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Code · BILL · 113th Congress · S. 826 (Introduced in Senate) — To amend the Internal Revenue Code of 1986 to reform and enforce taxation of tobacco products. · Sec. 203

Sec. 203. Improved marking and labeling

1,090 words·~5 min read·/bill/113/s/826/is/section-203

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Subsection
(b)of section 5723 is amended to read as follows: Subject to paragraphs (2), (3), and (4), every package of tobacco products, processed tobacco, or cigarette papers or tubes shall, before removal, bear the marks, labels, and notices that the Secretary by regulation prescribes. Each person who is a manufacturer or importer of tobacco products or processed tobacco shall (in accordance with regulations prescribed by the Secretary) ensure that, before any product intended for sale or distribution within the United States is removed, a unique identification marking is affixed to or forms part of each package of tobacco product or processed tobacco manufactured or imported by such person for sale or distribution. Any markings required to be placed on a tobacco product or processed tobacco package by this subsection shall be placed on the innermost sealed container visible from the outside of the individual package. For any tobacco product or processed tobacco package that contains multiple smaller packages of tobacco products or processed tobacco, any markings required to be so placed on tobacco product or processed tobacco packages shall be placed on all the individual tobacco product or processed tobacco packages. To facilitate efficient tracking and tracing of tobacco products or processed tobacco through the distribution system, all manufacturers or importers of tobacco products or processed tobacco shall, in addition to such unique identification marking, also, in accordance with regulations prescribed by the Secretary, ensure that unique identification markings are affixed to or form part of aggregate packing modes (such as cartons, cases, and master cases for cigarettes). The Secretary shall determine the size, location, and methods for such markings. The Secretary shall establish regulations requiring that all persons within the distribution chain, up to but not including the ultimate retailer, utilize the unique identification markings on aggregate packing modes to facilitate the tracking and tracing of tobacco products or processed tobacco through the distribution system. A unique identification marking shall be affixed to or form part of each package of tobacco product or processed tobacco that is exported, or sold for export, that distinguishes it from those products or processed tobacco intended for sale or distribution within the United States. The Secretary shall by regulation prescribe the size, location, and other characteristics of such marking, and it may contain a serial number that is assigned to the country of export, except that no such serial number shall be required on tobacco products or processed tobacco sold at retail to consumers by duty free stores for consumption beyond the jurisdiction of the internal revenue laws of the United States. Such tobacco products or processed tobacco shall instead bear markings indicating the tobacco product or processed tobacco is only for duty-free sale to consumers, as prescribed through regulation by the Secretary, before the product or processed tobacco is removed. Not later than 3 years after the date of the enactment of the Tobacco Tax and Enforcement Reform Act , the Secretary shall by regulation require the use of a unique identification marking on all products subject to tax under this chapter. . Section 5723 is amended by adding at the end the following new subsection: No tobacco product or processed tobacco may be sold, offered for sale, distributed, mailed, or otherwise delivered for final sale to any consumer in the United States unless the unique identification marking that meets the requirements of this section (and any regulations prescribed thereunder) is affixed to or forms part of the package in which it is contained. The Secretary shall design such system to coordinate and avoid interference with State, local, and Indian tribal tax stamps and markings, facilitate collection of the tax imposed by this chapter, impede contraband tobacco trafficking, minimize counterfeit marking, allow for more effective tracking and tracing of tobacco products and processed tobacco, facilitate the enforcement of related Federal laws, and utilize such available technology as may promote the purposes of this chapter. The Secretary shall prescribe the method and manner in which such unique identification markings are to be distributed, purchased, and applied to or made part of tobacco product and processed tobacco packages, and may provide for the cancellation of such markings. The unique identification marking must provide (through the marking or record associated with the marking) such information as the Secretary by regulation prescribes, including: A unique serial number or tracking code for each tobacco product or processed tobacco package or aggregate package. The name and address of the person purchasing the marking (and, if different, of the person ensuring the marking is affixed to or made part of the package). The name and address of the first unrelated person purchasing or otherwise receiving the tobacco product or processed tobacco from the person who ensures the marking is affixed to or made part of the package and the date of such purchase or receipt. The information described in subparagraph
(C)may be required to, to the extent practicable— be cryptographically encrypted, and be readable by a portable scanning device (or similar device) to be utilized by regulatory and law enforcement officials at the time and place of inspection, or be otherwise accessible remotely at such time and place. For purposes of this subsection, the term unrelated person means a person other than a related person within the meaning of section 267(b) or 707(b)(1). . Section 5723, as amended by subsection (b), is amended by adding at the end the following new subsections: For purposes of this section, the term package means a pack, box, carton, or container of any kind or, if no other container, any wrapping (including cellophane), in which a tobacco product or processed tobacco is sold, offered for sale, distributed, or otherwise delivered for final sale to any consumer. For purposes of this section, the term unique identification marking means a device in such design and denomination as the Secretary authorizes by regulation that is affixed to or made part of a package of a tobacco product or processed tobacco. Such markings shall contain overt security features for public authentication and covert security features embedding a unique, secure, encrypted identifier onto the marking, enabling law enforcement authentication, production control, and tracking and tracing of the product or processed tobacco bearing the marking. . The Secretary of the Treasury shall consult with the Secretary of Health and Human Services as may be appropriate to carry out the purposes of subsection (f), and paragraphs (2), (3), and
(4)of subsection (b), of section 5723 of the Internal Revenue Code of 1986 (as added by this section).
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