On October 13, 2011, the Smuggled Tobacco Prevention (“STOP”) Act was again introduced in the U.S. House of Representatives. Designed to enhance law enforcement’s ability to combat illegal tobacco trafficking, the STOP Act has been introduced in various forms since 2004. The bill would make it virtually impossible for unlicensed tobacco product manufacturers to continue operating. Suppliers of unlicensed manufacturers, including machinery and raw materials suppliers, would be subject to criminal penalties. Customers of unlicensed manufacturers would be subject to the same penalties. The bill would also make it more expensive for licensed manufacturers to operate by requiring new packaging – probably a digital stamp – to facilitate tracking and tracing of cigarettes.
Neither chamber of Congress took action on the 2010 version of the bill after it was introduced. The Alcohol Tobacco Tax and Trade Bureau of the U.S. Treasury Department supports the legislation. John Manfreda, the administrator of TTB, testified before the House Ways and Means Committee in May 2010 regarding issues associated with tobacco excise tax collections. He advocated many of the measures contained in the STOP Act. The bill has also been supported by companies that sell tracking and tracing systems and digital stamping technology, and a number of public health groups, including the Campaign for Tobacco Free Kids.
Here is a summary of the Stop Act’s provisions:
Tracking and Tracing
- The Treasury Secretary would be required to promulgate regulations requiring manufacturers and importers to attach “a unique identification marking” to all tobacco product packaging, which probably would include cigarette packs, cartons and cases.
- The “unique identification marking” would include a unique tracking number, the name of the manufacturer, the date the marking was purchased and affixed and the name of the purchaser. The information must be encrypted and readable by a portable scanning device.
- The Secretary’s regulations would be effective within three years of the STOP Act’s passage.
- There currently is no stamp that evidences payment of federal excise taxes. The new system likely would require digital stamps similar to those currently required by some states.
- Tobacco products that do not have the unique markings could not be delivered for sale.
- All persons in the distribution chain, including distributors and retailers, would be required to “utilize” the unique markings to facilitate tracking and tracing. This would probably require the recipient of tobacco products to scan the products into their inventory upon receipt.
- Distributors would be required to maintain the same records as manufacturers.
- Manufacturers and distributors would be required to maintain records regarding the chain of custody of tobacco products.
- Retailers would be required to maintain records regarding their receipt and regarding any non-retail sale or delivery of tobacco products.
- The STOP Act would make it harder to obtain a TTB permit. A TTB permit may not be granted unless the applicant is in compliance with the Contraband Cigarette Trafficking Act, the Jenkins Act, the Tobacco Buyout statute and the Family Smoking Prevention and Tobacco Control Act. A TTB permit also may not be granted to any entity that previously has manufactured without a permit.
- Wholesalers would be required to obtain TTB permits.
- The Act would prohibit any tobacco production machine from being sold, leased or delivered to any person engaged in the unlicensed manufacture of tobacco products, or engaged in the sale of contraband tobacco products.
- Tobacco production machinery sellers would be required to keep records regarding their sales. They also would be required to have a TTB permit.
- Violations of these provisions would be subject to fines and/or five years’ imprisonment.
- The STOP Act would impose criminal penalties for the sale of tobacco products to, or the receipt of tobacco products from, any person that has not received a required permit.
- The STOP Act would impose criminal penalties for the sale of processed tobacco to anyone other than a licensed manufacturer or processor.
- The STOP Act would prohibit the sale of more than 3,000 cigarettes (15 cartons) in a single transaction or series of related transactions.
- The foregoing offenses would be subject to fines and up to five years in prison.
For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.