[Congressional Record Volume 155, Number 68 (Tuesday, May 5, 2009)]
[Senate]
[Pages S5130-S5163]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. KERRY:
  S. 969. A bill to amend the Public Health Service Act to ensure 
fairness in the coverage of women in the individual health insurance 
market; to the Committee on Health, Education, Labor, and Pensions.
  Mr. KERRY. Mr. President, there continues to be discrimination 
against women in the individual insurance market. As you know, the 
individual insurance market is often the last resort for health 
coverage for individuals who do not have access to an employer-
sponsored plan or who earn too much to qualify for Medicaid.
  To assist these women, I am today introducing the Women's Health 
Insurance Fairness Act of 2009, a bill that would end the 
discrimination against women who seek to purchase an insurance policy 
on the individual market.
  According to the Kaiser Family Foundation, of the 94.7 million women 
between the ages of 18 and 64 in 2007, 64 percent had insurance through 
an employer, 18 percent were uninsured, 13 percent were enrolled in 
Medicaid or another type of public insurance, and 6 percent were in the 
individual market. In other words, about 5.7 million American women in 
2007 received health insurance on the individual market. With rising 
unemployment, it is likely that more women will rely on individual 
insurance market for coverage in the future.
  This market is too often a problem for women for a number of reasons. 
First, women are often charged more than men for insurance in the 
individual market. Gender rating is a common insurance practice under 
which most women are charged higher premiums than men for identical 
coverage. Federal civil rights law prevents employers with more than 15 
employees from charging different premiums based on gender and other 
factors. This protection is not extended to policies sold in the 
individual insurance market.
  According to a recent report entitled ``Nowhere to Turn: How the 
Individual Health Insurance Market Fails Women'' by the National 
Women's Law Center, a 25 year old woman can pay up to 45 percent more 
than a 25 year old man for the same coverage. A 40 year old woman can 
pay up to 48 percent more than a 40 year old man for the same coverage. 
A 55 year old woman can pay up to 37 percent more than a 55 year old 
man for the same coverage.
  Today, only 10 states prohibit and 2 States limit gender rating in 
the individual market. I am pleased that Massachusetts is one of the 10 
States that prohibit insurers from charging different premiums based on 
gender. But, we should-make sure that this prohibition is extended to 
every state in the nation.
  A second problem facing women on the individual market is that 
insurers may delay, deny, or limit coverage to women due to pregnancy 
or delivery method. Over 30 years ago with the passage of the Pregnancy 
Discrimination Act of 1978, Federal civil rights law established as sex 
discrimination denial of coverage for pregnancy, childbirth and related 
conditions in employer-based insurance policies. Unfortunately, this 
protection is not extended to policies sold in the individual insurance 
market.
  Individual market insurers can deny coverage to women based on a 
``pre-existing condition''. If the insurer discovers that a woman 
applying for coverage had a Cesarean section in the past, they can: 
charge a higher premium; impose a waiting period during which it 
refuses to cover another C-section or pregnancy; or deny coverage 
unless the woman has been sterilized or is no longer of childbearing 
age.
  Currently, there are only 5 States which prohibit insurance carriers 
from refusing to sell individual health insurance coverage to 
applicants who have health conditions or problems. Massachusetts is one 
of the five states which require insurers to accept applicants 
regardless of health status. Again, this prohibition should be extended 
to every state in the nation.
  A third problem facing women is that the vast majority of policies do 
not provide coverage for maternity care. The 1978 Pregnancy 
Discrimination Act specified that employers with more than 15 employees 
must cover pregnancy on the same basis as other medical conditions. 
Once again, similar protections do not exist in the individual 
insurance market.
  The National Women's Law Center recently analyzed over 3,500 
individual insurance market policies and found that just 12 percent 
included comprehensive maternity coverage and another 9 percent 
provided coverage for maternity care that is not comprehensive. They 
also found that a limited number of insurers sell separate maternity 
coverage for an additional fee known as a ``rider'', but this 
supplemental coverage is often expensive and limited in scope.
  Currently, 5 States, including Massachusetts, have enacted laws 
requiring insurers to include coverage for maternity services in all 
individual health insurance policies sold in their state. Every woman 
should have access to these services.
  That is why I am introducing the Women's Health Insurance Fairness 
Act of 2009, to end the discrimination against women who seek to 
purchase an insurance policy on the individual market. It has three 
basic parts.
  First, the bill prevents insurers in the individual market from 
charging women higher premiums than men. Gender rating is insurance 
discrimination based on sex and should not be tolerated. Over 40 years 
ago, the insurance industry voluntarily abandoned its practice of using 
race as a rating factor and now it is time to end rating discrimination 
against women. Gender rating hurts women's health by inflating premiums 
and creating substantial financial barriers for women seeking to obtain 
health care coverage.
  Second, the bill prevents insurers in the individual market from 
denying or limiting coverage based on a current or past pregnancy or a 
past or future method of delivery. No longer will insurance companies 
be able to deny coverage to women simply by treating a pregnancy like a 
pre-existing condition. Similarly, they will not be able to impose 
waiting periods relating to a pregnancy. They will no longer be able to 
impose higher premiums or deductibles on women with prior Cesareans.
  Finally, the bill will require all insurance policies offered on the 
individual market to provide comprehensive maternity coverage for the 
full scope of maternity services from preconception through postpartum. 
There is a huge cost to our society by denying maternity coverage. In 
2005, the costs associated with preterm birth, one of the most 
expensive pregnancy complications linked to lack of prenatal care, 
totaled over $26.2 billion. Yet, for every $1 spent on preconception 
care saved anywhere from $1.60 to $5.19 in maternal care costs.
  If women do not have the necessary maternity coverage, they will be 
exposed to substantial out of pocket

[[Page S5131]]

costs. Too many women are unable to pay these costs. The average U.S. 
hospital cost for an uncomplicated vaginal delivery ranges from $7,500 
to $15,000 and from $11,000 to $19,000 for a caesarean delivery. I 
believe comprehensive maternity coverage will save money and improve 
maternal and child health outcomes. Those currently without coverage 
often turn to our public safety net for assistance. Today, forty 
percent of all pregnancies are covered by Medicaid. We need to do 
everything possible to increase health outcomes for our children.
  The bill would provide the Secretary of Health and Human Services 
with the authority to monitor compliance with the requirements of this 
act. It gives the Secretary the ability to assess fines of at least 
$10,000 against any health insurance company that fails to submit the 
required data. Additionally, the bill directs the Government 
Accountability Office to issue a report by December 31, 2010 about 
problems any remaining for women on the individual insurance market in 
all 50 States.
  I would like to thank a number of organizations who have already 
endorsed the legislation including the American College of 
Obstetricians and Gynecologists, Children's Defense Fund, Consumers 
Union, Families USA, the National Partnership for Women & Families, and 
OWL--The Voice of Midlife and Older Women.
  During the Senate's consideration of comprehensive health care 
reform, I will work with Senate Finance Committee Chairman Baucus, 
Ranking Member Grassley to make sure that discriminatory insurance 
practices against women are ended. I will also work with my 
Massachusetts colleague, Senate Committee on Health, Education, Labor 
and Pensions Chairman Ted Kennedy to make sure this legislation is 
enacted into law. As in other areas of health reform, Massachusetts is 
already leading the way in preventing insurers from engaging in 
practices that harm women. I believe the rest of the country should 
benefit from our experience.
  I find it especially appropriate to introduce this legislation as we 
approach Mother's Day on Sunday, May 10th and National Women's Health 
Week on May 10th-16th. I can think of no better gift to our mothers, 
daughters, and sisters than the gift of affordable and accessible 
insurance that meets their health needs.
                                 ______
                                 
      By Mr. GRASSLEY (for himself and Mrs. Hagan):
  S. 972. A bill to amend the Food, Conservation, and Energy Act of 
2008 to provide funding for successful claimants following a 
determination on the merits of Pigford claims related to racial 
discrimination by the Department of Agriculture, to the Committee on 
Agriculture, Nutrition, and Forestry.
  Mr. GRASSLEY. Mr. President, I want to first start off by thanking 
the Senate and in particular the Senate Agriculture Committee for 
addressing a new cause of action in Federal court for those African-
American farmers who may have been discriminated against and who were 
denied entry in the Pigford v. Glickman Consent Decree. The Food, 
Conservation, and Energy Act of 2008 including a provision entitled 
Determination on Merits of Pigford Claims.
  For those who do not know, the Consent Decree was a settlement that 
resulted from a class action lawsuit initiated by a class of African-
American farmers who had for decades been discriminated against by the 
U.S. Department of Agriculture in the administration of its FSA loan 
program. The discriminatory treatment was well-documented by both the 
USDA's own Inspector General and an internal task force appointed by 
then USDA Secretary Glickman.
  We had some unanticipated consequences in the Consent Decree's 
implementation. There was denial of approximately 77,000 African-
American farmers into the Decree even though these farmers filed 
petitions by the late-claim deadline. More than half of these late-
claim petitioners didn't even know about the Consent Decree. The Court 
said the lack of notice was not a sufficient reason to allow them into 
the Consent Decree. Thus, these individuals were denied entry and their 
discrimination complaints went unresolved. This was not a fair outcome 
for farmers or those attempting to farm at that time.
  The farm bill did the right thing by allowing late filers to have 
their claims heard and judged on the merits. These farmers deserve 
justice and at least the opportunity to have their claims heard.
  Unfortunately, it has been very difficult to determine how many of 
the 77,000 actually have valid claims. Lots of different folks have 
lots of different calculations. Either way, it's likely to be 
expensive. Because of the budget constraints, the Farm Bill only could 
put $100 million towards the endeavor.
  I think we can and must do better than that. That is why today I am 
introducing bipartisan legislation with Senator Hagan of North 
Carolina. This bill will make 3 changes to the farm bill. First it will 
allow the claimants to access the $100 million already appropriated in 
the farm bill, but once that is expended gain access to the Department 
of Treasury permanent appropriated judgment fund. Second, it will allow 
reasonable attorney fees, administrative costs, and expenses to be paid 
from the judgment fund in accordance with the 1999 consent decree. 
Finally, it includes a section making fraud related to claims a 
criminal offense with punishment of a fine or up to 5 years in prison 
or both.
  The claimants, who were able to timely file, were allowed access to 
the judgment fund and so it makes sense that we treat these new 
claimants the exact same way. The Department of Justice was treating 
the $100 million included in the farm bill as a cap, but Congress 
simply viewed it as a down payment to rectify the damage done.
  The farm bill we passed last year does one thing right. It focuses a 
considerable amount of resources on new and beginning farmers and 
ranchers. Well, many of the Pigford claimants were in that same boat 20 
years ago. It is time to rectify that.
  The farm bill has simply opened up the door so that claims can be 
heard. If a person brings a claim and can not meet the burden of proof, 
then no award will be given. However, we know USDA has admitted that 
the discrimination occurred, and now we are obligated to do our best in 
getting those that deserve it, some relief. That is why I am 
introducing this legislation with Senator Hagan and I urge my 
colleagues to support the bill. It is time to make these claimants 
right and move forward into a new era of civil rights at the Department 
of Agriculture.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 972

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

     SECTION 1. FUNDING FOR PIGFORD CLAIMS.

       Section 14012 of the Food, Conservation, and Energy Act of 
     2008 (122 Stat. 2209; Public Law 110-246) is amended--
       (1) by striking subsection (c) and inserting the following:
       ``(c) Criminal Penalties.--
       ``(1) In general.--It shall be unlawful for any person to--
       ``(A) knowingly execute, or attempt to execute, a scheme or 
     artifice to defraud, or obtain money or property from any 
     person by means of false or fraudulent pretenses, 
     representations, or promises, relating to the eligibility or 
     ability of a person to--
       ``(i) file a civil action relating to a Pigford claim;
       ``(ii) submit a late-filing request under section 5(g) of 
     the consent decree;
       ``(iii) obtain a determination on the merits of a Pigford 
     claim; or
       ``(iv) recover damages or other relief relating to a 
     Pigford claim; and
       ``(B) for the purpose of executing the scheme or artifice 
     or attempting so to do, or obtaining the money or property--
       ``(i) place or deposit, or cause to be placed or deposited, 
     any matter or thing to be sent or delivered by the Postal 
     Service or any private or commercial interstate carrier;
       ``(ii) take or receive any matter or thing sent or 
     delivered by the Postal Service or any private or commercial 
     interstate carrier;
       ``(iii) knowingly cause to be delivered by the Postal 
     Service or any private or commercial interstate carrier any 
     matter or thing according to the direction on the matter or 
     thing, or at the place at which the matter or thing is 
     directed to be delivered by the person to whom it is 
     addressed; or
       ``(iv) transmit, or cause to be transmitted, any writings, 
     signs, signals, pictures, or sounds by means of wire, radio, 
     or television communication in interstate or foreign 
     commerce.
       ``(2) Penalty.--Any person who violates paragraph (1) shall 
     be fined under title 18,

[[Page S5132]]

     United States Code, imprisoned for not more than 5 years, or 
     both.''; and
       (2) in subsection (i), by striking paragraph (2) and 
     inserting the following:
       ``(2) Permanent judgment appropriation.--
       ``(A) In general.--After the expenditure of all funds made 
     available under paragraph (1), any additional payments or 
     debt relief in satisfaction of claims against the United 
     States under subsection (b) and for any actions under 
     subsection (f) or (g) shall be paid from amounts appropriated 
     under section 1304 of title 31, United States Code.
       ``(B) Authorization of certain expenses.--Reasonable 
     attorney's fees, administrative costs, and expenses described 
     in section 14(a) of the consent decree and related to 
     adjudicating the merits of claims brought under subsection 
     (b), (f), or (g) shall be paid from amounts appropriated 
     under section 1304 of title 31, United States Code.
       ``(3) Authorization of appropriations.--In addition to any 
     other funds made available under this subsection, there are 
     authorized to be appropriated such sums as are necessary to 
     carry out this section.''.
                                 ______
                                 
      By Mr. GRASSLEY:
  S. 976. A bill to provide that certain provisions of subchapter I of 
chapter 35 of title 44, United States Code, relating to Federal 
information policy shall not apply to the collection of information 
during any investigation, audit, inspection, evaluation, or other 
review conducted by any Federal office of Inspector General, and for 
other purposes; to the Committee on Homeland Security and Governmental 
Affairs.
  Mr. GRASSLEY. Mr. President, the Federal Inspectors General are the 
frontline of protection for taxpayer dollars, ensuring that Federal 
agencies spend taxpayer dollars in an effective, efficient, economical 
manner that is in accordance with all applicable law. The Inspectors 
General root out fraud, waste, and abuse in Government programs by 
auditing, evaluating, and investigating how Federal agencies spend 
taxpayer dollars and how Government programs utilize funds. The 
Inspectors General occupy a unique position within our government. 
Created by the Inspector General Act of 1978 and by various subsequent 
statutes, the Inspectors General at Executive Branch agencies also 
report directly to the Legislative Branch. They were created to keep 
tabs on the government bureaucracy to make sure that agencies follow 
the spirit and intent of the laws while protecting taxpayer dollars.
  I have been an outspoken advocate for Inspectors General during my 
time in the Senate and I was proud to be a cosponsor of the Inspector 
General Reform Act of 2008, which was signed into law by President Bush 
last year. That legislation ensures that Inspectors General are truly 
independent of the Federal agencies they oversee. The independence of 
Inspectors General is a critical requirement to their ability to get 
the job done. If Inspectors General lack independence from the agency 
they oversee, the quality of their work is impacted negatively and 
their reputation as independent watchdogs is tarnished.
  Over the years, I have seen a number of Inspectors General come and 
go. It is a tough job to be an Inspector General. You can not go along 
to get along. You must buck the system, dig deep into the books of the 
agency, find where the secrets are hidden, and then report the truth to 
Congress, the President, and the American people. Unfortunately, 
Inspectors General must do all this with the agencies that often fight 
their every move. These entrenched bureaucracies have an interest in 
not seeing Inspectors General succeed--they do not want egg on their 
face. That is why we in Congress must make sure they have all the tools 
they need to get the job done and ensure that there is accountability 
for the billions in taxpayer dollars that are spent annually on the 
operation of the Executive Branch.
  One growing area of concern I have seen over the years is procedural 
roadblocks being placed before Inspectors General to limit or prohibit 
their ability to do their job of protecting taxpayer dollars. One 
recent example relates to the Special Inspector General for the 
Troubled Asset Relief Program SIGTARP, Neil Barofsky. Inspector General 
Barofsky notified me on January 22, 2009, that he intended to begin an 
oversight initiative that would have improved the transparency of the 
Troubled Asset Relief Program, TARP. Inspector General Barofsky's plan 
was to collect data from TARP recipients asking them for a response 
outlining the use of TARP funds, copies of support documents, a 
description of plans to comply with executive compensation 
restrictions, and certification by a senior executive officer of the 
accuracy of the statements they make. This sounded like a legitimate 
plan from the Inspector General tasked by Congress with ensuring that 
the $700 billion handed out by the TARP program wasn't lost to fraud or 
abuse. However, it was shortly after this letter that Mr. Barofsky ran 
into procedural hurdles erected by the Office of Management and Budget, 
OMB.
  On January 30, 2009, I asked the Inspector General for an update on 
his initiative when he informed me that OMB had advised the SIGTARP 
that he could not initiate his effort due to the restrictions in the 
Paperwork Reduction Act of 1980, PRA. As a result, SIGTARP requested 
``emergency processing'' by OMB to consider the impact of its letter to 
TARP recipients. It is my understanding that OMB initially responded 
favorably finding that SIGTARP would not be limited by the PRA. 
However, OMB reversed course and withdrew the emergency approval right 
after it was granted.
  OMB then informed SIGTARP that the PRA required he post his proposed 
letter online for TARP recipients to review for 15 days, wait for 
comments from the recipients, and then require that the SIGTARP justify 
to OMB that it has taken into account all the public comments. This was 
a significant, unnecessary roadblock that was erected at a time when 
American Taxpayers were asking everyone ``where did the money go.'' 
This type of procedural hurdle to an audit and investigation by the 
SIGTARP is unacceptable. Can you imagine what the very corporations 
that took taxpayer money would write during the comment period? It is 
my view that corporations that took Government money should be 
subjected to oversight by Inspectors General and they should not have a 
say in drafting or amending a letter from the Inspector General that 
they must respond to. This is exactly what OMB was asking of the 
SIGTARP.
  I am glad to report that later that same week SIGTARP Barofsky was 
given approval from OMB to send the letter requests to the TARP 
recipients without delay. However, around the same time that the 
letters were approved and sent, the Department of Treasury posted a 
comment request in the Federal Register about the SIGTARP request. 
Those responses were due to Treasury by April 13, 2009. While SIGTARP 
Barofsky was ultimately able to send his request, this uncertainty 
about the application of the PRA to audits, evaluations, inspections, 
or investigations by Inspectors General remains a significant question. 
This whole saga was a wakeup call for many Inspectors General. As a 
result, many Inspectors General have reached out to my office about 
this issue and the dangers the PRA could pose to their audits and 
investigations.
  That is why I am here today to introduce legislation that will 
clarify the impact the PRA has on official audits, evaluations, 
inspections, and investigations conducted by Inspectors General. This 
legislation is narrowly tailored to ensure that Inspectors General are 
not subject to bureaucratic hurdles erected by OMB, which could be used 
to limit the independence and authority of Inspectors General, and most 
importantly information that we can garner through their work.
  Specifically, the PRA currently states that agencies must receive 
approval for each collection request before it is implemented. Failure 
to get this approval provides the recipient of the request the 
protection to not comply with the request without penalty. The current 
PRA does not apply to criminal investigations, administrative actions, 
or investigations involving an agency against a specific individual or 
entities. However, it does apply to ``general'' investigations. The PRA 
is also silent as to whether it was intended to apply to Inspectors 
General and defines agency as any ``executive department, military 
department, Government corporation, Government controlled corporation, 
or other establishment in the executive branch of the Government 
including the Executive Office of the President, or any independent 
regulatory agency. The PRA does expressly exclude the Government 
Accountability Office and the Federal

[[Page S5133]]

Election Commission, but not the Inspectors General.

  The PRA was passed with the noble goal of reducing the impact Federal 
Government regulatory agencies have on small businesses and other 
private individuals. However, over the years the investigative and 
audit roles of the Inspectors General have expanded to ensure that 
taxpayer dollars are not lost to fraud, waste, or abuse. As a result, 
the important work of the Inspectors General may run directly into the 
PRA resulting in a slower process for audits, evaluations, and 
investigations, as well as potentially tipping off those being 
investigated by the Inspectors General and providing them time to, for 
example cover-up potential wrong doing.
  The legislation I'm introducing today is designed to protect the PRA 
as well as the Inspectors General by trying to head off a potential 
conflict among the two statutes before it has to be decided by the 
courts. It simply states that the PRA shall not apply to the collection 
of information ``during the conduct of any investigation, audit, 
inspection, evaluation, or other review conducted by'' any Federal 
office of Inspector General. It further defines the definition of 
Inspector General to include: statutory Inspectors General, Federal 
entity Inspectors General, and any Special Inspector General. This 
definition also includes the Council of the Inspectors General on 
Integrity and Efficiency, CIGIE, created by the Inspector General 
Reform Act, and the Recovery, Accountability, and Transparency Board 
created by the stimulus bill signed into law earlier this year. These 
two entities have some audit and evaluation roles provided to them and 
should also not face procedural hurdles under the PRA when they are 
overseeing the various Inspectors General or Recovery programs.
  All in all, this is a simple piece of legislation that I encourage 
all my colleagues to support. It picks up on the great work of the 
Inspector General Reform Act to ensure that Inspectors General are 
independent and free from any undue influence--procedural or 
substantive--when conducting audits, evaluations, inspections, or 
audits on behalf of the American people. I hope this legislation will 
receive expedited consideration and swift passage.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 976

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

     SECTION 1. INVESTIGATIONS, AUDITS, INSPECTIONS, EVALUATIONS, 
                   AND REVIEWS CONDUCTED BY INSPECTORS GENERAL.

       Section 3518(c) of title 44, United States Code, is 
     amended--
       (1) in paragraph (1), by striking ``paragraph (2)'' and 
     inserting ``paragraph (3)'';
       (2) by redesignating paragraph (2) as paragraph (3); and
       (3) by inserting after paragraph (1) the following:
       ``(2) Notwithstanding paragraph (3), this subchapter shall 
     not apply to the collection of information during the conduct 
     of any investigation, audit, inspection, evaluation, or other 
     review conducted by--
       ``(A) any Federal office of Inspector General, including--
       ``(i) any office of Inspector General of any establishment, 
     Federal entity, or designated Federal entity as those terms 
     are defined under sections 12(2), 8G(a)(1), and 8G(a)(2) of 
     the Inspector General Act of 1978 (5 U.S.C. App.), 
     respectively; or
       ``(ii) any office of Special Inspector General established 
     by statute;
       ``(B) the Council of the Inspectors General on Integrity 
     and Efficiency established under section 11 of the Inspector 
     General Act of 1978 (5 U.S.C. App.); or
       ``(C) the Recovery Accountability and Transparency Board 
     established under section 1521 of division A of the American 
     Recovery and Reinvestment Act of 2009 (Public Law 111-5; 123 
     Stat. 289).''.
                                 ______
                                 
      By Mr. DURBIN (for himself, Ms. Snowe, and Mrs. Lincoln):
  S. 979. A bill to amend the Public Health Service Act to establish a 
nationwide health insurance purchasing pool for small businesses and 
the self-employed that would offer a choice of private health plans and 
make health coverage more affordable, predictable, and accessible; to 
the Committee on Finance.
  Mr. DURBIN. Mr. President, I rise today to introduce legislation with 
Senators Snowe and Lincoln to make healthcare more affordable and 
accessible for our nation's small businesses and self-employed 
individuals. This bipartisan legislation is known as the Small Business 
Health Options Program Act, or the SHOP Act, and I am working with the 
Finance and HELP Committees to incorporate it into the broader 
healthcare reform bill the Senate is developing.
  Health reform is a priority of the American people and a central 
element of this Congress's agenda. While more must be done, we have 
taken some small but important steps already.
  We expanded the CHIP program to provide healthcare to an additional 4 
million children who are uninsured today.
  We provided assistance to laid-off workers to help them pay for 
health insurance under the COBRA continuation program, so that families 
receiving an average monthly unemployment check of $1,300 aren't 
expected to pay $1,100 in insurance premiums.
  We included in the Recovery Act $87 billion for the Medicaid program 
over the next 2 years.
  We provided $2 billion for community health centers, which serve more 
than 18 million patients.
  But we have more to do. Overall, 46 million Americans are uninsured. 
At the beginning of this decade, fewer than 40 million people were 
uninsured. Over the same period, health insurance premiums have risen 4 
times faster than wages.
  This is the year to enact reforms to reduce healthcare costs, expand 
coverage, and improve the quality of the healthcare we receive.
  It is not easy for small businesses and the self-employed to afford 
health insurance. Without the benefits of large group purchasing, 
double-digit rate increases are not uncommon.
  The recession has made it worse. The Main Street Alliance recently 
polled nearly 500 small businesses in a dozen states and found that 35 
percent have reduced coverage and 12 percent have dropped it altogether 
in the past 2 years.
  More than 50 percent of the uninsured in America are in households 
led by someone who is either self-employed or works for a business with 
fewer than 100 employees.
  Workers in the smallest businesses are almost three times likely to 
be uninsured as those who work for the largest businesses. That is not 
because small businesses don't want to offer health insurance; it is 
because insurance is more expensive for them than for large companies.
  Administrative costs for health insurance are higher for small 
businesses than larger businesses. About 20-25 percent of a small 
business's premium goes to administrative expenses, compared to about 
10 percent for large employers.
  Small businesses are less able than large employers to spread the 
risk that someone will get sick. Even a single employee with a serious 
medical condition can cause a dramatic increase in a small business's 
health insurance premium.
  Small businesses are also more likely to have lower wages and 
narrower profit margins than large businesses, making it more difficult 
for these employers and employees to cover the cost of health coverage.
  Small business owners like Doug Mayol of Springfield, IL, and David 
Borris, of Northbrook, IL, know all too well the difficulty of 
maintaining health insurance in this struggling economy.
  Since 1988, Doug Mayol has owned and operated a small business in 
downtown Springfield that sells cards, gifts, and other knick-knacks. 
He has found that his profits are at the mercy of the rising costs of 
healthcare. He is fortunate that his only employee is over 65 and 
qualifies for Medicare and also receives spousal benefits from her late 
husband. If this were not the case, Doug does not think he would be 
able to provide her with coverage.
  In terms of his own insurance, Doug has a preexisting condition and 
fears the real possibility of becoming uninsured. Almost 30 years ago, 
Doug was diagnosed with a congenital heart valve defect. He has no 
symptoms, but without regular healthcare he is at risk of developing 
serious problems.
  Like most Americans, his healthcare premiums have risen over the 
years, but recently the increases have been

[[Page S5134]]

dramatic. In 2001, he paid $200 a month. By 2005, he was paying $400 a 
month. The next year, after he turned 50, his rate shot up to $750 a 
month.
  Trying to work within the system, he chose a smaller network of 
providers and a higher deductible to bring his premium back down to 
$650. Unfortunately, last year it jumped to $1037 a month. Only by 
taking the highest deductible allowed, $2500, was he able to bring it 
down to $888. And these rates will continue to rise.
  Ironically, Doug is not even a costly patient. With his high 
deductible, his insurance rarely kicks in, as he has never made a claim 
for illness or injury and has received only routine primary care. Yet 
more affordable insurance carriers reject him due to his preexisting 
condition.
  Meanwhile, Doug avoids seeing a cardiologist, even though periodic 
visits would be a good idea, because he fears it would add another red 
flag to his already imperfect health record.
  What kind of healthcare system is it that causes even those with 
coverage to avoid care? Americans need the peace-of-mind that comes 
with knowing that health insurance companies will not be able to reject 
you, or keep raising your rates, because you have a preexisting 
condition.
  David Borris faces another dilemma. David is the owner of Hel's 
Kitchen Catering, an off-premise catering company located along 
suburban Chicago's north shore in Northbrook, IL. Over 2 decades ago, 
David and his wife opened their business in a 900 square foot 
storefront with a handful of recipes from his mother and his wife. Both 
David and his wife left good-paying jobs in the hospitality industry to 
take their shot at the American dream of owning their own business.
  David now employs 25 full-time employees and has offered health 
insurance to them since 1992. At first, David offered to contribute 50 
percent of the premium in an employee's first year and 100 percent 
thereafter. The company had 8 full-time employees and David felt a 
moral obligation to offer insurance to the people who were helping to 
grow his business.
  Around 2002, the company started to see staggering premium increases. 
In 2004, the premium jumped 21 percent. In 2005, it increased by 10 
percent. In 2006, the increase was 16 percent. In 2007, he was quoted a 
26 percent rate hike, and only a change of carriers allowed him to hold 
the increase to 17 percent. In total, his premiums have doubled since 
2002, forcing him to ask longtime employees to contribute toward the 
cost of the premiums.
  Today, David insures only 13 of his 25 full-time employees--the other 
12 cannot afford their 50 percent share of the premium in the first 
year, and the company cannot afford to pay more.
  David spent almost 13 percent of his covered employees' payroll on 
health insurance premiums last year, and he expects he will have to ask 
employees to contribute more again next year.
  He knows that one employee's wife has a kidney problem and another 
employee's son receives an expensive treatment for a health condition. 
Trying to maintain health coverage for his loyal workers has become a 
major complication as he tries to grow his business.
  Both Doug and David are living the American dream as small business 
owners. Providing health insurance for their employees should not 
destroy that dream.
  As Congress works to reform the healthcare system, we need to keep in 
mind the struggle of small business owners like Doug and David. Small 
businesses are the backbone of the American economy. They need to be 
able to count on health insurance premiums that are reasonable and 
predictable. They need something better than our current system offers.
  That is why I am reintroducing the SHOP Act with Senators Snowe and 
Lincoln. Our legislation offers new hope for entrepreneurs who struggle 
to afford health insurance. It will make health insurance more 
accessible and more affordable for small businesses and the self-
employed.
  Our bill has three core elements: purchasing pools for small 
businesses and the self-employed; health insurance rating reforms; and 
tax credits.
  Our bill would create incentives for States to establish purchasing 
pools and would create a national pool that we call SHOP, the Small 
Business Health Options Program, for small businesses with up to 100 
employees and for the self-employed.

