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HB 224: "An Act relating to a tobacco product manufacturer's compliance with certain statutory requirements regarding cigarette sales; and providing for an effective date."

00                             HOUSE BILL NO. 224                                                                          
01 "An Act relating to a tobacco product manufacturer's compliance with certain statutory                                  
02 requirements regarding cigarette sales; and providing for an effective date."                                           
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1.  The uncodified law of the State of Alaska is amended by adding a new section                         
05 to read:                                                                                                                
06       FINDINGS AND PURPOSE.  (a)  The legislature finds that                                                            
07            (1)  violations of AS 45.53 threaten the integrity of the tobacco product Master                             
08 Settlement Agreement recognized in AS 45.53.010, the fiscal soundness of the state, and the                             
09 public health; and                                                                                                      
10            (2)  enacting procedural enhancements will aid the enforcement of AS 45.53                                   
11 and safeguard the Master Settlement Agreement, the fiscal soundness of the state, and the                               
12 public health.                                                                                                          
13       (b)  The purpose of this Act is to implement the findings set out in (a) of this section.                         
14    * Sec. 2.  AS 43.50 is amended by adding new sections to read:                                                     
01     Article 5.  Compliance with Statutory Requirements Regarding Cigarette Sales.                                     
02            Sec. 43.50.500.  Tobacco product manufacturer certifications.  (a) Every                                   
03       tobacco product manufacturer whose cigarettes are sold in this state whether directly                             
04       or through a distributor, retailer, or similar intermediary or intermediaries shall                               
05       execute and deliver on a form or in the manner prescribed by the commissioner a                                   
06       certification to the commissioner, no later than April 30 of each year, certifying under                          
07       penalty of perjury that, as of the date of the certification, the tobacco product                                 
08       manufacturer is either a participating manufacturer or is in full compliance with                                 
09       AS 45.53.                                                                                                         
10            (b)  A participating manufacturer shall include in its certification a list of its                           
11       brand families.  The participating manufacturer shall update the list 30 days before any                          
12       addition or modification to its brand families by executing and delivering a                                      
13       supplemental certification to the commissioner.                                                                   
14            (c)  A non-participating manufacturer shall include in its certification a                                   
15       complete list of all of its brand families.  The non-participating manufacturer shall                             
16       update the list 30 days before any addition or modification to its brand families by                              
17       executing and delivering a supplemental certification to the commissioner.  A non-                                
18       participating manufacturer's certification must                                                                   
19                 (1)  separately list brand families of cigarettes and the number of units                               
20       sold for each brand family that was sold in the state during the preceding calendar                               
21       year;                                                                                                             
22                 (2)  list all of its brand families that have been sold in the state at any                             
23       time during the current calendar year;                                                                            
24                 (3)  indicate by an asterisk any brand family sold in the state during the                              
25       preceding calendar year that is no longer being sold in the state as of the date of the                           
26       certification; and                                                                                                
27                 (4)  identify by name and address any other manufacturer of the listed                                  
28       brand families in the preceding calendar year.                                                                    
29            (d)  For a non-participating manufacturer, the certification required by (a) of                              
30       this section shall additionally certify that the non-participating manufacturer                                   
31                 (1)  is registered to do business in the state or has appointed a resident                              
01       agent for service of process and provided notice of the appointment as required by                                
02       AS 43.50.530;                                                                                                     
03                 (2)  has                                                                                                
04                      (A)  established and continues to maintain a qualified escrow                                      
05            fund; and                                                                                                    
06                      (B)  executed a qualified escrow agreement that has been                                           
07            reviewed and approved by the Department of Law and that governs the                                          
08            qualified escrow fund; and                                                                                   
09                 (3)  is in full compliance with AS 45.53 and this section, and any                                      
10       regulations adopted under those statutes.                                                                         
11            (e)  For a non-participating manufacturer, the certification shall also include                              
