A Law Synopsis by the Tobacco Control Legal Consortium August 2012

Law. Health. Justice.

Strategies to Combat Illicit Tobacco TradeJess Alderman

Tobacco ControlLegal Consortium

Suggested citation: Jess Alderman, Tobacco Control Legal Consortium, Strategies to Combat Illicit Tobacco Trade (2012).

Tobacco Control Legal Consortium 875 Summit Avenue Saint Paul, Minnesota 55105 USA www.publichealthlawcenter.org www.tclconline.org 651.290.7506

Copyright © 2012 Tobacco Control Legal Consortium

This synopsis is provided for educational purposes only and is not to be construed as a legal opinion or as a substitute for obtaining legal advice from an attorney. Laws cited are current as of August 2012. The Tobacco Control Legal Consortium provides legal information and education about tobacco and health, but does not provide legal representation. Readers with questions about the application of the law to specific facts are encouraged to consult legal counsel familiar with the laws of their jurisdictions.

Strategies to Combat Illicit Tobacco TradeStrategies to Combat Illicit Tobacco TradeJess Alderman

Key Points

• IllicittobaccotradeintheU.S.includesdirectsmugglingoftobaccoproductsintothecountry;introducingproductsdesignatedforexportonlyintotheAmericandomesticmarket;manufacturingtobaccoproductswithoutalicense;buyingproductsinonestateforillegalresaleinanother;buyingcigarettesonNativeAmericanterritoryforillegalresaletonon-tribalmembersandbuyingfromwebsitesthatdonotchargetaxes.

• Smugglingtobaccoproductsishighlyprofitableandthepenaltiesforsmugglingtobaccoarelenient,whichmakesillicittobaccotradealow-riskcrime.

• Tax-freetobaccosalesinNativeAmericansmokeshopsareamajorproblemintheUnitedStates.ItisillegalforNativeAmericantribestoselluntaxedtobaccoproductsontheirterritorytonon-tribalmembers,butstatesfinditextremelydifficulttoaddressthewidespreadlackofcompliancegiventheirlackoflegalauthorityoverNativeAmericantribes.

• Tobaccosmugglingoperationshavebeenlinkedtonumerousterroristorganizationsglobally,andevidenceshowsthatcigarettesmugglingprofitshavefinancedterrorismaroundtheworld.

• KeyfederallawsthataddresstheillegaltobaccotradearetheJenkinsAct,ContrabandCigaretteTraffickingAct,PACTAct,andtheFamilySmokingPreventionandTobaccoControlAct.Multiplefederalagenciesareresponsibleforenforcingtheselaws.

• Tocombatillicittobaccotrade,state,localandtribalgovernmentsandhealthadvocacyorganizationsneedtocoordinateandcooperateatmanydifferentlevelstosupportfederallegislationandalsotoincreaseanti-smugglingeffortsintheirownjurisdictions.

Introduction

Illicittobaccotradeisasignificantglobalproblem.Expertsestimatethatmorethan10percentofciga-rettesboughtaroundtheworldaresoldillegally,1 andintheUnitedStatesalonesmugglingcostsabout$5billionperyearinloststatetaxrevenues.2 Thecontrabandtobaccotradeisoneofthemostcomplexto-baccocontrolissuesbecauseitisin-tertwinedwithsomanyotherpoliti-cal,legal,andpolicyconcerns.Hightobaccotaxeshaveasignificantposi-tiveimpactonpublichealth3 andtheevasionoftobaccotaxesdirectlyunderminesthedocumentedabil-ityofthesetaxestoreducesmokingrates.Other,moreindirecteffectsincludeshieldingtobaccopurchasesfromstaterequirementsrelatingtocustomerageverification,licensing,advertising,manufacturingstan-dards,andrecordkeeping.

Thislawsynopsisfocusesonillicittobacco tradewithin and acrossthebordersoftheUnitedStates.Itexplainshowillegaltobaccotradeworksandwhyitisappealing,itsim-pactonstaterevenues,andthepastcomplicityofthetobaccoindustryinillicittrade.Itexploresthecom-plexroleplayedbyNativeAmericanlands,tribes,andbusinessesintax-freesalesandoutlinesvariouslawenforcementapproachestocombatsmuggling.Italsorecognizesthegrowingconnectionbetweensmug-

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glingandnationalsecurityissuesanddescribesthefederalagenciesandlawsthataddressit.Finally,thislawsynopsissuggestswaysinwhichstateandlocalgovernmentsaswellashealthadvocacyorganizationscancontributetothefightagainstillicittobaccotrade.

Q: How does the illicit tobacco trade work, and how is smuggling related to tobacco tax avoidance and evasion?

A: Theterm“smuggling”meansillegaltradeacrossborders,4 while“illicittrade”isabroadertermthatencompasses“anypracticeorconductprohibitedbylawandwhichrelatestoproduc-tion,shipment,receipt,possession,distribu-tion,saleorpurchase.”5 TherearenumerousmethodsofcontrabandtobaccotradeintheUnitedStates:directsmugglingofproductintothecountry;introducingproductsdesignatedforexportonlyintotheAmericandomestic

market;manufacturingtobaccoproductswith-outalicense;buyingproductsinonestateforillegalresaleinanother;buyingcigarettesonNativeAmericanterritoryforillegalresaletonon-Natives;andbuyingfromwebsitesthatdonotchargetaxes.Anotherstrategyinvolvesunderreportingproductionorsalestothestatetoavoidtaxes.6

TobaccotaxratesintheUnitedStateshavebeenrisingformorethanadecade.Forexample,theaveragestatetaxincreasebetween1998and2002was90percent.7 Highertaxratesleadtobothtaxavoidance(takingadvantageoflegalloopholesorexemptionsfromtax)andtaxevasion(illegallyavoidingpayingarequiredtax).8 Differencesintobaccotaxratesamongstatescancreateanincentivetotransportto-baccoproductsfromlow-taxjurisdictionstohigherones.Topurchasecheapercigarettesforpersonaluse,individualsmightcrossstatelines

Smuggling tobacco products is highly profitable and the penalties are lenient.

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topatronizestoresinlower-taxstates,ortheymightgotocommissariesonmilitarybasesortosmokeshopsonNativeAmericanreserva-tionswheretheycanavoidpayingstatetaxes.“Bootlegging”occurswhenindividualsorsmallgroupspurchaseathresholdamountoftobaccoproductsinalow-taxstateforillegalresaleinahigh-taxstate.9 Forexample,thereisahighbootleggingratebetweenVirginia,whichhasverylowtobaccotaxes,andNewYork,whichhasamongthehighest.10

Internetsalesoftobaccoproductsalsoplayaroleintaxevasion.Thesitestraditionallyhavenotchargedapplicabletaxes,offeringproductsatmuchlowerpricesandunderminingstates’publichealthefforts.11 Itisalsodifficulttoverifyacustomer’sageontheInternet,increas-ingminors’accesstotobacco.12 Thenumberofwebsitessellingtax-freecigarettestoAmeri-cansmushroomedfrom88in2000to772in2006.13 Frustratedbystates’lackofabilitytodirectlystoptheflowofuntaxedmerchandise,in2005theNationalAssociationofAttorneysGeneral(NAAG)reachedagreementswithcreditcardcompaniestorefusetoprocessillegalInternetsales,14 andlaterthatyearseveralmaildeliveryservicesagreedtostopcigarettedeliver-iestoindividualAmericansunderpressurefromNAAG.15 In2008CaliforniamadeasimilaragreementwithabankthathadbeenprocessingalargevolumeofillegalInternetsales.16

