I thank my colleagues for supporting S.1147, the Prevent All Cigarette Trafficking (PACT) Act.  The 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.  With its passage, we cut off a source of funding for terrorists and criminals raise more money, enhance states’ ability to collect significant amounts of tax revenue, and further limit kids from easy access to tobacco products sold over the internet. 

By passing this bill, we are solving a serious problem that is growing every day.  In 1998, the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE) had six active tobacco smuggling investigations.  Today there are more than 400 active tobacco smuggling investigations.

Last November, BATFE announced that they were charging fourteen people with paying over $8 million, nearly 40 firearms, and drugs to purchase more than 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.  The problem is significant, and today we are giving law enforcement the additional tools they need to root out and end cigarette trafficking and related crimes.

The number of cases alone does not sufficiently put this problem into perspective.  The amount of money involved is truly astonishing.  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 squeeze their budgets even tighter by cutting programs and increasing college tuition.  Tobacco smuggling may provide some with cheap access to cigarettes, but those cheap cigarettes are coming at a significant cost to the rest of us.

The cost to Americans is not merely financial.  Tobacco smuggling has developed into a popular, and highly profitable, means of generating revenue for criminal and terrorist organizations.  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. 

In July 2004, the 9/11 Commission recommended that “[v]igorous efforts to track terrorist financing must remain front and center in U.S. counterterrorism efforts.”  And the 9/11 commission stressed that it is important to rely, in part, on traditional criminal tools to disrupt terrorist fundraising efforts, since they often raise money by trafficking in counterfeit goods.  Specifically, it said, “[c]ounterterrorism investigations often overlap or are cued by other criminal investigations, such as money laundering or the smuggling of contraband.”  All too often, that contraband is cigarettes.

By passing this bill today, we are sending a strong message that terrorist organizations can no longer exploit the weaknesses in our tobacco laws to generate significant amounts of money.  Cutting off financial support to terrorist groups is an indispensable part of protecting the country against future attacks.

According to the Government Accountability Office (GAO), cigarette trafficking investigations are growing more and more complex, and take longer to resolve.  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.  The PACT Act does that by enhancing BATFE’s authority to enter premises to investigate and enforce cigarette trafficking laws.  It also increases penalties for cigarette trafficking under the Jenkins Act from a misdemeanor to a felony.  Instead of a slap on the wrist, we need to show these people we mean business and make sure the investigative efforts of our law enforcement officers pays off.  Unless these existing laws are strengthened, traffickers will continue to operate with near impunity.

Just as important, though, we must enable our country’s law enforcement officials to combat the cigarette smugglers of the 21st century.  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. 

Without innovative enforcement methods, law enforcement will not be able to effectively address the growing challenges facing them today.  The PACT Act sets out to do just that by empowering states to go after out-of-state sellers who are violating their tax laws in federal court.  It also cuts off their method of delivery.  A significant part of this problem involves the shipment of contraband cigarettes through the United States Postal Service (USPS).  This bill would cut off online vendors’ access to the USPS.  We would treat cigarettes just like we treat alcohol, making it illegal to ship them through the U.S. mails and cutting off a large portion of the delivery system.

In addition to cracking down on tobacco smuggling, the bill will keep tobacco out of the hands of kids.  One of the primary ways children get access to cigarettes today is on the Internet and through the mails.  The PACT Act contains a strong age verification section that will prevent online sales of cigarettes by requiring sellers to use a method of shipment that includes a signature and photo ID check upon delivery.  Most states already have similar laws on the books, and this would simply make sure that we have a national standard to ensure that the Internet is not being used to evade ID checks required at our grocery and convenience stores.

It is important to point out that this bill has been carefully drafted, following negotiations with numerous interested parties, including the Campaign for Tobacco Free Kids, the National Association of Attorneys General, the Department of Justice, and various tribal groups, to ensure that it would be strictly neutral in regards to Tribal sovereignty and Tribal immunity rights.  The PACT Act would neither expand nor contract the current scope of Tribal sovereignty and immunity (as determined by federal statute and judicial interpretations).  Also, the bill makes clear that it cannot be used to expand, contract, or otherwise change the scope of Tribal sovereignty and immunity. 

The common sense approach of the PACT Act has brought together a strong coalition of supporters.  Tobacco companies and public health advocates; state law enforcement and federal law enforcement; and Republicans and Democrats alike all agree that this is an issue that must be addressed.  Today, we begin to provide law enforcement authorities with the tools they need to combat a very serious threat to our states’ coffers, national security, and public health. 

Again, I thank leadership, the cosponsors of the bill, and all of my colleagues for their support of the PACT Act.