  Purchasing pools will lower administrative costs, give employers and 
employees more private health insurance plans to choose from, and 
enhance competition by making it easier to compare plans.
  Our bill would prohibit insurers from setting premiums based on 
health status in both the national SHOP pool and in States' small group 
markets, and would gradually reduce other sources of premium variation. 
These rating changes will make premiums more stable from year to year 
and make coverage more affordable for those who need it most.
  To lower the cost of providing health coverage, our bill would 
provide a tax credit to small businesses with up to 50 workers who pay 
at least 60 percent of their employees' premiums.
  The size of the tax credit would be targeted to the size of the 
business. A full tax credit of $1,000 for self-only coverage and $2,000 
for family coverage would be available to the smallest businesses, with 
the value of the tax credit phased down as the size of the employer 
increases.
  Employers who cover more than 60 percent of the premium would be 
rewarded with a bonus credit.
  In addition, we would move to a system where individual employees can 
choose their own health plan instead of having their employer choose it 
for them. Where rating rules permit it, each worker would be able to 
enroll in the health plan in SHOP that best meets his or her needs.
  The bill we have introduced reflects our commitment to find 
reasonable compromises and address the challenges faced by small 
employers and the self-employed. This bipartisan legislation has the 
support of a range of business, labor, and consumer groups.
  We have worked closely with the National Federation of Independent 
Business, the National Association of Realtors, and SEIU in the 
development of the bill, and we also have the support of Families USA, 
the National Restaurant Association, and the Partnership for Women and 
Families.
  We have received valuable input from the National Association of 
Insurance Commissioners and have taken the hard steps they have 
recommended to address rating issues and ensure that the approach is 
viable over the long haul.
  Although each group that supports SHOP has its own priorities for 
broader health reform, this diverse coalition of stakeholders from 
across the political spectrum came together to address the needs of 
small businesses as one important component of reform.
  Everyone understands that this bill is not comprehensive health 
reform, and none of us would stop with SHOP. However, the renewed focus 
on broader reform has given us an opportunity to offer SHOP as a 
carefully-crafted component of broader reform that addresses the 
specific needs of the small business community. We believe our approach 
is consistent with the broader conversation and can help the greater 
reform effort move forward on a bipartisan basis, and we look forward 
to including the features of SHOP in the broader bill.
  In a town hall meeting in March this year, the President spoke to a 
crowd about the new mindset of this Administration. He talked about 
``understanding that we're all in this together and that if the middle 
class is working well, if working people are doing well, then everybody 
does well.''
  This bill is consistent with that thinking. Its seemingly disparate 
supporters may disagree on many things, but they have worked together 
to develop this legislation because they agree on a greater principle: 
that our current system is hurting everyone--families, businesses, and 
our economy.
  We must keep working together on a bipartisan basis to try to enact 
legislation that will give all Americans access to affordable health 
insurance, and solving the healthcare challenges faced by small 
businesses is an important part of that process.
  I look forward to working with my colleagues to enact such 
legislation and ensure that the healthcare needs of small businesses 
and all Americans are met.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.

[[Page S5135]]

  There being no objection, the text of the bill was ordered to be 
placed in the Record, as follows:

                                 S. 979

       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 ``Small Business Health 
     Options Program Act of 2009'' or the ``SHOP Act''.

     SEC. 2. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT.

       The Public Health Service Act (42 U.S.C. 201 et seq.) is 
     amended by adding at the end the following:

          ``TITLE XXXI--SMALL BUSINESS HEALTH OPTIONS PROGRAM

     ``SEC. 3101. DEFINITIONS.

       ``(a) In General.--In this title:
       ``(1) Administrator.--The term `Administrator' means the 
     Administrator appointed under section 3102(a).
       ``(2) Small business health board.--The term `Small 
     Business Health Board' means the Board established under 
     section 3102(d).
       ``(3) Employee.--The term `employee' has the meaning given 
     such term under section 3(6) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(6)). Such term 
     shall not include an employee of the Federal Government.
       ``(4) Employer.--The term `employer' has the meaning given 
     such term under section 3(5) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(5)), except that 
     such term shall include employers who employed an average of 
     at least 1 but not more than 100 employees (who worked an 
     average of at least 35 hours per week) on business days 
     during the year preceding the date of application, and shall 
     include self-employed individuals with either not less than 
     $5,000 in net earnings or not less than $15,000 in gross 
     earnings from self-employment in the preceding taxable year. 
     Such term shall not include the Federal Government.
       ``(5) Health insurance coverage.--The term `health 
     insurance coverage' has the meaning given such term in 
     section 2791.
       ``(6) Health insurance issuer.--The term `health insurance 
     issuer' has the meaning given such term in section 2791.
       ``(7) Health status-related factor.--The term `health 
     status-related factor' has the meaning given such term in 
     section 2791(d)(9).
       ``(8) Participating employer.--The term `participating 
     employer' means an employer that--
       ``(A) elects to provide health insurance coverage under 
     this title to its employees; and
       ``(B) is not offering other comprehensive health insurance 
     coverage to such employees.
       ``(b) Application of Certain Rules in Determination of 
     Employer Size.--For purposes of subsection (a)(3):
       ``(1) Application of aggregation rule for employers.--All 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 of the Internal Revenue Code 
     of 1986 shall be treated as 1 employer.
       ``(2) Employers not in existence in preceding year.--In the 
     case of an employer which was not in existence for the full 
     year prior to the date on which the employer applies to 
     participate, the determination of whether such employer meets 
     the requirements of subsection (a)(4) shall be based on the 
     average number of employees that it is reasonably expected 
     such employer will employ on business days in the employer's 
     first full year.
       ``(3) Predecessors.--Any reference in this subsection to an 
     employer shall include a reference to any predecessor of such 
     employer.
       ``(c) Waiver and Continuation of Participation.--
       ``(1) Waiver.--The Administrator may waive the limitations 
     relating to the size of an employer which may participate in 
     the health insurance program established under this title on 
     a case by case basis if the Administrator determines that 
     such employer makes a compelling case for such a waiver. In 
     making determinations under this paragraph, the Administrator 
     may consider the effects of the employment of temporary and 
     seasonal workers and other factors.
       ``(2) Continuation of participation.--An employer 
     participating in the program under this title that 
     experiences an increase in the number of employees so that 
     such employer has in excess of 100 employees, may not be 
     excluded from participation solely as a result of such 
     increase in employees.
       ``(d) Treatment of Health Insurance Coverage as Group 
     Health Plan.--Health insurance coverage offered under this 
     title shall be treated as a group health plan for purposes of 
     applying the Employee Retirement Income Security Act of 1974 
     (29 U.S.C. 1001 et seq.) except to the extent that a 
     provision of this title expressly provides otherwise.
       ``(e) Application of HIPAA Rules.--Subject to the 
     provisions of this title, parts A and C of title XXVII shall 
     apply to health insurance coverage offered under this title 
     by health insurance issuers. Subject to section 2723, a State 
     may modify State law as appropriate to provide for the 
     enforcement of such provisions for health insurance coverage 
     offered in the State under this title. Part 7 of subtitle B 
     of title I of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1181 et seq.) shall continue to apply to 
     group health plans offering coverage under this title. 
     Subtitle K of the Internal Revenue Code of 1986 shall 
     continue to apply to covered employers and group health plans 
     offering coverage under this title.

     ``SEC. 3102. ADMINISTRATION OF SMALL BUSINESS HEALTH 
                   INSURANCE POOL.

       ``(a) Office and Administrator.--The Secretary shall 
     designate an office within the Department of Health and Human 
     Services to administer the program under this title. Such 
     office shall be headed by an Administrator to be appointed by 
     the Secretary.
       ``(b) Qualifications.--The Secretary shall ensure that the 
     individual appointed to serve as the Administrator under 
     subsection (a) has an appropriate background with experience 
     in health insurance, healthcare management, or health policy.
       ``(c) Duties.--The Administrator shall--
       ``(1) enter into contracts with health insurance issuers to 
     provide health insurance coverage to individuals and 
     employees who enroll in health insurance coverage in 
     accordance with this title;
       ``(2) maintain the contracts for health insurance policies 
     when an employee elects which health plan offered under this 
     title to enroll in as permitted under section 3107(d)(7);
       ``(3) ensure that health insurance issuers comply with the 
     requirements of this title;
       ``(4) ensure that employers meet eligibility requirements 
     for participation in the health insurance pool established 
     under this title;
       ``(5) enter into agreements with entities to serve as 
     navigators, as defined in section 3103;
       ``(6) collect premiums from employers and employees and 
     make payments for health insurance coverage;
       ``(7) collect other information needed to administer the 
     program under this title;
       ``(8) compile, produce, and distribute information (which 
     shall not be subject to review or modification by the States) 
     to employers and employees (directly and through navigators) 
     concerning the open enrollment process, the health insurance 
     coverage available through the pool, and standardized 
     comparative information concerning such coverage, which shall 
     be available through an interactive Internet website, 
     including a description of the coverage plans available in 
     each State and comparative information, about premiums, index 
     rates, benefits, quality, and consumer satisfaction under 
     such plans;
       ``(9) provide information to health insurance issuers, 
     including, at the discretion of the Administrator, 
     notification when proposed rates are not in a competitive 
     range;
       ``(10) conduct public education activities (directly and 
     through navigators) to raise the awareness of the public of 
     the program under this title and the associated tax credit 
     under the Internal Revenue Code of 1986;
       ``(11) develop methods to facilitate enrollment in health 
     insurance coverage under this title, including through the 
     use of the Internet;
       ``(12) if appropriate, enter into contracts for the 
     performance of administrative functions under this title as 
     permitted under section 3109;
       ``(13) carefully consider benefit recommendations that are 
     endorsed by at least two-thirds of the members of the Small 
     Business Health Board;
       ``(14) establish and administer a contingency fund for risk 
     corridors as provided for in section 3108;
       ``(15) coordinate with State insurance regulators to ensure 
     timely and effective consideration of complaints, grievances, 
     and appeals; and
       ``(16) carry out any other activities necessary to 
     administer this title.
       ``(d) Limitations.--The Administrator shall not--
       ``(1) negotiate premiums with participating health 
     insurance issuers; or
       ``(2) exclude health insurance issuers from participating 
     in the program under this title except for violating 
     contracts or the requirements of this title.
       ``(e) Small Business Health Board.--
       ``(1) In general.--There shall be established a Small 
     Business Health Board to monitor the implementation of the 
     program under this title and to make recommendations to the 
     Administrator concerning improvements in the program.
       ``(2) Appointment.--The Comptroller General shall appoint 
     13 individuals who have expertise in healthcare benefits, 
     financing, economics, actuarial science, or other related 
     fields, to serve as members of the Small Business Health 
     Board. In appointing members under the preceding sentence, 
     the Comptroller General shall ensure that such members 
     include--
       ``(A) a mix of different types of professionals;
       ``(B) a broad geographic representation;
       ``(C) not less than 3 individuals with an employee 
     perspective;
       ``(D) not less than 3 individuals with a small business 
     perspective, at least 1 of whom shall have a self-employed 
     perspective;
       ``(E) not less than 1 individual with a background in 
     insurance regulation; and
       ``(F) not less than 1 individual with a patient 
     perspective.
       ``(3) Terms.--Members of the Small Business Health Board 
     shall serve for a term of 3 years, such terms to end on March 
     15 of the applicable year, except as provided in paragraph 
     (4). The Comptroller General shall stagger the terms for 
     members first appointed. A member may be reappointed after 
     the expiration of a term. A member may

[[Page S5136]]

     serve after expiration of a term until a successor has been 
     appointed.
       ``(4) Small business representatives.--Beginning on March 
     16, 2013, 3 of the individuals the Comptroller General 
     appoints to the Small Business Health Board shall be 
     representatives of the 3 navigators through which the largest 
     number of individuals have enrolled for health insurance 
     coverage over the previous 2-year period. Such appointees 
     shall serve for 1 year. The Comptroller General shall 
     consider for appointment in years prior to the date specified 
     in this paragraph, individuals who are representatives of 
     entities that may serve as navigators.
       ``(5) Chairperson; vice chairperson.--The Comptroller 
     General shall designate a member of the Small Business Health 
     Board, at the time of appointment of such member, to serve as 
     Chairperson and a member to serve as Vice Chairperson for the 
     term of the appointment, except that in the case of a vacancy 
     of either such position, the Comptroller General may 
     designate another member to serve in such position for the 
     remainder of such member's term.
       ``(6) Compensation.--While serving on the business of the 
     Small Business Health Board (including travel time), a member 
     of the Small Business Health Board shall be entitled to 
     compensation at the per diem equivalent of the rate provided 
     for level IV of the Executive Schedule under section 5315 of 
     title 5, United States Code, and while so serving away from 
     home and the member's regular place of business, a member may 
     be allowed travel expenses, as authorized by the Chairperson 
     of the Small Business Health Board.
       ``(7) Disclosure.--The Comptroller General shall establish 
     a system for the public disclosure, by members of the Small 
     Business Health Board, of financial and other potential 
     conflicts of interest.
       ``(8) Meetings.--The Small Business Health Board shall meet 
     at the call of the Chairperson. Each such meeting shall be 
     open to the public.
       ``(9) Duties.--The Small Business Health Board shall--
       ``(A) provide general oversight of the program under this 
     title and make recommendations to the Administrator;
       ``(B) monitor, review, seek public input on, and make 
     recommendations to the Administrator on the benefit 
     requirements for nationwide plans in this title;
       ``(C) make recommendations concerning information that the 
     Administrator, health plans, and navigators should distribute 
     to employers and employees participating in the program under 
     this title; and
       ``(D) monitor and make recommendations to the Administrator 
     on adverse selection within the program under this title and 
     between the coverage provided under the program and the 
     State-regulated health insurance market.
       ``(10) Approval of recommendations.--A recommendation shall 
     require approval by not less than two-thirds of the members 
     of the Board.
       ``(11) Public notice and comment on recommendations.--The 
     Administrator shall--
       ``(A) publish recommendations by the Small Business Health 
     Board in the Federal Register;
       ``(B) solicit written comments concerning such 
     recommendations; and
       ``(C) provide an opportunity for the presentation of oral 
     comments concerning such recommendations at a public meeting.

     ``SEC. 3103. NAVIGATORS.

       ``(a) In General.--The Administrator shall enter into 
     agreements with private and public entities, beginning a 
     reasonable period prior to the beginning of the first 
     calendar year in which health insurance coverage is offered 
     under this title, under which such entities will serve as 
     navigators.
       ``(b) Eligibility.--To be eligible to enter into an 
     agreement under subsection (a), an entity shall demonstrate 
     to the Administrator that the entity has existing 
     relationships with, or could readily establish relationships 
     with, employers or employees and self-employed individuals, 
     likely to be eligible to participate in the program under 
     this title. Such entities may include trade, industry and 
     professional associations, chambers of commerce, unions, 
     small business development centers, and other entities that 
     the Administrator determines to be capable of carrying out 
     the duties described in subsection (c).
       ``(c) Duties.--An entity that serves as a navigator under 
     an agreement under subsection (a) shall--
       ``(1) coordinate with the Administrator on public education 
     activities to raise awareness of the program under this 
     title;
       ``(2) distribute information developed by the Administrator 
     on the open enrollment process, private health plans 
     available through the program under this title, and 
     standardized comparative information about the health 
     insurance coverage under the program;
       ``(3) distribute information about the availability of the 
     tax credit under section 36 of the Internal Revenue Code of 
     1986 as added by the Small Business Health Options Program 
     Act of 2009;
       ``(4) provide referrals to the applicable State agency or 
     agencies for any enrollee with a grievance, complaint, or 
     question regarding their health insurance issuer, their 
     coverage or plan, or a determination under such coverage or 
     plan;
       ``(5) assist employers and employees in enrolling in the 
     program under this title; and
       ``(6) respond to questions about the program under this 
     title and participating plans.
       ``(d) Supplemental Materials.--In addition to information 
     developed by the Administrator under subsection (c)(2), a 
     navigator may develop and distribute other information that 
     is related to the health insurance program established under 
     this title, subject to review and approval by the 
     Administrator and filing in each State in which the navigator 
     operates.
       ``(e) Standards.--
       ``(1) In general.--The Administrator shall establish 
     standards for navigators under this section, including 
     provisions to avoid conflicts of interest. Under such 
     standards, a navigator may not--
       ``(A) be a health insurance issuer; or
       ``(B) receive any consideration directly or indirectly from 
     any health insurance issuer in connection with the 
     participation of any employer in the program under this title 
     or the enrollment of any eligible employee in health 
     insurance coverage under this title.
       ``(2) Fair and impartial information and services.--The 
     Administrator shall consult with the Small Business Health 
     Board concerning the standards necessary to ensure that a 
     navigator will provide fair and impartial information and 
     services. An agreement between the Administrator and a 
     navigator may include specific provisions with respect to 
     such navigator to ensure that such navigator will provide 
     fair and impartial information and services. If a navigator, 
     or entity seeking to become a navigator, is a party to any 
     arrangement with any health insurance issuer to receive 
     compensation related to other healthcare programs not covered 
     under this title, the entity shall disclose the terms of such 
     compensation arrangements to the Administrator, and the 
     Administrator shall take such information into account in 
     determining the appropriate standards and agreement terms for 
     such navigator.

     ``SEC. 3104. CONTRACTS WITH HEALTH INSURANCE ISSUERS.

       ``(a) In General.--The Administrator may enter into 
     contracts with qualified health insurance issuers, without 
     regard to section 5 of title 41, United States Code, or other 
     statutes requiring competitive bidding, to provide health 
     benefits plans to employees of participating employers and 
     self-employed individuals under this title. Each contract 
     shall be for a uniform term of at least 1 year, but may be 
     made automatically renewable from term to term in the absence 
     of notice of termination by either party. In entering into 
     such contracts, the Administrator shall ensure that health 
     benefits coverage is provided for an individual only, 2 
     adults in a household, 1 adult and 1 or more children, and a 
     family.
       ``(b) Eligibility.--A health insurance issuer shall be 
     eligible to enter into a contract under subsection (a) if 
     such issuer--
       ``(1) is licensed to offer health benefits plan coverage in 
     each State in which the plan is offered; and
       ``(2) meets such other reasonable requirements as 
     determined appropriate by the Administrator, after an 
     opportunity for public comment and publication in the Federal 
     Register.
       ``(c) Cost-sharing and Networks.--The Administrator shall 
     ensure that health benefits plans with a range of cost-
     sharing and network arrangements are available under this 
     title.
       ``(d) Revocation.--Approval of a health benefits plan 
     participating in the program under this title may be 
     withdrawn or revoked by the Administrator only after notice 
     to the health insurance issuer involved and an opportunity 
     for a hearing without regard to subchapter II of chapter 5 
     and chapter 7 of title 5, United States Code.
       ``(e) Conversion.--
       ``(1) In general.--Except as provided in paragraph (2), a 
     contract may not be made or a plan approved under this 
     section if the health insurance issuer under such contract or 
     plan does not provide to each enrollee whose coverage under 
     the plan is terminated, including a termination due to 
     discontinuance of the contract or plan, the option to have 
     issued to that individual a nongroup policy without evidence 
     of insurability. A health insurance issuer shall provide a 
     notice of such option to individuals who enroll in the plan. 
     An enrollee who exercises such conversion option shall pay 
     the full periodic charges for the nongroup policy.
       ``(2) Exceptions.--A health insurance issuer shall not be 
     required to offer a nongroup policy under paragraph (1) if 
     the termination under the plan occurred because--
       ``(A) the enrollee failed to pay any required monthly 
     premiums under the plan;
       ``(B) the enrollee performed an act or practice that 
     constitutes fraud in connection with the coverage under the 
     plan;
       ``(C) the enrollee made an intentional misrepresentation of 
     a material fact under the terms of coverage of the plan; or
       ``(D) the terminated coverage under the plan was replaced 
     by similar coverage within 31 days after the effective date 
     of such termination.
       ``(f) Payment of Premiums.--
       ``(1) In general.--Employers shall collect premium payments 
     from their employees through payroll deductions or other 
     payments from employees and shall forward such payments and 
     the contribution of the employer (if any) to the 
     Administrator. The Administrator shall develop procedures 
     through which such payments shall be received and forwarded 
     to the health insurance issuer involved.

[[Page S5137]]

       ``(2) Failure to pay.--The Administrator shall establish--
       ``(A) procedures for the termination of employers that fail 
     for a consecutive 2-month period (or such other time period 
     as determined appropriate by the Administrator) to make 
     premium payments in a timely manner; and
       ``(B) other procedures regarding unpaid and uncollected 
     premiums.

     ``SEC. 3105. EMPLOYER PARTICIPATION.

       ``(a) Participation Procedure.--The Administrator shall 
     develop a procedure for employers and self-employed 
     individuals to participate in the program under this title, 
     including procedures relating to the offering of health 
     benefits plans to employees and the payment of premiums for 
     health insurance coverage under this title. For the purpose 
     of premium payments, a self-employed individual shall be 
     considered an employer that is making a 100 percent 
     contribution toward the premium amount.
       ``(b) Enrollment and Offering of Other Coverage.--
       ``(1) Enrollment.--A participating employer shall ensure 
     that each eligible employee has an opportunity to enroll in a 
     plan of the employer's choice or a plan of the employee's 
     choice in accordance with section 3107(d)(7).
       ``(2) Prohibition on offering other comprehensive health 
     benefit coverage.--A participating employer may not offer a 
     health insurance plan providing comprehensive health benefit 
     coverage to employees other than a health benefits plan 
     offered under this title.
       ``(3) Prohibition on coercion.--An employer shall not 
     pressure, coerce, or offer inducements to an employee to 
     elect not to enroll in coverage under the program under this 
     title or to select a particular health benefits plan.
       ``(4) Offer of supplemental coverage options.--
       ``(A) In general.--A participating employer may offer 
     supplementary coverage options to employees.
       ``(B) Definition.--In subparagraph (A), the term 
     `supplementary coverage' means benefits described as 
     `excepted benefits' under section 2791(c).
       ``(c) Regulatory Flexibility.--In developing the procedure 
     under subsection (a), the Administrator shall comply with the 
     requirements specified under the Regulatory Flexibility Act 
     under chapter 6 of title 5, United States Code, consider the 
     economic impacts that the regulation will have on small 
     businesses, and consider regulatory alternatives that would 
     mitigate such impact. The Administrator shall publish and 
     publicly disseminate a small business compliance guide, 
     pursuant to section 212 of the Small Business Regulatory 
     Enforcement Fairness Act, that explains the compliance 
     requirements for employer participation. Such compliance 
     guide shall be published not later than the date of the 
     publication of the final rule under this title, or the 
     effective date of such rules, whichever is later.
       ``(d) Rule of Construction.--Except as provided in section 
     3104(f), nothing in this title shall be construed to require 
     that an employer make premium contributions on behalf of 
     employees.

     ``SEC. 3106. ELIGIBILITY AND ENROLLMENT.

       ``(a) In General.--An individual shall be eligible to 
     enroll in health insurance coverage under this title for 
     coverage beginning in 2012 if such individual is an employee 
     of a participating employer described in section 3101(a)(4) 
     or is a self-employed individual as defined in section 
     401(c)(1)(B) of the Internal Revenue Code of 1986 and meets 
     the definition of a participating employer in section 
     3101(a)(8). An employer may allow employees who average fewer 
     than 35 hours per week to enroll.
       ``(b) Limitation.--A health insurance issuer may not refuse 
     to provide coverage to any eligible individual under 
     subsection (a) who selects a health benefits plan offered by 
     such issuer under this title.
       ``(c) Type of Enrollment.--An eligible individual may 
     enroll as an individual or as an adult with 1 or more 
     children regardless of whether another adult is present in 
     the enrollee's household or family.
       ``(d) Open Enrollment.--
       ``(1) In general.--The Administrator shall establish an 
     annual open enrollment period during which an employer may 
     elect to become a participating employer and an employee may 
     enroll in a health benefits plan under this title for the 
     following calendar year.
       ``(2) Open enrollment period.--For purposes of this title, 
     the term `open enrollment period' means, with respect to 
     calendar year 2012 and each succeeding calendar year, the 
     period beginning on October 1, 2011, and ending December 1, 
     2011, and each succeeding period beginning October 1 and 
     ending December 1. Coverage in a health benefits plan 
     selected during such an open enrollment period shall begin on 
     January 1 of the calendar year following the selection.
       ``(3) Newly eligible employers and employees.--
     Notwithstanding the open enrollment period provided for under 
     paragraph (2), the Administrator shall establish an 
     enrollment process to enable a newly eligible employer or an 
     employer with an existing health benefits plan whose term is 
     ending to become a participating employer and for an employee 
     of such employer, or a new employee of a participating 
     employer, to enroll in a health benefits plan under this 
     title outside of an open enrollment period subject to 
     2701(f). The Administrator may establish a process for 
     setting the renewal date for the participation of an employer 
     that initially becomes a participating employer outside of 
     the open enrollment period to coincide with a subsequent open 
     enrollment period.
       ``(4) Limitation of changing enrollment.--An employer or 
     employee (as the case may be) may elect to change the health 
     benefits plan that the employee is enrolled in only during an 
     open enrollment period.
       ``(5) Effectiveness of election and change of election.--An 
     election to change a health benefits plan that is made during 
     the open enrollment period under paragraph (2) shall take 
     effect as of the first day of the following calendar year.
       ``(6) Continuation of enrollment.--An employee who has 
     enrolled in a health benefits plan under this title is 
     considered to have been continuously enrolled in that health 
     benefits plan until such time as--
       ``(A) the employer or employee (as the case may be) elects 
     to change health benefits plans; or
       ``(B) the health benefits plan is terminated.
       ``(e) Providing Information To Promote Informed Choice.--
     The Administrator shall compile, produce, and disseminate 
     information to employers, employees, and navigators under 
     section 3102(c)(8) to promote informed choice that shall be 
     made available at least 30 days prior to the beginning of 
     each open enrollment period.
       ``(f) Termination of Employment.--
       ``(1) In general.--With respect to an employee who is 
     enrolled in a health plan through the program under this 
     title and who is terminated or separated from employment, 
     such employee may remain enrolled in such health plan for the 
     period described in paragraph (2) if the employee pays 102 
     percent of the monthly premium for such plan for such period 
     as provided for under paragraph (3).
       ``(2) Period described.--The period described in this 
     paragraph is the longer of--
       ``(A) the period provided for in the COBRA continuation 
     provisions (as such term is defined in section 3001(a)(10)(B) 
     of division B of the American Recovery and Reinvestment Act 
     of 2009) beginning on the date of the termination or 
     separation involved; or
       ``(B) the period permitted under any applicable 
     continuation of coverage provisions of the State in which the 
     employee resides.
       ``(3) Administration.--The Administrator shall develop 
     guidelines for administering the provision of health plan 
     coverage for employees under this subsection. Such guidelines 
     shall address the rating rules for such continuation coverage 
     in the calendar years prior to 2014 and shall provide for the 
     administration of this section in a manner similar to the 
     manner in which the COBRA continuation provisions (as such 
     term is defined in section 3001(a)(10)(B) of division B of 
     the American Recovery and Reinvestment Act of 2009) are 
     administered, including the collection of premiums by the 
     Administrator.
       ``(4) Nonapplication of provisions.--The COBRA continuation 
     provisions (as such term is defined in section 3001(a)(10)(B) 
     of division B of the American Recovery and Reinvestment Act 
     of 2009) shall not apply to an employee to which this 
     subsection applies.
       ``(g) Rule of Construction.--Nothing in this title shall be 
     construed to prohibit a health insurance issuer providing 
     coverage through the program under this title from using the 
     services of a licensed agent or broker.

     ``SEC. 3107. HEALTH COVERAGE AVAILABLE WITHIN THE SMALL 
                   BUSINESS POOL.

       ``(a) Preexisting Condition Exclusions.--Section 2701 shall 
     apply to coverage under this title, except that with respect 
     to such coverage, the reference to `12 months (or 18 months 
     in the case of a late enrollee)' in subsection (a)(2) of each 
     such section shall be deemed to be `6 months'. The period 
     involved shall be reduced by the aggregate of 1 day for each 
     day that the individual was covered under creditable health 
     insurance coverage (as defined for purposes of section 
     2701(c)) immediately preceding the date the individual 
     submitted an application for coverage under this title.
       ``(b) Rates and Premiums; State Laws.--
       ``(1) In general.--Rates charged and premiums paid for a 
     health benefits plan under this title--
       ``(A) shall be determined in accordance with subsection 
     (d);
       ``(B) may be annually adjusted; and
       ``(C) shall be adjusted to cover the administrative costs 
     of the Administrator under this title and the office 
     established under section 3102.
       ``(2) Benefit mandate laws.--With respect to a contract 
     entered into under this title under which a health insurance 
     issuer will offer health benefits plan coverage, State 
     mandated benefit laws in effect in the State in which the 
     plan is offered shall continue to apply, except in the case 
     of a nationwide plan.
       ``(3) Limitation.--Nothing in this subsection shall be 
     construed to preempt any State or local law (including any 
     State grievance, claims, and appeals procedure laws, State 
     provider mandate laws, and State network adequacy laws) 
     except those laws and regulations described in subsection 
     (b)(2), (d)(2)(B), and (d)(5).
       ``(c) Termination and Reenrollment.--If an individual who 
     is enrolled in a health benefits plan under this title 
     voluntarily terminates the enrollment, except in the case of 
     an individual who has lost or changes employment or whose 
     employer is terminated for failure to pay premiums, the 
     individual shall not be eligible for reenrollment until

[[Page S5138]]

     the first open enrollment period following the expiration of 
     6 months after the date of such termination.
       ``(d) Rating Rules and Transitional Application of State 
     Law.--
       ``(1) Years 2012 and 2013.--With respect to calendar years 
     2012 and 2013 (open enrollment period beginning October 1, 
     2011, and October 1, 2012), the following shall apply:
       ``(A) In the case of an employer that elects to participate 
     in the program under this title, the State rating 
     requirements applicable to employers purchasing health 
     insurance coverage in the small group market in the State in 
     which the employer is located shall apply with respect to 
     such coverage, except that premium rates for such coverage 
     shall not vary based on health-status related factors.
       ``(B) State rating requirements shall apply to health 
     insurance coverage purchased in the small group market in the 
     State, except that a State shall be prohibited from allowing 
     premium rates to vary based on health-status related factors.
       ``(2) Subsequent years.--
       ``(A) NAIC recommendations.--
       ``(i) Study.--Beginning in 2010, the Administrator shall 
     contract with the National Association of Insurance 
     Commissioners to conduct a study of the rating requirements 
     utilized in the program under this title and the rating 
     requirements that apply to health insurance purchased in the 
     small group markets in the States, and to develop 
     recommendations concerning rating requirements. Such 
     recommendations shall be submitted to the appropriate 
     committees of Congress during calendar year 2012.
       ``(ii) State law harmonization.--Beginning in calendar year 
     2011, the Administrator shall contract with the National 
     Association of Insurance Commissioners to conduct a study of 
     administrative procedures, including rate and form filing, 
     standards of external review, and standards of internal 
     review, that apply to the program under this title and to 
     health insurance purchased in the small group markets in the 
     States.
       ``(iii) Consultation.--In conducting the study under clause 
     (i), the National Association of Insurance Commissioners 
     shall consult with key stakeholders (including small 
     businesses, self-employed individuals, employees of small 
     businesses, health insurance issuers, healthcare providers, 
     and patient advocates).
       ``(iv) Recommendations.--During calendar year 2012, the 
     recommendations of the National Association of Insurance 
     Commissioners shall be submitted to Congress (in the form of 
     a legislative proposal), and shall concern--

       ``(I) rating requirements for health insurance coverage 
     under this title for calendar year 2014 and subsequent 
     calendar years; and
       ``(II) a maximum permissible variance between State rating 
     requirements and the rating requirements for coverage under 
     this title that will allow State flexibility without causing 
     significant adverse selection for health insurance coverage 
     under this title.

