[Federal Register Volume 66, Number 58 (Monday, March 26, 2001)]
[Proposed Rules]
[Pages 16425-16430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-7409]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 275, 290 and 296

[Notice No. 913]
RIN: 1512-AC35


Implementation of Public Laws 106-476 and 106-554, Relating to 
Tobacco Importation Restrictions, Markings, Repackaging, and 
Destruction of Forfeited Tobacco Products (2000R-492P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of 
the Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Bureau of Alcohol, Tobacco and Firearms (ATF) is proposing 
to amend the regulations governing tobacco products in order to 
implement several provisions of the Imported Cigarette Compliance Act 
of 2000 included as part of the Tariff Suspension and Trade Act of 
2000. Sections 4002 and 4003 of this new law require that tobacco 
products and cigarette papers and tubes manufactured in the United 
States and labeled for exportation can only be re-imported by the 
original manufacturer or by an export warehouse authorized to do so by 
the original manufacturer, provide that those articles labeled for 
exportation may not be sold or held for sale for domestic consumption 
in the United States unless they are removed from their export 
packaging and repackaged by the original manufacturer into new 
packaging that does not contain an export label, and require the 
destruction of tobacco products forfeited under Sec. 5761(c).
    This notice also proposes regulations that will implement section 
315 of the Consolidated Appropriations Act, 2001 which allows travelers 
to bring personal-use quantities of tobacco

[[Page 16426]]

products into the United States (up to the quantity allowed entry free 
of tax and duty under the Harmonized Tariff Schedule of the United 
States). Travelers may voluntarily relinquish to the U.S. Customs 
Service at the time of entry any excess of such quantity without 
incurring the penalty under Sec. 5761(c).
    This notice proposes to implement these changes in the law by 
providing new and amended regulations in parts 275, 290 and 296 of 
title 27 of the Code of Federal Regulations (CFR). Note that the 
effective date of the above provisions of the Imported Cigarette 
Compliance Act of 2000 is February 7, 2001. Section 315 of the 
Consolidated Appropriations Act, 2001 is retroactive to the effective 
date of the Balanced Budget Act of 1997, January 1, 2000.
    Several other provisions of the Imported Cigarette Compliance Act 
of 2000 amend the Tariff Act of 1930 by imposing additional 
requirements for the entry of cigarettes into the United States. Those 
provisions of the new law will be implemented through regulations 
issued by the U.S. Customs Service.

DATES: Written comments must be received by May 25, 2001.

ADDRESSES: Send written comments to: Chief, Regulations Division, 
Bureau of Alcohol, Tobacco and Firearms, P.O. Box 50221, Washington, DC 
20091-0221; Notice No. 913.

FOR FURTHER INFORMATION CONTACT: Mr. Daniel Hiland, Regulations 
Division, Bureau of Alcohol, Tobacco and Firearms, 650 Massachusetts 
Avenue, NW, Washington, DC 20226; Telephone (202) 927-8210.

SUPPLEMENTARY INFORMATION:

