Congress Passes Bill to Stubb Out Cigarette Smuggling
March 19, 2010WASHINGTON (AP) -- Congress has moved to stamp out a multibillion-dollar tobacco trafficking industry that has enriched criminals and terrorists and made it easier for kids to buy cigarettes online.
A bill cracking down on smugglers cleared the House Wednesday and went to President Barack Obama for his signature. The measure could restore significant amounts of revenue lost to states because cigarette taxes are not being paid.
Rep. Anthony Weiner, D-N.Y., said New York alone loses as much as $1 billion a year from cigarette tax evasion. Weiner sponsored the measure with Rep. Lamar Smith, R-Texas.
The legislation, approved on a 387-25 vote, would prohibit cigarette shipments through the U.S. Postal Service, cutting off the main source of transport for Internet vendors selling contraband tobacco products. UPS, DHL and FedEx already have agreements with the New York Attorney General not to ship cigarettes nationwide.
Sellers would have to use a shipping method requiring signatures and other ID checks to stop Internet sales to kids.
The measure will make it easier for states to sue out-of-state sellers in federal court and give the Bureau of Alcohol, Tobacco, Firearms and Explosives added authority to enter premises to investigate trafficking violations.
It also makes cigarette smuggling, now a misdemeanor, a felony crime.
Cigarette smuggling is lucrative because of wide disparities in taxes among the states. Some states impose little or no tax on cigarettes, while a resident of New York City must pay $4.25 a pack in state and local cigarette excise taxes, inviting criminals to smuggle cigarettes from low-tax to high-tax states.
Sen. Herb Kohl, D-Wis., sponsor of the bill in the Senate, said states and the federal government lose an estimated $5 billion a year in tax revenues. He said the ATF had six active tobacco smuggling investigations in 1998: today, it has more than 400.
Last November, he said, the ATF said it was charging 14 people with paying more than $8 million, nearly 40 firearms and drugs to buy more than 77 million contraband cigarettes for resale in New York.
Beyond criminals, he said, Hezbollah, al-Qaida and Hamas have all generated significant revenue from selling contraband cigarettes.