The Justice Department is proposing new regulations aimed at cracking down on the diversion of legal tobacco products onto the illegal market. The new regulations would expand a cigarette trafficking law, the Contraband Cigarette Trafficking Act, to cover smokeless tobacco, set up new reporting requirements and lower the minimum number of cigarettes required for a shipment to constitute illegal smuggling.
Organized crime and international terrorist groups including Hezbollah and al-Qaeda have links to illegal tobacco trafficking, according to investigations by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and other law enforcement agencies.
ATF would have an expanded mandate under the new rules, which were proposed in the Federal Register last week. The proposed rules would impose new reporting requirements on companies that have delivery sales of more than 10,000 cigarettes.
They also would make it a crime for any person knowingly to ship, transport, receive, possess, sell, distribute, or purchase in excess of 10,000 cigarettes without paying state taxes. The previous definition of contraband cigarettes applied to purchases of more than 60,000 cigarettes.
The regulations would extend the law to apply to contraband smokeless tobacco, defined as any quantity above 500 single-unit consumer-sized cans or packages. Smokeless tobacco seized under the law could be either used in law enforcement operations or destroyed under the new guidelines.
The regulations would allow state and local governments or anyone with a federal tobacco permit to a bring civil lawsuit against companies and distributors who violate the law.
According to the Justice Department, billions of dollars in tax revenue are lost each year because of illegal tobacco trafficking. Since the enactment of the Contraband Cigarette Trafficking Act in 1978, cigarette smuggling has grown in complexity. Smugglers are not only crossing state borders, but international borders as well, ATF said.