Background

    On December 22, 1999, the Bureau of Alcohol, Tobacco and Firearms 
published a temporary rule, T.D. ATF-421, in the Federal Register (64 
FR 71918, Dec. 22, 1999). This temporary rule implemented several 
provisions found in section 9302 of the Balanced Budget Act of 1997 
(Act), Pub. L. 105-33, 111 Stat. 672. Section 9302 of the Act had 
amended the Internal Revenue Code of 1986 at sections 5704(b), 5712, 
5754 and 5761(c). These amendments: placed restrictions on the 
importation of previously exported tobacco products, required markings 
on tobacco products or cigarette papers and tubes removed or 
transferred without payment of the federal excise tax, provided 
penalties for selling, relanding, or receiving, within the jurisdiction 
of the United States, tobacco products or cigarette papers and tubes 
which have been labeled and shipped for exportation and were removed 
after the effective date, and authorized the Secretary to prescribe 
minimum capacity or activity requirements as a criteria for issuance of 
a manufacturer's permit. These new provisions of law became effective 
January 1, 2000.
    The temporary rule, T.D. ATF-421, implemented these changes in law 
by providing new and amended regulations in parts 200, 270, 275 and 290 
of title 27 of the Code of Federal Regulations (CFR). Concurrently with 
the temporary rule, ATF also published a notice of proposed rulemaking, 
Notice No. 887 (64 FR 71927, Dec. 22, 1999), that solicited comments 
regarding the temporary regulations. The original comment period for 
Notice No. 887 lasted for 60 days and closed on February 22, 2000.
    During the comment period, the ATF received requests to extend the 
comment period in order to provide sufficient time for all interested 
parties to respond to the issues raised in the notice. ATF found that a 
reopening of the comment period was warranted and on March 21, 2000, 
ATF published Notice No. 893 in the Federal Register. This notice 
reopened the comment period for Notice No. 887 for an additional 30 
days. The second comment period for Notice No. 887 closed on April 20, 
2000.
    On April 18, 2000 the United States District Court for the District 
of Columbia in the civil action, World Duty Free Americas, Inc. v. 
Treasury, (D.D.C. No. 00-00404 (RCL)), issued a temporary injunction 
enjoining the Treasury Department from enforcing Temporary Rules 27 CFR 
275.11 and 27 CFR 275.83, in T.D. ATF-421, to the extent that they 
prohibited the importation of cigarettes purchased in U.S. duty free 
stores up to the limit allowed by the personal use exemption provided 
by 19 U.S.C. 1555 and the Harmonized Tariff Schedule of the United 
States, 19 U.S.C. 1202, subheadings 9804.00.65, 9804.00.70 and 
9804.00.72.
    Later, on November 9, 2000, the President signed the Tariff 
Suspension and Trade Act of 2000, Public Law 106-476, 114 Stat. 2101, 
that included the Imported Cigarette Compliance Act of 2000 (ICCA 
2000). Several sections of the IRC that were amended by Balanced Budget 
Act of 1997 have been further amended by the ICCA 2000, including 
sections 5704(d), 5754 and 5761(c). These new amendments require that 
tobacco products and cigarette papers and tubes manufactured in the 
United States and labeled for exportation can only be re-imported by 
the original manufacturer, or by an export warehouse authorized to do 
so by the original manufacturer, provide that those articles labeled 
for exportation may not be sold or held for sale for domestic 
consumption in the United States unless they are removed from their 
export packaging and repackaged by the original manufacturer into new 
packaging that does not contain an export label, and require the 
destruction of tobacco products forfeited under Sec. 5761(c).
    In addition, the Consolidated Appropriations Act, 2001, signed 
December 21, 2000, Public Law 106-554, 114 Stat. 2763, amended the IRC 
at section 5761(c) by adding language to the law which provides that 
travelers can bring personal-use quantities of U.S. manufactured 
tobacco products labeled for export into the United States (up to the 
quantity allowed entry free of tax and duty under the Harmonized Tariff 
Schedule of the United States). Further, the law provides that a person 
may voluntarily relinquish any excess quantity of tobacco products 
without incurring the penalty. However, no quantity of tobacco products 
other than the amount permitted under chapter 98 of the Harmonized 
Tariff Schedule of the United States may be relanded or received as a 
personal use quantity.
    ATF believes that the above-described changes in the law are clear 
and leave no discretion in implementation. However, because of the 
pending litigation (World Duty Free Americas, Inc. v. Treasury), ATF 
has decided to issue this notice of proposed rulemaking prior to the 
issuance of a final rule.
    Accordingly, this notice of proposed rulemaking seeks public 
comment on the proposed amendments to the regulations in parts 275, 
290, and 295 of title 27 of the Code of Federal Regulations (CFR).
    The following is a discussion of those sections of the IRC that 
were amended by the Balanced Budget Act of 1997 and further amended by 
the ICCA 2000 and the Consolidated Appropriations Act, 2001.

