Passed by the House March 17, 2003 Yeas 98   FRANK CHOPP ________________________________________ Speaker of the House of Representatives Passed by the Senate April 8, 2003 Yeas 46   BRAD OWEN ________________________________________ President of the Senate | I, Cynthia Zehnder, Chief Clerk of the House of Representatives of the State of Washington, do hereby certify that the attached is SUBSTITUTE HOUSE BILL 1930 as passed by the House of Representatives and the Senate on the dates hereon set forth. CYNTHIA ZEHNDER ________________________________________ Chief Clerk | |
Approved April 16, 2003. GARY F. LOCKE ________________________________________ Governor of the State of Washington | April 16, 2003 - 4:13 p.m. Secretary of State State of Washington |
State of Washington | 58th Legislature | 2003 Regular Session |
READ FIRST TIME 03/10/03.
AN ACT Relating to restricting the ability of tobacco product manufacturers, wholesalers, and distributors and other persons to violate or to facilitate the violation of chapter 70.157 RCW; amending RCW 82.24.130, 82.24.145, and 82.24.210; adding a new chapter to Title 70 RCW; prescribing penalties; providing an effective date; and declaring an emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 The legislature finds that violations of RCW
70.157.020 threaten the integrity of the tobacco master settlement
agreement, the fiscal soundness of the state, and the public health.
The legislature finds the enacting procedural enhancements will help
prevent violations and aid the enforcement of RCW 70.157.020 and
thereby safeguard the master settlement agreement, the fiscal soundness
of the state, and the public health. The provisions of this act are
not intended to and shall not be interpreted to amend chapter 70.157
RCW.
NEW SECTION. Sec. 2 The following definitions apply to this
chapter unless the context clearly requires otherwise.
(1) "Brand family" means all styles of cigarettes sold under the
same trademark and differentiated from one another by means of
additional modifiers or descriptors, including, but not limited to,
"menthol," "lights," "kings," and "100s," and includes any brand name
alone or in conjunction with any other word, trademark, logo, symbol,
motto, selling message, recognizable pattern of colors, or any other
indicia of product identification identical or similar to, or
identifiable with, a previously known brand of cigarettes.
(2) "Board" means the liquor control board.
(3) "Cigarette" has the same meaning as in RCW 70.157.010(d).
(4) "Director" means the director of the department of revenue
except as otherwise noted.
(5) "Directory" means the directory to be created and published on
a web site by the attorney general pursuant to section 3(2) of this
act.
(6) "Distributor" has the same meaning as in RCW 82.26.010(3),
except that for purposes of this chapter, no person is a distributor if
that person does not deal with cigarettes as defined in this section.
(7) "Master settlement agreement" has the same meaning as in RCW
70.157.010(e).
(8) "Nonparticipating manufacturer" means any tobacco product
manufacturer that is not a participating manufacturer.
(9) "Participating manufacturer" has the meaning given that term in
section II(jj) of the master settlement agreement.
(10) "Qualified escrow fund" has the same meaning as in RCW
70.157.010(f).
(11) "Stamp" means "stamp" as defined in RCW 82.24.010(7) or as
referred to in RCW 43.06.455(4).
(12) "Tobacco product manufacturer" has the same meaning as in RCW
70.157.010(i).
(13) "Units sold" has the same meaning as in RCW 70.157.010(j).
(14) "Wholesaler" has the same meaning as in RCW 82.24.010.
NEW SECTION. Sec. 3 (1) Every tobacco product manufacturer whose
cigarettes are sold in this state, whether directly or through a
wholesaler, distributor, retailer, or similar intermediary or
intermediaries, shall execute and deliver on a form prescribed by the
attorney general a certification to the attorney general, no later than
the thirtieth day of April each year, certifying under penalty of
perjury that, as of the date of such certification, the tobacco product
manufacturer is either a participating manufacturer; or is in full
compliance with RCW 70.157.020(b)(1), including all payments required
by that section or this act.
(a) A participating manufacturer shall include in its certification
a list of its brand families. The participating manufacturer shall
update the list thirty calendar days prior to any addition to or
modification of its brand families by executing and delivering a
supplemental certification to the attorney general.
