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• Gristedes chief still on warpath on cheap Indian cigarettes 

The freshly remodeled Gristedes supermarket on 25 University Place has expanded its space, adding new sections for beer, hot food, a salad bar, bakery and organic products, all looking like crowd-pleasers beneath Thanksgiving decorations strung above the aisles.

But cigarettes are no longer on sale here -- seemingly a sign of the times in this upscale Greenwich Village neighborhood near New York University.

"We haven't had them for some time now," said an assistant manager who identified himself only as Thomas. He noted that cigarettes are available at other Gristedes stores in New York (about 20 still carry them), even though he believes the demand is down. The main reason for the decline in tobacco sales, another Gristedes manager said, is that "people know where they can get them elsewhere" for half the price that conventional retailers in New York charge -- upward of $95 per carton, with $4.25 in state and city taxes tacked on.

He was alluding to untaxed tobacco sold on Indian reservations, a subject that has bedeviled convenience-store operators and New York governors from Cuomo to Paterson.

Led by its Greek-born owner and C.E.O., John Catsimatidis, a longtime New York City mayoral wannabe who smokes an occasional cigar, Gristedes Foods Inc. has claimed in protracted litigation that Indian merchants on two Eastern Long Island reservations are luring away New York customers, and even helping to fund organized crime gangs and terrorist groups like Hezbollah with bulk sales, a charge some politicians dismiss as absurd but others solemnly repeat. . . .

Since he cares so much about health, why does he sell any cigarettes at his grocery stores?

"There is such a thing as freedom of choice," the mogul replied. "I lecture my wife, who smokes, and tell her, Why don't you just have one or two instead of more? It's like what the Greek philosophers say: Everything in moderation."

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Statement by Senator Herb Kohl on S. 1147, the Prevent All Cigarette Trafficking (PACT) Act of 2009  

The PACT Act will strengthen our tobacco laws to ensure that law enforcement has the tools they need to investigate and prosecute cigarette traffickers. Each day we delay its passage, terrorists and criminals raise more money, states lose significant amounts of tax revenue, and kids have easy access to tobacco products sold over the internet.

This is not a minor problem. . . .

The common sense approach taken in the PACT Act to combat this problem has brought together a strong coalition of supporters. The legislation has the backing of the law enforcement community, numerous public health advocates, and tobacco companies. I am optimistic that we can work together to pass this bill.

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S. 1147: Text of Legislation, Introduced in Senate 

• This version: Introduced in Senate. This is the original text of the bill as it was written by its sponsor and submitted to the Senate for consideration. This is the latest version of the bill available on this website. . . .

• (a) Short Title- This Act may be cited as the ‘Prevent All Cigarette Trafficking Act of 2009’ or ‘PACT Act’.

• (b) Findings- Congress finds that--

• (1) the sale of illegal cigarettes and smokeless tobacco products significantly reduces Federal, State, and local government revenues, with Internet sales alone accounting for billions of dollars of lost Federal, State, and local tobacco tax revenue each year;

• (2) Hezbollah, Hamas, al Qaeda, and other terrorist organizations have profited from trafficking in illegal cigarettes or counterfeit cigarette tax stamps;

• (3) terrorist involvement in illicit cigarette trafficking will continue to grow because of the large profits such organizations can earn;

• (4) the sale of illegal cigarettes and smokeless tobacco over the Internet, and through mail, fax, or phone orders, makes it cheaper and easier for children to obtain tobacco products;

• (5) the majority of Internet and other remote sales of cigarettes and smokeless tobacco are being made without adequate precautions to protect against sales to children, without the payment of applicable taxes, and without complying with the nominal registration and reporting requirements in existing Federal law;

• (6) unfair competition from illegal sales of cigarettes and smokeless tobacco is taking billions of dollars of sales away from law-abiding retailers throughout the United States;

• (7) with rising State and local tobacco tax rates, the incentives for the illegal sale of cigarettes and smokeless tobacco have increased;

• (8) the number of active tobacco investigations being conducted by the Bureau of Alcohol, Tobacco, Firearms, and Explosives rose to 452 in 2005;

• (9) the number of Internet vendors in the United States and in foreign countries that sell cigarettes and smokeless tobacco to buyers in the United States increased from only about 40 in 2000 to more than 500 in 2005; and

• (10) the intrastate sale of illegal cigarettes and smokeless tobacco over the Internet has a substantial effect on interstate commerce.

• (c) Purposes- It is the purpose of this Act to--

• (1) require Internet and other remote sellers of cigarettes and smokeless tobacco to comply with the same laws that apply to law-abiding tobacco retailers;

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S. 1147 - Summary: PACT Act 

5/21/2009--Introduced.