Importation Restrictions

    Balanced Budget Act. Section 9302 of the Balanced Budget Act of 
1997 added a new section, 26 U.S.C. 5754, to the IRC entitled, 
``Restriction on importation of previously exported tobacco products.'' 
This new section became effective on January 1, 2000 and it placed 
severe limitations on the conditions under which previously exported 
tobacco products, and cigarette papers and tubes may be imported or 
brought back into the United States. Section 5754 stated that such 
products

[[Page 16427]]

may only be imported or brought into the United States as provided in 
section 5704(d). The referenced section, 5704(d), allowed previously 
exported tobacco products and cigarette papers and tubes to be released 
from Customs custody, without payment of tax, for transfer to a 
manufacturer of tobacco products or cigarette papers and tubes, or to 
the proprietor of an export warehouse. Thus, under section 5754, the 
only condition under which previously exported tobacco products and 
cigarette papers and tubes could be imported or brought into the United 
States was by release from Customs custody to a manufacturer or an 
export warehouse proprietor as an in-bond transfer. However, section 
5704(d) allowed previously exported tobacco products to be transferred 
to any manufacturer of tobacco products or cigarette papers and tubes, 
or to any export warehouse proprietor. The law did not mandate that the 
previously exported products return to the original manufacturer or 
export warehouse proprietor as authorized by the original manufacturer.
    Imported Cigarette Compliance Act of 2000. Section 4002 of the 
Imported Cigarette Compliance Act of 2000 further amends sections 5754 
and 5704(d) of the IRC whereby tobacco products and cigarette papers 
and tubes manufactured in the United States and previously exported may 
be imported or brought into the United States, if such articles are 
released from Customs custody with the partial duty exemption provided 
in section 5704(d), or are returned to the original manufacturer of 
such articles as provided in section 5704(c). Further, section 5704(d) 
of the IRC was amended by deleting a reference to ``a manufacturer of'' 
and inserting ``the original manufacturer of'' tobacco products or 
cigarette papers and tubes. The term ``proprietor of an export 
warehouse'' was also amended by inserting the phrase ``authorized by 
such manufacturer to receive such articles'' after the term 
``proprietor of an export warehouse.'' Therefore, the amended language 
of the law in 5704(d) now refers to ``proprietor of an export warehouse 
authorized by such manufacturer to receive such articles.''
    Thus, with these amendments to sections 5754 and 5704(d), 
previously exported tobacco products and cigarette papers and tubes of 
United States manufacture may be imported or brought into the United 
States by: (1) Release from Customs custody under 5704(d) to ``the 
original manufacturer'' or to ``the proprietor of an export warehouse 
authorized by such manufacturer to receive such articles'' or, (2) 
return to the original manufacturer of such articles as provided in 
5704(c).
    Proposed Amendments to the Regulations. This NPRM proposes to amend 
the regulations at 27 CFR 275.82 to reflect the above described changes 
in the law.

Tobacco Products Labeled for Export

    Balanced Budget Act. As discussed above, section 9302 of the 
Balanced Budget Act of 1997 amended the IRC by adding section 5754 
which imposed restrictions on the importation of previously exported 
tobacco products. Thus, only articles which had been exported from the 
United States were subject to the re-importation restriction. It also 
amended section 5704(b) by providing that tobacco products, and 
cigarette papers and tubes may not be transferred or removed under 26 
U.S.C. Sec. 5704(b) unless they bear the proper marks, labels and 
notices.
    Imported Cigarette Compliance Act of 2000. Section 4002 of the 
Imported Cigarette Compliance Act of 2000 further amends the IRC by 
providing new language at section 5754 whereby tobacco products and 
cigarette papers and tubes manufactured in the United States and 
``labeled for exportation'' are subject to the restrictions and 
penalties applicable to this section. Thus, the new language at section 
5754 makes the law applicable to both exported articles and articles 
labeled for export, but not exported. The Committee report that 
accompanied the bill states: ``The provision expands the application of 
the special tax penalty for re-importing tobacco products to include 
the sale in the U.S. domestic market of tobacco products labeled for 
export (but not actually exported). Thus, this penalty can be imposed 
in addition to the present-law penalties and other sanctions that apply 
to tobacco products that might be removed for export, but instead are 
diverted into the U.S. domestic market.'' S. Rep. No. 503, 106th Cong., 
2nd Sess. 89 (2000).
    Amendments to the Regulations. This NPRM proposes to amend the 
regulations at 27 CFR 275.82 to reflect the above described change in 
the law. The penalty provisions in 27 CFR 275.83(a), which implement 
verbatim section 5761(c), already applied to articles ``labeled or 
shipped for exportation.'' Therefore, since articles labeled for 
exportation are already addressed in section 275.83, it is not 
necessary to amend it.