Variationsintaxratesareonlyoneofthefactorsthatdrivesmuggling.Illicittradeandtaxevasionoccurevenwhentaxratesintheinvolvedareasaresimilar,andinfactcountrieswiththelowestcigarettepricestendtohavehighersmugglingrates.17 Large-scalesmugglingtendstoinvolveorganizedcrimeandsophisticatedlocaldistribu-tionsystems.18 Whilebootleggersrelyontaxdifferencestoproduceprofit,large-scalesmug-glerstypicallyavoidtaxesbydivertingproductstax-free(e.g.,whentheyareintransitbetweencountries).19 Theirhighlyorganizedoperationsareheavilyinfluencedbytheeaseofoperatingin

aspecificarea:thepresenceoforganizedcrimenetworks;thelevelofpoliticalcorruptioninthearea;theseverityofthepenaltiestheyface;theextenttowhichthelocaltobaccoindustryfacilitatessmuggling;etc.20

IntheUnitedStates,tax-freeindividualpur-chasesforpersonaluseandbootleggingaresmallproblemscomparedtolarger-scaleorganizedsmuggling.21 Small-scaleevasionoftobaccotaxestendstospikeafterataxincreaseandthengraduallyfade,likelybecausesmokersprefertheconvenienceoflocalpurchasestocheaperbutlessconvenientpurchasesthatrequirepre-planningand/orbuyinginbulk.22

Q: Why smuggle a product that can be purchased legally around the world?

A: Therearetwoprimaryreasons:

Smuggling tobacco products is highly profitable. Unlikethosewhorunsmugglingoperationsin-volvingillegalorhighlyregulatedproductslikedrugsandweapons,tobaccosmugglers’primarymotivationistoavoidpayingtaxes.Smugglinghasaveryhighprofitmarginiftaxescanbeavoidedanywherealongthesupplychain.23 Forexample,awholesalercanprofitfromsellingtax-freetobaccoproductstoretailersanddistribu-tors.Aretailercanboostrevenuebybuyingtax-freecigarettesfromsmugglersandthensellingthemtocustomersatregularrates.24 In2011,Maryland’sFieldEnforcementDirectornotedthat“theamountofmoneyisphenomenal.It’stensofthousandsofdollarsinanyparticularrun.”25 Evensmall-timesmugglerscanmakeasmuchas$7,000perday.26 Smugglingatruck-load(48,000cartons)ofcigarettespurchasedinVirginiaforillegalresaleinNewYorkCitycannetaprofitof$2million.27 Similarly,itcostsabout$100,000tomanufactureashippingcontainerofcigarettes(10millioncigarettes)inChinathatcanbringin$2millionwhensoldintheUnitedStates.28 Insomecases,itismoreprofitabletosmuggletobaccothantodeal

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drugs.29 Forexample,inonegovernmentsting,twosuspectswillinglytradedundercoveragentsakilogramofcocaine(worthabout$30,000)for3,000cartonsofcigarettes,30 andinothersofferedmarijuanaandweaponsinexchangeforuntaxedcigarettes.31

The penalties for smuggling tobacco are lenient,whichmakesillicittobaccotradealow-riskcrime.32 Inmanycases,contrabandcigarettesaresimplyconfiscated,resultinginalossofprofitbutnoreallegaldeterrent.33 Jailtimeistypicallyonlyafewyearsunlessthecrimeinvolvesgunsordrugs.34 Thetypicalworst-casescenarioforsmugglersisarelativelyshortjailsentencethatwillenablethemtoresumelucrativesmugglingoperationssoonafterrelease.35 Recentlawshavebeguntoincreasepenaltiesfortobaccosmug-gling(seediscussioninfra).

Thehighprofitpotentialandlowriskofsmug-glingtobaccoareespeciallyappealingtocriminalorganizationswithalreadyestablishedsmug-glingoperationsforothersubstances(e.g.,il-legaldrugsorarms),whichcaneasilyuseexist-

ingcontactsandresourcestoestablishtobaccosmugglingroutes.36

Q: How do tobacco taxes and illicit trade affect state revenues?

A: Tobaccotaxeshaveproventobeavaluablesourceofrevenueforstateandlocalgovern-ments.Eventhoughmanystatesdonotuseallorevensomeofthisrevenuefortobaccocontrolprograms,raisingtobaccotaxesbenefitsbothhealthandfinancialgoals.Whileatobaccotaximposedforanyreasonhasapositiveeffectonpublichealthbyreducingsmokingrates,statesmayconsidertobaccotaxesseparatelyfromtheirhealthobjectives.Theclaimthatloweringoreliminatingtobaccotaxeswillsignificantlyreduceanytypeofsmugglingismostlyfalse(asdiscussedbelow),and,inanycase,statestypicallyprofitmorefromtaxesthantheylosefromsmuggling.Nonetheless,illicittradehasanegativeimpactonstates’bottomline;stateslosebillionsofdollarseachyearasaresultofunpaidtobaccotaxes.37 Althoughtobaccotaxcollectionenforcementcostscanbehigh,especiallywhen

The tobacco industry tends to view illegal markets as just another kind of business and has little incentive to discourage contraband sales.

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dealingwithInternettransactions,lostrevenuefromtobaccotaxescombinedwithothercostslikehealthcareexpendituresmakeenforcementeffortsbeneficial.38

Q: Why hasn’t the tobacco industry tried to stop illicit trade?

A: Illicittobaccotradebenefitstheindustryinmanyways.39 Itmakestobaccoproductsmoreaffordableforconsumers,whichincreasesde-mandandcanfosterbrandloyalty.Inaddition,itismucheasierforminorstopurchaseillegalciga-rettesbecausevendorswhooperateintheshad-owsofstateregulationsseldomverifycustomerage,ensnaringanewgenerationofsmokers.Thetobaccoindustrytendstoviewillegalmarketsasjustanotherkindofbusiness40 andhaslittleincentivetodiscouragecontrabandsales.41

Historically,thetobaccoindustryhasbeencom-plicitintobaccosmuggling,inmanycasesknow-inglyprovidingitsproductstosmugglers.42 Forexample,theindustrywillinglysuppliedciga-rettesforablackmarketbetweenCanadaandtheUnitedStates.43 Numerousexamplesofactiveindustryinvolvementinillicittrade,sometimesdocumentedininternalcompanydocuments,haveoccurredaroundtheworld.44 Legalcrack-downshaveimprovedthesituationinEuropeandNorthAmerica,althoughexpertssuspecttheindustrycontinuestoworkwithsmugglersinotherpartsoftheworld.45

Theindustrypubliclyclaimsthatstatesshouldlowertobaccotaxesbecauselowertaxrateswilldecreasesmuggling,46 buttobaccocom-paniesareawarethatthisassertionisprimarilyfalse.47 Highertobaccotaxeshavebeendemon-stratedtodecreasesmokingrateswhileincreas-inggovernmentrevenues.48 Whilesmugglingcertainlyreducestobaccotaxrevenues,49 itdoesnotdosotoanextentthatloweringoreliminat-ingtobaccotaxeswouldbeadesirableoption.Further,researchinEuropeancountriesdidnotfindacorrelationbetweenhightaxesandhigh

smugglingratesbecauselarge-scaleillicittradeinvolvescompletetaxevasionratherthanmerelyexploitingdifferencesintaxrates.50 Atthesametimetheindustryclaimsthathighertaxeswillincreasesmugglingrates,ithasitselfraisedbasepriceswithoutexpressingsuchconcerns.51 Thetobaccoindustryhasalsoclaimedthathighcigarettetaxeshavedetrimentaleconomiccon-sequences,suchashurtinglocalbusinesses,butresearchsuggeststhatsuchconcernsareoftenfalseorexaggerated.52

Q: What do tobacco taxes and smuggling have to do with Native Americans?