Prevent All Cigarette Trafficking Act of 2009 or PACT Act - Amends the Jenkins Act to: (1) include smokeless tobacco as a regulated substance; (2) impose shipping and recordkeeping requirements on delivery sellers (sellers using the telephone, mails, or the Internet) of cigarettes and smokeless tobacco; (3) require common carriers of cigarette products to obtain age and identity verification upon delivery of such products; (4) require the Attorney General to compile and publish a list of delivery sellers of cigarettes or smokeless tobacco who have not complied with the registration or other requirements of such Act; (5) increase criminal penalties and impose new civil penalties for violations of this Act; and (6) grant jurisdiction to U.S. district courts to prevent and restrain violations of this Act and direct the Attorney General to administer and enforce this Act. Amends the federal criminal code to: (1) treat cigarettes and smokeless tobacco as nonmailable and prohibit such items from being deposited in or carried through the U.S. mails (with specified exceptions, including for mailings for consumer testing); and (2) authorize officers of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) to enter the premises of certain cigarette shippers to inspect records and inventories. Prohibits a tobacco product manufacturer or importer from selling or delivering in states cigarettes not in compliance with model or qualifying state statutes. Limits the applicability of this Act with respect to Indian tribes and certain tribal matters. Directs the ATF Director to create regional contraband tobacco trafficking teams and a Tobacco Intelligence Center to monitor and coordinate tobacco diversion investigations. Expresses the sense of Congress with respect to the precedential effect of this Act.

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PACT Act Q&A 

As tobacco product excise taxes increase, so do the prices of tobacco products. Criminal organizations exploit these increases by selling contraband or counterfeit tobacco products for their own financial gain and without regard to youth access prevention laws. This illicit activity deprives governments of tax revenue and hurts law-abiding businesses. Law enforcement groups, trade associations, health care advocates and the states have been advocating for the passage of legislation to combat illegal Internet sales of cigarettes and smokeless tobacco a number of years.

The Senate is currently considering S.1147 – the Prevent All Cigarette Trafficking Act (“PACT Act”), which would impose new restrictions on Internet cigarette and smokeless tobacco sales. This legislation will help States recover revenues at a time when they need it most, ensure appropriate age verification, and restore a level competitive environment for the law-abiding wholesalers and retailers throughout the United States who pay their taxes and play by the rules. The PACT Act is an important step in addressing the larger issue of stopping the trade of contraband tobacco.

The PACT Act is strongly supported by a broad array of advocates. Earlier this year, the House passed the PACT Act by an overwhelming bipartisan vote of 397 to 11. Since 2002, both houses have passed the PACT Act on multiple occasions.

Opposition to the PACT Act arises mainly from a few owners and operators of cigarette Internet sites – the sites that engage in the very activity that has robbed states of hundreds of millions of dollars in excise taxes and that has taken enormous business from legitimate retailers and wholesalers. Congress should reject these arguments, and do so based on a clear and accurate understanding of what the PACT Act will do for the states, for retailers and wholesalers, for law enforcement, and for the broad array of other stakeholders who strongly support it. Below are a series of questions and answers intended to clarify why the PACT Act should be enacted. [Top]

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• Internet Cigarette Sales--an Illegal Rip-off of Our Nation / It's Time for the Feds to Act! (PDF) 

• Intent on determining whether progress has been made in curbing the illegal Internet sale of tobacco products, an American Wholesale Marketers Association (AWMA) researcher selected 27 Internet sites at random and purchased 22 cartons of cigarettes using a Visa card and a prepaid Visa card. Of the 27 random sites selected using the Internet search engine Google, 74% allowed the use of a credit card—Visa, Diners Club, MasterCard, and/or American Express.

• None of the cigarettes purchased carried U.S. state tax stamps, and in no case were taxes collected at the time of purchase.

• The American Wholesale Marketers Association will notify proper state authorities of the purchases and pay the appropriate amount of tax to comply with the law.

• Age verification was virtually nonexistent. Most sites simply had a statement on the home page, or hidden in a disclaimer or under Frequently Asked Questions, stating that a purchaser must be a certain age to buy cigarettes. Some asked for a simple check-off that the buyer was over 18.

• This study clearly demonstrates that efforts to restrict illegal cigarette sales via the Internet are ineffective, that billions of dollars in taxes are going uncollected, and that legitimate sellers of tobacco products in the U.S. face unfair competition from unscrupulous online purveyors who are scoffing at U.S. laws and tax requirements.