Returned Articles in the U.S. Market

    Balanced Budget Act. Section 9302 of the Balanced Budget Act of 
1997 imposed a new civil penalty on persons, other than manufacturers 
or export warehouse proprietors, who sell, reland or receive tobacco 
products or cigarette papers or tubes that have been labeled or shipped 
for exportation under Chapter 52 of the IRC. However, section 9302(i) 
of this Act also provided that the amendments to the IRC under the 
Balanced Budget Act of 1997 only applied to ``articles removed'' after 
December 31, 1999. As a consequence, articles that were removed on or 
before December 31, 1999 were not subject to the new penalty. Thus, 
relanded tobacco products in packages bearing export marks that were 
lawfully removed from Customs custody and entered into the United 
States prior to January 1, 2000 were lawful products and not subject to 
the civil penalty, or other criminal provisions of Chapter 52 of the 
IRC.
    Imported Cigarette Compliance Act of 2000. Section 4002 of the 
Imported Cigarette Compliance Act 2000 amends the IRC by providing new 
language at section 5754(a)(1)(C) whereby tobacco products and 
cigarette papers and tubes manufactured in the United States and 
labeled for exportation may not be sold or held for sale for domestic 
consumption in the United States unless such articles are removed from 
their export packaging and repackaged by the original manufacturer into 
new packaging that does not contain an export label. Further, the 
provisions of section 4002 take effect 90 days after enactment of the 
Act and, therefore, are effective on February 7, 2001. See section 
4002(d) of the ICCA 2000 for the effective date.
    The consequence of this amendment is that whereas the Balanced 
Budget Act of 1997 had allowed previously exported articles that were 
imported before January 1, 2000 to be legally sold on the domestic 
market, the ICCA 2000 makes the sale or holding for sale of such 
articles illegal effective February 7, 2001, unless they are removed 
from their export packaging and repackaged by the original manufacturer 
into new packaging that does not contain an export label.
    The Committee report that accompanied the bill, states: ``The 
provision also authorizes the Treasury Department to seize all export-
labeled tobacco products found in the U.S. domestic market regardless 
of the date of removal.'' S. Rep. No. 503, 106th Cong., 2nd Sess. 89 
(2000).
    Further, amended section 5754(a)(2) also provides that the 
restrictions on export-labeled articles also apply to articles that 
have been altered by a person other than the original manufacturer. 
Thus, if a person places

[[Page 16428]]

stickers over the export label, or otherwise attempts to conceal or 
remove the export label on the packaging, the restrictions in 26 U.S.C. 
5754 still apply to that article.
    Amendments to the Regulations. This NPRM proposes to amend the 
regulations at 27 CFR 275.82 and 296.166(b) and (c) to reflect these 
changes in the law.

Disposition of Forfeited Tobacco Products

    Balanced Budget Act. Section 9302 of the Balanced Budget Act of 
1997 amended the IRC by adding a new civil penalty at 26 U.S.C. 
5761(c). The penalty applies to persons, other than manufacturers or 
export warehouse proprietors, who sell, reland or receive tobacco 
products or cigarette papers or tubes that have been labeled or shipped 
for exportation under Chapter 52 of the IRC. In addition to the civil 
penalty, criminal penalties and forfeiture of the product and any 
vessel, vehicle or aircraft involved in relanding or removing such 
product could be imposed. However, section 5761(c) did not specify how 
the Department of the Treasury should dispose of forfeited tobacco 
products.
    Imported Cigarette Compliance Act of 2000. Section 4002(c) of the 
Imported Cigarette Compliance Act of 2000 amends section 5761(c) of the 
IRC by adding language which requires that all relanded tobacco 
products and cigarette papers and tubes shall be forfeited to the 
United States and destroyed. The Committee report that accompanied the 
bill states, ``The provision also provides that tobacco products that 
are forfeited to the Federal Government under present-law provisions 
must be destroyed (rather than being disposed of in any manner 
administratively determined by the Treasury Department).'' S. Rep. No. 
503, 106th Cong., 2nd Sess. 89 (2000).
    Amendments to the Regulations. This NPRM proposes to amend the 
regulations at 275.83(c) by providing that forfeited tobacco products 
and cigarette papers and tubes will be destroyed.