(b) A nonparticipating manufacturer shall include in its
certification: (i) A list of all of its brand families and the number
of units sold for each brand family that were sold in the state during
the preceding calendar year; (ii) a list of all of its brand families
that have been sold in the state at anytime during the current calendar
year; (iii) indicating, by an asterisk, any brand family sold in the
state during the preceding calendar year that is no longer being sold
in the state as of the date of such certification; and (iv) identifying
by name and address any other manufacturer of brand families in the
preceding or current calendar year. The nonparticipating manufacturer
shall update the list thirty calendar days prior to any addition to or
modification of its brand families by executing and delivering a
supplemental certification to the attorney general.
(c) In the case of a nonparticipating manufacturer, the
certification shall further certify:
(i) That the nonparticipating manufacturer is registered to do
business in the state or has appointed a resident agent for service of
process and provided notice as required by section 4 of this act;
(ii) That the nonparticipating manufacturer: (A) Has established
and continues to maintain a qualified escrow fund; and (B) has executed
a qualified escrow agreement that has been reviewed and approved by the
attorney general and that governs the qualified escrow fund;
(iii) That the nonparticipating manufacturer is in full compliance
with RCW 70.157.020(b)(1) and this chapter, and any rules adopted
pursuant thereto; and
(iv)(A) The name, address, and telephone number of the financial
institution where the nonparticipating manufacturer has established a
qualified escrow fund required pursuant to RCW 70.157.020(b)(1) and all
rules adopted thereunder; (B) the account number of the qualified
escrow fund and any subaccount number for the state of Washington; (C)
the amount the nonparticipating manufacturer placed in the fund for
cigarettes sold in the state during the preceding calendar year, the
date and amount of each deposit, and evidence or verification as may be
deemed necessary by the attorney general to confirm the foregoing; and
(D) the amount and date of any withdrawal or transfer of funds the
nonparticipating manufacturer made at any time from the fund or from
any other qualified escrow fund into which it ever made escrow payments
pursuant to RCW 70.157.020(b)(1) and all rules adopted thereunder.
(d) A tobacco product manufacturer may not include a brand family
in its certification unless: (i) In the case of a participating
manufacturer, the participating manufacturer affirms that the brand
family is to be deemed to be its cigarettes for purposes of calculating
its payments under the master settlement agreement for the relevant
year, in the volume and shares determined pursuant to the master
settlement agreement; and (ii) in the case of a nonparticipating
manufacturer, the nonparticipating manufacturer affirms that the brand
family is to be deemed to be its cigarettes for purposes of RCW
70.157.020(b)(1). Nothing in this section limits or otherwise affects
the state's right to maintain that a brand family constitutes
cigarettes of a different tobacco product manufacturer for purposes of
calculating payments under the master settlement agreement or for
purposes of RCW 70.157.020.
(e) A tobacco product manufacturer shall maintain all invoices and
documentation of sales and other information relied upon for such
certification for a period of five years, unless otherwise required by
law to maintain them for a greater period of time.
(2) Not later than November 1, 2003, the attorney general shall
develop and publish on its web site a directory listing all tobacco
product manufacturers that have provided current and accurate
certifications conforming to the requirements of this section and all
brand families that are listed in these certifications, except as noted
below:
(a) The attorney general shall not include or retain in the
directory the name or brand families of any nonparticipating
manufacturer that has failed to provide the required certification or
whose certification the attorney general determines is not in
compliance with subsection (1)(b) and (c) of this section, unless the
attorney general has determined that the violation has been cured to
the satisfaction of the attorney general.
(b) Neither a tobacco product manufacturer nor brand family shall
be included or retained in the directory if the attorney general
concludes, in the case of a nonparticipating manufacturer, that: (i)
Any escrow payment required pursuant to RCW 70.157.020(b)(1) for any
period for any brand family, whether or not listed by the
nonparticipating manufacturer, has not been fully paid into a qualified
escrow fund governed by a qualified escrow agreement that has been
approved by the attorney general; or (ii) any outstanding final
judgment, including interest, for a violation of RCW 70.157.020(b)(1)
that has not been fully satisfied for the brand family or manufacturer.