A: NativeAmericantribeslocatedwithintheUnitedStatesareprotectedbysovereignim-munity.TheUnitedStatesCongressalonecanlimittribes’legalindependence;statesdonothavelegalauthorityoverIndiantribeslocatedwithintheirborders53 andcannotbringenforcementlawsuitsagainsttribes.54 TheuniquestatusofNativeAmericanlandscreatesmanylegaldif-ficultiesforstatesthatwanttoaddressproblemsrelatedtotobaccosmugglingbecausetheymustrelyonCongresstoregulatebusinessactivitiesonreservations.Itislegaltoselltobaccoprod-uctsonaNativeAmericanreservationtax-freeonlytotribalmembers.However,statesfinditextremelydifficulttocollecttaxesonsalestonon-NativesgiventheirlackofauthorityoverNativeAmericanterritoryandthewidespreadlackofcomplianceamongNativeAmericanshopown-ershopingtoprofitfromnon-Nativecustomers.

Itisclearthatsometribesaresellinglargeamountsofcigarettestonon-Nativesbecauseoftheexcessivevolumeoftheirimports.Thenumberofcigarettesimportedbysometribeswouldbeenoughforeveryreservationresident,includingchildrenandinfants,tosmokehun-dredsofpacksaday.55 Forexample,atinyLongIslandreservationwith283residentsimported90millioncigarettesin2000andmorethan2billionin2007.56 Theproblemisespecially

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prevalentinNewYork,wheretax-freepurchasesonreservationsareestimatedtocompriseaboutathirdofallbrand-namesales.57 In2008,sevenwholesalers,sixofwhichwerelocatedinNewYork,suppliedmorethan90percentofciga-rettessoldonNativeAmericanterritory.58 TheSenecaNationtribeinwesternNewYorkhasbeenamajorsourceoftax-freecigarettesalesaroundthecountry.59 Inthemid-2000s,twoSenecareservationshousedmorethan75per-centofNativeAmericantobaccowebsitesand95percentofthetribe’stobaccosalestookplaceonlineoroverthephone.60

TheongoingbattlebetweenthestateofNewYorkanditsNativeAmericanretailersovertobaccotaxcollectionillustratesthecomplexityofthisissue.TheUnitedStatesSupremeCourtruledin197661 andreaffirmedin199462 thatstatescanimposetaxesonreservationsalestonon-tribalmembers.Despitethesedeci-sions,NewYorkhaslongdeclinedtoenforcetax-avoidancelawsagainstNativeAmericantribes,63 whohavefiercelyresistedstateat-temptstocollecttaxontheirsales.Facingbud-getshortfallsin2010,thestatepassedalawspecifyingmechanismsforcollectingtobaccotaxesonNativesalestonon-Natives.Muchlitigationandastormypoliticalbattlefollowed,butultimatelyafederalcourtruledin2011thatNewYorkcouldproceedwithtaxcollection.64

Q: Which law enforcement approaches are most effective against smuggling?

A: TheU.S.GovernmentAccountabilityOfficenotesthatsmugglersrapidlyaltertheirmethodsofoperationinresponsetoexternalfactorslikehighertaxes,newlaws,andvaryinglevelsoflawenforcementeffortsintheregion.65 Thedifficultyofcombatingsmugglingiscommonlyreferredtoasa“whack-a-mole”problembecauseoftheneedtoconstantlychangetactics.66

Anotherchallengeisthatlawenforcementcan-notalwaysrelyonaffectedcommunitiesforsup-

port.Low-incomesmokersmaybesupportiveofsmugglersintheirneighborhoods.Hightaxeshavebeenshowntodissuademanysmokersfrompurchasingtobacco,butsomehighlyaddictedpeopleonlimitedbudgetswhowouldlikelyreacttoataxincreasebyskimpingonothernecessitiesmightviewsmugglingasareasonableresponsetoskyrocketingtobaccoprices.67

Tobaccosmugglingisdrivenbysupply,68 sothe key to controlling it is to cut off thesource.69 Becausetobaccoisalegalproduct,trackingcontrabandsales shouldbemucheasierthantrackingsmugglingofillegalprod-ucts.70 Producersanddistributorshavealargeamountofpowertoaddresssmuggling,andiftheyareheldresponsibleforcontrollingtheprocess,greatprogresscouldbemadeinhaltingtheundergroundtobaccotrade.71

Somestateshavebeenmakingprogresswithapproachestailoredtotheirspecificneeds.Forexample,California’ssuccessfulattemptstodecreasesmugglingincludeda2003lawthatrequiredalicensetoselltobaccoproductsandadigitaltaxstamplawimplementedin2005thatmayhaveledtotherecoveryofasmuchas$24million.72 Despiteareluctancetotakeonthetobaccoindustryincourt,73 in2008NewYorkpassedalawthatrequiredmanufacturerstoverifythatwholesalerswerenotprovidingtax-freecigarettestoNativeAmericanshopsforsalestonon-Natives.74 NewYorkalsowasapioneerinbanningdirect-to-consumerdeliv-eriesofcigarettestostopillegalInternetpur-chases.75 Afederalcourtupheldthebanagainstchallengesbythetobaccoindustry76 andotherstateshavesincepassedsimilarlaws.

Combatingtobaccosmugglingrequirescomplexcoordinationatmanylevels,includinginterna-tionally.77 ThroughtheWorldHealthOrga-nization’sFrameworkConventiononTobaccoControl(“FCTC”),about135countrieshavene-gotiatedaninternationaltreatytoaddresssmug-gling78 thatisexpectedtoberatifiedaround

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2014.79 Provisionsincluderequiringlicensingofmanufacturersandtraceablemarkingonpack-ages,trackingofInternetandduty-freesales,andestablishingformalcooperationamongcountriesconductinginvestigationsofcontrabandtobaccotrade.80 TheUnitedStateswasnotapartytothenegotiations81 butthePreventAllCigaretteTrafficking(PACT)Act(seebelow)willaddressmanyofitsnationalconcerns.

Q: What does illicit tobacco trade have to do with national security?

A: Theillicittobaccotradehasramificationsthatextendbeyondtheharmfuleffectsofsmoking.Tobaccosmugglingoperationshavebeenlinkedtonumerousterroristorganizationsglobally,andthereisampleevidencethatcigarettesmugglingprofitsoftenfinanceterrorismaroundtheworld.Authoritieshavetracedcigarettesmugglingfundstoterroristorganizationsandmilitantgroups,82 makingsmugglingamuchhigherpriorityfortheBureauofAlcohol,Tobacco,Firearms,andExplosives(“ATF”).83 Otherterroristorganizationsfinancedbycontraband

tobaccotradeincludetheIrishRepublicanArmy, theTaliban, theKurdistanWorkers’Party,FARC(RevolutionaryArmedForcesofColombia),andtheCNDP,aCongoleserebelgroup.84 Unfortunately,terrorismisrelativelyinexpensivecomparedtoprofitsfromsmuggling.Theestimatedcostofthe2005Londonsubwaybombingwas$15,000,whilealloftheattacksontheUnitedStatesonSeptember11,2001areestimatedtohavecostbetween$400,000and$500,000.85 Ifgovernmentsatanylevelreducefundingfortobaccocontrolprogramswhenfacedwithlimitedfinancialresources,nationalsecurityconcernsshouldensurethataddressingcontrabandtobaccoremainsahighpriority.

