[Congressional Record Volume 148, Number 127 (Wednesday, October 2, 2002)]
[Senate]
[Pages S9852-S9855]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HUTCHINSON:
  S. 3035. A bill to prohibit the sale of tobacco products through the 
Internet or other indirect means to underage individuals, to ensure the 
collection of all cigarette taxes, and for other purposes; to the 
Committee on the Judiciary.
  Mr. HUTCHINSON. Mr. President, today I have introduced legislation to 
stop the illegal sales of cigarettes over the Internet, an escalating 
problem which has had a particularly negative effect in my home State 
of Arkansas. While every State in the union has enacted laws 
prohibiting minors from purchasing or possessing tobacco products, this 
law is easily evaded when minors purchase cigarettes over the Internet. 
Disreputable websites flagrantly break the law, even advertising that 
they do not check identification.
  In the first quarter of 2002, the number of Internet site selling 
cigarettes had already increased by over 10 percent from 2001, and the 
number of those based overseas increased almost 20 percent. In addition 
to putting cigarettes in the hands of minors, these websites also fail 
to pay the sales and tobacco taxes many states levy on these products.
  The Government Accounting Office released a study in August 2002 
which reports that by 2005 states will be losing as much as $1.4 
billion annually due to this tax evasion. This is revenue states cannot 
afford to do without. Current federal laws must be updated and 
strengthened to address this growing threat.
  My bill, the Eliminating Profiteering through Illegal Cigarette 
Sales, EPICS Act, addresses both aspects of the problem. It is designed 
to both strengthen domestic security by giving law enforcement agencies 
additional tools they need to choke off this source of terrorist 
income, and to ensure that legitimate Internet sites selling cigarettes 
take significant steps to prevent their orders from falling into the 
hands of our kids.
  The EPICS Act prohibits online sales of cigarettes to minors. It also 
ensures that minors are not able to purchase cigarettes online using a 
false identification by enacting strict identification verification 
requirements.
  In order to assist states enforcement of age requirements and 
collection of taxes, this bill will dramatically strengthen the Jenkins 
Act. This law requires anyone who ships or sells tobacco products over 
state lines other than to licensed dealers to report those sales to the 
state tax administrator. When this is done, states can ensure that 
sales are not being made to minors and that due taxes have been 
collected.
  Currently, there is very little enforcement of the Jenkins Act. This 
bill remedies this by establishing much harsher penalties for those who 
do not comply and by allowing a State's Attorney General to enforce the 
Federal law. Following the recommendation of the GAO, the bill will 
give the Bureau of Alcohol, Tobacco and Firearms concurrent authority 
with the Justice Department to enforce the amended Jenkins Act. It also 
updates the law to make it clear that the Jenkins Act reporting 
requirements apply to all sales by Internet, mail and phone.
  Additionally, this bill will improve current laws to prohibit the 
trafficking in contraband cigarettes. The EPICS Act lowers the number 
of unstamped cigarettes required to trigger the law from 60,000 to 
2,000, adds reporting requirements and allows a State's Attorney 
General and Federal tobacco permit holders to bring causes of action to 
enforce the federal law. With numerous reports of terrorist 
organizations transporting contraband cigarettes across State lines to 
reap profits right here in the U.S., it is especially important that 
this law be effective.
  Terrorists and others who seek to profit by illegal means have 
discovered the goldmine of Internet sales. The number of Internet sites 
selling untaxed cigarettes or selling to minors is increasing almost 
daily. Heightened media coverage has pointed out the problem, but also 
advertised their availability to minors and tax-evaders. I hope my 
colleagues will act quickly to prevent illegal tobacco profits, keep 
cigarettes out of the hands of minors and stop tobacco tax evasion.
  Mr. President, I ask unanimous consent that the text of the 
legislation be printed in the Record.
  There being no objection the bill was ordered to be printed in the 
Record, as follows:

                                S. 3035

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

[[Page S9853]]

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Eliminating Profiteering 
     through Illegal Cigarette Sales Act'' or ``EPICS Act''.

