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January 29, 2004, 9:00 AM ET, Alert No. 826.
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House Judiciary Committee Approves Internet Tobacco Sales Enforcement Act

1/28. The House Judiciary Committee amended and approved HR 2824, the "Internet Tobacco Sales Enforcement Act", by unanimous voice votes.

On July 23, 2003, Rep. Mark Green (R-WI), Rep. Marty Meehan (D-MA), and others introduced HR 2824. See, story titled "Internet Cigarette Sales Bill Introduced in House" in TLJ Daily E-Mail Alert No. 711, August 5, 2003.

On October 2, 2003, the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property amended and approved the bill. See, story titled "House Subcommittee Approves Internet Tobacco Sales Enforcement Act" in TLJ Daily E-Mail Alert No. 752, October 3, 2003.

Also, on August 13, 2002, the General Accounting Office (GAO) released a report [60 pages in PDF] titled "Internet Cigarette Sales: Giving ATF Investigative Authority May Improve Reporting and Enforcement" which documents non compliance with the Jenkins Act by internet vendors. See also, story titled "GAO Reports on Internet Cigarette Sales" in TLJ Daily E-Mail Alert No. 491, August 14, 2002.

Rep. Anthony WeinerRep. Meehan (at right) stated at the January 28 markup that the bill serves two purposes. First, it addresses "the problem of illegal sales of tobacco to children over the internet". Second, it addresses "the rampant tax evasion" resulting in lost state revenues due to internet sales.

The Jenkins Act, enacted in 1949, does not create a federal tax collection regime. Rather, it established reporting requirements. It requires that any person who sells and ships cigarettes across a state line to a buyer, other than a licensed distributor, to report the sale to the buyer's state tobacco tax administrator. Some states impose vastly higher taxes on the sales of cigarettes than others. The Jenkins Act helps these states enforce their cigarette tax laws. It is codified at 15 U.S.C. §§ 375-378. Currently, many internet based cigarette sellers are not reporting sales to state tax administrators. And, states have little recourse.

The Committee approved an amendment in the nature of substitute offered by Rep. Green and Rep. Meehan.

The bill revises the Jenkins Act in a number of ways.

Section 2 of the bill provides that "Each person who engages in an interstate sale of cigarettes or smokeless tobacco or in an interstate distribution of cigarettes or smokeless tobacco shall comply with all the excise, sales, and use tax laws applicable to the sale or other transfer of cigarettes or smokeless tobacco in the State and place in which the cigarettes or smokeless tobacco are delivered as though the person were physically located in that State or place."

It further provides that "Unless State law requires otherwise, no cigarettes or smokeless tobacco may be delivered pursuant to an interstate sale unless in advance of delivery -- (A) any cigarette or smokeless tobacco excise tax that is imposed by the State in which the cigarettes or smokeless tobacco are to be delivered has been paid to the State ..."

It imposes expanded record keeping and reporting requirements on remote sellers of cigarettes and smokeless tobacco.

The bill also give states the ability to enforce these requirements of Section 2. It provides that "the attorney general of a State may in a civil action obtain any appropriate relief, including money damages, civil penalties, and injunctive or other equitable relief ..." The bill also provides for federal criminal penalties for violation of Section 2.

It expands the covered products to include a range of smokeless tobacco products.

The bill's definition of "interstate sale of cigarettes or smokeless tobacco" is noteworthy. It does not require a transaction across state lines. It includes any transaction in which "the buyer submits the order for such sale by means of a telephone or other method of voice transmissions, the mails, or the Internet or other online service, or the seller is not in the physical presence of the buyer when the request for purchase or order is made ..."

This bill pertains to taxes on remotes sales, in the special case of cigarettes and smokeless tobacco. The issue of sales and use taxes on remote sellers generally is a contentious and unresolved issue in the Congress. Hence, this bill now contains language stating that this bill is not a precedent for other types of remote sales.

The bill provides that "It is the sense of Congress that unique harms are associated with the remote interstate sales of cigarette and smokeless tobacco, including problems associated with verifying the legal age of consumers and long-term negative health effects associated with the continued use of these products. This Act further affirms Congress' long-standing interest in encouraging compliance and enforcement of State laws that relate to the remote sales, including internet sales, of these products. Enacted more than 50 years ago, the Jenkins Act established reporting requirements for remote interstate sellers of cigarettes in order to reduce incentives for smuggling and to help states enforce tobacco taxes. In light of the unique federal policy and historic distinctions between cigarettes and smokeless tobacco and other products, the requirements of this Act are in no way meant to create, and ought not be considered, precedent regarding the collection of State sales or use taxes by out-of-state entities that lack a physical presence within the taxing State."