       ``(B) Application of requirements.--If, pursuant to this 
     subsection, an Act is enacted to implement rating 
     requirements pursuant to the recommendations submitted under 
     subparagraph (A), or alternative rating requirements 
     developed by Congress, such rating requirements shall apply 
     to the program under this title beginning in calendar year 
     2014 (open enrollment periods beginning October 1, 2013, and 
     thereafter).
       ``(3) Failure to enact legislation.--If an Act is not 
     enacted as provided for in paragraph (2)(B), the fallback 
     rating rules under paragraph (5) shall apply beginning in 
     calendar year 2014 (open enrollment periods beginning October 
     1, 2013, and thereafter).
       ``(4) Expedited congressional consideration.--
       ``(A) Introduction and committee consideration.--
       ``(i) Introduction.--A legislative proposal submitted to 
     Congress pursuant to paragraph (2) shall be introduced in the 
     House of Representatives by the Speaker, and in the Senate by 
     the majority leader, immediately upon receipt of the language 
     and shall be referred to the appropriate committees of 
     Congress. If the proposal is not introduced in accordance 
     with the preceding sentence, legislation may be introduced in 
     either House of Congress by any member thereof.
       ``(ii) Committee consideration.--Legislation introduced in 
     the House of Representatives and the Senate under clause (i) 
     shall be referred to the appropriate committees of 
     jurisdiction of the House of Representatives and the Senate. 
     Not later than 45 calendar days after the introduction of the 
     legislation or February 15th, 2013, whichever is later, the 
     committee of Congress to which the legislation was referred 
     shall report the legislation or a committee amendment 
     thereto. If the committee has not reported such legislation 
     (or identical legislation) at the end of 45 calendar days 
     after its introduction, or February 15th, 2013, whichever is 
     later, such committee shall be deemed to be discharged from 
     further consideration of such legislation and such 
     legislation shall be placed on the appropriate calendar of 
     the House involved.
       ``(B) Expedited procedure.--
       ``(i) Consideration.--Not later than 15 calendar days after 
     the date on which a committee has been or could have been 
     discharged from consideration of legislation under this 
     paragraph, the Speaker of the House of Representatives, or 
     the Speaker's designee, or the majority leader of the Senate, 
     or the leader's designee, shall move to proceed to the 
     consideration of the committee amendment to the legislation, 
     and if there is no such amendment, to the legislation. It 
     shall also be in order for any member of the House of 
     Representatives or the Senate, respectively, to move to 
     proceed to the consideration of the legislation at any time 
     after the conclusion of such 15-day period. All points of 
     order against the legislation (and against consideration of 
     the legislation) with the exception of points of order under 
     the Congressional Budget Act of 1974 are waived. A motion to 
     proceed to the consideration of the legislation is highly 
     privileged in the House of Representatives and is privileged 
     in the Senate and is not debatable. The motion is not subject 
     to amendment, to a motion to postpone consideration of the 
     legislation, or to a motion to proceed to the consideration 
     of other business. A motion to reconsider the vote by which 
     the motion to proceed is agreed to or not agreed to shall not 
     be in order. If the motion to proceed is agreed to, the House 
     of Representatives or the Senate, as the case may be, shall 
     immediately proceed to consideration of the legislation in 
     accordance with the Standing Rules of the House of 
     Representatives or the Senate, as the case may be, without 
     intervening motion, order, or other business, and the 
     resolution shall remain the unfinished business of the House 
     of Representatives or the Senate, as the case may be, until 
     disposed of, except as provided in clause (iii).
       ``(ii) Consideration by other house.--If, before the 
     passage by one House of the legislation that was introduced 
     in such House, such House receives from the other House 
     legislation as passed by such other House--

       ``(I) the legislation of the other House shall not be 
     referred to a committee and shall immediately displace the 
     legislation that was introduced in the House in receipt of 
     the legislation of the other House; and
       ``(II) the legislation of the other House shall immediately 
     be considered by the receiving House under the same 
     procedures applicable to legislation reported by or 
     discharged from a committee under this paragraph.

       ``Upon disposition of legislation that is received by one 
     House from the other House, it shall no longer be in order to 
     consider the legislation that was introduced in the receiving 
     House.
       ``(iii) Senate vote requirement.--Legislation under this 
     paragraph shall only be approved in the Senate if affirmed by 
     the votes of \3/5\ of the Senators duly chosen and sworn. If 
     legislation in the Senate has not reached final passage 
     within 10 days after the motion to proceed is agreed to 
     (excluding periods in which the Senate is in recess) it shall 
     be in order for the majority leader to file a cloture 
     petition on the legislation or amendments thereto, in 
     accordance with rule XXII of the Standing Rules of the 
     Senate. If such a cloture motion on the legislation fails, it 
     shall be in order for the majority leader to proceed to other 
     business and the legislation shall be returned to or placed 
     on the Senate calendar.
       ``(iv) Consideration in conference.--Immediately upon a 
     final passage of the legislation that results in a 
     disagreement between the two Houses of Congress with respect 
     to the legislation, conferees shall be appointed and a 
     conference convened. Not later than 15 days after the date on 
     which conferees are appointed (excluding periods in which one 
     or both Houses are in recess), the conferees shall file a 
     report with the House of Representatives and the Senate 
     resolving the differences between the Houses on the 
     legislation. Notwithstanding any other rule of the House of 
     Representatives or the Senate, it shall be in order to 
     immediately consider a report of a committee of conference on 
     the legislation filed in accordance with this subclause. 
     Debate in the House of Representatives and the Senate on the 
     conference report shall be limited to 10 hours, equally 
     divided and controlled by the Speaker of the House of 
     Representatives and the minority leader of the House of 
     Representatives or their designees and the majority and 
     minority leaders of the Senate or their designees. A vote on 
     final passage of the conference report shall occur 
     immediately at the conclusion or yielding back of all time 
     for debate on the conference report. The conference report 
     shall be approved in the Senate only if affirmed by the votes 
     of \3/5\ of the Senators duly chosen and sworn.
       ``(C) Rules of the senate and house of representatives.--
     This paragraph is enacted by Congress--
       ``(i) as an exercise of the rulemaking power of the Senate 
     and House of Representatives, respectively, and is deemed to 
     be part of the rules of each House, respectively, but 
     applicable only with respect to the procedure to be followed 
     in that House in the case of legislation under this 
     paragraph, and it supersedes other rules only to the extent 
     that it is inconsistent with such rules; and
       ``(ii) with full recognition of the constitutional right of 
     either House to change the rules (so far as they relate to 
     the procedure of that House) at any time, in the same manner, 
     and to the same extent as in the case of any other rule of 
     that House.
       ``(5) Fallback rating rules.--For purposes of paragraph 
     (3), the fallback rating rules are as follows:
       ``(A) Program.--
       ``(i) Rating rules.--A health insurance issuer that enters 
     into a contract under the program under this title shall 
     determine the amount of premiums to assess for coverage under 
     a health benefits plan based on a community rate that may be 
     annually adjusted only--

[[Page S5139]]

       ``(I) based on the age of covered individuals (subject to 
     clause (iii));
       ``(II) based on the geographic area involved if the 
     adjustment is based on geographical divisions that are not 
     smaller than a metropolitan statistical area and the issuer 
     provides evidence of geographic variation in cost of 
     services;
       ``(III) based on industry (subject to clause (iv));
       ``(IV) based on tobacco use; and
       ``(V) based on whether such coverage is for an individual, 
     2 adults in a household, 1 adult and 1 or more children, or a 
     family.

       ``(ii) Limitation.--Premium rates charged for coverage 
     under the program under this title shall not vary based on 
     health-status related factors, gender, class of business, or 
     claims experience or any other factor not described in clause 
     (i).
       ``(iii) Age adjustments.--

       ``(I) In general.--With respect to clause (i)(I), in making 
     adjustments based on age, the Administrator shall establish 
     not more than 5 age brackets to be used by a health insurance 
     issuer in establishing rates for individuals under the age of 
     65. The rates for any age bracket shall not exceed 300 
     percent of the rate for the lowest age bracket. Age-related 
     premiums may not vary within age brackets.
       ``(II) Ages 65 and older.--With respect to clause (i)(I), a 
     health insurance issuer may develop separate rates for 
     covered individuals who are 65 years of age or older for whom 
     the primary payor for health benefits coverage is the 
     Medicare program under title XVIII of the Social Security 
     Act, for the coverage of health benefits that are not 
     otherwise covered under Medicare.

       ``(iv) Industry adjustment.--With respect to clause 
     (i)(III), in making adjustments based on industry, the rates 
     for any industry shall not exceed 115 percent of the rate for 
     the lowest industry and shall be based on evidence of 
     industry variation in cost of services.
       ``(B) State rating rules.--State rating requirements shall 
     apply to health insurance coverage purchased in the small 
     group market, except that a State shall not permit premium 
     rates to vary based on health-status related factors.
       ``(6) State with less premium variation.--Effective 
     beginning in calendar year 2014, in the case of a State that 
     provides a rating variance with respect to age that is less 
     than the Federal limit established under paragraph (2)(B) or 
     (3) or that provides for some form of community rating, or 
     that provides a rating variance with respect to industry that 
     is less than the Federal limit established under paragraph 
     (2)(B) or (3), or that provides a rating variance with 
     respect to the geographic area involved that is less than the 
     Federal limit established in paragraph (2)(B) or (3), premium 
     rates charged for health insurance coverage under this title 
     in such State with respect to such factor shall reflect the 
     rating requirements of such State.
       ``(7) Employee choice.--
       ``(A) Calendar years 2012 and 2013.--With respect to 
     calendar years 2012 and 2013 (open enrollment periods 
     beginning October 1, 2011, and October 1, 2012), in the case 
     of a State that applies community rating or adjusted 
     community rating where any age bracket does not exceed 300 
     percent of the lowest age bracket, employees of an employer 
     located in that State may elect to enroll in any health plan 
     offered under this title.
       ``(B) Subsequent years.--Beginning in calendar year 2014 
     (open enrollment periods beginning October 1, 2013, and 
     thereafter), employees of an employer that participates in 
     the program under this title may elect to enroll in any 
     health plan offered under this title.
       ``(C) Exception.--In any State or year in which an employee 
     is not able to select a health plan as provided for in 
     subparagraph (A) or (B), the employer shall select the health 
     plan or plans that shall be made available to the employees 
     of such employer.
       ``(8) State approval of rates.--State laws requiring the 
     approval of rates with respect to health insurance shall 
     continue to apply to health insurance coverage under this 
     title in such State unless the State fails to enforce the 
     application of rates that would otherwise apply to health 
     insurance issuers under the program under this title.
       ``(e) Benefits.--
       ``(1) Statement of benefits.--Each contract under this 
     title shall contain a detailed statement of benefits offered 
     and shall include information concerning such maximums, 
     limitations, exclusions, and other definitions of benefits as 
     the Administrator considers necessary or reasonable.
       ``(2) Nationwide plans.--
       ``(A) In general.--In the case of contracts with health 
     insurance issuers that offer a health benefit plan on a 
     nationwide basis, the benefit package shall include benefits 
     established by the Administrator.
       ``(B) Process for establishing benefits for nationwide 
     plans.--The benefits provided for under subparagraph (A) 
     shall be determined as follows:
       ``(i) Not later than 30 days after the date of enactment of 
     this title, the Secretary shall enter into a contract with 
     the Institute of Medicine to develop a minimum set of 
     benefits to be offered by nationwide plans.
       ``(ii) In developing such minimum set of benefits, the 
     Institute of Medicine shall convene public forums to allow 
     input from key stakeholders (including small businesses, 
     self-employed individuals, employees of small businesses, 
     health insurance issuers, insurance regulators, healthcare 
     providers, and patient advocates) and shall consult with the 
     Small Business Health Board.
       ``(iii) The Institute of Medicine shall consider--

       ``(I) the clinical appropriateness and effectiveness of the 
     benefits covered;
       ``(II) the affordability of the benefits covered;
       ``(III) the financial protection of enrollees against high 
     healthcare expenses;
       ``(IV) access to necessary healthcare services, including 
     preventive health services; and
       ``(V) benefits similar to those available in the small 
     group market on the date of enactment of this title.

       ``(iv) The benefits package shall not be discriminatory or 
     be likely to promote or induce adverse selection.
       ``(v) The Administrator shall publish the benefits 
     recommended by the Institute of Medicine for public comment.
       ``(vi) Based on the comments received, the Administrator 
     may make changes only to the extent that the recommendation 
     from the Institute of Medicine is not consistent with the 
     criteria contained in clause (iii) or there is a compelling 
     need for the changes to ensure the effective functioning of 
     the program.
       ``(vii) The Administrator shall submit a report to Congress 
     on the benefits included in the nationwide package.
       ``(C) Changes to benefits.--
       ``(i) In general.--By a vote of a two-thirds majority, the 
     Small Business Health Board may recommend to the 
     Administrator changes to the benefit package for nationwide 
     plans under this paragraph for years subsequent to the first 
     year in which such benefits are in effect.
       ``(ii) Reduction in benefits.--The Administrator may reduce 
     benefits that were previously covered under this paragraph 
     only if--

       ``(I) two-thirds of the Small Business Health Board 
     recommend such change; or
       ``(II) there is a compelling need for the change to prevent 
     a substantial reduction in participation in the program under 
     this title.

       ``(f) Additional Premium for Delayed Enrollment.--
       ``(1) In general.--A self-employed individual who is 
     eligible to participate in the program under this title, who 
     does not reside in a State where a self-employed individual 
     is eligible for coverage in the small group market, and who 
     does not elect to enroll in coverage under such program in 
     the first year in which the self-employed individual is 
     eligible to so enroll, shall be subject to an additional 
     premium for delayed enrollment.
       ``(2) Amount.--The Administrator shall establish the amount 
     of the additional premium under paragraph (1), which shall be 
     the amount determined by the Administrator to be actuarially 
     appropriate, to encourage enrollment, and to reduce adverse 
     selection. The amount of the additional premium shall be 
     calculated by the Administrator based on the number of years 
     specified in paragraph (4).
       ``(3) Payment.--A self-employed individual shall pay the 
     additional premium under this subsection, if any, for a 
     period of time equal to the number of years specified in 
     paragraph (4). After the expiration of such period the 
     additional premium for delayed enrollment shall be 
     terminated.
       ``(4) Years.--The number of years specified in this 
     paragraph is the number of years that the self-employed 
     individual involved was eligible to participate in the 
     program under this title but did not enroll in coverage under 
     such program and did not otherwise have creditable coverage 
     (as defined for purposes of section 2701(c)).
       ``(g) State Enforcement.--
       ``(1) State authority.--With respect to the enforcement of 
     provisions in this title that supersede State law (as 
     described in paragraph (2)), a State may require that health 
     insurance issuers that issue, sell, renew, or offer health 
     insurance coverage in the State in the small group market or 
     through the program under this title, comply with the 
     requirements of this title with respect to such issuers.
       ``(2) Provisions described.--The provisions described in 
     this paragraph shall include the following:
       ``(A) Prohibitions on varying premium rates based on 
     health-status related factors (subsections (d)(1)(A) and (B) 
     of section 3107).
       ``(B) The implementation of rating requirements that shall 
     apply to the program under this title beginning in calendar 
     year 2014 (subsections (d)(2)(B) and (d)(3) of section 3107).
       ``(C) Benefit requirements for nationwide plans available 
     in the program under this title (subsection (e)).
       ``(3) Failure to implement or enforce provisions.--In the 
     case of a determination by the Secretary that a State has 
     failed to substantially enforce a provision (or provisions) 
     described in paragraph (2) with respect to health insurance 
     issuers in the State, the Secretary shall enforce such 
     provision (or provisions).
       ``(4) Secretarial enforcement authority.--The Secretary 
     shall have the same authority in relation to the enforcement 
     of the provisions of this title with respect to issuers of 
     health insurance coverage in a State as the Secretary has 
     under section 2722(b)(2) in relation to the enforcement of 
     the provisions of part A of title XXVII with

[[Page S5140]]

     respect to issuers of health insurance coverage in the small 
     group market in the State.
       ``(h) State Opt Out.--A State may prohibit small employers 
     and self-employed individuals in the State from participating 
     in the program under this title if the Administrator finds 
     that the State--
       ``(1) defines its small group market to include groups of 1 
     (so that self-employed individuals are eligible for coverage 
     in such market);
       ``(2) prohibits the use of health-status related factors 
     and other factors described in subsection (d)(5)(A);
       ``(3) has in effect rating rules that--
       ``(A) in calendar years 2012 and 2013, comply with 
     subsection (d)(5)(A); and
       ``(B) in calendar year 2014 and thereafter, comply with 
     subsection (d)(2)(B) or (d)(3), whichever is in effect for 
     such calendar year;
     except that such rules may impose limits on rating variation 
     in addition to those provided for in such subsection;
       ``(4) maintains a State-wide purchasing pool that provides 
     purchasers in the small group market a choice of health 
     benefits plans, with comparative information provided 
     concerning such plans and the premiums charged for such plans 
     made available through the Internet; and
       ``(5) enacts a law to request an opt out under this 
     subsection.

     ``SEC. 3108. ENCOURAGING PARTICIPATION BY HEALTH INSURANCE 
                   ISSUERS THROUGH ADJUSTMENTS FOR RISK.

       ``(a) Application of Risk Corridors.--
       ``(1) In general.--This section shall only apply to health 
     insurance issuers with respect to health benefits plans 
     offered under this Act during any of calendar years 2012 
     through 2014.
       ``(2) Notification of costs under the plan.--In the case of 
     a health insurance issuer that offers a health benefits plan 
     under this title in any of calendar years 2012 through 2014, 
     the issuer shall notify the Administrator, before such date 
     in the succeeding year as the Administrator specifies, of the 
     total amount of costs incurred in providing benefits under 
     the health benefits plan for the year involved and the 
     portion of such costs that is attributable to administrative 
     expenses.
       ``(3) Allowable costs defined.--For purposes of this 
     section, the term `allowable costs' means, with respect to a 
     health benefits plan offered by a health insurance issuer 
     under this title, for a year, the total amount of costs 
     described in paragraph (2) for the plan and year, reduced by 
     the portion of such costs attributable to administrative 
     expenses incurred in providing the benefits described in such 
     paragraph.
       ``(b) Adjustment of Payment.--
       ``(1) No adjustment if allowable costs within 3 percent of 
     target amount.--If the allowable costs for the health 
     insurance issuer with respect to the health benefits plan 
     involved for a calendar year are at least 97 percent, but do 
     not exceed 103 percent, of the target amount for the plan and 
     year involved, there shall be no payment adjustment under 
     this section for the plan and year.
       ``(2) Increase in payment if allowable costs above 103 
     percent of target amount.--
       ``(A) Costs between 103 and 108 percent of target amount.--
     If the allowable costs for the health insurance issuer with 
     respect to the health benefits plan involved for the year are 
     greater than 103 percent, but not greater than 108 percent, 
     of the target amount for the plan and year, the Administrator 
     shall reimburse the issuer for such excess costs through 
     payment to the issuer of an amount equal to 75 percent of the 
     difference between such allowable costs and 103 percent of 
     such target amount.
       ``(B) Costs above 108 percent of target amount.--If the 
     allowable costs for the health insurance issuer with respect 
     to the health benefits plan involved for the year are greater 
     than 108 percent of the target amount for the plan and year, 
     the Administrator shall reimburse the issuer for such excess 
     costs through payment to the issuer in an amount equal to the 
     sum of--
       ``(i) 3.75 percent of such target amount; and
       ``(ii) 90 percent of the difference between such allowable 
     costs and 108 percent of such target amount.
       ``(3) Reduction in payment if allowable costs below 97 
     percent of target amount.--
       ``(A) Costs between 92 and 97 percent of target amount.--If 
     the allowable costs for the health insurance issuer with 
     respect to the health benefits plan involved for the year are 
     less than 97 percent, but greater than or equal to 92 
     percent, of the target amount for the plan and year, the 
     issuer shall be required to pay into a contingency reserve 
     fund established and maintained by the Administrator, an 
     amount equal to 75 percent of the difference between 97 
     percent of the target amount and such allowable costs.
       ``(B) Costs below 92 percent of target amount.--If the 
     allowable costs for the health insurance issuer with respect 
     to the health benefits plan involved for the year are less 
     than 92 percent of the target amount for the plan and year, 
     the issuer shall be required to pay into the contingency fund 
     established under subparagraph (A), an amount equal to the 
     sum of--
       ``(i) 3.75 percent of such target amount; and
       ``(ii) 90 percent of the difference between 92 percent of 
     such target amount and such allowable costs.
       ``(4) Target amount described.--
       ``(A) In general.--For purposes of this subsection, the 
     term `target amount' means, with respect to a health benefits 
     plan offered by an issuer under this title in any of calendar 
     years 2012 through 2014, an amount equal to--
       ``(i) the total of the monthly premiums estimated by the 
     health insurance issuer and accepted by the Administrator to 
     be paid for enrollees in the plan under this title for the 
     calendar year involved; reduced by
       ``(ii) the amount of administrative expenses that the 
     issuer estimates, and the Administrator accepts, will be 
     incurred by the issuer with respect to the plan for such 
     calendar year.
       ``(B) Submission of target amount.--Not later than December 
     31, 2011, and each December 31 thereafter through calendar 
     year 2013, an issuer shall submit to the Administrator a 
     description of the target amount for such issuer with respect 
     to health benefits plans provided by the issuer under this 
     title.
       ``(c) Disclosure of Information.--
       ``(1) In general.--Each contract under this title shall 
     provide--
       ``(A) that a health insurance issuer offering a health 
     benefits plan under this title shall provide the 
     Administrator with such information as the Administrator 
     determines is necessary to carry out this subsection 
     including the notification of costs under subsection (a)(2) 
     and the target amount under subsection (b)(4)(B); and
       ``(B) that the Administrator has the right to inspect and 
     audit any books and records of the issuer that pertain to the 
     information regarding costs provided to the Administrator 
     under such subsections.
       ``(2) Restriction on use of information.--Information 
     disclosed or obtained pursuant to the provisions of this 
     subsection may be used by the office designated under section 
     3102(a) and its employees and contractors only for the 
     purposes of, and to the extent necessary in, carrying out 
     this section.

     ``SEC. 3109. ADMINISTRATION THROUGH REGIONAL OR OTHER 
                   ADMINISTRATIVE ENTITIES.

       ``(a) In General.--In order to provide for the 
     administration of the benefits under this title with maximum 
     efficiency and convenience for participating employers and 
     healthcare providers and other individuals and entities 
     providing services to such employers, the Administrator--
       ``(1) shall enter into contracts with eligible entities, to 
     the extent appropriate, to perform, on a regional or other 
     basis, activities to receive, disburse, and account for 
     payments of premiums to participating employers by 
     individuals, and for payments by participating employers and 
     employees to health insurance issuers; and
       ``(2) may enter into contracts with eligible entities, to 
     the extent appropriate, to perform, on a regional or other 
     basis, 1 or more of the following:
       ``(A) Collect and maintain all information relating to 
     individuals, families, and employers participating in the 
     program under this title.
       ``(B) Serve as a channel of communication between health 
     insurance issuers, participating employers, and individuals 
     relating to the administration of this title.
       ``(C) Otherwise carry out such activities for the 
     administration of this title, in such manner, as may be 
     provided for in the contract entered into under this section.
       ``(b) Application.--To be eligible to receive a contract 
     under subsection (a), an entity shall prepare and submit to 
     the Administrator an application at such time, in such 
     manner, and containing such information as the Administration 
     may require.
       ``(c) Process.--
       ``(1) Competitive bidding.--All contracts under this 
     section shall be awarded through a competitive bidding 
     process on a biennial basis.
       ``(2) Requirement.--No contract shall be entered into with 
     any entity under this section unless the Administrator finds 
     that such entity will perform its obligations under the 
     contract efficiently and effectively and will meet such 
     requirements as to financial responsibility, legal authority, 
     and other matters as the Administrator finds pertinent.
       ``(3) Publication of standards and criteria.--If the 
     Administrator enters into contracts under subsection (a), the 
     Administrator shall publish in the Federal Register standards 
     and criteria for the efficient and effective performance of 
     contract obligations under this section, and opportunity 
     shall be provided for public comment prior to implementation. 
     In establishing such standards and criteria, the 
     Administrator shall provide for a system to measure an 
     entity's performance of responsibilities.
       ``(4) Term.--Each contract under this section shall be for 
     a term of at least 2 years, and may be made automatically 
     renewable from term to term in the absence of notice by 
     either party of intention to terminate at the end of the 
     current term, except that the Administrator may terminate any 
     such contract at any time (after such reasonable notice and 
     opportunity for hearing to the entity involved as the 
     Administrator may provide in regulations) if the 
     Administrator finds that the entity has failed substantially 
     to carry out the contract or is carrying out the contract in 
     a manner inconsistent with the efficient and effective 
     administration of the program established by this title.
       ``(d) Terms of Contract.--A contract entered into under 
     this section shall include--
       ``(1) a description of the duties of the contracting 
     entity;

[[Page S5141]]

       ``(2) an assurance that the entity will furnish to the 
     Administrator such timely information and reports as the 
     Administrator determines appropriate;
       ``(3) an assurance that the entity will maintain such 
     records and afford such access thereto as the Administrator 
     finds necessary to assure the correctness and verification of 
     the information and reports under paragraph (2) and otherwise 
     to carry out the purposes of this title;
       ``(4) an assurance that the entity shall comply with such 
     confidentiality and privacy protection guidelines and 
     procedures as the Administrator may require;
       ``(5) an assurance that the entity does not have, and will 
     continue to avoid, any conflicts of interest relative to any 
     functions it will perform; and
       ``(6) such other terms and conditions not inconsistent with 
     this section as the Administrator may find necessary or 
     appropriate.

     ``SEC. 3110. PUBLIC EDUCATION CAMPAIGN AND REPORT.

       ``(a) In General.--In carrying out this title, the 
     Administrator shall develop and implement an educational 
     campaign with interagency participation (including at a 
     minimum the Small Business Administration, the Department of 
     Labor, and employees of the office established under section 
     3102 who oversee the provision of information through 
     navigators) to provide information to employers and the 
     general public concerning the health insurance program 
     developed under this title, including the contact information 
     relating to an individual or individuals who will be 
     available to resolve various types of problems with health 
     insurance coverage provided under this title.
       ``(b) Public Education Campaign.--There is authorized to be 
     appropriated to carry out this section, such sums as may be 
     necessary for each of fiscal years 2009 through 2011.
       ``(c) Reports to Congress.--Not later than 1 year and 2 
     years after the implementation of the campaign under 
     subsection (a), the Administrator shall submit to the 
     appropriate committees of Congress a report that describes 
     the activities of the Administrator under subsection (a), 
     including a determination by the Administrator of the 
     percentage of employers with knowledge of the health benefits 
     program under this title.

     ``SEC. 3111. APPROPRIATIONS.

       ``There are authorized to be appropriated to the 
     Administrator such sums as may be necessary in each fiscal 
     year for the development and administration of the program 
     under this title.

     ``SEC. 3112. EFFECTIVE DATE.

       ``This title shall take effect on the date of enactment of 
     this title.''.

     SEC. 3. AMENDMENT TO ERISA.

       Section 514(b)(2) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1144(b)(2)) is amended by 
     adding at the end the following:
       ``(C) Notwithstanding subparagraph (A), the provisions of 
     subsections (d)(1)(B) and (g)(2)(A) of section 3107 of the 
     Public Health Service Act (relating to the prohibition on 
     health-status related rating and the Federal enforcement of 
     such provisions) shall supercede any State law that conflicts 
     with such provisions.''.

     SEC. 4. CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH INSURANCE 
                   EXPENSES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     credits) is amended by inserting after section 45N the 
     following new section:

     ``SEC. 45O. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE CREDIT.

