Prepared Testimony and Statement for the Record of
Scott Ramminger
President, American Wholesale Marketers Assn.
Hearing on HR 4081
Before the House Judiciary Committee
U.S. House of Representatives
May 1, 2008

Thank you for providing the opportunity to testify in support of HR 4081, legislation that would address the widespread problem of illegal Internet sales of cigarettes.  My name is Scott Ramminger and I am the President of the American Wholesale Marketers Association (AWMA).  AWMA represents more than 600 member companies in the supply channel – distributors, manufacturers, suppliers, brokers and retailers, all working together to get products to the consumer.  Our industry represents product sales of over $85 billion annually nationwide.  The products they distribute include tobacco, candy, foodservice, general merchandise, snacks and health and beauty care to name just a few.

We thank the Members of the Committee for holding this hearing and for introducing legislation to address the serious problem of illegal Internet sales of cigarettes.  In this statement, I will summarize AWMA’s concerns over this issue and express our support for HR 4081, the bill now before the Committee.

AWMA has cited illegal Internet sales of tobacco as one of the most pressing problems facing our industry.  In 2005, our Association undertook a study to determine just how widespread this problem was and whether various efforts to combat these illegal sales were effective.  As you know, an agreement was reached between major credit card companies, states attorneys general, and the Bureau of Alcohol, Tobacco and Firearms to halt the use of credit cards for Internet cigarette sales, and a voluntary effort was also made by various carriers – UPS and FedEx included – to end delivery of these products, all in an attempt to crack down on these illegal sales.  Unfortunately, the results of our own study were very troubling and indicate that despite these – and other – efforts to end these transactions, the illegal sale of these products continues to flourish.

As a sampling of what our study found, AWMA easily used a credit card to purchase 14 cartons of cigarettes – eight cartons were within the U.S. and six were from foreign countries.  Of the 30 random sites used to purchase cigarettes, 53% allowed the use of a credit card – Visa, Diners, Mastercard, and/or American Express.  And none of the cigarettes purchased had any U.S. state tax stamps and in no case were taxes collected at the time of purchase.  It should be noted, that the AWMA notified the Virginia Department of Taxation of the tax stamp omission and paid the appropriate amount of tax to comply with the law.  Even more troubling, age verification was virtually nonexistent.  Most sites simply had a statement on the home page indicating that a purchaser had to be of a certain age to buy cigarettes but nothing beyond to prevent an underage person from buying the cigarettes.  Some asked for a simple check off that the buyer was over 18.

It was clear from our informal study that efforts to restrict the illegal cigarette sales via the Internet are falling short of the mark.  We believe that federal legislation is needed to address this issue and we are supporting HR 4081.

From our industry’s perspective, every sale of an illegal tobacco product over the Internet translates into a loss for responsible, legitimate, law-abiding distributors and retailers across the country.  And, it’s not just our industry that’s impacted – states are losing millions of dollars each year in unpaid excise taxes and enforcement expenses.  And, more important, many of the cigarettes sold over the Internet are ending up in the hands of under-age smokers because of the lack of safeguards inherent in these types of remote sales. 

I commend the Committee for its efforts on behalf of HR 4081 and for its recognition as to the need for federal legislation to address this serious problem.  I urge the Committee to approve HR 4081 and I appreciate the opportunity to submit this testimony on behalf of the American Wholesale Marketers Association.

Respectfully,

Scott Ramminger
President
American Wholesale Marketers Association