[Senate Report 105-180]
[From the U.S. Government Publishing Office]
Calendar No. 353
105th Congress Report
SENATE
2d Session 105-180
_______________________________________________________________________
NATIONAL TOBACCO POLICY AND YOUTH SMOKING REDUCTION ACT
__________
R E P O R T
OF THE
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
on
S. 1415
May 1, 1998.--Ordered to be printed
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
one hundred fifth congress
second session
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington WENDELL H. FORD, Kentucky
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA SNOWE, Maine JOHN F. KERRY, Massachusetts
JOHN ASHCROFT, Missouri JOHN B. BREAUX, Louisiana
BILL FRIST, Tennessee RICHARD H. BRYAN, Nevada
SPENCER ABRAHAM, Michigan BYRON L. DORGAN, North Dakota
SAM BROWNBACK, Kansas RON WYDEN, Oregon
John Raidt, Staff Director
Mark Buse, Policy Director
Ivan A. Schlager, Democratic Chief Counsel and Staff Director
James S. W. Drewry, Democratic General Counsel
Calendar No. 353
105th Congress Report
SENATE
2d Session 105-180
_______________________________________________________________________
NATIONAL TOBACCO POLICY AND YOUTH SMOKING REDUCTION ACT
_______
May --, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. McCain, from the Committee on Commerce, Science, and
Transportation, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany S. 1415]
The Committee on Commerce, Science, and Transportation, to
which was referred the bill (S. 1415) ``A Bill to reform and
restructure the processes by which tobacco products are
manufactured, marketed, and distributed, to prevent the use of
tobacco products by minors, to redress the adverse health
effects of tobacco use, and for other purposes'', having
considered the same, reports favorably thereon with an
amendment (in the nature of a substitute) and recommends that
the bill (as amended) do pass.
purpose of the bill
The purpose of this bill is (1) to prevent children from
using tobacco products; (2) to more effectively inform the
public of the dangers of using tobacco products; (3) to ensure
that nicotine and tobacco products are appropriately regulated
by the Food and Drug Administration to better protect public
health; (4) to settle claims of the various states against the
tobacco industry; (5) to require payments from the industry to
provide for the settlement of relevant state suits; (6) to
increase the price-per-pack of cigarettes to deter youth
consumption; (7) to provide a stream of revenue to finance
smoking prevention, cessation and related health research
initiatives; and (8) to assist tobacco farmers and rural
communities affected by reductions in the volume of tobacco
consumption.
background and need for the legislation
The use of tobacco products poses a serious threat to public
health. Health studies show that nicotine is an addictive
substance and tobacco use is harmful to the human body. In the
United States, over 400,000 people per year die from smoking
related disease, including cancer, heart disease and emphysema.
The human and economic toll of tobacco use is enormous. The
Surgeon General reports that tobacco use is the number one
preventable cause of disease and death.
The Secretary of HHS estimates that smoking related health
care costs exceed $45 billion per year, including from Medicare
and Medicaid, and the total economic cost of tobacco use exceed
$145 billion per year, including the cost of fire damage and
related injuries; absenteeism and lost productivity.
The vast majority of tobacco users (90 percent) take up the
addiction in their teenage years. Four and one-half million
underage Americans use tobacco. Three thousand youth begin
smoking every day, one thousand of whom will die early from
smoking related disease. The American Cancer Society calls
youth consumption of tobacco a ``pediatric epidemic.''
According to the Center for Disease Control one out of three
adolescents in the United States is using tobacco by age 18.
Seventy-one percent of underage smokers smoke daily. Every
living Surgeon General has signed a letter urging Congress to
approve comprehensive legislation to address the public health
problems associated with tobacco use..
Tobacco industry documents indicate that tobacco companies
have long known the adverse health impact and addictiveness of
tobacco use, and, nevertheless, have actively marketed to
children and teens.
Forty-one states have filed suit against the tobacco industry
to recover damages. On June 20, 1997, the state attorneys
general, plaintiff attorneys and the industry reached an
agreement in principle to settle state and other civil suits.
Under the settlement, the industry would agree to tobacco
advertising and marketing restrictions; nicotine and tobacco
products would be submitted to FDA regulation; the industry
would agree to meet youth tobacco use reduction targets and pay
assessments for non-attainment of such targets; and the
industry would pay up to $368 billion over the next 25 years.
In return, under the June 20th agreement, the industry would
receive certain limitations on liability.
The June 20th agreement cannot take effect without enactment
of implementing legislation, and the execution of a National
Protocol and state consent decrees. The protocol and consent
decrees would bind the industry to obligations under the
agreement that, due to constitutional limitations, may not be
imposed on the industry without their consent to the waiver of
certain constitutional rights.
The National Tobacco Policy and Youth Smoking Reduction Act
mirrors the structural framework of the June 20th agreement,
although there are significant differences. In general, the
bill increases industry payments from $368 billion over 25
years to $516 billion; approximately doubles the penalties the
industry would pay for failure to attain targets for the
reduction of youth tobacco use; and bolsters FDA regulatory
authority over nicotine and tobacco products. The bill provides
a yearly civil liability cap; settles only state and local
government suits and the Castano class action claims based on
tobacco addiction and dependency, and does not restrict the
right of groups or individuals to sue and receive compensation
from the industry.
legislative history
At least five comprehensive tobacco policy bills have been
introduced in the Senate during the 105th Congress. The omnibus
nature of these measures, including legislation to implement
the June 20th Agreement, contained provisions within the
jurisdiction of various Senate Committees.
The multi-jurisdictional nature of comprehensive tobacco
legislation posed procedural and logistical difficulties for
the Senate in determining how, and in what form, omnibus
legislation would be reported to the full Senate. Legislation
to implement the comprehensive tobacco settlement reached
between state Attorneys General and the tobacco industry
contained provisions that would customarily fall under the
legislative jurisdiction of various Senate Committees including
the Commerce, Science, and Transportation Committee, the Labor
and Human Resources Committee, the Finance Committee, the
Judiciary Committee, the Agriculture Committee, the Environment
and Public Works Committee, and the Indian Affairs Committee.
In order to ensure that a single comprehensive and bipartisan
tobacco bill would be reported to the full Senate in a timely
manner, the Senate Commerce Committee was selected to develop
and report such a bill. Therefore, the Commerce Committee was
required to address issues not otherwise within the scope of
the Committee. The chairmen of the other directly relevant
committees were subsequently invited to testify about their
priorities for a tobacco bill before the Commerce Committee, as
were other interested Senators.
To fulfill its charge of dealing with this comprehensive
legislation, the Committee conducted ten hearings concerning
proposed tobacco legislation. Each of those hearings is
summarized below
Hearing I: July 29, 1997
The first full committee hearing to begin examination of the
Global Settlement of Tobacco Litigation was held on July 29,
1997.
witnesses
PANEL I
Dr. C. Everett Koop, Co-Chair, The Advisory Committee on
Tobacco Policy and Public Health
Dr. David A. Kessler, Co-Chair, The Advisory Committee on
Tobacco Policy and Public Health
PANEL II
Hon. Hubert H. Humphrey III, Attorney General of Minnesota
Hon. Grant Woods, Attorney General of Arizona
Hon. Christine Gregoire, Attorney General of Washington
Hon. Mike Moore, Attorney General of Mississippi
PANEL I
The Co-Chairs of The Advisory Committee on Tobacco Policy and
Public Health, Dr. C. Everett Koop and Dr. David A. Kessler,
asked Congress to act urgently to enact legislation to protect
the American people from smoking-related illnesses. They
indicated there are 50 million tobacco ``addicts'' in this
country, that each day 3,000 new children become addicted, and
that one-third of them will die prematurely from smoking
related disease. They also advised that the proposed tobacco
settlement should be strengthened to meet public health goals,
and that no special liability protections should be afforded to
the industry.
PANEL II
Attorney General Hubert Humphrey III urged Congress to pass
tobacco legislation. He agreed with Dr. Koop's and Dr.
Kessler's proposals to strengthen the tobacco settlement and
requested that Congress subpoena key tobacco documents that
show that the tobacco industry has lied to Congress since the
1960s.
Attorney General Grant Woods stated that he believed that the
negotiated tobacco settlement was an excellent agreement. He
warned that it may not be possible to strengthen tobacco
legislation due to constitutional limitations and the need for
consent to waive constitutional rights.
Attorney General Christine Gregoire testified that the
tobacco settlement was based on the need to prevent tobacco
sales to children, and change the corporate culture of the
tobacco industry to prevent tobacco advertising aimed at
children.
Attorney General Mike Moore gave a background to the
negotiations and purpose of the tobacco agreement. He also
discussed the advertising and liability provisions of the
settlement.
Hearing II: September 16, 1997
The committee held its second hearing on September 16, 1997.
The hearing examined the effect of advertising and marketing on
children and explored the advertising restrictions included in
the tobacco settlement.
witnesses
PANEL I
Ms. Shirley Igo, Vice President For Legislation, National
Parent Teacher Association
Mr. Matthew Myers, Executive Vice President & General
Counsel, National Center for Tobacco Free Kids
PANEL II
Dr. Joseph DiFranza, University of Massachusetts Medical
Center
Dr. Alfred Munzer, Past President of the American Lung
Association
Mr. D. Scott Wise, Partner, Davis, Polk & Wardwell
PANEL I
Shirley Igo, Vice President for Legislation, National Parent
Teacher Association, testified that tobacco advertising is very
influential in convincing children to start smoking. She also
stated the National PTA supported only restrictions on
advertising directed to children and youth to be sensitive to
the First Amendment considerations.
Matthew Myers, Executive Vice-President for the Campaign for
Tobacco-Free Kids, agreed that tobacco marketing and
advertising is a major cause of increased smoking among youth.
He also believed that the tobacco settlement between the
attorneys general and the tobacco industry should be
strengthened to restrict marketing and advertising to children
and include a comprehensive program to reduce youth smoking.
PANEL II
Dr. Joseph DiFranza testified on the behalf of the non-profit
organization Stop Teenage Addiction to Smoking (STAT). He said
that there has been a reduction in teen smoking where there is
strong enforcement of community laws that prohibit tobacco
sales to children. He also alleged that the tobacco industry
has played a key role in reducing the ability of communities to
enforce their anti-teen smoking laws.
Dr. Alfred Munzer, Past President of the American Lung
Association, testified that he did not support the proposed
tobacco settlement because it failed to achieve meaningful
public health protections. He also stated that the provisions
of the tobacco settlement concerning tobacco advertising will
not inhibit the tobacco industry's ability to appeal to
teenagers.
D. Scott Wise, a partner with Davis, Polk, and Wardwell who
has represented major tobacco companies, stated that provisions
of the tobacco settlement concerning youth smoking were based
on restrictions proposed by the U.S. Food and Drug
Administration (FDA) in their rule, issued in 1996, concerning
tobacco. Mr. Wise noted the agreement included every
restriction the FDA proposed and added even more restrictions.
He believes that these restrictions are strong enough to
significantly diminish the allure and access to tobacco
products by youth.
Hearing III: October 9, 1997
The committee held its third hearing on October 9, 1997. The
hearing examined the potential impact of the proposed tobacco
settlement on public health.
witnesses
Dr. John Seffrin, CEO, American Cancer Society
Dr. Ronald M. Davis, Chair, Council on Scientific Affairs,
American Medical Association
Mr. Cass Wheeler, CEO, American Heart Association
Dr. John Seffrin, the Chief Executive Officer of the American
Cancer Society, stated that tobacco causes the largest number
of preventable deaths in our country. It also annually costs
the U.S. economy $100 billion of which $22 billion comes from
taxpayers to pay for treating smokers through Medicare,
Medicaid, and VA programs. He also said that tobacco should be
considered a ``pediatric'' disease, because ninety percent of
all smokers start by age 18. He urged strong legislation to
reduce the incidence of smoking and tobacco use.
Dr. Ronald M. Davis, Chair of the American Medical
Association's Council on Scientific Affairs, testified that the
proposed tobacco settlement is a promising beginning to meeting
public health goals of reduced smoking. However, he suggested
that the FDA should have more authority over tobacco products
and the Look Back program (assessments on the industry for non-
attainment of youth smoking reduction targets) should be
redesigned to provide further incentives for the tobacco
companies to reduce underage tobacco use.
M. Cass Wheeler, Chief Staff Executive Officer of the
American Heart Association, agreed with earlier testimony that
tobacco advertising played an important role in the increase in
youth smoking. He supported measures to encourage the tobacco
industry to stop marketing and promoting tobacco to children.
Hearing IV: February 24, 1998
At the Committee's fourth hearing, the chairmen of the five
major tobacco companies testified.
WITNESSES
Mr. Geoffrey C. Bible, Chairman and CEO, Philip Morris
Companies, Inc.
Mr. Nicholas G. Brooks, Chairman and CEO, Brown and
Williamson Tobacco Corporation
Mr. Steven F. Goldstone, Chairman and CEO, RJR Nabisco, Inc.
Mr. Laurence A. Tisch, Co-Chairman of the Board and Co-CEO,
Loews Corporation
Mr. Vincent A. Gierer, Jr., Chairman and CEO, UST Inc.
Geoffrey C. Bible, Chairman and Chief Executive Officer of
the Philip Morris Companies, testified that the proposed
tobacco settlement offered an opportunity for cooperation and
progress in the debate over tobacco policy, and that a new era
of responsible management was at the helm.
N.G. Brookes, Chairman and Chief Executive Officer of Brown
and Williamson Tobacco Corporation agreed with Mr. Bible that
the legislation offered an opportunity to achieve public health
goals, and asked that the Committee to pursue legislation that
will benefit the American people, rather than enacting
legislation that would seek to punish the tobacco companies.
Steven F. Goldstone, Chairman and Chief Executive Officer of
RJR Nabisco, Inc., stated that he believed the proposed
settlement was an appropriate balance between the ability of
the tobacco companies to sell a legal product and the country
to establish a public health policy that educates people about
health issues concerning tobacco products.
Laurence A. Tisch, Co-Chairman of the Board and Co-CEO, Loews
Corporation, said that the tobacco settlement was a realistic
plan to deal with cigarette smoking and other forms of tobacco
use.
Vincent A. Gierer, Jr., Chairman and Chief Executive Officer
of UST Inc., also agreed that the tobacco settlement was a
comprehensive approach to resolving the different concerns
about tobacco products. He warned that if the settlement was
addressed in a piecemeal fashion, it might not achieve the
shared goals of reducing youth access to tobacco products and
achieving other public health objectives.
Hearing V: February 26, 1998
The committee held a fifth hearing on February 26, 1998. The
hearing addressed the issue of civil liability for tobacco
related harm.
WITNESSES
PANEL I
Hon. Orrin Hatch, U.S. Senator, Utah
PANEL II
Hon. Mike Moore, Attorney General of Mississippi
Hon. Carla Stovall, Attorney General of Kansas
Hon. Gale Norton, Attorney General of Colorado
PANEL III
Mr. Stanley Chesley, Esq., Waite, Schneider, Bayless &
Chesley Co., L.P.A.
Mr. Eugene Pavalon, Past President, Association of Trial
Lawyers of America
Professor Kris Kobach, University of Missouri at Kansas City
School of Law
Mr. Richard Scruggs, Scruggs, Millette, Lawson, Bozeman &
Dent
PANEL I
Senator Orrin G. Hatch, Chairman of the Senate Committee on
the Judiciary, stated his support for comprehensive tobacco
legislation largely based on the proposed tobacco settlement.
He warned that the advertising restrictions would violate the
First Amendment unless they are based on consent. He urged the
committee to find a constitutional way to obtain that consent
and thus to achieve these restrictions.
PANEL II
Attorney General Mike Moore testified that the civil
liability provisions play an important part in the proposed
agreement as they are needed to get the tobacco companies to
agree to waive their constitutional rights, among them,
restrictions on their rights to advertise.
Attorney General Carla Stovall said that she felt that the
benefits of the tobacco settlement outweighed the concerns
about it and urged Congress to support legislation to enact the
agreement.
Attorney General Gale Norton explained the provisions of the
tobacco settlement concerning civil liability and related
issues.
PANEL III
Stanley M. Chesley, of Waite, Schneider, Bayless & Chesley
Co., L.P.A., explained that the tobacco settlement only settled
state and local cases and the Castano class action. Although
existing class actions would be decertified, individuals could
still pursue their individual claims for smoking related
injuries.
Eugene I. Pavalon, former President of the Association of
Trial lawyers of America, said that the liability provisions
are inadequate for those injured by tobacco companies, and
urged that any legislation should include direct compensation
to victims and meaningful penalties on the industry.
Professor Kris Kobach, Professor of Constitutional Law at the
University of Missouri in Kansas City stated that congressional
interference with the contracts between the States and their
attorneys, concerning attorney's fees, would be
unconstitutional and likely would be invalidated in the court
if challenged.
Richard F. Scruggs, the Senior Partner in the law firm
Scruggs, Millette, Lawson, Bozeman & Dent, P.A., testified that
restricting class actions against the tobacco industry is a
protection for individual plaintiffs because the restriction
prevents the industry from collusively settling a class action
and thereby evade liability to individual victims.
Hearing VI: March 3, 1998
The committee held its sixth hearing on March 3, 1998. The
hearing examined the advertising, marketing and labeling
restrictions in the proposed tobacco settlement.
WITNESSES
PANEL I
Honorable Connie Mack, U.S. Senator, Florida
PANEL II
Mr. Robert Pitofsky, Chairman, Federal Trade Commission
Dr. Michael Eriksen, Director, Office on Smoking and Health,
Centers for Disease Control and Prevention
PANEL III
Mr. Matthew Myers, Executive V.P. & General Counsel, National
Center for Tobacco Free Kids
Professor Richard Daynard, Northeastern University School of
Law
Mr. David Versfelt, Esq., Donovan, Leisure, Newton & Irvine,
LLP
Professor Martin Redish, Louis and Harriet Ancel Professor of
Law and Public Policy, Northwestern University School of Law
PANEL I
Senator Connie Mack testified that the most effective way to
improve the health of American citizens is for the Congress to
pass bipartisan legislation based on a consensual agreement
between the tobacco companies and the American people.
PANEL II
FTC Chairman Robert Pitofsky addressed proposed restrictions
on the advertising, marketing and sale of tobacco products, as
well as possible areas for FTC involvement. He also indicated
an antitrust exemption was not necessary to implement proposed
settlement.
Michael Eriksen, an official with the Centers for Disease
Control and Prevention, discussed the problem of tobacco use by
youth and ways to address it. According to Dr. Eriksen, tobacco
use is the number one preventable cause of death and disease in
our society. Each person who dies of tobacco-related lung
cancer loses an average of 14 years from their predicted life
expectancy.
PANEL III
Matthew Myers, from the Campaign for Tobacco-Free Kids,
argued that congressional action is needed to insure that at
least one federal agency has the authority to eliminate those
forms of tobacco advertising that have the greatest impact on
children. Specifically, Mr. Myers argued that it would not be
difficult to amend Section 520(e) of the Food, Drug and
Cosmetic Act to clarify that this section enables the Food and
Drug Administration to regulate tobacco advertising.
Northeastern University School of Law Professor Richard
Daynard testified that the contemplated advertising
restrictions for tobacco products could be constitutionally
imposed without the consent of the tobacco industry. Professor
Daynard argued that Congress has the power to directly regulate
the tobacco industry's commercial advertising.
The general counsel to the American Association of
Advertising Agencies, David Versfelt, expressed concern that
Congress might statutorily enact the unprecedented, sweeping
advertising restrictions in the Proposed Settlement. Mr.
Versfelt testified that such restrictions were not
Constitutional and that Congressional imposition of content and
format based commercial speech restrictions would also
establish unfortunate precedents that go far beyond the subject
of tobacco advertising.
Mr. Martin Redish, the Louis and Harriet Ancel Professor of
Law and Public Policy at Northwestern University, evaluated the
constitutionality of the suppression or restriction of tobacco
advertising. Dr. Redish testified that, in his view,
governmental restriction of tobacco advertising violates
fundamental precepts underlying the First Amendment guarantee
of free speech, as well as established Supreme Court doctrine
concerning the protection of commercial speech.
Hearing VII: March 11, 1998
The committee held its seventh hearing on March 11, 1998. At
the hearing the Committee heard testimony from Senators
concerning the various bills introduced concerning the tobacco
settlement.
WITNESSES
Hon. Richard Lugar, U.S. Senator, Indiana
Hon. Max Baucus, U.S. Senator, Montana
Hon. Orrin G. Hatch, U.S. Senator, Utah
Hon. John H. Chaffee, U.S. Senator, Rhode Island
Hon. Kent Conrad, U.S. Senator, North Dakota
Senator Dick Lugar, Chairman of the Senate Committee on
Agriculture, Nutrition and Forestry, testified that his support
for tobacco legislation will be guided by three basic
principles: (1) increasing the price per pack of cigarettes by
at least $1.50; (2) opposing any limitation on the right of any
individual or group to seek legal redress; and (3) his belief
that it is simply wrong for the federal government to support
tobacco farming, marketing, and warehousing.
Senator Max Baucus testified that the ultimate goals of
Congress for national tobacco policy should be to: (1) protect
kids from a product that is harmful to them; (2) make tobacco
less available to kids; and (3) dedicate payments from the
tobacco industry toward children including child care, child
healthcare, education and programs to stop children from
smoking).
Senator Orrin G. Hatch, Chairman of the Senate Committee on
the Judiciary, testified in support of S. 1530, the Placing
Restraints on Tobacco's Endangerment of Children and Teens Act
(PROTECT) Act. Senator Hatch said his legislation is
comprehensive and has worked through many of the tough
questions associated with devising a national anti-tobacco
program that would work well. He urged the Committee to use S.
1530 as a starting point in drafting legislation.
Senator John H. Chaffee, Chairman of the Senate Committee on
Environment and Public Works, testified on Environmental
Tobacco Smoke (ETS). According to the Senator, the ETS
exposures of most concern are beyond the reach of the federal
government. Those most vulnerable to ETS are children and non-
smoking adults that live with smokers. ETS, better known as
second-hand smoke, creates public health and policy dilemmas of
its own because one cannot address ETS exposure in private
homes but this is where the most significant exposures occur.
Senator Kent Conrad explained that the purpose of the bill he
introduced, S. 1638, the Healthy Kids Act, is to protect
children, promote the public health, help tobacco farmers,
resolve Federal, State and local legal claims, invest in
children and health care, and provide savings for Social
Security and Medicare.
Hearing VIII: March 17, 1998
The committee held its eighth hearing on March 17, 1998. The
hearing addressed issues concerning tobacco and the Food and
Drug Administration (FDA). The hearing also examined the
regulatory issues raised by spit tobacco.
WITNESSES
PANEL I
Mr. Bill Schultz, Deputy Commissioner for Policy, Food and
Drug Administration
Dr. Gregory N. Connolly, Director, Massachusetts Tobacco
Control Program, Massachusetts Department of Public Health
PANEL II
Mr. Joe Garagiola, Former Baseball Player and anti-tobacco
advocate
Mr. Richard Verheij, General Counsel, UST
PANEL I
Deputy FDA Commissioner Bill Schultz discussed three tobacco
issues of concern to the FDA: (1) the Agency's tobacco program
as formulated through regulation; (2) the Administration's
position on tobacco legislation; and (3) some of the issues
relevant to FDA's authority raised by pending bills.. Mr.
Schultz emphasized that the FDA and the Administration strongly
support comprehensive tobacco legislation which would
significantly reduce young people's tobacco use and meet the
other goals announced by the President.
