[Federal Register Volume 66, Number 168 (Wednesday, August 29, 2001)]
[Rules and Regulations]
[Pages 45613-45619]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-21857]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 44, 46 and 275

[T.D. ATF-465 ; Ref: 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.

[[Page 45614]]


ACTION: Final rule (Treasury decision).

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SUMMARY: This final rule amends 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 or shipped for 
exportation (under the Internal Revenue Code of 1986 (IRC)) can only be 
re-imported by the original manufacturer or by an export warehouse 
proprietor authorized to do so by the original manufacturer (except for 
a personal use exemption discussed below), 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 section 5761(c) of the 
IRC.
    This final rule also amends the regulations governing tobacco 
products in order to implement section 315 of the Consolidated 
Appropriations Act, 2001. 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 the 
penalty under section 5761(c) of the IRC.
    This final rule implements these changes in the law by providing 
new and amended regulations in parts 44 (formerly part 290), 46 
(formerly part 296) and 275 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.

DATES: This final rule is effective on October 29, 2001.

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.
    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 the temporary 
regulations at 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 were 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 or shipped for exportation under the IRC can only be 
re-imported by the original manufacturer, or by an export warehouse 
proprietor authorized to do so by the original manufacturer. Also, 
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. Finally, the ICCA 
2000 requires the destruction of tobacco products forfeited under 
section 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 that provides that 
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 the penalty under section 
5761(c). However, no quantity of tobacco products, other than the 
quantity allowed entry free of tax and duty 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 
litigation then pending in World Duty Free Americas, Inc. v. Treasury, 
ATF decided to issue a notice of proposed rulemaking prior to the 
issuance of a final rule.

Notice of Proposed Rulemaking

    On March 26, 2001, ATF published a notice of proposed rulemaking in 
the Federal Register (Notice No. 913, 66 FR 16425, March 26, 2001) to 
solicit public comments on proposed regulations. In that notice, ATF 
proposed to amend the regulations in 27 CFR parts 275, 290

[[Page 45615]]

(currently part 44) and 296 (currently part 46) in order to implement 
several of the new provisions of law found in the ICCA 2000 and the 
Consolidated Appropriations Act, 2001. The public was invited to submit 
comments on this notice for a period of 60 (sixty) days ending May 25, 
2001.

Recodification of Parts 290 and 296

    Following the publication of Notice No. 913 there were two separate 
rulemaking actions which affected the numbering system for the 
regulations that were proposed in Notice No. 913. The regulations at 27 
CFR part 290 have been recodified as 27 CFR part 44. Similarly the 
regulations at 27 CFR part 296 have been recodified as 27 CFR part 46. 
Thus, all references to parts 290 and 296 in Notice 913 will now appear 
in this final rule as parts 44 and 46 respectively.

Comments on the NPRM

    In response to Notice No. 913, ATF received one letter of comment 
from Mr. Craig A. Johnson of Philip Morris Incorporated. In his letter, 
Mr. Johnson stated that Philip Morris Incorporated urged prompt 
adoption (without change) of the proposed rule, which would implement 
the provisions of the ICCA 2000. He further stated that he understood 
that U.S. Customs will be promulgating regulations to implement the 
other provisions of this new law which amends the Tariff Act of 1930 
and he urged ATF and U.S. Customs to coordinate with each other to 
enforce the law.
    The proposed regulations have been largely adopted as proposed in 
Notice No. 913. The following is a summary 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. 
Also discussed are the sections of the regulations that have been 
amended by this final rule.

Final Rule

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 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 ICCA 2000 further amended 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).
Amendments to the Regulations
    This final rule amends the regulations at 27 CFR 275.82 to reflect 
the above described changes in the law at 26 U.S.C. 5754. Further, 
amended section 275.82(c) of the regulations is the section that 
provides for the type of importations described under 26 U.S.C. 5704(d) 
and amended section 275.82(d) of the regulations provides for the type 
of importations described under 26 U.S.C. 5704(c).

