2) by inserting ``every wholesaler,'' after ``every 
     importer,'',
       (3) by striking ``such records'' and inserting ``records 
     concerning the chain of custody of the tobacco products and 
     such other records'', and
       (4) by adding at the end the following new subsection:
       ``(b) Retailers.--Retailers shall maintain records of 
     receipt of tobacco products, and

[[Page S3259]]

     such records shall be available to the Secretary for 
     inspection and audit. An ordinary commercial record or 
     invoice shall satisfy the requirements of this subsection if 
     such record shows the date of receipt, from whom tobacco 
     products were received, and the quantity of tobacco products 
     received.''.

     SEC. 106. REPORTS.

       Section 5722 (relating to reports) is amended--
       (1) by inserting ``(a) In General.--'' before ``Every 
     manufacturer'', and
       (2) by adding at the end the following new subsection:
       ``(b) Reports By Export Warehouse Proprietors.--
       ``(1) In general.--Prior to exportation of tobacco products 
     from the United States, the export warehouse proprietor shall 
     submit a report (in such manner and form as the Secretary may 
     by regulation prescribe) to enable the Secretary to identify 
     the shipment and assure that it reaches its intended 
     destination.
       ``(2) Agreements with foreign governments.--Notwithstanding 
     section 6103 of this title, the Secretary is authorized to 
     enter into agreements with foreign governments to exchange or 
     share information contained in reports received from export 
     warehouse proprietors of tobacco products if--
       ``(A) the Secretary believes that such agreement will 
     assist in--
       ``(i) ensuring compliance with the provisions of this 
     chapter or regulations promulgated thereunder, or
       ``(ii) preventing or detecting violations of the provisions 
     of this chapter or regulations promulgated thereunder, and
       ``(B) the Secretary obtains assurances from such government 
     that the information will be held in confidence and used only 
     for the purposes specified in clauses (i) and (ii) of 
     subparagraph (A).
     No information may be exchanged or shared with any government 
     that has violated such assurances.''.

     SEC. 107. FRAUDULENT OFFENSES.

       (a) In General.--Subsection (a) of section 5762 (relating 
     to fraudulent offenses) is amended by striking paragraph (1) 
     and redesignating paragraphs (2) through (6) as paragraphs 
     (1) through (5), respectively.
       (b) Offenses Relating to Distribution of Tobacco 
     Products.--Section 5762 is amended--
       (1) by redesignating subsection (b) as subsection (c),
       (2) in subsection (c) (as so redesignated), by inserting 
     ``or (b)'' after ``(a)'', and
       (3) by inserting after subsection (a) the following new 
     subsection:
       ``(b) Offenses Relating to Distribution of Tobacco 
     Products.--It shall be unlawful--
       ``(1) for any person to engage in the business as a 
     manufacturer or importer of tobacco products or cigarette 
     papers and tubes, or to engage in the business as a 
     wholesaler or an export warehouse proprietor, without filing 
     the bond and obtaining the permit where required by this 
     chapter or regulations thereunder;
       ``(2) for an importer, manufacturer, or wholesaler 
     permitted under this chapter intentionally to ship, 
     transport, deliver, or receive any tobacco products from or 
     to any person other than a person permitted under this 
     chapter or a retailer, except a permitted importer may 
     receive foreign tobacco products from a foreign manufacturer 
     or a foreign distributor that have not previously entered the 
     United States;
       ``(3) for any person, except a manufacturer or an export 
     warehouse proprietor permitted under this chapter to receive 
     any tobacco products that have previously been exported and 
     returned to the United States;
       ``(4) for any export warehouse proprietor intentionally to 
     ship, transport, sell, or deliver for sale any tobacco 
     products to any person other than a permitted manufacturer or 
     foreign purchaser;
       ``(5) for any person other than an export warehouse 
     proprietor permitted under this chapter intentionally to 
     ship, transport, receive, or possess, for purposes of resale, 
     any tobacco product in packages marked pursuant to 
     regulations issued under section 5723, other than for direct 
     return to a manufacturer or export warehouse proprietor for 
     repacking or for re-exportation;
       ``(6) for any manufacturer, export warehouse proprietor, 
     importer, or wholesaler permitted under this chapter to make 
     intentionally any false entry in, to fail willfully to make 
     appropriate entry in, or to fail willfully to maintain 
     properly any record or report that such person is required to 
     keep as required by this chapter or the regulations 
     promulgated thereunder; and
       ``(7) for any person to alter, mutilate, destroy, 
     obliterate, or remove any mark or label required under this 
     chapter upon a tobacco product held for sale, except pursuant 
     to regulations of the Secretary authorizing relabeling for 
     purposes of compliance with the requirements of this section 
     or of State law.
     Any person violating any of the provisions of this subsection 
     shall, upon conviction, be fined as provided in section 3571 
     of title 18, United States Code, imprisoned for not more than 
     5 years, or both.''.
       (c) Intentionally Defined.--Section 5762 is amended by 
     adding at the end the following:
       ``(d) Definition of Intentionally.--For purposes of this 
     section and section 5761, the term `intentionally' means 
     doing an act, or omitting to do an act, deliberately, and not 
     due to accident, inadvertence, or mistake, regardless of 
     whether the person knew that the act or omission constituted 
     an offense.''.

     SEC. 108. CIVIL PENALTIES.

       Subsection (a) of section 5761 (relating to civil 
     penalties) is amended--
       (1) by striking ``willfully'' and inserting 
     ``intentionally'', and
       (2) by striking ``$1,000'' and inserting ``$10,000''.