Dr. Gregory N. Connolly is the Director of the Massachusetts
Tobacco Control Program with the Massachusetts Department of
Public Health. He testified on the health risk to consumers of
spit tobacco products and efforts to develop spit tobacco
cessation programs.
PANEL II
Joe Garagiola, a former baseball player and Baseball Hall of
Fame member, testified on behalf of the National Spit Tobacco
Education Program. Mr. Garagiola stated that spit tobacco is
dangerous, addictive and potentially deadly. He discussed the
use of spit tobacco in professional baseball and his campaign
to stop it.
Richard H. Verheij, Executive Vice President and General
Counsel of UST testified on his company's production and
marketing of smokeless tobacco products. He discussed his
support for the Proposed Resolution between the Attorneys
General and the tobacco industry.
Hearing IX: March 19, 1998
The committee held its ninth hearing on March 19, 1998. The
hearing examined both how the tobacco settlement would change
the price of cigarettes and the way tobacco products are sold
at retail.
WITNESSES
PANEL I
Mr. Raymond Scheppach, Executive Director, National
Governors' Association
Mr. R. Timothy Columbus, Counsel, National Association of
Convenience Stores
PANEL II
Mr. Martin Feldman, Senior Analyst, Smith Barney, Inc.
PANEL I
Raymond C. Scheppach, Executive Director of the National
Governors' Association, testified on the commitment of the
nation's governors to reduce youth smoking and restrict access
to tobacco products by underage Americans.
Washington attorney R. Timothy Columbus, testified on behalf
of the National Association of Convenience Stores. Mr. Columbus
told the Committee that the Association's primary concern
regarding the proposed settlement are its proposed restrictions
on access to, and promotion of, tobacco products in retail
establishments. The Association seeks workable restrictions on
tobacco access that reflect practical aspects of retailing. Mr.
Columbus recommended that any regulations on the sale or
advertisement of tobacco products at retail stores be equally
and uniformly applied to all types of retailers that sell
tobacco products.
PANEL II
Martin Feldman, equity analyst with Salomon Smith Barney,
testified on the potential impact of various legislative
proposals on the valuation of cigarette manufacturers. Mr.
Feldman stated that the retail prices of cigarettes may
experience a larger increase as a result of the tobacco
settlement legislation than has been previously forecasted.
Hearing X: March 23, 1998
The Committee held its tenth and final hearing on March 23,
1998. The hearing addressed issues concerning the
constitutionality of certain legislative proposals, the
implications of bankruptcy for creditors and future plaintiffs,
and issues concerning the price of tobacco products under
proposed tobacco legislation.
WITNESSES
PANEL I
Hon. Jonathan Gruber, Deputy Assistant Secretary, Office of
Economic Policy, Department of Treasury
Hon. Larry Summers, Deputy Secretary, Department of Treasury
PANEL II
Mr. Floyd Abrams, Constitutional Lawyer, Cahil Gordon &
Reindel
Mr. Scott Strand, Deputy Counsel, Office of the Attorney
General, State of Minnesota
PANEL III
Mr. Martin Feldman, Senior Analyst, Smith Barney, Inc.
Mr. Harvey Miller, Bankruptcy Lawyer, Weil Gotshal & Manges
LLP
Mr. Harvey Rosen, Economist, Burke, Rosen & Associates
PANEL I
Treasury Deputy Secretary Lawrence Summers and Deputy
Assistant Secretary Gruber testified on the Administration's
budget proposal calling for a $1.10 increase in the price per
pack of cigarettes. Secretary Summers also addressed concerns
that comprehensive tobacco legislation, in line with the
President's core principles, would impose unmanageable
adjustment costs on tobacco suppliers and the tobacco industry
as a whole. Secretary Summers concluded that the President's
proposal would not inflict an undue financial burden on the
tobacco industry and that it would not push the industry into
bankruptcy.
PANEL II
Floyd Abrams, a partner with Cahill Gordon & Reindel,
testified on the First Amendment issues concerning limitations
of tobacco advertising. Mr. Abrams indicated that given
existing Supreme Court precedent, it is unlikely that the Food
and Drug Administration's proposed regulations on advertising
could survive First Amendment scrutiny. Mr. Abrams also
indicated that the advertising restrictions contained in the
Proposed Settlement could not be constitutionaly imposed on the
tobacco companies without their consent.
Scott R. Strand, Deputy Counsel for the Minnesota State
Attorney General's office, stated that Congress could impose
strong restrictions on tobacco advertising without the consent
of the tobacco industry. Mr. Strand also said that advertising
restrictions achieved through consent agreements would not
work; in part, due to the difficulty of enforcing such
agreements. Mr. Strand also encouraged Congress to adopt strong
youth smoking reduction standards.
PANEL III
Martin Feldman, equity analyst with Salomon Smith Barney,
explained the effect of the tobacco settlement on the financial
status of the tobacco companies and the prices of cigarettes.
Harvey R. Miller, Senior Partner with Weil, Gotshal & Manges
LLP, Harvey S. Rosen, of Burke, Rose & Associates of Cleveland,
Ohio, testified on the considerations a company undertakes when
contemplating bankruptcy, the protections and procedures found
in the Bankruptcy Code, and the implications of bankruptcy
protection for interested parties, including those individuals
with a legal claim against an entity which seeks bankruptcy
protection.
Section-by-Section Analysis
SECTION L. SHORT TITLE; TABLE OF CONTENTS
Section 1 provides that the bill may be cited as the
``National Tobacco Policy and Youth Smoking Reduction Act of
1998.'' This section also contains the table of contents for
the bill.
SECTION 2. FINDINGS
Section 2 includes the findings of Congress with respect to
tobacco and the need for comprehensive legislation to establish
national tobacco policies to reduce youth consumption of
tobacco, and to reduce the adverse public health, economic, and
social impacts of tobacco use.
SECTION 3. PURPOSE
Section 3 establishes that the purposes of the Act are to
confirm the authority of the Food and Drug Administration to
regulate tobacco products under the Food, Drug and Cosmetic
Act; to require the tobacco industry to fund tobacco regulation
and other initiatives to prevent and redress the adverse
economic and health impacts of tobacco use; to tighten youth
access restrictions; to establish youth consumption targets and
subject the industry to financial penalties for failing to meet
such targets.
SECTION 4. SCOPE AND EFFECT
Section 4 establishes that Congress does not intend the act
to establish any precedent with regard to other industries,
circumstances, situations or legal actions. This section also
establishes that the act does not affect the authority of the
Secretary of the Treasury, or state and local government with
respect to the taxation of tobacco products. The Act also does
not affect the authority of the Secretary of Agriculture
concerning the growing, cultivation, or curing of raw tobacco.
SECTION 5 NON-PREEMPTION OF MORE RESTRICTIVE LAWS
Section 5 establishes that the act does not prohibit federal,
state, local or tribal governments from adopting and enforcing
additional measures to restrict youth access to tobacco
products, nor from adopting and/or enforcing any law, rule,
regulation or other measure relating to or prohibiting the
sale, distribution, possession or exposure to or use of tobacco
products. Unless otherwise provided in the Act, nothing in the
Act or in rules promulgated under its authority will supersede
the authority of States, pursuant to State law, to expend funds
provided under this Act.
SECTION 6 DEFINITIONS
Section 6 defines terms used in the act; including the
definition of cigarette, brand, manufacturer, distributor,
retailer, and tobacco product.
SECTION 7 NOTIFICATION IF YOUTHFUL CIGARETTE SMOKING RESTRICTIONS
INCREASE YOUTHFUL PIPE AND CIGAR SMOKING
Section requires the Secretary of Health and Human Services
to notify Congress if underage use of cigars and pipe tobacco
increase as a result of tightening youth access to cigarettes
and spit tobacco.
SECTION 8 LIABILITY LIMITATIONS DISAPPEAR IF MANUFACTURERS CHALLENGE
ADVERTISING LIMITS
This section provides that the benefit of the annual
liability cap on judgements and settlements will not apply to
any tobacco manufacture which brings an action to have the
advertising restrictions in the act ruled unconstitutional.
SECTION 9. FTC JURISDICTION NOT AFFECTED
Unless expressly provided in this Act, nothing in this Act
limits or diminishes the authority of the Federal Trade
Commission. Any advertising that violates this Act or the
Protocol is an ``unfair or deceptive act or practice'' under
Section 5(a) of the Federal Trade Commission Act.
SECTION 10. CONGRESSIONAL REVIEW PROVISIONS
Congress may review and disapprove any rule under this Act
that is subject to Section 801, with the exception of the FDA's
initial rule concerning tobacco as issued in 1996.
TITLE I--REGULATION OF THE TOBACCO INDUSTRY
Subtitle A--Jurisdiction of Food and Drug Administration
I. Introduction and Summary
Title I, Subtitle A of this bill provides explicit authority
to the Food and Drug Administration (FDA) to regulate tobacco
products. To ensure that the August 28, 1996 regulations
restricting the access to and promotion of cigarettes and
smokeless tobacco to children and adolescents go into effect,
section 901 deems FDA's regulations lawful and lawfully
promulgated under this bill. The remainder of Subtitle A
addresses the Secretary's statutory authority to regulate
tobacco products. Tobacco products raise different public
health issues than medical devices regulated under Chapter V of
the Federal Food, Drug, and Cosmetic Act (FDCA). While
maintaining to the greatest extent practical the full range of
authorities that the Secretary and FDA would have exercised
over these products as devices, the bill modifies and adapts
certain FDCA device authorities so that they are more
appropriate to address the unique problems encountered in
regulating tobacco products. Therefore, the Committee believes
that it is appropriate to create a separate chapter of the FDCA
for the regulation of tobacco products.
New Chapter IX is created to provide for comprehensive
regulation of tobacco products and incorporates almost all of
the authorities available to the Secretary in regulating
devices, including the authority to: (1) address the
adulteration or misbranding of a product, (2) require
manufacturers to register and list their products, (3) restrict
the sale, distribution, and use of a product, (4) require
manufacturers to comply with ``good manufacturing practice''
requirements, (5) require manufacturers to comply with
performance standards, (6) require manufacturers of novel
products to obtain premarket approval, (7) require
manufacturers to notify users of unreasonable risks posed by a
product, (8) require manufacturers to recall products
associated with unusually serious risks, (9) require
manufacturers to maintain records and make reports, and (10)
require manufacturers to conduct postmarket surveillance, where
appropriate. Other provisions of the bill extend to tobacco
products FDA's authority to investigate and prosecute
violations of the FDCA.
Some of the medical device authorities have, however, been
modified to reflect the special concerns raised by the
regulation of tobacco products. For example, in regulating
devices under Chapter V, the Secretary must determine whether
the regulatory actions taken will ``provide reasonable
assurance of the safety and effectiveness'' of the device.
Under the provisions of Chapter IX, this standard has been
replaced with the requirement, to be used only for tobacco
products, that the Secretary find that regulations and other
requirements imposed on tobacco products ``are appropriate for
the protection of the public health.'' This change makes
explicit FDA's authority to consider, among other things, the
adverse consequences that could result from removal of a
product that is dangerous but to which millions of Americans
are addicted. In addition, section 906(d), which like all of
Chapter IX does not affect other products regulated under the
Act, makes explicit the Secretary's authority to restrict the
advertising and promotion of tobacco products as part of a
regulation restricting the sale, distribution, and use of such
a product. That provision also prohibits the Secretary from
restricting tobacco products to prescription use. In addition,
a special procedure is established for notifying Congress
regarding any restriction on the sale of tobacco products in
retail outlets. Because of the importance of any such decision
by the Secretary, the committee strongly believes that Congress
should have adequate opportunity, prior to implementation of
any such restriction, to review such a decision and to enact
legislation to override it. Therefore, the President must
notify Congress that such a restriction has been issued and
implementation of any such restriction is delayed for at least
two years.
Chapter IX also omits a small number of device authorities
that are unnecessary, duplicative, or not well-suited to the
regulation of tobacco products. For example, Chapter IX does
not require the Secretary to classify tobacco products,
although it preserves the Secretary's authority to use all of
the authorities available for each class (i.e., general
controls, special controls, and premarket approval). Chapter IX
contains no counterpart to section 516 of the FDCA, which
authorizes FDA to ban devices that present ``a substantial risk
of illness and injury.'' A special procedure is established
under section 907 for notifying Congress regarding the issuance
of any performance standard that eliminates nicotine or
specific categories of tobacco products. Because of the
importance of any such decision, the committee strongly
believes that Congress should have adequate opportunity, prior
to implementation of any such performance standard, to review
such a decision and to enact legislation to override it.
Therefore, the President must notify Congress that such a
performance standard has been issued and implementation of any
such performance standard is delayed for at least two years.
Chapter IX also omits provisions analogous to sections 502(j),
518(b), (c), 519(b), (c), (e), 520(b), (h), (j), (m), and makes
small changes in a number of other provisions intended to
tailor these provisions to the needs of regulating tobacco
products.
Chapter IX includes certain new provisions that grant the
Secretary explicit authority to undertake regulatory measures
particularly relevant to tobacco regulation. For example,
section 904 specifically requires manufacturers to submit to
the Secretary information about (1) the ingredients,
components, and substances in their products, (2) the content,
delivery, and form of nicotine in their products, and (3) their
research on the health, behavioral, or physiologic effects of
tobacco products and their constituents, on reductions in risk
associated with available technology, and on the marketing of
tobacco products. Section 913 imposes certain requirements on
manufacturers who wish to market ``reduced risk'' tobacco
products.
The bill creates a separate chapter for tobacco products, and
thus, expressly directs the Secretary to maintain a distinct
regulatory program for tobacco products. However, the Secretary
may follow precedents involving, decisions under, and
interpretations of, comparable provisions governing devices
under Chapter V to the extent the Secretary deems appropriate
for tobacco products.
II. Definitions
Subtitle A defines ``tobacco product'' for purposes of the
FDCA as 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). This definition potentially
encompasses the full range of tobacco products marketed in the
United States. As described below in section III of this
report, however, the Secretary's authority to regulate tobacco
products under Chapter IX is limited to those products
specifically covered by regulations issued by the Secretary.
Current regulations cover only cigarettes and smokeless tobacco
products.
III. FDA Authority over Tobacco Products
The Committee expects that the Secretary will regulate
tobacco products exclusively under Chapter IX, and any general
provisions of the FDCA that encompass tobacco products, except
where: (1) they are intended for diagnosis, cure, mitigation,
treatment, or prevention of disease within the meaning of
section 201(g)(1)(B) or (h)(2) of the FDCA, or (2) a health
claim is made for them within the meaning of section
201(g)(1)(C) or (h)(3) of the FDCA. Sections 201(g)(1)(B) and
are relevant portions of the definition of ``drug'' under the
FDCA, and sections 201(h)(2) and (3) are corresponding portions
of the definition of ``device'' under the FDCA. This provision
would not limit FDA's traditional authority to regulate as a
drug or device, for example, a cigarette marketed to assist
smoking cessation, or to treat Parkinson's disease or
depression. See, e.g., United States v. 354 Bulk Cartons . . .
Trim Reducing-Aid Cigarettes, 178 F. Supp. 847, 851 (D.N.J.
1959). The term ``health claim'' as used in this provision is
not intended to relate to, or to affect in any way, the
agency's authority to regulate health claims for food.
Section 901(b) provides that Chapter IX shall apply to all
tobacco products subject to 21 CFR part 897 (the regulations
issued on August 28, 1996), and to any other tobacco products
that the Secretary deems to be subject to Chapter IX by
regulation. Cigarettes and smokeless tobacco products are
currently covered by part 897, and are thus immediately subject
to regulation under Chapter IX. To regulate other categories of
tobacco product, the Secretary must issue regulations making
them subject to Chapter IX.
As stated above, the bill incorporates the provisions of part
897 of title 21, Code of Federal Regulations, issued by the
Secretary as a final rule on August 28, 1996, and therefore the
Committee does not intend the Secretary to repromulgate these
regulations. The bill therefore includes section 901(c), which
deems the regulations lawful and lawfully enacted pursuant to
the new chapter of the FDCA for tobacco products. The Secretary
may choose to recodify these regulations in a different part of
title 21, Code of Federal Regulations.
Section 901(d)(1) clarifies that nothing in chapter IX shall
be construed to affect the regulation of drugs and devices
under chapter V that are not tobacco products under the FDCA.
Section 901(d)(2) provides that chapter IX shall not apply to
tobacco leaf that is not in the possession of the manufacturer,
or to producers of tobacco leaf, including tobacco growers,
tobacco warehouses, and tobacco grower cooperatives, and that
FDA employees may not enter onto a farm owned by a producer of
tobacco leaf without the producer's written consent. However,
if the producer of tobacco leaf is also a tobacco product
manufacturer or within the control of a manufacturer, then the
grower will be subject to this chapter as a manufacturer. The
bill also provides that chapter IX may not be construed to
grant the Secretary authority to promulgate regulations
affecting the production of tobacco leaf or a producer, other
than activities by a manufacturer affecting production. This
provision does not alter the Secretary's authority under the
FDCA over tobacco manufacturers, including the Secretary's
ability, through performance standards and other statutory
authorities, to require modifications to tobacco products.
IV. Standard of Review of Certain Regulatory Actions under Chapter IX
In regulating devices, the Secretary may undertake certain
regulatory actions only if the Secretary finds that the action
will ``provide reasonable assurance of the safety and
effectiveness'' of the device. Meeting these standards for
tobacco products requires taking into account factors not
ordinarily considered when regulating devices. For example, FDA
in developing the tobacco regulations acknowledged that in
imposing restrictions on the availability of tobacco products,
it is necessary to consider such factors as the development of
a black market, or the risk to addicted users of precipitous
withdrawal. Similarly, in allowing the sale of novel tobacco
products likely to be perceived as safer than conventional
tobacco products, it may be appropriate to consider the
likelihood that such products will encourage more young people
to use tobacco or discourage current users from quitting. The
Committee believes that such factors can more readily be taken
into consideration under the standard adopted in chapter IX.
In addition, reaching the conclusion that a particular
regulatory measure will provide a reasonable assurance of the
safety and effectiveness of a tobacco product may create
controversy. Therefore, under the provisions of Chapter IX,
wherever a reasonable assurance of safety and effectiveness was
required to take action under the device authorities, this
standard has been replaced with the requirement that the
Secretary find that regulations imposed on a tobacco product
``are appropriate for the protection of the public health.'' In
making this finding, the Secretary is directed to consider the
risks and benefits to the population as a whole, including
users and nonusers of the tobacco product, and taking into
account the increased or decreased likelihood that (1) existing
users of tobacco products will stop using such products, and
(2) those who do not use tobacco products will initiate use.
This change clarifies that the Secretary need not find that a
regulatory measure provides for the absolute safety of tobacco
products, and that the Secretary may weigh a variety of
consequences resulting from possible new regulations on tobacco
products, including the use of contraband products and the
development of black markets, and may consider the effects of
the regulation on both users and nonusers of the products. The
committee does not intend that this standard be applied to any
other product regulated under the Act.
V. The Provisions of Chapter IX
SECTION 902. ADULTERATION
The bill incorporates adulteration provisions that track
adulteration provisions for devices that are relevant to the
regulation of tobacco products under chapter IX (section
501(a)(1), (a)(2)(A), (a)(3), (e), (f), (h), and (I)). Minor
modifications were made to conform the provisions to the
requirements under the relevant chapter IX provisions. In
addition, section 902(a)(1) includes products that are
``otherwise contaminated by any poisonous or deleterious
substance which may render the product injurious to health'' to
make clear that a tobacco product that contains contamination
by something other than a filthy, putrid, or decomposed
substance is adulterated under this section.
SECTION 903. MISBRANDING
The bill incorporates misbranding provisions that track
misbranding provisions for devices that are relevant to the
regulation of tobacco products under chapter IX (section
502(a), (b), (c), (e), (f), (o), (q), (r), (s), (t)). Minor
modifications were made to conform the provisions to the
requirements under the relevant chapter IX provisions. In
addition, section 903(a)(4), which authorizes the Secretary to
specify by regulation the established name of a tobacco product
and requires the established name to appear on the product's
label, employs simplified language that is consistent with the
regulation at part 897 establishing the established names of
tobacco products subject to the provisions of part 897. Section
903(a)(5), which authorizes the Secretary to issue regulations
requiring adequate directions for use and adequate warnings
against use by children, has also been simplified. Sections
903(a)(7) and 903(a)(8) apply to all tobacco products, and are
not limited to tobacco products that are subject to regulations
promulgated under section 906(d). Section 903(a)(8), which is
based on section 502(r), deems tobacco product advertising
misbranded unless it contains, among other items, ``a brief
statement of the uses of the tobacco product.'' Section 903(b)
authorizes the Secretary to require by regulation the prior
approval of statements made on the label of a tobacco product,
and explicitly states that no regulation issued under this
subsection may require the prior approval by the Secretary of
the content of any advertisement. The remainder of section
903(b) tracks section 502(r).
SECTION 904. SUBMISSION OF HEALTH INFORMATION TO THE SECRETARY
The bill requires each manufacturer or importer of tobacco
products, or their agents, to submit to the Secretary, within 6
months of the date of enactment and annually thereafter,
information concerning their products and all documents related
to research conducted on, or involving the use of, those
products. Similar information must be submitted at least 90
days before the marketing of a new product not on the market as
of the date of enactment. A manufacturer must also notify the
Secretary within 60 days of the time a manufacturer adds a new
additive, modifies the amount of an existing additive or of the
nicotine content, delivery, or form, or eliminates an additive.
The purpose of this provision is to clarify the Secretary's
authority to obtain information useful in assessing the health
risks of tobacco products, including their addictiveness, and
in understanding how these products are being marketed. This
section is intended to be in addition to, and separate from,
the requirements for ingredient disclosure under section 7 of
the Federal Cigarette and Labeling Act (15 U.S.C. 1335a).
SECTION 905. REGISTRATION OF PRODUCERS OF TOBACCO PRODUCTS
Subsections (a) - (g) of section 905 track subsections (a) -
(f), (h) of section 510. Minor changes were made to conform the
provisions to the requirements in chapter IX.
Report preceding introduction into interstate commerce of
certain tobacco products: Sections 905(j) and 910 adopt the
substantial equivalence provisions of sections 510(k), 513(I)
and 515(b), with certain modifications. Section 905(j) is
analogous to section 510(k), which requires a manufacturer of a
new device to notify the Secretary at least 90 days before
beginning to market the new device and to state the basis for
the manufacturer's determination that the new device is
substantially equivalent to an already marketed device. Section
905(j) differs in two respects from section 510(k). First,
section 905(j) requires that the already-marketed tobacco
product have been commercially marketed as of August 11, 1995,
the date of the issuance of FDA's proposed tobacco regulations.
Test marketing before that date is not sufficient to satisfy
this requirement. Within six months after enactment of the
bill, persons who, before enactment of this bill, introduced
into or delivered for introduction into interstate commerce for
commercial distribution a tobacco product intended for human
use that was not commercially marketed (other than for test
marketing) in the United States as of August 11, 1995, are
required to submit a report under this subsection to the
Secretary if that tobacco product continues to be marketed in
the United States. Second, section 905(j) requires that the
Secretary issue regulations defining the applicability of that
section. The Committee is aware that FDA's regulations under
Part 897 do not appear to contemplate 510(k) submissions, at
least for minor changes to existing tobacco products. Nothing
in the bill restricts the Secretary's discretion to determine
when and for what types of new products a 905(j) submission
might be appropriate. The Committee expects that the Secretary
will promptly issue guidance to the industry on when such
submissions are needed for products introduced between August
11, 1995, and the date of enactment of this bill. Section 910,
which governs premarket review and is discussed below, defines
``substantial equivalence.''