       ``(a) Determination of Credit.--In the case of a qualified 
     small employer, there shall be allowed as a credit against 
     the tax imposed by this chapter for the taxable year an 
     amount equal to the credit amount described in subsection 
     (b).
       ``(b) General Credit Amount.--For purposes of this 
     section--
       ``(1) In general.--The credit amount described in this 
     subsection is the product of--
       ``(A) the amount specified in paragraph (2),
       ``(B) the employer size factor specified in paragraph (3), 
     and
       ``(C) the percentage of year factor specified in paragraph 
     (4).
       ``(2) Applicable amount.--For purposes of paragraph (1)--
       ``(A) In general.--The applicable amount is equal to--
       ``(i) $1,000 for each employee of the employer who receives 
     self-only health insurance coverage through the employer,
       ``(ii) $2,000 for each employee of the employer who 
     receives family health insurance coverage through the 
     employer, and
       ``(iii) $1,500 for each employee of the employer who 
     receives health insurance coverage for 2 adults or 1 adult 
     and 1 or more children through the employer.
       ``(B) Bonus for payment of greater percentage of 
     premiums.--The applicable amount otherwise specified in 
     subparagraph (A) shall be increased by $200 in the case of 
     subparagraph (A)(i), $400 in the case of subparagraph 
     (A)(ii), and $300 in the case of subparagraph (A)(iii), for 
     each additional 10 percent of the qualified employee health 
     insurance expenses exceeding 60 percent which are paid by the 
     qualified small employer.
       ``(3) Employer size factor.--For purposes of paragraph (1), 
     the employer size factor is the percentage determined in 
     accordance with the following table:


----------------------------------------------------------------------------------------------------------------
                              ``If the employer size is:                                   The percentage is:
----------------------------------------------------------------------------------------------------------------
10 or fewer full-time employees                                                        100%
More than 10 but not more than 20 full-time employees                                  80%
More than 20 but not more than 30 full-time employees                                  60%
More than 30 but not more than 40 full-time employees                                  40%
More than 40 but not more than 50 full-time employees                                  20%
More than 50 full-time employees                                                       0%
----------------------------------------------------------------------------------------------------------------

       ``(4) Percentage of year factor.--For purposes of paragraph 
     (1), the percentage of year factor is equal to the ratio of--
       ``(A) the number of months during the taxable year for 
     which the employer paid or incurred qualified employee health 
     insurance expenses, and
       ``(B) 12.
       ``(c) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified small employer.--
       ``(A) In general.--The term `qualified small employer' 
     means any employer (as defined in section 3101(a)(4) of the 
     Public Health Service Act) which--
       ``(i) either--

       ``(I) purchases health insurance coverage for its employees 
     in a small group market in a State which meets the 
     requirements under subparagraph (B), or
       ``(II) with respect to any taxable year beginning after 
     2011, is a participating employer (as defined in section 
     3101(a)(8) of such Act) in the program under title XXX of 
     such Act,

       ``(ii) pays or incurs at least 60 percent of the qualified 
     employee health insurance expenses of such employer or is 
     self-employed, and
       ``(iii) employed an average of 50 or fewer full-time 
     employees during the preceding taxable year or was a self-
     employed individual with either not less than $5,000 in net 
     earnings or not less than $15,000 in gross earnings from 
     self-employment in the preceding taxable year.
       ``(B) State small group market requirements.--A State meets 
     the requirements of this subparagraph if--
       ``(i) during calendar years 2010 and 2011, the State--

       ``(I) defines its small group market to include groups of 
     one (so that self-employed individuals are eligible for 
     coverage in such market),
       ``(II) prohibits the use of health-status related factors 
     and other factors described in section 3107(d)(5)(A) of such 
     Act, and
       ``(III) has in effect rating rules that comply with section 
     3107(d)(5)(A) of such Act (except that such rules may impose 
     limits on rating variation in addition to those provided for 
     in such section),

       ``(ii) during calendar years 2012 and 2013, the State--

       ``(I) meets the requirements under clause (i), and
       ``(II) maintains a State-wide purchasing pool that provides 
     purchasers in the small group market a choice of health 
     benefit plans, with comparative information provided 
     concerning such plans and the premiums charged for such plans 
     made available through the Internet, and

       ``(iii) for calendar years after 2013, the State--

       ``(I) meets the requirements under clauses (i)(I), (i)(II), 
     and (ii)(II), and
       ``(II) has in effect rating rules that comply with 
     paragraph (2)(B) or (3) of section 3107(d) of such Act, 
     whichever is in effect for such calendar year (except that 
     such rules may impose limits on rating variation in addition 
     to those provided for in such section).

       ``(2) Qualified employee health insurance expenses.--
       ``(A) In general.--The term `qualified employee health 
     insurance expenses' means any amount paid by an employer or 
     an employee of such employer for health insurance coverage 
     under such Act to the extent such amount is attributable to 
     coverage--
       ``(i) provided to any employee (as defined in subsection 
     3101(a)(3) of such Act), or
       ``(ii) for the employer, in the case of a self-employed 
     individual.
       ``(B) Exception for amounts paid under salary reduction 
     arrangements.--No amount paid or incurred for health 
     insurance coverage pursuant to a salary reduction arrangement 
     shall be taken into account under subparagraph (A).
       ``(3) Full-time employee.--The term `full-time employee' 
     means, with respect to any period, an employee (as defined in 
     section 3101(a)(3) of such Act) of an employer if the average 
     number of hours worked by such employee in the preceding 
     taxable year for such employer was at least 35 hours per 
     week.

[[Page S5142]]

       ``(d) Inflation Adjustment.--
       ``(1) In general.--For each taxable year after 2010, the 
     dollar amounts specified in subsections (b)(2)(A), (b)(2)(B), 
     and (c)(1)(A)(iii) (after the application of this paragraph) 
     shall be the amounts in effect in the preceding taxable year 
     or, if greater, the product of--
       ``(A) the corresponding dollar amount specified in such 
     subsection, and
       ``(B) the ratio of the index of wage inflation (as 
     determined by the Bureau of Labor Statistics) for August of 
     the preceding calendar year to such index of wage inflation 
     for August of 2009.
       ``(2) Rounding.--If any amount determined under paragraph 
     (1) is not a multiple of $100, such amount shall be rounded 
     to the next lowest multiple of $100.
       ``(e) Application of Certain Rules in Determination of 
     Employer Size.--For purposes of this section--
       ``(1) Application of aggregation rule for employers.--All 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 shall be treated as 1 
     employer.
       ``(2) Employers not in existence in preceding year.--In the 
     case of an employer which was not in existence for the full 
     preceding taxable year, the determination of whether such 
     employer meets the requirements of this section shall be 
     based on the average number of full-time employees that it is 
     reasonably expected such employer will employ on business 
     days in the employer's first full taxable year.
       ``(3) Predecessors.--Any reference in this subsection to an 
     employer shall include a reference to any predecessor of such 
     employer.
       ``(f) Coordination With Advance Payments of Credit.--With 
     respect to any taxable year, the amount which would (but for 
     this subsection) be allowed as a credit to the taxpayer under 
     subsection (a) shall be reduced by the aggregate amount paid 
     on behalf of such taxpayer under section 7527A for months 
     beginning in such taxable year. If the amount determined 
     under this subsection is less than zero, the taxpayer shall 
     owe additional tax in such amount under this chapter.
       ``(g) Credits for Nonprofit Organizations.--Any credit 
     which would be allowable under subsection (a) with respect to 
     a qualified small business if such qualified small business 
     were not exempt from tax under this chapter shall be treated 
     as a credit allowable under this subpart to such qualified 
     small business.''.
       (b) Advance Payments of Credit.--Chapter 77 of the Internal 
     Revenue Code of 1986 is amended by inserting after section 
     7527 the following new section:

     ``SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE 
                   COSTS FOR QUALIFIED SMALL EMPLOYERS.

       ``(a) General Rule.--Not later than December 31, 2009, the 
     Secretary shall establish a program for making monthly 
     payments on behalf of qualified small employers to the 
     program established under title XXX of the Public Health 
     Service Act. The amount of the monthly payment for a 
     qualified small employer shall be one-twelfth of the amount 
     of the credit for the tax year to which the qualified small 
     employer is entitled under section 36. If a monthly payment 
     is made by the Secretary for which the employer is not 
     entitled to a corresponding credit, the employer shall owe 
     additional tax in such amount under this chapter.
       ``(b) Qualified Small Employer.--For purposes of this 
     section, the term `qualified small employer' has the meaning 
     given such term in section 36(c)(1).''.
       (c) Conforming Amendments.--
       (1) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new items:

``Sec. 45O. Small business employee health insurance credit.''.
       (2) The table of sections for chapter 77 of such Code is 
     amended by inserting after the item relating to section 7527 
     the following new item:

``Sec. 7527A. Advance payment of credit for health insurance costs for 
              qualified small employers.''.
       (d) Deductibility.--The payment of premiums by a 
     participating employer under this Act shall be considered to 
     be an ordinary and necessary expense in carrying on a trade 
     or business for purposes of the Internal Revenue Code of 1986 
     and shall be deductible.
       (e) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2009.
                                 ______
                                 
      By Mr. REID:
  S. 981. A bill to support research and public awareness activities 
with respect to inflammatory bowel disease, and for other purposes; to 
the Committee on Health, Education, Labor, and Pensions.
  Mr. REID. Mr. President, I ask unanimous consent that the text of the 
bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 981

       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 ``Inflammatory Bowel Disease 
     Research and Awareness Act''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) Crohn's disease and ulcerative colitis are serious 
     inflammatory diseases of the gastrointestinal tract.
       (2) Crohn's disease may occur in any section of the 
     gastrointestinal tract but is predominately found in the 
     lower part of the small intestine and the large intestine. 
     Ulcerative colitis is characterized by inflammation and 
     ulceration of the innermost lining of the colon. Complete 
     removal of the colon in patients with ulcerative colitis can 
     potentially alleviate and cure symptoms.
       (3) Because Crohn's disease and ulcerative colitis behave 
     similarly, they are collectively known as inflammatory bowel 
     disease. Both diseases present a variety of symptoms, 
     including severe diarrhea, abdominal pain with cramps, fever, 
     arthritic joint pain, inflammation of the eye, and rectal 
     bleeding. There is no known cause of inflammatory bowel 
     disease, or medical cure.
       (4) It is estimated that up to 1,400,000 people in the 
     United States suffer from inflammatory bowel disease, 30 
     percent of whom are diagnosed during their childhood years.
       (5) Children with inflammatory bowel disease miss school 
     activities because of bloody diarrhea and abdominal pain, and 
     many adults who had onset of inflammatory bowel disease as 
     children had delayed puberty and impaired growth and have 
     never reached their full genetic growth potential.
       (6) Inflammatory bowel disease patients are at high risk 
     for developing colorectal cancer.
       (7) The total annual medical costs for inflammatory bowel 
     disease patients are estimated at more than $2,000,000,000.
       (8) The average time from presentation of symptoms to 
     diagnosis in children is 3 years.
       (9) Delayed diagnosis of inflammatory bowel disease 
     frequently results in more-active disease associated with 
     increased morbidity and complications.
       (10) Congress has appropriated $3,480,000 from fiscal year 
     2005 to fiscal year 2009 for epidemiology research on 
     inflammatory bowel disease through the Centers for Disease 
     Control and Prevention.
       (11) The National Institutes of Health National Commission 
     on Digestive Diseases issued comprehensive research goals 
     related to inflammatory bowel disease in its April 2009 
     report to Congress and the American public entitled; 
     ``Opportunities and Challenges in Digestive Diseases 
     Research: Recommendations of the National Commission on 
     Digestive Diseases''.

     SEC. 3. ENHANCING PUBLIC HEALTH ACTIVITIES ON INFLAMMATORY 
                   BOWEL DISEASE AT THE CENTERS FOR DISEASE 
                   CONTROL AND PREVENTION.

       Part B of title III of the Public Health Service Act (42 
     U.S.C. 243 et seq.) is amended by inserting after section 
     320A the following:

     ``SEC. 320B. INFLAMMATORY BOWEL DISEASE EPIDEMIOLOGY PROGRAM.

       ``(a) In General.--The Secretary, acting through the 
     Director of the Centers for Disease Control and Prevention, 
     shall conduct, support and expand existing epidemiology 
     research on inflammatory bowel disease in both pediatric and 
     adult populations.
       ``(b) Grants.--The Secretary, acting through the Director 
     of the Centers for Disease Control and Prevention, may award 
     grants to, and enter into contracts and cooperative 
     agreements with, a patient or medical organization with 
     expertise in conducting inflammatory bowel disease research 
     to develop and administer the epidemiology program.
       ``(c) Rule of Construction.--Nothing in this section shall 
     be construed to limit the authority of the Centers for 
     Disease Control and Prevention to support a pediatric 
     inflammatory bowel disease patient registry.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section, 
     $1,500,000 for each of the fiscal years 2010 through 2014.

     ``SEC. 320C. INCREASING PUBLIC AWARENESS OF INFLAMMATORY 
                   BOWEL DISEASE AND IMPROVING HEALTH PROFESSIONAL 
                   EDUCATION.

       ``(a) In General.--The Secretary, acting through the 
     Director of the Centers for Disease Control and Prevention, 
     shall award grants to eligible entities for the purpose of 
     increasing awareness of inflammatory bowel disease among the 
     general public and health care providers.
       ``(b) Use of Funds.--An eligible entity shall use grant 
     funds under this section to develop educational materials and 
     conduct awareness programs focused on the following subjects:
       ``(1) Crohn's disease and ulcerative colitis, and their 
     symptoms.
       ``(2) Testing required for appropriate diagnosis, and the 
     importance of accurate and early diagnosis.
       ``(3) Key differences between pediatric and adult disease.
       ``(4) Specific physical and psychosocial issues impacting 
     pediatric patients, including stunted growth, malnutrition, 
     delayed puberty, and depression.
       ``(5) Treatment options for both adult and pediatric 
     patients.
       ``(6) The importance of identifying aggressive disease in 
     children at an early stage in order to implement the most 
     effective treatment protocol.
       ``(7) Complications of inflammatory bowel disease and 
     related secondary conditions, including colorectal cancer.
       ``(8) Federal and private information resources for 
     patients and physicians.

[[Page S5143]]

       ``(9) Incidence and prevalence data on pediatric and adult 
     inflammatory bowel disease.
       ``(c) Eligible Entity.--For purposes of this section, the 
     term `eligible entity' means a patient or medical 
     organization with experience in serving adults and children 
     with inflammatory bowel disease.
       ``(d) Report to Congress.--Not later than September 30, 
     2010, the Secretary shall submit to the Committee on Energy 
     and Commerce of the House of Representatives, the Committee 
     on Health, Education, Labor, and Pensions of the Senate, and 
     the Committee on Appropriations of the House of 
     Representatives and the Senate, a report regarding the status 
     of activities carried out under this section.
       ``(e) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there is authorized to be 
     appropriated such sums as may be necessary for each of fiscal 
     years 2010 through 2014.''.

     SEC. 4. EXPANSION OF BIOMEDICAL RESEARCH ON INFLAMMATORY 
                   BOWEL DISEASE.

       (a) Sense of Congress.--It is the sense of Congress that--
       (1) the Secretary of Health and Human Services, acting 
     through the Director of the National Institutes of Health and 
     the Director of the National Institute of Diabetes and 
     Digestive and Kidney Diseases (in this section referred to as 
     the Institute), should aggressively support basic, 
     translational, and clinical research designed to meet the 
     research goals for inflammatory bowel disease included in the 
     National Institutes of Health National Commission on 
     Digestive Diseases report entitled ``Opportunities and 
     Challenges in Digestive Diseases Research: Recommendations of 
     the National Commission on Digestive Diseases'', which shall 
     include--
       (A) establishing an objective basis for determining 
     clinical diagnosis, detailed phenotype, and disease activity 
     in inflammatory bowel disease;
       (B) developing an individualized approach to inflammatory 
     bowel disease risk evaluation and management based on genetic 
     susceptibility;
       (C) modulating the intestinal microflora to prevent or 
     control inflammatory bowel disease;
       (D) effectively modulating the mucosal immune system to 
     prevent or ameliorate inflammatory bowel disease;
       (E) sustaining the health of the mucosal surface;
       (F) promoting regeneration and repair of injury in 
     inflammatory bowel disease;
       (G) providing effective tools for clinical evaluation and 
     intervention in inflammatory bowel disease; and
       (H) ameliorating or preventing adverse effects of 
     inflammatory bowel disease on growth and development in 
     children and adolescents;
       (2) the Institute should support the training of qualified 
     health professionals in biomedical research focused on 
     inflammatory bowel disease, including pediatric 
     investigators; and
       (3) the Institute should continue its strong collaboration 
     with medical and patient organizations concerned with 
     inflammatory bowel disease and seek opportunities to promote 
     research identified in the scientific agendas ``Challenges in 
     Inflammatory Bowel Disease Research'' (Crohn's and Colitis 
     Foundation of America) and ``Chronic Inflammatory Bowel 
     Disease'' (North American Society for Pediatric 
     Gastroenterology, Hepatology and Nutrition).
       (b) Biennial Reports.--As part of the biennial report 
     submitted under section 403 of the Public Health Service Act 
     (42 U.S.C. 283), the Secretary of Health and Human Services 
     shall include information on the status of inflammatory bowel 
     disease research at the National Institutes of Health.
                                 ______
                                 
      By Mr. REID (for Mr. Kennedy (for himself, Mr. Dodd, Ms. Collins, 
        Mr. Harkin, Ms. Snowe, Mr. Durbin, Mr. Lugar, Ms. Mikulski, Mr. 
        Reed, Mrs. Murray, Mr. Reid, Mr. Bingaman, Mr. Sanders, Mr. 
        Brown, Mr. Casey, Mr. Merkley, Mr. Whitehouse, Mr. Leahy, Mr. 
        Lautenberg, Mr. Kerry, Mr. Schumer, Mr. Lieberman, Mrs. 
        Feinstein, Mr. Levin, Mr. Baucus, Mr. Wyden, Mr. Akaka, Mr. 
        Nelson, of Florida, Ms. Landrieu, Mr. Carper, Mrs. Gillibrand, 
        Mr. Bennet, Mr. Begich, Mr. Burris, Mr. Kaufman, Mr. Udall, of 
        New Mexico, Mr. Udall, of Colorado, Mr. Kohl, Mr. Feingold, Ms. 
        Cantwell, and Mrs. Lincoln)):
  S. 982. A bill to protect the public health by providing the Food and 
Drug Administration with certain authority to regulate tobacco 
products; to the Committee on Health, Education, Labor, and Pensions.
  Mr. KENNEDY. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
placed in the Record, as follows:

                                 S. 982

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Family 
     Smoking Prevention and Tobacco Control Act''.
       (b) Table of Contents.--The table of contents of 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. Severability.

         TITLE I--AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

Sec. 101. Amendment of Federal Food, Drug, and Cosmetic Act.
Sec. 102. Final rule.
Sec. 103. Conforming and other amendments to general provisions.
Sec. 104. Study on raising the minimum age to purchase tobacco 
              products.
Sec. 105. Enforcement action plan for advertising and promotion 
              restrictions.

 TITLE II--TOBACCO PRODUCT WARNINGS; CONSTITUENT AND SMOKE CONSTITUENT 
                               DISCLOSURE

Sec. 201. Cigarette label and advertising warnings.
Sec. 202. Authority to revise cigarette warning label statements.
Sec. 203. State regulation of cigarette advertising and promotion.
Sec. 204. Smokeless tobacco labels and advertising warnings.
Sec. 205. Authority to revise smokeless tobacco product warning label 
              statements.
Sec. 206. Tar, nicotine, and other smoke constituent disclosure to the 
              public.

       TITLE III--PREVENTION OF ILLICIT TRADE IN TOBACCO PRODUCTS

Sec. 301. Labeling, recordkeeping, records inspection.
Sec. 302. Study and report.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) The use of tobacco products by the Nation's children is 
     a pediatric disease of considerable 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) It is in the public interest for Congress to enact 
     legislation that provides the Food and Drug Administration 
     with the authority to regulate tobacco products and the 
     advertising and promotion of such products. The benefits to 
     the American people from enacting such legislation would be 
     significant in human and economic terms.
       (13) Tobacco use is the foremost preventable cause of 
     premature death in America. It causes over 400,000 deaths in 
     the United States each year, and approximately 8,600,000 
     Americans have chronic illnesses related to smoking.
       (14) Reducing the use of tobacco by minors by 50 percent 
     would prevent well over 10,000,000 of today's children from 
     becoming regular, daily smokers, saving over 3,000,000 of 
     them from premature death due to tobacco-induced disease. 
     Such a reduction in youth smoking would also result in 
     approximately $75,000,000,000 in savings attributable to 
     reduced health care costs.
       (15) 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

[[Page S5144]]

     youth. Past efforts to oversee these activities have not been 
     successful in adequately preventing such increased use.
       (16) In 2005, the cigarette manufacturers spent more than 
     $13,000,000,000 to attract new users, retain current users, 
     increase current consumption, and generate favorable long-
     term attitudes toward smoking and tobacco use.
       (17) Tobacco product advertising often misleadingly 
     portrays the use of tobacco as socially acceptable and 
     healthful to minors.
       (18) 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.
       (19) 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.
       (20) 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.
       (21) 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.
       (22) Tobacco advertising expands the size of the tobacco 
     market by increasing consumption of tobacco products 
     including tobacco use by young people.
       (23) Children are more influenced by tobacco marketing than 
     adults: more than 80 percent of youth smoke three heavily 
     marketed brands, while only 54 percent of adults, 26 and 
     older, smoke these same brands.
       (24) Tobacco company documents indicate that young people 
     are an important and often crucial segment of the tobacco 
     market. Children, who tend to be more price sensitive than 
     adults, are influenced by advertising and promotion practices 
     that result in drastically reduced cigarette prices.
       (25) Comprehensive advertising restrictions will have a 
     positive effect on the smoking rates of young people.
       (26) 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.
       (27) 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.
       (28) Text only requirements, although not as stringent as a 
     ban, will help reduce underage use of tobacco products while 
     preserving the informational function of advertising.
       (29) It is in the public interest for Congress to adopt 
     legislation to address the public health crisis created by 
     actions of the tobacco industry.
       (30) The final regulations promulgated by the Secretary of 
     Health and Human Services in the August 28, 1996, issue of 
     the Federal Register (61 Fed. Reg. 44615-44618) for inclusion 
     as part 897 of title 21, Code of Federal Regulations, are 
     consistent with the first amendment to the United States 
     Constitution and with the standards set forth in the 
     amendments made by this subtitle for the regulation of 
     tobacco products by the Food and Drug Administration, and the 
     restriction on the sale and distribution of, including access 
     to and the advertising and promotion of, tobacco products 
     contained in such regulations are substantially related to 
     accomplishing the public health goals of this Act.
       (31) The regulations described in paragraph (30) will 
     directly and materially advance the Federal Government's 
     substantial interest in reducing the number of children and 
     adolescents who use cigarettes and smokeless tobacco and in 
     preventing the life-threatening health consequences 
     associated with tobacco use. An overwhelming majority of 
     Americans who use tobacco products begin using such products 
     while they are minors and become addicted to the nicotine in 
     those products before reaching the age of 18. Tobacco 
     advertising and promotion play a crucial role in the decision 
     of these minors to begin using tobacco products. Less 
     restrictive and less comprehensive approaches have not and 
     will not be effective in reducing the problems addressed by 
     such regulations. The reasonable restrictions on the 
     advertising and promotion of tobacco products contained in 
     such regulations will lead to a significant decrease in the 
     number of minors using and becoming addicted to those 
     products.
       (32) The regulations described in paragraph (30) impose no 
     more extensive restrictions on communication by tobacco 
     manufacturers and sellers than are necessary to reduce the 
     number of children and adolescents who use cigarettes and 
     smokeless tobacco and to prevent the life-threatening health 
     consequences associated with tobacco use. Such regulations 
     are narrowly tailored to restrict those advertising and 
     promotional practices which are most likely to be seen or 
     heard by youth and most likely to entice them into tobacco 
     use, while affording tobacco manufacturers and sellers ample 
     opportunity to convey information about their products to 
     adult consumers.
       (33) Tobacco dependence is a chronic disease, one that 
     typically requires repeated interventions to achieve long-
     term or permanent abstinence.
       (34) Because the only known safe alternative to smoking is 
     cessation, interventions should target all smokers to help 
     them quit completely.
       (35) Tobacco products have been used to facilitate and 
     finance criminal activities both domestically and 
     internationally. Illicit trade of tobacco products has been 
     linked to organized crime and terrorist groups.
       (36) It is essential that the Food and Drug Administration 
     review products sold or distributed for use to reduce risks 
     or exposures associated with tobacco products and that it be 
     empowered to review any advertising and labeling for such 
     products. It is also essential that manufacturers, prior to 
     marketing such products, be required to demonstrate that such 
     products will meet a series of rigorous criteria, and will 
     benefit the health of the population as a whole, taking into 
     account both users of tobacco products and persons who do not 
     currently use tobacco products.
       (37) Unless tobacco products that purport to reduce the 
     risks to the public of tobacco use actually reduce such 
     risks, those products can cause substantial harm to the 
     public health to the extent that the individuals, who would 
     otherwise not consume tobacco products or would consume such 
     products less, use tobacco products purporting to reduce 
     risk. Those who use products sold or distributed as modified 
     risk products that do not in fact reduce risk, rather than 
     quitting or reducing their use of tobacco products, have a 
     substantially increased likelihood of suffering disability 
     and premature death. The costs to society of the widespread 
     use of products sold or distributed as modified risk products 
     that do not in fact reduce risk or that increase risk include 
     thousands of unnecessary deaths and injuries and huge costs 
     to our health care system.
       (38) As the National Cancer Institute has found, many 
     smokers mistakenly believe that ``low tar'' and ``light'' 
     cigarettes cause fewer health problems than other cigarettes. 
     As the National Cancer Institute has also found, mistaken 
     beliefs about the health consequences of smoking ``low tar'' 
     and ``light'' cigarettes can reduce the motivation to quit 
     smoking entirely and thereby lead to disease and death.
       (39) Recent studies have demonstrated that there has been 
     no reduction in risk on a population-wide basis from ``low 
     tar'' and ``light'' cigarettes, and such products may 
     actually increase the risk of tobacco use.
       (40) The dangers of products sold or distributed as 
     modified risk tobacco products that do not in fact reduce 
     risk are so high that there is a compelling governmental 
     interest in ensuring that statements about modified risk 
     tobacco products are complete, accurate, and relate to the 
     overall disease risk of the product.
       (41) As the Federal Trade Commission has found, consumers 
     have misinterpreted advertisements in which one product is 
     claimed to be less harmful than a comparable product, even in 
     the presence of disclosures and advisories intended to 
     provide clarification.
       (42) Permitting manufacturers to make unsubstantiated 
     statements concerning modified risk tobacco products, whether 
     express or implied, even if accompanied by disclaimers would 
     be detrimental to the public health.
       (43) The only way to effectively protect the public health 
     from the dangers of unsubstantiated modified risk tobacco 
     products is to empower the Food and Drug Administration to 
     require that products that tobacco manufacturers sold or 
     distributed for risk reduction be reviewed in advance of 
     marketing, and to require that the evidence relied on to 
     support claims be fully verified.
       (44) The Food and Drug Administration is a regulatory 
     agency with the scientific expertise to identify harmful 
     substances in products to which consumers are exposed, to 
     design standards to limit exposure to those substances, to 
     evaluate scientific studies supporting claims about the 
     safety of products, and to evaluate the impact of labels, 
     labeling, and advertising on consumer behavior in order to 
     reduce the risk of harm and promote understanding of the 
     impact of the product on health. In connection with its 
     mandate to promote health and reduce the risk of harm, the 
     Food and Drug Administration routinely makes decisions about 
     whether and how products may be marketed in the United 
     States.
       (45) The Federal Trade Commission was created to protect 
     consumers from unfair or deceptive acts or practices, and to 
     regulate unfair methods of competition. Its focus is on those 
     marketplace practices that deceive or mislead consumers, and 
     those that give some competitors an unfair advantage. Its 
     mission is to regulate activities in the marketplace. Neither 
     the Federal Trade Commission nor any other Federal agency 
     except the Food and Drug Administration possesses the 
     scientific expertise needed to implement effectively all 
     provisions of the Family Smoking Prevention and Tobacco 
     Control Act.
       (46) If manufacturers state or imply in communications 
     directed to consumers through the media or through a label, 
     labeling, or advertising, that a tobacco product is approved 
     or inspected by the Food and Drug Administration or complies 
     with Food and Drug Administration standards, consumers are 
     likely to be confused and misled. Depending upon the 
     particular language used and its context, such a statement 
     could result in consumers being misled into believing that 
     the product is endorsed by the Food and Drug Administration 
     for use or in consumers being misled about the harmfulness of 
     the

[[Page S5145]]

     product because of such regulation, inspection, approval, or 
     compliance.
       (47) In August 2006 a United States district court judge 
     found that the major United States cigarette companies 
     continue to target and market to youth. USA v. Philip Morris, 
     USA, Inc., et al. (Civil Action No. 99-2496 (GK), August 17, 
     2006).
       (48) In August 2006 a United States district court judge 
     found that the major United States cigarette companies 
     dramatically increased their advertising and promotional 
     spending in ways that encourage youth to start smoking 
     subsequent to the signing of the Master Settlement Agreement 
     in 1998. USA v. Philip Morris, USA, Inc., et al. (Civil 
     Action No. 99-2496 (GK), August 17, 2006).
       (49) In August 2006 a United States district court judge 
     found that the major United States cigarette companies have 
     designed their cigarettes to precisely control nicotine 
     delivery levels and provide doses of nicotine sufficient to 
     create and sustain addiction while also concealing much of 
     their nicotine-related research. USA v. Philip Morris, USA, 
     Inc., et al. (Civil Action No. 99-2496 (GK), August 17, 
     2006).

     SEC. 3. PURPOSE.

       The purposes of this Act are--
       (1) to provide authority to 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 as provided for in this Act;
       (2) to ensure that the Food and Drug Administration has the 
     authority to address issues of particular concern to public 
     health officials, especially the use of tobacco by young 
     people and dependence on tobacco;
       (3) to authorize the Food and Drug Administration to set 
     national standards controlling the manufacture of tobacco 
     products and the identity, public disclosure, and amount of 
     ingredients used in such products;
       (4) to provide new and flexible enforcement authority to 
     ensure that there is effective oversight of the tobacco 
     industry's efforts to develop, introduce, and promote less 
     harmful tobacco products;
       (5) to vest the Food and Drug Administration with the 
     authority to regulate the levels of tar, nicotine, and other 
     harmful components of tobacco products;
       (6) in order to ensure that consumers 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;
       (7) 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;
       (8) to impose appropriate regulatory controls on the 
     tobacco industry;
       (9) to promote cessation to reduce disease risk and the 
     social costs associated with tobacco-related diseases; and
       (10) to strengthen legislation against illicit trade in 
     tobacco products.

     SEC. 4. SCOPE AND EFFECT.

       (a) Intended Effect.--Nothing in this Act (or an amendment 
     made by this Act) shall be construed to--
       (1) establish a precedent with regard to any other 
     industry, situation, circumstance, or legal action; or
       (2) affect any action pending in Federal, State, or Tribal 
     court, or any agreement, consent decree, or contract of any 
     kind.
       (b) Agricultural Activities.--The provisions of this Act 
     (or an amendment made by 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.
       (c) Revenue Activities.--The provisions of this Act (or an 
     amendment made by this Act) which authorize the Secretary to 
     take certain actions with regard to tobacco products shall 
     not be construed to affect any authority of the Secretary of 
     the Treasury under chapter 52 of the Internal Revenue Code of 
     1986.

     SEC. 5. SEVERABILITY.

       If any provision of this Act, of the amendments made by 
     this Act, or of the regulations promulgated under this Act 
     (or under such amendments), or the application of any such 
     provision to any person or circumstance is held to be 
     invalid, the remainder of this Act, such amendments and such 
     regulations, and the application of such provisions to any 
     other person or circumstance shall not be affected and shall 
     continue to be enforced to the fullest extent possible.

         TITLE I--AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

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

       (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:
       ``(rr)(1) 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).
       ``(2) The term `tobacco product' does not mean an article 
     that is a drug under subsection (g)(1), a device under 
     subsection (h), or a combination product described in section 
     503(g).
       ``(3) The products described in paragraph (2) shall be 
     subject to chapter V of this Act.
       ``(4) A tobacco product shall not be marketed in 
     combination with any other article or product regulated under 
     this Act (including a drug, biologic, food, cosmetic, medical 
     device, or a dietary supplement).''.
       (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 910 as sections 
     1001 through 1010; and
       (3) by inserting after chapter VIII the following:

                     ``CHAPTER IX--TOBACCO PRODUCTS

     ``SEC. 900. DEFINITIONS.