     SEC. 109. DEFINITIONS.

       (a) Export Warehouse Proprietor.--Subsection (j) of section 
     5702 (relating to definition of export warehouse proprietor) 
     is amended by inserting before the period the following: ``or 
     any person engaged in the business of exporting tobacco 
     products from the United States for purposes of sale or 
     distribution. Any duty free store that sells, offers for 
     sale, or otherwise distributes to any person in any single 
     transaction more than 30 packages of cigarettes, or its 
     equivalent for other tobacco products as the Secretary shall 
     by regulation prescribe, shall be deemed an export warehouse 
     proprietor under this chapter''.
       (b) Retailer; Wholesaler.--Section 5702 is amended by 
     adding at the end the following:
       ``(q) 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 its equivalent for 
     other tobacco products.
       ``(r) Wholesaler.--The term `wholesaler' means any person 
     engaged in the business of purchasing tobacco products for 
     resale at wholesale, or any person acting as an agent or 
     broker for any person engaged in the business of purchasing 
     tobacco products for resale at wholesale.''.

     SEC. 110. EFFECTIVE DATE.

       The amendments made by this title shall take effect on 
     January 1, 2000.
    TITLE II--AMENDMENTS TO THE CONTRABAND CIGARETTE TRAFFICKING ACT

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

       (a) Definitions.--Section 2341 of title 18, United States 
     Code, is amended--
       (1) in paragraph (2), by striking ``60,000'' and inserting 
     ``30,000'';
       (2) in paragraph (4), by striking ``and'' at the end;
       (3) in paragraph (5), by striking the period and inserting 
     a semicolon; and
       (4) by adding at the end the following:
       ``(6) the term `tobacco product' means cigars, cigarettes, 
     smokeless tobacco, 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 
     quantity of tobacco product that is equivalent to or more 
     than 30,000 cigarettes as determined by regulation, which 
     bear 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.
       (b) Unlawful Acts.--Section 2342 of title 18, United States 
     Code, is amended--
       (1) in subsection (a), by inserting ``or contraband tobacco 
     products'' before the period;
       (2) by striking subsection (b) and inserting the following:
       ``(b) It shall be 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 to maintain records or reports, 
     alter or obliterate required markings, or interfere with any 
     inspection, required under this chapter, with respect to such 
     quantity of cigarettes or other tobacco products.''; and
       (3) by adding at the end the following:
       ``(c) It shall be unlawful for any person knowingly to 
     transport tobacco products under a false bill of lading or 
     without any bill of lading.''.
       (c) Recordkeeping.--Section 2343 of title 18, United States 
     Code, is amended--
       (1) in subsection (a)--
       (A) by inserting after ``transaction'' the following: ``, 
     or, in the case of other tobacco products an equivalent 
     quantity as determined by regulation,'';
       (B) by striking ``60,000'' and inserting ``30,000''; and
       (C) by striking the last sentence 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.'';
       (2) in subsection (b)--
       (A) by striking ``60,000'' and inserting ``30,000''; and
       (B) by inserting after ``transaction'' the following: ``, 
     or, in the case of other tobacco products an equivalent 
     quantity as determined by regulation,''; and
       (3) by adding at the end the following:
       ``(c)(1) Any person who ships, sells, or distributes 
     cigarettes or tobacco products for resale in interstate 
     commerce, whereby such cigarettes or tobacco products are 
     shipped into a State taxing the sale or use of such 
     cigarettes or tobacco products or who advertises or offers 
     cigarettes or tobacco products for such sale or transfer and 
     shipment shall--

[[Page S3260]]

       ``(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 person's name, and trade name (if any), and the 
     address of the person's principal place of business and of 
     any other place of business; and
       ``(B) not later than the 10th of each calendar 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 cigarettes or tobacco 
     products made during the previous calendar 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 cigarettes or 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 
     cigarettes or tobacco products were sold, shipped, or 
     distributed for resale by such person.
       ``(3) For purposes of this subsection--
       ``(A) the term `use' in addition to its ordinary meaning, 
     means consumption, storage, handling, or disposal of 
     cigarettes or tobacco products; and
       ``(B) the term `tobacco tax administrator' means the State 
     official authorized to administer tobacco tax laws of the 
     State.''.
       (d) Penalties.--Section 2344 of title 18, United States 
     Code, is amended--
       (1) in subsection (b), by inserting ``or (c)'' after 
     ``section 2342(b)''; and
       (2) in subsection (c), by inserting ``or contraband tobacco 
     products'' after ``cigarettes''.
       (e) State Jurisdiction Not Affected.--Section 2345 of title 
     18, United States Code, is amended--
       (1) in subsection (a)--
       (A) by inserting ``or tobacco product'' after 
     ``cigarette''; and
       (B) by inserting ``, tobacco products,'' after 
     ``cigarettes''; and
       (2) in subsection (b)--
       (A) by inserting ``or tobacco product'' after 
     ``cigarette''; and
       (B) by inserting ``, tobacco products,'' after 
     ``cigarettes''.
       (f) Repeal.--The Act entitled ``An Act to assist States in 
     collecting sales and use taxes on cigarettes'', approved 
     October 19, 1949 (15 U.S.C. 375 et seq.) is repealed.
       (g) Civil Forfeiture.--Section 981(a)(1)(C) of title 18, 
     United States Code, is amended by striking ``or 1344'' and 
     inserting ``1344, or 2344''.
                                 ______