Q: Which federal agencies are involved in policing illegal tobacco trade?

A: Manytobaccocontrolissuescanbeaddressedatthelocallevel:forexample,astate,cityortowncanprohibitsmokinginrestaurants.Incontrast,mostofthelawsdirectlypertainingtosmugglingarefederallawsenforcedbyfederalagencies.Whenstateandlocalauthoritiesareinvolved,

… about 135 countries have negotiated an international treaty to address smuggling that is expected to be ratified around 2014.

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effortsmustbecoordinatedtomonitorandcon-trollargemultistateandmultinationalsmugglingoperationseffectively.Afurthercomplicationisthatmultiplefederalagenciesareresponsibleforenforcementoflawsthataffectsmuggling.

TheBureauofAlcohol,Tobacco,Firearms,andExplosives(“ATF”),whichtraditionallyper-formedmostofthefederalgovernment’stobacco-relatedfunctions,wasreorganizedinJanuary2003inaccordancewiththeHomelandSecurityAct.86 TheATF,theprimaryagencychargedwithcombating“illegaldiversion”oftobacco,nowoperatesundertheauspicesoftheDepartmentofJustice.TheAlcoholandTobaccoTaxandTradeBureau(TTB),abranchoftheDepartmentoftheTreasury,isresponsibleforcollectingtobaccotaxes.Otherfederalagenciesaremoretangen-tiallyinvolved,asexplainedbelow.

Q: What are the primary federal laws that address illegal tobacco trade?

A: Jenkins Act. TheJenkinsAct,passedin1949,requiressellerswhoshipcigarettesacrossstatelinestoreporttothestatewheretheyareshippedthenamesandaddressesofrecipientsaswellasthequantitiesandbrandsshipped.87 However,priortothepassageofthePACTAct,thislawwasrarelyenforcedbythefederalgovernment.Stategovernmentsfounditdifficulttoensurecompliancewithrelatedstatelaws,facinglegalchallengestotheirjurisdictionoverout-of-stateorinternationalInternetsellers,lackofauthoritytoholdsovereigntribesaccountable,andproblemswithidentifyingandprosecut-ingInternetsuppliers.88 ManyInternetsellerssimplyignoredJenkinsActrequirements.89

Contraband Cigarette Trafficking Act. Thislawpenalizes illicit trade,establishesthresholdamountsforcontraband,andsetsforthrecordkeepingrequirementsfortransactionsthatex-ceedthethreshold.90 TheUSAPATRIOTImprovementandReauthorizationActof2005loweredthresholdamountstomorethan10,000

cigarettesand/or500single-unitpackagesofsmokelesstobacco.91 EnforcementauthoritywasexpandedbythePACTAct.

PACT Act.ThePreventAllCigaretteTrafficking(PACT)Act,passedin2009toupdateandclosegapsintheJenkinsAct,directlyaddressedpublichealthadvocates’concernsandcodifiedmanyoftheirrecommendations.Itappliesreportingrequirementsfortobaccotaxestosales,advertis-ingofsales,andtheshippingandtransportingofcigarettesandsmokelesstobacco,includingship-mentintoastate,city,town,orNativeAmericanreservationthattaxestheproductbeingshipped.92

Sellerswhomailtobaccoproductstocustom-ersmustpaytherelevanttaxes,complywiththelawsinforceattheircustomers’location,registerwithandmakeperiodicreportstothestate,andverifycustomerageatbothpurchaseanddelivery.Theycannotshipgoodsweighingmorethan10poundsandmustkeeprecordsofalldeliveriesforfouryears.TheActalsoprovidesstateattorneysgeneral,localgovernments,Na-tiveAmericantribes,manufacturers,importers,andexportwarehouseswiththeabilitytosueviolatorsoftheAct.PenaltiesforviolationsoftheActincludefinesanduptothreeyearsinprison.Civilpenaltiesare2percentofannualgrosssalesoftobaccoproductsor$5000forafirstviolationand$10,000forfurtheroffenses,whicheverisgreater.93

AddressingtheUnitedStatesPostalService’sinabilitytocomplywithtrackingandageveri-ficationrequirements,94 theActdesignatedcigarettesandsmokelesstobaccotobe“non-mailable”materials.95 ItalsobansdeliveryofpackagesfromnoncompliantsellersbycommoncarrierssuchasUPSandFedEx.

TheoriginalversionofthelawallowedstatestosueanynoncompliantInternetsellers,includingthoseonNativeAmericanlands.Asdiscussedabove,NativeAmericanbusinessesarenotsub-jecttoenforcementlawsuitsbythestates,sothe

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originallawwouldhavesignificantlyexpandedstatepowers.ProtestsbytribalgovernmentsledtoanarrowingofthelawtopreservetribalsovereigntyassubjectonlytoCongress.96 ThefinalversionoftheActdoesnot“affect,amendormodify”anyexistingagreementswithIndiantribes,97 preventingstatesfromprosecutingNativeAmericantribesfornotcomplyingwithtax-collectingrequirements,althoughitex-plicitlyallowsagreementsbetweentribesandstateorlocalgovernmentsregardingtobaccotaxcollection.TheActallowstribesaswellasstatestobringenforcementlawsuits.TobaccotaxreportinglawsalreadyrequireNativeAmericanInternetsellerstoreportsalestotheircustomers’states,andtheActexpandsthisrequirementtomandateInternetsellerstoreportsalesdeliveredtotriballandstoNativeAmericantaxauthori-tiestofacilitatecollectionoftribaltaxes.98

TheActisenforcedmostlybyATF,althoughotheragencies,suchastheU.S.PostalService,arealsoinvolved.ItauthorizestheATFtoinspecttherecordsandproductsofdeliverysellers.99

Family Smoking Prevention and Tobacco Control Act. TheTobaccoControlActof2009authorizedtheFoodandDrugAdministrationtoregulatetobaccoproducts.TitleIIIofthislawdealswithtobaccosmuggling.100 Itsetsforthnewrequire-mentsforlabeling(e.g.,“saleonlyallowedintheUnitedStates”),inspection,andrecordstotrackmerchandiseanddirectstheComptrollerGeneraltoconductastudyofcross-bordertobaccotrade.Italsorequiresmanufacturersanddistributorstoreportknownorreasonablysuspectedtobaccosmugglingortaxevasion.

Other applicable federal laws. TheFederalTradeCommissionenforcestheFairPackagingand

LabelingAct,whichrequiresinformationonpackagesandlabelstobeaccurateandalsoregulatespackagewarningsandtobaccoad-vertising.101 U.S.CustomsandBorderPro-tectioncollectstaxesandfees,imposesrecordkeepingrequirements,102 andenforcesotheranti-smugglinglawssuchasarequirementthatimportsbemarkedwiththenameofthecountryoforigin.103 American-madecigarettesdesig-natedforexportcannotbebroughtbackintotheUnitedStatesbyanyoneexcepttheoriginalmanufacturerorawarehouseproprietorithasauthorizedtodoso.Thereisnofederallicensetoselltobaccoproducts,butTTBmustapprovemanufacturersandimporters.