SECTION 906. GENERAL PROVISIONS RESPECTING CONTROL OF TOBACCO PRODUCTS
Section 906 addresses general issues respecting control of
tobacco products. These provisions incorporate subsections of
section 520 that are appropriate for the regulation of tobacco
products. Subsections (a), (b), (c), and (g) of section 906,
which relate to (1) the applicability of particular tobacco
product requirements that are inconsistent with requirements
imposed under section 906(d), 907, or 910, (2) notices and
findings, (3) trade secret information, and (4) research and
development, track the parallel provisions in section 520
(subsections (a), (b), (c), and (k)).
Restrictions: Section 906(d) is the authority that parallels
section 520(e), which is the statutory basis for the
regulations restricting the sale and distribution of cigarettes
and smokeless tobacco codified in part 897 of title 21, Code of
Federal Regulations. Subsection (d) clarifies that the
Secretary may by regulation require that a tobacco product be
restricted to sale, distribution, or use upon such conditions,
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 bill includes factors that
are to be taken into account in making a finding as to whether
the restriction is appropriate for the protection of the public
health. Under the bill, the Secretary may not 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. Because of the importance of any
decision by the Secretary to restrict the sale of any class of
tobacco products on the market on the date of enactment of this
bill to specific categories of retail outlets, it is
appropriate for Congress to have the opportunity to review such
a decision and enact legislation to override it. Therefore, any
such restriction may not take effect before a date that is two
years after the President notifies Congress that a final
regulation imposing the restriction has been issued.
Good manufacturing practice requirements: Section 906(e)
authorizes the Secretary to promulgate regulations requiring
that the methods used in, and the facilities and controls used
for, the manufacture, pre-production design validation
(including a process to assess the performance of a tobacco
product packing, storage, and installation of a tobacco product
conform to current good manufacturing practice, as prescribed
in such regulations, to assure that the public health is
protected and that the tobacco product is in compliance with
this chapter. This provision tracks section 520(f), the device
provision for good manufacturing practice requirements. The
bill makes explicit that the Secretary has the authority to
grant either temporary or permanent exemptions or variances
from a requirement. As discussed in the context of section 915,
the bill establishes a single tobacco product advisory
committee to perform the duties assigned to separate advisory
committees that are established under various provisions in
device law, including 520(f). Thus, the advisory committee
established under section 915 will be afforded an opportunity
to submit recommendations with respect to regulations proposed
to be promulgated under this subsection. In addition, the
Secretary may refer petitions for exemptions or variances to
the advisory committee for recommendation.
Investigational use exemption: Section 906(f) provides the
Secretary with authority to exempt tobacco products intended
for investigational use from some or all of the provisions of
chapter IX under such conditions as the Secretary may prescribe
by regulation. Because of the unique circumstances under which
a tobacco product would likely be intended for investigational
use, the bill allows the Secretary broad discretion to develop
regulations appropriate for the investigational use of tobacco
products.
SECTION 907. PERFORMANCE STANDARDS
The bill authorizes the Secretary to promulgate performance
standards if the Secretary determines that a standard is
appropriate for protection of the public health. This authority
is the same as that in section 514, but makes explicit the
Secretary's existing authority to reduce or eliminate nicotine
or other harmful components pursuant to a performance standard.
Because of the importance of any decision by the Secretary to
eliminate all cigarettes, all smokeless tobacco products, or
any similar class of tobacco products, or to require the
reduction of nicotine yields to of a tobacco product to zero,
it is appropriate for Congress to have the opportunity to
review such a decision and enact legislation to override it.
Therefore, any such standard may not take effect before a date
that is two years after the President notifies Congress that a
final regulation imposing the restriction has been issued. As
noted above, the bill establishes a single tobacco product
advisory committee to perform the duties assigned to separate
advisory committees that are established under various
provisions in device law, including section 514. The bill
authorizes the Secretary to refer proposed regulations
respecting performance standards to the advisory committee
established under section 915 for a report and recommendation
with respect to matters involved in the proposed regulation
that require the exercise of scientific judgement.
SECTION 908. NOTIFICATION AND OTHER REMEDIES
The bill contains provisions that adopt the notification
requirements and certain other remedies of section 518. Section
908(a), which permits the Secretary to require notification to
users and other appropriate persons if such notification is
necessary to eliminate an unreasonable risk of substantial harm
to the public health, is the same as section 518(a). Likewise,
section 908(b) parallels section 518(d), which makes clear that
compliance with a notification order does not relieve persons
from liability under Federal or State law. The bill does not
incorporate the repair and reimbursement provisions of 518(b)
and `` because they are not required for the regulation of
tobacco products. Section 908'' provides the Secretary with the
authority to issue cease and desist orders and to order recalls
of particular tobacco products where the Secretary finds that a
tobacco product contains a manufacturing or other defect that
is not ordinarily contained in tobacco products on the market
and would cause serious, adverse health consequences or death.
The procedures of subsection (e) are the same as in section
518(e), the parallel provision for devices.
SECTION 909. RECORDS AND REPORTS
The bill incorporates subsections (a) and (f) of section 519,
but adopts a different threshold for requiring reports to be
submitted under subsection (a). The bill authorizes the
Secretary to require a report from a manufacturer or importer
who 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. The provisions of 519 dealing with user
facilities and device tracking have been omitted because they
are not suited to the needs of regulating tobacco products.
SECTION 910. PREMARKET REVIEW
Section 910 provides for premarket review of new tobacco
products that are not substantially equivalent to products on
the market as of August 11, 1995. This section provides the
Secretary with authority to obtain needed data on the risks of
novel tobacco products, and to assure that such products do not
introduce more risks than conventional tobacco products. The
provisions of section 910 are similar to those of section 515,
with the following modifications: (1) full reports must be
provided on the health risks of the product, rather than on
safety and effectiveness; (2) the Secretary shall deny approval
of the application if the Secretary finds that there is a lack
of a showing that permitting the product to be marketed would
be appropriate for the public health, rather than a lack of a
showing of safety and effectiveness; (3) the opportunity for
administrative review of an approval or denial of an
application has been eliminated; (4) the standard for the
evidence needed to support an application has been modified
slightly to clarify that well-controlled investigations will be
required only when necessary; and (5) the provisions related to
product development protocols have been eliminated.
The bill provides that an approval of an application for
premarket approval is not required for a tobacco product
subject to section 910(a)(1) introduced into or delivered for
introduction into interstate commerce for commercial
distribution (other than for test marketing) in the United
States between August 11, 1995, and the date of enactment of
this bill if a report has been submitted pursuant to section
905(j) within six months of the enactment of this bill until
the Secretary issues an order that requires premarket approval.
Definition of substantial equivalence: Subsection (a)(2)
includes provisions, analogous to section 513(I) in the device
provisions, that define ``substantial equivalence'' for
purposes of this section and section 905(j). The definition in
910(a)(2) is largely the same as in section 513(I) with a few
modifications. The principal changes are: (1) the standard for
a finding by the Secretary that a product with different
characteristics than an already marketed (predicate) product
does not require premarket review is whether the information
submitted by the manufacturer demonstrates that premarket
review would not be appropriate because the new product does
not raise different public health questions than the predicate
product; (2) the term ``characteristics'' means the materials,
ingredients, design, composition, heating source, or other
features of a tobacco product; and (3) the summary of
information required under 910(a)(3)(A) must cover ``any health
information related to the tobacco product'' rather than safety
and effectiveness information.
SECTION 911. JUDICIAL REVIEW
The bill includes procedures for judicial review of certain
actions under chapter IX that are the same as section 517. The
bill also incorporates the requirement of section 517 that a
regulation or order issued under certain sections of chapter IX
must include a statement of the reasons for its issuance and
the basis in whatever proceedings that led to its issuance, for
its issuance.
SECTION 912. POSTMARKET SURVEILLANCE
The bill grants the Secretary discretion to require a
manufacturer to conduct postmarket surveillance of a tobacco
product if the Secretary determines that such surveillance is
necessary to protect the public health or to provide
information regarding the health risks and other safety issues
involving the tobacco product.
SECTION 913. REDUCED RISK TOBACCO PRODUCTS
The bill contains a section not in device law that permits
the Secretary to designate a tobacco product as a ``reduced
risk tobacco product'' if the Secretary finds, based on an
application by the manufacturer or other responsible person
that includes data from studies as specified in the bill and as
required by the Secretary, the product will significantly
reduce harm to individuals caused by a tobacco product and is
otherwise appropriate to protect the public health based on an
application by the manufacturer or other responsible person. A
tobacco product may be marketed as a ``reduced risk tobacco
product'' only if the product is so designated by the
Secretary, bears a label prescribed by the Secretary concerning
the product's contribution to reducing harm to health, and
complies with requirements prescribed by the Secretary relating
to advertising, marketing, and other provisions of chapter IX.
The Secretary may revoke such designation at any time after
providing an opportunity for an informal hearing. The bill also
provides that a manufacturer of a tobacco product shall provide
written notice to the Secretary upon the development or
acquisition of any technology that would reduce the risk of
such products to the health of the user for which the
manufacturer is not seeking designation as a ``reduced risk
tobacco product'' under this section.
SECTION 914. PRESERVATION OF STATE AND LOCAL AUTHORITY
The bill includes provisions regarding state and local
requirements affecting tobacco products that relate to matters
under chapter IX. Section 914 incorporates portions of section
521, which relates to state and local requirements respecting
devices. Preemption of state and local requirements affecting
tobacco products under section 914 is more limited than under
the device section. State or local requirements that are
different from, or in addition to, any requirement applicable
under chapter IX relating to performance standards, premarket
approval, adulteration, misbranding, registration, reporting,
good manufacturing standards, or reduced risk products, are
preempted. As is the case in section 521, state or political
subdivisions may apply for a waiver of preemption from the
Secretary. The procedures are the same as in section 521. State
and local requirements relating to the sale, use, or
distribution of a tobacco product, including requirements
related to the access to, and the advertising and promotion of
a tobacco product, that are in addition to, or more stringent
than, requirements under chapter IX are not preempted by the
FDCA.
The bill makes clear that except as expressly provided in
section 914, nothing shall in the FDCA shall be construed as
prohibiting a State or political subdivision from adopting or
enforcing a requirement applicable to a tobacco product that is
in addition to, or more stringent than requirements established
under chapter IX. The bill provides that where a requirement of
a State or political subdivision is more stringent than a
requirement established under chapter IX, the requirement of
the State or political subdivision shall apply. The bill also
clarifies that no provisions of chapter IX relating to tobacco
products shall be construed to modify or otherwise affect any
action or the liability of any person under the product
liability laws of any State.
SECTION 915. TOBACCO PRODUCT SCIENTIFIC ADVISORY COMMITTEE
Under the bill, the Secretary will establish a tobacco
product scientific advisory committee. Several device sections
that are incorporated into chapter IX include provisions that
require the Secretary to establish an advisory committee for
purposes of specific duties under each section. The approach
used in chapter V, had it been adopted in chapter IX for
tobacco products, would have required at least three separate
advisory committees. The Committee has instead provided for a
single tobacco product advisory committee to perform the
responsibilities specified in sections 906(g), 907, and 910. In
addition, the advisory committee will provide advice,
information, and recommendations to the Secretary on the
effects of the alteration of the nicotine yield from tobacco
products; on whether there is a threshold level below which
nicotine yields do not produce dependence on the tobacco
product involved; and on other safety, dependence, or health
issues relating to tobacco products as requested by the
Secretary.
SECTION 916. EQUAL TREATMENT OF RETAIL OUTLETS
The bill provides that 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.
VI. Section 102. Conforming and other Amendments to the general
provisions of the FFDCA
Chapter III of the FDCA, which contains prohibited acts and
penalties, provides the mechanisms and remedies for enforcing
the various requirements in the product-specific chapters.
Chapter VII includes general administrative provisions for
regulations and hearings, examinations and investigations,
records of intestate commerce, inspections, publicity, the
treatment of confidential information, and a presumption of
interstate commerce. Chapter VIII pertains to imports and
exports. Chapter X, as redesignated by this bill, contains
miscellaneous sections. The basic approach of the bill is to
expressly include ``tobacco product'' wherever ``device''
appeared in these provisions. In a few instances, new
provisions based on provisions applicable to devices were
added. The intent is to ensure that the full range of
compliance, enforcement, and other general authorities
available to the Secretary for devices continue when tobacco
products are regulated pursuant to chapter IX.
Exports
The amendments to sections 801(e) and 802, which include the
addition of a new paragraph (4) to section 801(e) and a new
paragraph (3) to section 802(a), impose the same requirements
for the export of tobacco products that do not meet the
requirements of the FDCA that apply to devices.
Sections 801(e)(4) and 802 apply to tobacco products that do
not comply with performance standards promulgated by the
Secretary under section 907, do not comply with the premarket
review requirements in section 910, if applicable, or are
exempt from sections 907 or 910 pursuant to regulations
promulgated under section 906(f). Tobacco products that comply
with these requirements, but violate other provisions of the
FDCA may be exported if they comply with the basic export
requirements in section 801(e)(1).
The new section 801(e)(4) tracks the requirements of section
801(e)(2), which applies to certain device exports. Similarly,
new paragraph (3) of section 802(a) parallels paragraph (3),
which lists the statutory categories of devices to which
section 802 applies.
Some concerns were raised in the Committee regarding the
terms ``approval of the country to which it is intended for
export'' and ``valid marketing authorization'' which appear in
sections 801(e)(4) and 802, respectively. These terms apply to
device exports in current law. Many foreign countries do not
have affirmative approval systems for medical devices and
others do not have medical device laws. FDA interprets the term
``approval of the country to which it is intended for export''
in section 801(e)(2) to mean that the importing country must
approve of the importation of the device. This is frequently
established through a letter to FDA from the relevant authority
in that country indicating that the country will permit or does
not object to the importation of the device. With respect to
the phrase ``valid marketing authorization'' in section 802(b),
in those countries in which the regulatory systems permit
marketing of a device without an affirmative act or decision by
the government, FDA considers the device to have ``marketing
authorization'' if the country does not object to the product's
marketing. These workable and effective approaches to the
language of sections 801(e) and 802(b) are appropriate for
tobacco product exports as well.
Thus, under section 802, a tobacco product that violates a
performance standard promulgated under section 907, such as one
prohibiting certain ingredients, could be exported to any
country in which it can be legally marketed if at least one
country ``listed'' in section 802(b)(1)(A) permits its sale,
and the requirements of section 802(f) are met. This approach
is consistent with FDA's application of section 802(b) to
devices.
Subtitle B--Advertising
SECTION 121. ADVERTISING PROVISIONS IN PROTOCOL
Section 121 indicates the advertising limitations the
protocol must contain and that the tobacco product
manufacturers must commit to observe.
SECTION 122. TOBACCO PRODUCT LABELING AND ADVERTISING
Section 122 identifies the various requirements that would be
contained in the protocol. Under the protocol no tobacco
product could be sold or distributed in the United States
unless the numerous advertising and labeling requirements are
met. Those limitations are the same as those contained in the
agreement reached on June 20, 1997 with the addition of animal
figures and color advertising on the back of all magazines.
SECTION 123. POINT-OF-SALE RESTRICTIONS
Section 123 would require that the protocol contain various
limitations on the use of point-of-sale advertising.
TITLE II--REDUCTIONS IN UNDERAGE TOBACCO USE
SECTION 201. GOALS FOR REDUCING UNDERAGE TOBACCO USE
Section 201 requires the Secretary, in cooperation with
state, local and tribal authorities, to take all actions under
this act necessary to achieve prescribed reductions in youth
usage of cigarettes and spit tobacco.
These reductions must be made from a baseline percentage of
youth tobacco usage established by a comprehensive study
conducted at the University of Michigan in 1995. This model
identified the number of youth (age 13-17) who use tobacco
daily and calculated the percentage of such tobacco users in
relation to the total population in that age bracket.
This section requires that in years 3 and 4 after the date of
enactment of this Act, the incidence of youth cigarette smoking
among the underage population (age 13 to 17) be reduced by at
least 15 percent of the baseline percentage; at least a 30
percent reduction from the 1995 baseline percentage in years 5
and 6; at least a 50 percent reduction from the baseline
percentage for years 7, 8, and 9; and for year 10 and beyond a
60 percent reduction from the baseline percentage is required.
This section also sets targets for youth consumption
reductions for smokeless (spit) tobacco. For year 3 and 4, a
12.5 percent reduction in youth consumption of smokeless or
spit tobacco from the 1995 baseline percentage is required. For
years 5 and 6, a 25 percent reduction from the 1995 baseline
percentage is required. For years 7, 8, and 9 a 35 percent
reduction from the 1995 baseline percentage is required. For
year 10 and thereafter a 45 percent reduction from the 1995
baseline percentage is required.
SECTION 202. LOOK-BACK ASSESSMENT
Section 202 sets forth: how the baseline of youth tobacco use
is established, how non-attainment of youth tobacco targets is
determined and, how financial assessments would be imposed on
the industry for falling to meet youth tobacco use reduction
targets.Subsection (a) calls on the Secretary to conduct
annually a survey using the University of Michigan survey model
or some other more accurate measurement method at the
Secretary's discretion. Using the selected survey model, the
Secretary shall calculate the incidence of underage tobacco use
and measure the percentage reduction from the 1995 percentage
baseline established in the University of Michigan study.
Subsection (b) calls on the Secretary to impose financial
penalties for each percentage point that youth consumptions
reductions fall short of the targets established in Section
201.
The financial penalties for cigarettes are as follows: from
one to five percentage points short of the youth tobacco usage
reduction goal, the industry must pay $80 million per point;
from six to nine points short, the industry must pay $160
million per point; from 10 or more points short, the industry
must pay $240 million per point.
For instance, if in year five the incidence of youth tobacco
usage falls by only 25 percent, rather than the required 30
percent, the industry would be assessed a penalty of $400
million ($80 million multiplied by each percentage point
missed, in this case five). If youth tobacco usage falls by
only 23 percent (or 7 points short of target ), the industry
would be assessed the $400 million for points 1-5, and an
additional $320 million ($160 million multiplied by two for
points six and seven) for a total penalty of $720 million.
The financial penalties for smokeless tobacco are $8 million
per point for percentage points one through 5; $16 million per
point for percentage points 5 through 10; and, $24 million per
point beyond 10 percentage points.
The Committee believes that the severity of the penalty
should increase with the severity of the non-attainment.
Accordingly, for non-attainment of between 5 and 10 percentage
points, the penalty is doubled from $80 million to $160 million
per point; and for non-attainment of more than ten points, the
penalty is tripled from $80 million to $240 million per point.
The financial penalties are assessed and calculated in the
same manner for cigarettes and spit tobacco, although the
penalties for smokeless are different from those for
cigarettes.
Subsection (b)(3) establishes an annual cap on penalties of
$3.5 billion. Financial penalties assessed under this Title
shall not be tax deductible. The June 20th agreement capped
penalties at $2 billion per year and provided that those
penalties would be tax deductible. Furthermore, when the $3.5
billion annual cap under S. 1415 is reached, the industry and
individual tobacco manufacturers may also lose the liability
cap provided in Title VII.
Subsection (b)(4) provides that if the industry fails to
attain the youth smoking reduction target in any year by more
than 20 points, the Secretary of Health and Human Services
shall determine which manufacturers are responsible for the
industry failing to meet the target and shall take action to
remove the liability limitations provided in Title VII from
such manufacturer or manufacturers.
Subsection (c) provides that each manufacturer shall be
jointly and severally liable for the payment. Under this
provision, the Secretary may receive payment from any or all of
the manufacturers. The manufacturers would then have the right
to seek compensation from each other for equitable payment of
industry penalties. This provision serves as a major incentive
for individual companies to achieve reduction targets, and to
hold non-performing companies individually liable.
Subsection (c)(4) provides a de-minimis exemption for payment
of penalties to any manufacturer with less than one percent of
domestic, unless such manufacturers product is used
predominantly by underage users.
Subsection (f) provides that monetary penalty
payments are non-tax deductible as ordinary and
necessary business expenses.
SECTION 203. SUBSTANTIAL NON-ATTAINMENT OF REQUIRED REDUCTIONS
This section provides for the procedures by which the
Secretary of Health and Human Services would seek to remove the
civil liability apportionment cap of any company that exceeds
its non-attainment of the youth reduction target by greater
than 20 points. The court of jurisdiction shall determine
whether the preponderance of evidence shows that the
manufacturer failed to comply with this act, or took any
material action to undermine achievement of the youth tobacco
use reduction goal.
The subsection provides that any loss of liability limitation
under Title VII of this act shall be in effect the later of
either two years, or until the manufacturer is in compliance
with the Act; has ceased taking material actions to undermine
achievement of the reduction target; and has pursued reasonable
additional measures to achieve youth tobacco use targets.
SECTION 204. DEFINITIONS
Section 204 sets forth definitions of terms used in subtitle
A of title II.
Subtitle B--State Emforcement Incentives
SECTION 211. COMPLIANCE BONUS FUND
Section 211 establishes within the National Tobacco
Settlement Trust Fund a separate account called the Compliance
Bonus Account for States and Retailers.
SECTION 212. BLOCK GRANTS
The Secretary would award block grants each year to states
where ``fewer than 5 percent of all individuals under 18 years
of age who attempt to purchase tobacco products in the State''
are successful such purchase.
SECTION 213. STATE ENFORCEMENT INCENTIVES
This section sets out requirements for State eligibility for
grants authorized under Section 212, including state
enforcement of state law requiring a minimum age of 18 years
for the legal purchase of tobacco products, and the conduct of
random testing of retail outlets to enforce compliance with
youth access requirements. The FDA's youth access requirements
require retailers to check the photo ID of customers under the
age of 27 who are seeking to buy cigarettes or smokeless
tobacco. States are required to send the results of their
tobacco compliance checks to the FDA.
A state is deemed in non-compliance with this section if such
state has not complied with the minimum number of random,
unannounced inspections and other minimum guidelines
established in this title. Likewise a state is deemed in non-
compliance if the state inspections find that the retail
outlets in such state do not achieve the following compliance
targets with the applicable youth access restriction: 75
percent compliance in years 5 and 6 after enactment; at least
85 percent compliance in years 8, 9, and 10; at least 90
percent compliance in year 11 and every year thereafter.
The Secretary shall establish a reduction in the Section 1921
amount for non-compliance with this Section.
Subtitle C--Other Programs
SECTION 221. NATIONAL SMOKING CESSATION PROGRAM
This section authorizes the Secretary to award grants to
public and nonprofit entities, and individuals for smoking
cessation purposes. The creation of a national smoking
cessation program is called for under the June 20th agreement.
Funds to these entities shall be used to establish and
administer approved tobacco product use cessation programs. The
funds or vouchers received by individuals are intended to help
citizens enroll in a program to permanently help them stop
using cigarettes or other tobacco product. The Secretary will
issue regulations for approved tobacco product cessation
programs and products, based on the best scientific information
available.
Approximately 48 million Americans currently smoke
cigarettes, and most smokers are either actively trying to quit
or want to quit. While prevention programs can prevent many
young people from ever becoming addicted to nicotine, some will
succumb and ten to twenty million current smokers will die from
tobacco-related diseases unless they have access to treatment
for tobacco addiction.