       ``In this chapter:
       ``(1) Additive.--The term `additive' means any substance 
     the intended use of which results or may reasonably be 
     expected to result, directly or indirectly, in its becoming a 
     component or otherwise affecting the characteristic of any 
     tobacco product (including any substances intended for use as 
     a flavoring or coloring or in producing, manufacturing, 
     packing, processing, preparing, treating, packaging, 
     transporting, or holding), except that such term does not 
     include tobacco or a pesticide chemical residue in or on raw 
     tobacco or a pesticide chemical.
       ``(2) Brand.--The term `brand' means a variety of tobacco 
     product distinguished by the tobacco used, tar content, 
     nicotine content, flavoring used, size, filtration, 
     packaging, logo, registered trademark, brand name, 
     identifiable pattern of colors, or any combination of such 
     attributes.
       ``(3) Cigarette.--The term `cigarette'--
       ``(A) means a product that--
       ``(i) is a tobacco product; and
       ``(ii) meets the definition of the term `cigarette' in 
     section 3(1) of the Federal Cigarette Labeling and 
     Advertising Act; and
       ``(B) 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.
       ``(4) 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 applicable to cigarettes 
     under this chapter shall also apply to cigarette tobacco.
       ``(5) Commerce.--The term `commerce' has the meaning given 
     that term by section 3(2) of the Federal Cigarette Labeling 
     and Advertising Act.
       ``(6) Counterfeit tobacco product.--The term `counterfeit 
     tobacco product' means a tobacco product (or the container or 
     labeling of such a product) that, without authorization, 
     bears the trademark, trade name, or other identifying mark, 
     imprint, or device, or any likeness thereof, of a tobacco 
     product listed in a registration under section 905(i)(1).
       ``(7) Distributor.--The term `distributor' as regards a 
     tobacco product means any person who furthers the 
     distribution of a tobacco product, 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 chapter.
       ``(8) Illicit trade.--The term `illicit trade' means any 
     practice or conduct prohibited by law which relates to 
     production, shipment, receipt, possession, distribution, 
     sale, or purchase of tobacco products including any practice 
     or conduct intended to facilitate such activity.
       ``(9) Indian country.--The term `Indian country' has the 
     meaning given such term in section 1151 of title 18, United 
     States Code.
       ``(10) 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.
       ``(11) Little cigar.--The term `little cigar' means a 
     product that--
       ``(A) is a tobacco product; and
       ``(B) meets the definition of the term `little cigar' in 
     section 3(7) of the Federal Cigarette Labeling and 
     Advertising Act.
       ``(12) 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.
       ``(13) 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 a tobacco 
     product is offered for sale, sold, or otherwise distributed 
     to consumers.
       ``(14) Retailer.--The term `retailer' means any person, 
     government, or entity who sells tobacco products to 
     individuals for personal consumption, or who operates a 
     facility where self-service displays of tobacco products are 
     permitted.
       ``(15) Roll-your-own tobacco.--The term `roll-your-own 
     tobacco' means any tobacco product 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.
       ``(16) Small tobacco product manufacturer.--The term `small 
     tobacco product

[[Page S5146]]

     manufacturer' means a tobacco product manufacturer that 
     employs fewer than 350 employees. For purposes of determining 
     the number of employees of a manufacturer under the preceding 
     sentence, the employees of a manufacturer are deemed to 
     include the employees of each entity that controls, is 
     controlled by, or is under common control with such 
     manufacturer.
       ``(17) Smoke constituent.--The term `smoke constituent' 
     means any chemical or chemical compound in mainstream or 
     sidestream tobacco smoke that either transfers from any 
     component of the cigarette to the smoke or that is formed by 
     the combustion or heating of tobacco, additives, or other 
     component of the tobacco product.
       ``(18) Smokeless tobacco.--The term `smokeless tobacco' 
     means any tobacco product that consists of cut, ground, 
     powdered, or leaf tobacco and that is intended to be placed 
     in the oral or nasal cavity.
       ``(19) State; territory.--The terms `State' and `Territory' 
     shall have the meanings given to such terms in section 201.
       ``(20) Tobacco product manufacturer.--The term `tobacco 
     product manufacturer' means any person, including any 
     repacker or relabeler, who--
       ``(A) manufactures, fabricates, assembles, processes, or 
     labels a tobacco product; or
       ``(B) imports a finished tobacco product for sale or 
     distribution in the United States.
       ``(21) Tobacco warehouse.--
       ``(A) Subject to subparagraphs (B) and (C), the term 
     `tobacco warehouse' includes any person--
       ``(i) who--

       ``(I) removes foreign material from tobacco leaf through 
     nothing other than a mechanical process;
       ``(II) humidifies tobacco leaf with nothing other than 
     potable water in the form of steam or mist; or
       ``(III) de-stems, dries, and packs tobacco leaf for storage 
     and shipment;

       ``(ii) who performs no other actions with respect to 
     tobacco leaf; and
       ``(iii) who provides to any manufacturer to whom the person 
     sells tobacco all information related to the person's actions 
     described in clause (i) that is necessary for compliance with 
     this Act.
       ``(B) The term `tobacco warehouse' excludes any person 
     who--
       ``(i) reconstitutes tobacco leaf;
       ``(ii) is a manufacturer, distributor, or retailer of a 
     tobacco product; or
       ``(iii) applies any chemical, additive, or substance to the 
     tobacco leaf other than potable water in the form of steam or 
     mist.
       ``(C) The definition of the term `tobacco warehouse' in 
     subparagraph (A) shall not apply to the extent to which the 
     Secretary determines, through rulemaking, that regulation 
     under this chapter of the actions described in such 
     subparagraph is appropriate for the protection of the public 
     health.
       ``(22) 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. 901. FDA AUTHORITY OVER TOBACCO PRODUCTS.

       ``(a) In General.--Tobacco products, including modified 
     risk tobacco products for which an order has been issued in 
     accordance with section 911, shall be regulated by the 
     Secretary under this chapter and shall not be subject to the 
     provisions of chapter V.
       ``(b) Applicability.--This chapter shall apply to all 
     cigarettes, cigarette tobacco, roll-your-own tobacco, and 
     smokeless tobacco and to any other tobacco products that the 
     Secretary by regulation deems to be subject to this chapter.
       ``(c) Scope.--
       ``(1) In general.--Nothing in this chapter, or any policy 
     issued or regulation promulgated thereunder, or in sections 
     101(a), 102, or 103 of title I, title II, or title III of the 
     Family Smoking Prevention and Tobacco Control Act, shall be 
     construed to affect, expand, or limit the Secretary's 
     authority over (including the authority to determine whether 
     products may be regulated), or the regulation of, products 
     under this Act that are not tobacco products under chapter V 
     or any other chapter.
       ``(2) Limitation of authority.--
       ``(A) In general.--The provisions of this chapter shall not 
     apply to tobacco leaf that is not in the possession of a 
     manufacturer of tobacco products, 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 to enter 
     onto a farm owned by a producer of tobacco leaf without the 
     written consent of such producer.
       ``(B) Exception.--Notwithstanding subparagraph (A), 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. The exception in this 
     subparagraph shall not apply to a producer of tobacco leaf 
     who grows tobacco under a contract with a tobacco product 
     manufacturer and who is not otherwise engaged in the 
     manufacturing process.
       ``(C) Rule of construction.--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.
       ``(d) Rulemaking Procedures.--Each rulemaking under this 
     chapter shall be in accordance with chapter 5 of title 5, 
     United States Code. This subsection shall not be construed to 
     affect the rulemaking provisions of section 102(a) of the 
     Family Smoking Prevention and Tobacco Control Act.
       ``(e) Center for Tobacco Products.--Not later than 90 days 
     after the date of enactment of the Family Smoking Prevention 
     and Tobacco Control Act, the Secretary shall establish within 
     the Food and Drug Administration the Center for Tobacco 
     Products, which shall report to the Commissioner of Food and 
     Drugs in the same manner as the other agency centers within 
     the Food and Drug Administration. The Center shall be 
     responsible for the implementation of this chapter and 
     related matters assigned by the Commissioner.
       ``(f) Office To Assist Small Tobacco Product 
     Manufacturers.--The Secretary shall establish within the Food 
     and Drug Administration an identifiable office to provide 
     technical and other nonfinancial assistance to small tobacco 
     product manufacturers to assist them in complying with the 
     requirements of this Act.
       ``(g) Consultation Prior to Rulemaking.--Prior to 
     promulgating rules under this chapter, the Secretary shall 
     endeavor to consult with other Federal agencies as 
     appropriate.

     ``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 added poisonous or added 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 package is composed, in whole or in part, of any 
     poisonous or deleterious substance which may render the 
     contents injurious to health;
       ``(4) the manufacturer or importer of the tobacco product 
     fails to pay a user fee assessed to such manufacturer or 
     importer pursuant to section 919 by the date specified in 
     section 919 or by the 30th day after final agency action on a 
     resolution of any dispute as to the amount of such fee;
       ``(5) it is, or purports to be or is represented as, a 
     tobacco product which is subject to a tobacco product 
     standard established under section 907 unless such tobacco 
     product is in all respects in conformity with such standard;
       ``(6)(A) it is required by section 910(a) to have premarket 
     review and does not have an order in effect under section 
     910(c)(1)(A)(i); or
       ``(B) it is in violation of an order under section 
     910(c)(1)(A);
       ``(7) 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
       ``(8) it is in violation of section 911.

     ``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;
       ``(B) an accurate statement of the quantity of the contents 
     in terms of weight, measure, or numerical count;
       ``(C) an accurate statement of the percentage of the 
     tobacco used in the product that is domestically grown 
     tobacco and the percentage that is foreign grown tobacco; and
       ``(D) the statement required under section 920(a),
     except that under subparagraph (B) 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 an establishment not duly 
     registered under section 905(b), 905(c), 905(d), or 905(h), 
     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

[[Page S5147]]

     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 or distributed 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 described in paragraph (4), 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 appropriate 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 tobacco 
     product standard established under section 907, unless it 
     bears such labeling as may be prescribed in such tobacco 
     product standard; or
       ``(10) if there was a failure or refusal--
       ``(A) to comply with any requirement prescribed under 
     section 904 or 908; or
       ``(B) to furnish any material or information required under 
     section 909.
       ``(b) Prior Approval of Label Statements.--The Secretary 
     may, by regulation, require prior approval of statements made 
     on the label of a tobacco product to ensure that such 
     statements do not violate the misbranding provisions of 
     subsection (a) and that such statements comply with other 
     provisions of the Family Smoking Prevention and Tobacco 
     Control Act (including the amendments made by such Act). No 
     regulation issued under this subsection may require prior 
     approval by the Secretary of the content of any 
     advertisement, except for modified risk tobacco products as 
     provided in section 911. No advertisement of a tobacco 
     product published after the date of enactment of the Family 
     Smoking Prevention and Tobacco Control Act shall, with 
     respect to the language of label statements as prescribed 
     under section 4 of the Federal Cigarette Labeling and 
     Advertising Act and section 3 of the Comprehensive Smokeless 
     Tobacco Health Education Act of 1986 or the regulations 
     issued under such sections, be subject to the provisions of 
     sections 12 through 15 of the Federal Trade Commission Act.

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

       ``(a) Requirement.--Each tobacco product manufacturer or 
     importer, or agents thereof, shall submit to the Secretary 
     the following information:
       ``(1) Not later than 6 months after the date of enactment 
     of the Family Smoking Prevention and Tobacco Control Act, a 
     listing of all ingredients, including tobacco, substances, 
     compounds, and additives that are, as of such date, added by 
     the manufacturer to the tobacco, paper, filter, or other part 
     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 in accordance with regulations promulgated by the 
     Secretary in accordance with section 4(e) of the Federal 
     Cigarette Labeling and Advertising Act.
       ``(3) Beginning 3 years after the date of enactment of the 
     Family Smoking Prevention and Tobacco Control Act, a listing 
     of all constituents, including smoke constituents as 
     applicable, identified by the Secretary as harmful or 
     potentially harmful to health in each tobacco product, and as 
     applicable in the smoke of each tobacco product, by brand and 
     by quantity in each brand and subbrand. Effective beginning 3 
     years after such date of enactment, the manufacturer, 
     importer, or agent shall comply with regulations promulgated 
     under section 915 in reporting information under this 
     paragraph, where applicable.
       ``(4) Beginning 6 months after the date of enactment of the 
     Family Smoking Prevention and Tobacco Control Act, all 
     documents developed after such date of enactment that relate 
     to health, toxicological, behavioral, or physiologic effects 
     of current or future tobacco products, their constituents 
     (including smoke constituents), ingredients, components, and 
     additives.
       ``(b) Data Submission.--At the request of the Secretary, 
     each tobacco product manufacturer or importer of tobacco 
     products, or agents thereof, shall submit the following:
       ``(1) Any or 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, 
     toxicological, behavioral, or physiologic effects of tobacco 
     products and their constituents (including smoke 
     constituents), ingredients, components, and additives.
       ``(2) Any or 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.
       ``(3) Any or all documents (including underlying scientific 
     or financial information) relating to marketing research 
     involving the use of tobacco products or marketing practices 
     and the effectiveness of such practices used by tobacco 
     manufacturers and distributors.
     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.
       ``(c) Time for Submission.--
       ``(1) In general.--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 the 
     Family Smoking Prevention and Tobacco Control Act, the 
     manufacturer of such product shall provide the information 
     required under subsection (a).
       ``(2) Disclosure of additive.--If at any time a tobacco 
     product manufacturer adds to its tobacco products a new 
     tobacco additive or increases the quantity of an existing 
     tobacco additive, the manufacturer shall, except as provided 
     in paragraph (3), at least 90 days prior to such action so 
     advise the Secretary in writing.
       ``(3) Disclosure of other actions.--If at any time a 
     tobacco product manufacturer eliminates or decreases an 
     existing additive, or adds or increases an additive that has 
     by regulation been designated by the Secretary as an additive 
     that is not a human or animal carcinogen, or otherwise 
     harmful to health under intended conditions of use, the 
     manufacturer shall within 60 days of such action so advise 
     the Secretary in writing.
       ``(d) Data List.--
       ``(1) In general.--Not later than 3 years after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act, and annually thereafter, the Secretary shall 
     publish in a format that is understandable and not misleading 
     to a lay person, and place on public display (in a manner 
     determined by the Secretary) the list established under 
     subsection (e).
       ``(2) Consumer research.--The Secretary shall conduct 
     periodic consumer research to ensure that the list published 
     under paragraph (1) is not misleading to lay persons. Not 
     later than 5 years after the date of enactment of the Family 
     Smoking Prevention and Tobacco Control Act, the Secretary 
     shall submit to the appropriate committees of Congress a 
     report on the results of such research, together with 
     recommendations on whether such publication should be 
     continued or modified.
       ``(e) Data Collection.--Not later than 24 months after the 
     date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall establish, and 
     periodically revise as appropriate, a list of harmful and 
     potentially harmful constituents, including smoke 
     constituents, to health in each tobacco product by brand and 
     by quantity in each brand and subbrand. The Secretary shall 
     publish a public notice requesting the submission by 
     interested persons of scientific and other information 
     concerning the harmful and potentially harmful constituents 
     in tobacco products and tobacco smoke.

     ``SEC. 905. ANNUAL REGISTRATION.

       ``(a) Definitions.--In this section:
       ``(1) Manufacture, preparation, compounding, or 
     processing.--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.
       ``(2) Name.--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. If enactment of the Family Smoking Prevention and 
     Tobacco Control Act occurs in the second half of the calendar 
     year, the Secretary shall designate a date no later than 6 
     months into the subsequent calendar year by which 
     registration pursuant to this subsection shall occur.
       ``(c) Registration by 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

[[Page S5148]]

     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) 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 registered with the Secretary under this 
     section shall be subject to inspection under section 704 or 
     subsection (h), and every such establishment engaged in the 
     manufacture, compounding, or processing of a tobacco product 
     or tobacco products shall be so inspected by 1 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) Registration by Foreign Establishments.--Any 
     establishment within any foreign country engaged in the 
     manufacture, preparation, compounding, or processing of a 
     tobacco product or tobacco products, shall register under 
     this section under regulations promulgated by the Secretary. 
     Such regulations shall require such establishment to provide 
     the information required by subsection (i) 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), (d), or (h) 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 have 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 tobacco product 
     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 
     tobacco product 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) Consultation with respect to forms.--The Secretary 
     shall consult with the Secretary of the Treasury in 
     developing the forms to be used for registration under this 
     section to minimize the burden on those persons required to 
     register with both the Secretary and the Tax and Trade Bureau 
     of the Department of the Treasury.
       ``(3) 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). 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 
     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 February 15, 2007, 
     shall, at least 90 days prior to making such introduction or 
     delivery, report to the Secretary (in such form and manner as 
     the Secretary shall prescribe)--
       ``(A) the basis for such person's determination that--
       ``(i) 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 February 15, 2007, or to a tobacco 
     product that the Secretary has previously determined, 
     pursuant to subsection (a)(3) of section 910, is 
     substantially equivalent and that is in compliance with the 
     requirements of this Act; or
       ``(ii) the tobacco product is modified within the meaning 
     of paragraph (3), the modifications are to a product that is 
     commercially marketed and in compliance with the requirements 
     of this Act, and all of the modifications are covered by 
     exemptions granted by the Secretary pursuant to paragraph 
     (3); 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-february 15, 2007, 
     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 February 15, 2007, 
     and prior to the date that is 21 months after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act shall be submitted to the Secretary not later 
     than 21 months after such date of enactment.
       ``(3) Exemptions.--
       ``(A) In general.--The Secretary may exempt from the 
     requirements of this subsection relating to the demonstration 
     that a tobacco product is substantially equivalent within the 
     meaning of section 910, tobacco products that are modified by 
     adding or deleting a tobacco additive, or increasing or 
     decreasing the quantity of an existing tobacco additive, if 
     the Secretary determines that--
       ``(i) such modification would be a minor modification of a 
     tobacco product that can be sold under this Act;
       ``(ii) a report under this subsection is not necessary to 
     ensure that permitting the tobacco product to be marketed 
     would be appropriate for protection of the public health; and
       ``(iii) an exemption is otherwise appropriate.
       ``(B) Regulations.--Not later than 15 months after the date 
     of enactment of the Family Smoking Prevention and Tobacco 
     Control Act, the Secretary shall issue regulations to 
     implement this paragraph.

     ``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, section 911, 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, section 911, 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 or other notification under 
     section 907, 908, 909, 910, or 911 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 therefore) 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 therefore.
       ``(c) Limited Confidentiality of Information.--Any 
     information reported to or otherwise obtained by the 
     Secretary or the Secretary's representative under section 
     903, 904,

[[Page S5149]]

     907, 908, 909, 910, 911, 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) In general.--The Secretary may by regulation require 
     restrictions on the sale and distribution of a tobacco 
     product, including restrictions on the access to, and the 
     advertising and promotion of, the tobacco product, if the 
     Secretary determines that such regulation would be 
     appropriate for the protection of the public health. The 
     Secretary may by regulation impose restrictions on the 
     advertising and promotion of a tobacco product consistent 
     with and to full extent permitted by the first amendment to 
     the Constitution. 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 nonusers 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 regulation 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) Label statements.--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) Limitations.--
       ``(A) In general.--No restrictions under paragraph (1) 
     may--
       ``(i) prohibit the sale of any tobacco product in face-to-
     face transactions by a specific category of retail outlets; 
     or
       ``(ii) establish a minimum age of sale of tobacco products 
     to any person older than 18 years of age.
       ``(B) Matchbooks.--For purposes of any regulations issued 
     by the Secretary, matchbooks of conventional size containing 
     not more than 20 paper matches, and which are customarily 
     given away for free with the purchase of tobacco products, 
     shall be considered as adult-written publications which shall 
     be permitted to contain advertising. Notwithstanding the 
     preceding sentence, if the Secretary finds that such 
     treatment of matchbooks is not appropriate for the protection 
     of the public health, the Secretary may determine by 
     regulation that matchbooks shall not be considered adult-
     written publications.
       ``(4) Remote sales.--
       ``(A) In general.--The Secretary shall--
       ``(i) within 18 months after the date of enactment of the 
     Family Smoking Prevention and Tobacco Control Act, promulgate 
     regulations regarding the sale and distribution of tobacco 
     products that occur through means other than a direct, face-
     to-face exchange between a retailer and a consumer in order 
     to prevent the sale and distribution of tobacco products to 
     individuals who have not attained the minimum age established 
     by applicable law for the purchase of such products, 
     including requirements for age verification; and
       ``(ii) within 2 years after such date of enactment, issue 
     regulations to address the promotion and marketing of tobacco 
     products that are sold or distributed through means other 
     than a direct, face-to-face exchange between a retailer and a 
     consumer in order to protect individuals who have not 
     attained the minimum age established by applicable law for 
     the purchase of such products.
       ``(B) Relation to other authority.--Nothing in this 
     paragraph limits the authority of the Secretary to take 
     additional actions under the other paragraphs of this 
     subsection.
       ``(e) Good Manufacturing Practice Requirements.--
       ``(1) Methods, facilities, and controls to conform.--
       ``(A) In general.--In applying manufacturing restrictions 
     to tobacco, the Secretary shall, in accordance with 
     subparagraph (B), prescribe regulations (which may differ 
     based on the type of tobacco product involved) requiring that 
     the methods used in, and the facilities and controls used 
     for, the manufacture, preproduction 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, or hazard analysis 
     and critical control point methodology, as prescribed in such 
     regulations to assure that the public health is protected and 
     that the tobacco product is in compliance with this chapter. 
     Such regulations may provide for the testing of raw tobacco 
     for pesticide chemical residues regardless of whether a 
     tolerance for such chemical residues has been established.
       ``(B) Requirements.--The Secretary shall--
       ``(i) before promulgating any regulation under subparagraph 
     (A), afford the Tobacco Products Scientific 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 Tobacco Products Scientific Advisory 
     Committee a reasonable time to make its recommendation with 
     respect to proposed regulations under subparagraph (A);
       ``(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; and
       ``(v) not require any small tobacco product manufacturer to 
     comply with a regulation under subparagraph (A) for at least 
     4 years following the effective date established by the 
     Secretary for such regulation.
       ``(2) Exemptions; variances.--
       ``(A) Petition.--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) Referral to the tobacco products scientific advisory 
     committee.--The Secretary may refer to the Tobacco Products 
     Scientific Advisory Committee any petition submitted under 
     subparagraph (A). The Tobacco Products Scientific 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 the 
     Tobacco Products Scientific Advisory Committee,
     whichever occurs later, the Secretary shall by order either 
     deny the petition or approve it.
       ``(C) Approval.--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, facilities, and controls prescribed 
     by the requirement are sufficient to assure that the tobacco 
     product will be in compliance with this chapter.
       ``(D) Conditions.--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) Hearing.--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.--Compliance with requirements under this 
     subsection shall not be required before the end of the 3-year 
     period following the date of enactment of the Family Smoking 
     Prevention and Tobacco Control Act.
       ``(f) Research and Development.--The Secretary may enter 
     into contracts for research, testing, and demonstrations 
     respecting tobacco products and may obtain tobacco products 
     for research, testing, and demonstration purposes.

     ``SEC. 907. TOBACCO PRODUCT STANDARDS.

       ``(a) In General.--
       ``(1) Special rules.--
       ``(A) Special rule for cigarettes.--Beginning 3 months 
     after the date of enactment of the Family Smoking Prevention 
     and Tobacco Control Act, a cigarette or any of its component 
     parts (including the tobacco, filter, or paper) shall not 
     contain, as a constituent (including a smoke constituent) or 
     additive, an artificial or natural flavor (other than tobacco 
     or menthol) or an herb or spice, including strawberry, grape, 
     orange, clove, cinnamon, pineapple, vanilla, coconut, 
     licorice, cocoa, chocolate, cherry, or coffee, that is a 
     characterizing flavor of the tobacco product or tobacco 
     smoke. Nothing in this subparagraph shall be construed to 
     limit the

[[Page S5150]]

     Secretary's authority to take action under this section or 
     other sections of this Act applicable to menthol or any 
     artificial or natural flavor, herb, or spice not specified in 
     this subparagraph.
       ``(B) Additional special rule.--Beginning 2 years after the 
     date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, a tobacco product manufacturer shall not 
     use tobacco, including foreign grown tobacco, that contains a 
     pesticide chemical residue that is at a level greater than is 
     specified by any tolerance applicable under Federal law to 
     domestically grown tobacco.
       ``(2) Revision of tobacco product standards.--The Secretary 
     may revise the tobacco product standards in paragraph (1) in 
     accordance with subsection (c).
       ``(3) Tobacco product standards.--
       ``(A) In general.--The Secretary may adopt tobacco product 
     standards in addition to those in paragraph (1) if the 
     Secretary finds that a tobacco product standard is 
     appropriate for the protection of the public health.
       ``(B) Determinations.--
       ``(i) Considerations.--In making a finding described in 
     subparagraph (A), the Secretary shall consider scientific 
     evidence concerning--

       ``(I) the risks and benefits to the population as a whole, 
     including users and nonusers of tobacco products, of the 
     proposed standard;
       ``(II) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products; and
       ``(III) the increased or decreased likelihood that those 
     who do not use tobacco products will start using such 
     products.

       ``(ii) Additional considerations.--In the event that the 
     Secretary makes a determination, set forth in a proposed 
     tobacco product standard in a proposed rule, that it is 
     appropriate for the protection of public health to require 
     the reduction or elimination of an additive, constituent 
     (including a smoke constituent), or other component of a 
     tobacco product because the Secretary has found that the 
     additive, constituent, or other component is or may be 
     harmful, any party objecting to the proposed standard on the 
     ground that the proposed standard will not reduce or 
     eliminate the risk of illness or injury may provide for the 
     Secretary's consideration scientific evidence that 
     demonstrates that the proposed standard will not reduce or 
     eliminate the risk of illness or injury.
       ``(4) Content of tobacco product standards.--A tobacco 
     product standard established under this section for a tobacco 
     product--
       ``(A) shall include provisions that are appropriate for the 
     protection of the public health, including provisions, where 
     appropriate--
       ``(i) for nicotine yields of the product;
       ``(ii) for the reduction or elimination of other 
     constituents, including smoke constituents, or harmful 
     components of the product; or
       ``(iii) relating to any other requirement under 
     subparagraph (B);
       ``(B) shall, where appropriate for the protection of the 
     public health, include--
       ``(i) provisions respecting the construction, components, 
     ingredients, additives, constituents, including smoke 
     constituents, 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 tobacco 
     product 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);
       ``(C) shall, where appropriate, require the use and 
     prescribe the form and content of labeling for the proper use 
     of the tobacco product; and
       ``(D) shall require tobacco products containing foreign-
     grown tobacco to meet the same standards applicable to 
     tobacco products containing domestically grown tobacco.
       ``(5) Periodic reevaluation of tobacco product standards.--
     The Secretary shall provide for periodic evaluation of 
     tobacco product 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 (4)(B) by 
     any person.
       ``(6) Involvement of other agencies; informed persons.--In 
     carrying out duties under this section, the Secretary shall 
     endeavor to--
       ``(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, 
     agricultural, or consumer organizations who in the 
     Secretary's judgment can make a significant contribution.
       ``(b) Considerations by Secretary.--
       ``(1) Technical achievability.--The Secretary shall 
     consider information submitted in connection with a proposed 
     standard regarding the technical achievability of compliance 
     with such standard.
       ``(2) Other considerations.--The Secretary shall consider 
     all other information submitted in connection with a proposed 
     standard, including information concerning the countervailing 
     effects of the tobacco product standard on the health of 
     adolescent tobacco users, adult tobacco users, or nontobacco 
     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.
       ``(c) Proposed Standards.--
       ``(1) In general.--The Secretary shall publish in the 
     Federal Register a notice of proposed rulemaking for the 
     establishment, amendment, or revocation of any tobacco 
     product standard.
       ``(2) Requirements of notice.--A notice of proposed 
     rulemaking for the establishment or amendment of a tobacco 
     product standard for a tobacco product shall--
       ``(A) set forth a finding with supporting justification 
     that the tobacco product standard is appropriate for the 
     protection of the public health;
       ``(B) invite interested persons to submit a draft or 
     proposed tobacco product standard for consideration by the 
     Secretary;
       ``(C) invite interested persons to submit comments on 
     structuring the standard so that it does not advantage 
     foreign-grown tobacco over domestically grown tobacco; and
       ``(D) invite the Secretary of Agriculture to provide any 
     information or analysis which the Secretary of Agriculture 
     believes is relevant to the proposed tobacco product 
     standard.
       ``(3) Finding.--A notice of proposed rulemaking for the 
     revocation of a tobacco product standard shall set forth a 
     finding with supporting justification that the tobacco 
     product standard is no longer appropriate for the protection 
     of the public health.
       ``(4) Comment.--The Secretary shall provide for a comment 
     period of not less than 60 days.
       ``(d) Promulgation.--
       ``(1) In general.--After the expiration of the period for 
     comment on a notice of proposed rulemaking published under 
     subsection (c) respecting a tobacco product standard and 
     after consideration of comments submitted under subsections 
     (b) and (c) and any report from the Tobacco Products 
     Scientific Advisory Committee, the Secretary shall--
       ``(A) if the Secretary determines that the standard would 
     be appropriate for the protection of the public health, 
     promulgate a regulation establishing a tobacco product 
     standard and publish in the Federal Register findings on the 
     matters referred to in subsection (c); or
       ``(B) publish a notice terminating the proceeding for the 
     development of the standard together with the reasons for 
     such termination.
       ``(2) Effective date.--A regulation establishing a tobacco 
     product standard shall set forth the date or dates upon which 
     the standard shall take effect, but no such regulation may 
     take effect before 1 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. In establishing such effective date or dates, the 
     Secretary shall consider information submitted in connection 
     with a proposed product standard by interested parties, 
     including manufacturers and tobacco growers, regarding the 
     technical achievability of compliance with the standard, and 
     including information concerning the existence of patents 
     that make it impossible to comply in the timeframe envisioned 
     in the proposed standard. If the Secretary determines, based 
     on the Secretary's evaluation of submitted comments, that a 
     product standard can be met only by manufacturers requiring 
     substantial changes to the methods of farming the 
     domestically grown tobacco used by the manufacturer, the 
     effective date of that product standard shall be not less 
     than 2 years after the date of publication of the final 
     regulation establishing the standard.
       ``(3) Limitation on power granted to the food and drug 
     administration.--Because of the importance of a decision of 
     the Secretary to issue a regulation--
       ``(A) banning all cigarettes, all smokeless tobacco 
     products, all little cigars, all cigars other than little 
     cigars, all pipe tobacco, or all roll-your-own tobacco 
     products; or
       ``(B) requiring the reduction of nicotine yields of a 
     tobacco product to zero,
     the Secretary is prohibited from taking such actions under 
     this Act.
       ``(4) Amendment; revocation.--
       ``(A) Authority.--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 subsection (c) and paragraph (2), amend or revoke a 
     tobacco product standard.