Travelers Entering the United States

    Balanced Budget Act. As discussed earlier, the Balanced Budget Act 
of 1997 amended the IRC by adding two new sections of law aimed at 
restricting the importation of previously exported tobacco products. 26 
U.S.C. 5754 provided that only manufacturers of tobacco products and 
export warehouses may import previously exported tobacco products. In 
addition, section 5761(c) provided penalties for selling, receiving, 
and relanding of tobacco products labeled or shipped for export. 
Neither section of law provided an exemption for travelers entering the 
United States with small quantities of tobacco products for personal 
use.
    This application of the law was challenged by several operators of 
duty free stores and in a civil action, World Duty Free Americas, Inc. 
v. Treasury. The court in World Duty Free issued a temporary injunction 
enjoining the Treasury Department from enforcing Temporary Rules 27 CFR 
275.11 and 275.83 to the extent that they prohibited the importation of 
cigarettes purchased in U.S. duty free stores up to the limit allowed 
by the personal use exemption provided by 19 U.S.C. 1555 and the 
Harmonized Tariff Schedule of the United States, 19 U.S.C. 1202, 
subheadings 9804.00.65, 9804.00.70 and 9804.00.72.
    ICCA 2000 and Consolidated Appropriations Act, 2001. As discussed 
earlier, on November 9, 2000 the President signed the Imported 
Cigarette Compliance Act of 2000. Section 4003 of the Imported 
Cigarette Compliance Act of 2000 amended the IRC at section 5761(c) by 
inserting the following language: ``This subsection and section 5754 
shall not apply to any person who relands or receives tobacco products 
in the quantity allowed entry free of tax and duty under subchapter IV 
of chapter 98 of the Harmonized Tariff Schedule of the United States. 
No quantity of tobacco products other than the quantity referred to in 
the preceding sentence may be relanded or received as a personal use 
quantity.''
    Shortly thereafter, on December 21, 2000, the President also signed 
the Consolidated Appropriations Act, 2001. Section 315 of the 
Consolidated Appropriations Act, 2001 further amended section 5761(c) 
in the IRC by substituting the following language: ``This subsection 
and section 5754 shall not apply to any person who relands or receives 
tobacco products in the quantity allowed entry free of tax and duty 
under chapter 98 of the Harmonized Tariff Schedule of the United 
States, and such person may voluntarily relinquish to the Secretary at 
the time of entry any excess of such quantity without incurring the 
penalty under this subsection. No quantity of tobacco products other 
than the quantity referred to in the preceding sentence may be relanded 
or received as a personal use quantity.''
    Under this revised language in the law, travelers entering the 
United States, if they claim and are granted a personal use exemption, 
are allowed to bring U.S. manufactured tobacco products labeled for 
export back into the United States up to the quantity allowed entry 
free of tax and duty under chapter 98 of the Harmonized Tariff Schedule 
of the United States. In addition, a traveler claiming such a personal 
use exemption upon arrival at the border may voluntarily relinquish to 
the U.S. Customs Service any excess of such quantity without incurring 
a penalty under this section. Only the numerical quantity allowable 
under the Harmonized Tariff Schedule of the United States free of tax 
and duty may be considered as a personal use quantity.
    In addition, section 315 of the Consolidated Appropriations Act, 
2001 made the above described allowance for travelers retroactive to 
January 1, 2000, when the original restrictions and penalties imposed 
by the Balanced Budget Act of 1997 took effect.
    Amendments to the Regulations. In accordance with the above 
described amendments to the IRC, ATF proposes to amend the regulations 
at 27 CFR 275.82 and 275.83 to provide that personal use quantities 
allowed under the law are exempt from the restrictions and penalties 
applicable to reimported tobacco products. The definition of 
``relanding'' at 27 CFR 275.11 is amended to delete the second sentence 
relating to the relinquishment of tobacco products by travelers, which 
is now delineated in the proposed revisions to 27 CFR 275.82 and 
275.83.

Miscellaneous Amendments

    In addition to amendments described above, ATF proposes to amend 
the authority cite that appears after 27 CFR 290.185, Label or Notice, 
to include a reference to 26 U.S.C. 5704(b), which allows the Secretary 
to prescribe appropriate marks, labels or notices.