Although it is difficult to quit tobacco use because of the
addictive nature of the product, quitting results in
significant and immediate health benefits both for healthy
people as well as for those suffering from tobacco-related
diseases. For those who quit smoking fifteen years ago, for
example, the risk of death today is similar to the risk for
people who have never smoked at all. In addition, the health
benefits of quitting tobacco are significant for the unborn
children of pregnant women and for children and adults exposed
to environmental tobacco smoke.
The Committee finds that tobacco use treatment will reduce
the human toll of tobacco and is cost effective. Compared to
the estimated $60 billion in direct medical care spent annually
on smoking-related illnesses and another $47 billion accounted
for lost productivity and forfeited earnings caused by smoking-
related disabilities, the average estimated per smoker cost for
smoking cessation is $165. The cost of each intervention varies
according to the amount of counseling, whether and which
pharmaceutical adjuncts are offered, and effectiveness of the
intervention. For every dollar invested in a smoking cessation
program for pregnant women, an estimated $6 is saved in
neonatal intensive care costs and the long-term care associated
with low birth weight.
However, a number of barriers impede the delivery of
effective tobacco use cessation services.
Clinicians do not consistently assess whether their patients
use tobacco, nor do they offer smoking cessation treatment to
every smoker at every office visit. Evidence shows that 70
percent of U.S. smokers see their physician each year, and 60
percent of the U.S. population five years of age and older is
seen by a dentist, giving physicians and dentists considerable
access to smokers. If only half of all the U.S. physicians and
dentists gave brief advice to their patients and 10 percent of
them were successful in quitting, there would be nearly 2
million new nonsmokers in the U.S. each year.
Inadequate training, lack of time and lack of reimbursement
for services have made it difficult for physicians and other
health care professionals to provide adequate tobacco cessation
counseling and treatment.
Surveys indicate that tobacco cessation therapy is not
consistently provided as paid services for subscribers of
health insurance packages despite the fact that tobacco use
cessation is considered a highly cost effective service. One
survey demonstrated that as few as 11 percent of health
insurance carriers provide coverage for treatment of nicotine
addiction; another survey of 105 health maintenance
organizations found that few knew about the prevalence of
smoking within their membership. In addition, a 1994 study of
California health insurance plans found that only two percent
of the 48 insurance companies sold any policies that covered
smoking cessation treatment. Even Medicare and Medicaid do not
routinely cover smoking cessation services.
Tobacco users of low socioeconomic status tend to be under
served by tobacco use cessation programs. They may be less
likely to have health insurance; they may be unable to afford
over-the-counter cessation products; or they may live in areas
where these products are less easily obtainable and cessation
services less accessible.
When financial barriers are removed, participation increases.
For example, when Group Health Cooperative of Puget Sound
included smoking cessation as a covered benefit, its program
participation jumped ten-fold, from 175 participants to over
2,000 in the first year. In groups with a $42 co-payment, about
30 percent of registered participants did not participate. By
contrast, only one percent of those with no co-payment do not
participate after registering.
The Committee intends its bill to establish a national
comprehensive tobacco use treatment program which includes:
grants to states and localities; support of federal programs
providing health services to low-income Americans, training of
health care professionals, and other appropriate initiatives to
fulfill the purposes of this section.
Finally, the Committee recognizes the tobacco use treatment
methods as outlined in the 1996 Agency for Health Care Policy
and Research (AHCPR) Clinical Practice Guideline on Smoking
Cessation, and recommends that grant recipients who develop and
administer such programs mirror these and/or other similar
evidence based guidelines. AHCPR's cessation guidelines
recommend that clinicians record the tobacco-use status of
every patient and offer smoking cessation treatment to every
smoker at every office visit. Any national cessation effort
must ensure that health care systems are doing everything they
can to identify and intervene with tobacco users. The Committee
expects AHCPR to periodically update its guidelines as new
research becomes available regarding tobacco use treatment
methods. Furthermore, the Committee believes that dissemination
of the guidelines to clinicians and other health professionals
is essential.
SECTION 222. NATIONAL TOBACCO-FREE PUBLIC EDUCATION PROGRAM
Section 222 of the bill reported by the Committee would
establish an independent board to enter into contracts with or
award grants to both private and public entities to carry out
public informational and educational activities designed to
reduce the use of tobacco. The creation of the National Tobacco
Free Public Education Program is called for under the June 20th
agreement. The Committee intends for this program to be
multifaceted, but the primary focus should be on counter-
advertising, and the programs should serve as a complement to
the community based education programs outlined above.
The Committee has directed that the programs in this section
be established because it believes they are necessary to offset
the extensive marketing efforts of the industry. The tobacco
industry spends over five billion dollars a year marketing and
advertising its products. A 1998 study in the Journal of the
American Medical Association provided evidence that tobacco
industry advertising and promotional activities are causally
related to the onset of smoking. In addition, a 1995 article in
the Journal of the National Cancer Institute found that tobacco
marketing has a greater influence than exposure to parents or
peers who smoke in prompting children to take up smoking, and
other studies have shown the vast majority of young smokers,
unlike adults, prefer one of the most heavily advertised brands
of cigarettes. In addition, recently released internal tobacco
industry documents indicate a deliberate strategy by the
tobacco industry to attract children. Research also shows that
anti-tobacco advertisements are effective in reducing tobacco
consumption. The 1994 Surgeon General's Report indicates that
mass media are particularly appropriate channels for tobacco
education among young people who are heavily exposed to and
often greatly interested in the media. A coordinated national
campaign can be quite effective, the Committee believes, in
discouraging the use of tobacco products and inducing smokers
to quit using tobacco products. The Committee intends for this
section to provide for a national media campaign but to also
provide for assistance to state and local efforts to discourage
smoking and tobacco use. The Committee believes that while it
is critical to have a national effort, local priorities and
unique circumstances such as high rates of smokeless tobacco
product use or particularly high rates among specific
population groups must also be addressed.
At present, there is no national anti-tobacco public
education campaign to counter the pro-tobacco imagery presented
to both adults and children by tobacco industry marketing
efforts. Several states (e.g., California, Arizona, and
Massachusetts) have developed programs that have been shown to
be effective, and several more have recently received funds for
short term programs through settlements of lawsuits
(Mississippi, Florida, Texas), but relatively few states have
the resources to undertake the type of sustained, long term
extensive public education and counter-advertising efforts that
are necessary. In part this is due to the high cost of
developing these programs and purchasing media. The federal
approach outlined in this section will address this critical
need.
These programs are to be media- and nonmedia-based. Paid mass
media is an essential component of any effective public
education effort. According to various studies, paid media is
most effective when it is utilized in conjunction with other
approaches. This section requires a multidisciplinary effort.
Mass media prevention efforts should be coordinated with
community and school-based prevention programs as well as
clinical interventions. In addition, the programs must address
in a culturally appropriate way high-risk and special
populations, especially because these groups have often been
the target of marketing and advertising efforts directed
specifically to them.
The Committee notes that it is essential that the advertising
provided under this section be undertaken free from any
connection to or influence by the tobacco industry, and so
directs the Secretary to ensure that any resources and decision
making utilized to carry out this section are unencumbered by
any such connections or influence. The Committee believes that
the independent board established in this section will allow
for the creation of the most effective programs and will
provide for the necessary flexibility to ensure that the needs
of local communities are met. In addition, an independent board
that includes experts in advertising, marketing, public health,
adolescent psychology and education that are not in any
affiliated with the tobacco industry will ensure that the
programs provided for under this section are effective.
SECTION 223. NATIONAL COMMUNITY ACTION PROGRAM
Section 223 of the bill reported by the Committee authorizes
the establishment of a grant program to assist local
communities in their efforts to educate the community and young
people about the dangers of tobacco and ways to reduce tobacco
use and to assist in encouraging the reduction of tobacco use.
The creation of a National Community Action Program is called
for under the June 20 agreement. The Committee regards
community based prevention and education programs including
school based programs to be critical aspects of a national
tobacco control strategy and essential to discouraging tobacco
use and reversing the upward trends in youth tobacco use.
Research demonstrates that well-designed, well-implemented
school-based programs to prevent tobacco are effective and
provide education during the years when the risk of becoming
addicted to tobacco is greatest. The 1994 Surgeon General's
Report, Preventing Tobacco Use Among Young People, indicates
that school-based smoking prevention programs that identify
social influences to smoke and teach skills to resist those
influences have demonstrated consistent and significant
reductions in adolescent smoking. In addition to the
demonstrated reductions in tobacco use, the Centers for Disease
Control and Prevention (CDC) has indicated that these school-
based programs can also help prevent the use of other drugs.
Research, including the 1994 Surgeon General's Report,
indicates that community-based strategies to prevent tobacco
use are important adjuncts to school-based programs. The
effectiveness of school-based tobacco prevention programs
appears to be enhanced and sustained by community wide programs
that involve parents, mass media, community organizations, and
other elements of an adolescent's social environment. This
report indicates that concerted use of multiple school and
community channels for affecting adolescent tobacco-use
behavior can produce a synergistic effect on the risk factors
associated with adolescent tobacco use.
In the last 15 years, several major community-based
prevention trials that target youth tobacco use have been
undertaken and have proven to be effective in driving down
youth smoking rates. For example, the Minnesota Heart Health
Program, addressed several cardiovascular risk factors for all
age groups and used a variety of community strategies. Young
people in this study received interventions through school and
home-based programs indirectly through a community wide attempt
to structure the overall social and physical environment to
discourage young people from beginning to use tobacco. Young
people in this study, had significantly lower smoking
prevalence.
Several states are undertaking anti-tobacco campaigns.
Minnesota was the first to use tobacco excise taxes to carry
out such a program. More recently, California, Massachusetts,
and Arizona have adopted state-based public education programs,
and several other states are initiating them. While it is too
early to evaluate the efforts of many of the programs, the
available data demonstrate that both the California and
Massachusetts programs both of which include large scale
community-based components have been effective in reducing
tobacco use. For example, three years after Massachusetts began
its public education and tobacco control campaign, an
independent evaluation found that tobacco consumption in
Massachusetts declined at a rate three times that of the rate
for the rest of the nation, and while smoking among high school
students increased dramatically on the national level, it did
not increase significantly in Massachusetts.
The American Stop Smoking Intervention Study for Cancer
Prevention (ASSIST), which is funded through the National
Cancer Institute at the National Institutes of Health, has
provided further evidence regarding the effectiveness of
comprehensive coordinated community efforts to reduce tobacco
use. ASSIST provides funding to 17 states and is designed to
promote broad social and environmental change. After just 4
years, tobacco consumption in ASSIST states was 10 percent
lower than in non-ASSIST states--an estimated 70 million fewer
packs of cigarettes being consumed each month in these states.
ASSIST has been used as a model for the development of state-
based tobacco control interventions in California,
Massachusetts, as well as the Centers for Disease Control and
Prevention's limited tobacco control program. The Committee
intends that a significant portion of the funds from this
section be used to fund the expansion of the ASSIST program or
programs modeled after ASSIST.
Research in the United States and abroad has demonstrated
that education and prevention programs work to both increase
knowledge and decrease consumption. But, there have been
insufficient resources and commitment, including from the
federal government, and the Committee intends its bill to
greatly increase the resources available to assist state and
local community efforts to discourage tobacco use.
SECTION 224. STATE RETAIL LICENSING PROGRAM
This section provides for the establishment of a state retail
licensing incentive grant program to be administered by the
Secretary of Health and Human Services. To receive a grant, a
state must enter into an agreement with the Secretary to assume
responsibility for implementation and enforcement of a tobacco
retailer licensing program. An effective licensing program
which enlists tobacco product retailers and their employees in
a systematic effort to reduce illegal tobacco purchases by
minors is vital to this legislation. The Committee intends that
States be allowed the opportunity to design their own retailer
licensing programs, in compliance with the basic licensing
requirements set forth in this Section. If States demonstrate
to the Secretary of HHS that their retailer licensing program
meets these requirements, and abides by the Youth Access
Restrictions promulgated by the FDA, the State shall receive a
block grant out of settlement funds to pay for the licensing
program's administration and enforcement. The Secretary will
promulgate regulations for a retailer licensing system to apply
in those States that do not seek to design and implement their
own retailer licensing system.
Section 235(c) requires States seeking to design and
implement their own licensing system (and receive settlement
payments to do so) to demonstrate to the Secretary that their
program includes the following core components. First, a State
license is required for all retailers selling tobacco products
to consumers, and the State provides notice to such businesses
of their legal requirements pertaining to tobacco sales under
State and Federal law. Second, criminal penalties will be
imposed for the sale of tobacco products without a license, and
civil penalties will be imposed for tobacco sales in violation
State law by a licensee. The civil penalties enacted by States
must include a graduated system of fines and suspension or
revocation of licenses, for repeated violations by licensees.
The monetary amount of fines are left to the discretion of
States. Third, each State licensing plan must include some form
of penalty imposed upon underage youths who possess, purchase,
or attempt to purchase tobacco products. The penalties could
include fines, suspension of driving privileges, or community
service. Each State licensing program must provide procedures
for judicial review of all State actions regarding license
applications, suspensions, and revocations.
Section 235 (b) is the enforcement requirement for States
establishing a licensing system with a settlement block grant.
It requires States to enforce its tobacco licensing program in
a manner reasonably expected to reduce the sale of tobacco
products to underage youths. To ensure proper State action
regarding enforcement, the Secretary can reduce the block grant
of any State found to be not in compliance with this standard.
Section 235(c) authorizes the Secretary to establish a
retailer licensing system in those States which did not
establish their own. It authorizes the Secretary to promulgate
regulations creating retailer licensing requirements,
enforcement measures and applicable penalties. As under current
law, the Secretary is authorized to enter into agreements with
State officials for enforcement of federal regulations, and
provide grant funding from tobacco settlement accounts for
related costs.
TITLE III--TOBACCO PRODUCT WARNINGS AND SMOKE CONSTITUENT DISCLOSURE
Subtitle A: Product Warnings, Labeling and Packaging
SECTION 301. CIGARETTE LABEL AND ADVERTISING WARNINGS
Section 301 provides for new, more emphatic warnings for
cigarette labels, packaging and advertising. These new warnings
are achieved by amending Section 4 of the Federal Cigarette
Labeling and Advertising Act (15 U.S.C. 1333).
In general, this section would require the warning statement
to take-up the upper 25 percent of both the front and the back
of the cigarette package. Cigarette advertising is also
required to carry these warning statements in compliance with a
defined format. The Secretary of Health and Human Services has
the authority to modify the format for the warning statements
as they appear on cigarette packaging and in cigarette
advertising.
SECTION 302. AUTHORITY TO REVISE CIGARETTE WARNING LABEL STATEMENTS
The Secretary may by rulemaking modify the warning label
statements if it would ``promote greater public understanding
of the risks associated with the use of tobacco products.''
SECTION 303. SMOKELESS TOBACCO LABELS AND ADVERTISING WARNINGS
Section 303 provides for new, more emphatic warnings for
smokeless tobacco labels, packaging and advertising. These new
warnings are achieved by amending Section 3 of the
Comprehensive Smokeless Tobacco Health Education Act of 1986
(15 U.S.C. 4402).As with cigarettes, the warning statements
required must appear in a defined format.
SECTION 304. AUTHORITY TO REVISE SMOKELESS TOBACCO PRODUCT WARNING
LABEL STATEMENTS
The Secretary may by rulemaking modify the warning label
statements if it would ``promote greater public understanding
of the risks associated with the use of smokeless tobacco
products.''
SECTION 305. TAR, NICOTINE AND OTHER SMOKE CONSTITUENT DISCLOSURE TO
THE PUBLIC
Section 305 transfers authority over the disclosure of
cigarette constituents from the Federal Trade Commission to the
Secretary of Health and Human Services. The Secretary would be
given the authority to determine whether cigarette package
labels and advertising will report tar and nicotine yields. The
Secretary would have the authority to specify the format for
such disclosures. The Secretary, by rulemaking, could also
require the disclosure of any other smoke constituent.
Subtitle B: Testing and Reporting of Tobacco Product Smoke Constituents
SECTION 311. REGULATION REQUIREMENT
Section 311 would require the Secretary to issue regulations,
within one year of the Act's effectiveness, which would provide
for the testing, reporting and disclosure to the public of
``tobacco product smoke constituents and ingredients that the
Secretary determine should be disclosed . . . to protect the
public health.''
TITLE IV--NATIONAL TOBACCO SETTLEMENT TRUST FUND
SECTION 401. NATIONAL TOBACCO SETTLEMENT TRUST FUND
This Section establishes a National Tobacco Settlement Trust
Fund within the United States Treasury. The up-front and annual
payments received from tobacco manufacturers under Section 403;
amounts equivalent to the fines or penalties paid by tobacco
manufacturers for failure to meet youth tobacco use reduction
targets under Section 202, including interest and penalties
under shall be credited to the trust fund.
The Section provides that the receipts and disbursement of
the Trust Fund shall not be included in the totals of the
budget or subject to limitations imposed by other statutes.
SECTION 402. STATE LITIGATION SETTLEMENT ACCOUNT
This section provides for the establishment, within the
National Tobacco Settlement Trust Fund, of a separate account
to be known as the State Litigation Settlement Account. From
the amounts received into the Trust Fund pursuant to this act,
$196 billion shall be credited to the State Litigation
Settlement Account over 25 years. Amounts credited to the
account shall be distributed to eligible states without further
appropriation.
Subsection 402(c) provides that as state may use amounts
received from the State Litigation Settlement Account as the
state determines is appropriate, and that these funds will not
be deemed as reimbursement for Medicaid expenditures or as
Medicaid overpayments for purposes of recoupment.
SECTION 403. PAYMENTS BY INDUSTRY
This section requires five of the major participating
manufacturers (those manufacturers that become a signatory of
the Master Settlement Agreement and enter into state consent
decrees) to make an up-front payment of $10 billion.
The up-front payment shall be paid in accordance with the
following apportionment:
Phillip Morris Incorporated--65.8 percent
Brown and Williamson Tobacco Corporation--17.3
percent
Lorillard Tobacco Company--7.1 percent
R.J. Reynolds Tobacco Company--6.6 percent
United States Tobacco Company--3.2 percent
The five major participating manufacturers listed above, and
other qualified participating manufacturers, shall contribute
to annual payments beginning the first year after enactment of
this act, as follows.
Year 1: $14.4 billion
Year 2: $15.4 billion
Year 3: $17.7 billion
Year 4: $21.4 billion
Year 5: $23.6 billion
Year 6 and every year thereafter: $23.6 billion.
The payments pursuant to this section, made by participating
manufacturers, shall be deemed payments in settlement of civil
suits in accordance with the Master Settlement Agreement and
consent decrees.
The annual amount required to be paid by participating
tobacco manufacturers in years one through five after enactment
of this act, except for the up-front payment, is calculated by
multiplying the price-per-pack increase designated for that
year, by the year's anticipated volume of per-pack sales. The
price-per- pack increase schedule begins with a 65 cents hike
in year one and graduates to $1.10 in year five, in compliance
with the Administration's FY `99 budget request. Anticipated
volumes have been calculated by the U.S. Department of Treasury
factoring in reductions in demand due to yearly price
increases. Accordingly the listed payments are pre-volume
adjusted, and have also been adjusted for inflation.
The Committee received expert testimony that a substantial
and immediate price increase in tobacco products is an
essential component of a comprehensive effort to deter youth
consumption. This section will achieve that objective.
In year six and every year thereafter, the participating
tobacco manufacturers will be required to pay $23.6 billion,
adjusted to inflation. The yearly payment beginning in year six
is further volume adjusted. The payment of $23.6 billion each
year will be increased or decreased by the same percentage
increase or decrease in volume of sales from the established
baseline.
According to the Department of the Treasury, the total sum of
payments from tobacco manufacturers over 25 years, including
the $10 billion up-front payment, and assuming no increase in
sales volumes, would not be greater than $516 billion (not
including look back assessments provided in Title III).
Annual payments are due in one-third installments to be paid
on March 1, June 1, and September 1 of each year. The share of
the annual payment apportioned to a participating manufacturer
shall be equal to that manufacturer's adjusted unit sales. This
section provides how adjusted units are calculated for
cigarettes and smokeless tobacco.
SECTION 404. ADJUSTMENTS
This section provides for the inflation and volume
adjustments described above.
SECTION 405. PAYMENTS TO BE PASSED THROUGH TO CONSUMERS
This section provides that the yearly payments from
participating tobacco manufacturers required under Section 403,
be passed through to the price of tobacco products sold by such
manufacturer. This is to ensure that the act effects the
increases in price necessary to deter youth consumption.
This section also provides for the assessment of a penalty
against a participating manufacturer for the failure to pass
through payments to product prices. The penalty is increased if
such shortfall was intentional.
SECTION 406. TAX TREATMENT OF PAYMENTS
This section provides that payments made under section 403
are considered ordinary and necessary business expenses for
purposes of tax treatment in accordance with current law. The
administration has expressed its concurrence that current law
be applied with respect to the tax treatment of annual
payments.
SECTION 407. ENFORCEMENT FOR NONPAYMENT
This section provides for the imposition of a civil penalty
on a participating manufacturer for the failure to make any
payment required under Section 404 and 405. The section
specifies a penalty of $100,000 for each day, after 60 days, a
payment is due. The section provides relief from the penalty
for any failure to pay that is not willful or intentional. If a
participating manufacturer fails to make a payment within one
year of when such payment is due, such manufacturer will be
deemed a non-participating manufacturer and will be ineligible
for any protections or assistance provided for under this Act.
SECTION 408. IMPLEMENTING AND ENFORCEMENT FUNDS
This section provides that not less than $300 million of the
amounts available in the trust fund shall be available each
year to the Commissioner of the Food and Drug Administration to
reimburse the FDA for the cost of implementing and enforcing
requirements related to tobacco products.
Subtitle B--General Spending Provisions
SECTION 411. IMPROVING CHILD CARE AND EARLY CHILDHOOD DEVELOPMENT
This section authorizes the Trustees to use funds from the
Trust Fund to expand funding for the Child Care Development
Block Grant to improve the affordability; quality, and
availability of child care, including health services and
improving services for children with disabilities. Proponents
of the amendment by Senator Kerry, as adopted by the Committee,
believe that good quality child care is key to the healthy
development of children and constructive after-school
activities are an important part of keeping school-age children
from smoking. Proponents of the amendment believe that using
tobacco settlement funds to expand the Child Care Development
Block Grant, the major federal child care program for working
families, by up to $4 billion a year would help accomplish
these goals. This section provides that any funds made
available by the trustees for the purposes of this section be
further subject to appropriations.
TITLE V--STANDARDS TO REDUCE INVOLUNTARY EXPOSURE TO TOBACCO SMOKE
Title V provides regulations for a Smoke Free Environment
Policy in public buildings in the U.S. Health and scientific
studies show a causal relationship between secondhand tobacco
smoke and disease in non-smokers. The presence of tobacco smoke
in non-ventilated public buildings and corridors is an
unhealthy and unfair imposition on the rights of non smokers. A
smoke free atmosphere in public buildings will protect the
health of all non-smokers from the ill-effects of tobacco
smoke. This is of particular importance to adults and children
who have medical ailments which are exacerbated by the presence
of tobacco smoke. Importantly, Title V affords State officials
the choice to determine whether the federal smoke free
environment policies mandated herein are suitable for their
States. The Committee recognizes that States have traditional
authority over regulations pertaining to tobacco usage in
public facilities, and the varying policy choices which will
arise from new health-oriented requirements. Therefore, section
507 provides States to opt-out of these federal requirements by
the enactment of contrasting State law.