     SEC. 2. UNLAWFUL ACTS REGARDING SALE OF TOBACCO PRODUCTS TO 
                   UNDERAGE INDIVIDUALS.

       (a) In General.--It shall be unlawful for any person who is 
     in the business of selling tobacco products, and who 
     advertises such products through the Internet or any other 
     means, to sell a tobacco product to an individual under the 
     legal age (according to State law) to purchase tobacco 
     products if pursuant to the sale the person mails the product 
     or ships the product by carrier in or affecting interstate 
     commerce.
       (b) Procedures To Protect Against Sales to Underage 
     Individuals.--It shall be unlawful for any person in the 
     business of selling tobacco products to take an order for a 
     tobacco product, other than from a person who is in the 
     business of selling tobacco products, through the mail, or 
     through any telecommunications means (including by telephone, 
     facsimile, or the Internet), if in providing for the sale or 
     delivery of the product pursuant to the order the person 
     mails the product, or ships the product by carrier in or 
     affecting interstate commerce, and the person fails to comply 
     with each of the following procedures:
       (1) Before mailing or shipping the product, the person 
     receives from the individual who places the order the 
     following:
       (A) A copy of a valid government-issued document (whether 
     an operator's permit or otherwise) that provides the name, 
     address, and date of birth of the individual.
       (B) A signed statement in writing from the individual 
     providing a certification of the individual that--
       (i) such document and information correctly identifies the 
     individual and correctly states the address and date of birth 
     of the individual;
       (ii) the individual understands that forging another 
     person's signature to the statement is illegal; and
       (iii) the individual understands that tobacco sales to 
     minors are illegal and that tobacco purchases by minors may 
     be illegal under applicable State law.
       (2) Before mailing or shipping the product, the person--
       (A) verifies the information received from the individual 
     under paragraph (1) against a commercially available 
     database; and
       (B) sends a letter to the individual requesting--
       (i) confirmation of the order; and
       (ii) that the individual reply immediately (to a specified 
     toll-free phone number or e-mail address) if the individual 
     did not submit the order.
       (3) In the case of an order for a product pursuant to an 
     advertisement on the Internet, the person receives payment by 
     credit card or check for the order before mailing or shipping 
     the product.
       (4) Unless the person is identified as a member of the 
     Armed Forces by the document issued by the Department of 
     Defense identifying individuals as members of the Armed 
     Forces, the person provides for the mailing or shipping of 
     the product to the name and address provided on the 
     government-issued document received under paragraph (1).
       (5)(A) The person employs a method of mailing or shipping 
     the product requiring that the individual purchasing the 
     product--
       (i) be the addressee;
       (ii) personally sign for delivery of the package; and
       (iii) if the individual appears to the carrier making the 
     delivery to be under 27 years of age, take delivery of the 
     package only after producing valid, government-issued 
     identification that--
       (I) bears a photograph of the individual;
       (II) indicates that the individual is not under the legal 
     age to purchase cigarettes; and
       (III) indicates that the individual is not younger than the 
     age indicated on the government-issued document received 
     under paragraph (1).
       (B) The bill of lading clearly states the requirements in 
     subparagraph (A) and specifies that Federal law requires 
     compliance with the requirements.
       (6) The person notifies the carrier for the mailing or 
     shipping, in writing, of the age of the addressee as 
     indicated by the government-issued document received under 
     paragraph (1).
       (c) Advertising Through Internet; Prominent Warning 
     Labels.--It shall be unlawful for any person in the business 
     of selling tobacco products to advertise tobacco products for 
     sale through an Internet website to a person other than a 
     person who is in the business of selling tobacco products 
     unless such website contains, on the part of each website 
     page relating to sale of such products that is immediately 
     visible when accessed, prominent and clearly legible warning 
     labels as follows:
       (1) A warning label stating that sales of tobacco products 
     to persons under 18 years of age are illegal in all States 
     except Alabama, Alaska, and Utah, where sales of tobacco 
     products to person under 19 years of age are illegal.
       (2) A warning label described--
       (A) in the case of cigarettes, in subsections (a)(1) and 
     (b)(2) of section 4 of the Federal Cigarette Labeling and 
     Advertising Act (15 U.S.C. 1333); and
       (B) in the case of smokeless tobacco products, in 
     subsections (a)(1) and (b)(1) of section 3 of the Federal 
     Comprehensive Smokeless Tobacco Health Education Act of 1986 
     (15 U.S.C. 4402).
       (d) Advertising Through Internet; Access.--It shall be 
     unlawful for any person in the business of selling tobacco 
     products to advertise such products for sale through an 
     Internet website unless access to the website (other than a 
     nonselling website home page) is provided only to individuals 
     who provide to the person the information described in 
     subparagraphs (A) and (B) of subsection (b)(1) and whose 
     information is verified according to the procedures described 
     in subsection (b)(2).
       (e) Rule of Construction Regarding Common Carriers.--This 
     Act may not be construed as imposing liability upon any 
     common carrier, or officers or employees thereof, when acting 
     within the scope of business of the common carrier.