Q: What can state and local governments or health advocacy organizations do to combat the illicit tobacco trade?

A: Stateandlocalgovernmentsandhealthad-vocacyorganizationscancombatillegaltobaccotradeinseveralways.ThePACTActexpandsthepowersofstate,local,andtribalgovernments,givinganyoftheseentitiesthatchargeatobaccotaxbroadenforcementpowersandmakingpre-emptionissueslesslikely.Aprimarygoalofstateandlocalgovernmentsshouldbetosupportthisfederallegislationthroughcoordinationandcoop-erationatmanydifferentlevels.Anotherprimarygoalshouldbetoincreaseanti-smugglingeffortsintheirownjurisdictions.Ifmanylocalareasstepuptheirownefforts,thecumulativeeffectcouldbequitepowerful.Healthadvocacyorganizationscanalsoplayakeyrolebytailoringcurrentpro-gramsand/ordevelopingnewprojectsthathelpalllevelsofgovernmentimplementsolutions.Figure1providesanoverviewoftheseoptions.

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Federal Laws (e.g., PACT ACT) and Agencies (e.g., ATF)

I. Support Federal Law

II. Expand Local Efforts

A

State and Local Governments » Facilitate cooperation and information sharing

» Police local manufacturers, wholesalers, and retailers

» Pressure businesses to make illicit transactions more difficult

» File lawsuits against noncompliant parties

» Provide public information about how to report violators

» Offer legal protection to whistleblowers

A

State and Local Governments » Design hard-to--counterfeit tax stamps

» Focus on production (aggressively monitor industry) and distribution (wholesalers)

» Raise tobacco rates » Support local law enforcement efforts

» Be flexible with law enforcement approach

» Focus on key players » Encourage federal solutions to Native American and military purchase problems

B

Both State/Local Government and Advocacy Organizations » Educate local stakeholders

» Identify and/or report violators

» Support ATF funding increases

B

Both State/Local Government and Advocacy Organizations » Partner with local tribes

» Apply for funding for national security projects

C

Health Advocacy Organizations » Share information

» Share best practices

C

Health Advocacy Organizations

Figure 1. Overview of State and Local Options to Combat Illicit Tobacco Trade

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I. Support the new federal legislation

Publichealthadvocateshavelongcalledforincreasedpenalties,betterrecordkeepingre-quirements,reportingrequirementsfordeliverysellers,verificationofInternetbuyers’age,andregistrationwiththestate.ThePACTActad-dressesalloftheseissuesandhasthepotentialtomakearealimpactonsmuggling.

A. State and Local Governments

■■ Facilitate cooperation and information sharing. Coordinationisakeyelementincombatingillicittrade,whichisveryrarelylimitedtoalocalareaandfrequentlyinvolvesinternationalrings.Local,state,andfederalgovernmentsneedaveryhighlevelofcommunicationandcooperationiftheireffortsaretobeeffective,andtheyshouldalsoworkcloselywithhealthadvocacygroupswhenpossible.

■■ Police manufacturers, wholesalers, and retail-ers within the jurisdiction. Whilesmugglinginvolvesaninterstateorinternationalsupplychain,statesandlocalitieshavejurisdictionoverinvolvedlocalparties.

■■ Pressure economic entities that might be in-volved, even unwittingly, in facilitating smug-gling to adopt business practices that make illicit trade more difficult. Asmentionedabove,inthepaststateattorneysgeneralhaveworkedwithbusinessessuchascreditcardcompanies,com-moncarriers,andbankstoblockillegaltobaccotransactions.Evenincircumstancesinwhichstateandlocalgovernmentscannotdirectlyaddresssmugglingissuesbecausetheylackjurisdiction,thistypeofindirectactioncanhelp.

■■ Bring lawsuits against noncompliant parties. TakingadvantageofthisnewlygrantedrightunderthePACTActwillhelpsendapow-erfulmessagethatthestatewillnottolerateviolators,andthatitwillexposenoncompliantpartiestobadpublicityandcreateafinancialdisincentivetosmuggle.

■■ Publicize information about how to anony-mously report suspected illicit trade. Maintainahotline,emailaddressorothersimplewayforpeopletocommunicatewithlawenforce-mentiftheyhaveinformationaboutsus-pectedsmugglingorotherillegalactivity.104

■■ Legally protect whistleblowers who report illicit activity toremoveanydisincentivetoreportsuspiciousbehaviortolawenforce-ment.105 Therearenumerousstateandfed-erallawsprotectingwhistleblowers,althoughmostpertaintoemployeesanditisnotclearwhetherthetypicalwhistleblowerinato-baccosmugglingcasewouldbeanemployeeofaninvolvedparty.Ifso,morespecificstateandfederallawswouldbehelpful.Non-em-ployeewhistleblowerswouldalsobenefitfromprotectionagainstlawsuits,etc.Smuggling’sconnectiontoterrorismmaymakeiteasierpoliticallytopasslawsprotectingthosewhoreportsuspectedillegalactivity.

B. Both State/Local Governments and Advocacy Organizations

■■ Educate local stakeholders about the PACT Act. WhilelargebusinessesshouldalreadybefamiliarwiththeAct,smallbusinesses,localleaders,aldermen,andotherswouldlikelywelcomeaconvenientsourceofinformationaboutPACT.Inaddition,itmaybeusefulforlocalorganizationsandcitizenstobeawareofkeyprovisionsandrequirements.

■■ Assist the federal government in identifying violators. Locallawenforcementismorelikelytobefamiliarwithlocalcriminaloperationsandsuspectsandtobeawarewhensomethinghaschangedoractivityseemsoutoftheor-dinary.Thistypeofintelligenceiscriticalinidentifyingsmugglersandcollectingevidence.

■■ Support increased funding for ATF’s tobac-co-related enforcement activities. Closeties

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Tobacco Control Legal Consortium

betweenlarge-scalesmugglingandterroristactivityshouldnowmaketobaccosmugglinginvestigationsatoppriority.

C. Health Advocacy Organizations

■■ Share information and best practices. Healthadvocacygroups,particularlythosethatare

nationwideorganizationsorganizedintolo-calchapters,arewell-placedtocollectdatafromtheirownorganizationsbothtoim-provetheirowneffortsandtoassistalllevelsofgovernment.

II. Expand local efforts to combat smuggling

Whilesupportingfederallawiskey,localsolu-tionsthattargetspecificissuesintheregionarealsonecessary.PreemptionisunlikelytobemuchofabarrierbecausethePACTActwasdesignedtoexpandthepowerofstate,local,andtribalgovernmentsandexplicitlydoesnotaffectanyexistingrightsthatstateorlocalgovern-mentsalreadyhadtoenforceanti-smugglinglaws.Althoughtheydonothaveenforcementpowers,healthadvocacyorganizationscanalsobeactiveparticipantsbysupportingandenhanc-inglocaleffortsaswellasfacilitatingcoopera-tionandcoordination.

A. State and Local Governments

■■ Design hard-to-counterfeit tax stamps andimplementstrictrequirementsabouttheiruse.Thisapproachcansimplifyinspections,aidindetectingviolations,andfacilitatestatetobaccotaxcollection.