(c) The attorney general shall update the directory as necessary in
order to correct mistakes and to add or remove a tobacco product
manufacturer or brand family to keep the directory in conformity with
the requirements of this chapter. The attorney general shall transmit,
by email or other practicable means to each wholesaler or distributor,
notice of any addition to or removal from the directory of any tobacco
product manufacturer or brand family. Unless otherwise provided by
agreement between the wholesaler or distributor and a tobacco product
manufacturer, the wholesaler or distributor shall be entitled to a
refund from a tobacco product manufacturer for any money paid by the
wholesaler or distributor to the tobacco product manufacturer for any
cigarettes of the tobacco product manufacturer still held by the
wholesaler or distributor on the date of notice by the attorney general
of the removal from the directory of that tobacco product manufacturer
or the brand family of the cigarettes. The attorney general shall not
restore to the directory the tobacco product manufacturer or the brand
family until the tobacco product manufacturer has paid the wholesaler
or distributor any refund due.
(d) Every wholesaler and distributor shall provide and update as
necessary an electronic mail address to the attorney general for the
purpose of receiving any notifications as may be required by this
chapter.
(e) A tobacco product manufacturer included in the directory may
request that a new brand family be certified and added to the
directory. Within forty-five business days of receiving the request,
the attorney general will respond by either: (i) Certifying the new
brand family; or (ii) denying the request. However, in cases where the
attorney general determines that it needs clarification as to whether
the requestor is actually the tobacco product manufacturer, the
attorney general may take more time as needed to clarify the request,
to locate and assemble information or documents needed to process the
request, and to notify persons or agencies affected by the request.
(f) The web site will state that this act applies only to
cigarettes including, pursuant to the definition of "cigarettes" in
this act, roll-your-own tobacco.
(3) It is unlawful for any person (a) to affix a stamp to a package
or other container of cigarettes of a tobacco product manufacturer or
brand family not included in the directory, or to pay or cause to be
paid the tobacco products tax on any package or container; or (b) to
sell, offer, or possess for sale in this state or import for sale in
this state, any cigarettes of a tobacco product manufacturer or brand
family not included in the directory.
NEW SECTION. Sec. 4 (1) Any nonresident or foreign
nonparticipating manufacturer that has not registered to do business in
the state as a foreign corporation or business entity shall, as a
condition precedent to having its brand families included or retained
in the directory, appoint and continually engage without interruption
the services of an agent in this state to act as agent for the service
of process on whom all process, and any action or proceeding against it
concerning or arising out of the enforcement of this chapter and RCW
70.157.020(b)(1), may be served in any manner authorized by law. The
service shall constitute legal and valid service of process on the
nonparticipating manufacturer. The nonparticipating manufacturer shall
provide the name, address, phone number, and proof of the appointment
and availability of the agent to the satisfaction of the attorney
general.
(2) The nonparticipating manufacturer shall provide notice to the
attorney general thirty calendar days prior to termination of the
authority of an agent and shall further provide proof to the
satisfaction of the attorney general of the appointment of a new agent
no less than five calendar days prior to the termination of an existing
agent appointment. In the event an agent terminates an agency
appointment, the nonparticipating manufacturer shall notify the
attorney general of the termination within five calendar days and
include proof to the satisfaction of the attorney general of the
appointment of a new agent.
(3) Any nonparticipating manufacturer whose cigarettes are sold in
this state, who has not appointed and engaged an agent as required in
this section, shall be deemed to have appointed the secretary of state
as the agent and may be proceeded against in courts of this state by
service of process upon the secretary of state. However, the
appointment of the secretary of state as agent shall not satisfy the
condition precedent for having the brand families of the
nonparticipating manufacturer included or retained in the directory.