Amendments to the Tariff Act of 1930

    The Imported Cigarette Compliance Act of 2000 also amends the 
Tariff Act of 1930 by imposing additional requirements for the entry of 
cigarettes into the United States. Those provisions of the new law will 
be implemented through regulations issued by the U.S. Customs Service.

Public Participation

Who May Comment on This Notice?

    ATF requests comments on this notice of proposed rulemaking from 
all interested persons. All comments received on or before the closing 
date will be carefully considered. Comments received after that date 
will be given the same consideration if it is practical to do so, but 
assurance of consideration

[[Page 16429]]

cannot be given except as to comments received on or before the closing 
date.

Will ATF Keep My Comments Confidential?

    ATF will not recognize any material in comments as confidential. 
Comments may be disclosed to the public. Any material that a respondent 
considers to be confidential or inappropriate for disclosure to the 
public should not be included in the comment. The name of any person 
submitting a comment is not exempt from disclosure.

Can I Review Comments Received?

    Yes. You may view and copy written comments on this notice during 
normal business hours in the ATF Public Reading Room, Room 6480, 650 
Massachusetts Avenue, NW, Washington, DC 20226, telephone (202) 927-
8480.

How Do I Send Facsimile Comments?

    Comments may be submitted by facsimile transmission to (202) 927-
8525. Facsimile comments must:
     be legible;
     be 8\1/2\" x 11" in size;
     contain a legible written signature;
     be not more than three pages.
    We will not acknowledge receipt of FAX transmissions. We will treat 
facsimile transmissions as originals.

How Do I Send Electronic Mail (e-mail) Comments?

    You may submit comments by e-mail by sending the comments to 
[email protected]. You must follow these instructions. E-mail 
comments must:
     contain your name, mailing address, and e-mail address;
     reference this notice number;
     be legible when printed on not more than three pages 8\1/
2\1/2" x 11" in size.
    We will not acknowledge receipt of e-mail. We will treat e-mail as 
originals.

How Do I Send Comments to the ATF Internet Web Site?

    Comments may be submitted electronically using ATF's web site. You 
may comment on this proposed notice by using the form provided through 
ATF's web site. You can reach this notice and comment form through the 
address http://www.atf.treas.gov/core/tobacco/rules/rules.htm.

Can I Request a Public Hearing?

    If you desire the opportunity to comment orally at a public hearing 
on this proposed regulation, you must submit a request in writing to 
the Director within the 60-day comment period. The Director reserves 
the right, in light of all circumstances, to determine if a public 
hearing is necessary.

Regulatory Analyses and Notices

Is This a Significant Regulatory Action as Defined by Executive Order 
12866?

    It has been determined that this proposed regulation is not a 
significant regulatory action as defined by Executive Order 12866. 
Accordingly, this proposal is not subject to the analysis required by 
this Executive Order.

How Does the Regulatory Flexibility Act Apply to This Proposed Rule?

    These proposed regulations will not have a significant economic 
impact on a substantial number of small entities. Accordingly, a 
regulatory flexibility analysis is not required. The revenue effects of 
this rulemaking on small businesses flow directly from the underlying 
statute. Likewise, any secondary or incidental effects, and any 
reporting, recordkeeping, or other compliance burdens flow directly 
from the statute. Pursuant to 26 U.S.C. 7805(f), this proposed 
regulation will be submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Does the Paperwork Reduction Act Apply to This Proposed Rule?

    This notice of proposed rulemaking does not contain any new 
collections of information nor does it revise existing collections of 
information to impose new burdens. Consequently, the provisions of the 
Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35, and its 
implementing regulations, 5 CFR part 1320, do not apply to this notice.

Drafting Information

    The principal author of this document is Mr. Daniel Hiland, 
Regulations Division, Bureau of Alcohol, Tobacco and Firearms. However, 
other personnel of ATF and the Treasury Department participated in 
developing the document.

List of Subjects

27 CFR Part 275

    Administrative practice and procedure, Authority delegations, 
Cigarette papers and tubes, Claims, Customs duties and inspection, 
Electronic fund transfer, Excise taxes, Imports, Labeling, Packaging 
and containers, Penalties, Reporting requirements, Seizures and 
forfeitures, Surety bonds, Tobacco products, U.S. possessions, 
Warehouses.

