[Congressional Record (Bound Edition), Volume 150 (2004), Part 1]
[Senate]
[Pages 215-216]
[From the U.S. Government Publishing Office, www.gpo.gov]




          PREVENT ALL CIGARETTE TRAFFICKING (PACT) ACT OF 2003

  Mr. HATCH. Madam President, I am pleased to inform my colleagues that 
we have reached an agreement on final language for S. 1177, the Prevent 
All Cigarette Trafficking, PACT Act of 2003, which my friend Senator 
Kohl and I introduced on June 3, 2003. The manager's amendment makes 
the PACT Act even stronger than as introduced.
  The distinguished Senator from Wisconsin and I originally introduced 
the PACT Act because of our concern that contraband cigarette 
trafficking both damages the economies of several States and 
contributes heavily to the profits of organized crime syndicates, 
including global terrorist organizations. When we reported this bill 
from the Judiciary Committee on July 31, 2003, I pledged to work with 
my colleagues on both sides of the aisle to address any and all 
concerns they had with the legislation. The result of this bipartisan 
effort is a piece of legislation that will prevent cigarette and 
smokeless tobacco smuggling and ensure the collection of tobacco excise 
taxes without infringing upon the rights of Native Americans or 
consumers.
  Internet sales of cigarettes and smokeless tobacco are an impediment 
States face in their collection of tobacco excise taxes. A recent 
General Accounting Office report indicates Internet tobacco sellers 
rarely comply with requirements under the Jenkins Act of 1949 (15 
U.S.C. Sec. Sec. 375-378 (2003)). The Jenkins Act, as modified by this 
legislation, is a Federal statute that requires tobacco retailers to 
register with the tax authority for each State in which they sell 
cigarette and smokeless tobacco products and to file monthly reports 
providing shipment information within each state. Failing to comply 
with the Jenkins Act damages not only individual States, but also 
retailers that are put in unfair commercial disadvantage.

[[Page 216]]

  By ensuring the collection of state excise taxes from all tobacco 
retailers, the PACT Act will neither inconvenience nor hinder smokers 
and smokeless tobacco users in their ability as consumers to purchase 
the tobacco products of their choice over the Internet. This 
legislation merely removes any uncertainty regarding the scope of the 
Jenkins Act by explicitly mandating Internet tobacco retailers also 
comply with existing requirements under the Jenkins Act. This strong 
vehicle with which to collect taxes from Internet tobacco retailers 
will allow States to finally claim their rightful revenue and level the 
playing field for all tobacco retailers.
  The PACT Act as modified by the manager's amendment also clarifies 
that the bill will not affect existing tribal compacts relating to 
tobacco tax collection on tribal lands and allows Native American 
Tribes to maintain enforcement authority over their own excise tax 
laws.
  As I mentioned in June, law enforcement authorities have uncovered 
several instances in which organized crime syndicates are illegally 
funding terrorist organizations, such as Lebanon-based Hezbollah, 
through the smuggling of cigarettes. These groups purchase cigarettes 
in States with low taxes and then transport them into states with 
higher taxes where the contraband is sold to small retailers at below 
market costs. The September 19, 2003, edition of the Detroit Free Press 
reports that one such scheme involved a 12-member syndicate, which 
purchased cigarettes in North Carolina and resold them in Michigan. 
Because North Carolina collects a 50-cent-per-carton tax and Michigan 
collects a $12.50 per carton tax, federal prosecutors estimated that 
one member of the scheme, Hassan Moussa Makki, who monthly smuggled 
$36,000 to $72,000 worth of cigarettes into the State during a 2-year-
period, prevented Michigan from collecting $2 million in tax revenue. 
Law enforcement authorities determined Makki donated a substantial 
portion of these profits to Hezbollah. By providing state attorneys 
general with the necessary enforcement tools and the Bureau of Alcohol, 
Tobacco, Firearms and Explosives with investigative and inspection 
authority, the PACT Act will ultimately disrupt this form of terrorist 
funding and ensure that state, local and tribal governments collect 
their rightful excise taxes from both cigarette and smokeless tobacco 
sales.
  With respect to delivery sales of smokeless tobacco, this provision 
is intended to impose strict federal limitations on delivery sales in 
order to supplement, and not preempt, applicable State or local law. 
Accordingly, it is intended that State-specific requirements in 
connection with the collection and remittance of applicable smokeless 
tobacco excise taxes will remain controlling, notwithstanding that 
advance payment of excise taxes might otherwise be required by Federal 
law in the absence of contrary State law. Moreover, the Federal 
proscription of delivery sales of smokeless tobacco with respect to 
which excise taxes have not been paid in advance of the delivery is not 
intended to apply where the laws or administrative practices of the 
State and locality in which the delivery is made provide that the 
delivery seller may remit applicable smokeless tobacco excise taxes in 
an alternate manner.
  For example, the law of the delivery State and locality may 
explicitly or implicitly provide for the payment of smokeless tobacco 
excise taxes along with the filing of a tax return in the month 
subsequent to the delivery sale. Under such circumstances, even though 
applicable State or local law may not require the applicable smokeless 
tobacco excise taxes be remitted after the delivery, where the law of 
the delivery State and locality allows for such taxes to be remitted 
after the delivery, the intent of this provision is that the delivery 
sale may be made without violating federal law provided that applicable 
State and local law with respect to the collection and/or remittance of 
applicable smokeless tobacco excise taxes are satisfied.
  I call upon my colleagues to support Senator Kohl's and my efforts to 
prevent the funding of global terrorist organizations and ensure the 
collection of all excise taxes from the sale of cigarettes and 
smokeless tobacco, including Internet sales, so States can utilize 
their rightful revenue.

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