NEW SECTION. Sec. 5 (1) In addition to the reporting
requirements under RCW 70.157.010(j) and the rules adopted thereunder,
not later than twenty-five calendar days after the end of each calendar
month, and more frequently if directed by the director, each wholesaler
and distributor shall submit information the director requires to
facilitate compliance with this chapter, including, but not limited to,
a list by brand family of the total number of cigarettes, or, in the
case of roll-your-own, the equivalent stick count for which the
wholesaler or distributor affixed stamps during the previous calendar
month or otherwise paid the tax due for the cigarettes. Each
wholesaler and distributor shall maintain and make available to the
director, all invoices and documentation of sales of all
nonparticipating manufacturer cigarettes and any other information
relied upon in reporting to the attorney general or the director for a
period of five years.
(2) Information or records required to be furnished to the
department, the board, or the attorney general are confidential and
shall not be disclosed. However, the director and the board are
authorized to disclose to the attorney general any information received
under this chapter and requested by the attorney general for purposes
of determining compliance with and enforcing the provisions of this
chapter. The director, the board, and the attorney general may share
with each other the information received under this chapter, and may
share information with other federal, state, or local agencies,
including without limitation the board, only for purposes of
enforcement of this chapter, RCW 70.157.020, or corresponding laws of
other states. If a tobacco product manufacturer that is required to
establish a qualified escrow fund under RCW 70.157.020 disputes the
attorney general's determination of what that manufacturer needs to
place into escrow, and the attorney general determines that the dispute
can likely be resolved by disclosing reports from the relevant
distributors and wholesalers indicating the sales or purchases of the
tobacco manufacturer's products, then the attorney general shall
request voluntary waivers of confidentiality so that the reports may be
disclosed to the tobacco product manufacturer to help resolve the
dispute. If the waivers are provided, then the director and the
attorney general are authorized to disclose the waived confidential
information collected on the sales or purchases of cigarettes to the
tobacco product manufacturer. However, before the attorney general or
the director discloses the waived confidential information, the tobacco
product manufacturer must provide to the attorney general all records
relating to its sales or purchases of cigarettes in dispute. The
information provided to a tobacco product manufacturer pursuant to this
subsection (2) shall be limited to brands or products of that
manufacturer only, may be used only for the limited purpose of
determining the appropriate escrow deposit, and may not be disclosed by
the tobacco product manufacturer.
(3) The attorney general may require at any time from the
nonparticipating manufacturer proof, from the financial institution in
which the manufacturer has established a qualified escrow fund for the
purpose of compliance with RCW 70.157.020(b)(1), of the amount of money
in the fund, exclusive of interest, the amount and date of each deposit
to the fund, and the amount and date of each withdrawal from the fund.
(4) In addition to the information required to be submitted
pursuant to section 3 of this act, this section, and chapters 82.24 and
82.26 RCW, the director, the board, or the attorney general may require
a wholesaler, distributor, or tobacco product manufacturer to submit
any additional information including, but not limited to, samples of
the packaging or labeling of each brand family, as is necessary to
enable the attorney general to determine whether a tobacco product
manufacturer is in compliance with this chapter. If the director, the
board, or the attorney general makes a request for information pursuant
to this subsection (4), the tobacco product manufacturer, distributor,
or wholesaler shall comply promptly.
(5) A nonparticipating manufacturer that either: (a) Has not
previously made escrow payments to the state of Washington pursuant to
RCW 70.157.020; or (b) has not actually made any escrow payments for
more than one year, shall make the required escrow deposits in
quarterly installments during the first year in which the sales covered
by the deposits are made or in the first year in which the payments are
made. The director or the attorney general may require production of
information sufficient to enable the attorney general to determine the
adequacy of the amount of the installment deposit.
NEW SECTION. Sec. 6 (1) In addition to or in lieu of any other
civil or criminal remedy provided by law, upon a determination that a
wholesaler has violated section 3(3) of this act or any rule adopted
pursuant to this chapter, the director or the board may revoke or
suspend the license of the wholesaler in the manner provided by chapter
82.24 or 82.32 RCW. Each stamp affixed and each sale or offer to sell
cigarettes in violation of section 3(3) of this act shall constitute a
separate violation. For each violation of this chapter, the director
or the board may also impose a civil penalty in an amount not to exceed
the greater of five hundred percent of the retail value of the
cigarettes or five thousand dollars upon a determination of violation
of section 3(3) of this act or any rules adopted pursuant thereto. The
penalty shall be imposed in the manner provided by chapter 82.24 RCW.
