H.R.5178 - Smuggled Tobacco Prevention Act of 2010111th Congress (2009-2010)
|Sponsor:||Rep. Doggett, Lloyd [D-TX-25] (Introduced 04/29/2010)|
|Committees:||House - Ways and Means|
|Latest Action:||04/29/2010 Referred to the House Committee on Ways and Means. (All Actions)|
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Text: H.R.5178 — 111th Congress (2009-2010)All Bill Information (Except Text)
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Introduced in House (04/29/2010)
To amend the Internal Revenue Code to reduce tobacco smuggling, and for other purposes.
Mr. Doggett (for himself, Mr. Levin, Mr. Waxman, Mr. Weiner, Mr. George Miller of California, Mr. Van Hollen, Mr. Pascrell, Mr. Lewis of Georgia, Mr. McDermott, Mr. Davis of Illinois, Mr. Kind, Mr. Blumenauer, Ms. Linda T. Sánchez of California, Mr. Stark, Ms. Schwartz, Mr. Thompson of California, Ms. Ginny Brown-Waite of Florida, Ms. DeLauro, Ms. Eshoo, Mr. Israel, Ms. Jackson Lee of Texas, Ms. Kilpatrick of Michigan, Mr. Lipinski, Mrs. McCarthy of New York, Mr. Snyder, Ms. Sutton, Mr. Walz, Mr. Welch, Ms. Woolsey, Mr. Nadler of New York, Mr. Berman, Mr. Langevin, Ms. DeGette, Mrs. Maloney, Mr. Gene Green of Texas, Mr. Hinchey, Ms. Lee of California, Mr. DeFazio, Mr. Delahunt, Mr. Rush, Mr. Markey of Massachusetts, Mr. Cummings, Mr. Filner, Ms. Zoe Lofgren of California, Ms. Matsui, Mr. Meeks of New York, Mr. Platts, Ms. Eddie Bernice Johnson of Texas, Mr. Pierluisi, Mr. Pallone, Mrs. Capps, Mr. Holt, Mr. Smith of New Jersey, Mr. Wu, Mr. Sherman, Mr. Braley of Iowa, Mr. Ellison, Mr. Hare, Mr. Hinojosa, Mr. Honda, Ms. Clarke, Mr. Kucinich, Mr. Matheson, Ms. Slaughter, Mr. Tierney, Mr. Grayson, Mr. Serrano, Ms. Waters, Mr. Bishop of New York, Ms. Kaptur, Ms. Watson, Mrs. Davis of California, Mr. Grijalva, Mr. Farr, Ms. Loretta Sanchez of California, Mr. Carnahan, Mr. Cohen, Mrs. Napolitano, Mr. Connolly of Virginia, Mr. Gutierrez, Mr. Sires, Ms. Baldwin, Mr. Olver, Mr. Payne, Ms. Richardson, Ms. Roybal-Allard, Mrs. Lowey, Mr. McGovern, Ms. Edwards of Maryland, Mr. Loebsack, Ms. Schakowsky, Mr. Frank of Massachusetts, Mr. Rothman of New Jersey, Mr. Andrews, Mr. Ryan of Ohio, Ms. Tsongas, Mr. Ackerman, Ms. Hirono, Mr. Oberstar, Mr. Capuano, Mr. Lynch, Mr. Sarbanes, Ms. Wasserman Schultz, Ms. Norton, Mr. Arcuri, Mr. Jackson of Illinois, Ms. Kilroy, Mr. Sestak, Mr. Kennedy, Mr. Hall of New York, Mr. Himes, Mr. Tonko, Mr. Moran of Virginia, Mrs. Dahlkemper, Ms. Harman, Mr. Moore of Kansas, Mr. Baird, Mr. Schrader, and Mr. Garamendi) introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code to reduce tobacco smuggling, and for other purposes.
(a) Short title.—This Act may be cited as the “Smuggled Tobacco Prevention Act of 2010” or the “STOP Act”.
(b) Table of contents.—The table of contents of this Act is as follows:
Sec. 1. Short title and table of contents.
Sec. 101. Amendment of 1986 code.
Sec. 102. Machines used to manufacture or package cigarettes or other tobacco products.