[[Page S5151]]

       ``(B) Effective date.--The Secretary may declare a proposed 
     amendment of a tobacco product 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) Referral to advisory committee.--
       ``(A) In general.--The Secretary may refer a proposed 
     regulation for the establishment, amendment, or revocation of 
     a tobacco product standard to the Tobacco Products Scientific 
     Advisory Committee for a report and recommendation with 
     respect to any matter involved in the proposed regulation 
     which requires the exercise of scientific judgment.
       ``(B) Initiation of referral.--The Secretary may make a 
     referral under this paragraph--
       ``(i) on the Secretary's own initiative; or
       ``(ii) upon the request of an interested person that--

       ``(I) demonstrates good cause for the referral; and
       ``(II) is made before the expiration of the period for 
     submission of comments on the proposed regulation.

       ``(C) Provision of data.--If a proposed regulation is 
     referred under this paragraph to the Tobacco Products 
     Scientific Advisory Committee, the Secretary shall provide 
     the Advisory Committee with the data and information on which 
     such proposed regulation is based.
       ``(D) Report and recommendation.--The Tobacco Products 
     Scientific Advisory Committee shall, within 60 days after the 
     referral of a proposed regulation under this paragraph 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.
       ``(E) Public availability.--The Secretary shall make a copy 
     of each report and recommendation under subparagraph (D) 
     publicly available.
       ``(e) Menthol Cigarettes.--
       ``(1) Referral; considerations.--Immediately upon the 
     establishment of the Tobacco Products Scientific Advisory 
     Committee under section 917(a), the Secretary shall refer to 
     the Committee for report and recommendation, under section 
     917(c)(4), the issue of the impact of the use of menthol in 
     cigarettes on the public health, including such use among 
     children, African Americans, Hispanics, and other racial and 
     ethnic minorities. In its review, the Tobacco Products 
     Scientific Advisory Committee shall address the 
     considerations listed in subsections (a)(3)(B)(i) and (b).
       ``(2) Report and recommendation.--Not later than 1 year 
     after its establishment, the Tobacco Product Scientific 
     Advisory Committee shall submit to the Secretary the report 
     and recommendations required pursuant to paragraph (1).
       ``(3) Rule of construction.--Nothing in this subsection 
     shall be construed to limit the Secretary's authority to take 
     action under this section or other sections of this Act 
     applicable to menthol.

     ``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 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) In general.--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) Notice.--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).

     ``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) 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) In general.--Except as provided in paragraph (2), 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) Exception.--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).

[[Page S5152]]

     ``SEC. 910. APPLICATION FOR REVIEW OF CERTAIN TOBACCO 
                   PRODUCTS.

       ``(a) In General.--
       ``(1) New tobacco product defined.--For purposes of this 
     section the term `new tobacco product' means--
       ``(A) any tobacco product (including those products in test 
     markets) that was not commercially marketed in the United 
     States as of February 15, 2007; or
       ``(B) any modification (including a change in design, any 
     component, any part, or any constituent, including a smoke 
     constituent, or in the content, delivery or form of nicotine, 
     or any other additive or ingredient) of a tobacco product 
     where the modified product was commercially marketed in the 
     United States after February 15, 2007.
       ``(2) Premarket review required.--
       ``(A) New products.--An order under subsection (c)(1)(A)(i) 
     for a new tobacco product is required unless--
       ``(i) the manufacturer has submitted a report under section 
     905(j); and the Secretary has issued an order that the 
     tobacco product--

       ``(I) is substantially equivalent to a tobacco product 
     commercially marketed (other than for test marketing) in the 
     United States as of February 15, 2007; and
       ``(II) is in compliance with the requirements of this Act; 
     or

       ``(ii) the tobacco product is exempt from the requirements 
     of section 905(j) pursuant to a regulation issued under 
     section 905(j)(3).
       ``(B) Application to certain post-february 15, 2007, 
     products.--Subparagraph (A) shall not apply to a tobacco 
     product--
       ``(i) that was first introduced or delivered for 
     introduction into interstate commerce for commercial 
     distribution in the United States after February 15, 2007, 
     and prior to the date that is 21 months after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act; and
       ``(ii) for which a report was submitted under section 
     905(j) within such 21-month period,

     except that subparagraph (A) shall apply to the tobacco 
     product if the Secretary issues an order that the tobacco 
     product is not substantially equivalent.
       ``(3) Substantially equivalent defined.--
       ``(A) In general.--In this section and section 905(j), the 
     term `substantially equivalent' or `substantial equivalence' 
     means, 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) Characteristics.--In subparagraph (A), the term 
     `characteristics' means the materials, ingredients, design, 
     composition, heating source, or other features of a tobacco 
     product.
       ``(C) Limitation.--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.
       ``(4) Health information.--
       ``(A) Summary.--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) Required information.--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 under this section 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, 
     additives, 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 tobacco product 
     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 tobacco product 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;
       ``(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) Referral to tobacco products scientific 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) may, upon the request of an applicant,
     refer such application to the Tobacco Products Scientific 
     Advisory Committee for reference and for submission (within 
     such period as the Secretary may establish) of a report and 
     recommendation respecting the application, together with all 
     underlying data and the reasons or basis for the 
     recommendation.
       ``(c) Action on Application.--
       ``(1) Deadline.--
       ``(A) In general.--As promptly as possible, but in no event 
     later than 180 days after the receipt of an application under 
     subsection (b), the Secretary, after considering the report 
     and recommendation submitted under subsection (b)(2), shall--
       ``(i) issue an order that the new product may be introduced 
     or delivered for introduction into interstate commerce if the 
     Secretary finds that none of the grounds specified in 
     paragraph (2) of this subsection applies; or
       ``(ii) issue an order that the new product may not be 
     introduced or delivered for introduction into interstate 
     commerce if the Secretary finds (and sets forth the basis for 
     such finding as part of or accompanying such denial) that 1 
     or more grounds for denial specified in paragraph (2) of this 
     subsection apply.
       ``(B) Restrictions on sale and distribution.--An order 
     under subparagraph (A)(i) may require 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 application.--The Secretary shall deny an 
     application submitted under subsection (b) 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 tobacco product standard in effect under 
     section 907, 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 remove such application from deniable 
     form (which measures may include further research by the 
     applicant in accordance with 1 or more protocols prescribed 
     by the Secretary).
       ``(4) Basis for finding.--For purposes of this section, the 
     finding as to whether the marketing of a tobacco product for 
     which an application has been submitted 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 nonusers 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) Investigations.--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 1 or more 
     clinical investigations by experts qualified by training and 
     experience to evaluate the tobacco product.
       ``(B) Other evidence.--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 the 
     Tobacco Products Scientific Advisory Committee, and after due 
     notice and opportunity for informal hearing for a tobacco 
     product for which an order was issued under subsection 
     (c)(1)(A)(i), issue an order withdrawing the order 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;

[[Page S5153]]

       ``(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 
     reviewed, 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 reviewed, 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 such order was issued, that such tobacco product is not 
     shown to conform in all respects to a tobacco product 
     standard which is in effect under section 907, compliance 
     with which was a condition to the issuance of an order 
     relating to 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 an order issued 
     pursuant to subsection (c)(1)(A)(i) may, by petition filed on 
     or before the 30th day after the date upon which such holder 
     receives notice of such withdrawal, obtain review thereof in 
     accordance with section 912.
       ``(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 order 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 
     authority of the manufacturer to market the product. 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.
       ``(f) Records.--
       ``(1) Additional information.--In the case of any tobacco 
     product for which an order issued pursuant to subsection 
     (c)(1)(A)(i) for an application filed under subsection (b) is 
     in effect, the applicant shall establish and maintain such 
     records, and make such reports to the Secretary, as the 
     Secretary may by regulation, or by order with respect to such 
     application, prescribe on the basis of a finding that such 
     records and reports are necessary in order to enable the 
     Secretary to determine, or facilitate a determination of, 
     whether there is or may be grounds for withdrawing or 
     temporarily suspending such order.
       ``(2) Access to records.--Each person required under this 
     section to maintain records, and each person in charge of 
     custody thereof, shall, upon request of an officer or 
     employee designated by the Secretary, permit such officer or 
     employee at all reasonable times to have access to and copy 
     and verify such records.
       ``(g) Investigational Tobacco Product Exemption for 
     Investigational Use.--The Secretary may exempt tobacco 
     products intended for investigational use from the provisions 
     of this chapter under such conditions as the Secretary may by 
     regulation prescribe.

     ``SEC. 911. MODIFIED RISK TOBACCO PRODUCTS.

       ``(a) In General.--No person may introduce or deliver for 
     introduction into interstate commerce any modified risk 
     tobacco product unless an order issued pursuant to subsection 
     (g) is effective with respect to such product.
       ``(b) Definitions.--In this section:
       ``(1) Modified risk tobacco product.--The term `modified 
     risk tobacco product' means any tobacco product that is sold 
     or distributed for use to reduce harm or the risk of tobacco-
     related disease associated with commercially marketed tobacco 
     products.
       ``(2) Sold or distributed.--
       ``(A) In general.--With respect to a tobacco product, the 
     term `sold or distributed for use to reduce harm or the risk 
     of tobacco-related disease associated with commercially 
     marketed tobacco products' means a tobacco product--
       ``(i) the label, labeling, or advertising of which 
     represents explicitly or implicitly that--

       ``(I) the tobacco product presents a lower risk of tobacco-
     related disease or is less harmful than one or more other 
     commercially marketed tobacco products;
       ``(II) the tobacco product or its smoke contains a reduced 
     level of a substance or presents a reduced exposure to a 
     substance; or
       ``(III) the tobacco product or its smoke does not contain 
     or is free of a substance;

       ``(ii) the label, labeling, or advertising of which uses 
     the descriptors `light', `mild', or `low' or similar 
     descriptors; or
       ``(iii) the tobacco product manufacturer of which has taken 
     any action directed to consumers through the media or 
     otherwise, other than by means of the tobacco product's 
     label, labeling, or advertising, after the date of enactment 
     of the Family Smoking Prevention and Tobacco Control Act, 
     respecting the product that would be reasonably expected to 
     result in consumers believing that the tobacco product or its 
     smoke may present a lower risk of disease or is less harmful 
     than one or more commercially marketed tobacco products, or 
     presents a reduced exposure to, or does not contain or is 
     free of, a substance or substances.
       ``(B) Limitation.--No tobacco product shall be considered 
     to be `sold or distributed for use to reduce harm or the risk 
     of tobacco-related disease associated with commercially 
     marketed tobacco products', except as described in 
     subparagraph (A).
       ``(C) Smokeless tobacco product.--No smokeless tobacco 
     product shall be considered to be `sold or distributed for 
     use to reduce harm or the risk of tobacco-related disease 
     associated with commercially marketed tobacco products' 
     solely because its label, labeling, or advertising uses the 
     following phrases to describe such product and its use: 
     `smokeless tobacco', `smokeless tobacco product', `not 
     consumed by smoking', `does not produce smoke', `smokefree', 
     `smoke-free', `without smoke', `no smoke', or `not smoke'.
       ``(3) Effective date.--The provisions of paragraph 
     (2)(A)(ii) shall take effect 12 months after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act for those products whose label, labeling, or 
     advertising contains the terms described in such paragraph on 
     such date of enactment. The effective date shall be with 
     respect to the date of manufacture, provided that, in any 
     case, beginning 30 days after such effective date, a 
     manufacturer shall not introduce into the domestic commerce 
     of the United States any product, irrespective of the date of 
     manufacture, that is not in conformance with paragraph 
     (2)(A)(ii).
       ``(c) Tobacco Dependence Products.--A product that is 
     intended to be used for the treatment of tobacco dependence, 
     including smoking cessation, is not a modified risk tobacco 
     product under this section if it has been approved as a drug 
     or device by the Food and Drug Administration and is subject 
     to the requirements of chapter V.
       ``(d) Filing.--Any person may file with the Secretary an 
     application for a modified risk tobacco product. Such 
     application shall include--
       ``(1) a description of the proposed product and any 
     proposed advertising and labeling;
       ``(2) the conditions for using the product;
       ``(3) the formulation of the product;
       ``(4) sample product labels and labeling;
       ``(5) all documents (including underlying scientific 
     information) relating to research findings conducted, 
     supported, or possessed by the tobacco product manufacturer 
     relating to the effect of the product on tobacco-related 
     diseases and health-related conditions, including information 
     both favorable and unfavorable to the ability of the product 
     to reduce risk or exposure and relating to human health;
       ``(6) data and information on how consumers actually use 
     the tobacco product; and
       ``(7) such other information as the Secretary may require.
       ``(e) Public Availability.--The Secretary shall make the 
     application described in subsection (d) publicly available 
     (except matters in the application which are trade secrets or 
     otherwise confidential, commercial information) and shall 
     request comments by interested persons on the information 
     contained in the application and on the label, labeling, and 
     advertising accompanying such application.
       ``(f) Advisory Committee.--
       ``(1) In general.--The Secretary shall refer to the Tobacco 
     Products Scientific Advisory Committee any application 
     submitted under this section.
       ``(2) Recommendations.--Not later than 60 days after the 
     date an application is referred to the Tobacco Products 
     Scientific Advisory Committee under paragraph (1), the 
     Advisory Committee shall report its recommendations on the 
     application to the Secretary.
       ``(g) Marketing.--
       ``(1) Modified risk products.--Except as provided in 
     paragraph (2), the Secretary shall, with respect to an 
     application submitted under this section, issue an order that 
     a modified risk product may be commercially marketed only if 
     the Secretary determines that the applicant has demonstrated 
     that such product, as it is actually used by consumers, 
     will--
       ``(A) significantly reduce harm and the risk of tobacco-
     related disease to individual tobacco users; and
       ``(B) benefit the health of the population as a whole 
     taking into account both users of tobacco products and 
     persons who do not currently use tobacco products.
       ``(2) Special rule for certain products.--

[[Page S5154]]

       ``(A) In general.--The Secretary may issue an order that a 
     tobacco product may be introduced or delivered for 
     introduction into interstate commerce, pursuant to an 
     application under this section, with respect to a tobacco 
     product that may not be commercially marketed under paragraph 
     (1) if the Secretary makes the findings required under this 
     paragraph and determines that the applicant has demonstrated 
     that--
       ``(i) such order would be appropriate to promote the public 
     health;
       ``(ii) any aspect of the label, labeling, and advertising 
     for such product that would cause the tobacco product to be a 
     modified risk tobacco product under subsection (b) is limited 
     to an explicit or implicit representation that such tobacco 
     product or its smoke does not contain or is free of a 
     substance or contains a reduced level of a substance, or 
     presents a reduced exposure to a substance in tobacco smoke;
       ``(iii) scientific evidence is not available and, using the 
     best available scientific methods, cannot be made available 
     without conducting long-term epidemiological studies for an 
     application to meet the standards set forth in paragraph (1); 
     and
       ``(iv) the scientific evidence that is available without 
     conducting long-term epidemiological studies demonstrates 
     that a measurable and substantial reduction in morbidity or 
     mortality among individual tobacco users is reasonably likely 
     in subsequent studies.
       ``(B) Additional findings required.--To issue an order 
     under subparagraph (A) the Secretary must also find that the 
     applicant has demonstrated that--
       ``(i) the magnitude of the overall reductions in exposure 
     to the substance or substances which are the subject of the 
     application is substantial, such substance or substances are 
     harmful, and the product as actually used exposes consumers 
     to the specified reduced level of the substance or 
     substances;
       ``(ii) the product as actually used by consumers will not 
     expose them to higher levels of other harmful substances 
     compared to the similar types of tobacco products then on the 
     market unless such increases are minimal and the reasonably 
     likely overall impact of use of the product remains a 
     substantial and measurable reduction in overall morbidity and 
     mortality among individual tobacco users;
       ``(iii) testing of actual consumer perception shows that, 
     as the applicant proposes to label and market the product, 
     consumers will not be misled into believing that the 
     product--

       ``(I) is or has been demonstrated to be less harmful; or
       ``(II) presents or has been demonstrated to present less of 
     a risk of disease than 1 or more other commercially marketed 
     tobacco products; and

       ``(iv) issuance of an order with respect to the application 
     is expected to benefit the health of the population as a 
     whole taking into account both users of tobacco products and 
     persons who do not currently use tobacco products.
       ``(C) Conditions of marketing.--
       ``(i) In general.--Applications subject to an order under 
     this paragraph shall be limited to a term of not more than 5 
     years, but may be renewed upon a finding by the Secretary 
     that the requirements of this paragraph continue to be 
     satisfied based on the filing of a new application.
       ``(ii) Agreements by applicant.--An order under this 
     paragraph shall be conditioned on the applicant's agreement 
     to conduct postmarket surveillance and studies and to submit 
     to the Secretary the results of such surveillance and studies 
     to determine the impact of the order on consumer perception, 
     behavior, and health and to enable the Secretary to review 
     the accuracy of the determinations upon which the order was 
     based in accordance with a protocol approved by the 
     Secretary.
       ``(iii) Annual submission.--The results of such postmarket 
     surveillance and studies described in clause (ii) shall be 
     submitted annually.
       ``(3) Basis.--The determinations under paragraphs (1) and 
     (2) shall be based on--
       ``(A) the scientific evidence submitted by the applicant; 
     and
       ``(B) scientific evidence and other information that is 
     made available to the Secretary.
       ``(4) Benefit to health of individuals and of population as 
     a whole.--In making the determinations under paragraphs (1) 
     and (2), the Secretary shall take into account--
       ``(A) the relative health risks to individuals of the 
     tobacco product that is the subject of the application;
       ``(B) the increased or decreased likelihood that existing 
     users of tobacco products who would otherwise stop using such 
     products will switch to the tobacco product that is the 
     subject of the application;
       ``(C) the increased or decreased likelihood that persons 
     who do not use tobacco products will start using the tobacco 
     product that is the subject of the application;
       ``(D) the risks and benefits to persons from the use of the 
     tobacco product that is the subject of the application as 
     compared to the use of products for smoking cessation 
     approved under chapter V to treat nicotine dependence; and
       ``(E) comments, data, and information submitted by 
     interested persons.
       ``(h) Additional Conditions for Marketing.--
       ``(1) Modified risk products.--The Secretary shall require 
     for the marketing of a product under this section that any 
     advertising or labeling concerning modified risk products 
     enable the public to comprehend the information concerning 
     modified risk and to understand the relative significance of 
     such information in the context of total health and in 
     relation to all of the diseases and health-related conditions 
     associated with the use of tobacco products.
       ``(2) Comparative claims.--
       ``(A) In general.--The Secretary may require for the 
     marketing of a product under this subsection that a claim 
     comparing a tobacco product to 1 or more other commercially 
     marketed tobacco products shall compare the tobacco product 
     to a commercially marketed tobacco product that is 
     representative of that type of tobacco product on the market 
     (for example the average value of the top 3 brands of an 
     established regular tobacco product).
       ``(B) Quantitative comparisons.--The Secretary may also 
     require, for purposes of subparagraph (A), that the percent 
     (or fraction) of change and identity of the reference tobacco 
     product and a quantitative comparison of the amount of the 
     substance claimed to be reduced shall be stated in immediate 
     proximity to the most prominent claim.
       ``(3) Label disclosure.--
       ``(A) In general.--The Secretary may require the disclosure 
     on the label of other substances in the tobacco product, or 
     substances that may be produced by the consumption of that 
     tobacco product, that may affect a disease or health-related 
     condition or may increase the risk of other diseases or 
     health-related conditions associated with the use of tobacco 
     products.
       ``(B) Conditions of use.--If the conditions of use of the 
     tobacco product may affect the risk of the product to human 
     health, the Secretary may require the labeling of conditions 
     of use.
       ``(4) Time.--An order issued under subsection (g)(1) shall 
     be effective for a specified period of time.
       ``(5) Advertising.--The Secretary may require, with respect 
     to a product for which an applicant obtained an order under 
     subsection (g)(1), that the product comply with requirements 
     relating to advertising and promotion of the tobacco product.
       ``(i) Postmarket Surveillance and Studies.--
       ``(1) In general.--The Secretary shall require, with 
     respect to a product for which an applicant obtained an order 
     under subsection (g)(1), that the applicant conduct 
     postmarket surveillance and studies for such a tobacco 
     product to determine the impact of the order issuance on 
     consumer perception, behavior, and health, to enable the 
     Secretary to review the accuracy of the determinations upon 
     which the order was based, and to provide information that 
     the Secretary determines is otherwise necessary regarding the 
     use or health risks involving the tobacco product. The 
     results of postmarket surveillance and studies shall be 
     submitted to the Secretary on an annual basis.
       ``(2) Surveillance protocol.--Each applicant required to 
     conduct a surveillance of a tobacco product under paragraph 
     (1) shall, within 30 days after receiving notice that the 
     applicant 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 the data or other information designated by the Secretary 
     as necessary to protect the public health.
       ``(j) Withdrawal of Authorization.--The Secretary, after an 
     opportunity for an informal hearing, shall withdraw an order 
     under subsection (g) if the Secretary determines that--
       ``(1) the applicant, based on new information, can no 
     longer make the demonstrations required under subsection (g), 
     or the Secretary can no longer make the determinations 
     required under subsection (g);
       ``(2) the application failed to include material 
     information or included any untrue statement of material 
     fact;
       ``(3) any explicit or implicit representation that the 
     product reduces risk or exposure is no longer valid, 
     including if--
       ``(A) a tobacco product standard is established pursuant to 
     section 907;
       ``(B) an action is taken that affects the risks presented 
     by other commercially marketed tobacco products that were 
     compared to the product that is the subject of the 
     application; or
       ``(C) any postmarket surveillance or studies reveal that 
     the order is no longer consistent with the protection of the 
     public health;
       ``(4) the applicant failed to conduct or submit the 
     postmarket surveillance and studies required under subsection 
     (g)(2)(C)(ii) or subsection (i); or
       ``(5) the applicant failed to meet a condition imposed 
     under subsection (h).
       ``(k) Chapter IV or V.--A product for which the Secretary 
     has issued an order pursuant to subsection (g) shall not be 
     subject to chapter IV or V.
       ``(l) Implementing Regulations or Guidance.--
       ``(1) Scientific evidence.--Not later than 2 years after 
     the date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall issue regulations or 
     guidance (or any combination thereof) on the scientific 
     evidence required

[[Page S5155]]

     for assessment and ongoing review of modified risk tobacco 
     products. Such regulations or guidance shall--
       ``(A) to the extent that adequate scientific evidence 
     exists, establish minimum standards for scientific studies 
     needed prior to issuing an order under subsection (g) to show 
     that a substantial reduction in morbidity or mortality among 
     individual tobacco users occurs for products described in 
     subsection (g)(1) or is reasonably likely for products 
     described in subsection (g)(2);
       ``(B) include validated biomarkers, intermediate clinical 
     endpoints, and other feasible outcome measures, as 
     appropriate;
       ``(C) establish minimum standards for postmarket studies, 
     that shall include regular and long-term assessments of 
     health outcomes and mortality, intermediate clinical 
     endpoints, consumer perception of harm reduction, and the 
     impact on quitting behavior and new use of tobacco products, 
     as appropriate;
       ``(D) establish minimum standards for required postmarket 
     surveillance, including ongoing assessments of consumer 
     perception;
       ``(E) require that data from the required studies and 
     surveillance be made available to the Secretary prior to the 
     decision on renewal of a modified risk tobacco product; and
       ``(F) establish a reasonable timetable for the Secretary to 
     review an application under this section.
       ``(2) Consultation.--The regulations or guidance issued 
     under paragraph (1) shall be developed in consultation with 
     the Institute of Medicine, and with the input of other 
     appropriate scientific and medical experts, on the design and 
     conduct of such studies and surveillance.
       ``(3) Revision.--The regulations or guidance under 
     paragraph (1) shall be revised on a regular basis as new 
     scientific information becomes available.
       ``(4) New tobacco products.--Not later than 2 years after 
     the date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall issue a regulation 
     or guidance that permits the filing of a single application 
     for any tobacco product that is a new tobacco product under 
     section 910 and which the applicant seeks to commercially 
     market under this section.
       ``(m) Distributors.--Except as provided in this section, no 
     distributor may take any action, after the date of enactment 
     of the Family Smoking Prevention and Tobacco Control Act, 
     with respect to a tobacco product that would reasonably be 
     expected to result in consumers believing that the tobacco 
     product or its smoke may present a lower risk of disease or 
     is less harmful than one or more commercially marketed 
     tobacco products, or presents a reduced exposure to, or does 
     not contain or is free of, a substance or substances.

     ``SEC. 912. JUDICIAL REVIEW.

       ``(a) Right To Review.--
       ``(1) In general.--Not later than 30 days after--
       ``(A) the promulgation of a regulation under section 907 
     establishing, amending, or revoking a tobacco product 
     standard; or
       ``(B) a denial of an application under section 910(c),

     any person adversely affected by such regulation or denial 
     may file a petition for judicial review of such regulation or 
     denial with the United States Court of Appeals for the 
     District of Columbia or for the circuit in which such person 
     resides or has their principal place of business.
       ``(2) Requirements.--
       ``(A) Copy of petition.--A copy of the petition filed under 
     paragraph (1) shall be transmitted by the clerk of the court 
     involved to the Secretary.
       ``(B) Record of proceedings.--On receipt of a petition 
     under subparagraph (A), the Secretary shall file in the court 
     in which such petition was filed--
       ``(i) the record of the proceedings on which the regulation 
     or order was based; and
       ``(ii) a statement of the reasons for the issuance of such 
     a regulation or order.
       ``(C) Definition of record.--In this section, the term 
     `record' means--
       ``(i) all notices and other matter published in the Federal 
     Register with respect to the regulation or order reviewed;
       ``(ii) all information submitted to the Secretary with 
     respect to such regulation or order;
       ``(iii) proceedings of any panel or advisory committee with 
     respect to such regulation or order;
       ``(iv) any hearing held with respect to such regulation or 
     order; and
       ``(v) 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) Standard of Review.--Upon the filing of the petition 
     under subsection (a) 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 for in such chapter. A 
     regulation or denial described in subsection (a) shall be 
     reviewed in accordance with section 706(2)(A) of title 5, 
     United States Code.
       ``(c) 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.
       ``(d) 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.
       ``(e) Regulations and Orders Must Recite Basis in Record.--
     To facilitate judicial review, a regulation or order issued 
     under section 906, 907, 908, 909, 910, or 916 shall contain a 
     statement of the reasons for the issuance of such regulation 
     or order in the record of the proceedings held in connection 
     with its issuance.

     ``SEC. 913. 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. 914. JURISDICTION OF AND COORDINATION WITH THE FEDERAL 
                   TRADE COMMISSION.

       ``(a) Jurisdiction.--
       ``(1) In general.--Except where expressly provided in this 
     chapter, nothing in this chapter 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.
       ``(2) Enforcement.--Any advertising that violates this 
     chapter or a provision of the regulations referred to in 
     section 102 of the Family Smoking Prevention and Tobacco 
     Control Act, is an unfair or deceptive act or practice under 
     section 5(a) of the Federal Trade Commission Act and shall be 
     considered a violation of a rule promulgated under section 18 
     of that Act.
       ``(b) Coordination.--With respect to the requirements of 
     section 4 of the Federal Cigarette Labeling and Advertising 
     Act and section 3 of the Comprehensive Smokeless Tobacco 
     Health Education Act of 1986--
       ``(1) the Chairman of the Federal Trade Commission shall 
     coordinate with the Secretary concerning the enforcement of 
     such Act as such enforcement relates to unfair or deceptive 
     acts or practices in the advertising of cigarettes or 
     smokeless tobacco; and
       ``(2) the Secretary shall consult with the Chairman of such 
     Commission in revising the label statements and requirements 
     under such sections.

     ``SEC. 915. REGULATION REQUIREMENT.