Section 501 defines the type of buildings to which the
federal policy for smoke free buildings will apply. The bill
defines public buildings as those which are regularly entered
by at least ten persons one day a week, including federally-
owned or leased buildings, other than buildings used for
residential purposes. Section 501(B) lists the buildings which
are not considered to be public buildings for the purposes of
this Title, and thus are not subject to the smoke free policy
requirements. These are largely buildings patronized by adults,
such as bars, casinos, hotels, private clubs, and restaurants.
Importantly, fast food restaurants are specifically required
under section 501 (B) and (C) to establish a smoke free policy
in compliance with this bill. The Committee believes that the
large numbers and frequency of children and teenagers who
patronize fast food restaurants warrants the adoption of smoke
free environment policies.
Section 502 provides the basic elements of the smoke free
environment policy that the owners or controlling lessees
public buildings must implement. The owner or lessee who
operates the building must prohibit the smoking of tobacco
products within the facility and in close proximity to the
facility's entrance. They may establish a specially-designated
smoking area in the building, under the following restrictions.
The designated smoking areas must directly ventilated to the
outside of the building and not allow tobacco smoke to enter
other areas of the public building; the room must be maintained
at negative pressure; and non-smoking individuals do not have
to enter the room for any purpose. This section and Section 505
authorizes the OSHA Administrator to promulgate regulations to
carry out this Title.
Enforcement of a smoke free environment policy is a key
aspect of ensuring that non-smokers are not subject to an
unhealthy environment due to violations of this Title. Section
503 authorizes any aggrieved person, OSHA, and any State or
local governmental agency to bring suit in a proper federal
district court to enforce these smoke free environment
requirements. Defendants are subject to injunctions against
violative practices and civil penalties fines of up to $5,000
per day of violation. However, to afford owners and lessors a
fair opportunity to correct violations without unnecessary
litigation, an aggrieved person must first provide notice to
them about the violation. Section 503(c) stipulates that the
owner or lessee that operates the building then has 60 days to
correct the violation before the grievant can file an action
under this Title.
Section 506 and section 507 establish the effective date of
this title and the ability of States to opt- out of its
requirements, respectively. The Committee believes that this
title should not take effect in a State until that State has
the opportunity to evaluate whether they are suitable public
building requirements. Therefore this title's federal smoke
free environment policies will take effect on the first day of
the January, following the regular session of a State
legislature in which a measure to opt out may have been
considered.
Nothing in this title requires any public facility owner or
lessee to make any structural change to such facility. If a
public facility owner or lessee does not have a specially
designated smoking area that meets the requirements of this
title, and does not wish to incur any expense to create such an
area, the owner or lessee may choose not to have a specially
designated smoking area.
TITLE VI--APPLICATION TO INDIAN TRIBES
SECTION 601. SHORT TITLE
Section 601 provides that this title may be cited as the
``Reduction in Tobacco Use and Regulation of Tobacco Products
in Indian Country Act of 1998''.
SECTION 602. FINDINGS AND PURPOSES
Section 602 contains findings and purposes relevant to this
Title.
SECTION 603. APPLICATION OF TOBACCO-RELATED PROVISIONS TO NATIVE
AMERICANS
In making the provisions of the bill applicable to Indian
tribes and the manufacture, distribution, and sale of tobacco
or tobacco products (tobacco-related activities) on Indian
lands, the Committee had various principal objectives,
including: first, to ensure national, uniform application of
the Act with respect to the activities of Indian tribes, their
members, and tobacco-related activities on Indian lands;
second, to recognize and preserve specified traditional,
religious, and ceremonial uses of tobacco as part of the Native
American culture; and third, to recognize the inherent tribal
authority to make and enforce laws governing persons and
activities occurring on lands within the tribes' jurisdiction.
The Committee does not intend to modify current law with regard
to jurisdiction on Indian lands.
Sections 601 through 603 of Title VI as reported by this
Committee do not represent a final agreement by the Chairman
and Committee members regarding a number of outstanding issues.
It is the intent of the Committee to reach consensus on
language to be included in a Manager's Amendment to be offered
when the bill is considered by the full Senate. The Committee's
intent, however, is clear with regard to a number of matters:
to ensure national, uniform application of the Act with respect
to the activities of Indian tribes, their members, and tobacco-
related activities on Indian lands; to recognize and preserve
specified traditional, religious, and ceremonial uses of
tobacco as part of the Native American culture; to disburse
tobacco trust fund monies to tribes or tribal organizations on
an equitable basis; and to provide eligible Indian tribes
resources to operate tobacco retailer licensing programs, as
prescribed for states under section 224 of the Act. If tribes
are unwilling, unqualified or ineligible (or are non-
participating tobacco products manufacturers under the Act) to
conduct such licensing programs, then states may conduct the
licensing programs under voluntary cooperative agreements with
those tribes, or the federal government shall conduct such
licensing programs.
The Committee recognizes that language may have to be
included to address the unique circumstances of Alaska, in
particular, the Alaska Native Claims Settlement Act, the U.S.
Supreme Court's Venetie decision, and health-care delivery
systems traditionally serving Alaska Native communities.
SECTION 604. STATE TOBACCO EXCISE TAX COMPLIANCE
Uniformly increasing the price of tobacco products and
eliminating pricing disparities are basic functions of this
Act, and Section 604 is designed to eliminate sources, for non-
tribal members, of cheaper tobacco products. For the sale of
tobacco products to non-tribal members, Section 604 requires
Indian tribes to collect and remit to the U.S. Treasury all
excise and sales taxes of the state within which the sale
occurs. The Treasury, in turn, is required to remit these taxes
to the state within which they were collected.
TITLE VII--CIVIL LIABILITY OF MANUFACTURERS OF TOBACCO PRODUCTS
SECTION 701. DEFINITIONS
Section 701 provides definitions for terms which are not
defined elsewhere in the bill or which have unique meaning in
Title VII.
SECTION 702. APPLICATION
Section 702 explains that the provisions of Title VII apply
to all tobacco claims brought against participating
manufacturers and various agents of the participating
manufacturers, including retailers, wholesalers and growers.
Section 702(b) clarifies that Title VII does not apply to non-
participating manufacturers, nor does it apply to claims which
are not tobacco claims, such as enforcement actions by the
states, workers' compensation claims, securities actions, and
actions brought by the United States. Section 702 also provides
a one-time opt out mechanism for states to elect not to settle
their pending actions. The Secretary of the Treasury would
establish procedures for the execution of this opt-out. If a
state opts-out, then its actions against the tobacco
manufacturers would not be settled. The state would forgo
payments from the National Tobacco Settlement Trust Fund, but
would receive any funds it receives in settlement or judgment
from its suits against tobacco manufacturers.
SECTION 703. PREEMPTION AND RELATIONSHIP TO OTHER LAW
The Section preempts other bases in state law for tobacco
claims to the extent that state law is inconsistent with Title
VII. It also clarifies that Title VII does not limit any
criminal liability of the tobacco manufacturers.
SECTION 704. GOVERNMENTAL CLAIMS AND CASTANO CIVIL ACTIONS
This section prohibits any state governmental entity, or
political subdivision, and Indian tribes from bringing a
tobacco claim, except as provided in Title VII. Section 702(b)
provides for the settlement of existing state claims by consent
decree. Section 702(c) settles the pending private class
actions based solely on addiction and dependence and known as
the Castano cases. While the Castano class actions are
decertified, the plaintiffs within the class could bring their
actions on an individual basis in accordance with Title VII.
Subsections (2) and (3) of 704(c) provides a mechanism for
awarding attorneys' fees in the Castano cases.
SECTION 705. CONCURRENT JURISDICTION; FEDERAL CAUSE OF ACTION; ACTIONS
DAMAGES; LIABILITY; REMOVAL
Section 705 establishes a federal cause of action for tobacco
claims, based upon the substantive law of the state in which an
action is brought. This federal cause of action is the
exclusive cause of action for tobacco claims, and all other
bases for claims are preempted. This approach of creating a
federal cause of action allows this Act to cover all tobacco
claims, while both permitting existing state law to apply to
those actions and avoiding bringing all tobacco claims into the
Federal court system.
Section 705(b) provides that tobacco claims may only be
brought against a tobacco manufacturer or the surviving entity
of a tobacco manufacturer. This structure provides an incentive
for tobacco manufacturers to elect to participate. Section
(b)(2) preserves all causes of action which would have
otherwise been viable under state law if the tobacco
manufacturers are unable to make payments required by the Act.
Subsection (c) prohibits addiction and dependence claims.
Subsection (d) provides evidentiary rules for tobacco claims:
including authentication of documents produced from the
national depository established by the Act, and a prohibition
against introducing evidence related to reduced-risk tobacco
products to thereby eliminate a significant disincentive to the
development of safer tobacco products.
Section 705(e) establishes joint and several liability among
the participating manufacturers, but provides that the
participating manufacturers will not be jointly and severally
liable with non-participating manufacturers. Participating
manufacturers may be jointly and severally liable with any
other person, except a non-participating manufacturer.
Subsection (4) of (e) provides that trials in actions against a
participating manufacturer and a non-participating manufacturer
may be severed and heard by separate juries. Subsection (5)
establishes an evidentiary rebuttable presumption that nicotine
is addictive and that certain diseases are caused in whole or
in part by use of tobacco products.
SECTION 706. PAYMENT OF TOBACCO CLAIM SETTLEMENTS AND JUDGMENTS
This section established a system for payment of settlements
and judgments of tobacco claims out of the fund set aside for
these payments. This section coordinates the payment of
judgments and settlements from all courts to ensure that the
fund is distributed according to certain procedures and
guidelines. Subsection (b) provides that the Secretary of the
Treasury will maintain a record or judgments and settlements
and will establish a priority for their payment. Payment is
made according to the date when the judgment or settlement is
registered with the Secretary. The annual payment cap is
established at $6.5 billion. If that amount is insufficient to
pay all the recorded judgments and settlements in any year,
then the unpaid judgments and settlements will be paid in the
following year. Subsection (d) permits a participating tobacco
manufacturer to seek an injunction against any state court
which attempts to enforce or execute any judgment in a manner
inconsistent with this section. Section 706(e) provides that
the participating tobacco manufacturers are jointly and
severally liable for judgments and settlements payable under
this section and shall enter into an agreement apportioning the
amounts payable among themselves. The apportioned payments are
to be given priority, and may not be avoided or discharged, in
any bankruptcy proceeding or other insolvency proceeding.
SECTION 707. ATTORNEYS' FEES AND EXPENSES
This section establishes an arbitration procedure for
awarding plaintiff's attorney's fees in which the attorney is
unable to agree with his client as to the fee to be paid. The
arbitration panel shall consist of 3 people: 1 selected by the
plaintiff, one selected by the attorney, and one chosen jointly
by those 2 arbitrators. Subsection (4) sets forth the
substantive criteria the panel must follow in making awards of
fees, including the time and labor expended; the novelty and
difficulty of the issues in the claim; the skill required; the
extent to which the employment has precluded other employment;
whether a fee agreement exists based upon a fixed fee or a
percentage; time limitations imposed; the amount of the
judgment or settlement; the experience and reputation of the
attorney; the undesirability of the action; amounts already
paid under the fee agreement in dispute; and such other factors
as justice requires. Nothing in this section abrogates or
restricts the rights of any parties to mediate, negotiate, or
settle fee disputes, or to enter into fee agreements with
respect to the allocation or division of fees.
SECTION 708. NON-PARTICIPATING MANUFACTURERS
This section provides for fees to be paid by non-
participating manufacturers, including fees equivalent to 150
percent of the annual payments made by participating
manufacturers and an escrowed fee to cover potential tobacco
claim related liability payments. This structure both provides
an incentive for tobacco manufacturers to participate and
ensures there will not be a price advantage for tobacco
manufacturers that do not participate.
SECTION 709. CONFORMING AMENDMENTS
This section contains provisions necessary to provide
consistency with other statutes.
SECTION 710. TRUST FUND
This section establishes a Tort Trust Fund, as requested by
the Administration, to ensure that individual claimants have a
source for payment of judgments and settlements against the
tobacco companies. This section is a place holder and will be
revised.
TITLE VIII--TOBACCO INDUSTRY COMPLIANCE AND EMPLOYEE PROTECTION FROM
REPRISALS
SECTION 801. TOBACCO INDUSTRY COMPLIANCE ACCOUNTABILITY REQUIREMENTS
Section 801 would require the Commissioner of the Food and
Drug Administration to establish an advisory panel called the
``Tobacco Agreement Accountability Panel.'' Within one year of
the effectiveness of the Act, each participating tobacco
manufacturer must submit to the Commissioner a plan to reduce
youth smoking. That plan will be reviewed by the Accountability
Panel which may recommend additional measures to reduce youth
smoking.
Annually, the Accountability Panel would be required to
submit to the Commissioner and Congress a report which
describes each tobacco manufacturer's compliance with the Act
and determines whether the efforts undertaken by each tobacco
manufacturer is likely to meet the youth smoking reduction
targets. The Commissioner is, within 60 days of receiving this
report, required to implement any recommendation made by the
Accountability Panel or report to Congress why the
recommendation is not being implemented.
The panel would be permitted to declare a public health
emergency if it unanimously determines that a tobacco
manufacturer's ``actions or inactions'' concerning compliance
with the Act would create a ``clear and present danger to the
attainment of the targets for underage smoking reduction.'' If
the Commissioner determines that the Accountability Panel's
determination is ``supported by clear and convincing evidence''
then the Commissioner would be required to bring an action,
under provisions of the Act, to seek the ``immediate suspension
of the manufacturer's annual limitation cap on civil
judgments.'' If the court then determines that ``the Secretary
has proved by clear and convincing evidence'' that the tobacco
manufacturer's actions or inactions present a ``clear and
present danger to the attainment of the targets for underage
smoking reduction'', the court may suspend the tobacco
manufacturer's annual limitation on civil judgements.
If the Secretary determines that the tobacco manufacturer
will miss its youth reduction targets by more than 20
percentage points, the Secretary would be required to either
bring an action against the tobacco manufacturer under section
203 or issue a finding that the manufacturer made ``reasonable
efforts'' to reach the attainment targets. Compliance with all
Accountability Panel recommendations will be prima facie
evidence that the tobacco manufacturer made ``reasonable
efforts'' to achieve the targets for reduction of youth
smoking.
SECTION 802. TOBACCO PRODUCT MANUFACTURER EMPLOYEE PROTECTION
The Act would provide various whistle blower protections for
employees of tobacco manufacturers. The Act would also give the
Secretary certain investigatory and enforcement powers to
protect such employees. The Act would provide for judicial
review of such determinations.
Tobacco manufacturers would be prohibited from taking action
against an employee that exposed the manufacturers's violations
of the Act, testified in government proceedings concerning
those violations or refused to engage in practices made
unlawful by the act.
Employees that believe they have been adversely treated for
their actions to expose tobacco manufacturer violations may
file a complaint with the Secretary. The Secretary would be
required to investigate the employee's complaint and may take
action to reinstate a fired employee or take other actions to
abate the violation if the employee makes a prima facie showing
of discriminatory treatment due to the employee's actions to
expose the tobacco company's violations. The Secretary may
dismiss the employee's complaint if the tobacco manufacturer
proves by clear and convincing evidence that it did not
discriminate or retaliate against the employee.
TITLE IX--PUBLIC DISCLOSURE OF TOBACCO INDUSTRY DOCUMENTS
Over the past several decades, tobacco companies have amassed
a truly massive amount of scientific, manufacturing, marketing,
and company policy information. These documents, which include
internal tobacco company studies and strategic policy
assessments, comprise literally millions of pages. They are of
tremendous importance to public health officials interested in
an effective national tobacco policy, as well as private
citizens. The information that can be gleaned from these
materials will be especially vital to individuals who have
suffered medical problems due to tobacco products, and who are
considering whether to file suit for compensation. Without a
centralized tobacco document repository, citizen plaintiffs
would face considerable costs, delays, and difficulties in
investigating company information that may be relevant to the
consideration of their claim. Discovery efforts could prove
extremely burdensome and time consuming for many individuals.
The Committee supports the State Attorneys General
recommendation that a central document repository of
appropriate, non-privileged tobacco company information be
established. The repository will serve the Act's objective of a
sound national tobacco policy by providing public access to
documentary evidence of the industry's knowledge, policies, and
conduct.
SECTION 901. FINDINGS
Section 901 contains Congressional findings that the tobacco
manufacturers have taken action in bad faith to protect
internal documents from public disclosure when disclosure of
those documents would promote public understanding of the
tobacco industry's research and business practices.
SECTION 902. APPLICABILITY
This Title applies only to participating manufacturers of
tobacco products as defined under the Act.
SECTION 903. NATIONAL TOBACCO DOCUMENT DEPOSITORY
Section 903 would require the participating tobacco product
manufacturers to establish in the Washington DC area, within
180 days of the enactment of this Act, a document repository
called the National Tobacco Document Depository. This document
depository would greatly enhance the knowledge of both the
public and the public health community concerning tobacco
industry behavior and research concerning tobacco products. The
document depository would also greatly facilitate individuals
in bringing lawsuits against the tobacco manufacturers to gain
compensation for injuries related to tobacco use.
Each participating tobacco product manufacturer would be
required to place in the Depository all of its documents, and
those of the Center of Tobacco Research or the Tobacco
Institute, concerning: all original laboratory research; all
industry documents produced in discovery in the actions brought
by state attorneys general; any documents produced in
conjunction with the Federal Trade Commission's investigation
concerning Joe Camel; all documents produced to litigation
adversaries during any private litigation and in specifically
enumerated litigation; any trial-related documents; any
documents referring to health research about tobacco products,
dependency of consumers on tobacco products, and safer or less
hazardous tobacco products; all indices of documents relating
to tobacco products and health; and, various privilege and
trade secrecy logs describing certain documents exempt from
disclosure.
Section 903(d) would provide for the disclosure, by
participating tobacco manufacturers, of documents created after
the effective date of the Act. The following types of documents
would have to be supplied to the depository within 90 days of
the document's completion: all original laboratory research
relating to the health effects or safety of tobacco products;
all studies relating to tobacco product use by minors; all
documents referring to the relationship between advertising and
promotion of tobacco products and their use by minors; a
privilege log to describe those documents that are exempt from
disclosure; and, a trade secrecy log to describe such documents
that are exempt from disclosure.
All documents supplied to the Depository would be
sequentially numbered and coded to identify the tobacco
manufacturer that is the source of the document.
SECTION 904. PRIVILEGE AND TRADE SECRET CLAIMS
Section 904 establishes procedures for handling documents the
tobacco manufacturers claim should not be made available to the
public due to attorney-client privilege, attorney work product
protection or trade secret protection. The tobacco
manufacturers would be required to submit such documents to the
Depository but they would be marked as privileged documents.
Submitting such documents to the Depository would not waive any
claim of privilege or trade secret protection.
The tobacco manufacturers would be required to provide a
comprehensive log that identifies all documents for which a
privilege is asserted. The log of documents would describe each
document and explain why a privilege is asserted. Tobacco
manufacturers would be required to examine each document for
which they had previously made a claim of privilege and make a
good faith review as to whether that claim is still
appropriate.
SECTION 905. DISCLOSURE BY THE DEPOSITORY
The Depository would be required to release to the public all
documents that are not privileged by placing them on the
Internet and through other appropriate methods.
Under Section 905(b), documents that are submitted to the
Depository are to be treated for evidentiary purposes in the
same manner as documents from the National Archives. In other
words, if the document is certified as coming from the
Depository, then it is authenticated as a matter of evidence
and is treated as if it were the original document.
Under Section 905(c), if a document, protected as a trade
secret, is released inappropriately by the Board or the
Depository it is a criminal violation.
SECTION 906. NATIONAL TOBACCO DOCUMENTS REVIEW BOARD
Section 906 creates the National Tobacco Documents Review
Board with 5 members, appointed by the President and confirmed
by the Senate. The Board would have responsibility for
maintaining and operating the Depository. The Board would be
charged with applying the doctrines of attorney-client
privilege and attorney work-product in a manner consistent with
Federal law.
SECTION 907. RESOLUTION OF DISPUTED PRIVILEGE AND TRADE SECRET CLAIMS
The Board would be responsible for determining whether to
uphold or reject a tobacco manufacturer's claim that a document
should not be revealed to the public due to a claim that the
document is protected by attorney client privilege, the
attorney work product doctrine or trade secret protection. Such
a determination could be made by a single member of the Board.
The decision is to be made in writing and is subject to
judicial review.
SECTION 908. APPEAL OF BOARD DECISION
Any person may appeal a decision by the Board by filing a
petition for review with the United States Court of Appeals for
the Federal Circuit. In the Appeals Court's review, the Board's
findings of fact are conclusive if supported by ``substantial
evidence on the record taken as a whole''. The Appeals Court
would be able to conduct a de novo review of the Board's legal
decisions. The Supreme Court may review any decision made by
the Appeals Court.
Once a final decision has been reached about the document,
the Board would be required to make it available to the public
within 30 days. Once a final decision has been reached no
Federal or State court would have jurisdiction to again
evaluate a claim of privilege as to that document.
If the Board decides that a document should not be made
available to the public due to an appropriate claim of
privilege, the Board's decision is not binding in a judicial
proceeding concerning that document.
Section 907(f) would require participating tobacco
manufacturers to supply to the Food and Drug Administration any
document it submits to the Depository for public review and all
documents for which it asserts a trade secret protection.
Tobacco manufacturers would not have to supply documents for
which it asserts attorney-client privilege or attorney work
product protection.
SECTION 909. MISCELLANEOUS
Section 909(a) appears to be a duplicate power of Section
908(f).
The disclosure process in this Title does not affect the
Federal Rules of Civil Procedure or Criminal Procedure and the
Title does not affect any Federal law that requires the
disclosure of documents. The Title also does not affect any law
the deals with attorney-client privilege, attorney work product
protection, or trade secret protection.
SECTION 910. PENALTIES
Each tobacco manufacturer is required to act with good faith
as to document disclosure. If the Board determines that a
manufacturer has not acted in good faith then it may impose
certain costs and attorney's fees on that manufacturer. The
board would also be able to impose civil penalties of up to
$10,000 per violation if it determines the tobacco manufacturer
acted in bad faith.
If a participating tobacco manufacturer fails to produce
indexes and documents in accord with the schedule outlined in
this Title then a civil penalty of up to $500 may be assessed
per violation. A separate violation occurs for each document
that is not produced. The maximum penalty for a related series
of violations is $10,000.
SECTION 911. DEFINITIONS
Section 911 defines relevant terms.
TITLE X--LONG-TERM ASSISTANCE FOR FARMERS
SECTION 1001. SHORT TITLE
This section names title X as the ``Long-Term Economic
Assistance for Farmers (LEAF) Act.''
SECTION 1002. DEFINITIONS
This section sets out the definitions applicable to title X.
Subtitle A--Tobacco Community Revitalization Trust Fund
SECTION 1011. ESTABLISHMENT OF TRUST FUND
This section establishes the ``Tobacco Community
Revitalization Trust Fund.'' The trust fund is to be funded by
assessments to tobacco manufacturers and importers as
designated in section 1012. It is not the Committee's intention
to require that tobacco manufacturers that have made their full
annual payment into the National Tobacco Settlement Trust Fund
under section 403 also make a separate annual payment of their
assessment for the Tobacco Community Revitalization Trust Fund.