27 CFR Part 290

    Administrative practice and procedure, Aircraft, Authority 
delegations, Cigarette papers and tubes, Claims, Customs duties and 
inspection, Excise taxes, Exports, Foreign trade zones, Labeling, 
Packaging and containers, Penalties, Surety bonds, Tobacco products, 
Vessels, Warehouses.

27 CFR Part 296

    Authority delegations, Cigarette papers and tubes, Claims, Disaster 
assistance, Excise taxes, Exports, Packaging and containers, Penalties, 
Surety bonds, Tobacco products.

Authority and Issuance

    Accordingly, we propose to amend title 27, Code of Federal 
Regulations as follows:

PART 275--IMPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES

    Paragraph 1. The authority citation for part 275 continues to read 
as follows:

    Authority: 18 U.S.C. 2342; 26 U.S.C. 5701, 5703, 5704, 5705, 
5708, 5712, 5713, 5721, 5722, 5723, 5741, 5754, 5761, 5762, 5763, 
6301, 6302, 6313, 6404, 7101, 7212, 7342, 7606, 7652, 7805; 31 
U.S.C. 9301, 9303, 9304, 9306.


Sec. 275.11  [AMENDED]

    Par. 2. In Sec. 275.11, the definition for ``Relanding'' is amended 
by removing the second sentence.
    Par. 3. Section 275.82 is revised to read as follows:


Sec. 275.82  Restrictions on Tobacco Products Labeled for Export.

    (a) The provisions of this section apply to tobacco products and 
cigarette papers and tubes manufactured in the United States and 
labeled for exportation.
    (b) Articles described in paragraph (a) of this section may be 
transferred to or removed from the premises of a manufacturer or an 
export warehouse proprietor only if such articles are being transferred 
or removed without tax as provided in this part.
    (c) Articles described in paragraph (a) of this section that are 
put up in packages may only be imported or brought into the United 
States, after their exportation, by release from Customs custody for 
delivery to the original manufacturer of such tobacco products or 
cigarette papers or tubes or to the proprietor of an export warehouse 
authorized by such manufacturer to

[[Page 16430]]

receive such articles. These products are transferred in bond and are 
released from Customs custody without payment of that part of the duty 
attributable to internal revenue tax.
    (d) Articles described in paragraph (a) of this section that are 
not put up in packages may only be imported or brought into the United 
States by release from Customs custody without payment of tax for 
delivery to the original manufacturer of such articles.
    (e) Articles described in paragraph (a) of this section may not be 
sold or held for sale for domestic consumption in the United States 
unless such articles are removed from their export packaging and 
repackaged by the original manufacturer into new packaging that does 
not contain an export label. The new packages, marks and notices must 
conform to the requirements of 27 CFR part 270.
    (f) The provisions of this section shall apply to articles labeled 
for export even if the packaging or the appearance of such packaging to 
the consumer of such articles has been modified or altered by a person 
other than the original manufacturer so as to remove or conceal or 
attempt to remove or conceal (including by placement of a sticker over) 
any export label.
    (g) For purposes of this section, an article is labeled for export 
or contains an export label if it bears the mark, label, or notice 
required by Sec. 290.185.
    (h) For purposes of this section, references to exportation shall 
be treated as including a reference to shipment to the Commonwealth of 
Puerto Rico.
    (i) The provisions of this section do not apply to any person who, 
when entering U.S. manufactured tobacco products labeled for export, 
claims and is granted an exemption from duty and tax for such products 
under chapter 98 of the Harmonized Tariff Schedule of the United 
States. The quantity of tobacco products entered may not exceed the 
quantity limit imposed on such products under the applicable tariff 
provision. A traveler claiming an exemption under this subsection upon 
arrival at the border may voluntarily relinquish to the U.S. Customs 
Service at the time of entry any excess of such quantity without 
incurring the penalty under section 275.83.
    (j) For civil penalties and forfeiture provisions related to 
violations of this section, see Sec. 275.83. For a criminal penalty 
applicable to any violation of this section see 26 U.S.C. 5762(b).
    Par. 4. Section 275.83 is revised to read as follows:


Sec. 275.83  Penalties and forfeiture for products labeled or shipped 
for export.

