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Prevent All Cigarette Trafficking Act of 2008

Press Release

Location: Washington, DC

PREVENT ALL CIGARETTE TRAFFICKING ACT OF 2008 -- (Extensions of Remarks - September 10, 2008)

* Mr. KING of New York. Mr. Speaker, I rise today in support of the Prevent All Cigarette Trafficking Act of 2007, referred to as the ``PACT Act,'' introduced by my colleague from New York, Mr. Weiner.

* As we approach the seventh anniversary of the terrorist attacks of September 11, 2001, the threat from radical Islamic terrorist groups remains very real. Supporters of Hamas, Hezbollah, and al Qaeda are constantly adapting and seeking new means to further and finance their cause.

* As law enforcement officials make it more difficult to raise and move money through ``traditional'' terror financing avenues, criminal enterprise is increasingly the life-blood of terrorist groups. Smuggling illicit cigarettes is a perfect example. This illicit activity is more than just a matter of health concern and hundreds of millions of dollars in lost tax revenue--it is a matter of national security.

* An April 2008 Committee on Homeland Security Republican staff report based on numerous interviews with Federal, State, and local law enforcement officials, estimated that millions of dollars in profits generated by tight-knit, Arab-based illicit cigarette smuggling operations are being remitted to the Middle East, where these funds directly or indirectly finance groups such as Hezbollah, Hamas, and al Qaeda. The report outlined how these criminal and terrorist organizations purchase tax free cigarettes on Indian reservations or in lower tobacco tax States, transport them to New York City, affix counterfeit tax stamps, and sell them for full retail price. A well-organized network could generate up to $50,000 on an average load of 1,500 cartons of contraband cigarettes.

* The report further found that New York State's policy of forbearance, despite a U.S. Supreme Court ruling that upheld States' rights to tax all cigarettes sold on Indian reservations to nonmembers of the tribe, has resulted in an environment where cigarette smuggling rings operate with virtual impunity.

* The PACT Act aims to attack part of the problem in States such as New York. It strengthens current Federal contraband cigarette laws through increased transparency in recordkeeping, enhanced existing penalties, and increased compliance standards for Internet sellers. In addition, it provides law enforcement more resources to help close critical gaps in enforcement that will make it more difficult for criminal and terrorist organizations to exploit disparities in tobacco tax rates among States.

* Another way to restrict terrorist organizations from obtaining revenue by exploiting low-cost cigarettes is for States like New York to abandon their policies of forbearance and take action to fully enforce their tax laws. By refusing to collect taxes on cigarettes sold to nonresidents of Indian reservations, the State of New York is fueling a boom in illicit cigarette smuggling and inflating the profit margins of criminal and terrorist smuggling networks. Enforcing the tax laws will generate up to $800 million in lost tax revenue while cutting off a revenue stream to those who wish to do harm to our Nation.

* Mr. Speaker, while H.R. 4081 is a good first step, I look forward to working with my colleagues to strengthen this bill as it moves through the legislative process to help keep terrorists from exploiting this revenue source.

* I urge my colleagues to support passage of this bill.

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