     SEC. 3. FEDERAL TRADE COMMISSION.

       (a) Civil Enforcement.--For purposes of the enforcement of 
     section 2 by the Federal Trade Commission, a violation of a 
     provision of subsection (a) or (b) of such section shall be 
     deemed to be an unfair or deceptive act or practice in or 
     affecting commerce within the meaning of the Federal Trade 
     Commission Act, and the procedures under section 5(b) of such 
     Act shall apply with respect to such a violation.
       (b) Regulations.--Not later than 90 days after the date of 
     the enactment of this Act, the Commission shall promulgate a 
     final rule for carrying out this Act.
       (c) Information Regarding State Laws on Minimum Purchase-
     Age.--The Commission shall post on the Internet site of the 
     Commission information that, by State, provides the minimum 
     age at which it is legal under State law to purchase tobacco 
     products in the State.

     SEC. 4. CRIMINAL PENALTIES.

       (a) In General.--
       (1) First violation.--Except as provided in paragraph (2), 
     any person who violates a provision of subsection (a) or (b) 
     of section 2 shall be fined not more than $1,000.
       (2) Subsequent violations.--In the case of a second or 
     subsequent violation by a person of a provision of subsection 
     (a) or (b) of section 2, the person shall be fined not less 
     than $1,000 and not more than $5,000.
       (3) Rule of construction.--This subsection does not apply 
     to a violation of a provision of subsection (a) or (b) of 
     section 2 if any provision of subsection (b) of this section 
     applies to such violation.
       (b) Knowing Violations.--
       (1) First violation.--Except as provided in paragraph (2), 
     any person who knowingly violates a provision of subsection 
     (a) or (b) of section 2 shall be fined in accordance with 
     title 18, United States Code, imprisoned not more than two 
     years, or both.
       (2) Subsequent violations.--In the case of a second or 
     subsequent knowing violation by a person of a provision of 
     subsection (a) or (b) of section 2, the person shall be fined 
     in accordance with title 18, United States Code, imprisoned 
     not more than five years, or both.

     SEC. 5. FEDERAL CIVIL ACTIONS BY STATE ATTORNEYS GENERAL AND 
                   CERTAIN OTHER INDIVIDUALS.

