Stop Tobacco Smuggling in the Territories Act of 2012

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 5934) to amend title 18, United States Code, to include certain territories and possessions of the United States in the definition of State for the purposes of chapter 114, relating to trafficking in contraband cigarettes and smokeless tobacco.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous materials on H.R. 5934 currently under consideration.

Mr. Speaker, I yield myself such time as I may consume.

H.R. 5934, the Stop Tobacco Smuggling in the Territories Act of 2012, was introduced by Mr. Faleomavaega, my good friend from American Samoa--and I apologize if I did damage to that. I thank him for his work on this issue.

Cigarette trafficking is one of the most lucrative smuggling operations in the United States and around the world. It is estimated that illicit cigarettes account for over 10 percent of the more than 5.7 trillion cigarettes sold globally each year.

Here in the United States, approximately 4 billion cigarettes sold each year are illicit. Cigarette smuggling is typically carried out by sophisticated,

large-scale criminal organizations that take advantage of the significant disparity between the taxes levied on cigarettes across the States. For example, Mr. Speaker, a pack of cigarettes that costs $13 in a high-tax State like New York will cost only about $5 in a low-tax State such as Virginia.

These differences create a highly lucrative market for individuals to evade the local sales tax and purchase cigarettes in one locality and transport them to another for resale below the market value. Criminal organizations are able to make a profit of as much as $1 million on just a single truckload of illicit cigarettes.

State cigarette taxes in the United States have been on the rise since 1992 and have increased more than 65 percent over this period; however, the States' gross tax revenues have increased by only 35 percent due in significant part to the illicit tobacco trade.

Exploiting the price disparity for a single pack of cigarettes between individual States has proved profitable for criminal networks. According to the Justice Department, this illicit activity costs the States and the Federal Government approximately $5 billion each year. This is money that could--and should--be put to better use.

Congress took steps to curb the sale of contraband cigarettes with the Prevent All Cigarette Trafficking (PACT) Act of 2009. The PACT Act prohibits the sale of cigarettes and smokeless tobacco products over the Internet, and it made changes to the criminal anti-cigarette smuggling statutes.

H.R. 5934, Mr. Speaker, provides a technical correction to ensure that the criminal prohibitions against cigarette smuggling apply to the U.S. territories of American Samoa, Guam, and the Northern Mariana Islands in the same way that they do for the rest of the country. This is a modest but important change that will help to promote safety and tax revenues in these territories.

I again thank my friend from American Samoa for his work on this issue, and I urge my colleagues to join me and Mr. Scott in support of this bill.

I reserve the balance of my time.

I have no additional speakers. I reserve the balance of my time.

(Mr. FALEOMAVAEGA asked and was given permission to revise and extend his remarks.)

In closing, I want to thank Mr. Scott as well, and my good friend from American Samoa. Eni, I apologize for my having fractured the pronunciation of your name earlier. But folks, this is a good bill that addresses a formidable threat, and I urge my colleagues to vote in favor of the bill and support it.

I yield back the balance of my time.

Mr. Speaker, again I cannot express enough my deepest appreciation to the gentleman from Virginia (Mr. Scott) and my good friend, the gentleman from North Carolina (Mr. Coble) for their management of this bill.

Mr. Speaker, I rise today in strong support of H.R. 5934, a bill that I authored to stop tobacco smuggling in the territories.

First, I want to thank the chairman of the House Judiciary Committee, Mr. Smith, and my dear friend, the ranking member, Mr. Conyers, and all the members of the committee for their strong support of this legislation.

I also want to acknowledge Speaker John Boehner and House Majority Leader Cantor, and our Democratic leader, Nancy Pelosi, for their support of this bill.

I thank my colleagues, the gentlelady from Guam, and also, the gentleman from the Northern Mariana Islands, Ms. Bordallo and Mr. Sablan, respectively, for their cosponsorship of this bill.

Mr. Speaker, today American Samoa faces a serious problem of tobacco smuggling, as I'm sure it's the same with the other territories. According to a recent study, 2 years ago, as many as 5,792,924 cigarettes were smuggled into the territory. The study found that tobacco smuggling resulted in the loss of about $724,116 in revenues to the American Samoa Government.

If continued undeterred, tobacco smuggling in the territory will lead to heavier losses in local tax revenues, especially if cigarette excise tax rates were to be increased.

Mr. Speaker, in this age of government fiscal responsibility, securing and sustaining stable resources of local revenue stream is essential and must be encouraged for the territories. It was for this reason I began to look into this important issue. And I was disappointed, however, to find that, under current law prohibiting cigarette smuggling, not all the territories were included.

Under the Contraband Cigarette Trafficking Act that Congress passed in 1978, it is illegal to ship, sell, transport, or possess more than 10,000 cigarettes, or 500 packs per month, not bearing the tax stamp of the jurisdiction in which they are found. Violation is a felony punishable by up to 5 years in prison and seizure of the contraband cigarettes.

