Kohl on Cigarette Smuggling

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Judiciary Committee Approves Kohl Bill To Snuff Out Black Market Cigarette Smuggling; Tobacco Trafficking Funnels Money to Terrorists, Short-Changes State Tax Coffers

11/19/09 -- WASHINGTON -- The U.S. Senate Judiciary Committee today unanimously approved legislation sponsored by Senator Herb Kohl to crack down on black market tobacco selling. The Prevent All Cigarette Trafficking (PACT) Act closes loopholes in current tobacco trafficking laws, enhances penalties for violations, and provides law enforcement with new tools to combat the innovative methods being used by cigarette traffickers to distribute their products. In 1998, the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE) had six active tobacco smuggling investigations. Today there are more than 400 open cases.

“Tobacco smuggling has developed into a popular, and highly profitable, means of generating revenue for criminal and terrorist organizations,” Senator Herb Kohl said. “Hezbollah, al Qaeda and Hamas have all generated significant revenue from the sale of counterfeit cigarettes. That money is often raised right here in the United States, and it is then funneled back to these international terrorist groups. Cutting off financial support to terrorist groups is an indispensable part of protecting this country against future attacks.”

Earlier this month, BATFE announced that they were charging fourteen people with paying over $8 million, nearly 40 firearms, and drugs to purchase over 77 million contraband cigarettes to sell in New York. Moreover, two of the conspirators were also charged with hiring a hitman to kill two people they believed to be stealing contraband cigarettes.

Kohl noted that cigarette trafficking, including the illegal sale of tobacco products over the internet, costs states billions of dollars in lost tax revenue each year. It is estimated that we lose $5 billion of tax revenue, at the federal and state level, each year. As lost tobacco tax revenue lines the pockets of criminals and terrorist groups, states are being forced to increase college tuition and restrict access to other programs because of these lost revenues.

The Internet represents a new obstacle to enforcement. Illegal tobacco vendors around the world evade detection by conducting transactions over the Internet, and then shipping their illegal products around the country to consumers. Just a few years ago, there were less than 100 vendors selling cigarettes online. Today, approximately 500 vendors sell illegal tobacco products over the Internet.

“More people are selling cigarettes illegally, and they are getting better at it. As these cases become more difficult to crack, we owe it to law enforcement officials to do our part to lend a helping hand,” Kohl said.

The PACT Act will:

· Strengthen the reporting requirements for interstate cigarette sellers.

· Increase the criminal penalty from a misdemeanor to a felony and create a substantial civil penalty for violations, including violations of the reporting requirements and state tobacco tax laws.

· Grant federal and state law enforcement officials more powers to investigate and prosecute violators.

· Prohibit the United States Postal Service from delivering tobacco products

On May 21, 2009 the House of Representatives passed companion legislation by an overwhelming majority, 397 to 11, and the Senate Judiciary Committee unanimously approved Kohl’s PACT Act in May, 2007. But previous efforts to pass the bill in the full Senate have been blocked by a small number of Republican Senators on behalf of special interests, such as tobacco companies and large delivery services. Kohl has worked closely with the common carriers, including UPS, to ensure that the PACT Act does not place any unreasonable burdens on those businesses.

Source: Senator Herb Kohl