12       the                                                                                                               
13                 (1)  name, address, telephone number, and electronic mail address of                                    
14       the financial institution where the non-participating manufacturer has established the                            
15       qualified escrow fund required under AS 45.53 and the regulations adopted under that                              
16       chapter;                                                                                                          
17                 (2)  account number of the qualified escrow fund and sub-account                                        
18       number for the State of Alaska;                                                                                   
19                 (3)  amount that the non-participating manufacturer placed in the                                       
20       qualified escrow fund for cigarettes sold in the state during the preceding calendar                              
21       year, the date and amount of each such deposit, and the evidence or verification                                  
22       considered necessary by the commissioner to confirm the information submitted under                               
23       this section; and                                                                                                 
24                 (4)  amounts of and dates of any withdrawal or transfer of money the                                    
25       non-participating manufacturer made at any time from the qualified escrow fund or                                 
26       from any other qualified escrow fund into which the non-participating manufacturer                                
27       ever made escrow payments in accordance with AS 45.53 and the regulations adopted                                 
28       under that chapter.                                                                                               
29            (f)  A tobacco product manufacturer may not include a brand family in its                                    
30       certification unless                                                                                              
31                 (1)  for a participating manufacturer, the participating manufacturer                                   
01       affirms that the brand family is to be considered to be its cigarettes for purposes of                            
02       calculating its payments under the Master Settlement Agreement for the relevant year,                             
03       in the volume and shares determined under the Master Settlement Agreement; and                                    
04                 (2)  for a non-participating manufacturer, the non-participating                                        
05       manufacturer affirms that the brand family is to be considered to be its cigarettes for                           
06       purposes of AS 45.53.                                                                                             
07            (g)  Nothing in this section shall be construed as limiting or otherwise affecting                           
08       the state's right to maintain that a brand family constitutes cigarettes of a different                           
09       tobacco product manufacturer for purposes of calculating payments under the Master                                
10       Settlement Agreement or for purposes of AS 45.53.                                                                 
11            (h)  A tobacco product manufacturer shall maintain all invoices and                                          
12       documentation of sales of cigarettes and other information relied upon for the                                    
13       certification for a period of five years, unless otherwise required by law to maintain                            
14       them for a greater period of time.                                                                                
15            Sec. 43.50.510.  Directory of cigarettes approved for sale and importation.                                
16       Not later than July 30 of each year, the commissioner shall develop and make                                      
17       available for public inspection a directory listing all tobacco product manufacturers                             
18       that have provided current and accurate certifications conforming to the requirements                             
19       of AS 43.50.500 and all brand families that are listed in those certifications, except as                         
20       follows:                                                                                                          
21                 (1)  the commissioner may not include or retain in the directory the                                    
22       name or brand families of any non-participating manufacturer that fails to provide the                            
23       required certification or whose certification the commissioner determines is not in                               
24       compliance with AS 43.50.500, unless the commissioner has determined that the                                     
25       violation has been cured to the satisfaction of the commissioner;                                                 
26                 (2)  neither a tobacco product manufacturer nor brand family shall be                                   
27       included or retained in the directory if the commissioner concludes that                                          
28                      (A)  for a non-participating manufacturer all escrow payments                                      
29            required under AS 45.53 for any period for any brand family, regardless of                                   
30            whether listed by the non-participating manufacturer, have not been fully paid                               
31            into a qualified escrow fund governed by a qualified escrow agreement that has                               
01            been approved by the Department of Law; or                                                                   
02                      (B)  all outstanding final judgments, including interest on those                                  
03            judgments, for violations of AS 45.53 have not been fully satisfied for the                                  
04            brand family and the manufacturer;                                                                           
05                 (3)  the commissioner shall update the directory as necessary in order to                               
06       correct mistakes and to add or remove a tobacco product manufacturer or brand                                     
07       families to keep the directory in conformity with the requirements of AS 43.50.500 -                              