    Except for the return of exported products that are specifically 
authorized under Sec. 275.82:
    (a) Every person who sells, relands, or receives within the 
jurisdiction of the United States any tobacco products or cigarette 
papers or tubes which have been labeled or shipped for exportation;
    (b) Every person who sells or receives such relanded tobacco 
products or cigarette papers or tubes; and,
    (c) Every person who aids or abets in such selling, relanding, or 
receiving, shall, in addition to the tax and any other penalty provided 
for in title 26 U.S.C., be liable for a penalty equal to the greater of 
$1,000 or 5 times the amount of the tax imposed by title 26 U.S.C. All 
tobacco products and cigarette papers and tubes relanded within the 
jurisdiction of the United States shall be forfeited to the United 
States and destroyed. All vessels, vehicles and aircraft used in such 
relanding or in removing such products, papers, and tubes from the 
place where relanded, shall be forfeited to the United States.
    (d) The provisions of this section do not apply to any person who, 
when entering U.S. manufactured tobacco products labeled for export, 
claims and is granted an exemption from duty and tax for such products 
under chapter 98 of the Harmonized Tariff Schedule of the United 
States. The quantity of tobacco products entered may not exceed the 
quantity limit imposed on such products under the applicable tariff 
provision. A traveler claiming an exemption under this subsection upon 
arrival at the border may voluntarily relinquish to the U.S. Customs 
Service at the time of entry any excess of such quantity without 
incurring the penalty under this section.
    (e) For purposes of this section, references to exportation shall 
be treated as including a reference to shipment to the Commonwealth of 
Puerto Rico.

PART 290--EXPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES, WITHOUT PAYMENT OF TAX, OR WITH DRAWBACK OF TAX

    Par. 5. The authority citation for part 290 continues to read as 
follows:

    Authority: 26 U.S.C. 5142, 5143, 5146, 5701, 5703-5705, 5711-
5713, 5721-5723, 5731, 5741, 5751, 5754, 6061, 6065, 6151, 6402, 
6404, 6806, 7011, 7212, 7342, 7606, 7805; 31 U.S.C. 9301, 9303, 
9304, 9306.

    Par. 6. The parenthetical authority citation after Sec. 290.185 is 
removed.

PART 296--MISCELLANEOUS REGULATIONS RELATING TO TOBACCO PRODUCTS 
AND CIGARETTE PAPERS AND TUBES

    Par. 7. The authority citation for part 296 is revised to read as 
follows:

    Authority: 18 U.S.C. 2341-2346, 26 U.S.C. 5704, 5708, 5751, 
5754, 5761-5763, 6001, 6601, 6621, 6622, 7212, 7342, 7602, 7606, 
7805; 44 U.S.C. 3504(h), 49 U.S.C. 782, unless otherwise noted.
    Par. 8. Section 296.166 is revised to read as follows:


Sec. 296.166  Dealing in tobacco products.

    (a) All tobacco products purchased, received, possessed, offered 
for sale, sold or otherwise disposed of, by any dealer must be in 
proper packages which bear the mark or notice as prescribed in parts 
270 and 275 of this chapter. Tobacco products may be sold, or offered 
for sale, at retail from such packages, provided the products remain in 
the packages until removed by the customer or in the presence of the 
customer. Where a vending machine is used, tobacco products must 
similarly be vended in proper packages or directly from such packages.
    (b) Tobacco products manufactured in the United States and labeled 
for exportation may not be sold or held for sale for domestic 
consumption in the United States unless such articles are removed from 
their export packaging and repackaged by the original manufacturer into 
new packaging that does not contain an export label. This applies to 
articles labeled for export even if the packaging or the appearance of 
such packaging to the consumer of such articles has been modified or 
altered by a person other than the original manufacturer so as to 
remove or conceal or attempt to remove or conceal (including by 
placement of a sticker over) the export label.
    (c) For penalty and forfeiture provisions applicable to the 
selling, relanding or receipt of articles which have been labeled or 
shipped for exportation, see Sec. 275.83.

    Signed: March 1, 2001.
Bradley A. Buckles,
Director.
    Approved: March 15, 2001.
Timothy E. Skud,
Acting Deputy Assistant Secretary (Regulatory, Tariff and Trade 
Enforcement).
[FR Doc. 01-7409 Filed 3-23-01; 8:45 am]
BILLING CODE 4810-31-P