Rather, their obligation to make payments under this title will
be satisfied by transfers from the National Tobacco Settlement
Trust Fund of amounts equivalent to their annual assessment
under this title. Funds deposited into the Tobacco Community
Trust Fund are to be used for the following: payments for lost
tobacco quota, payments for sale of quotas, payments for
community economic development grants, worker transition
program, higher education assistance programs, and to reimburse
the federal government for the administration of the program.
The legislation includes specific dollar limitations on annual
payouts for each program. All monies and payments under the
Trust Fund are deemed to constitute budget authority in advance
of appropriations Acts. The legislation has earmarked $28.5
billion for the program, pursuant to section 1012. Of this
amount, the following annual expenditures are to be made
annually for fiscal years 1999-2023: (1) Payments for lost
tobacco quota as delineated under section 1021, except that
such payments are not exceed $1.65 billion annually, unless
additional monies are needed for acceleration of lost tobacco
quota; (2) Payments for the administration of the tobacco
support program by the Department of Agriculture under section
1022; (3) Payments for the community economic development
program under section 1023, which is not to exceed $375 million
annually for fiscal years 1999-2008, and $450 million annually
for fiscal years 2009-2023; (4) Payments for the worker
transition program under section 1031, which is not to exceed
$25 million in any fiscal year; and (5) Payments for the higher
education opportunity grants under section 1032, which are not
to exceed: $42.5 million for each of the academic years from
1999 to 2004; $50 million for each of the academic years from
2004 to 2009; $57.5 million for each of the academic years from
2009 to 2014; $65 million for each of the academic years from
2014 to 2019; and $72.5 million for each of the academic years
from 2019 to 2024.
SECTION 1012. CONTRIBUTIONS BY TOBACCO PRODUCT MANUFACTURERS AND
IMPORTERS
This section specifies that contributions are to be made by
tobacco manufacturers and importers to the Tobacco Community
Revitalization Trust Fund on a market share basis. The total
contribution that is to be made by companies is $28.5 billion.
The payments are to be pursuant to the following schedule: $2.1
billion annually for fiscal years 1999-2008 and $500 million
annually for fiscal years 2009-2023.
Subtitle B--Tobacco Market Transition Assistance
SECTION 1021. PAYMENTS FOR LOST TOBACCO QUOTA
This section restructures the procedures for compensating
tobacco quota holders, quota lessees, and quota tenants for
lost tobacco quota as a result of declines in the tobacco
market. Tobacco quota holders, lessees, and tenants are to be
compensated on a lost quota basis. Reimbursements are to be
made based on the average base quota of each party. The base
quotas are to be determined as specified: (1) For quota
holders, the base quota is the average tobacco farm marketing
quota for the 1995-1997 marketing years; (2) For a quota
lessee, the base quota level is fifty percent of the average
number of pounds of tobacco quota established for a farm for
the 1995-1997 marketing years that was leased or rented to the
quota lessee minus twenty-five percent of the average number of
pounds of that quota grown by a quota tenant; and (3) For a
quota tenant, the base quota level is fifty percent of the
average number of tobacco quota pounds for marketing years
1995-1997 which were leased to the tenant by a quota holder and
produced by the tenant, plus twenty-five percent of the average
number of tobacco quota pounds for marketing years 1995-1997
that were leased by a quota lessee and grown by the tenant.
Monetary Reimbursements for Lost Quota/Regulations for Sale of Quotas
The legislation has included set dollar amounts for
determining the actual amount of reimbursement due to each
party in the tobacco support program. Additionally, consistent
with the Committee's desire to restructure the current quota
system, so as to ensure quota owners are actual producers,
provisions have been included to encourage the transfer of
quotas by quota owners to persons who are actual producers. The
Committee recognizes, however, that there are different market
conditions regarding the nation's two prominent types of
tobacco--burley and flue-cured. Accordingly, the legislation
includes separate monetary payout and quota-buyout incentives
for burley and flue-cured businesses. These procedures set out
below:
Compensation Procedures for Burley Tobacco
Compensation for Lost Quota. Annual payments for lost quota
for persons involved in the production of tobacco, other than
flue-cured tobacco, are to made pursuant to the following
formulas: (1) For quota holders, payments are to be based on
the number of pounds by which the farm marketing quota is less
than the base quota level for the quota holder times $4 per
pound, subject to a lifetime limitation of $8 per pound; and
(2) For lessees and tenants, the formula for determining actual
payments is the percentage by which the national marketing
quota is less than the national marketing quota for marketing
years 1995-1997 times the base quota level of the lessee or
tenant times $4 per pound, subject to a lifetime limitation of
$8 per pound.
If the amounts that are due to quota holders, lessees, and
tenants exceed the amount available for lost quota payments
under section 1011, the actual payments are to be adjusted and
made on a pro-rata share. The amount of the reductions to each
party, however, are to be rolled-over to such succeeding fiscal
years as are necessary.
In general, payments are to be made on a yearly basis.
However, payments are to be accelerated any time the national
marketing quota is below 50 percent of the national tobacco
marketing quota for the 1998 marketing year for three
consecutive years, or if Congress abolishes the tobacco support
program.
Relinquishment of Quota by Quota Holders. Burley quota
holders will be given an option to relinquish their quotas in
return for a payment. Notification to exercise the option must
be made by January 15, 1999. The payments to relinquishing
quota holders are to be made annually in fiscal years 1999-
2008, based on a lifetime payment of $8 per pound multiplied by
the base quota level. The payments are to be made annually, and
are to be equal to 1/10 of the lifetime payment. Quota holders
who relinquish their quota are ineligible for any other
payments for lost or relinquishing quota.
Reissuance of Quota. Lessees and tenants of burley quota
holders are to be given a one-year option of having an
allotment of the farm or acreage marketing quota relinquished
by the quota holder relocated to a farm owned by the quota
tenant or lessee. The relocated amount is not to exceed 50% of
the farm acreage owned by the quota lessee or tenant. Lessees
and tenants that receive transferred quota allotments are not
to receive any additional compensation for lost quota as a
result of the reallocation. The recovery of payments as a quota
holder and lessee or tenant is prohibited.
If the relinquished quota is not transferred to a quota
lessee or tenant, the Secretary may transfer the quota to other
quota holders. Such transfers are to be limited to quota
holders in the same county, unless state law permits county-to-
county transfers. Quota holders are not eligible for additional
lost quota payments to quota holders as a result of the
transfer of the relinquished quota.
Death Of Quota Lessee or Tenant. If a quota lessee or tenant
dies, his or her lost quota payments are to transfer to his or
her spouse or dependents.
Treatment of Flue-cured Tobacco
Abolishment of Quota System for Flue-cured Tobacco. The
legislation will abolish the quota system for flue-cured
tobacco. The procedures for exchange of quotas for permits are
set out in section 1024. Current quota holders who are
producers, as well as lessees and tenants, will be given the
option of transitioning to the permit system. All flue-cured
quota owners, who are not actual producers, will be required to
relinquish their quotas in exchange for a payment. The quotas
are to be yielded by November 15, 1998. Relinquishing quota
owners are to be paid annually 1/10 of a lifetime limitation of
$8 per pound times their base quota level. The payments are to
be made for fiscal years 1999-2008. The lessee or tenant of the
quota will be given an automatic option under section 1024 of
obtaining a permit to continue farming. However, if the lessee
or tenant rejects the option of continuing to farm under the
new permit system, each is eligible under section 1021 for a
transition payment of $8 per pound times their base quota level
as established by the legislation. The payments are to be made
for fiscal years 1999-2008.
Lost Quota Payments for Lessees and Tenants Under Permit
System. Lessees and tenants that have active permits are
eligible for annual lost quota payments of $2 per pound times
the number of pounds by which the production authorized under
their permit is less than twice their base quota level, subject
to a lifetime limitation of $4 per pound.
If the amounts that are due to quota holders, lessees, and
tenants, exceed the amount available for lost quota payments
under section 1011, the actual payments are to be adjusted and
made on a pro-rata share. The amount of reductions to each
party, however, are to be rolled-over to such succeeding fiscal
years as are necessary.
In general, payments are to be made on a yearly basis.
However, payments are to be accelerated any time the national
marketing quota for flue-cured tobacco is below 50% of the
national marketing quota allotment for the 1998 marketing year
for three years in a row.
SECTION 1022. INDUSTRY PAYMENTS FOR ALL DEPARTMENT COSTS ASSOCIATED
WITH TOBACCO PRODUCTION
This section authorizes the Department of Agriculture to use
monies from the Tobacco Community Revitalization Trust Fund for
the administration of the tobacco support programs.
SECTION 1023. TOBACCO COMMUNITY ECONOMIC DEVELOPMENT GRANTS
This section authorizes the Department of Agriculture to
award economic development grants to tobacco-growing
communities. The amount of the grants is to be based on the
amount of the state's farm income pursuant to the 1995-1997
marketing years. States must submit an application to the
Department before a grant can be awarded. The application is to
describe the purposes for which the grant will be used. The
grants may be used for such programs as loan assistance
programs for restructuring communities or for the support of
new industries. Such funds, however, are reserved for counties
in the state that had at least $100,000 in tobacco production
in one or more of the 1995-1997 marketing years. Although
states are given considerable latitude in determining the use
of the grant funds, the legislation does include the following
earmarks: (1) at least 20% of the funds must be used for
economic development and agriculture-based rural development
activities; (2) a minimum of 4% is to be used for technical
assistance; and (3) no less than 6% of the funds are to be used
to provide direct payments to tobacco warehouse owners based on
declines in yearly volume sales as compared to sales during the
1998 marketing year.
Additionally, a state may require recipients of funds to
provide preferences in hiring persons who, during the 1998
calendar year, were employed in farming, manufacturing, and
processing of tobacco and are eligible for assistance under the
tobacco worker transition program, as well as persons eligible
for higher education grants under the bill.
SECTION 1024. FLUE-CURED TOBACCO PRODUCTION PERMITS
This section replaces the tobacco quota system for flue-cured
tobacco with a federal tobacco permit system. The federal
tobacco permit system will require official permits to farm
tobacco. These permits will be issued by the Department of
Agriculture, which will include production and acreage
allotment limitations. Permits will only be issued to actual
producers. Lessees and tenants that produce flue-cured tobacco
under agreements with quota owners will automatically be given
the right to obtain permits to continue their farming. The
permits will not be transferable, and will be prohibited from
being used as an asset. Permits, however, will be permitted to
be transferred to the permit owner's surviving spouse and
descendants. Lessees and tenants that have permits that
automatically revert to them will be given the option of
relinquishing their permits for a payment. The payments are to
be made on an annual basis from 1999 to 2008, subject to a
lifetime limitation of $8 per pound times the base quota level
(section 1021).
SECTION 1025. MODIFICATIONS IN FEDERAL TOBACCO PROGRAMS
This section includes technical changes to the tobacco quota
program. The section provides that in cases where tobacco
marketing quotas are still in effect following the enactment of
the bill, the Department of Agriculture, on receipt of a
petition from 5% of the producers of a particular type of
tobacco in a state, is to conduct a statewide referendum on a
proposal regarding the lease and transfer of tobacco quota. If
a majority of the state's producers of that type of tobacco
approve, the state is to implement quota transfers and leases
according to the proposed procedures.
This section changes the penalties that are to be assessed to
tobacco companies for failure to meet quota purchase
agreements. The penalty is changed from the current penalty
assessment of twice the per pound assessment times the quantity
of purchasers that are less than 90% of the quantity of
intended purchases, to 105% of the average market price times
the quantity of purchasers that are less than 90% of the
quantity of intended purchases.
Subtitle C--Farmer and Worker Transition Assistance
SECTION 1031. TOBACCO WORKER TRANSITION PROGRAM
This section sets forth a program that is to be administered
by the Department of Labor to assist workers in the tobacco
industry. To benefit, a group of workers of a tobacco entity
will be required to file a petition with the Labor Department
for assistance. The workers will be required to show that: (1)
they have or will become totally or partially separated; (2)
the entity's sales production has decreased substantially; and
(3) that the national tobacco settlement contributed
importantly to the production declines. If the petition is
approved, the workers are to be provided the following benefits
and services: employment services; training for new employment;
and adjustment allowances (payments to aid in the transition to
a new job, except that these payments are to be made only if
the person is in the job training program). No person who has
received payments for tobacco lost quota is eligible for the
program. The program is to be funded at a rate of $25 million
yearly through fiscal year 2008. At least $12.5 million is to
be used for the job training program.
SECTION 1032. FARMER OPPORTUNITY GRANTS
This section provides for the establishment of educational
grants to assist tobacco producers and their relatives in
obtaining undergraduate degrees. To be eligible, a person has
to be a member of a tobacco farm family. The section defines a
tobacco farm family or member as an active tobacco producer or
worker, and their spouse, son, daughter, stepson, stepdaughter,
brother, sister, stepbrother, stepsister, son-in-law, or
daughter-in-law. The bill sets forth the following yearly
amounts of the grants: $1700 for each of the academic years
from 1999 to 2004; $2000 for each of the academic years from
2004 to 2009; $2300 for each of the academic years from 2009 to
2014; $2600 for each of the academic years from 2014 to 2019;
and $2600 for each of the academic years from 2019 to 2024. The
monies are to be paid to the institution directly or to the
student. A grantee may receive a scholarship for only one
institution, and is required to maintain a qualifying average
for student eligibility at the institution. A grantee is barred
from receiving a grant if he or she is in default on a higher
education loan or is indebted to an institution of higher
education.
Subtitle D--Immunity
SECTION 1041. GENERAL IMMUNITY FOR TOBACCO PRODUCERS AND TOBACCO
WAREHOUSE OWNERS
This section immunizes tobacco producers, tobacco-related
growers associations, tobacco warehouse owners and employees
from any liability associated with the failure of a tobacco
product manufacturer, distributor, or retailer to comply with
the national tobacco settlement legislation.
TITLE XI--MISCELLANEOUS
Subtitle A: Prohibitions Relating to Tobacco Products and Children
SECTION 1101. SHORT TITLE
This subtitle may be cited as the ``Tobacco Use by Minors
Prevention Act''.
SECTION 1102. PROHIBITIONS RELATING TO TOBACCO PRODUCTS AND CHILDREN
Section 1102 would amend Chapter VIII of the Federal Food,
Drug, and Cosmetic Act by adding two new sections at the end of
that Chapter. The Committee does not intend for these
provisions to have extraterritorial application.
Section 804 ``Prohibition on Sale or Distribution of Tobacco
Products to Children'' would make in unlawful for any domestic
tobacco concern to in any way contribute to the ``sale or
distribution of tobacco products in a foreign country to
children'' or to advertise or promote tobacco products in a
foreign country in a manner that does not comply with Federal
requirements for advertising or promotion within the United
States.
Section 805, ``Labeling'' would make it unlawful for any
domestic concern to in any way participate in the sale of a
tobacco product in a foreign country if that tobacco product
does not contain a warning label, in that country's dominant
language, that complies with the Federal labeling requirements
for tobacco products sold in the United States. The only
exception would be if the Secretary determines the foreign
country's labeling requirements are ``substantially similar''
to those in the United States and those requirements are
``adequately enforced'' then the domestic concern may abide by
the labeling laws of the country where the tobacco product is
sold.
SECTION 1103. ENFORCEMENT
Enforcement would be provided under Section 301 of the
Federal Food, Drug and Cosmetic Act.
SECTION 1104. REWARD
A reward of up to $125,000 would be available to those
providing information leading to a criminal conviction for a
violation of the international sales and labeling requirements.
SECTION 1105. DEFINITIONS
Section 1105 defines the term ``domestic concern''.
SECTION 1106. AMENDMENTS TO PUBLIC HEALTH SERVICE ACT
This portion of the bill authorizes a major new medical
research initiative to more effectively prevent and treat
tobacco addiction and tobacco-related diseases.
Tobacco use kills more than 400,000 Americans each year and
therefore is, according to former Surgeon General C. Everett
Koop, ``the chief, single avoidable cause of death in our
society and the most important public health issue of our
time.'' Yet despite the billions of dollars expended each year
to research diseases caused by tobacco addiction, only a tiny
fraction of medical research in the United States is devoted to
understanding the causes of tobacco addiction, how to decrease
the number of children who start, and how to best help people
to quit. As a result, we know too little about how to prevent
and treat this destructive behavior
For example, according to a report by the Society for
Research on Nicotine and Tobacco, the National Institutes of
Health (NIH) spends less than one percent of its budget to
research a behavior that accounts for 20 percent of mortality
in our nation. Despite the large increases in youth smoking
rates and the leveling off of reductions in adult smoking, our
nation's commitment to tobacco research has increased only
slightly over the last ten years. Lack of funding has resulted
in missed opportunities for advancement in tobacco control and
has likely discouraged young behavioral researchers from
pursuing this area of research. The research that does take
place on this subject at NIH is spread across numerous
Institutes and is inadequately coordinated.
Despite inadequate funding, tobacco researchers have in
recent years made important preliminary findings about the
health effects of tobacco, the addictiveness of nicotine,
addictive behaviors in general, as well as treatments for
cessation of tobacco use. Reflected in several reports of the
Surgeon General, as well as in medical and scientific journals,
these findings have played a vital role in the public demand
for a national tobacco control policy. But much more research
is needed to inform public policy. Significant new funding is
warranted to support epidemiological, behavioral,
pharmacological, health services and social services research
related to the prevention and treatment of tobacco addiction.
An increased commitment to tobacco-related research will help
save lives and tobacco-related health care costs. For example,
additional research will lead to increased knowledge about
cost-effective prevention strategies such as counter-
advertising, education, and community based activities.
Enhanced research will also yield more affordable and effective
cessation tools and perhaps safer tobacco products. The
Committee intends for the research initiative in the
Committee's bill to inform and ensure that the prevention
programs, including the education and counter-advertising
programs as well as the cessation programs that are also
included in the Committee bill are effective and built on sound
scientific evidence about how to reduce tobacco use.
SECTION 1106 OF THE COMMITTEE BILL EMPHASIZES THE ROLE OF BEHAVIORAL
RESEARCH IN PREVENTING AND TREATING ADDICTION TO
TOBACCO PRODUCTS. THE COMMITTEE URGES THAT THE
FOLLOWING TOPICS BE AMONG THOSE ADDRESSED BY THIS
RESEARCH INITIATIVE:
Initiation. Smoking and other uses of tobacco are
forms of addiction, involving physical and
psychological factors. But smoking initiation is purely
behavioral. Research should focus on why children begin
to smoke and the role of such individual traits as risk
taking, attitudes toward health, self- perception,
decision making and the impact of tobacco industry
marketing on decisions, and how childhood and
adolescent development affects these and other relevant
psychological processes.
Cessation. Not everyone tries smoking, and not
everyone who tries it becomes addicted. Some who do
become addicted quit on their own. What are the
protective factors in these cases? How can those
factors be encouraged in people who are at risk? It is
also important to understand the effects of smoking on
behavior, such as the changes in the brain and
cognitive impairment that can result from smoking.
Research is also needed on the behavioral effects of
withdrawal, which range from anger and aggression to
reduced motor and cognitive functioning.
Effective strategies. Smoking initiation and
cessation are both influenced by social, economic and
cultural factors. The effects of peer pressure on
shaping beliefs and behaviors, the role of family in
promoting or protecting against tobacco use, and other
socially-based factors must be understood to help
develop interventions that encourage and sustain
healthy behavior.
The Committee believes that a narrow biomedical approach to
tobacco addiction is shortsighted. We must expand scientific
inquiry into the behavioral aspects of smoking in order to
prevent children from smoking in the first place and to treat
nicotine addiction more effectively. In addition, behavioral
research on tobacco use will help policy makers address related
health concerns, such as illicit drug abuse and underage
drinking, and will help the development of effective
interventions for those risky behaviors as well.
At the same time, the Committee anticipates that enactment of
this bill will result in sufficient new resources at the NIH to
justify increased expenditures on diseases associated with
tobacco use, such as cancer and heart disease. However, it is
the Committee's intent that the NIH give the highest priority
to epidemiological, behavioral and social science research on
the prevention and treatment of tobacco addiction itself. The
Committee believes very strongly that research focused on
prevention and treatment of tobacco addiction will be very
cost-effective and be instrumental in reducing tobacco use and
avoiding the high human and economic costs associated with
tobacco.
The Committee recognizes that aspects of tobacco related
research will occur at federal agencies other than the NIH,
including the Food and Drug Administration, the Centers for
Disease Control, the Agency for Health Care Policy and
Research, the Occupational Safety and Health Administration,
and the Environmental Protection Agency. The Committee expects
the Secretary of Health and Human Services acting through,
among others, the Director of the Centers for Disease Control
and the Director of the new Office of Tobacco-Related Research
at NIH, to coordinate the work of these disparate agencies.
The Committee has also sought to spur coordination by means
of the National Tobacco Task Force established in the new
section 2802 of the Public Health Service Act. The Committee
expects the Task Force, guided in part by the Institute of
Medicine study mandated by the new section 2801 of the Public
Health Service Act, to prepare a national tobacco research
agenda, periodically update this agenda, and make policy
recommendations based on the research findings.
Research on the use of tobacco and its effects must take into
account the needs of special populations, especially those
groups that have been targeted by the tobacco industry.
Section 1106(a) amends the Public Health Service Act by
adding a new title at the end of the Act. That title, Title
XXVIII, would require various research programs concerning
youth smoking.
Section 2801, ``Study By the Institute of Medicine'', would
require the Secretary to enter into a contract with the
Institute of Medicine ``for the conduct of a study on the
framework for a research agenda and research priorities to be
used by the National Tobacco Task Force''. Various
considerations are outlined for the development of the this
framework. The Institute of Medicine would be required to
report on its recommendations within 10 months of entering into
the contract. Appropriations of $750,000 are authorized for
this activity.
Section 2802, National Tobacco Task Force, would require the
Secretary to establish a National Tobacco Task Force to
``foster coordination'' among entities undertaking tobacco-
related research. The section outlines the composition of the
Task Force, its duties and the research activities it shall
undertake.
Section 2803, Research Activities of the Centers for Disease
Control and Prevention, would require the expenditure of $4.195
Billion in research over 10 years. The funds are directed to be
taken from the Tobacco Settlement Trust Fund.
Section 2804, Research Activities of the National Institutes
of Health, would require expenditures of $20 Billion over 10
years for research by the NIH concerning tobacco. The Secretary
would be required to establish a Tobacco-Related Research
Initiative, headed by the Director of the NIH, to provide funds
to conduct research ``related to the prevention and treatment
of tobacco addiction, and the prevention and treatment of
diseases associated with tobacco use. At least one-third of the
funds provided must be used to address the ``prevention and
treatment of addiction.''
The Director of NIH is to ensure appropriate coordination of
these research efforts by cooperating with the National Tobacco
Task Force and by establishing the Office of Tobacco-Related
Research. The Office of Tobacco-Related Research will be headed
by a director appointed by the Secretary and it shall undertake
various administrative tasks to assure appropriate research
coordination.
Section 1106(b) of this Act further amends the Public Health
Service Act by adding further duties for the Secretary. The
Secretary shall, with respect to minority health activities,
seek interagency coordination of research and monitor and then
report periodically to Congress the amount of Federal funds
targeted for research related to minorities and tobacco.