       ``(a) Testing, Reporting, and Disclosure.--Not later than 
     36 months after the date of enactment of the Family Smoking 
     Prevention and Tobacco Control Act, the Secretary shall 
     promulgate regulations under this Act that meet the 
     requirements of subsection (b).
       ``(b) Contents of Rules.--The regulations promulgated under 
     subsection (a)--
       ``(1) shall require testing and reporting of tobacco 
     product constituents, ingredients, and additives, including 
     smoke constituents, by brand and subbrand that the Secretary 
     determines should be tested to protect the public health, 
     provided that, for purposes of the testing requirements of 
     this paragraph, tobacco products manufactured and sold by a 
     single tobacco product manufacturer that are identical in all 
     respects except the labels, packaging design, logo, trade 
     dress, trademark, brand name, or any combination thereof, 
     shall be considered as a single brand; and
       ``(2) may require that tobacco product manufacturers, 
     packagers, or importers make disclosures relating to the 
     results of the testing of tar and nicotine through labels or 
     advertising or other appropriate means, and make disclosures 
     regarding the results of the testing of other constituents, 
     including smoke constituents, ingredients, or additives, that 
     the Secretary determines should be disclosed to the public to 
     protect the public health and will not mislead consumers 
     about the risk of tobacco-related disease.
       ``(c) Authority.--The Secretary shall have the authority 
     under this chapter to conduct or to require the testing, 
     reporting, or disclosure of tobacco product constituents, 
     including smoke constituents.
       ``(d) Small Tobacco Product Manufacturers.--
       ``(1) First compliance date.--The initial regulations 
     promulgated under subsection (a) shall not impose 
     requirements on small tobacco product manufacturers before 
     the later of--
       ``(A) the end of the 2-year period following the final 
     promulgation of such regulations; and
       ``(B) the initial date set by the Secretary for compliance 
     with such regulations by manufacturers that are not small 
     tobacco product manufacturers.
       ``(2) Testing and reporting initial compliance period.--
       ``(A) 4-year period.--The initial regulations promulgated 
     under subsection (a) shall give each small tobacco product 
     manufacturer a 4-year period over which to conduct testing 
     and reporting for all of its tobacco products. Subject to 
     paragraph (1), the end of the first year of such 4-year 
     period shall coincide with the initial date of compliance 
     under this section set by the Secretary with respect to 
     manufacturers that are not small tobacco product 
     manufacturers or the end of the 2-year period following the 
     final promulgation of such regulations, as described in 
     paragraph (1)(A). A small tobacco product manufacturer shall 
     be required--
       ``(i) to conduct such testing and reporting for 25 percent 
     of its tobacco products during each year of such 4-year 
     period; and

[[Page S5156]]

       ``(ii) to conduct such testing and reporting for its 
     largest-selling tobacco products (as determined by the 
     Secretary) before its other tobacco products, or in such 
     other order of priority as determined by the Secretary.
       ``(B) Case-by-case delay.--Notwithstanding subparagraph 
     (A), the Secretary may, on a case-by-case basis, delay the 
     date by which an individual small tobacco product 
     manufacturer must conduct testing and reporting for its 
     tobacco products under this section based upon a showing of 
     undue hardship to such manufacturer. Notwithstanding the 
     preceding sentence, the Secretary shall not extend the 
     deadline for a small tobacco product manufacturer to conduct 
     testing and reporting for all of its tobacco products beyond 
     a total of 5 years after the initial date of compliance under 
     this section set by the Secretary with respect to 
     manufacturers that are not small tobacco product 
     manufacturers.
       ``(3) Subsequent and additional testing and reporting.--The 
     regulations promulgated under subsection (a) shall provide 
     that, with respect to any subsequent or additional testing 
     and reporting of tobacco products required under this 
     section, such testing and reporting by a small tobacco 
     product manufacturer shall be conducted in accordance with 
     the timeframes described in paragraph (2)(A), except that, in 
     the case of a new product, or if there has been a 
     modification described in section 910(a)(1)(B) of any product 
     of a small tobacco product manufacturer since the last 
     testing and reporting required under this section, the 
     Secretary shall require that any subsequent or additional 
     testing and reporting be conducted in accordance with the 
     same timeframe applicable to manufacturers that are not small 
     tobacco product manufacturers.
       ``(4) Joint laboratory testing services.--The Secretary 
     shall allow any 2 or more small tobacco product manufacturers 
     to join together to purchase laboratory testing services 
     required by this section on a group basis in order to ensure 
     that such manufacturers receive access to, and fair pricing 
     of, such testing services.
       ``(e) Extensions for Limited Laboratory Capacity.--
       ``(1) In general.--The regulations promulgated under 
     subsection (a) shall provide that a small tobacco product 
     manufacturer shall not be considered to be in violation of 
     this section before the deadline applicable under paragraphs 
     (3) and (4), if--
       ``(A) the tobacco products of such manufacturer are in 
     compliance with all other requirements of this chapter; and
       ``(B) the conditions described in paragraph (2) are met.
       ``(2) Conditions.--Notwithstanding the requirements of this 
     section, the Secretary may delay the date by which a small 
     tobacco product manufacturer must be in compliance with the 
     testing and reporting required by this section until such 
     time as the testing is reported if, not later than 90 days 
     before the deadline for reporting in accordance with this 
     section, a small tobacco product manufacturer provides 
     evidence to the Secretary demonstrating that--
       ``(A) the manufacturer has submitted the required products 
     for testing to a laboratory and has done so sufficiently in 
     advance of the deadline to create a reasonable expectation of 
     completion by the deadline;
       ``(B) the products currently are awaiting testing by the 
     laboratory; and
       ``(C) neither that laboratory nor any other laboratory is 
     able to complete testing by the deadline at customary, 
     nonexpedited testing fees.
       ``(3) Extension.--The Secretary, taking into account the 
     laboratory testing capacity that is available to tobacco 
     product manufacturers, shall review and verify the evidence 
     submitted by a small tobacco product manufacturer in 
     accordance with paragraph (2). If the Secretary finds that 
     the conditions described in such paragraph are met, the 
     Secretary shall notify the small tobacco product manufacturer 
     that the manufacturer shall not be considered to be in 
     violation of the testing and reporting requirements of this 
     section until the testing is reported or until 1 year after 
     the reporting deadline has passed, whichever occurs sooner. 
     If, however, the Secretary has not made a finding before the 
     reporting deadline, the manufacturer shall not be considered 
     to be in violation of such requirements until the Secretary 
     finds that the conditions described in paragraph (2) have not 
     been met, or until 1 year after the reporting deadline, 
     whichever occurs sooner.
       ``(4) Additional extension.--In addition to the time that 
     may be provided under paragraph (3), the Secretary may 
     provide further extensions of time, in increments of no more 
     than 1 year, for required testing and reporting to occur if 
     the Secretary determines, based on evidence properly and 
     timely submitted by a small tobacco product manufacturer in 
     accordance with paragraph (2), that a lack of available 
     laboratory capacity prevents the manufacturer from completing 
     the required testing during the period described in paragraph 
     (3).
       ``(f) Rule of Construction.--Nothing in subsection (d) or 
     (e) shall be construed to authorize the extension of any 
     deadline, or to otherwise affect any timeframe, under any 
     provision of this Act or the Family Smoking Prevention and 
     Tobacco Control Act other than this section.

     ``SEC. 916. PRESERVATION OF STATE AND LOCAL AUTHORITY.

       ``(a) In General.--
       ``(1) Preservation.--Except as provided in paragraph 
     (2)(A), nothing in this chapter, or rules promulgated under 
     this chapter, shall be construed to limit the authority of a 
     Federal agency (including the Armed Forces), a State or 
     political subdivision of a State, 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 that is in addition to, or more stringent 
     than, requirements established under this chapter, including 
     a law, rule, regulation, or other measure relating to or 
     prohibiting the sale, distribution, possession, exposure to, 
     access to, advertising and promotion of, or use of tobacco 
     products by individuals of any age, information reporting to 
     the State, or measures relating to fire safety standards for 
     tobacco products. No provision of this chapter shall limit or 
     otherwise affect any State, Tribal, or local taxation of 
     tobacco products.
       ``(2) Preemption of certain state and local requirements.--
       ``(A) In general.--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 under the provisions of this 
     chapter relating to tobacco product standards, premarket 
     review, adulteration, misbranding, labeling, registration, 
     good manufacturing standards, or modified risk tobacco 
     products.
       ``(B) Exception.--Subparagraph (A) does not apply to 
     requirements relating to the sale, distribution, possession, 
     information reporting to the State, exposure to, access to, 
     the advertising and promotion of, or use of, tobacco products 
     by individuals of any age, or relating to fire safety 
     standards for tobacco products. Information disclosed to a 
     State under subparagraph (A) that is exempt from disclosure 
     under section 552(b)(4) of title 5, United States Code, shall 
     be treated as a trade secret and confidential information by 
     the State.
       ``(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.

     ``SEC. 917. TOBACCO PRODUCTS SCIENTIFIC ADVISORY COMMITTEE.

       ``(a) Establishment.--Not later than 6 months after the 
     date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall establish a 12-
     member advisory committee, to be known as the Tobacco 
     Products Scientific Advisory Committee (in this section 
     referred to as the `Advisory Committee').
       ``(b) Membership.--
       ``(1) In general.--
       ``(A) Members.--The Secretary shall appoint as members of 
     the Tobacco Products Scientific Advisory Committee 
     individuals who are technically qualified by training and 
     experience in medicine, medical ethics, science, or 
     technology involving the manufacture, evaluation, or use of 
     tobacco products, who are of appropriately diversified 
     professional backgrounds. The committee shall be composed 
     of--
       ``(i) 7 individuals who are physicians, dentists, 
     scientists, or health care professionals practicing in the 
     area of oncology, pulmonology, cardiology, toxicology, 
     pharmacology, addiction, or any other relevant specialty;
       ``(ii) 1 individual who is an officer or employee of a 
     State or local government or of the Federal Government;
       ``(iii) 1 individual as a representative of the general 
     public;
       ``(iv) 1 individual as a representative of the interests of 
     the tobacco manufacturing industry;
       ``(v) 1 individual as a representative of the interests of 
     the small business tobacco manufacturing industry, which 
     position may be filled on a rotating, sequential basis by 
     representatives of different small business tobacco 
     manufacturers based on areas of expertise relevant to the 
     topics being considered by the Advisory Committee; and
       ``(vi) 1 individual as a representative of the interests of 
     the tobacco growers.
       ``(B) Nonvoting members.--The members of the committee 
     appointed under clauses (iv), (v), and (vi) of subparagraph 
     (A) shall serve as consultants to those described in clauses 
     (i) through (iii) of subparagraph (A) and shall be nonvoting 
     representatives.
       ``(C) Conflicts of interest.--No members of the committee, 
     other than members appointed pursuant to clauses (iv), (v), 
     and (vi) of subparagraph (A) shall, during the member's 
     tenure on the committee or for the 18-month period prior to 
     becoming such a member, receive any salary, grants, or other 
     payments or support from any business that manufactures, 
     distributes, markets, or sells cigarettes or other tobacco 
     products.
       ``(2) Limitation.--The Secretary may not appoint to the 
     Advisory Committee any individual who is in the regular full-
     time employ of the Food and Drug Administration or any agency 
     responsible for the enforcement of this Act. The Secretary 
     may appoint Federal officials as ex officio members.
       ``(3) Chairperson.--The Secretary shall designate 1 of the 
     members appointed under clauses (i), (ii), and (iii) of 
     paragraph (1)(A) to serve as chairperson.
       ``(c) Duties.--The Tobacco Products Scientific Advisory 
     Committee shall provide advice, information, and 
     recommendations to the Secretary--
       ``(1) as provided in this chapter;

[[Page S5157]]

       ``(2) on the effects of the alteration of the nicotine 
     yields from tobacco products;
       ``(3) on whether there is a threshold level below which 
     nicotine yields do not produce dependence on the tobacco 
     product involved; and
       ``(4) on its review of other safety, dependence, or health 
     issues relating to tobacco products as requested by the 
     Secretary.
       ``(d) Compensation; Support; FACA.--
       ``(1) Compensation and travel.--Members of the Advisory 
     Committee who are not officers or employees of the United 
     States, while attending conferences or meetings of the 
     committee or otherwise engaged in its business, shall be 
     entitled to receive compensation at rates to be fixed by the 
     Secretary, which may not exceed the daily equivalent of the 
     rate in effect under the Senior Executive Schedule under 
     section 5382 of title 5, United States Code, for each day 
     (including travel time) they are so engaged; and while so 
     serving away from their homes or regular places of business 
     each member may be allowed travel expenses, including per 
     diem in lieu of subsistence, as authorized by section 5703 of 
     title 5, United States Code, for persons in the Government 
     service employed intermittently.
       ``(2) Administrative support.--The Secretary shall furnish 
     the Advisory Committee clerical and other assistance.
       ``(3) Nonapplication of faca.--Section 14 of the Federal 
     Advisory Committee Act does not apply to the Advisory 
     Committee.
       ``(e) Proceedings of Advisory Panels and Committees.--The 
     Advisory Committee shall make and maintain a transcript of 
     any proceeding of the panel or committee. Each such panel and 
     committee shall delete from any transcript made under this 
     subsection information which is exempt from disclosure under 
     section 552(b) of title 5, United States Code.

     ``SEC. 918. DRUG PRODUCTS USED TO TREAT TOBACCO DEPENDENCE.

       ``(a) In General.--The Secretary shall--
       ``(1) at the request of the applicant, consider designating 
     products for smoking cessation, including nicotine 
     replacement products as fast track research and approval 
     products within the meaning of section 506;
       ``(2) consider approving the extended use of nicotine 
     replacement products (such as nicotine patches, nicotine gum, 
     and nicotine lozenges) for the treatment of tobacco 
     dependence; and
       ``(3) review and consider the evidence for additional 
     indications for nicotine replacement products, such as for 
     craving relief or relapse prevention.
       ``(b) Report on Innovative Products.--
       ``(1) In general.--Not later than 3 years after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act, the Secretary, after consultation with 
     recognized scientific, medical, and public health experts 
     (including both Federal agencies and nongovernmental 
     entities, the Institute of Medicine of the National Academy 
     of Sciences, and the Society for Research on Nicotine and 
     Tobacco), shall submit to the Congress a report that examines 
     how best to regulate, promote, and encourage the development 
     of innovative products and treatments (including nicotine-
     based and non-nicotine-based products and treatments) to 
     better achieve, in a manner that best protects and promotes 
     the public health--
       ``(A) total abstinence from tobacco use;
       ``(B) reductions in consumption of tobacco; and
       ``(C) reductions in the harm associated with continued 
     tobacco use.
       ``(2) Recommendations.--The report under paragraph (1) 
     shall include the recommendations of the Secretary on how the 
     Food and Drug Administration should coordinate and facilitate 
     the exchange of information on such innovative products and 
     treatments among relevant offices and centers within the 
     Administration and within the National Institutes of Health, 
     the Centers for Disease Control and Prevention, and other 
     relevant agencies.

     ``SEC. 919. USER FEES.

       ``(a) Establishment of Quarterly Fee.--Beginning on the 
     date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act, the Secretary shall in accordance with 
     this section assess user fees on, and collect such fees from, 
     each manufacturer and importer of tobacco products subject to 
     this chapter. The fees shall be assessed and collected with 
     respect to each quarter of each fiscal year, and the total 
     amount assessed and collected for a fiscal year shall be the 
     amount specified in subsection (b)(1) for such year, subject 
     to subsection (c).
       ``(b) Assessment of User Fee.--
       ``(1) Amount of assessment.--The total amount of user fees 
     authorized to be assessed and collected under subsection (a) 
     for a fiscal year is the following, as applicable to the 
     fiscal year involved:
       ``(A) For fiscal year 2009, $85,000,000 (subject to 
     subsection (e)).
       ``(B) For fiscal year 2010, $235,000,000.
       ``(C) For fiscal year 2011, $450,000,000.
       ``(D) For fiscal year 2012, $477,000,000.
       ``(E) For fiscal year 2013, $505,000,000.
       ``(F) For fiscal year 2014, $534,000,000.
       ``(G) For fiscal year 2015, $566,000,000.
       ``(H) For fiscal year 2016, $599,000,000.
       ``(I) For fiscal year 2017, $635,000,000.
       ``(J) For fiscal year 2018, $672,000,000.
       ``(K) For fiscal year 2019 and each subsequent fiscal year, 
     $712,000,000.
       ``(2) Allocations of assessment by class of tobacco 
     products.--
       ``(A) In general.--The total user fees assessed and 
     collected under subsection (a) each fiscal year with respect 
     to each class of tobacco products shall be an amount that is 
     equal to the applicable percentage of each class for the 
     fiscal year multiplied by the amount specified in paragraph 
     (1) for the fiscal year.
       ``(B) Applicable percentage.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     applicable percentage for a fiscal year for each of the 
     following classes of tobacco products shall be determined in 
     accordance with clause (ii):

       ``(I) Cigarettes.
       ``(II) Cigars, including small cigars and cigars other than 
     small cigars.
       ``(III) Snuff.
       ``(IV) Chewing tobacco.
       ``(V) Pipe tobacco.
       ``(VI) Roll-your-own tobacco.

       ``(ii) Allocations.--The applicable percentage of each 
     class of tobacco product described in clause (i) for a fiscal 
     year shall be the percentage determined under section 625(c) 
     of Public Law 108-357 for each such class of product for such 
     fiscal year.
       ``(iii) Requirement of regulations.--Notwithstanding clause 
     (ii), no user fees shall be assessed on a class of tobacco 
     products unless such class of tobacco products is listed in 
     section 901(b) or is deemed by the Secretary in a regulation 
     under section 901(b) to be subject to this chapter.
       ``(iv) Reallocations.--In the case of a class of tobacco 
     products that is not listed in section 901(b) or deemed by 
     the Secretary in a regulation under section 901(b) to be 
     subject to this chapter, the amount of user fees that would 
     otherwise be assessed to such class of tobacco products shall 
     be reallocated to the classes of tobacco products that are 
     subject to this chapter in the same manner and based on the 
     same relative percentages otherwise determined under clause 
     (ii).
       ``(3) Determination of user fee by company.--
       ``(A) In general.--The total user fee to be paid by each 
     manufacturer or importer of a particular class of tobacco 
     products shall be determined for each quarter by 
     multiplying--
       ``(i) such manufacturer's or importer's percentage share as 
     determined under paragraph (4); by
       ``(ii) the portion of the user fee amount for the current 
     quarter to be assessed on all manufacturers and importers of 
     such class of tobacco products as determined under paragraph 
     (2).
       ``(B) No fee in excess of percentage share.--No 
     manufacturer or importer of tobacco products shall be 
     required to pay a user fee in excess of the percentage share 
     of such manufacturer or importer.
       ``(4) Allocation of assessment within each class of tobacco 
     product.--The percentage share of each manufacturer or 
     importer of a particular class of tobacco products of the 
     total user fee to be paid by all manufacturers or importers 
     of that class of tobacco products shall be the percentage 
     determined for purposes of allocations under subsections (e) 
     through (h) of section 625 of Public Law 108-357.
       ``(5) Allocation for cigars.--Notwithstanding paragraph 
     (4), if a user fee assessment is imposed on cigars, the 
     percentage share of each manufacturer or importer of cigars 
     shall be based on the excise taxes paid by such manufacturer 
     or importer during the prior fiscal year.
       ``(6) Timing of assessment.--The Secretary shall notify 
     each manufacturer and importer of tobacco products subject to 
     this section of the amount of the quarterly assessment 
     imposed on such manufacturer or importer under this 
     subsection for each quarter of each fiscal year. Such 
     notifications shall occur not later than 30 days prior to the 
     end of the quarter for which such assessment is made, and 
     payments of all assessments shall be made by the last day of 
     the quarter involved.
       ``(7) Memorandum of understanding.--
       ``(A) In general.--The Secretary shall request the 
     appropriate Federal agency to enter into a memorandum of 
     understanding that provides for the regular and timely 
     transfer from the head of such agency to the Secretary of the 
     information described in paragraphs (2)(B)(ii) and (4) and 
     all necessary information regarding all tobacco product 
     manufacturers and importers required to pay user fees. The 
     Secretary shall maintain all disclosure restrictions 
     established by the head of such agency regarding the 
     information provided under the memorandum of understanding.
       ``(B) Assurances.--Beginning not later than fiscal year 
     2015, and for each subsequent fiscal year, the Secretary 
     shall ensure that the Food and Drug Administration is able to 
     determine the applicable percentages described in paragraph 
     (2) and the percentage shares described in paragraph (4). The 
     Secretary may carry out this subparagraph by entering into a 
     contract with the head of the Federal agency referred to in 
     subparagraph (A) to continue to provide the necessary 
     information.
       ``(c) Crediting and Availability of Fees.--
       ``(1) In general.--Fees authorized under subsection (a) 
     shall be collected and available for obligation only to the 
     extent and in the amount provided in advance in 
     appropriations Acts. Such fees are authorized to remain 
     available until expended. Such sums as may be necessary may 
     be transferred from the Food and Drug Administration salaries 
     and expenses appropriation account without fiscal year 
     limitation to such appropriation

[[Page S5158]]

     account for salaries and expenses with such fiscal year 
     limitation.
       ``(2) Availability.--
       ``(A) In general.--Fees appropriated under paragraph (3) 
     are available only for the purpose of paying the costs of the 
     activities of the Food and Drug Administration related to the 
     regulation of tobacco products under this chapter and the 
     Family Smoking Prevention and Tobacco Control Act. No fees 
     collected under subsection (a) may be used for any other 
     costs.
       ``(B) Prohibition against use of other funds.--
       ``(i) In general.--Except as provided in clause (ii), fees 
     collected under subsection (a) are the only funds authorized 
     to be made available for the purpose described in 
     subparagraph (A).
       ``(ii) Startup costs.--Clause (i) does not apply until the 
     date on which the Secretary has collected fees under 
     subsection (a) for 2 fiscal year quarters. Any amounts 
     provided to pay the costs described in subparagraph (A) prior 
     to the date described in the previous sentence shall be 
     reimbursed through fees collected under subsection (a).
       ``(3) Authorization of appropriations.--For fiscal year 
     2009 and each subsequent fiscal year, there is authorized to 
     be appropriated for fees under this section an amount equal 
     to the amount specified in subsection (b)(1) for the fiscal 
     year.
       ``(d) Collection of Unpaid Fees.--In any case where the 
     Secretary does not receive payment of a fee assessed under 
     subsection (a) within 30 days after it is due, such fee shall 
     be treated as a claim of the United States Government subject 
     to subchapter II of chapter 37 of title 31, United States 
     Code.
       ``(e) Applicability to Fiscal Year 2009.--If the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act occurs during fiscal year 2009, the following 
     applies, subject to subsection (c):
       ``(1) The Secretary shall determine the fees that would 
     apply for a single quarter of such fiscal year according to 
     the application of subsection (b) to the amount specified in 
     paragraph (1)(A) of such subsection (referred to in this 
     subsection as the `quarterly fee amounts').
       ``(2) For the quarter in which such date of enactment 
     occurs, the amount of fees assessed shall be a pro rata 
     amount, determined according to the number of days remaining 
     in the quarter (including such date of enactment) and 
     according to the daily equivalent of the quarterly fee 
     amounts. Fees assessed under the preceding sentence shall not 
     be collected until the next quarter.
       ``(3) For the quarter following the quarter to which 
     paragraph (2) applies, the full quarterly fee amounts shall 
     be assessed and collected, in addition to collection of the 
     pro rata fees assessed under paragraph (2).''.
       (c) Conforming Amendment.--Section 9(1) of the 
     Comprehensive Smokeless Tobacco Health Education Act of 1986 
     (15 U.S.C. 4408(i)) is amended to read as follows:
       ``(1) The term `smokeless tobacco' has the meaning given 
     such term by section 900(18) of the Federal Food, Drug, and 
     Cosmetic Act.''.

     SEC. 102. FINAL RULE.

       (a) Cigarettes and Smokeless Tobacco.--
       (1) In general.--On the first day of publication of the 
     Federal Register that is 180 days or more after the date of 
     enactment of this Act, the Secretary of Health and Human 
     Services shall publish in the Federal Register a final rule 
     regarding cigarettes and smokeless tobacco, which--
       (A) is deemed to be issued under chapter 9 of the Federal 
     Food, Drug, and Cosmetic Act, as added by section 101 of this 
     Act; and
       (B) shall be deemed to be in compliance with all applicable 
     provisions of chapter 5 of title 5, United States Code, and 
     all other provisions of law relating to rulemaking 
     procedures.
       (2) Contents of rule.--Except as provided in this 
     subsection, the final rule published under paragraph (1), 
     shall be identical in its provisions to part 897 of the 
     regulations promulgated by the Secretary of Health and Human 
     Services in the August 28, 1996, issue of the Federal 
     Register (61 Fed. Reg., 44615-44618). Such rule shall--
       (A) provide for the designation of jurisdictional authority 
     that is in accordance with this subsection in accordance with 
     this Act and the amendments made by this Act;
       (B) strike Subpart C--Labels and section 897.32(c);
       (C) strike paragraphs (a), (b), and (i) of section 897.3 
     and insert definitions of the terms ``cigarette'', 
     ``cigarette tobacco,'', and ``smokeless tobacco'' as defined 
     in section 900 of the Federal Food, Drug, and Cosmetic Act;
       (D) insert ``or roll-your-own paper'' in section 897.34(a) 
     after ``other than cigarettes or smokeless tobacco'';
       (E) include such modifications to section 897.30(b), if 
     any, that the Secretary determines are appropriate in light 
     of governing First Amendment case law, including the decision 
     of the Supreme Court of the United States in Lorillard 
     Tobacco Co. v. Reilly (533 U.S. 525 (2201));
       (F) become effective on the date that is 1 year after the 
     date of enactment of this Act;
       (G) amend paragraph (d) of section 897.16 to read as 
     follows:
       ``(d)(1) Except as provided in subparagraph (2), no 
     manufacturer, distributor, or retailer may distribute or 
     cause to be distributed any free samples of cigarettes, 
     smokeless tobacco, or other tobacco products (as such term is 
     defined in section 201 of the Federal Food, Drug, and 
     Cosmetic Act).
       ``(2)(A) Subparagraph (1) does not prohibit a manufacturer, 
     distributor, or retailer from distributing or causing to be 
     distributed free samples of smokeless tobacco in a qualified 
     adult-only facility.
       ``(B) This subparagraph does not affect the authority of a 
     State or local government to prohibit or otherwise restrict 
     the distribution of free samples of smokeless tobacco.
       ``(C) For purposes of this paragraph, the term `qualified 
     adult-only facility' means a facility or restricted area 
     that--
       ``(i) requires each person present to provide to a law 
     enforcement officer (whether on or off duty) or to a security 
     guard licensed by a governmental entity government-issued 
     identification showing a photograph and at least the minimum 
     age established by applicable law for the purchase of 
     smokeless tobacco;
       ``(ii) does not sell, serve, or distribute alcohol;
       ``(iii) is not located adjacent to or immediately across 
     from (in any direction) a space that is used primarily for 
     youth-oriented marketing, promotional, or other activities;
       ``(iv) is a temporary structure constructed, designated, 
     and operated as a distinct enclosed area for the purpose of 
     distributing free samples of smokeless tobacco in accordance 
     with this subparagraph; and
       ``(v) is enclosed by a barrier that--
       ``(I) is constructed of, or covered with, an opaque 
     material (except for entrances and exits);
       ``(II) extends from no more than 12 inches above the ground 
     or floor (which area at the bottom of the barrier must be 
     covered with material that restricts visibility but may allow 
     airflow) to at least 8 feet above the ground or floor (or to 
     the ceiling); and
       ``(III) prevents persons outside the qualified adult-only 
     facility from seeing into the qualified adult-only facility, 
     unless they make unreasonable efforts to do so; and
       ``(vi) does not display on its exterior--
       ``(I) any tobacco product advertising;
       ``(II) a brand name other than in conjunction with words 
     for an area or enclosure to identify an adult-only facility; 
     or
       ``(III) any combination of words that would imply to a 
     reasonable observer that the manufacturer, distributor, or 
     retailer has a sponsorship that would violate section 
     897.34(c).
       ``(D) Distribution of samples of smokeless tobacco under 
     this subparagraph permitted to be taken out of the qualified 
     adult-only facility shall be limited to 1 package per adult 
     consumer containing no more than 0.53 ounces (15 grams) of 
     smokeless tobacco. If such package of smokeless tobacco 
     contains individual portions of smokeless tobacco, the 
     individual portions of smokeless tobacco shall not exceed 8 
     individual portions and the collective weight of such 
     individual portions shall not exceed 0.53 ounces (15 grams). 
     Any manufacturer, distributor, or retailer who distributes or 
     causes to be distributed free samples also shall take 
     reasonable steps to ensure that the above amounts are limited 
     to one such package per adult consumer per day.
       ``(3) Notwithstanding subparagraph (2), no manufacturer, 
     distributor, or retailer may distribute or cause to be 
     distributed any free samples of smokeless tobacco--
       ``(A) to a sports team or entertainment group; or
       ``(B) at any football, basketball, baseball, soccer, or 
     hockey event or any other sporting or entertainment event 
     determined by the Secretary to be covered by this 
     subparagraph.
       ``(4) The Secretary shall implement a program to ensure 
     compliance with this paragraph and submit a report to the 
     Congress on such compliance not later than 18 months after 
     the date of enactment of the Family Smoking Prevention and 
     Tobacco Control Act.
       ``(5) Nothing in this paragraph shall be construed to 
     authorize any person to distribute or cause to be distributed 
     any sample of a tobacco product to any individual who has not 
     attained the minimum age established by applicable law for 
     the purchase of such product.''.
       (3) Amendments to rule.--Prior to making amendments to the 
     rule published under paragraph (1), the Secretary shall 
     promulgate a proposed rule in accordance with chapter 5 of 
     title 5, United States Code.
       (4) Rule of construction.--Except as provided in paragraph 
     (3), nothing in this section shall be construed to limit the 
     authority of the Secretary to amend, in accordance with 
     chapter 5 of title 5, United States Code, the regulation 
     promulgated pursuant to this section, including the 
     provisions of such regulation relating to distribution of 
     free samples.
       (5) Enforcement of retail sale provisions.--The Secretary 
     of Health and Human Services shall ensure that the provisions 
     of this Act, the amendments made by this Act, and the 
     implementing regulations (including such provisions, 
     amendments, and regulations relating to the retail sale of 
     tobacco products) are enforced with respect to the United 
     States and Indian tribes.
       (6) Qualified adult-only facility.--A qualified adult-only 
     facility (as such term is defined in section 897.16(d) of the 
     final rule published under paragraph (1)) that is also a 
     retailer and that commits a violation as a retailer shall not 
     be subject to the limitations in section 103(q) and shall be 
     subject to penalties applicable to a qualified adult-only 
     facility.
       (7) Congressional review provisions.--Section 801 of title 
     5, United States Code,

[[Page S5159]]

     shall not apply to the final rule published under paragraph 
     (1).
       (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 of Health 
     and Human Services or the Food and Drug Administration as 
     binding precedent:
       (1) The preamble to the proposed rule in the document 
     titled ``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 titled ``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 titled 
     ``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 titled ``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)).