Sec. 103. Improved marking and labeling.
Sec. 104. Wholesalers and manufacturers, importers, and sellers of tobacco production machines required to have permit.
Sec. 105. Conditions of permit.
Sec. 106. Records to be maintained.
Sec. 107. Reports.
Sec. 108. Fraudulent offenses.
Sec. 109. Penalties.
Sec. 110. Definitions.
Sec. 111. Conforming amendments.
Sec. 112. Effective date.
Sec. 201. Maximum penalty for importation of tobacco products and cigarette papers and tubes by fraudulent means.
Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
(1) by redesignating subsection (b) as subsection (c), and
(2) by inserting after subsection (a) the following new subsection:
“(I) the sale, lease, or delivery of such machines,
“(II) the manufacture or processing of tobacco products, or
“(III) the application of unique identification markings onto tobacco product packages pursuant to section 5723, and
“(ii) that have all Federal and State permits, registrations, and licenses required to engage in such activities, or
“(B) in the case of a machine which is meant and expected to be used by an individual to make tobacco products for his or her own personal use, such an individual.
“(2) SALE, LEASE, DELIVERY OF MACHINES TO PERSONS ENGAGED IN ILLEGAL MANUFACTURE OF CONTRABAND.—No tobacco production machine shall knowingly be manufactured for or be (directly or indirectly) sold, leased, delivered, imported, or otherwise made available to any person engaged in the illegal manufacture, distribution, or sale of counterfeit or contraband tobacco products, unique identification markings, or other tax-payment indicia.
“(3) RENDERING UNUSED MACHINES INOPERABLE.—Any tobacco production machine that is no longer being used as such shall be made irreparably inoperable for such use before being disposed of or put to any other use. This paragraph shall not apply to any such machines being kept solely for display or for historical purposes.
“(A) IN GENERAL.—Any person leasing, importing, exporting, or delivering a tobacco production machine shall maintain and keep records relating to any transfers or deliveries of the machine, including the name, address, other contact information, and any permit, registration, or license number of the person receiving delivery of the machine, or to whom the machine is leased or otherwise transferred, as the case may be.
“(B) 5-YEAR HOLDING PERIOD FOR RECORDS.—Any record required to be maintained and kept under subparagraph (A) shall be kept for the 5-year period beginning on the first date such record is required to be so maintained and kept.
“(C) AVAILABILITY OF RECORDS.—Such records shall be made available to the Secretary and other Federal and State government law enforcement officials for inspection and audit upon request.
“(D) SAFE HARBOR.—An ordinary commercial record or invoice shall satisfy the requirements of this paragraph if such record describes the transaction and the related machine and provides the date of the transaction and the name, contact information, and any permit, registration, or license number of all parties to the transaction or acting as agents for those parties in regard to the transaction.
“(5) TOBACCO PRODUCTION MACHINE.—For purposes of this subsection, the term ‘tobacco production machine’ means any machine (or component integral to the operation of such a machine) used to manufacture, process, or package tobacco products or to apply unique identification markings to packages of tobacco products.
“(A) IN GENERAL.—Whoever knowingly violates paragraph (1), (2), or (3) shall, for each offense, be fined not more than $10,000 or an amount equal to 3 times the fair market value of the tobacco product machine involved (whichever is greater), or imprisoned not more than five years, or both.
“(B) RECORDKEEPING.—Whoever knowingly violates paragraph (4) shall, for each offense, be fined not more than $10,000.”.
(b) Conforming amendment.—Subsection (c) of section 5762 (as so redesignated) is amended by striking “subsection (a)” and inserting “subsections (a) and (b)”.
(c) Effective date.—The amendment made by this section shall apply to sales, leases, and transfers more than 6 months after the date of the enactment of this Act.