■■ Focus on production and distribution. Partiesattheseinitialstagesofthetobaccotradecanhaveatremendousinfluenceonwhathappenslaterandshouldbeheldaccountableforanydown-streamactivitywithintheirsphereofinfluence.Inparticular,localgovernmentsshouldaggres-sivelymonitorthetobaccoindustry.TherehasalreadybeenmuchimprovementinaddressingNorthAmericaandEuropeansmugglingissuesbasedonindustryaccountability.Itissimplynottruethattheindustrycannotexertagreatdealofcontroloverillicittobaccotraffic.

■■ Raise tobacco taxes. States(andlocalitiestotheextentthattheyareable)withlowto-baccotaxratesshouldraisethem.Thereislittledownsidetothisapproach:ithasprovenpublichealthbenefits,generatesrevenue,andcanreducesmugglingmotivatedbytaxdif-ferentialsinthelocalregion.

» Emphasizingthattobaccotaxesareama-jorsourceofstaterevenueshouldincreasepoliticalsupport.

» Loweringtaxesharmspublichealth,de-creasesrevenuemorethanreducingsmug-glingincreasesit,andprovidesadditionalincentiveforthetobaccoindustrytospreadmisinformation.Taxratedifferencesarenottheprimaryprobleminlarge-scalesmuggling.Totheextentthattheyareanimportantfactor,itmakesmuchmoresenseforlow-taxjurisdictionstoraisetheirratesratherthanviceversa.

■■ Recognize the importance of strong law en-forcement. Generallawenforcementandanti-corruptioneffortsplayanimportantroleinaddressingillicittobaccosales.

» Support and prioritize combating organized crime and political corruption. Themorepo-liticalcorruptionandorganizedcrimeinanarea,themoreappealingitwillbetotobaccosmugglers.Thesetypesoffactorsmaybelessobviousinfluencesthanlocaltobaccotaxrates,buttheyareatleastasimportantandinsomecasesmoreimportant.

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Strategies to Combat Illicit Tobacco Trade

» Work with customs near the border. Borderstatesandlocalitiesneedtoincreaseaware-nessoftobaccosmugglingissuesandworkcloselywithU.S.Customstogenerateef-fectivelocalstrategies.

■■ Be flexible with law enforcement approaches. Aslawsandpolicieschange,sowillthemeth-odsofsmuggling.Beawareofdifferenttac-ticssmugglersmightuseandreadytoadjustenforcementaccordingly.

■■ Stay focused on key players. Statesshouldpri-oritizethelargest,mostorganizedoperations.Whileindividualtaxevasiontendstoincreaseafterataxhike,itusuallywanesratherquicklyasconsumersseekconvenienceoversavings.Pursuingsmall-timesmugglersorindividualsusuallyisnotagooduseoflawenforcementresourcesbecauseitdoesnotaddresstheun-derlyingcausesoreffectsoftheproblem,seemsparticularlydraconianforalegalproductandisthuspoliticallyunpopular,andisexceedinglydifficultandimpracticaltomonitor.Localgov-ernmentsshouldensurethattheirlawenforce-menteffortstargetthelarge-scaleorganizedoperationsandkeyplayersthatposetherealthreattopublichealth.

■■ Encourage federal solutions to problems with sales on Native American lands and military commissaries. Whenaproblemisbeyondthelegalreachofastateorlocality,itcanstillplayaroleinraisingpublicawarenessoftheproblem,explainingthechallengesitfaces,andincreasingsupportforafederalresponse.

B. Both State/Local Governments and Advocacy Organizations

■■ Partner with local tribal governments. StateandlocalgovernmentsandorganizationsmustpartnerwithsovereignNativeAmericantribestocombatsmuggling.

» Allow tribes to keep any state taxes they collect. Thisapproachhasbeentriedinsomestatesinordertoequalizethepricesonreservations

andsurroundingareas.106 Inreturnfortribescollectingstatetaxesonreservationsales,thestateagreesthatthetribecankeepthetaxrevenues.Thestatestilllosestaxrevenuesbutbenefitsfromareductioninnon-Nativestravelingtoreservationstopurchasetax-freetobaccoproducts.

» Offer other benefits to tribes. Similarly,thestatemightofferotherstate-sponsoredbenefitstotribemembersinexchangefortobaccotaxcollection.Theofferingscouldbetailoredtolocalneedsandresources.

» Support Native American public health programs. Manypartiesindisputesabouttobaccotaxesconceptualizetheissueassolelyfinancial.However,NativeAmeri-cansthemselveshavethehighestsmokingratesintheUnitedStates.107 AproactivefocusonNativeAmericanhealthissueshaslongbeenlackingindebatesaboutsmugglingandwouldbenefiteveryone.StatesmightoffertofundNativehealthprogramsinexchangefortaxcollectioncompliance.Healthadvocacyorganizationscanalsoofferhealthprogramstailoredtotheneedsoflocaltribes.SuchprogramscouldworkwiththeIndianHealthSer-vicetoaddressunmetneedsduetolackoffundingandmightofferassistancewithsmokingcessationandprovideeducationabouttheharmfuleffectsofsmokingandtheroleoftaxesinreducingsmokingratesandassociatedhealthproblems.

■■ Apply for funding opportunities for state and local projects related to national security. Asconcernsaboutnationalsecurityincrease,sohasfunding.Usetheconnectionbetweenillicittobaccoandnationalsecurityissuestoobtainlocalgrantsthatareavailablefornationalsecurityprojects.Combatingto-baccosmugglingcanoftenbenefitbothpublichealthandnationalsecurity.

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Tobacco Control Legal Consortium

Conclusion

Illicittobaccotrade,whichincludessmuggling,bootlegging,andrelatedtaxevasionschemes,isamajorglobalproblem.Giventhehighprofitpotentialandlenientpenaltiesfortobaccosmug-gling,thisactivityisoftenregardedasalow-riskcrimebycriminalorganizations.WhileitisclearthatsomeNativeAmericantribesaresellinglargeamountsofcigarettestonon-tribalmem-bers,theuniquestatusofNativeAmericantribescreatesmanybarrierstostateenforcement.Statesmustdeveloppartnershipswithlocaltribalgov-ernments,involvingthemasactiveparticipantsinstateeffortstocombatsmuggling.Notonlydoesillicittobaccotradehaveafinancialimpactonstates,whichlosebillionsofdollarsannuallyduetounpaidtobaccotaxes,butcontrabandtobaccooperationshavebeenlinkedtoterror-istorganizations,whichjeopardizesnationalsecurity.Althoughseveralfederallawsaddress

illegaltobaccotrade,enforcementischallengingandrequirescomplexcoordinationwithmanyfederalagencies.Local,stateandtribalgovern-mentscanhelpcombatillicittobaccotradebyexpandinglocaleffortstoaddressthisproblemintheirjurisdictionsandbycoordinatingwithandsharinginformationwithfederalenforcementagencies.Healthadvocacyorganizationscanalsoplayaroleinsupportinglawenforcementeffortsbysharinginformationandbestpractices.

About the Author

JessAlderman,MD,JD,isaHealthLaw&PolicyConsultantfornon-profit,academic,andgovernmentalorganizations.SheisanaffiliatedfacultymemberattheSchoolofPublicHealthandHealthProfessionsattheUniversityatBuffalo,SUNY.