     SEC. 103. 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) in subsection (a), by inserting ``tobacco product,'' 
     after ``device,'';
       (2) in subsection (b), by inserting ``tobacco product,'' 
     after ``device,'';
       (3) in subsection (c), by inserting ``tobacco product,'' 
     after ``device,'';
       (4) in subsection (e)--
       (A) by striking the period after ``572(i)''; and
       (B) by striking ``or 761 or the refusal to permit access 
     to'' and inserting ``761, 909, or 920 or the refusal to 
     permit access to'';
       (5) in subsection (g), by inserting ``tobacco product,'' 
     after ``device,'';
       (6) in subsection (h), by inserting ``tobacco product,'' 
     after ``device,'';
       (7) in subsection (j)--
       (A) by striking the period after ``573''; and
       (B) by striking ``708, or 721'' and inserting ``708, 721, 
     904, 905, 906, 907, 908, 909, or 920(b)'';
       (8) in subsection (k), by inserting ``tobacco product,'' 
     after ``device,'';
       (9) by striking subsection (p) and inserting the following:
       ``(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(i)(3).'';
       (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), 903(b), 907, 908, or 916;
       ``(B) to furnish any notification or other material or 
     information required by or under section 519, 520(g), 904, 
     909, or 920; or
       ``(C) to comply with a requirement under section 522 or 
     913.'';
       (11) in subsection (q)(2), by striking ``device,'' and 
     inserting ``device or tobacco product,'';
       (12) in subsection (r), by inserting ``or tobacco product'' 
     after the term ``device'' each time that such term appears; 
     and
       (13) by adding at the end the following:
       ``(oo) The sale of tobacco products in violation of a no-
     tobacco-sale order issued under section 303(f).
       ``(pp) The introduction or delivery for introduction into 
     interstate commerce of a tobacco product in violation of 
     section 911.
       ``(qq)(1) Forging, counterfeiting, simulating, or falsely 
     representing, or without proper authority using any mark, 
     stamp (including tax stamp), tag, label, or other 
     identification device upon any tobacco product or container 
     or labeling thereof so as to render such tobacco product a 
     counterfeit tobacco product.
       ``(2) Making, selling, disposing of, or keeping in 
     possession, control, or custody, or concealing any punch, 
     die, plate, stone, or other item that is designed to print, 
     imprint, or reproduce the trademark, trade name, or other 
     identifying mark, imprint, or device of another or any 
     likeness of any of the foregoing upon any tobacco product or 
     container or labeling thereof so as to render such tobacco 
     product a counterfeit tobacco product.
       ``(3) The doing of any act that causes a tobacco product to 
     be a counterfeit tobacco product, or the sale or dispensing, 
     or the holding for sale or dispensing, of a counterfeit 
     tobacco product.
       ``(rr) The charitable distribution of tobacco products.
       ``(ss) The failure of a manufacturer or distributor to 
     notify the Attorney General and the Secretary of the Treasury 
     of their knowledge of tobacco products used in illicit trade.
       ``(tt) With respect to a tobacco product, any statement or 
     representation, express or implied, directed to consumers 
     through the media or through the label, labeling, or 
     advertising that is false or would reasonably be expected to 
     mislead consumers into believing that the product is approved 
     by the Food and Drug Administration, or that the Food and 
     Drug Administration deems the product to be safe for use by 
     consumers, or that the product is endorsed by the Food and 
     Drug Administration for use by consumers, or that is false or 
     would reasonably be expected to mislead consumers regarding 
     the harmfulness of the product because of the Food and Drug 
     Administration's regulation or inspection of it or because of 
     its compliance with regulatory requirements set by the Food 
     and Drug Administration.''.
       (c) Section 303.--Section 303(f) (21 U.S.C. 333(f)) is 
     amended--
       (1) in paragraph (1)(A), by inserting ``or tobacco 
     products'' after the term ``devices'' each place such term 
     appears;
       (2) in paragraph (5)--
       (A) in subparagraph (A)--
       (i) by striking ``assessed'' the first time it appears and 
     inserting ``assessed, or a no-tobacco-sale order may be 
     imposed,''; and
       (ii) by striking ``penalty'' the second time it appears and 
     inserting ``penalty, or upon whom a no-tobacco-sale order is 
     to be imposed,'';
       (B) in subparagraph (B)--
       (i) by inserting after ``penalty,'' the following: ``or the 
     period to be covered by a no-tobacco-sale order,''; and
       (ii) by adding at the end 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.''; and
       (C) by adding at the end the following:
       ``(D) The Secretary may compromise, modify, or terminate, 
     with or without conditions, any no-tobacco-sale order.'';
       (3) in paragraph (6)--
       (A) by inserting ``or the imposition of a no-tobacco-sale 
     order'' after the term ``penalty'' each place such term 
     appears; and
       (B) by striking ``issued.'' and inserting ``issued, or on 
     which the no-tobacco-sale order was imposed, as the case may 
     be.''; and
       (4) by adding at the end the following:
       ``(8) 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). Prior to the entry of a no-sale order under this 
     paragraph, a person shall be entitled to a hearing pursuant 
     to the procedures established through regulations of the Food 
     and Drug Administration for assessing civil money penalties, 
     including at a retailer's request a hearing by telephone, or 
     at the nearest regional or field office of the Food and Drug 
     Administration, or at a Federal, State, or county facility 
     within 100 miles from the location of the retail outlet, if 
     such a facility is available.''.
       (d) Section 304.--Section 304 (21 U.S.C. 334) is amended--
       (1) in subsection (a)(2)--
       (A) by striking ``and'' before ``(D)''; and
       (B) by striking ``device.'' and inserting the following: 
     ``device, and (E) Any adulterated or misbranded tobacco 
     product.'';
       (2) in subsection (d)(1), by inserting ``tobacco product,'' 
     after ``device,'';
       (3) in subsection (g)(1), by inserting ``or tobacco 
     product'' after the term ``device'' each place such term 
     appears; and
       (4) in subsection (g)(2)(A), by inserting ``or tobacco 
     product'' after ``device''.
       (e) Section 505.--Section 505(n)(2) (21 U.S.C. 355(n)(2)) 
     is amended by striking ``section 904'' and inserting 
     ``section 1004''.
       (f) Section 523.--Section 523(b)(2)(D) (21 U.S.C. 
     360m(b)(2)(D)) is amended by striking ``section 903(g)'' and 
     inserting ``section 1003(g)''.
       (g) Section 702.--Section 702(a)(1) (U.S.C. 372(a)(1)) is 
     amended--
       (1) by striking ``(a)(1)'' and inserting ``(a)(1)(A)''; and
       (2) by adding at the end the following:
       ``(B)(i) For a tobacco product, to the extent feasible, the 
     Secretary shall contract with the States in accordance with 
     this paragraph to carry out inspections of retailers within 
     that State in connection with the enforcement of this Act.
       ``(ii) The Secretary shall not enter into any contract 
     under clause (i) with the government of any of the several 
     States to exercise enforcement authority under this Act on 
     Indian country without the express written consent of the 
     Indian tribe involved.''.
       (h) Section 703.--Section 703 (21 U.S.C. 373) is amended--
       (1) by inserting ``tobacco product,'' after the term 
     ``device,'' each place such term appears; and
       (2) by inserting ``tobacco products,'' after the term 
     ``devices,'' each place such term appears.
       (i) Section 704.--Section 704 (21 U.S.C. 374) is amended--
       (1) in subsection (a)(1)--
       (A) by striking ``devices, or cosmetics'' each place it 
     appears and inserting ``devices, tobacco products, or 
     cosmetics'';
       (B) by striking ``or restricted devices'' each place it 
     appears and inserting ``restricted devices, or tobacco 
     products'';
       (C) by striking ``and devices and subject to'' and all that 
     follows through ``other

[[Page S5160]]

     drugs or devices'' and inserting ``devices, and tobacco 
     products and subject to reporting and inspection under 
     regulations lawfully issued pursuant to section 505(i) or 
     (k), section 519, section 520(g), or chapter IX and data 
     relating to other drugs, devices, or tobacco products'';
       (2) in subsection (b), by inserting ``tobacco product,'' 
     after ``device,''; and
       (3) in subsection (g)(13), by striking ``section 903(g)'' 
     and inserting ``section 1003(g)''.
       (j) Section 705.--Section 705(b) (21 U.S.C. 375(b)) is 
     amended by inserting ``tobacco products,'' after 
     ``devices,''.
       (k) Section 709.--Section 709 (21 U.S.C. 379a) is amended 
     by inserting ``tobacco product,'' after ``device,''.
       (l) Section 801.--Section 801 (21 U.S.C. 381) is amended--
       (1) in subsection (a)--
       (A) by inserting ``tobacco products,'' after the term 
     ``devices,'';
       (B) by inserting ``or section 905(h)'' after ``section 
     510''; and
       (C) by striking the term ``drugs or devices'' each time 
     such term appears and inserting ``drugs, devices, or tobacco 
     products'';
       (2) in subsection (e)(1)--
       (A) by inserting ``tobacco product'' after ``drug, 
     device,''; and
       (B) by inserting ``, and a tobacco product intended for 
     export shall not be deemed to be in violation of section 
     906(e), 907, 911, or 920(a),'' before ``if it--''; and
       (3) by adding at the end the following:
       ``(p)(1) Not later than 36 months after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act, and annually thereafter, the Secretary shall 
     submit to the Committee on Health, Education, Labor, and 
     Pensions of the Senate and the Committee on Energy and 
     Commerce of the House of Representatives, a report 
     regarding--
       ``(A) the nature, extent, and destination of United States 
     tobacco product exports that do not conform to tobacco 
     product standards established pursuant to this Act;
       ``(B) the public health implications of such exports, 
     including any evidence of a negative public health impact; 
     and
       ``(C) recommendations or assessments of policy alternatives 
     available to Congress and the executive branch to reduce any 
     negative public health impact caused by such exports.
       ``(2) The Secretary is authorized to establish appropriate 
     information disclosure requirements to carry out this 
     subsection.''.
       (m) Section 1003.--Section 1003(d)(2)(C) (as redesignated 
     by section 101(b)) is amended--
       (1) by striking ``and'' after ``cosmetics,''; and
       (2) inserting ``, and tobacco products'' after ``devices''.
       (n) Section 1009.--Section 1009(b) (as redesignated by 
     section 101(b)) is amended by striking ``section 908'' and 
     inserting ``section 1008''.
       (o) Section 409 of the Federal Meat Inspection Act.--
     Section 409(a) of the Federal Meat Inspection Act (21 U.S.C. 
     679(a)) is amended by striking ``section 902(b)'' and 
     inserting ``section 1002(b)''.
       (p) Rule of Construction.--Nothing in this section is 
     intended or shall be construed to expand, contract, or 
     otherwise modify or amend the existing limitations on State 
     government authority over tribal restricted fee or trust 
     lands.
       (q) Guidance and Effective Dates.--
       (1) In general.--The Secretary of Health and Human Services 
     shall issue guidance--
       (A) defining the term ``repeated violation'', as used in 
     section 303(f)(8) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 333(f)(8)) as amended by subsection (c), as 
     including at least 5 violations of particular requirements 
     over a 36-month period at a particular retail outlet that 
     constitute a repeated violation and providing for civil 
     penalties in accordance with paragraph (2);
       (B) providing for timely and effective notice by certified 
     or registered mail or personal delivery to the retailer of 
     each alleged violation at a particular retail outlet prior to 
     conducting a followup compliance check, such notice to be 
     sent to the location specified on the retailer's registration 
     or to the retailer's registered agent if the retailer has 
     provider such agent information to the Food and Drug 
     Administration prior to the violation;
       (C) providing for a hearing pursuant to the procedures 
     established through regulations of the Food and Drug 
     Administration for assessing civil money penalties, including 
     at a retailer's request a hearing by telephone or at the 
     nearest regional or field office of the Food and Drug 
     Administration, and providing for an expedited procedure for 
     the administrative appeal of an alleged violation;
       (D) 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;
       (E) establishing that civil money penalties for multiple 
     violations shall increase from one violation to the next 
     violation pursuant to paragraph (2) within the time periods 
     provided for in such paragraph;
       (F) providing that good faith reliance on the presentation 
     of a false government-issued photographic identification that 
     contains a date of birth does not constitute a violation of 
     any minimum age requirement for the sale of tobacco products 
     if the retailer has taken effective steps to prevent such 
     violations, including--
       (i) adopting and enforcing a written policy against sales 
     to minors;
       (ii) informing its employees of all applicable laws;
       (iii) establishing disciplinary sanctions for employee 
     noncompliance; and
       (iv) requiring its employees to verify age by way of 
     photographic identification or electronic scanning device; 
     and
       (G) providing for the Secretary, in determining whether to 
     impose a no-tobacco-sale order and in determining whether to 
     compromise, modify, or terminate such an order, to consider 
     whether the retailer has taken effective steps to prevent 
     violations of the minimum age requirements for the sale of 
     tobacco products, including the steps listed in subparagraph 
     (F).
       (2) Penalties for violations.--
       (A) In general.--The amount of the civil penalty to be 
     applied for violations of restrictions promulgated under 
     section 906(d), as described in paragraph (1), shall be as 
     follows:
       (i) With respect to a retailer with an approved training 
     program, the amount of the civil penalty shall not exceed--

       (I) in the case of the first violation, $0.00 together with 
     the issuance of a warning letter to the retailer;
       (II) in the case of a second violation within a 12-month 
     period, $250;
       (III) in the case of a third violation within a 24-month 
     period, $500;
       (IV) in the case of a fourth violation within a 24-month 
     period, $2,000;
       (V) in the case of a fifth violation within a 36-month 
     period, $5,000; and
       (VI) in the case of a sixth or subsequent violation within 
     a 48-month period, $10,000 as determined by the Secretary on 
     a case-by-case basis.

       (ii) With respect to a retailer that does not have an 
     approved training program, the amount of the civil penalty 
     shall not exceed--

       (I) in the case of the first violation, $250;
       (II) in the case of a second violation within a 12-month 
     period, $500;
       (III) in the case of a third violation within a 24-month 
     period, $1,000;
       (IV) in the case of a fourth violation within a 24-month 
     period, $2,000;
       (V) in the case of a fifth violation within a 36-month 
     period, $5,000; and
       (VI) in the case of a sixth or subsequent violation within 
     a 48-month period, $10,000 as determined by the Secretary on 
     a case-by-case basis.

       (B) Training program.--For purposes of subparagraph (A), 
     the term ``approved training program'' means a training 
     program that complies with standards developed by the Food 
     and Drug Administration for such programs.
       (C) Consideration of state penalties.--The Secretary shall 
     coordinate with the States in enforcing the provisions of 
     this Act and, for purposes of mitigating a civil penalty to 
     be applied for a violation by a retailer of any restriction 
     promulgated under section 906(d), shall consider the amount 
     of any penalties paid by the retailer to a State for the same 
     violation.
       (3) General effective date.--The amendments made by 
     paragraphs (2), (3), and (4) of subsection (c) shall take 
     effect upon the issuance of guidance described in paragraph 
     (1) of this subsection.
       (4) Special effective date.--The amendment made by 
     subsection (c)(1) shall take effect on the date of enactment 
     of this Act.
       (5) Package label requirements.--The package label 
     requirements of paragraphs (2), (3), and (4) of section 
     903(a) of the Federal Food, Drug, and Cosmetic Act (as 
     amended by this Act) shall take effect on the date that is 12 
     months after the date of enactment of this Act. The effective 
     date shall be with respect to the date of manufacture, 
     provided that, in any case, beginning 30 days after such 
     effective date, a manufacturer shall not introduce into the 
     domestic commerce of the United States any product, 
     irrespective of the date of manufacture, that is not in 
     conformance with section 903(a)(2), (3), and (4) and section 
     920(a) of the Federal Food, Drug, and Cosmetic Act.
       (6) Advertising requirements.--The advertising requirements 
     of section 903(a)(8) of the Federal Food, Drug, and Cosmetic 
     Act (as amended by this Act) shall take effect on the date 
     that is 12 months after the date of enactment of this Act.

     SEC. 104. STUDY ON RAISING THE MINIMUM AGE TO PURCHASE 
                   TOBACCO PRODUCTS.

       The Secretary of Health and Human Services shall--
       (1) convene an expert panel to conduct a study on the 
     public health implications of raising the minimum age to 
     purchase tobacco products; and
       (2) not later than 5 years after the date of enactment of 
     this Act, submit a report to the Congress on the results of 
     such study.

     SEC. 105. ENFORCEMENT ACTION PLAN FOR ADVERTISING AND 
                   PROMOTION RESTRICTIONS.

       (a) Action Plan.--
       (1) Development.--Not later than 6 months after the date of 
     enactment of this Act, the Secretary of Health and Human 
     Services (in this section referred to as the ``Secretary'') 
     shall develop and publish an action plan to enforce 
     restrictions adopted pursuant to section 906 of the Federal 
     Food, Drug, and Cosmetic Act, as added by section 101(b) of 
     this Act, or pursuant to section 102(a) of this Act, on 
     promotion and advertising of menthol and other cigarettes to 
     youth.
       (2) Consultation.--The action plan required by paragraph 
     (1) shall be developed in

[[Page S5161]]

     consultation with public health organizations and other 
     stakeholders with demonstrated expertise and experience in 
     serving minority communities.
       (3) Priority.--The action plan required by paragraph (1) 
     shall include provisions designed to ensure enforcement of 
     the restrictions described in paragraph (1) in minority 
     communities.
       (b) State and Local Activities.--
       (1) Information on authority.--Not later than 3 months 
     after the date of enactment of this Act, the Secretary shall 
     inform State, local, and tribal governments of the authority 
     provided to such entities under section 5(c) of the Federal 
     Cigarette Labeling and Advertising Act, as added by section 
     203 of this Act, or preserved by such entities under section 
     916 of the Federal Food, Drug, and Cosmetic Act, as added by 
     section 101(b) of this Act.
       (2) Community assistance.--At the request of communities 
     seeking assistance to prevent underage tobacco use, the 
     Secretary shall provide such assistance, including assistance 
     with strategies to address the prevention of underage tobacco 
     use in communities with a disproportionate use of menthol 
     cigarettes by minors.

 TITLE II--TOBACCO PRODUCT WARNINGS; CONSTITUENT AND SMOKE CONSTITUENT 
                               DISCLOSURE

     SEC. 201. CIGARETTE LABEL AND ADVERTISING WARNINGS.

       (a) Amendment.--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, sell, offer to sell, distribute, 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 
     nonsmokers.
       ``WARNING: Quitting smoking now greatly reduces serious 
     risks to your health.
       ``(2) Placement; typography; etc.--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. Each label statement shall comprise the top 50 
     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 (c).
       ``(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.
       ``(4) Applicability to retailers.--A retailer of cigarettes 
     shall not be in violation of this subsection for packaging 
     that--
       ``(A) contains a warning label;
       ``(B) is supplied to the retailer by a license- or permit-
     holding tobacco product manufacturer, importer, or 
     distributor; and
       ``(C) is not altered by the retailer in a way that is 
     material to the requirements of this subsection.
       ``(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).
       ``(2) Typography, etc.--Each label statement required by 
     subsection (a) 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 (including a smoke 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 subsection (c). 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--
       ``(A) in the case of 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) Matchbooks.--Notwithstanding paragraph (2), for 
     matchbooks (defined as containing not more than 20 matches) 
     customarily given away with the purchase of tobacco products, 
     each label statement required by subsection (a) may be 
     printed on the inside cover of the matchbook.
       ``(4) 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; the text, format, and 
     type sizes of any required tar, nicotine yield, or other 
     constituent (including smoke constituent) disclosures; or the 
     text, format, and type sizes for any other disclosures 
     required under the Federal Food, Drug, and Cosmetic Act. 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). 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.
       ``(c) Marketing Requirements.--
       ``(1) Random display.--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.
       ``(2) Rotation.--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.
       ``(3) Review.--The Secretary shall review each plan 
     submitted under paragraph (2) and approve it if the plan--
       ``(A) will provide for the equal distribution and display 
     on packaging and the rotation required in advertising under 
     this subsection; and
       ``(B) 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.
       ``(4) Applicability to retailers.--This subsection and 
     subsection (b) apply to a retailer only if that retailer is 
     responsible for or directs the label statements required 
     under this section except that this paragraph shall not 
     relieve a retailer of liability if the retailer displays, in 
     a location open to the public, an advertisement that does not 
     contain a warning label or has been altered by the retailer 
     in a way that is material to the requirements of this 
     subsection and subsection (b).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect 12 months after the date of enactment of 
     this Act. Such effective date shall be with respect to the 
     date of manufacture, provided that, in any case, beginning 30 
     days after such effective date, a manufacturer shall not 
     introduce into the domestic commerce of the United States any 
     product, irrespective of the date of manufacture, that is not 
     in conformance with section 4 of the Federal Cigarette 
     Labeling and Advertising Act (15 U.S.C. 1333), as amended by 
     subsection (a).

     SEC. 202. AUTHORITY TO REVISE CIGARETTE WARNING LABEL 
                   STATEMENTS.

       (a) Preemption.--Section 5(a) of the Federal Cigarette 
     Labeling and Advertising Act (15 U.S.C. 1334(a)) is amended 
     by striking ``No'' and inserting ``Except to the extent the 
     Secretary requires additional or different statements on any 
     cigarette package by a regulation, by an order, by a 
     standard, by an authorization to market a product, or by a 
     condition of marketing a product, pursuant to the Family 
     Smoking Prevention and Tobacco Control Act (and the 
     amendments made by that Act), or as required under section 
     903(a)(2) or section 920(a) of the Federal Food, Drug, and 
     Cosmetic Act, no''.
       (b) Change in Required Statements.--Section 4 of the 
     Federal Cigarette Labeling and Advertising Act (15 U.S.C. 
     1333), as amended

[[Page S5162]]

     by section 201, is further amended by adding at the end the 
     following:
       ``(d) Change in Required Statements.--The Secretary through 
     a rulemaking conducted under section 553 of title 5, United 
     States Code--
       ``(1) shall issue regulations within 24 months of the date 
     of enactment of the Family Smoking Prevention and Tobacco 
     Control Act that require color graphics depicting the 
     negative health consequences of smoking to accompany label 
     requirements; and
       ``(2) may thereafter adjust the format, type size, color 
     graphics, and text of any of the label requirements, or 
     establish the format, type size, and text of any other 
     disclosures required under the Federal Food, Drug, and 
     Cosmetic Act, if the Secretary finds that such a change would 
     promote greater public understanding of the risks associated 
     with the use of tobacco products.''.

     SEC. 203. STATE REGULATION OF CIGARETTE ADVERTISING AND 
                   PROMOTION.

       Section 5 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1334) is amended by adding at the end the 
     following:
       ``(c) Exception.--Notwithstanding subsection (b), a State 
     or locality may enact statutes and promulgate regulations, 
     based on smoking and health, that take effect after the 
     effective date of the Family Smoking Prevention and Tobacco 
     Control Act, imposing specific bans or restrictions on the 
     time, place, and manner, but not content, of the advertising 
     or promotion of any cigarettes.''.

     SEC. 204. SMOKELESS TOBACCO LABELS AND ADVERTISING WARNINGS.

       (a) Amendment.--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, sell, offer to sell, distribute, 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 30 
     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.
       ``(5) A retailer of smokeless tobacco products shall not be 
     in violation of this subsection for packaging that--
       ``(A) contains a warning label;
       ``(B) is supplied to the retailer by a license- or permit-
     holding tobacco product manufacturer, importer, or 
     distributor; and
       ``(C) is not altered by the retailer in a way that is 
     material to the requirements of this subsection.
       ``(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)(A) Each label statement required by subsection (a) in 
     smokeless tobacco advertising shall comply with the standards 
     set forth in this paragraph.
       ``(B) 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.
       ``(C) The word `WARNING' shall appear in capital letters, 
     and each label statement shall appear in conspicuous and 
     legible type.
       ``(D) 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).
       ``(E) 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.
       ``(F) 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.
       ``(G) The label statements shall be in English, except 
     that--
       ``(i) in the case of 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
       ``(ii) 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)(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 
     subparagraphs (A) and (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.
       ``(D) This paragraph applies to a retailer only if that 
     retailer is responsible for or directs the label statements 
     under this section, unless the retailer displays, in a 
     location open to the public, an advertisement that does not 
     contain a warning label or has been altered by the retailer 
     in a way that is material to the requirements of this 
     subsection.
       ``(4) 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; 
     the text, format, and type sizes of any required tar, 
     nicotine yield, or other constituent disclosures; or the 
     text, format, and type sizes for any other disclosures 
     required under the Federal Food, Drug, and Cosmetic Act. The 
     text of any such label statements or disclosures shall be 
     required to appear only within the 20 percent area of 
     advertisements provided by paragraph (2). 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.
       ``(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.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect 12 months after the date of enactment of 
     this Act. Such effective date shall be with respect to the 
     date of manufacture, provided that, in any case, beginning 30 
     days after such effective date, a manufacturer shall not 
     introduce into the domestic commerce of the United States any 
     product, irrespective of the date of manufacture, that is not 
     in conformance with section 3 of the Comprehensive Smokeless 
     Tobacco Health Education Act of 1986 (15 U.S.C. 4402), as 
     amended by subsection (a).

     SEC. 205. AUTHORITY TO REVISE SMOKELESS TOBACCO PRODUCT 
                   WARNING LABEL STATEMENTS.

       (a) In General.--Section 3 of the Comprehensive Smokeless 
     Tobacco Health Education Act of 1986 (15 U.S.C. 4402), as 
     amended by section 204, 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 label requirements, require color 
     graphics to accompany the text, increase the required label 
     area from 30 percent up to 50 percent of the front and rear 
     panels of the package, or establish the format, type size, 
     and text of any other disclosures required under the Federal 
     Food, Drug, and Cosmetic Act, if the Secretary finds that 
     such a change would promote greater public understanding of 
     the risks associated with the use of smokeless tobacco 
     products.''.
       (b) Preemption.--Section 7(a) of the Comprehensive 
     Smokeless Tobacco Health Education Act of 1986 (15 U.S.C. 
     4406(a)) is

[[Page S5163]]

     amended by striking ``No'' and inserting ``Except as provided 
     in the Family Smoking Prevention and Tobacco Control Act (and 
     the amendments made by that Act), no''.

     SEC. 206. TAR, NICOTINE, AND OTHER SMOKE CONSTITUENT 
                   DISCLOSURE TO THE PUBLIC.

       Section 4 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1333), as amended by sections 201 and 202, is 
     further amended by adding at the end the following:
       ``(e) Tar, Nicotine, and Other Smoke Constituent 
     Disclosure.--
       ``(1) In general.--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.
       ``(2) Resolution of differences.--Any differences between 
     the requirements established by the Secretary under paragraph 
     (1) 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.
       ``(3) Cigarette and other tobacco product constituents.--In 
     addition to the disclosures required by paragraph (1), 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 constituent including any 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.
       ``(4) Retailers.--This subsection applies to a retailer 
     only if that retailer is responsible for or directs the label 
     statements required under this section.''.

       TITLE III--PREVENTION OF ILLICIT TRADE IN TOBACCO PRODUCTS

     SEC. 301. LABELING, RECORDKEEPING, RECORDS INSPECTION.

       Chapter IX of the Federal Food, Drug, and Cosmetic Act, as 
     added by section 101, is further amended by adding at the end 
     the following:

     ``SEC. 920. LABELING, RECORDKEEPING, RECORDS INSPECTION.

       ``(a) Origin Labeling.--
       ``(1) Requirement.--Beginning 1 year after the date of 
     enactment of the Family Smoking Prevention and Tobacco 
     Control Act, the label, packaging, and shipping containers of 
     tobacco products for introduction or delivery for 
     introduction into interstate commerce in the United States 
     shall bear the statement `sale only allowed in the United 
     States'.
       ``(2) Effective date.--The effective date specified in 
     paragraph (1) shall be with respect to the date of 
     manufacture, provided that, in any case, beginning 30 days 
     after such effective date, a manufacturer shall not introduce 
     into the domestic commerce of the United States any product, 
     irrespective of the date of manufacture, that is not in 
     conformance with such paragraph.
       ``(b) Regulations Concerning Recordkeeping for Tracking and 
     Tracing.--
       ``(1) In general.--The Secretary shall promulgate 
     regulations regarding the establishment and maintenance of 
     records by any person who manufactures, processes, 
     transports, distributes, receives, packages, holds, exports, 
     or imports tobacco products.
       ``(2) Inspection.--In promulgating the regulations 
     described in paragraph (1), the Secretary shall consider 
     which records are needed for inspection to monitor the 
     movement of tobacco products from the point of manufacture 
     through distribution to retail outlets to assist in 
     investigating potential illicit trade, smuggling, or 
     counterfeiting of tobacco products.
       ``(3) Codes.--The Secretary may require codes on the labels 
     of tobacco products or other designs or devices for the 
     purpose of tracking or tracing the tobacco product through 
     the distribution system.
       ``(4) Size of business.--The Secretary shall take into 
     account the size of a business in promulgating regulations 
     under this section.
       ``(5) Recordkeeping by retailers.--The Secretary shall not 
     require any retailer to maintain records relating to 
     individual purchasers of tobacco products for personal 
     consumption.
       ``(c) Records Inspection.--If the Secretary has a 
     reasonable belief that a tobacco product is part of an 
     illicit trade or smuggling or is a counterfeit product, each 
     person who manufactures, processes, transports, distributes, 
     receives, holds, packages, exports, or imports tobacco 
     products shall, at the request of an officer or employee duly 
     designated by the Secretary, permit such officer or employee, 
     at reasonable times and within reasonable limits and in a 
     reasonable manner, upon the presentation of appropriate 
     credentials and a written notice to such person, to have 
     access to and copy all records (including financial records) 
     relating to such article that are needed to assist the 
     Secretary in investigating potential illicit trade, 
     smuggling, or counterfeiting of tobacco products. The 
     Secretary shall not authorize an officer or employee of the 
     government of any of the several States to exercise authority 
     under the preceding sentence on Indian country without the 
     express written consent of the Indian tribe involved.
       ``(d) Knowledge of Illegal Transaction.--
       ``(1) Notification.--If the manufacturer or distributor of 
     a tobacco product has knowledge which reasonably supports the 
     conclusion that a tobacco product manufactured or distributed 
     by such manufacturer or distributor that has left the control 
     of such person may be or has been--
       ``(A) imported, exported, distributed, or offered for sale 
     in interstate commerce by a person without paying duties or 
     taxes required by law; or
       ``(B) imported, exported, distributed, or diverted for 
     possible illicit marketing,
     the manufacturer or distributor shall promptly notify the 
     Attorney General and the Secretary of the Treasury of such 
     knowledge.
       ``(2) Knowledge defined.--For purposes of this subsection, 
     the term `knowledge' as applied to a manufacturer or 
     distributor means--
       ``(A) the actual knowledge that the manufacturer or 
     distributor had; or
       ``(B) the knowledge which a reasonable person would have 
     had under like circumstances or which would have been 
     obtained upon the exercise of due care.
       ``(e) Consultation.--In carrying out this section, the 
     Secretary shall consult with the Attorney General of the 
     United States and the Secretary of the Treasury, as 
     appropriate.''.

     SEC. 302. STUDY AND REPORT.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of cross-border trade in tobacco 
     products to--
       (1) collect data on cross-border trade in tobacco products, 
     including illicit trade and trade of counterfeit tobacco 
     products and make recommendations on the monitoring of such 
     trade;
       (2) collect data on cross-border advertising (any 
     advertising intended to be broadcast, transmitted, or 
     distributed from the United States to another country) of 
     tobacco products and make recommendations on how to prevent 
     or eliminate, and what technologies could help facilitate the 
     elimination of, cross-border advertising; and
       (3) collect data on the health effects (particularly with 
     respect to individuals under 18 years of age) resulting from 
     cross-border trade in tobacco products, including the health 
     effects resulting from--
       (A) the illicit trade of tobacco products and the trade of 
     counterfeit tobacco products; and
       (B) the differing tax rates applicable to tobacco products.
       (b) Report.--Not later than 18 months after the date of 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to the Committee on Health, Education, 
     Labor, and Pensions of the Senate and the Committee on Energy 
     and Commerce of the House of Representatives a report on the 
     study described in subsection (a).
       (c) Definition.--In this section:
       (1) The term ``cross-border trade'' means trade across a 
     border of the United States, a State or Territory, or Indian 
     country.
       (2) The term ``Indian country'' has the meaning given to 
     such term in section 1151 of title 18, United States Code.
       (3) The terms ``State'' and ``Territory'' have the meanings 
     given to those terms in section 201 of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 321).

                          ____________________