(2) The attorney general may seek an injunction in superior court
to restrain a threatened or actual violation of section 3(3) or 5 (1)
or (4) of this act by a person and to compel the person to comply with
these sections. In any action brought pursuant to this section, the
state shall be entitled to recover the costs of investigation, costs of
the action, and reasonable attorney fees.
(3) It is unlawful for a person to: (a) Sell or distribute
cigarettes or (b) acquire, hold, own, possess, transport, import, or
cause to be imported cigarettes, that the person knows or should know
are intended for distribution or sale in the state in violation of
section 3(3) of this act. A violation of this subsection (3) is a
gross misdemeanor.
(4) Any violation of this chapter is not reasonable in relation to
the development and preservation of business and is an unfair and
deceptive act or practice and an unfair method of competition in the
conduct of trade or commerce in violation of RCW 19.86.020. Standing
to bring an action to enforce RCW 19.86.020 for violation of this
chapter shall lie solely with the attorney general. Remedies provided
by chapter 19.86 RCW are cumulative and not exclusive.
NEW SECTION. Sec. 7 (1) A determination of the attorney general
not to include or to remove from the directory a brand family or
tobacco product manufacturer shall be final agency action for purposes
of review under RCW 34.05.570(4).
(2) No person shall be issued a license or granted a renewal of a
license to act as a wholesaler unless the person has certified in
writing under penalty of perjury, that the person will comply fully
with this section.
(3) The first reports of wholesalers and distributors are due
August 25, 2003. The certifications by a tobacco product manufacturer
described in section 3(1) of this act are due September 15, 2003. The
directory described in section 3(2) of this act shall be published or
made available by November 1, 2003.
(4) The attorney general, the board, and the director may adopt
rules as necessary to effect the administration of this chapter.
(5) In any action brought by the state to enforce this chapter, the
state is entitled to recover the costs of investigation, expert witness
fees, costs of the action, and reasonable attorney fees.
(6) If a court determines that a person has violated this chapter,
the court shall order any profits, gain, gross receipts, or other
benefit from the violation to be disgorged and paid to the general
fund. Unless otherwise expressly provided, the remedies or penalties
provided by this chapter are cumulative to each other and to the
remedies or penalties available under all other laws of this state.
NEW SECTION. Sec. 8 If a court of competent jurisdiction finds
that the provisions of this act and chapter 70.157 RCW conflict and
cannot be harmonized, then the provisions of chapter 70.157 RCW shall
control. If any section, subsection, subdivision, paragraph, sentence,
clause, or phrase of this act causes chapter 70.157 RCW no longer to
constitute a qualifying or model statute, as those terms are defined in
the master settlement agreement, then that portion of this act shall
not be valid. If any section, subsection, subdivision, paragraph,
sentence, clause, or phrase of this act is for any reason held to be
invalid, unlawful, or unconstitutional, the decision shall not affect
the validity of the remaining portions of this act or any part thereof.
Sec. 9 RCW 82.24.130 and 1999 c 193 s 3 are each amended to read
as follows:
(1) The following are subject to seizure and forfeiture:
(a) Subject to RCW 82.24.250, any articles taxed in this chapter
that are found at any point within this state, which articles are held,
owned, or possessed by any person, and that do not have the stamps
affixed to the packages or containers; and any container or package of
cigarettes possessed or held for sale that does not comply with this
chapter.
(b) All conveyances, including aircraft, vehicles, or vessels,
which are used, or intended for use, to transport, or in any manner to
facilitate the transportation, for the purpose of sale or receipt of
property described in (a) of this subsection, except:
(i) A conveyance used by any person as a common or contract carrier
having in actual possession invoices or delivery tickets showing the
true name and address of the consignor or seller, the true name of the
consignee or purchaser, and the quantity and brands of the cigarettes
transported, unless it appears that the owner or other person in charge
of the conveyance is a consenting party or privy to a violation of this
chapter;
(ii) A conveyance subject to forfeiture under this section by
reason of any act or omission of which the owner thereof establishes to
have been committed or omitted without his or her knowledge or consent;
(iii) A conveyance encumbered by a bona fide security interest if
the secured party neither had knowledge of nor consented to the act or
omission.
