HB 381 -- GRAY MARKET TOBACCO

CO-SPONSORS:  Hoppe, Hosmer

COMMITTEE ACTION:  Voted "do pass" by the Committee on Local
Government and Related Matters by a vote of 12 to 3.

This bill bans the sale and distribution of "gray market
cigarettes."  Gray market cigarettes are cigarettes that are
packaged for sale outside the United States and may not contain
required health warnings and ingredient lists.  These cigarettes
may also be distributed under names and packages similar to
cigarettes manufactured for sale in the United States.  Persons
are prohibited from affixing any stamp or meter impressions to
gray market cigarettes.  Persons violating this law are guilty
of a class D felony.  The bill allows the Director of the
Department of Revenue to revoke or suspend the license of a
wholesaler who violates this law.  In addition, the director may
impose a civil penalty not greater than 500% of the retail value
of the cigarettes involved or $5,000.  Gray market cigarettes
sold or distributed in violation of this law are considered
contraband and subject to seizure and forfeiture.  In addition,
violations are subject to remedies or penalties available for a
violation of unlawful trade practices.  This law is to be
enforced by the Director of Revenue through the State Highway
Patrol and all local police authorities.  The Attorney General
has concurrent power with the prosecuting attorneys of the state
to enforce this law.

FISCAL NOTE:  Estimated Net Cost to General Revenue Fund of
$205,291 in FY 2002, $203,466 in FY 2003, and $208,626 in FY
2004.

PROPONENTS:  Supporters say that the state needs an enforcement
tool to keep gray market tobacco from coming into the state.
Federal laws do not address violation of gray market laws.
Forty-five other states have passed a similar law.  This will
protect the Master Settlement Agreement because gray market
cigarettes do not pay into the fund.  Gray market cigarettes are
also unfair competition to domestic cigarettes.

Testifying for the bill were Representative Hosmer; R.J.
Reynolds Tobacco; Brown and Williamson Tobacco; Lorillard
Tobacco; Quick Trip Corporation; Missouri Retailers Association;
Missouri Wholesale Distributors Association; Missouri Chamber of
Commerce; Missouri AFL-CIO; and Philip Morris.

OPPONENTS:  Those who oppose the bill say that gray market
cigarettes meet federal standards and they should be able to
sell them.  Companies that sell gray market tobacco do put money
in escrow for the tobacco settlement.  Only cigarettes
manufactured outside the United States are brought in and sold.
Big tobacco companies want to limit what can be sold.  They want
to control the market and retail prices.  Certain retailers need
the gray market business to stay in business.  This bill will
hurt competition.

Testifying against the bill were Dirt Cheap Corporation; and
U-Gas Incorporated.

Steve Bauer, Legislative Analyst

Missouri House of Representatives
Last Updated November 26, 2001 at 11:43 am