The Contraband Cigarette Trafficking Act currently, however, does not apply to American Samoa, Guam, and the Northern Mariana Islands. Historically, when Congress considered the bill in 1978 the Senate version defined State to include the 50 States, the District of Columbia, Puerto Rico, or a territory or a possession of the United States, while the House provision excluded the smaller territories. For some reason unbeknown to me, the conference substitute adopted the House provision, and according to the conference report, the House provision

is described as ``more accurately delineating the practical scope of the legislation.''

Mr. Speaker, the bill before us today will correct this oversight in the current law. This important piece of legislation will amend the Contraband Cigarette Trafficking Act to include the territories of American Samoa, Guam, and the Northern Mariana Islands. It will amend the definition of a State for the purpose of this Act to include all U.S. territories.

Again, I commend my good friends, the gentleman from North Carolina, as well as my friend from Virginia, for their extensive understanding and knowledge of this issue and the matter now before us. I urge my colleagues to support this bill.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 5934, the Stop Tobacco Smuggling in the Territories Act of 2012.

When enacted, H.R. 5934 will amend the Contraband Cigarette Trafficking Act by including American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam in existing legislation which makes it illegal to knowingly ship, transport, receive, possess, sell, distribute, or purchase 10,000 or more contraband cigarettes that do not have a State or territorial stamp.

Under the Contraband Cigarette Trafficking Act, violators face criminal penalties and fines. Currently, there are no such sanctions in effect for violations that occur in the territories, thus prohibiting the Bureau of Alcohol, Tobacco, Firearms and Explosives from investigating cigarette smuggling and Trafficking Act violations. H.R. 5934 will fix this.

Mr. Speaker, each year hundreds of millions of cigarettes are diverted from legal trade channels into the underworld. Cigarette counterfeiting is growing steadily. Cigarettes are believed to be the most illegally trafficked product in the world.

Cigarette smuggling results in significant economic impact in terms of depriving governments of excise tax revenue and depriving legitimate businesses from income due to unfair competition. Smuggling of genuine cigarettes steals as much as an estimated $40- to $50 billion from governments in tax revenue, with trafficking in counterfeit cigarettes stealing even billions more.

In May 2011, a report from the Territorial Audit Office on collection of cigarette tax by the American Samoa Government found that cigarettes are likely being smuggled into American Samoa and that, as a result, their government is losing a significant amount of cigarette excise tax revenue.

A subsequent study estimated that as many as close to 6 million cigarettes had been smuggled into the territory in 2010, resulting in an estimated loss of revenue to the American Samoa Government of over $700,000.

In addition to the economic impact, there are public health and public safety concerns. Smuggling delivers cigarettes that are cheaper to buy. Because cheaper cigarettes lure youth and other new customers, they boost sales and consumption, making it harder for smokers to quit.

It's also been reported that some import imitation cigarettes have been found to contain toxins. As a result, illegal trade adds steadily to healthcare costs, worker productivity losses, and the growing death toll from tobacco use, already almost over 5 million lives per year, projected to rise to 8 million by 2030.

From a public health standpoint, it is well documented that, as with other contraband, proceeds from cigarette trafficking support organized crime and even terrorist networks.

For these reasons, I support the bill. I encourage my colleagues to support the bill as well.

If the gentleman has no other speakers, I'd like to yield to the gentleman from American Samoa (Mr. Faleomavaega) for such time as he may consume.

Mr. Speaker, I yield myself such time as I may consume to thank the gentleman from American Samoa, the leadership of the Judiciary Committee, and my friend from North Carolina (Mr. Coble) for bringing this measure to the floor. I urge my colleagues to support the bill.

I yield back the balance of my time.

Mr. Speaker, I rise in strong support of H.R. 5934, the Stop Tobacco Smuggling in the Territories Act. This important bill would prohibit the trafficking of contraband cigarettes and smokeless tobacco in the Commonwealth of the Northern Mariana Islands, the Virgin Islands, Guam, and American Samoa.

This important and commonsense legislation was introduced by my great friend and colleague, Congressman Eni Faleomavaega. Currently, the federal criminal code prohibits the smuggling of tobacco in the states; however, tobacco products continue to be trafficked through the territories by individuals looking to avoid paying taxes. This practice does not only warp market prices and rob the government of thousands of dollars each year in tax revenue. It also contributes to the public health problems associated with smoking.

I am proud to represent the 37th Congressional District of California, which is home to the largest American Samoan population outside American Samoa. The issue of tobacco smuggling matters to the loved ones and family members of my constituents, and it has become a priority of mine, as well. I am proud to stand with Congressman Faleomavaega, and I thank him for his outstanding leadership.

Mr. Speaker, the passage of the Stop Tobacco Smuggling in the Territories Act will be an important step towards curbing this practice and restoring lost revenue back to local governments. I strongly support H.R. 5934, and I urge my colleagues to join me in strengthening the capacity of Samoan tobacco enforcement.