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• CORCORAN: Ottawa's fruit-flavoured tobacco bomb 

The result was Bill C-32, officially titled The Cracking Down on Tobacco Marketing Aimed at Youth Act -- a misnomer if ever there was one. Today, a year later, what Mr. Harper's Conservatives have delivered instead is an over-the-top law that threatens a global trade war and another bonanza for Canada's already out-of-control contraband cigarette market.

The trade-war potential gathered momentum earlier this month when, according to Inside US Trade, the United States joined Argentina, Mexico, Switzerland, the European Union and other nations in opposition to Ottawa's new anti-bubble-gum tobacco law. At a meeting in Geneva, the nations said Canada's law would restrict trade in regular tobacco products to the benefit of Canadian tobacco producers.

The more immediate impact of the law, however, is a ban on the sale in Canada of virtually all brands of U.S. cigarettes. Guess where that leads? The logical result of a ban on legal imports of Marlboros and Winstons is new demand for illegal supplies through the burgeoning Native-dominated contraband market, a tax-evading multi-billion-dollar industry that already accounts for between 33% to 50% of the Canadian cigarette market. . . .

While this may look like another case of unintended consequences run amok, it more likely is part of deliberate scheming by Health Canada officials and others who are consciously using fruit-flavoured smokes to create a global tobacco trade bomb against the U.S. and tobacco industries in Europe, South America and Asia. . . .

Still, Bill C-32 became law, even though Senator Segal abstained over the trade issue. As a result, Mr. Harper's opportunistic election gimmick, aimed at curbing the use of flavoured tobacco to children, will do nothing to protect children. By further enhancing the power and scope of the contraband market, it will only increase the supply of illegal cigarettes, a prime source of tobacco to the young. At the same time, the government has launched a protectionist scheme that threatens a trade conflict.

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• P.M. UPDATE: Cherokee Nation sponsoring tobacco cessation events  

TAHLEQUAH -- In an effort to keep area residents healthy, Thursday, has been designated as Great American Smoke-out Day in the Cherokee Nation. In honor of the event, the tribe is offering classes and incentives to help smokers and tobacco users stop for at least one day.

Cherokee Nation Healthy Nation will be celebrating the day by offering free cessation kits and prizes to all who commit to stop smoking and using tobacco for at least one day. Resources

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NYACS Backs Senator's Push for Cigarette Tax Collection 

State Senator Carl Kruger is working to close the state's deficit as Senate Finance Committee chairman, and recently held a press conference urging Gov. David Paterson to collect taxes on cigarettes sold on Native American reservations to non-Native Americans.

"We have to ask everybody to share both the benefits and the burdens of being a New Yorker," Kruger was quoted saying at a press conference, by the New York Daily News. "Part of being a New Yorker is paying taxes that are assessed upon you."

He added: "Today is the day that we draw the line in the sand, and I say that we should collect before we cut. We should collect the taxes due before we cut the services. While we negotiate we should be collecting. Anything short of that is denying the rule of law."

Kruger was joined Democratic Sen. Ruben Diaz Sr., according to the report. By collecting the cigarette taxes, the state's general fund could see a "cash infusion" of $135 million in December and $1.6 billion a year, according to Kruger.

Following the press conference, the New York Association of Convenience Stores (NYACS) President James Calvin voiced his support of Kruger's efforts.

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HAMMOND: Albany gasbags are full of it 

State lawmakers are spouting so much hot air about the state's budget crisis these days, it's a wonder the Capitol hasn't lifted off the ground like the old man's house in the movie "Up." . . .

They've got nothing.

Ditto for Sen. Carl Kruger of Brooklyn, who made a big show yesterday of demanding that Paterson immediately start enforcing cigarette tax laws on Indian reservations.

It's true that Albany has tolerated rampant tax evasion that hurts law-abiding merchants and costs state and local government big bucks.

But for Kruger to claim that enforcement could reap $1.6 billion a year is reckless. "If people smoked that much there would be a big black cloud over the state blocking out the sun," one budget official quipped.

Throwing around numbers like that suggests that Kruger is exploiting the issue as an excuse not to grapple with the politically dicey work of finding cuts.

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Mohawks would fight cigarette tax 

The St. Regis Mohawk Tribe is getting ready to show some muscle if the state goes through with its idea to collect taxes on tribally-sold cigarettes.

Gov. David A. Paterson has been floating the idea of collecting the taxes to help cover the state's massive budget deficit and recently asked the state attorney general to help assess the risk of violent demonstrations should the tax-collectors come knocking on American Indian reservation doors.

In a speech Tuesday at a state Senate public hearing in New York City, Chief James W. Ransom told the governor what kind of resistance may come his way.

"My response is that anytime someone attempts to infringe on the rights of Mohawks and the Haudenosaunee, we will defend ourselves," he said in the speech. "New York state should expect no less."