(c) Any vending machine used for the purpose of violating the
provisions of this chapter.
(d) Any cigarettes that are stamped, sold, imported, or offered or
possessed for sale in this state in violation of section 3(3) of this
act. For the purposes of this subsection (1)(d), "cigarettes" has the
meaning as provided in section 2(3) of this act.
(2) Property subject to forfeiture under this chapter may be seized
by any agent of the department authorized to collect taxes, any
enforcement officer of the board, or law enforcement officer of this
state upon process issued by any superior court or district court
having jurisdiction over the property. Seizure without process may be
made if:
(a) The seizure is incident to an arrest or a search under a search
warrant or an inspection under an administrative inspection warrant; or
(b) The department, the board, or the law enforcement officer has
probable cause to believe that the property was used or is intended to
be used in violation of this chapter and exigent circumstances exist
making procurement of a search warrant impracticable.
(3) Notwithstanding the foregoing provisions of this section,
articles taxed in this chapter which are in the possession of a
wholesaler or retailer, licensed under Washington state law, for a
period of time necessary to affix the stamps after receipt of the
articles, shall not be considered contraband.
Sec. 10 RCW 82.24.145 and 1999 c 193 s 4 are each amended to read
as follows:
When property is forfeited under this chapter the department may:
(1) Retain the property or any part thereof for official use or
upon application by any law enforcement agency of this state, another
state, or the District of Columbia, or of the United States for the
exclusive use of enforcing the provisions of this chapter or the laws
of any other state or the District of Columbia or of the United States.
(2) Sell the property at public auction to the highest bidder after
due advertisement, but the department before delivering any of the
goods so seized shall require the person to whom the property is sold
to affix the proper amount of stamps. The proceeds of the sale and all
moneys forfeited under this chapter shall be first applied to the
payment of all proper expenses of any investigation leading to the
seizure and of the proceedings for forfeiture and sale, including
expenses of seizure, maintenance of custody, advertising, and court
costs. The balance of the proceeds and all moneys shall be deposited
in the general fund of the state. Proper expenses of investigation
includes costs incurred by any law enforcement agency or any federal,
state, or local agency.
(3) Notwithstanding the provisions of subsections (1) and (2) of
this section, cigarettes seized for a violation of RCW 82.24.035 or
section 3(3) of this act shall be destroyed. For the purposes of this
subsection (3) "cigarettes" has the same meaning as provided in section
2(3) of this act.
Sec. 11 RCW 82.24.210 and 1975 1st ex.s. c 278 s 68 are each
amended to read as follows:
The department of revenue may promulgate rules and regulations
providing for the refund to dealers for the cost of stamps affixed to
articles taxed herein, which by reason of damage become unfit for sale
and are destroyed by the dealer or returned to the manufacturer or
jobber. In the case of any articles to which stamps have been affixed,
and which articles have been sold and shipped to a regular dealer in
such articles in another state, the seller in this state shall be
entitled to a refund of the actual amount of the stamps so affixed,
less the affixing discount, upon condition that the seller in this
state makes affidavit that the articles were sold and shipped outside
of the state and that he has received from the purchaser outside the
state a written acknowledgment that he has received such articles with
the amount of stamps affixed thereto, together with the name and
address of such purchaser. The department of revenue may redeem any
unused stamps purchased from it at the face value thereof less the
affixing discount. A distributor or wholesaler that has lawfully
affixed stamps to cigarettes, and subsequently is unable to sell those
cigarettes lawfully because the cigarettes are removed from the
directory created pursuant to section 3(2) of this act, may apply to
the department for a refund of the cost of the stamps.
NEW SECTION. Sec. 12 Sections 1 through 8 of this act constitute
a new chapter in Title
NEW SECTION. Sec. 13 This act is necessary for the immediate
preservation of the public peace, health, or safety, or support of the
state government and its existing public institutions, and takes effect
July 1, 2003.