       (a) Injunctive Relief.--A State, through its State attorney 
     general, on behalf of residents of the State, or any person 
     who holds a permit under section 5712 of the Internal Revenue 
     Code of 1986, may bring in an appropriate district court of 
     the United States a civil action to restrain violations by a 
     person of any provision of subsection (a) or (b) of section 
     2, including obtaining a preliminary or permanent injunction 
     or other order against the person.
       (b) Coordination With Commission.--Before bringing a civil 
     action under subsection (a), a State attorney general or any 
     such person shall provide to the Federal Trade Commission 
     written notice of the intent of the State attorney general or 
     such person to bring the action.
       (c) Federal Jurisdiction.--
       (1) In general.--The district courts of the United States 
     shall have jurisdiction over any civil action under 
     subsection (a).
       (2) Venue.--A civil action under subsection (a) may be 
     brought only in accordance with section 1391 of title 28, 
     United States Code, or in the district in which the recipient 
     of the tobacco products resides or is found.
       (d) Requirements for Injunctions and Orders.--
       (1) In general.--In any civil action under subsection (a), 
     upon a proper showing by the State attorney general or person 
     bringing the action involved, the court may issue a 
     preliminary or permanent injunction or other order to 
     restrain a violation of a provision of subsection (a) or (b) 
     of section 2.
       (2) Notice.--No preliminary injunction or permanent 
     injunction or other order may be issued under paragraph (1) 
     without notice to the adverse party and an opportunity for a 
     hearing.
       (3) Form and scope of order.--Any preliminary or permanent 
     injunction or other order entered in a civil action under 
     subsection (a) shall--
       (A) set forth the reasons for the issuance of the order;
       (B) be specific in its terms;
       (C) describe in reasonable detail, and not by reference to 
     the complaint or other document, the act or acts sought to be 
     restrained; and
       (D) be binding upon--
       (i) the parties to the action and the officers, agents, 
     employees, and attorneys of those parties; and

[[Page S9854]]

       (ii) persons in active concert or participation with the 
     parties to the action who receive actual notice of the order 
     by personal service or otherwise.
       (e) Additional Remedies.--
       (1) In general.--A remedy under subsection (a) is in 
     addition to any other remedies provided by law.
       (2) State court proceedings.--Nothing in this section may 
     be construed to prohibit an authorized State official from 
     proceeding in State court on the basis of an alleged 
     violation of any State law.

     SEC. 6. COLLECTION OF STATE CIGARETTE TAXES.