Endnotes1 LukJoossensetal.,The Impact of Eliminating the Global Illicit Cigarette Trade,105Addiction1640,

1645(2010).2 GaryFields,States Go To War on Cigarette Smuggling,WallSt.J.,July20,2009,available athttp://on-

line.wsj.com/article/SB124804682785163691.html%23printMode.3 FrankJ.Chaloupka,AydaYurekli&GeoffreyT.Fong,Tobacco Taxes as a Tobacco Control Strategy,21To-

baccoControl172,172(2012)[hereinafterChaloupkaetal.,Tobacco Taxes as Tobacco Control];FrankJ.Chalopka,KurtStraif,&MariaE.Leon,Effectiveness of Tax and Prices Policies in Tobacco Control,20TobaccoControl235,235(2011)[hereinafterChaloupkaetal.,Tax and Prices Policies].

4 LukJoossens&MartinRaw,From Cigarette Smuggling to Illicit Tobacco Trade,21TobaccoControl230,231(2012)[hereinafterJoossens&Raw,From Cigarette Smuggling to Illicit Tobacco Trade].

5 WorldHealthOrg.,WHOFrameworkConventiononTobaccoControl4(2003),available at http://whqlibdoc.who.int/publications/2003/9241591013.pdf.

6 U.S.Gov’tAccountabilityOffice,IllicitTobacco:VariousSchemesAreUsedtoEvadeTaxesandFees16(March2011),available at http://www.gao.gov/assets/320/316372.pdf[hereinafterGAO].

7 TePingChen,Smoke2U:TobaccoSalesTakeOffinCyberspace,iWatchNews.org(Dec.19,2008,12:00AM),http://www.iwatchnews.org/print/6352[hereinafterChen,Tobacco Sales in Cyberspace].

8 WorldHealthOrg.,Tax Avoidance and Illicit Production and Distribution,available athttp://www.who.int/tobacco/economics/tax_avoidance_and_illicit/en/index.html(lastviewedJune26,2012).

9 LukJoossensetal.,HowEliminatingtheGlobalIllicitCigaretteTradeWouldIncreaseTaxRevenueandSaveLives5(2009),available at http://www.tobaccofreeunion.org/assets/Techni-calpercent20Resources/Economicpercent20Reports/Howpercent20Eliminatingpercent20thepercent-20Globalpercent20Illicitpercent20Cigarettepercent20Tradepercent20Wouldpercent20Increaseper-cent20Taxpercent20Revenuepercent20andpercent20Savepercent20Livespercent20-percent20EN.pdf[hereinafterJoossensetal.,GlobalIllicitCigaretteTrade].

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Strategies to Combat Illicit Tobacco Trade

10 SariHorwitz,Cigarette Smuggling Linked to Terrorism,Wash.Post,June8,2004,atA01,available at http://www.washingtonpost.com/ac2/wp-dyn/A23384-2004Jun7?language=printer;BobOrr,Cigarette Smuggling Costs States Billions,CBSNews(Oct.18,2011,7:14PM),http://www.cbsnews.com/2100-18563_162-20122250.html.

11 SeeChen,Tobacco Sales in Cyberspace,supranote7.12 Id.13 Id.14 PressRelease,OfficeoftheAtt’yGen.oftheStateofIdaho,AttorneysGeneralandATFJoinwith

CreditCardCompaniestoPreventIllegalInternetCigaretteSales(March17,2005),available at http://www.ag.idaho.gov/media/newsReleases/2005/nr_03172005b.html.

15 SeeUPS to Stop Shipping Cigarettes to Individuals,L.A.Times,Oct.25,2005,http://articles.latimes.com/2005/oct/25/business/fi-rup25.3.

16 PressRelease,StateofCal.Dep’tofJustice,OfficeoftheAttorneyGen.,AttorneyGeneralBrownPre-ventsFirstRegionalBankfromEnablingOnlineTobaccoSales(Sep.18,2008),available at http://oag.ca.gov/news/press_release?id=1612.

17 Joossens&Raw,From Cigarette Smuggling to Illicit Tobacco Trade,supranote4,at232.18 BritishDep’tofHealth,AnnualReportoftheChiefMedicalOfficerontheState

ofPublicHealth2004:TobaccoandBorders:DeathMadeCheaper18(2004),available at http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/dh_4115781.pdf.

19 Joossensetal.,GlobalIllicitCigaretteTrade,supranote9.20 Joossens&Raw,From Cigarette Smuggling to Illicit Tobacco Trade,supranote4,at232,(citingLukJoos-

sensetal.,Issues in the Smuggling of Tobacco Products,in TobaccoControlPoliciesinDevelopingCountries(PrabhatJha&FrankJ.Chaloupkaeds.,2000)).

21 CampaignforTobacco-FreeKids,TheBigCigaretteCompaniesandCigaretteSmuggling(2003),available at http://www.tobaccofreekids.org/research/factsheets/pdf/0044.pdf[hereinafterCam-paignforTobacco-FreeKids,TheBigCigaretteCompanies].

22 Id.23 TePingChen,Smoking Dragon, Royal Charm,iWatchNews(Oct.20,200812:00AM),available at

http://www.iwatchnews.org/print/6358;GAO,supranote6.24 CampaignforTobacco-FreeKids,TheBigCigaretteCompanies,supranote21.25 Orr,supranote10.26 MarinaWalkerGuevara&KateWillson,Big Tobacco’s New York Black Market,inCenterforPublic

Integrity,TobaccoUnderground:TheBoomingGlobalTradeinSmuggledCigarettes(Dec.19,2008),available at http://www.publicintegrity.org/investigations/tobacco/articles/entry/1084/.

27 Horwitz,supranote10.28 KateWillson,Terrorism and Tobacco: Extremists, Insurgents Turn to Cigarette Smuggling,inCenterfor

PublicIntegrity,TobaccoUnderground:TheBoomingGlobalTradeinSmuggledCiga-rettes( June29,2009),available at http://www.publicintegrity.org/investigations/tobacco/articles/en-try/1441/[hereinafterWillson,Terrorism and Tobacco].

29 Orr,supranote10.30 Fields,supranote2.31 Orr,supranote10.32 GAO,supranote6,at14.33 KateWillson,The Guy in the Wheelchair: How an El Paso Smuggler Moved a Half-Billion Cigarettes Across

America,in CenterforPublicIntegrity,TobaccoUnderground:TheBoomingGlobalTradeinSmuggledCigarettes(Oct.20,2008),available at http://www.publicintegrity.org/investigations/tobacco/articles/entry/715/

34 Orr,supranote10.Forexample,aFloridamanwhopleadedguiltyin2009toevadingmorethan$6.5millionintaxesbysmugglingmorethan27millioncigarettesfromtheU.S.intoEuropereceiveda24-monthsentence.PressRelease,U.S.Dep’tofJustice,CutlerBayResidentPleadsGuiltytoSmuggling(Aug.14,2009),available at http://www.justice.gov/usao/fls/PressReleases/090814-01.html.

35 Willson,Terrorism and Tobacco,supranote28;Guevara&Willson,supranote26.36 Horwitz,supranote10;Willson,Terrorism and Tobacco,supranote28.37 Orr,supranote10.

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Tobacco Control Legal Consortium

38 SeeChristopherBanthin,Cheap Smokes: State and Federal Responses to Tobacco Tax Evasion Over the Inter-net,14HealthMatrix325,349-50(2004).