08       43.50.590;                                                                                                        
09                 (4)  every licensee shall provide to the commissioner, and update as                                    
10       necessary, an electronic mail address for the purpose of receiving any notifications                              
11       that may be required by AS 43.50.500 - 43.50.590.                                                                 
12            Sec. 43.50.520.  Prohibition against sale or importation of cigarettes not in                              
13       the directory.  (a)  A person may not sell, offer, or possess for sale in this state, or                        
14       import for personal consumption in this state, cigarettes of a tobacco product                                    
15       manufacturer or brand family not included in the directory.                                                       
16            (b)  Under regulations adopted by the department, the department may allow a                                 
17       licensee a credit for the tax paid under this chapter on cigarettes that the licensee                             
18       destroys, or returns to the manufacturer or distributor, to avoid a violation of this                             
19       section if                                                                                                        
20                 (1)  the tobacco product manufacturer and brand family of the                                           
21       cigarettes were included in the directory at the time the licensee came into possession                           
22       of the cigarettes; and                                                                                            
23                 (2)  the tobacco product manufacturer or brand family was                                               
24       subsequently removed from the directory while the licensee was still in possession of                             
25       the cigarettes.                                                                                                   
26            Sec. 43.50.530.  Agent for service of process.  (a)  A non-resident or foreign                             
27       non-participating manufacturer that has not registered to do business in the state as a                           
28       foreign corporation or business entity shall, as a condition precedent to having its                              
29       brand families listed or retained in the directory, appoint and continually engage                                
30       without interruption the services of an agent in this state to act as agent for the service                       
31       of process on whom all process, and an action or proceeding against the non-                                      
01       participating manufacturer concerning or arising out of the enforcement of                                        
02       AS 43.50.500 - 43.50.590 and AS 45.53, may be served in any manner authorized by                                  
03       law.  The non-participating manufacturer shall provide the name, address, phone                                   
04       number, electronic mail address, and proof of the appointment and availability of the                             
05       agent to and to the satisfaction of the commissioner and the Department of Law.                                   
06            (b)  The non-participating manufacturer shall provide notice to the                                          
07       commissioner and the Department of Law 30 calendar days before termination of the                                 
08       authority of an agent and shall additionally provide proof to the satisfaction of the                             
09       Department of Law of the appointment of a new agent no less than five calendar days                               
10       before the termination of an existing agent appointment.  If an agent terminates an                               
11       agency appointment, the non-participating manufacturer shall notify the commissioner                              
12       and the Department of Law of the termination within five calendar days and shall                                  
13       include proof to the satisfaction of the Department of Law of the appointment of a new                            
14       agent.                                                                                                            
15            (c)  Any non-participating manufacturer whose products are sold in this state,                               
16       without appointing or designating an agent as required by this section is considered to                           
17       have appointed the commissioner of the Department of Community and Economic                                       
18       Development as its agent and may be proceeded against in courts of this state by                                  
19       service of process upon the commissioner of the Department of Community and                                       
20       Economic Development in the manner described by AS 10.06.175(b), regardless of                                    
21       whether the non-participating manufacturer is a corporation; however, the                                         
22       appointment of the commissioner of the Department of Community and Economic                                       
23       Development as the agent does not satisfy the condition precedent to having the non-                              
24       participating manufacturer's brand families listed or retained in the directory.                                  
25            Sec. 43.50.540.  Reporting and disclosure of information; escrow                                           
26       installments.  (a)  Not later than the end of the month following the month in which                            
27       cigarettes were imported or sold in the state, each licensee shall submit the                                     
28       information the commissioner requires to facilitate compliance with AS 43.50.500 -                                
29       43.50.590, including a list by brand family of the total number of cigarettes or in the                           
30       case of roll-your-own cigarettes, the equivalent stick count for which the licensee                               
31       during the previous calendar month paid the tax due for the cigarettes.  For a period of                          
01       five years the licensee shall maintain, and make available to the commissioner, all                               
02       invoices and documentation of sales of cigarettes of all non-participating                                        
03       manufacturers and any other information relied upon in reporting to the commissioner.                             