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. 5704(b) unless they bear the 
proper marks, labels and notices.
Imported Cigarette Compliance Act of 2000
    Section 4002 of the ICCA 2000 further amended 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 
stated: ``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 final rule amends the regulations at 27 CFR 275.82 to reflect 
the above described change in the law.

[[Page 45616]]

Specifically, 27 CFR 275.82(a) now states that the provisions of this 
section apply to ``tobacco products and cigarette papers and tubes 
manufactured in the United States and labeled for exportation.'' 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 was not necessary to amend this 
section to add the term ``labeled or shipped for exportation.''

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 ICCA 2000 further amended 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, stated: ``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 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. Sec. 5754 still apply to that article.
Amendments to the Regulations
    This final rule amends the regulations at 27 CFR 275.82(e) and (f), 
and 46.166(b) and (c) (formerly 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. Sec. 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 ICCA 2000 amended 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 stated, 
``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 final rule amends the regulations at section 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 can 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 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 the temporary 
regulations at 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 
ICCA 2000. Section 4003 of the ICCA 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.''

[[Page 45617]]

    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, this 
final rule amends the regulations at 27 CFR 275.82(i) and 275.83(d) to 
provide that personal use quantities allowed under the law are exempt 
from the restrictions and penalties applicable to reimported tobacco 
products. Further, the definition of ``relanding'' at 27 CFR 275.11 has 
been amended to delete the second sentence relating to the 
relinquishment of tobacco products by travelers, which is now 
delineated in the revisions to 27 CFR 275.82 and 275.83.

Reimportation of Unpackaged Tobacco Products

    During the comment period for Notice 913, ATF noted a technical 
inconsistency in the language of the law at 26 U.S.C. 5754 and 5761(c). 
That technical inconsistency and the solution are discussed as follows.
    Prior to the enactment of the ICCA 2000, section 5754 of the IRC 
provided that tobacco products and cigarette papers and tubes 
previously exported from the United States could be imported into the 
United States ``only as provided in section 5704(d)'' (emphasis added). 
Further, the corresponding penalty in section 5761(c) specifically 
exempted ``(b) and (d) of section 5704''. Thus, the importation of 
previously exported products under section 5704(d) was exempt from the 
penalty provisions in section 5761(c).
    With the passage of the ICCA 2000, section 5754 was amended to 
provide that tobacco products and cigarette papers and tubes 
manufactured in the United States and labeled or shipped under the IRC 
for exportation may be imported or brought into the United States, 
after their exportation, only if such articles are either eligible to 
be released from customs custody ``with the partial duty exemption 
provided in section 5704(d) or are returned to the original 
manufacturer of such article as provided in section 5704(c).'' Thus, 
under the revised language in section 5754, products may be imported by 
the original manufacturer under sections 5704(c) or 5704(d).
    However, a problem arises with the language of the corresponding 
penalty provision in section 5761(c). Section 5761(c) continues to 
provide a penalty for selling, receiving, or relanding tobacco products 
``except as provided in (b) and (d) of section 5704.'' This is the same 
language used in section 5754 when it was first introduced by the 
Balanced Budget Act of 1997.
    Thus, while section 5754 now authorizes importations under sections 
5704(c) and (d), the penalty provision in 5761(c) only exempts from 
penalty those imports that are made under sections 5704(b) and (d). 
Therefore, authorized importations under 5704(c) could still be subject 
to the penalty imposed by section 5761(c). This appears to be a 
technical error in the language of the law, with a result that Congress 
did not intend.
    After consideration of this inconsistency, ATF has reviewed the law 
at 26 U.S.C. 5704(d) and determined that its language is broad enough 
to include the importation of both packaged articles and articles that 
``are not put up in packages.'' Thus, ATF has concluded that articles 
that might be imported under section 5704(c) can also be imported under 
section 5704(d) and thereby become exempt from the penalty provision in 
section 5761(c).
Amendments to the Regulations
    In order to address this problem, ATF has made some minor 
amendments to the language of the regulations at 27 CFR 275.82(c) and 
(d) and 275.83. Pursuant to these amendments, an original manufacturer 
that intends to import any bulk articles manufactured in the United 
States and labeled for exportation may do so under 27 CFR 275.82(d) (26 
U.S.C. 5704(c). Such articles will be administratively deemed to be 
imported or brought in under section 275.83(c) (26 U.S.C. 5704(d)). 
Thus, the potential penalty under section 275.83 (26 U.S.C. 5761(c)) 
will be avoided.

