H.R. 1676: To prevent tobacco smuggling, to ensure the collection of all tobacco taxes, and for other purposes (PACT Act)

H.R. 1676

To prevent tobacco smuggling, to ensure the collection of all tobacco taxes, and for other purposes (PACT Act)

Date
May 19, 2009 (111th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

H.R. 1676 is being considered on the floor under a suspension of the rules, requiring a two-thirds majority vote for passage on Tuesday, May 19, 2009. This legislation was introduced by Rep. Anthony Weiner (D-NY) on March 23, 2009. The bill was referred to the Committee on Judiciary, which held a mark up and reported the bill, as amended, by voice vote on April 28, 2009.

Bill Summary

H.R. 1676 would create new requirements and regulations on companies that sell and ship tobacco products (specifically, cigarettes and smokeless tobacco) through the mail to consumers.

Shipping and Labeling:  Under the bill, companies that ship tobacco products must not sell or ship for single delivery any tobacco product weighing more than ten pounds.  Also, the bill would require that every package containing tobacco products be clearly labeled with the statement:

"CIGRAETTES/SMOKELESS TOBACCO: FEDERAL LAW REQUIRES THE PAYMENT OF ALL APPLICABLE EXCISE TAXES, AND COMPLIANCE WITH APPLICABLE LICENSING AND TAX-STAMPING OBLIGATIONS."  

Tobacco products that do not have this labeling would be considered non-deliverable.

Age Verification and Records of Sale:  Additionally, the bill would require that all companies who mail tobacco products obtain the name, birthday, and address of anyone placing a mail order for tobacco.  This information would be kept in a database by the seller for four years and is to be available to all Federal, State, and Tribal authorities for compliance verification.

The bill would also require companies to use delivery methods that verify all persons accepting the delivery of tobacco products are of the minimum age required for the legal purchase of tobacco by providing government identification and signature.

List of Unregistered or Non-compliant Delivery Tobacco Sellers:  H.R. 1676 would require all tobacco delivery companies to register with the U.S. Attorney General within ninety days of this bill's enactment and requires the Attorney General to compile a list of those companies that have not registered or are not in compliance with the provisions of this bill.  These companies are to be notified of their inclusion on the non-compliance list. 

Taxes:  H.R. 1676 would require tobacco delivery companies to charge applicable Federal, State, or local taxes on tobacco products prior to shipping.

Penalties:  Tobacco delivery companies found to be in violation of any of the provision of H.R. 1676 will not be subject to civil penalties.  Penalties are to be the greater of: 1) two percent of the gross cigarette or smokeless tobacco receipts for the year prior to the date of violation; or 2) $5,000 for a first violation or $10,000 for any other.  Common carriers or independent delivery services that are found to enforce effective policies in compliance with this bill will be subject to penalties.

Background

According to the U.S. Department of the Treasury, the Jenkins Act of 1946 (P.L. 81-363) regulates the shipment of tobacco products to consumers through mail carriers such as the United States Postal Service and private carriers. The Jenkins Act requires that tobacco delivery companies file monthly reports on all taxes collected with the tax collection agencies in each State that it delivers tobacco products.

Consumers who order tobacco products on the internet from outside the United States are not exempt from paying Federal excise taxes or customs duties. Also, consumers who purchase tobacco products over the internet from another State may have to pay their State's tobacco sales and excise taxes. All tobacco products made in the U.S. and shipped outside the U.S. cannot be brought back in to the U.S. through purchase by an individual consumer over the internet.

Several major private shipping companies, such as UPS, DSL, and FedEx, do not ship tobacco products. Currently, most orders for tobacco made over the internet in the U.S. are shipped using the USPS.

According to the Republican Staff of the House Committee on Homeland Security, illegal tobacco trade is one of the most lucrative smuggling operations in the world. Estimates show that five percent of the cigarette market in North America, or 414 billion cigarettes, are illicit. The report indicates that money made through this type of trafficking is linked to funding terrorist organizations such as Hezbollah, Hamas, and al Qaeda.

Cost

A CBO score for H.R. 1676 was not available at press time. However, a CBO score for a similar bill in the 110th Congress (H.R. 4081) estimated that implementing the legislation would cost about $120 million over five years.