04            (b)  The commissioner is authorized to disclose to the Department of Law any                                 
05       information received under this chapter and requested by the Department of Law for                                
06       purposes of determining compliance with and enforcing the provisions of this chapter.                             
07       The commissioner and the Department of Law shall share with each other the                                        
08       information received under this chapter, and may share the information with other                                 
09       federal, state, or local agencies only for purposes of enforcement of AS 43.50.500 -                              
10       43.50.590, AS 45.53, or corresponding laws of other states.                                                       
11            (c)  The commissioner or Department of Law may require at any time that the                                  
12       non-participating manufacturer provide proof, from the financial institution in which                             
13       the manufacturer has established a qualified escrow fund for the purpose of                                       
14       compliance with AS 45.53, of the amount of money in the fund being held on behalf                                 
15       of the state and the dates of deposits, and listing the amounts of all withdrawals from                           
16       the fund and the dates of withdrawals.                                                                            
17            (d)  In addition to the information required to be submitted under (a) of this                               
18       section, the commissioner or the Department of Law may require a licensee or tobacco                              
19       product manufacturer to submit any additional information, including samples of the                               
20       packaging or labeling of each brand family, necessary to enable the commissioner or                               
21       the Department of Law to determine whether a tobacco product manufacturer is in                                   
22       compliance with AS 43.50.500 - 43.50.590.                                                                         
23            (e)  To promote compliance with the provisions of AS 43.50.500 - 43.50.590,                                  
24       the commissioner may adopt regulations requiring a tobacco product manufacturer                                   
25       subject to the requirements of AS 43.50.500 to make the escrow deposits required in                               
26       quarterly installments during the year in which the sales covered by the deposits are                             
27       made.  The commissioner may require production of information sufficient to                                       
28       determine the adequacy of the amount of the installment deposit.                                                  
29            Sec. 43.50.550.  Penalties and other remedies.  (a)  In addition to or in place                            
30       of any other civil or criminal remedy provided by law, upon a determination that a                                
31       licensee has violated AS 43.50.520(a) or any regulation adopted under that statute, the                           
01       commissioner may revoke or suspend the license issued under AS 43.50.010,                                         
02       43.50.035, or 43.50.320 of any licensee.  The department shall comply with the                                    
03       provisions of AS 44.62 (Administrative Procedure Act).  Each offer to sell cigarettes                             
04       in violation of AS 43.50.520(a) constitutes a separate violation.  The commissioner                               
05       also may impose a civil penalty in an amount not to exceed the greater of 500 percent                             
06       of the retail value of the cigarettes sold or $5,000 upon a determination of violation of                         
07       a provision of AS 43.50.520(a) or any regulations adopted under that statute.  The                                
08       penalty shall be imposed in the manner provided by AS 43.05.245.                                                  
09            (b)  Any cigarettes that have been sold, offered for sale, or possessed for sale in                          
10       this state, or imported for personal consumption in this state in violation of                                    
11       AS 43.50.520(a) are contraband, regardless of whether the violation was knowing, and                              
12       the cigarettes are subject to seizure and forfeiture; seized and forfeited cigarettes shall                       
13       be destroyed and may not be resold.  The department shall comply with the provisions                              
14       of AS 44.62 (Administrative Procedure Act).                                                                       
15            (c)  The Department of Law, on behalf of the commissioner, may seek an                                       
16       injunction to restrain a threatened or actual violation of AS 43.50.500, 43.50.520(a), or                         
17       43.50.540 by a licensee and to compel the licensee to comply with those provisions.                               