       (a) Definitions.--Section 1 of the Act of October 19, 1949 
     (15 U.S.C. 375), is amended--
       (1) in paragraph (1), by inserting ``and other legal 
     entities'' after ``individuals'';
       (2) by striking paragraph (3);
       (3) by redesignating paragraphs (4) through (7) as 
     paragraphs (3) through (6), respectively; and
       (4) by adding at the end the following new paragraphs:
       ``(7) The term `delivery sale' means any sale of cigarettes 
     to a consumer (other than a sale to a consumer for purposes 
     of resale) if--
       ``(A) the consumer submits the order for such sale by means 
     of a telephone or other method of voice transmission, the 
     mails, or the Internet or other online service; or
       ``(B) the cigarettes are delivered by use of the mails or 
     other delivery service.
       ``(8) The term `sale to a consumer for purposes of resale' 
     does not include a sale of cigarettes to a natural person who 
     does not conduct business as a distributor or retailer of 
     cigarettes in the jurisdiction in which such person 
     resides.''.
       (b) Reports to State Tobacco Tax Administrators.--Section 2 
     of that Act (15 U.S.C. 376) is amended--
       (1) in subsection (a)--
       (A) by striking ``or transfers'' and inserting ``, 
     transfers, or ships''; and
       (B) by striking ``to other than a distributor licensed by 
     or located in such State,''; and
       (2) in subsection (b)--
       (A) by striking ``(1)''; and
       (B) by striking ``, and (2)'' and all that follows and 
     inserting a period.
       (c) Requirements for Delivery Sales.--That Act is further 
     amended by inserting after section 2 the following new 
     section:
       ``Sec. 2A. (a) Each person making a delivery sale into a 
     State shall comply with--
       ``(1) the shipping requirements set forth in subsection 
     (b); and
       ``(2) all laws of the State generally applicable to sales 
     of cigarettes that occur entirely within the State, including 
     laws imposing--
       ``(A) excise taxes;
       ``(B) sales taxes;
       ``(C) licensing and tax-stamping requirements; and
       ``(D) escrow or other payment obligations.
       ``(b)(1) Each person who takes a delivery sale order shall 
     include on the bill of lading included with the shipping 
     package containing cigarettes sold pursuant to such order a 
     clear and conspicuous statement providing as follows: 
     `CIGARETTES: FEDERAL LAW REQUIRES THE PAYMENT OF ALL 
     APPLICABLE EXCISE AND SALES TAXES, AND COMPLIANCE WITH 
     APPLICABLE LICENSING, TAX-STAMPING, AND ESCROW PAYMENT 
     OBLIGATIONS'.
       ``(2) Any shipping package described in paragraph (1) that 
     is not labeled in accordance with that paragraph shall be 
     treated as nonmailable matter under section 3001 of title 39, 
     United States Code.
       ``(c) Each State shall have the authority to require any 
     person making a delivery sale of cigarettes into such State 
     to collect or pay the taxes referred to in subsection (a)(2) 
     and to comply with any other requirements described in that 
     subsection.''.
       (d) Penalties.--Section 3 of that Act (15 U.S.C. 377) is 
     amended to read as follows:
       ``Sec. 3. (a) Except as provided in subsection (b), whoever 
     violates a provision of section 2 or 2A shall be fined not 
     more than $1,000, imprisoned not more than 6 months, or both, 
     in the case of the first violation, and fined not more than 
     $5,000, imprisoned not more than 6 months, or both, in the 
     case of any subsequent violation.
       ``(b) Whoever knowingly violates a provision of section 2 
     or 2A shall be fined in accordance with title 18, United 
     States Code, imprisoned not more than 2 years, or both.''.
       (e) Injunctions.--Section 4 of that Act (15 U.S.C. 378) is 
     amended--
       (1) by inserting ``(a)'' before ``The United States 
     district courts''; and
       (2) by adding at the end the following new subsections:
       ``(b)(1) A State, through its attorney general, or any 
     person who holds a permit under section 5712 of the Internal 
     Revenue Code of 1986, may bring an action in the United 
     States district courts to prevent and restrain violations of 
     this Act by any person (or by any person controlling such 
     person).
       ``(2) Nothing in this section shall be construed to 
     prohibit an authorized State official from proceeding in 
     State court on the basis of an alleged violation of State 
     law.
       ``(c) The Secretary of the Treasury shall administer the 
     provisions of this Act, and shall have concurrent authority 
     with the Attorney General to enforce the provisions of this 
     Act.''.

     SEC. 7. TREATMENT OF CIGARETTES AS NONMAILABLE MATTER.

       Section 1716 of title 18, United States Code, is amended--
       (1) by redesignating subsection (j) as subsection (k); and
       (2) by inserting after subsection (i) the following new 
     subsection (j):
       ``(j) All cigarettes (as that term is defined in section 
     2341(1) of this title) are nonmailable and shall not be 
     deposited in or carried through the mails.''.

     SEC. 8. PENAL PROVISIONS REGARDING TRAFFICKING IN CONTRABAND 
                   CIGARETTES.