Miscellaneous Amendments

    In addition to amendments described above, this final rule amended 
the authority cite that appears after 27 CFR 44.185 (formerly 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.

Regulatory Analyses and Notices

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

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

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

    It is hereby certified that this final rule 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), a copy 
of the proposed regulation was submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business. No comments were received.

[[Page 45618]]

Does the Paperwork Reduction Act Apply to This Proposed Rule?

    This final rule 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 rulemaking.
    Drafting Information. The principal author of this document is Mr. 
Daniel Hiland, Regulations Division, Bureau of Alcohol, Tobacco and 
Firearms.

List of Subjects

27 CFR Part 44

    Administrative practice and procedure, Aircraft, Authority 
delegations, Cigars and cigarettes, 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 46

    Authority delegations, Cigars and cigarettes, Claims, Disaster 
assistance, Excise taxes, Exports, Packaging and containers, Penalties, 
Seizures and forfeitures, Surety bonds, Tobacco products.

27 CFR Part 275

    Administrative practice and procedure, Authority delegations, 
Cigars and cigarettes, 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, Warehouses.

Authority and Issuance

    Accordingly, title 27, Chapter I, Code of Federal Regulations is 
amended as follows:

PART 44--EXPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES, WITHOUT PAYMENT OF TAX, OR WITH DRAWBACK OF TAX

    Paragraph 1. The authority citation for part 44 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. 2. The authority citation that appears after Sec. 44.185 is 
revised to read as follows:


Sec. 44.185  Label or notice.

* * * * *

(26 U.S.C. 5704, 5723)

PART 46--MISCELLANEOUS REGULATIONS RELATING TO TOBACCO PRODUCTS AND 
CIGARETTE PAPERS AND TUBES

    Par. 3. The authority citation for part 46 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. 4. Section 46.166 is revised to read as follows:


Sec. 46.166  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 under chapter 52 of title 26, U.S.C. 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 of this chapter.

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


    Par. 5. 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.

    Par. 6. In Sec. 275.11, the definition for ``Relanding'' is amended 
by removing the second sentence.

    Par. 7. 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 under parts 44 and 270 of this chapter.
    (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 may only be 
imported or brought into the United States, after their exportation, 
under the provisions of 26 U.S.C. 5704(d), 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 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 be imported or brought into the United 
States under 26 U.S.C. 5704(c) by release from Customs custody without 
payment of tax for delivery to the original manufacturer of such 
articles. However, because such articles are also eligible for release 
under 26 U.S.C. 5704(d), such articles will be treated as though 
released under section 5704(d), due to the penalty provisions in 
section 5761(c).
    (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

[[Page 45619]]

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. 44.185 of this chapter.
    (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 
under parts 44 and 270 of this chapter, 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 Sec. 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. 8. 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(b) and (c):
    (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 
under parts 44 and 270 of this chapter;
    (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.

    Signed: July 9, 2001.
Bradley A. Buckles,
Director.
    Approved: August 9, 2001.
Timothy E. Skud,
Acting Deputy Assistant Secretary, (Regulatory, Tariff and Trade 
Enforcement).
[FR Doc. 01-21857 Filed 8-28-01; 8:45 am]
BILLING CODE 4810-31-P