[Congressional Record Volume 154, Number 106 (Wednesday, June 25, 2008)]
[House]
[Page H6085]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     CIGARETTE SMUGGLING BETWEEN STATES SHOULD BE A FELONY, NOT A 
                              MISDEMEANOR

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from New York (Mr. Weiner) is recognized for 5 minutes.
  Mr. WEINER. Mr. Speaker, I rise today to bring to the attention of 
the House a problem that exists, frankly, in all 50 States and is 
having a dramatic impact not only on individual States but having an 
impact tragically on our national security--the problem that tobacco 
excise taxes, which are levied State by State, have had the unwitting 
result of having a great incentive for people to smuggle tobacco over 
State lines. This is happening because of a weakness in the Federal law 
that makes it a misdemeanor to do so.
  Let me explain to you exactly what happens. In a State like New York, 
for example, the New York State excise tax for each pack of cigarettes 
is $2.75. New York City adds another $1.50 to that tax. So the base tax 
on cigarettes in New York is the combination of $2.75 in the State, 
$1.50 in the city.
  If you go to, say, North Carolina or another State that has a lower 
tax, there's an enormous amount of incentive for someone to buy the 
tobacco in a State like North Carolina, sell it in New York on the 
black market, or sell it on the Internet and wind up saving a great 
deal of money on that float between the two tax rates.
  Now this is illegal under the Jenkins Act. However, it's hardly ever 
enforced, and when you ask folks at the ATF why it's not enforced, they 
say quite simply, because the Jenkins Act is too weak. It only makes it 
a misdemeanor to do these things.
  What has become clear in recent months, though, and in recent years, 
according to the Government Accountability Office, according to the 
FBI, is that not only are people trying to make a couple of bucks doing 
this, but terrorist organizations have been funded.
  According to a GAO investigation, what has happened is that tobacco 
is being bought in North Carolina where the tax is only five cents a 
pack and being resold in Michigan where the tax is 75 cents a pack. 
They're taking that extra 50 cents which, when you consider cases and 
cases, truckloads and truckloads, and where do the profits go? $1.5 
million was shipped overseas to Lebanon to fund Hezbollah. This is just 
one example.
  FBI Director Robert Mueller, when he testified about this problem 
before the Senate, said the following:
  ``Terrorists now increasingly have to rely on criminal organizations 
to travel from country to country for false identifications, for 
smuggling, being smuggled in or out of a country. They have to rely on 
other criminal organizations for money laundering. We have had a number 
of cases where Hezbollah, for instance, has utilized cigarette 
smuggling to generate revenues to support Hezbollah.''
  In this GAO report that revealed this information, both DOJ--
Department of Justice--and ATF suggested that if violations of the 
Jenkins Act were felonies instead of misdemeanors, U.S. Attorneys' 
Offices might be less reluctant to prosecute.
  Well, I'm standing here to recommend that we do just that. We in the 
Crime Subcommittee of the Judiciary Committee recently had a hearing on 
my legislation which would do just that. It would raise the stakes on 
the Jenkins Act, and it would do something else. It would say that no 
longer can you transfer tobacco through the mail. In order for this 
selling to be done in a truly efficient way, you don't pack up a truck 
and drive it across lines; you get an Internet Web site and you offer 
to transport it over State lines using the mail service.
  Now you can't use FedEx, you can't use UPS, and you can't use DHL. 
Why? Well, because they have all signed a compact, essentially a 
consent order saying they refuse to carry it. The only way to mail 
tobacco is through the United States Postal Service. So an additional 
thing the legislation would do would make that illegal.
  This is a serious problem. As the tax goes up, as the difference 
between the State taxes goes up, it's no longer nickels and dimes, it's 
millions of dollars, millions of dollars that's going to black market 
tobacco that's funding nefarious activities and funding terrorism, and 
we should stop it.

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