(1) by striking “, if any,” in subsection (b),
“(1) GENERAL REQUIREMENTS FOR DOMESTIC MARKET.—Each person who is a manufacturer or importer of tobacco products shall (in accordance with final regulations promulgated by the Secretary) ensure that, before the product leaves the person’s custody, a unique identification marking is affixed to or forms part of each package of tobacco product manufactured or imported by such person for sale or distribution. To facilitate efficient tracking and tracing of tobacco products through the distribution system, all manufacturers or importers of tobacco products shall, in addition to such unique identification marking, also, in accordance with regulations prescribed by the Secretary, ensure that unique identification markings are affixed to or form part of aggregate packing modes (such as cartons, cases, and master cases for cigarettes). The Secretary shall determine the size, location, and methods for such markings. The Secretary shall establish regulations requiring that all persons within the distribution chain, up to but not including the ultimate retailer, utilize the unique identification markings on aggregate packing modes to facilitate the tracking and tracing of tobacco product through the distribution system.
“(2) MARKING REQUIREMENTS FOR EXPORTS.—A unique identification marking shall be affixed to or form part of each package of tobacco product that is exported, or sold for export, that distinguishes it from those products intended for distribution or sale within the United States. The Secretary shall by regulation prescribe the size, location, and other characteristics of such marking, and it may contain a serial number that is assigned to the country of export.
“(3) AUTHORIZATION OF FEDERAL UNIQUE IDENTIFICATION MARKING.—Not later than 1 year after the date of the enactment of the Smuggled Tobacco Prevention Act of 2010, the Secretary shall by regulation require the use of a unique identification marking on all products subject to tax under this chapter.”, and
(3) by adding at the end the following new subsection:
“(1) IN GENERAL.—No tobacco product may be sold, offered for sale, distributed, or otherwise delivered for final sale to any consumer in the United States unless the unique identification marking that meets the requirements of this section (and any regulations prescribed thereunder) is affixed to or forms part of the package in which it is contained. No person shall deliver or mail tobacco products unless the tax imposed by this chapter with respect to such product has been paid and the unique identification marking required under this section is affixed to or forms part of the package containing such product.
“(A) The Secretary shall design such system to coordinate and avoid interference with State and local tax stamps and markings, facilitate collection of the tax imposed by this chapter, impede contraband tobacco trafficking, minimize counterfeit marking, allow for more effective tracking and tracing of tobacco products, facilitate the enforcement of related Federal laws, and utilize such available technology as may promote the purposes of this chapter.
“(B) The Secretary shall prescribe the method and manner in which such unique identification markings are to be distributed, purchased, and applied to or made part of tobacco product packages, and may provide for the cancellation of such markings.
“(i) The denominated value of the marking.
“(ii) A unique serial number or tracking code.
“(iii) The name and address of the person purchasing the marking (and, if different, of the person ensuring the marking is affixed to or made part of the package).
“(iv) The date the marking was purchased and when it was affixed to or made part of the package.
“(v) The name and address of the first unrelated person purchasing or otherwise receiving the tobacco product from the person who ensures the marking is affixed to or made part of the package and the date of such purchase or transfer.
“(vi) Such other information as the Secretary may prescribe to carry out the purposes of this chapter.
“(i) be cryptographically encrypted, and
“(II) be otherwise accessible remotely at such time and place.
“(E) Tax reporting information shall be held on a secure government-controlled database to monitor tobacco production and for tracking and tracing the product from the point of production through the supply chain to the retailer.
“(3) UNRELATED PERSON.—For purposes of this subsection, the term ‘unrelated person’ means a person other than a related person within the meaning of section 267(b) or 707(b)(1).”.
(b) Definitions.—Section 5723, as amended by subsection (a), is amended by adding at the end the following new subsections:
“(g) Package defined.—For purposes of this section, the term ‘package’ means the innermost sealed container visible from the outside of the individual container irrespective of the material from which such container is made, in which a tobacco product is placed by the manufacturer and in which such tobacco product is offered for sale to a member of the general public.
“(h) Unique identification marking defined.—For purposes of this section, the term ‘unique identification marking’ means a device in such design and denomination as the Secretary authorizes by regulation that is affixed to or made part of a package of tobacco product as evidence that the tax imposed by this chapter is paid. Such markings shall contain overt security features for public authentication and covert security features embedding a unique, secure, encrypted identifier onto the marking, enabling law enforcement authentication, production control, and tracking and tracing of the product bearing the marking.”.
