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NCAI seeks Senate amendments to PACT Act

WASHINGTON –The National Congress of American Indians has asked the Senate to honor longstanding trade treaties and tribal sovereignty by amending a proposed cigarette bill to protect the nations’ legal tobacco industry in Indian country.

During its June mid-year conference in Niagara Falls, N.Y., the NCAI asked senators to amend the Prevent All Cigarette Trafficking Act.

The PACT Act would prohibit the U.S. Postal Service from delivering cigarettes and certain other tobacco products, putting Indian-owned mail order tobacco businesses out of operation and effectively destroying a mail order industry that was developed, nurtured and grown by the country’s indigenous peoples.

The resolution asks the Senate to adopt amendments to the PACT Act that honor federal treaty obligations guaranteeing free trade in Indian country, confirm that Indian nations can continue to use USPS to conduct their legal tobacco trade, and ensure that other governments are not empowered to override Indian tribes’ sovereign authority to govern their territories.

The U.S. Postal Service is the only remaining delivery system open to Indian-owned mail order tobacco businesses. A few years ago, the National Association of Attorneys General, led by former New York Attorney General Eliot Spitzer who resigned in 2008 after being exposed in a prostitution scandal, pressured UPS, FedEx and DHL to sign “voluntary” agreements not to transport tobacco.

While the act prohibits USPS from delivering cigarettes and smokeless tobacco, it provides no such prohibition on the delivery of cigars.

The NCAI notes that tribal nations have “traditionally and routinely enacted tribal laws to control all activity within (their) territories,” citing the Seneca Nation’s Import-Export Law, “a comprehensive revenue and regulatory law governing the sale of tobacco and other retail products within Seneca Nation Territories.”

The resolution names the Seneca Nation of Indians as an example of a tribe that has a treaty – the 1794 Treaty of Canandaigua – which includes a “guarantee that the U.S. will never permit anyone to ‘disturb the Seneca Nation. … in the free use and enjoyment of its lands,’” but also notes that “other Indian tribes enjoy similar privileges and immunities.”

The Seneca Nation is regarded as having perfected the mail order tobacco trade business model. The nation licenses hundreds of tribal individuals and businesses that are represented by the Seneca Free Trade Association, a nonprofit organization dedicated to developing commerce and industry within the nation’s territories. A 75 cent a carton import tax is levied on retailers and the revenue generated is expended on social services for tribal members.

The Seneca government has a vigilant system of oversight, and businesses violating its regulatory system are dealt with strictly. For example, businesses that violate a prohibition against selling cigarettes to minors have their licenses revoked.

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The Bureau of Alcohol, Tobacco, Firearms and Explosives has applauded Seneca for its cooperation and regulatory system. According to the resolution, Seneca has “worked cooperatively with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives in multiple enforcement actions related to tobacco sales within Seneca nation Territories.”

The resolution quotes a May 12 BATFE letter to Seneca, expressing “gratitude. … for assistance and support recently provided by the Seneca Nation of Indians to help curtail illegal cigarette trafficking,” and stating that “we at ATF believe that the Seneca Nation is taking the right steps toward ensuring the lawful operation of Seneca members involved in tobacco distribution and we look forward to our continued cooperative efforts.”

Around 95 percent of the mail order tobacco industry is dominated by Indian businesses, which has led some Indian business people to believe the PACT Act is racially targeting them.

The mail order tobacco business began around 15 years ago when none of the big tobacco companies – Philip Morris (Altria), Reynolds American (RJR) and Lorillard – thought it was worthwhile to develop “remote sales.” They had a stranglehold on local convenience stores and didn’t see a need to develop a new sales model.

Indian cigarette manufacturers, on the other hand, weren’t able to get a foothold in convenience stores for their generic and so-called “fourth tier” tobacco products, so they developed mail order sales using direct mail marketing and, ultimately, the Internet as a way to get their products, which are cheaper than big tobacco’s so-called “premium tobacco” products, to the retail market.

And they’ve been hugely successful all over the country, cutting into big tobacco’s market share, which explains why Philip Morris enthusiastically supports the PACT Act. In a statement last fall, Philip Morris spokesman David Sutton said the company “is proud to support the PACT Act. The sale of untaxed and under-taxed cigarettes and smokeless tobacco products remotely – via the Internet, mail or phone – harms legitimate wholesale and retail businesses, consumers and government budgets.”

Sutton’s implication that Indian mail order tobacco businesses are somehow illegitimate adds weight to the Indian business people’s belief that the proposed legislation targets them.

The PACT Act has been bouncing around the federal legislature for years and is traditionally initiated by New York legislators as part of that state’s ongoing tobacco tax wars in which various governors, state and federal legislators have tried to force tribes to collect tobacco and other taxes on behalf of the state.

This year’s version of the PACT Act, like last year’s, was sponsored by Congressman Anthony Weiner, D-N.Y. Congress passed the bill May 21 by 397-11.

The Senate bill was introduced on the same day by Sen. Herb Kohl, D-Wis., a colleague of Sen. Charles Schumer, D-N.Y., on the Senate Judiciary Committee. Schumer has sponsored the bill in the past. Washington insiders claim Kohl took up its sponsorship this year as a favor to Schumer.

The bill is co-sponsored by Schumer and Sen. Kirsten Gillibrand, D-N.Y., among others. A New York Times article March 27 revealed that in the mid-90s Gillibrand represented Philip Morris in its efforts to block the Justice Department from obtaining evidence that tobacco company executives had lied about the negative health effects of smoking.