The Committee is concerned about the significant rise in
smoking among minority youth in the U.S. The most recent report
by the Surgeon General found that smoking by high school age
African Americans rose nearly 80% between 1991 and 1997, and
that cigarette smoking among Hispanic teens rose by 34% in that
period. These disturbing figures represent a growing public
health problem among many of our nation's minority citizens,
and the Secretary should advise the Congress about federal
research activities targeted to remedy it.
SECTION 1107. BAN ON DISTRIBUTION OF TOBACCO PRODUCTS PRODUCED BY CHILD
LABOR
This Section amends Section 307 of the Tariff Act of 1930 to
include a ban on ``tobacco products produced or manufactured
wholly or in part in any foreign country by child labor.''
Subtitle B: Federal licensing of Tobacco Product Distribution
SECTION 1121. LICENSING OF TOBACCO PRODUCT DISTRIBUTION
Section 1121 provides for a program to license any ``domestic
concern'' that manufactures or distributes tobacco products.
Tobacco retailers would not be covered by this program. Such
manufacturers and distributors would require a license from the
Secretary. The fee for that license would be $1 for every 1,000
cigarettes manufactured or distributed. Manufacturing or
distributing tobacco products without a license would be a
violation of Section 301 of the Federal Food, Drug and Cosmetic
Act. The definition of ``tobacco products'' would include more
than cigarettes, yet the licensing fee is based solely on a
number of cigarettes. An appropriate conversion would be
necessary to handle smokeless tobacco products.
The Committee does not intend for this provision to have
extraterritorial application.
Subtitle C: International Provisions
SECTION 1131. INTERNATIONAL TOBACCO CONTROL TRUST FUND
Section 1131 would create within the Department of the
Treasury the International Tobacco Control Trust Fund to be
funded through the licensing fees established in Section 1121.
Annual funds of $150 million will be available to the
American Center on Global Health and Tobacco from the
International Tobacco Control Trust Fund. The Secretary may
also use the resources in the International Trust Fund ``for
grants and other forms of assistance to foreign governments,
nongovernmental organizations, and international organizations
to support tobacco control activities in foreign countries.''
Furthermore, the Secretary may also use resources in the
International Trust Fund to enforce ``any requirements related
to the sale, distribution, marketing, or promotion of tobacco
products internationally.''
SECTION 1132. AMERICAN CENTER ON GLOBAL HEALTH AND TOBACCO
Section 1132 would establish the American Center on Global
Health and Tobacco (ACT) ``to assist organizations in other
countries to reduce and prevent the use of tobacco'' through
public education programs and mass media campaigns.
ACT would be a not-for-profit corporation established within
the District of Columbia and would not be and agency or
establishment of the United States.
ACT would be funded through the creation within the National
Tobacco Settlement Trust Fund of the Global Public Health and
Education Resource Account which is to be credited with $150
million each fiscal year. The $150 million would be transferred
each October 1 from the Resource Account to ACT.
ACT and its grantees would be subject to oversight by
Congress and ACT would be required to annually report to
Congress on its activities. ACT would only be permitted to fund
private sector groups, it could not carry out programs
directly. ACT's accounts are to be audited annually by
independent certified public accountants. ACT's financial
transactions may also be audited by the Comptroller General.
SECTION 1133. PROHIBITION ON USE OF FUNDS TO FACILITATE THE EXPORTATION
OR PROMOTION OF TOBACCO
Section 1133 would bar any appropriation or use of Federal
funds to promote or encourage the export, sale, distribution or
advertising of tobacco products in a foreign country, or to
seek through negotiation or otherwise the removal or reduction
by any foreign country of limitations on the importation, sale,
distribution or advertising of tobacco products. This
prohibition would not apply if the foreign country's
restriction is ``applied in a manner which constitutes a means
of arbitrary or unjustified discrimination between countries''.
To invoke this exception the Secretary of Commerce would have
to make a certification to Congress in writing concerning the
nature of the actions by the foreign country and the Secretary
of HHS would have to certify to Congress in writing that the
restriction is not a ``reasonable means of protecting the
public health.''
SECTION 1134. HARMONIZATION WITH UNITED STATES INTERNATIONAL
COMMITMENTS AND OBLIGATIONS
The United States Trade Representative would be required to
report to Congress, within 90 days of the Act's effectiveness,
on ``any provisions of this Act that are inconsistent with
obligations of the United States . . . together with
recommendations as to how to implement or modify the provision
without violating international law.''
Subtitle D: Prevention of Tobacco Smuggling
SECTION 1141. DEFINITIONS
Section 1141 defines terms used in this Subtitle.
SECTION 1142. TOBACCO PRODUCT LABELING REQUIREMENTS
Section 1142 would make it unlawful to in any way introduce
into or receive from ``interstate or foreign commerce'' any
tobacco product that is not packaged and labeled in conformity
with the requirements of this section.
The Secretary of the Treasury would be required to promulgate
regulations to require manufacturers of tobacco products to
place a unique serial number on each package of tobacco
products so that the manufacturer and the location and date of
production may be determined. The package of each tobacco
product produced for export must be labeled with the name of
the country of final destination.
SECTION 1143. REQUIREMENTS FOR THE TRACKING OF TOBACCO PRODUCTS
Section 1143 would require the posting of a bond for all
exports of tobacco products. Each export would require posting
with the Secretary of the Treasury: a bond that indicates the
country of final destination, a written statement from the
recipient of the tobacco products that recipient will not
violate any laws of that country concerning tobacco products
and indicating they have never been convicted of any offense
with respect to tobacco products.
The Secretary of the Treasury would be required to promulgate
regulations to determine the amount and frequency of each bond
that must be posted. The bond, however, cannot be less than the
amount of Federal tax imposed, on tobacco products consumed in
the United States, under Chapter 52 of the Internal Revenue
Code of 1986.
The Secretary of the Treasury would return a bond upon
determination the tobacco products had been received in the
country of final destination as specified in the bond.
SECTION 1144. TOBACCO PRODUCT PERMITS
Section 1144 would require the Secretary of the Treasury to
establish a program to require permits for all persons involved
in the distribution or receipt of tobacco products in
interstate or foreign commerce. This section would not apply to
retailers but retailers would need to maintain commercial
records of the receipt of tobacco products and have those
records available for inspection and audit.
The Secretary of the Treasury would be required to demand
that permit holders ``keep records concerning the chain of
custody of the tobacco products that are the subject of the
permit''.
SECTION 1145. PROHIBITIONS
Section 1145 would make it unlawful, without a permit issued
under Section 1144, to import tobacco products, to engage in
the business of manufacturing, packaging or warehousing tobacco
products, or to engage in the business of purchasing tobacco
products for resale at wholesale. These prohibitions are to
come into effect 180 days after the date of enactment of this
subtitle.
SECTION 1146. PRICING AND LABELING OF PRODUCTS SOLD ON MILITARY
INSTALLATIONS OR BY NATIVE AMERICANS
Section 1146(a) would require the Secretary of the Treasury,
in conjunction with the Secretary of Defense, to issue
regulations to make sure the price of tobacco products sold on
a military installation is equal to the greater of the average
price of the tobacco product when sold in the nearest
metropolitan area or the highest price for which the product is
sold on military installations in the United States. Tobacco
products intended for sale on a military installations would
have to be labeled with that indication.
Section 1146(b) would require that tobacco products intended
for sale on an Indian reservation be labeled with that
indication.
SECTION 1147. PROHIBITION AGAINST SALE OF TOBACCO PRODUCTS IN OR TO
DUTY-FREE SHOPS OR FORWARDING THROUGH OR
MANUFACTURE IN TRADE ZONES
Section 1147(a) would make it unlawful to sell any tobacco
product in a duty-free shop located in the United States or to
sell to any duty-free shop. Section 1147(b) would make it
unlawful to forward through or manufacture a tobacco product in
any foreign trade zone.
SECTION 1148. JURISDICTION; PENALTIES; COMPROMISE OF LIABILITY
Federal District Courts have jurisdiction for suits brought
by the Attorney General to prevent or restrain violations of
any of the provisions of this subtitle.
In any conviction of the provisions of this subtitle, the
provisions of section 3571 of Title 18 U.S.C. will apply as if
the person were convicted of a felony under that title.
The Secretary of the Treasury is authorized to compromise the
liability arising from a violation of this subtitle upon
payment of fine not to exceed $10,000 per violation. In the
case of repetitious violations and in order to avoid multiple
criminal violations the United States may enter a consent
decree to enjoin the repetition of the violation.
SECTION 1149. AMENDMENTS TO THE CONTRABAND CIGARETTE TRAFFICKING ACT
Section 1149 would amend the Contraband Cigarette Trafficking
Act in the following key ways: to have the Act apply to more
than cigarettes by defining tobacco products to include cigars,
cigarettes, smokeless tobacco and pipe tobacco; to lower the
threshold amount of tobacco product which triggers the Act from
60,000 units to 30,000 units; to add prohibitions on knowingly
failing to maintain distribution records, altering or
obliterating required markings, or interfering with an
inspection; and, by making it unlawful to knowingly transport
tobacco products under a false bill of lading or without a bill
of lading. Any proceeds from the unlawful distribution of
tobacco products would be subject to seizure and forfeiture.
SECTION 1150. AUTHORIZATION OF APPROPRIATIONS
Such sums as are necessary to carry out this subtitle are
authorized for appropriations.
Subtitle E: Antitrust Exemption
SECTION 1161. LIMITED ANTITRUST EXEMPTION
Section 1161 would provide a limited antitrust exemption for
participating tobacco manufactures to facilitate actions in
conjunction with this Act. This limited exemption is necessary
to protect certain business agreements by tobacco companies, as
recommended by the State Attorneys General who negotiated the
original tobacco settlement. The Act requires cooperation by
tobacco companies regarding certain pricing, advertising, and
compliance activities, in order to ensure a uniform and
comprehensive national policy to regulate tobacco products in
the public interest. Without a limited antitrust exemption,
agreements by the tobacco companies to adopt similar pricing
and advertising policies could be subject to antitrust
challenges.
Subtitle F: Special Provisions Concerning Programs for Women,
Minorities, and Others
SECTION 1171. RESEARCH RELATED TO PATTERNS OF SMOKING BY WOMEN AND
MINORITIES
Research funded by this Act should where appropriate to the
``scope and purpose investigation, include data and analysis
with respect to different factors that may be present in the
case of women or minorities.''
Research funded under this Act to examine patterns of smoking
among minorities ``should be conducted in proportion to their
prevalence in the smoking population and shall be conducted at
minority education institutions, where available, or
institutions that provide the greatest amount of health care to
minority populations in a State.''
SECTION 1172. COUNTER-ADVERTISING PROGRAMS
Section 1172 would require the Secretary to carry out
programs to reduce tobacco usage to ``discourage the use of
tobacco products by individuals and to encourage those who use
such products to quit.'' To receive assistance through these
programs an entity would apply to the Secretary and meet such
eligibility requirements as the Secretary establishes. Funds
necessary to carry out this section will be provided from the
funds made available under Title IV of this Act.
SECTION 1173. PREVENTION ACTIVITIES OF COMMUNITY AND MIGRANT HEALTH
CENTERS
Section 1173 would provide $3 billion over 10 years from the
National Tobacco Trust Fund to Community and Migrant Health
Centers to ``provide health services for diseases related to
tobacco and to prevent tobacco-related diseases.
Subtitle G: Sense of the Senate
Subtitle G provides a list of purposes for which it would be
the sense of the Senate that the proceeds of this Act may be
applied. The Sense of the Senate would not limit the
application of the proceeds to other purposes.
Subtitle H: Ban on Sale of Tobacco Products Through the Use of Vending
Machines
SECTION 1191. BAN OF SALE OF TOBACCO PRODUCTS THROUGH THE USE OF
VENDING MACHINES
The Committee is concerned about the fact that vending
machines may represent a potential source of unrestricted
access to cigarettes for underage youths. While a ban on
tobacco vending machines enhances the Act's comprehensive
program to prevent youth smoking, it also raises issues of
economic injury and job loss to our nation's vending machine
industry.
The vending machine industry relies heavily on revenues from
the sales of tobacco products. There are over 2,000 vending
machine companies spread throughout the U.S., most of them
small, family-owned operations. The vending machine industry
employs an estimated 10,000 individuals, over one-third of them
minority citizens. There are an estimated 350,000 commercial
vending machines in operation in the U.S. Vending machine
industry representatives advised the Committee that 25% of
these companies rely solely on the sale of tobacco products in
their business operations, and that tobacco products produce
the large majority of sales and profits for the remaining 75%
of vending machine businesses.
Section 1191 would ban the use of vending machines to sell
tobacco products, effective one year after the of enactment of
this Act. Owners of tobacco vending machines would be
``reimbursed for the fair market value of their businesses,
including the cost of banned vending machines, compensation for
lost profits, unexpired contracts, and for the owner's or
operator's plant and equipment.'' Such reimbursal would be
directed through the Tobacco Vending Reimbursement Corporation,
which would be a private, not-for-profit corporation
established in the District of Columbia. Certain guidelines and
duties for that Corporation would be established by the Act.
The Secretary of the Treasury would be required to transfer
to the Reimbursement Corporation ``such sums as are necessary
to make due compensation to owners and operators of tobacco
vending machines and to carry out the duties of the
Corporation.'' These funds would be taken from the funds paid
by the tobacco manufacturers under Title IV of this Act.
TITLE XII--TOBACCO ASBESTOS TRUST FUND
Scientific evidence suggests that asbestos related health
problems are greatly facilitated and enhanced by cigarette
smoking. As a result, those injured by asbestos also believe
they should be able to seek compensation for their damages from
tobacco manufacturers.
SECTION 1201. DEFINITIONS
Section 1201 defines relevant terms used in this title.
SECTION 1202. TOBACCO ASBESTOS TRUST FUND
Section 1202 would establish in the United States Treasury a
Tobacco Asbestos Trust Fund. There would be five trustees, two
appointed by the Secretary of Health and Human Services to
represent the interests of asbestos trusts and asbestos
defendants, and two appointed by the Secretary of Labor to
represent asbestos claimants and labor unions with claimants as
members, and one chosen by the other four, who shall be a
health care professional with expertise in asbestos disease.
The Trust Fund receives funds from assessments made by the
Secretary of the Treasury on the tobacco industry. The Trust
would receive a total of $20 billion by the end of 2014.
Funds may be paid out of the Trust Fund only to victims
harmed by tobacco and asbestos.
The Trust Fund is divided into two equal funds - Fund I and
Fund II. Fund I would be administered by three trustees: the
two appointed by the Secretary of HHS, and the health
professional. Fund II would be administered by three trustees:
the two appointed by the Secretary of Labor, and the health
professional.
Fund I would assign credits to asbestos defendants and trusts
in proportion to their past payments to claimants for tobacco-
caused harm. The asbestos defendants, however, do not receive
any funds. Rather, they may direct the Trust to use such funds
to pay asbestos claims.
Fund II is used to pay the tobacco-caused portion of future
tobacco/asbestos claims. The funds available to the Trust are
allocated equally between Fund I and Fund II, but the trustees
of Fund II may provide an advance from Fund II as a loan to
Fund I.
SECTION 1203. PAYMENTS FROM FUND I
In order to determine the allocation of credits within Fund
I, the trustees shall request that all asbestos trusts and
defendants provide information as to the amount of payments or
settlements of asbestos claims made by or on behalf of the
defendants and trusts, and all bonded judgments as of the date
of enactment. The trustees shall establish credits base on each
trust's or defendant's payments as a percentage of the total.
The trustees shall include twenty percent of unpaid
settlements. In no event shall the total of the credits
relating to these unpaid settlements constitute more than six
percent of the total of Fund I.
Credits may be used only for the payment of asbestos claims.
None of the credits may be used for the payment of corporate
dividends, reimbursements of insurers, or any other corporate
purpose.
An asbestos defendant may use a credit to direct payment from
Fund I to any asbestos claimant. An asbestos trust shall use
its credits for payment to victims according to the rules of
the trust.
SECTION 1204. PAYMENTS FROM FUND II
Section 1204 would establish the rules for payment of funds
out of Fund II. The trustees of Fund II would be required to
establish the following: rules ensuring that funds can only be
used for the portion of harm caused by tobacco to an asbestos
claimant; rules ensuring that future and current claimants are
treated equally, and in the event that future demands require
limitations on current payments, those with the most serious
disease or disability get priority; criteria establishing a
minimum degree of asbestos- related disability or impairment
for a claimant to receive compensation; criteria to establish
an optional claims handling mechanism for asbestos caused harm
in accordance with the Louisiana Agreement Providing
Administrative Alternative for Claimants with Asbestos Related
Conditions; rules to insure fair and equitable administration
of the claims process, including attorneys' fees; and, rules
requiring Fund II recipients to execute a release of all
liability for tobacco-caused harm.
SECTION 1205. TRANSFERS FROM NATIONAL TOBACCO SETTLEMENT TRUST FUND.
To provide the funds that would be needed under Section 1202,
the Secretary of the Treasury would each year transfer from the
National Tobacco Settlement Trust Fund with certain indicated
amounts to a total of $21 billion by the year 2014.
SECTION 1206. RULES FOR CLAIMS AGAINST ASBESTOS TRUSTS, ASBESTOS
DEFENDANTS, AND TOBACCO COMPANIES
Section 1206 indicates the general purpose of the title is to
ensure that asbestos claimants and asbestos/tobacco claimants
receive compensation in a fair and timely manner.
Before a lawsuit for harm caused by tobacco and asbestos can
proceed to trial or judgment, the plaintiff must submit a claim
to Fund II for the tobacco-caused portion of the harm. The
plaintiff would receive a determination within 120 days, or
earlier if exigent circumstances exist. A claimant who rejects
an offer from, or is denied an award by, Fund II may proceed to
trial or judgment in a tort action.
A claimant who accepts an award from Fund II must execute a
release of liability for all tobacco-caused harm.
Tobacco companies shall not be liable to asbestos trusts and
defendants for claims arising from payments or obligations for
payments to asbestos/tobacco claimants made or incurred prior
to the date of enactment. Any existing lawsuits based on such
claims are extinguished. For claims subsequent to the date of
enactment, asbestos trusts and defendants may aggregate and
establish them based on valid statistical proof of relative
causation for each disease category.
A claimant who accepts an award from Fund II may not sue for
tobacco-caused harm. A claimant who rejects an award may sue
asbestos defendants for asbestos and tobacco harm in accordance
with other applicable law. An asbestos defendant that pays for
tobacco-caused harm may succeed to the claimant's rights to
request compensation from Fund II, or may bring an indemnity or
contribution action against a tobacco company.
In an asbestos action where the claimant had exposure to
tobacco, the trier of fact must apportion the relative
causation between asbestos and tobacco. The apportionment may
be determined based upon valid statistical data.
Nothing in this legislation shall limit any existing joint
liability among asbestos trusts or defendants for asbestos-
caused harm, limit anyone's ability to claim disability caused
by asbestos, or delay resolution of a claim.
TITLE XIII: VETERANS' BENEFITS
SECTION 1301. RECOVERY BY SECRETARY OF VETERANS AFFAIRS
Section 1301 would amend Title 38 of the United States Code
by adding ``Part VII: Recovery of Compensation Costs for
Tobacco-Related Disability or Death.''
Section 9101 of that Part VII would permit the Secretary of
Veteran's Affairs to sue tobacco manufacturers for cost of
compensation to be paid to veterans for their smoking related
injuries associated with their military service.
The funds recovered from such suits would be paid into a
revolving fund in the United States Treasury. The fund would be
called the Department of Veterans Affairs Tobacco Recovery
Fund. The ``Fund shall be available to the Secretary without
fiscal year limitation for purposes of veterans benefit
programs, including administrative costs.''
Section 9102 of Part VII would allow the Secretary to
establish procedures to determine the present value of future
benefits paid to a veteran in compensation of smoking related
injury. No action taken by the Secretary to seek compensation
from the tobacco manufacturers would ``operate to deny the
injured veteran . . . the recovery for that portion of his or
her damage not covered'' by compensation through the Veterans
Administration.
Section 9104 would exclude any sums recovered through this
Title by the Secretary from the annual limitations of damages
available to participating manufacturers.
Statement of Committee Intent
The Committee is working on additional amendments to S. 1415.
These amendments would be offered on the Senate floor to make
further technical and conforming changes, as well as
substantive modifications to further improve the bill and to
remedy language that does not correspond with the Committee's
intent.
The Committee intends that any further amendments would be
adopted by the Senate and considered as original text for
purposes of amendment.
Additional Views of Senator Ted Stevens and Senator Conrad Burns
The Committee includes payments to the Federal Black Lung
Program on the Sense of the Senate list of purposes to which
the proceeds from the tobacco legislation may be used.
Epidemiological evidence strongly suggests that cigarette
smoking is correlated to the decline in lung function of miners
exposed to coal dust who now receive payments from the Federal
Black Lung Program. The Committee therefore adopted the Sense
of the Senate that proceeds from the tobacco legislation may be
used for payments to the Federal Black Lung Program.
In 1985, the Surgeon General of the United States (C. Everett
Koop) reported that ``since the introduction of more effective
controls to reduce the levels of coal dust exposure at the
worksite, cigarette smoking has become the more significant
contributor to reported cases of disabling airflow obstruction
among coal miners'' . . . and further, that ``the prevalence of
ventilatory disabilities in coal miners could be substantially
reduced by reducing the prevalence of cigarette smoking, and
efforts aimed at reducing ventilatory disability should include
efforts to enhance successful smoking cessation.''
Since the Surgeon General's Report, numerous medical and
scientific studies have documented the direct relationship
between cigarette smoking and black lung disease or
pneumoconiosis. U.S. Department of Labor statistics reveal that
non-smoking coal miners rarely are awarded disability
compensation from the Black Lung Trust Fund while a substantial
majority of black lung claimants who have received federal
benefits are cigarette smokers. Medical studies have in fact
reported ``that the effect of (cigarette) smoking is five times
that of coal dust'' on decline in lung function while having
``five to ten times greater negative effect on ventilatory
capacity than coal dust.'' In short, the Federal Black Lung
Program is likely paying for harm caused, in part, by cigarette
smoking. Current estimates indicate that an infusion of $15
billion dollars from the tobacco industry would help keep the
federal programs working for black lung victims.
We recommend, in light of the relationship between cigarette
smoking and coal workers pneumoconiosis, and the fact that
Federal Black Lung Programs have paid almost $60 billion in
medical and disability benefits to those afflicted
beneficiaries, that the tobacco industry should also contribute
to the Federal Black Lung Program. We therefore recommend that
adequate funding be allocated from revenues from tobacco
legislation to ensure the solvency of the Federal Black Lung
Program and to provide for future benefits.
Rollcall Votes in Committee
In accordance with paragraph 7(c) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following description of the record votes during its
consideration of S. 1415:
Senator Ashcroft offered an amendment to delete all
references to limitations of liability. By rollcall vote of 2
yeas and 16 nays as follows, the amendment was defeated:
YEAS--2 NAYS--16
Mr. Ashcroft Mr. McCain
Mr. Brownback Mr. Stevens
Mr. Burns
Mr. Gorton
Mrs. Hutchison
Ms. Snowe
Mr. Frist \1\
Mr. Abraham \1\
Mr. Hollings
Mr. Inouye
Mr. Rockefeller
Mr. Kerry
Mr. Breaux \1\
Mr. Bryan
Mr. Dorgan
Mr. Wyden
\1\ By proxy.