(c) Regulations.—The Secretary of the Treasury shall consult with the Secretary of Health and Human Services as may be appropriate to carry out the purposes of subsection (f), and paragraphs (1), (2), and (3) of subsection (b), of section 5723 of the Internal Revenue Code of 1986.
(a) Wholesalers.—Section 5712 (relating to application for permit) is amended by inserting “, wholesaler,” after “manufacturer”.
(b) Manufacturers, importers, and sellers of tobacco production machines.—Section 5712 is amended by striking “or as an export warehouse proprietor” and inserting “, as an export warehouse proprietor, or as a manufacturer, seller, or importer of tobacco production machines (as defined in section 5762(b)(5))”.
Subsection (a) of section 5713 (relating to issuance of permit) is amended to read as follows:
“(1) IN GENERAL.—A person shall not engage in business as a manufacturer, wholesaler, or importer of tobacco products or processed tobacco, as an export warehouse proprietor, or as a manufacturer, seller, or importer of tobacco production machines (as defined in section 5762(b)(5)) without a permit to engage in such business. Such permit, conditioned upon compliance with this chapter and regulations issued thereunder, shall be issued in such form and in such manner as the Secretary shall by regulation prescribe, to every person properly qualified under section 5711 and 5712. Any entity granted such a permit is not eligible to provide any services the Secretary may elect to procure to facilitate the purposes of section 5723. Permit holders shall automatically count output and register, record, and transmit the quantities measured, in the form, conditions, and time limits established by the Secretary. A new permit may be required at such other time as the Secretary shall by regulation prescribe.
“(i) this chapter,
“(ii) chapter 114 of title 18, United States Code,
“(iii) the Act of October 19, 1949 (15 U.S.C. 375 et seq.; commonly referred to as the ‘Jenkins Act’),
“(iv) the Fair and Equitable Tobacco Reform Act of 2004, and any amendments made thereby,
“(v) the Family Smoking Prevention and Tobacco Control Act, and any amendments made thereby, and
“(vi) any related regulations thereunder, and
“(B) the applicant certifies that the applicant is in compliance with all other Federal and State laws relating to the taxation, manufacture, importation, exportation, distribution, marketing, sale, or transportation of tobacco products, processed tobacco, or tobacco production machines.
“(C) the applicant identifies in the application any violation of a law described in subparagraph (A) or (B) by the applicant resulting in a penalty under any such law during the 5-year period ending on the date of the application.”.
(1) by inserting “(a) In general.—” before “Every manufacturer”,
(2) by inserting “every wholesaler,” after “every importer,”,
(3) by striking “such records” and inserting “records concerning the chain of custody of the tobacco products (including the foreign country of final destination for packages marked for export) and the serial numbers, marks, labels, and notices required under section 5723, and such other records”, and
(4) by adding at the end the following new subsections:
“(b) Retailers.—Retailers shall maintain records of receipt, and any non-retail sale or delivery, of tobacco products. Such records shall be available to the Secretary for inspection and audit. An ordinary commercial record or invoice shall satisfy the requirements of this subsection if such record shows the date of receipt, from whom tobacco products were received, and the quantity of tobacco products received (or, in the case of non-retail sale or delivery, the date of sale or delivery, to whom the tobacco products were sold or delivered, and the quantity of the tobacco products sold or delivered). The preceding provisions of this subsection shall not be construed to limit or preclude other recordkeeping requirements imposed on any retailer.
“(c) Records concerning marks and chain of custody.—Records concerning the chain of custody and the marks, labels, and notices required under section 5723 shall be made available to Federal and State law enforcement officials for inspection and audit upon request.”.
(b) Consultation with Health and Human Services.—The Secretary of the Treasury shall consult with the Secretary of Health and Human Services as may be appropriate to carry out the purposes of section 5741 of the Internal Revenue Code of 1986.
Section 5722 (relating to reports) is amended—
(1) by inserting “(a) In general.—” before “Every manufacturer”, and
“(1) IN GENERAL.—Prior to exportation of tobacco products from the United States, the export warehouse proprietor shall submit a report (in such manner and form as the Secretary may by regulation prescribe) to enable the Secretary to identify the shipment and assure that it reaches its intended destination.