If the state moves to consult with the tribes and consider their rights, a "peaceful resolution of state concerns can be found," Mr. Ransom said.

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Kruger: Time to start collecting Indian cigarette taxes  

In what might be a sign that budget talks are really stalled and lawmakers are starting to — depending on who you talk to — flail about desperately or think outside the box, Senate Finance Chair Carl Kruger walked a letter to Gov. David Paterson's second-floor office demanding that he start collecting taxes on cigarettes sold on Native American lands.

Such a move, Kruger said, would generate $1.6 billion a year, with $135 million in December alone.

The Indian tax issue has been around for years despite lawmakers' passing legislation to collect the tax. So far, that effort has been stymied by the likelihood of endless litigation over the argument that the taxes don't apply to sovereign Indian lands, and the fear of violent protests by Native groups. Past actions have included the closure of the state Thruway; some of the largest Native American lands are along the Thruway in central and western regions.

Kruger compared that fear to the possibility that suburban homeowners could create an uprising and halt highway traffic in protest over their property taxes. "Everybody has to pay their fair share," Kruger said.� "We want taxes collected. It would be an instant cash flow infusion."

Not everyone agrees, most pointedly the Paterson Administration, which has typically fielded Indian tax calls more from Republicans than Democrats.

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• EDITORIAL: Illegal cigarettes can't be ignored  

It is in society's obvious interest, then, to crack down on the rampant trade in contraband cigarettes. And, in fairness, some efforts have been made. Brennan and Benzie report that a law enforcement trial project, in which U.S. and Canadian officers worked side by side this summer on Canadian Coast Guard vessels, led to more efficient cross-border patrolling. Such joint operations should become permanent.

Other ideas include restricting raw materials for large-scale cigarette-making to those with a valid manufacturers' licence and working with native groups to bring about a First Nations tobacco tax equal to the province's. It might also help if government did more work to promote alternate – and legitimate – economic pursuits in First Nations reserves, thereby easing dependence on illegal activities.

The illicit tobacco trade didn't appear overnight, and it won't be easily eliminated. But more could surely be done to stanch this dirty business, to protect both government revenues and public health.

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Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review  

In this study, the authors consider cigarette smuggling from two angles. First, they employ a statistical model to estimate the degree to which cigarette smuggling occurs in 47 of the 48 contiguous U.S. states. Second, they review the historical experiences of three states -- Michigan, New Jersey and California -- known to have problems with cigarette smuggling. The author's findings suggest that state policymakers should reassess the value of cigarette taxes as a revenue and public health tool.

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• $2 billion in tax revenue up in smoke 

One in two cigarettes smoked in Ontario is illegal, robbing provincial and federal coffers of more than $2 billion a year and raising concerns about children gaining easy access to tobacco.

"There's absolutely no doubt that there's an incredible amount of revenue lost both in the province of Ontario and Quebec and to the federal government as well," provincial Community Safety Minister Rick Bartolucci said in an interview.

A study for the Canadian Tobacco Manufacturers' Council found that illegal cigarette purchases in Ontario have climbed to 48.6 per cent, followed by Quebec with 40.1 per cent. . . .

Originating on First Nations reserves, the contraband smokes are readily available in most towns and cities.

"People have to understand the severity of buying, of making ... and what damage it does do," said Bartolucci.

But how do we know? Enter the squad of "butt pickers."

In a separate investigation last month, the National Coalition Against Contraband Tobacco collected by hand 19,770 cigarette butts near 110 high schools, and discovered 30 per cent were illegal.

The coalition, which was launched by the Canadian Convenience Stores Association, whose members lose an average of $115,000 in sales annually due to illegal cigarettes, analyzed 14,064 butts from 75 Quebec high schools and concluded 45 per cent were contraband.

Because each legal cigarette has a distinctive marking on the filter, investigators are able to pinpoint hot spots for untaxed and unregulated smokes.

Ontario and Quebec represent about 95 per cent of illegal tobacco sales in Canada, and about 33 per cent of cigarettes sold in Canada are contraband, according to the manufacturers' council study. . . .

The major source of that supply is the Akwesasne native reserve that straddles Ontario, Quebec and the State of New York. Ten cigarette manufacturing plants on the U.S. side pump out billions of cigarettes annually.

"We know that perhaps 95 per cent of the contraband in Canada originates in illegal operations located on four First Nations reserves, the most important of which by far is the U.S. side of Akwesasne near Cornwall, Ont. There is also Kahnawake near Montreal, Tyendinaga near Belleville, and Six Nations near Brantford," said Cunningham.

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