       (a) Threshold Quantity for Treatment as Contraband.--(1) 
     Section 2341(2) of title 18, United States Code, is amended 
     by striking ``60,000 cigarettes'' and inserting ``2,000 
     cigarettes''.
       (2) Section 2342(b) of that title is amended by striking 
     ``60,000'' and inserting ``2,000''.
       (3) Section 2343 of that title is amended--
       (A) in subsection (a), by striking ``60,000'' and inserting 
     ``2,000''; and
       (B) in subsection (b), by striking ``60,000'' and inserting 
     ``2,000''.
       (b) Recordkeeping, Reporting, and Inspection.--Section 2343 
     of that title, as amended by subsection (a)(3) of this 
     section, is further amended--
       (1) in subsection (a)--
       (A) in the matter preceding paragraph (1), by striking 
     ``only--'' and inserting ``such information as the Secretary 
     considers appropriate for purposes of enforcement of this 
     chapter, including--''; and
       (B) in the flush matter following paragraph (3), by 
     striking the second sentence;
       (2) by redesignating subsection (b) as subsection (c);
       (3) by inserting after subsection (a) the following new 
     subsection (b):
       ``(b) Any person who engages in a delivery sale, and who 
     ships, sells, distributes, or receives any quantity in excess 
     of 10,000 cigarettes within a single month, shall submit to 
     the Secretary, pursuant to rules or regulations prescribed by 
     the Secretary, a report that sets forth the following:
       ``(1) The person's beginning and ending inventory of 
     cigarettes (in total) for such month.
       ``(2) The total quantity of cigarettes that the person 
     received within such month from each other person (itemized 
     by name and address).
       ``(3) The total quantity of cigarettes that the person 
     distributed within such month to each person (itemized by 
     name and address) other than a retail purchaser.''; and
       (4) by adding at the end the following new subsection:
       ``(d) In this section, the term `delivery sale' means any 
     sale of cigarettes to a consumer (other than a sale to a 
     consumer for purposes of resale) if--
       ``(1) the consumer submits the order for such sale by means 
     of a telephone or other method of voice transmission, the 
     mails, or the Internet or other online service; or
       ``(2) the cigarettes are delivered by use of the mails or 
     other delivery service.''.
       (c) Disposal of Forfeited Cigarettes.--Section 2344(c) of 
     that title is amended by striking ``seizure and forfeiture,'' 
     and all that follows and inserting ``seizure and forfeiture, 
     and any cigarettes so seized and forfeited shall be destroyed 
     and not resold.''.
       (d) Enforcement.--Section 2346 of that title is amended--
       (1) by inserting ``(a)'' before ``The Secretary''; and
       (2) by adding at the end the following new subsection:
       ``(b) A State, through its attorney general, or any person 
     who holds a permit under section 5712 of the Internal Revenue 
     Code of 1986, may bring an action in the United States 
     district courts to prevent and restrain violations of this 
     chapter by any person (or by any person controlling such 
     person).''.
       (e) Conforming and Clerical Amendments.--(1) The section 
     heading for section 2343 of that title is amended to read as 
     follows:

     ``Sec. 2343. Recordkeeping, reporting, and inspection''.

       (2) The table of sections at the beginning of chapter 114 
     of that title is amended by striking the item relating to 
     section 2343 and inserting the following new item:

``2343. Recordkeeping, reporting, and inspection.''.

     SEC. 9. DEFINITIONS.

       In this Act:
       (1) State.--The term ``State'' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, American Samoa, Guam, the Commonwealth of the Northern 
     Mariana Islands, and the Virgin Islands.
       (2) State attorney general.--The term ``State attorney 
     general'' means the attorney general or other chief law 
     enforcement officer of a State, or the designee thereof.
       (3) Tobacco product.--The term ``tobacco product'' means 
     any product made or derived from tobacco that is intended for 
     human consumption, including cigarettes, smokeless tobacco, 
     pipe tobacco, and the product known as bidi.

     SEC. 10. EFFECTIVE DATE.

       (a) In General.--Except as provided in subsection (b), this 
     Act shall take effect 90 days after the date of the enactment 
     of this Act.
       (b) Rulemaking.--The authority of the Federal Trade 
     Commission to commence rulemaking under section 3(b) shall be 
     effective on the date of the enactment of this Act.
       (c) Unlawful Acts.--Section 2 shall apply to sales of 
     tobacco products occurring on or after the effective date of 
     this Act without regard to whether a final rule has been 
     promulgated under section 3(b) as of that date.

[[Page S9855]]

                                 ______