“(2) AGREEMENTS WITH FOREIGN GOVERNMENTS.—Notwithstanding section 6103 of this title, the Secretary is authorized to enter into agreements with foreign governments to exchange or share information contained in reports received from export warehouse proprietors of tobacco products if—
“(i) ensuring compliance with the provisions of this chapter or regulations promulgated thereunder, or
“(ii) preventing or detecting violations of the provisions of this chapter or regulations promulgated thereunder, and
“(B) the Secretary obtains written assurances from such government that the information will be held in confidence and used only for the purposes specified in clauses (i) and (ii) of subparagraph (A).
No information may be exchanged or shared with any government that has violated such assurances.”.
(1) by striking paragraph (1) and redesignating paragraphs (2) through (6) as paragraphs (1) through (5), respectively, and
(2) by striking “not more than $10,000” and inserting “not more than $10,000 or an amount equal to 3 times the amount of the tax imposed under this chapter on the tobacco product involved (whichever is greater)”.
(A) by redesignating subsection (c) as subsection (d), and
(B) by inserting after subsection (b) the following new subsection:
“(1) for any person to engage in business as a manufacturer or importer of tobacco products or cigarette papers and tubes, as a wholesaler or an export warehouse proprietor, or as a manufacturer, seller, or importer of tobacco production machines without filing the bond and obtaining the permit where required by this chapter or regulations thereunder,
“(2) for a manufacturer, importer, or wholesaler to knowingly ship, transport, deliver, or receive any tobacco products from or to any person other than a person who has obtained the permit required by this chapter, a retailer, or a person handling such products solely for purposes of shipment or delivery; except an importer who has obtained the permit required by this chapter may receive, from a foreign manufacturer or a foreign distributor, foreign tobacco products that have not previously entered the United States,
“(3) for a manufacturer of processed tobacco to knowingly ship, transport, sell, or deliver processed tobacco to any person other than a manufacturer of processed tobacco, a manufacturer of tobacco products, or an export warehouse proprietor,
“(4) for any person (other than the original manufacturer of such tobacco products or an export warehouse proprietor authorized to receive any tobacco products that have previously been exported and returned to the United States) to knowingly receive any tobacco products that have previously been exported and returned to the United States,
“(5) for any export warehouse proprietor to knowingly ship, transport, sell, or deliver for sale any tobacco products to any person other than the original manufacturer of such tobacco products, another export warehouse proprietor, or a foreign purchaser,
“(6) for any person (other than a manufacturer or an export warehouse proprietor permitted under this chapter) to knowingly ship, transport, receive, or possess, for purposes of resale, any tobacco product in packages marked pursuant to regulations issued under section 5723, other than for direct return to a manufacturer for repacking or for re-exportation or to an export warehouse proprietor for re-exportation,
“(7) for any manufacturer, importer, export warehouse proprietor, or wholesaler permitted under this chapter to make any false entry in, to fail to make an entry in, or to knowingly fail to maintain properly any record or report required by this chapter or the regulations promulgated thereunder with the intent to defraud the United States,
“(8) for any person, with the intent to defraud the United States, to alter, mutilate, destroy, obliterate, or remove any mark or label required under this chapter upon a tobacco product held for sale, or to create, possess, or apply on any tobacco product or its packaging any counterfeit versions of any such marks or labels, and
“(9) for any person to sell at retail more than 3,000 cigarettes in a single transaction or in a series of related transactions, or, in the case of other tobacco products, an equivalent quantity as determined by regulation.Any person violating any of the provisions of this subsection shall, upon conviction, be fined as provided in section 3571 of title 18, United States Code, or imprisoned for not more than 5 years, or both.”.
(2) CONFORMING AMENDMENT.—Section 5762(d) (as so redesignated) is amended by striking “and (b)” inserting “, (b), and (c)”.
(c) Other offenses.—Subsection (d) of section 5762 (as so redesignated) is amended by striking “not more than $1,000” and inserting “not more than $2,500 or an amount equal to the tax imposed under this chapter on the tobacco product involved (whichever is greater)”.
(A) by striking “willfully” and inserting “knowingly”, and
(B) by striking “$1,000” and inserting “$10,000”.