18            Sec. 43.50.560.  Miscellaneous provisions.  (a) A determination of the                                     
19       commissioner not to list in, or to remove from, the directory a brand family or tobacco                           
20       product manufacturer is subject to administrative review under AS 44.62.330 -                                     
21       44.62.630.                                                                                                        
22            (b)  A person may not be issued a license or granted a renewal of a license                                  
23       under AS 43.50.010, 43.50.035, or 43.50.320 unless the person has certified in                                    
24       writing, under penalty of perjury, that the person will comply fully with                                         
25       AS 43.50.500 - 43.50.590.                                                                                         
26            (c)  The department shall adopt under AS 44.62 (Administrative Procedure                                     
27       Act) reasonable regulations that it considers necessary to carry out the provisions of                            
28       AS 43.50.500 - 43.50.590.                                                                                         
29            (d)  If a court determines that a person has violated the provisions of                                      
30       AS 43.50.500 - 43.50.590, the court shall order any profits, gain, gross receipts, or                             
31       other benefit from the violation to be disgorged and paid to the state for deposit in the                         
01       general fund.  Unless otherwise expressly provided, the remedies or penalties provided                            
02       by AS 43.50.500 - 43.50.590 are cumulative to each other and to the remedies or                                   
03       penalties available under all other laws of this state.                                                           
04            Sec. 43.50.590.  Definitions.  In AS 43.50.500 - 43.50.590, unless the context                             
05       otherwise requires,                                                                                               
06                 (1)  "brand family" means all styles of cigarettes sold under the same                                  
07       trade mark and differentiated from one another by means of additional modifiers or                                
08       descriptors, including menthol, lights, kings, and 100s; "brand family" includes any                              
09       brand name, alone or in conjunction with any other word, trademark, logo, symbol,                                 
10       motto, selling message, recognizable pattern of colors, or any other indicium of                                  
11       product identification identical or similar to, or identifiable with, a previously known                          
12       brand of cigarettes;                                                                                              
13                 (2)  "cigarette" has the meaning given in AS 45.53.100;                                                 
14                 (3)  "commissioner" means the commissioner of revenue;                                                  
15                 (4)  "department" means the Department of Revenue;                                                      
16                 (5)  "directory" means the directory developed and made available                                       
17       under AS 43.50.510;                                                                                               
18                 (6)  "licensee" means a person licensed or required to be licensed under                                
19       AS 43.50.010, 43.50.035 or 43.50.320;                                                                             
20                 (7)  "Master Settlement Agreement" has the meaning given in                                             
21       AS 45.53.100;                                                                                                     
22                 (8)  "non-participating manufacturer" means a tobacco product                                           
23       manufacturer that is not a participating manufacturer;                                                            
24                 (9)  "participating manufacturer" has the meaning given in Section II(jj)                               
25       of the Master Settlement Agreement and all amendments to that agreement;                                          
26                 (10)  "qualified escrow fund" has the meaning given in AS 45.53.100;                                    
27                 (11)  "roll-your-own" has the meaning given in AS 45.53.100(4)(B);                                      
28                 (12)  "tobacco product manufacturer" has the meaning given in                                           
29       AS 45.53.100;                                                                                                     
30                 (13)  "units sold" has the meaning given in AS 45.53.100.                                               
31    * Sec. 3.  AS 44.62.330(a) is amended by adding a new paragraph to read:                                           
01                 (60)  the Department of Revenue for administrative review of actions                                    
02       taken under AS 43.50 relating to a tobacco product manufacturer's compliance with                                 
03       statutory requirements regarding cigarette sales.                                                                 
04    * Sec. 4.  AS 43.50.145 is repealed.                                                                             
05    * Sec. 5.  The uncodified law of the State of Alaska is amended by adding a new section to                         
06 read:                                                                                                                   
07       TRANSITION.  For the year 2003, if this Act takes effect after March 16, 2003, the                                
08            (1)  first report of licensees required by AS 43.50.540, added in sec. 2 of this                             
09 Act, is due 30 days after the effective date of this Act;                                                               
10            (2)  certifications by a tobacco product manufacturer described in                                           
11 AS 43.50.500, added in sec. 2 of this Act, are due 45 days after the effective date of this Act;                        
12            (3)  directory described in AS 43.50.510, added in sec. 2 of this Act, shall be                              
13 made available within 90 days after the effective date of this Act.                                                     
14    * Sec. 6.  This Act takes effect immediately under AS 01.10.070(c).