Fact Sheet - Tobacco Enforcement
ATF is the federal law enforcement agency with primary jurisdiction over the Contraband Cigarette Trafficking Act to stop tobacco diversion or the interstate transportation, possession and sale of non-state tax-paid cigarettes and smokeless tobacco.
Tobacco traffickers purchase cigarettes and/or other tobacco products from low tax states and sell them in high tax states. They can also use counterfeit tobacco that is manufactured or imported into the United States without any tax payment to be sold at a discounted price to consumers.
ATF disrupts and dismantles criminal organizations by identifying and arresting offenders who traffic tobacco products, and conducts financial investigations with ongoing criminal investigations in order to seize and deny further access to assets and funds used by criminals and terrorist organizations.
The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is the federal law enforcement agency with primary jurisdiction over the Contraband Cigarette Trafficking Act (CCTA). In pertinent part, the CCTA addresses:
- Illegal possession and/or transportation and distribution of more than 10,000 unstamped (non-state tax-paid) cigarettes.
- Illegal possession and/or transportation and distribution of other tobacco product (OTP).
ATF also enforces the Prevent All Cigarette Trafficking (PACT) Act, which, among other things, requires:
- All distributors of cigarettes and smokeless tobacco who sell or advertise in interstate commerce are to register with and report certain information to ATF and with to the tax administrators of the states into which shipments of tobacco are made or advertised.
- Tobacco sellers who ship to end-users comply with established reporting, labeling, delivery and recordkeeping requirements, and establishes the list of non-compliant delivery sellers.
The primary goal of ATF in combating tobacco trafficking is to enforce the federal laws relating to tobacco trafficking of domestically produced and counterfeit cigarettes and tobacco products, which can have a nexus to violent organized crime, and to protect the revenue of the federal and state governments.
Tobacco traffickers purchase cigarettes and/or OTP from low tax states and sell it in higher tax states. The financial gain of tobacco trafficking is immediately apparent. Legal distributors pay significant taxes on their product, including $1.01 per pack in federal excise tax; from $0.17 to $6.16 per pack in state and local excise taxes; and typically $0.60 per pack to the Master Settlement Fund for health care costs incurred by the states because of tobacco use by their citizens.
For example, purchasing legally taxed products in Virginia (a low excise tax state) for approximately $4.70 a pack and reselling them in New York City (a high excise tax city in a high excise tax state) for approximately $13.50, creates an estimated $8.80 per pack profit margin. In this example, a single carton (10 packs) yields a profit of $88; a single case (60 cartons) yields $5,280, and a single truckload (typically 800 cases) yields $4.2 million.
Counterfeit cigarettes are imitations of legitimate brand name cigarettes, serving to deceive consumers. These counterfeit cigarettes are manufactured under low quality-control standards and are smuggled into the United States outside of legitimate commerce to avoid paying taxes attributed to legitimate tobacco manufacturers and sellers.
The trade of counterfeit tobacco products is a rapidly growing global problem. While all cigarettes are dangerous and are known to cause disease, counterfeit cigarettes often contain higher levels of tar, nicotine and carbon monoxide than genuine cigarettes, and may contain contaminants such as sand and packaging materials. Counterfeit cigarettes pose a greater health risk to consumers and cost taxpayers millions in lost revenue.