(2) Subsection (b) of section 5761 (relating to failure to pay tax) is amended by striking “5 percent” and inserting “10 percent”.
(b) Use of increase in penalties and fines.—Subchapter G of chapter 52 is amended by adding at the end the following new section:
“(a) In general.—There is established a separate account in the Treasury known as the ‘Anti-Contraband Tobacco Trafficking Fund’. Amounts equivalent to 50 percent of the increase in revenues from criminal and civil penalties and fines collected under this chapter and attributable to title I of the Smuggled Tobacco Prevention Act of 2010 (or the amendments made thereby) shall be transferred into the Anti-Contraband Tobacco Trafficking Fund. Such amounts shall be available, as provided in appropriations Acts, to the Secretary solely for the purpose of expanding government efforts and available resources to enforce this chapter and other laws relating to contraband or illegal tobacco products.
“(b) Allocation of funds.—Of the respective amounts available to the Secretary under subsection (a), not less than 50 percent shall be allocated to the Federal departments and agencies that are responsible for the enforcement actions (including underlying investigations and administrative and judicial proceedings) in which such penalties and fines were imposed.”.
(c) Penalty amounts adjusted for inflation.—Section 5761 of such Code is amended by redesignating subsection (f) as subsection (g) and inserting after subsection (e) the following new subsection:
“(A) such dollar amount, multiplied by
“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2010’ for ‘calendar year 1992’ in subparagraph (B) thereof.
“(2) ROUNDING.—If any amount as adjusted under paragraph (1) is not a multiple of $10, such amount shall be rounded to the next highest multiple of $10.”.
(a) Export warehouse proprietor.—Subsection (i) of section 5702 (relating to definition of export warehouse proprietor) is amended by inserting before the period the following: “or any person engaged in the business of exporting tobacco products from the United States for purposes of sale or distribution. Any duty free store that sells, offers for sale, or otherwise distributes to any person in any single transaction (or series of related transactions) more than 3,000 cigarettes, or an equivalent quantity of other tobacco products as the Secretary shall by regulation prescribe, shall be deemed an export warehouse proprietor under this chapter”.
(b) Retailer; wholesaler.—Section 5702 is amended by adding at the end the following new subsections:
“(p) Retailer.—The term ‘retailer’ means any dealer who sells, or offers for sale, any tobacco product at retail. The term ‘retailer’ includes any duty free store that sells, offers for sale, or otherwise distributes at retail in any single transaction (or series of related transactions) 3,000 or fewer of cigarettes, or an equivalent quantity of other tobacco products as the Secretary shall by regulation prescribe.
“(q) Wholesaler.—The term ‘wholesaler’ means any person engaged in the business of purchasing tobacco products for resale at wholesale, or any person acting as an agent or broker for any person engaged in the business of purchasing tobacco products for resale at wholesale.”.
(1) in paragraph (2), by inserting “Federal taxes, wherever found, or” after “payment of applicable”; and
(2) in paragraph (2)(C), by inserting “in regard to State or local taxes,” before “a person”.
(1) by striking “State” in the heading thereof; and
(2) by striking “tax stamps” each place it appears and inserting “tax stamps or markings”.
Except as otherwise provided in this title, the amendments made by this title shall take effect 1 year after the date of the enactment of this Act.
(1) by striking “A fraudulent violation of subsection (a)” and inserting the following:
“(A) IN GENERAL.—Except as provided in subparagraph (B), a fraudulent violation of subsection (a)”; and
(2) by adding at the end the following:
“(B) TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES.—In the case of importation of tobacco products and cigarette papers and tubes subject to tax under chapter 52 of the Internal Revenue Code of 1986, a fraudulent violation of subsection (a) is punishable by a civil penalty in an amount not to exceed the sum of—
“(i) the domestic value of the merchandise, and
“(ii) four times the amount of Federal excise tax that could be imposed on the merchandise, if applicable.”.
(b) Effective date.—The amendments made by subsection (a) shall take effect on January 1, 2011, and shall apply with respect to violations of section 592 of the Tariff Act of 1930 (as so amended) that occur on or after that date.