Cigarette Web sites use U.S. Mail, upset Senecas

Source from:  Buffalo News 10/26/2010

DutyFreeDepot.com offers bargain prices on cartons of tax-free cigarettes, including Marlboros, Winstons and other popular American-made brands. Smokers can get a price break, the Web site says, by ordering as many as 20 cartons of cigarettes at a time. DutyFreeDepot.com is one of perhaps dozens of offshore cigarette Web sites advertising that they don't charge taxes but do use the U.S. Postal Service to deliver cheap smokes to people all over the United States. "We work only with the regular United States Postal Service to keep costs down," another offshore company says on its Web site. "We Deliver to anywhere in the USA." Such advertisements upset Seneca Nation business people, because - starting in June - a new federal law called the Prevent All Cigarette Trafficking Act, stopped them from using the U.S. Mail to make commercial cigarette deliveries. "From everything we can determine, foreign cigarette Web sites are still sending product into this country," said Margaret A. Murphy, a Buffalo lawyer who represents Native American cigarette businesses. "In my opinion, there's a loophole in the PACT Act that is so big you could drive a truckload of cigarettes through it," Murphy said. J. C. Seneca, a Seneca Tribal Council leader who also runs a cigarette business on the Cattaraugus Reservation, agrees with Murphy. "It isn't fair," Seneca said. "Our businesses employ local people and spend our money in Western New York, but we're the ones hit with the burdens of all these regulations." Are offshore Web sites still using the Postal Service to send cigarettes to customers in America? If they are, they are doing it unlawfully, said Gerald J. McKiernan, chief spokesman for the Postal Service in Washington. "A huge problem" And if companies tell customers they have the legal right to sell cigarettes through the U. S. Mail, those claims are wrong, McKiernan said in an interview with The Buffalo News. "They can't use the U. S. Mail," McKiernan said. "If we encounter a shipment of cigarettes coming into the U. S., we'll send it back to the country it came from. We've done this on a number of occasions." "When the PACT Act took effect, we sent a letter to every postal agency in the world, notifying them of this policy," McKiernan added. Repeated efforts last week by a reporter to reach DutyFree- Depot.com and other offshore sites by telephone or e-mail were unsuccessful. A federal law enforcement official, who spoke on the condition that he would not be named, called the smuggling of cigarettes into the United States "a huge problem." "It is very difficult to control, especially if these companies are shipping these cigarettes in plain, unmarked packages," the official said. "We already have bomb-sniffing dogs checking packages. Do we need to start using tobacco-sniffing dogs?" It is much harder for federal agents to enforce a law against foreign companies than it is to enforce it against companies located on American soil, the official added. It is also difficult to assess how widespread the problem is, because the offshore companies that are doing it don't report their sales to any U. S. government agency, said Eric Lindblom, policy research director at the Campaign For Tobacco- Free Kids. Lindblom's organization is a strong supporter of the PACT Act, and he is an expert on the new federal law. "Trying to stop people from using the mail to do this is difficult. [Senders] can flatten out cartons of cigarettes and send them in packages that look like ordinary pieces of business mail," Lindblom said. One offshore Web site examined by The Buffalo News said that if a customer orders five cartons of cigarettes, they will arrive in five separate packages on five different dates. Another Web site tells customers that its packaging is designed to "appear to contain a book" rather than cigarettes. Lindblom said the PACT Act is still in its infancy, and over time, he believes that the Postal Service and U. S. Customs & Border Protection inspectors will come up with effective ways to check misleading packages and enforce the law. "It is easier for law enforcement to crack down on companies in the U. S., because they can run sting operations on them, and agents can show up at the doors of the company," Lindblom said. Murphy said she believes it will be difficult - if not impossible - for the federal government to stop foreign businesses from sending cigarettes to buyers in the United States. "I think the PACT Act is doing nothing more than setting up a very active black market for these cigarettes coming in from offshore companies," Murphy said. "Many of the smokeshops in Western New York have already shut down, and we've lost those jobs, and the foreign Internet smokeshops are going to get the business we're losing." E-mail request One of her Native American clients recently received an e-mail from an offshore cigarette company, asking him to forward all his Internet requests from customers to the offshore company, Murphy said. "The locals can't do it anymore, so the offshore companies want them to pass their customers to them, and the locals would get a fee for doing it," Murphy said. She said her client declined the offer. James S. Calvin, president of the New York Association of Convenience Stores, said he is aware of offshore Web sites selling cigarettes, but added that he was not aware that some of the sites claim they still use the U. S. Postal Service to make the deliveries. "[Offshore Web sites] do seem to have more of a presence in the cigarette tax evasion picture these days, but it's hard to quantify it," said Calvin, who said there are about 7,500 convenience stores in the state. Calvin said a much bigger problem for the convenience stores is competing with cigarette stores on Indian reservations. The convenience stores have to collect $4.35 a pack in state taxes. Indian-owned businesses, because of an ongoing federal court case, do not have to collect the taxes. "Since the state's higher [cigarette] taxes went into effect on July 1, we've lost more of our customers than ever to the reservation stores," Calvin said. Enditem