Senator Snowe offered an amendment to codify provisions
relating to advertising and marketing. By rollcall vote of 5
yeas and 14 nays as follows, the amendment was defeated:
YEAS--5 NAYS--14
Ms. Snowe Mr. McCain
Mr. Rockefeller Mr. Stevens \1\
Mr. Breaux Mr. Burns
Mr. Dorgan Mr. Gorton
Mr. Wyden Mrs. Hutchison
Mr. Ashcroft
Mr. Frist
Mr. Abraham
Mr. Brownback
Mr. Hollings
Mr. Inouye \1\
Mr. Ford
Mr. Kerry \1\
Mr. Bryan
\1\ By proxy.
Senator Ashcroft offered an amendment to provide legal
standards and procedures for suppliers of raw materials and
component parts for medical devices. By rollcall vote of 3 yeas
and 13 nays as follows, the amendment was defeated:
YEAS--3 NAYS--13
Mr. Ashcroft Mr. McCain
Mr. Abraham Mr. Stevens \1\
Mr. Brownback Mr. Burns \1\
Mr. Gorton \1\
Ms. Snowe
Mr. Frist \1\
Mr. Hollings
Mr. Inouye \1\
Mr. Ford
Mr. Rockefeller
Mr. Kerry
Mr. Breaux
Mr. Bryan
\1\ By proxy.
Senator Dorgan offered an amendment to strike the cap on
liability limitations. By rollcall vote of 4 yeas and 15 nays
as follows, the amendment was defeated:
YEAS--4 NAYS--15
Mr. Ashcroft Mr. McCain
Mr. Brownback Mr. Stevens
Mr. Rockefeller Mr. Burns
Mr. Dorgan Mr. Gorton
Mrs. Hutchison
Ms. Snowe
Mr. Frist \1\
Mr. Abraham \1\
Mr. Hollings
Mr. Inouye
Mr. Ford
Mr. Kerry
Mr. Breaux
Mr. Bryan
Mr. Wyden
\1\ By proxy.
Senator Ashcroft offered an amendment to establish legal
standards procedures for product liability litigation. By
rollcall vote of 2 yeas and 16 nays as follows, the amendment
was defeated:
YEAS--2 NAYS--16
Mr. Ashcroft Mr. McCain
Mr. Brownback Mr. Stevens \1\
Mr. Burns \1\
Mr. Gorton \1\
Mrs. Hutchison
Ms. Snowe
Mr. Frist \1\
Mr. Abraham
Mr. Hollings
Mr. Inouye \1\
Mr. Ford
Mr. Rockefeller
Mr. Kerry
Mr. Breaux
Mr. Bryan
Mr. Wyden
\1\ By proxy.
Senator Ford offered an amendment to reduce annual payment
amounts to those contained in the Clinton budget. By rollcall
vote of 4 yeas and 13 nays as follows, the amendment was
defeated:
YEAS--4 NAYS--13
Mr. Burns Mr. McCain
Mr. Gorton Mr. Stevens
Mr. Ashcroft Ms. Snowe
Mr. Ford Mr. Frist \1\
Mr. Abraham
Mr. Brownback
Mr. Hollings
Mr. Inouye
Mr. Rockefeller
Mr. Kerry
Mr. Breaux
Mr. Bryan
Mr. Wyden
\1\ By proxy.
Senator Ford offered an amendment to limit ``real'' annual
payments to $506 billion over 25 years, as the legislation has
been publicly described. By rollcall vote of 1 yea and 16 nays
as follows, the amendment was defeated:
YEAS--1 NAYS--16
Mr. Ford Mr. McCain
Mr. Stevens \1\
Mr. Burns
Mr. Gorton
Ms. Snowe
Mr. Frist
Mr. Abraham
Mr. Brownback
Mr. Hollings
Mr. Inouye
Mr. Rockefeller
Mr. Kerry
Mr. Breaux
Mr. Bryan
Mr. Dorgan
Mr. Wyden
\1\ By proxy.
Senator Dorgan offered an amendment to strike the limited
antitrust exemption. By rollcall vote of 4 yeas and 15 nays as
follows, the amendment was defeated:
YEAS--4 NAYS--16
Mr. Rockefeller Mr. McCain
Mr. Kerry \1\ Mr. Stevens \1\
Mr. Dorgan Mr. Burns
Mr. Wyden Mr. Gorton
Mrs. Hutchison
Ms. Snowe
Mr. Ashcroft \1\
Mr. Frist \1\
Mr. Abraham
Mr. Brownback
Mr. Hollings \1\
Mr. Inouye
Mr. Ford
Mr. Breaux
Mr. Bryan
\1\ By proxy.
Senator Gorton offered an amendment to require Indian tribes
to collect State taxes on tobacco and remit them to the State.
Senator Bryan offered an amendment in the nature of a
substitute to require the tribes to remit the taxes to the
United States Treasury for distribution to the States. Senator
Gorton accepted the Bryan amendment as a modification of his
amendment. By rollcall vote of 10 yeas and 9 nays as follows,
the amendment was agreed to:
YEAS--10 NAYS--9
Mr. Burns Mr. McCain
Mr. Gorton Mr. Stevens \1\
Mrs. Hutchison Ms. Snowe
Mr. Ashcroft \1\ Mr. Hollings
Mr. Frist Mr. Inouye
Mr. Abraham Mr. Ford
Mr. Brownback \1\ Mr. Rockefeller
Mr. Kerry Mr. Breaux
Mr. Bryan Mr. Dorgan
Mr. Wyden
\1\ By proxy.
On a rollcall vote of 19 yeas and 1 nay as follows, the
Committee ordered S. 1415 favorably reported:
YEAS--19 NAYS--1
Mr. McCain Mr. Ashcroft
Mr. Stevens \1\
Mr. Burns
Mr. Gorton
Mr. Lott \1\
Mrs. Hutchison
Ms. Snowe
Mr. Frist
Mr. Abraham
Mr. Brownback
Mr. Hollings \1\
Mr. Inouye
Mr. Ford
Mr. Rockefeller
Mr. Kerry
Mr. Breaux
Mr. Bryan
Mr. Dorgan
Mr. Wyden
\1\ By proxy.
Without objection, the Committee authorized the staff to make
any necessary technical or conforming amendments to the bill.
Estimated Costs
In the opinion of the Committee, it is necessary under
paragraph 11(a)(3) of Rule XXVI of the Standing Rules of the
Senate to dispense with the requirements of paragraphs 11(a)(1)
and (2) of the Rule and section 403 of the Congressional Budget
Act of 1974 in order to expedite the business of the Senate.
Regulatory Impact Statement
In the opinion of the Committee, it is necessary under
paragraph 11(b)(2) of rule XXVI of the Standing Rules of the
Senate to dispense with the requirements of paragraph 11(b)(1)
of Rule XXVI of the Standing Rules of the Senate in order to
expedite the business of the Senate.
Changes in Existing Law
In the opinion of the Committee, it is necessary to dispense
with the requirements of paragraph 12 of Rule XXVI of the
Standing Rules of the Senate in order to expedite the business
of the Senate.
Additional Views by Chairman McCain
The Committee is working on additional amendment to S. 1415.
These amendment would be offered on the floor to make further
technical and conforming changes, as well as substantive
modifications to further improve the bill and to remedy
language that does not correspond with Committee intent.
The Committee intends that any further amendments would be
adopted by the Senate and considered as original text for
purpose of amendment.
funding for public health purposes and farmer assistance
The Committee intends that precise funding level for the
administration, enforcement and implementation of this act be
developed in consultation with the full Senate and the
administration prior to and during floor consideration of
S.1415.
While in certain cases funding amount are identified in the
legislation, the Committee recognizes that precise funding
level must be reconciled with the needs, priorities and
purposes of this Act.
The Committee intends to ensure that amounts reserved or
authorized for any purpose are fully prioritized, justified and
fiscally responsible.
spit tobacco
During the Executive Session on S. 1415 the Committee adopted
an amendment by Senator Ford regarding small tobacco
manufacturers. This amendment contained a formula by which spit
tobacco is equated in volume to cigarettes for purpose of
manufacturer payments and pricing.
The Committee subsequently learned that the effect of the
amendment would be to reduce the price increase on spit tobacco
pursuant to this act. Spit tobacco poses a substantial health
risk to youth. It is the Committee's intent that the price of
spit tobacco rise commensurately with cigarettes to effectively
deter youth consumption. The Committee will work on a further
amendment to repair this serious problem with the reported
bill.
native americans
A fundamental debate in the course of drafting tobacco
regulatory policy for our nation has centered on the question
of a potential unregulated tobacco loophole in Indian country.
Throughout the course of developing this tobacco proposal, I
have respected the inherent authority of Indian tribes in the
same manner as we do state governments. Certainly, no one
disagrees that the intent and scope of this bill applies to the
regulation of tobacco related activities of Indian tribes and
their members while providing the necessary protections to
Indian children from the dangers of tobacco.
It is clear that ``Indian country'' is an anomaly to many in
the Congress and to the general public. Indeed, the course of
federal policy with respect to Indian tribes has further
convoluted the national sentiment toward tribal governments,
with the actions of the Congress creating a matrix of
regulatory laws and jurisdictional complexity. It is this
intricate nature of federal policy and tribal governance which
compels our fair and deliberative consideration of any policy
we develop which affects multiple jurisdictional authorities.
An attempt was made in Section 604 of Title VI to broadly
treat what has been interpreted as a tax evasion issue in
Indian country in the collection of state taxes to non-members
who buy cigarette products on tribal lands or from tribal
retailers. However, a fundamental flaw exists within Section
604 to achieve this objective to ``eliminate pricing
disparity'' as a ``basic function of the Act.''
I note that although ``eliminating pricing disparity'' is a
``basic function of the Act,'' this is not an absolute
objective. For example, each of the fifty states retain their
ability to set their own cigarette tax rates notwithstanding
the near certainty that this will result in significant
(perhaps dramatic) interstate price disparities. In short, the
national objective of uniformity pauses to recognize the
sovereign nature of the state governments, in that states are
permitted to establish their own tax rates, even if those rates
frustrate and impede the policies of neighboring states. Indian
tribal governments, however, are not to be afforded the same
respect and discretion with regard to cigarette tax rates.
The Supreme Court has recognized that deference must be paid
to the sovereign status of Indian tribal governments.
Specifically, in Washington v. Colville, 447 U.S. 134 (1980)
the Supreme Court stopped far short of endorsing the state's
authority to ``enter onto the reservations, seize stocks of
cigarettes which are intended for sale to nonmembers, and sell
theses stocks to nonmembers, and sell these stocks in order to
obtain payment of the taxes due.'' The Court determined that
the state's ability to take this action was not properly before
the Court, but nevertheless, did recognize that seizure of on-
reservation cigarettes was ``considerably different'' from the
state's ability to seize off-reservation cigarettes ``where
state power over Indian affairs is considerably more expansive
than it is within reservation boundaries.'' The Court explained
that off-reservation seizure of cigarettes ``polices against
wholesale evasion of [state] taxes without unnecessarily
intruding on core tribal interests.''
Because of the federal trust responsibility to Indian tribes
and their members, Congress has a strong responsibility to
protect such ``core tribal interests'' even while seeking to
achieve other federal objectives. In addition, Congress must
consider these interests when enacting legislation or it risks
judicial invalidation of these provisions, just as it must be
solicitous of federalism concerns or it risks similar judicial
invalidation.
I am concerned that some interpretation of Section 604 could
result in a violation of the federal government's trust
obligation to tribes. Specifically, where tribes and states
have negotiated agreements providing for the collection of
state taxes, there is simply no rational basis for Congress to
de facto invalidate these agreement, arrangements, or state
laws simply because some tribes and states have not worked out
such satisfactory arrangements. Of course, Section 604 need not
be read to necessarily invalidate these freely negotiated
arrangements. I am sure that no one believes the Treasury
Department should implement this provision in a manner that
preempts state law or tribal-state voluntary agreements.
Second, the provision should not be interpreted to impose
state taxes on transactions that are otherwise exempt from
state taxes. For example, in Colville, the Court found that in
some circumstances states must credit tribes for the amount of
tribal taxes applicable to transactions between tribes and
nonmembers. The Supreme Court has encouraged Congress to
address both sides of the tribal-state taxing equation: equity
to tribes and states. Section 604 seeks to resolve state
concerns without considering legitimate issues raised by Indian
tribes.
If eliminating pricing disparities for those products is
indeed a paramount objective of the proposed tobacco
legislation, fundamental fairness as well as a desire to
realistically achieve such an end require that uniform
application of the principal be proposed. Short of that, the
disparate treatment accorded tribal and state governments
cannot be maintained as an equitable principal and will not
succeed as a practical matter.
In my home state of Arizona, the state tax law does not apply
to tribal or individual tribal retailers located on Indian
reservations where the tribal government imposes a commensurate
tax. Twelve tribes in the state enacted their own cigarette tax
and the state has cooperative agreements with three other
tribes which authorize the state to act as the tax collector
for the tribe. I note that the State of Nevada enacted
legislation in 1979 which authorizes tribes of the state to
collect a tribal sales tax in lieu of the state sales tax,
provided that the tax was equal to or greater than the
commensurate state tax. This applies to cigarette sales. The
tribes utilize the revenue from the tribal sales tax for
governmental services and benefits for their tribal members.
State-tribal tax agreements are operating in several states and
tribes are operating pursuant to state laws in others.
In conclusion, I am most concerned with the provision for two
reasons. First, as the Colville decision shows, even with
respect to transactions between tribes and non-Indians, not all
state retail sales are applicable. If this provision is
interpreted to impose all state taxes, then this Committee has
taken drastically needed tax revenues from this Nation's
poorest citizens. Second, this provision should not be
interpreted to discourage tribal-state agreements. There are
far more examples of tribal-state cooperation than conflict in
the field of tribal-state taxation. Our legislation should
build on such cooperation and not nullify the fruits of
cooperation.
Additional Views of Mr. Hollings
I acknowledge that some believe it is necessary to have
provisions in a comprehensive tobacco bill that relate to the
international aspects of tobacco sales. However, I am concerned
with the constitutionality and extraterritorial application of
some of the international provisions of this bill. Ultimately,
any such provisions must be constitutional, administrable, and
not result in the loss of American jobs or harm to American
farmers.
Additional Views of Senator Spencer Abraham: Explanation of Selected
Votes
Now that the Committee has reported out tobacco settlement
legislation--legislation that I know will require more work on
the floor--I would like to comment on several of the more
important votes that took place in Committee.
One of several contentious issues that arose during the mark-
up was the amendment offered by Senator Snowe proposing to
codify the provisions in the tobacco agreement relating to
advertising and marketing by the tobacco companies. The problem
with the Snowe amendment is that the vast majority of legal
scholars agree that the amendment, by definition, is
unconstitutional. The tobacco agreement negotiated between the
tobacco companies and the attorneys general from various states
was a very complex amalgam of legal and policy issues. To bring
the agreement to fruition will require a number of actions,
including laws passed by Congress (and obviously signed by the
President) and executive branch directives. In addition,
because the tobacco companies had expressed a willingness to
curtail, voluntarily, many advertising and marketing tactics
that are entirely legal under the Supreme Court's
interpretation of commercial free speech, the tobacco companies
also would have been required to enter into a consent decree in
which they would agree to cease such constitutionally protected
activities. In other words, what they could not be compelled to
do through legislative or executive action, they have agreed to
do voluntarily in order to obtain other aspects of the tobacco
agreement.
By codifying these provisions via the Snowe amendment,
Congress would have seriously risked ``torpedoing'' the entire
tobacco agreement by preemptively and--as most observers
agree--unconstitutionally restricting the companies' rights to
advertise and market their products. Primarily out of
constitutional concerns, the committee defeated the Snowe
amendment on a 5-14 vote, and I voted against it on those
grounds as well.
Several votes also occurred with respect to amendments
offered by Senator Ashcroft on important legal reform issues,
and they deserve some mention as well. I continue to be a
strong advocate of legal reform, but it is important to include
only reforms that belong in this legislation.
Senator Ashcroft first offered as an amendment to the tobacco
settlement legislation the text of the Biomaterials Access
Assurance Act, which the Committee had already reported out
this Congress as part of product liability reform legislation.
That amendment failed by a vote of 3-13, with the Committee
members who spoke in opposition to it indicating that they
supported the substance of the amendment but did not think that
the place for it was on this legislation. I supported that
amendment, however. Such important health-related legislation
as the biomaterials bill would be appropriate to include as
part of tobacco settlement legislation, and, in my view, should
in fact be directly linked to and included in the legislation.
While I support the substance of product liability reform
legislation and broader civil justice reform generally, I did
not support Senator Ashcroft's second amendment, which was
defeated by a vote of 2-16, to add the entire product liability
reform legislation to this bill. That legislation has already
been reported out of the Commerce Committee. Moreover, it has
been and still is the subject of sensitive negotiations, and
also deals with a broad array of products that do not
necessarily have anything to do with health. Including such
legislation here would have only complicated an already
difficult issue with a matter that the Committee has already
dealt with separately.
Finally, Senator Ashcroft and Senator Dorgan both offered
slightly different amendments to remove all liability limits
from the tobacco legislation. Each was defeated by a wide
margin. I opposed those amendments because the carefully
circumscribed liability limits developed by the Chairman were
central to the legislation that he was able to put together
with sufficient support to be reported out of Committee.
Nonetheless, Senator Ashcroft makes a valid point that if the
Congress is not willing to grant liability protections to
businesses and individuals that make and market safe and useful
products, then perhaps Congress should not be protecting
cigarette manufacturers, who produce a harmful product that
contributes to the deaths of millions of Americans each year.
Passage of Senator Ashcroft's efforts, while well-
intentioned, would simply have prevented any tobacco settlement
legislation from moving forward. The Chairman was able to put
together a piece of legislation on this complex and
controversial issue only through striking a delicate balance.
It is important for the Committee to move forward at this point
and to report out tobacco settlement legislation so that the
full Senate will have the opportunity to consider it this
Session.
Additional Views of Senator Ron Wyden
This bill takes an historic step toward reducing the negative
health consequences of tobacco on future generations of
Americans. It provides a comprehensive approach to addressing
the problems of advertising and labeling at home and abroad,
establishes youth smoking goals and addresses the unique
concerns of tobacco farmers.
accountability
As we address the problem of youth smoking and changing the
behavior of tobacco companies, it is important that there be an
objective body that can report on the success or failure of
those changes. The Accountability Panel will be the only
``watch-dog'' apparatus available to determine company specific
behavior. It will report annually on the success or failure of
specific company behavior in meeting the public health goal of
this bill--reducing youth smoking.
At any time, the panel may recommend a specific company's
liability protections be removed because the company's behavior
is significant enough to hinder the achievement of youth
smoking reduction goals. By creating the only link between
public health and the company's continued receipt of its
liability protection, the Accountability Panel will serve as a
trigger to those protections. In addition, should action be
initiated to remove liability protections, whether a company
has adopted the panel's recommendations can be considered
during the deliberations. Company specific accountability is
even more important because the look back provisions are
established on an industry-wide basis in this legislation.
The Accountability Panel would be composed of career public
health officials, including a voice for minority communities
that were targeted by tobacco companies. As unanticipated
technology and behavior changes occur, this panel will provide
the mechanism to identify the impact of specific company's
behavior that we cannot now predict. Under this bill, only the
Accountability Panel will provide an ongoing record of company
specific behavior to reduce youth smoking with the power to
recommend ending a company's liability protections.
minority health
This bill is the first serious attempt to resolve minority
health issues related to tobacco. While consumers are targeted
every day by companies, the targeting of minorities and women
by tobacco companies resulted in the lives of many individuals
and families being decimated by smoking-related diseases. The
importance of research and providing smoking prevention and
cessation programs for minority communities cannot be
understated. Research must focus on developing successful
cessation programs and smoking-related minority health
concerns. In addition, prevention and cessation programs should
be culturally and linguistically appropriate; cessation
programs must be affordable and community-based, including
community health centers to reach migrant populations and
others who might not have regular sources of health care.
international tobacco control
Another important aspect of this bill are the provisions that
relate to international tobacco control. Nothing in these
provisions is intended to prevent the U.S. government or
tobacco companies themselves from working with other nations to
develop strict standards against marketing to children. Through
a code of conduct, restrictions on U.S. government institutions
to promote tobacco exports, labeling and marketing standards,
anti-smuggling efforts and the creation of a non-governmental
organization to focus on tobacco control in developing nations,
this bill ensures that any U.S. tobacco settlement is not paid
for by selling tobacco to children overseas.
As one-in-three cigarettes produced in the U.S. is currently
exported, the issue of the U.S. establishing a strong position
concerning international tobacco control is critical to public
health and as a foreign policy goal. The World Health
Organization (WHO) projects that one-third of the world's
population over the age of 15 currently smokes--equivalent to
1.1. billion smokers. Over 90 percent of the smokers are
located outside the U.S., and 70 percent live in developing
countries.
It has been demonstrated repeatedly that when a U.S. tobacco
company enters a foreign market, overall consumption of
cigarettes increases in that country. In Taiwan and Japan, U.S.
brands jumped from one percent of the market to 20 percent in
less than two years. U.S. tobacco companies, like other
companies, know the image of the U.S. sells their products
overseas. We should insure that image our national image is not
used to promote tobacco products to children overseas.
environmental tobacco smoke (ets)
This legislation sets a tough standard against environmental
tobacco smoke, but creates exceptions for some public places
and allows states to opt out of the standard completely. There
should be no option for states to opt out. ETS causes or
exacerbates a wide range of adverse health effects, including
cancer, respiratory infections and asthma. ETS contains over
4000 chemical; 200 are poisons; 43 cause cancer. The
Environmental Protection Agency has classified ETS as a known
cause of cancer in human. Because one of the primary goals of
this legislation is the health of children, it is unfortunate
that the bill would allow ETS to harm children.
The Building Owners and Managers Association International
have correctly stated that this provision as written gives the
states the ability to ``just say no'' to protections against
ETS. The opportunity to remove a significant health hazard
should not be lost.
look back provisions and penalties to reduce youth smoking
While this bill sets reasonable goals for reductions in youth
smoking rates, it permits tobacco companies to miss the targets
by 20 percentage points. In addition, while the penalties in a
cumulative sense may appear large, they are capped and amount
to a graduated cost to the company ranging from under one-third
of a penny-a-pack to just a penny-per-pack.
The penalties, combined with the look back provision based on
an industry-wide basis are not enough. Companies must be held
accountable. One way to do that is to establish company
specific look-backs and penalties. In addition, the current
provision may result in smaller tobacco companies bearing a
larger share of the burden than their market share, should
other, larger companies not succeed in reducing youth smoking.
An amendment, which was offered in mark-up but was withdrawn,
would have provided company-specific look back provisions, and
imposed greater reductions in youth smoking goals. From a
public health perspective, this approach would be better than
the provisions of the current bill. Look back provisions should
be on a company-by-company basis in order to achieve
accountability for bad actors and to learn what strategies work
for different companies in achieving reductions in youth
smoking. Greater penalties should be required for missing those
targets. Finally, language to assure minority children are
appropriate counted in any look-back provisions would have been
preferable.
conclusion
Although some provisions of this bill could be strengthened,
the Committee's product is comprehensive and provides the
opportunity for Congress to take historic action to reduce one
of the known preventable health problems. In doing so, Congress
would increase the health status of all our communities and
reduce the long-term health care costs for smoking-related
diseases.