39 Joossens&MartinRaw,Progress in Combating Cigarette Smuggling: Controlling the Supply Chain,17TobaccoControl399,399(2008)[hereinafterJoossens&Raw,Progress in Combating Cigarette Smug-gling];LukJoossens&MartinRaw,Education and Debate: How Can Cigarette Smuggling Be Reduced?,321BMJ947,947(Oct.14,2000)[hereinafterJoossens&Raw, Education and Debate].

40 Joossens&Raw, Education and Debate,supranote39,at949.41 Id.at947;Guevara&Willson,supranote26.42 Joossens&Raw,Progress in Combating Cigarette Smuggling,supranote39;MarinaWalkerGuevara,

Overview,in CenterforPublicIntegrity,TobaccoUnderground:TheBoomingGlobalTradeinSmuggledCigarettes(Oct.20,2008),available at http://www.publicintegrity.org/investigations/tobacco/pages/introduction/;SusanWiltshireetal.,“They’re Doing People a Service” – Qualitative Study of Smoking, Smuggling, and Social Deprivation,323BMJ203,203( July282001);Guevara&Willson,supranote26.

43 Joossens&Raw,Progress in Combating Cigarette Smuggling,supranote39;CampaignforTobacco-FreeKids,TheBigCigaretteCompanies,supranote21.

44 Id.45 Guevara,supranote42.46 Joossens&Raw,From Cigarette Smuggling to Illicit Tobacco Trade,supranote4,at232.47 Joossens&Raw,Education and Debate,supranote39,at947;CampaignforTobacco-FreeKids,The

BigCigaretteCompanies,supranote21.48 Joossens&Raw,Education and Debate,supranote39,at947.49 Id.50 LukJoossens&MartinRaw,Cigarette Smuggling in Europe: Who Really Benefits?,7TobaccoControl

66,67(1998)[hereinafterJoossens&Raw,Cigarette Smuggling in Europe].51 CampaignforTobacco-FreeKids,TheBigCigaretteCompanies,supranote21.52 Chaloupkaetal.,Tobacco Taxes as Tobacco Control,supranote3,at176-77;Joossens&Raw,Cigarette

Smuggling in Europe,supranote50,at70.53 See,e.g.,Wash.v.ConfederatedTribesofColvilleIndianReservation,447U.S.134(1980).54 See,e.g.,SantaClaraPueblov.Martinez,436U.S.49(1978).55 Guevara&Willson,supranote26.56 Id.57 Id.58 Id.59 Id.60 Chen,Tobacco Sales in Cyberspace,supranote7.61 Moev.ConfederatedSalish&KootenaiTribesofFlatheadReservation,425U.S.463(1976)(holding

thatstatesmayimposesalestaxesongoodssoldbymembersofanIndiannationonreservationlandtopurchaserswhoarenotmembersofthenation,particularlywhenitisthenon-memberpurchaserwhobearstheultimatetaxburdenunderstatelaw).

62 Dep’tofTaxation&FinanceofNewYorkv.MilhelmAttea&Bros.Inc.,512U.S.61(1994).63 Guevara&Willson,supranote26.64 OneidaNationv.Cuomo,645F.3d154(2dCir.2011).65 GAO,supranote6.66 Id.;Chen,Tobacco Sales in Cyberspace,supranote7.67 SeeWiltshireetal.,supranote42,at205.68 Joossens&Raw,Education and Debate,supranote39,at947.69 Joossens&Raw,Progress in Combating Cigarette Smuggling,supranote39.70 Willson,Terrorism and Tobacco,supranote28.71 Id.;Joossens&Raw,Progress in Combating Cigarette Smuggling,supranote39,at403.72 HaoTang,DavidW.Cowling&ErinM.Abramsohn,California’s Cigarette and Tobacco Products Licens-

ing Act, Tax Stamp Law, and Their Impact on Smuggling and Other Tax Evasion Activities,4AsianJ.WTO&Int’lHealthL&Pol’y159(2009).

17

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73 Guevara&Willson,supranote26.74 Id.;PressRelease,Am.LungAss’n,HealthOrganizationsPraiseSigningofCigaretteTaxEvasionBill

(December15,2008),available at http://www.lung.org/associations/states/new-york/pressroom/news-releases/2008/health-organizations.html.

75 Banthin,supranote38,at346.76 Brown&WilliamsonTobaccoCorp.v.Pataki,320F.3d200(2dCir.2003).77 Joossens&Raw,From Cigarette Smuggling to Illicit Tobacco Trade,supranote4,at233.78 StephanieNebehay,WHO Brokers Deal to Stamp Out Tobacco Smuggling,Reuters,April4,2012,avail-

able at http://www.reuters.com/assets/print?aid=USBRE8330QZ20120404.79 Seeid.80 Id.81 Id.82 U.S.HouseComm.onHomelandSec’yRepublicanstaff,TobaccoandTerror:HowCigarette

SmugglingisFundingourEnemiesAbroad1,available at http://www.foxnews.com/projects/pdf/Cigarette_smuggling_042408.pdf.

83 Horwitz,supranote10.a84 Willson,Terrorism and Tobacco,supranote28.85 Id.86 Pub.L.No.107–296,116Stat.2135(2002).87 15U.S.C.§§375-378(1949).88 Chen,Tobacco Sales in Cyberspace,supranote7.89 Id.;Banthin,supranote38,at340.90 18U.S.C.§§2341-2346.(1978).91 Pub.L.No.109-177,Tit.I§121,120Stat.192(2005).92 Pub.L.No.111–154,124Stat.1087(2009).93 Id.§2.94 TheU.S.PostalServicelacksthecapacitytoverifycustomerageandthelegalauthoritytoinspectFirst

Classpackageswithoutawarrant.UnitedStatesPostalInspectionService,Frequently Asked Questions,available athttps://postalinspectors.uspis.gov/contactUs/faq.aspx.

95 Pub.L.No.111–154,§3.96 CampaignforTobacco-FreeKids,ThePACTActandIndianTribes(2010),available at http://

www.tobaccofreekids.org/research/factsheets/pdf/0362.pdf[hereinafterCampaignforTobacco-FreeKids,ThePACTActandIndianTribes].

97 Pub.L.No.111–154,§5.98 Id.§2.99 Id.§4.10021USC§387t(2009).10115U.S.C.§§1451-1461(1967).10219U.S.C.§1484(Supp.2010).10319U.S.C.§1304(2006).104Id.105Id.106CampaignforTobacco-FreeKids,StateOptionstoPreventandReduceCigaretteSmug-

glingandBlockOtherIllegalStateTobaccoTaxEvasion( June23,2011),available at http://www.tobaccofreekids.org/research/factsheets/pdf/0274.pdf[hereinafterCampaignforTobacco-FreeKids,StateOptions].

107U.S.Ctrs.forDiseaseControl&Prevention,Cigarette Smoking Among Adults — United States, 2007,57(45)Morbidity&MortalityWeeklyReport1221(2008),available at http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5745a2.htm.

About the Tobacco Control Legal Consortium

The Tobacco Control Legal Consortium is a network of legal programs supporting tobacco control policy change throughout the United States. Drawing on the expertise of its collaborating legal centers, the Consortium works to assist communities with urgent legal needs and to increase the legal resources available to the tobacco control movement. The Consortium’s coordinating office, located at William Mitchell College of Law in St. Paul, Minnesota, fields requests for legal technical assistance and coordinates the delivery of services by the collaborating legal resource centers. Our legal technical assistance includes help with legislative drafting; legal research, analysis and strategy; training and presentations; preparation of friend-of-the-court legal briefs; and litigation support.