The bill also contains language relating to tribal sovereignty. However, both Rep. Green and Rep. Meehan stated that they plan to continue to work with tribal groups and Senators to revise this language. Rep. Howard Berman (D-CA) stated that the reason the issue could not be fully addressed in the House Judiciary Committee' mark up is that inserting the appropriate language would have the consequence of giving another House committee jurisdiction over the bill. Several members of the Judiciary Committee stated that the issue of tribal sovereignty will be addressed in a conference committee that resolves differences between the House and Senate versions of the bill.

Rep. Anthony Weiner (D-NY) offered, but later withdrew, an amendment that would have provided that cities may also bring enforcement actions under the Jenkins Act. It would have extended enforcement authority to "the chief law enforcement officer of a local government that imposes an excise tax on cigarettes or smokeless tobacco".

New York City, which Rep. Weiner represents, has a cigarette tax. Rep. Weiner made several arguments in support of his amendment. Similar language is already in the Senate bill; few cities have a cigarette tax; most city taxes on cigarettes are small; and, cities are losing tax revenues.

Rep. James Sensenbrenner (R-WI), the Chairman of the Committee, argued that "this amendment, if adopted, could very well be a deal breaker". Rep. Green argued that the bill reflects a balance achieved after months of negotiations, and that adoption of the Weiner amendment could be a setback for the bill. Rep. Meehan jokingly referred to Rep. Weiner's amendment as "the Bloomberg amendment".

DHS Announces National Cyber Alert System

1/28. The Department of Homeland Security's (DHS) National Cyber Security Division (NCSD) announced that it has created a National Cyber Alert System (NCAS).

This announcement comes almost one year after the Bush administration released documents titled "National Strategy to Secure Cyberspace" and "Physical Protection of Critical Infrastructure and Key Assets", and less than two weeks after a group of House Democrats released a report [18 pages in PDF] that criticizes the Bush administration for delay in implementing its National Strategy to Secure Cyberspace.

See, story titled "Bush Administration Releases Final Cyber Security Plan" in TLJ Daily E-Mail Alert No. 605, February 17, 2003, and story titled "House Democrats Criticize Bush Administration on Cyber Security and Use of IT" also published in TLJ Daily E-Mail Alert No. 818, January 19, 2004.

The DHS described its new NCAS in a release as a "coordinated national cyber security system for identifying, analyzing, and prioritizing emerging vulnerabilities and threats. Managed by the United States Computer Emergency Readiness Team (US-CERT), a partnership between NCSD and the private sector, the National Cyber Alert System provides the first infrastructure for relaying graded computer security update and warning information to all users."

In September of 2003, the DHS's NCSD' formed a partnership with Carnegie Mellon University's CERT Coordination Center. This partnership is named the U.S. Computer Emergency Response Team, or U.S. CERT.

The NCAS will offer three things by e-mail -- Cyber Security Tips, Cyber Security Bulletins, and Cyber Security Alerts.

The Cyber Security Tips are bi-weekly e-mail messages that contain best computer security practices. They are targeted at non-technical home and corporate computer users.

The Cyber Security Bulletins are bi-weekly e-mail messages that contain summaries of security issues, new vulnerabilities, potential impact, patches and work-arounds, as well as actions required to mitigate risk. They are targeted at technical audiences.

Finally, Cyber Security Alerts are real-time information about security issues, vulnerabilities, and exploits currently occurring that encourage users to take rapid action. They are in two forms -- one for non-technical users and another for advanced for technical users.

Subscriptions to all of these are available for free. To subscribe, visit the U.S. CERT's NCAS subscriptions web page.

The DHS's release and the U.S. CERT web site do not identify what information the NCAS will provide that is not currently being provided by the CERT Coordination Center, private sector security companies, software companies, and other sources.

The NCSD has no web site. The DHS web site has a press release, dated June 6, 2003, announcing its creation. The NCSD is a part of the DHS's Information Analysis & Infrastructure Protection (IAIP) Directorate. On November 15, 2003, Amit Yoran was named Director of the NCSD. See, story titled "Amit Yoran Named Head of Cyber Security Division" in TLJ Daily E-Mail Alert No. 740, September 16, 2003.

Yoran works for Bob Liscouski, the Assistant Secretary for Infrastructure Protection in the IAIP. Liscouski works for Frank Libutti, the Under Secretary for Information Analysis and Infrastructure Protection. Libutti works for Tom Ridge, the Secretary of Homeland Security.

Frank LibuttiIAIP Under Secretary Frank Libutti (at right), an ex-Marine with no background in cyber security, stated in the DHS release announcing the formation of the NCAS that "The President's National Strategy to Secure Cyberspace provides a framework for the public and private sectors to work together to secure cyberspace". He added that "The National Cyber Security Division's mission is to serve as a focal point for implementing the National Strategy and protecting the American People."

On January 16, 2004, the Democrats on the House Homeland Security Committee released a report [18 pages in PDF] titled "America At Risk: The State of Homeland Security: Initial Findings". While the report criticizes the Bush administration across all areas of homeland security, it levels numerous accusations related to cyber security.

The Democrats' report states that "In February 2002, the Administration released a ``National Strategy to Secure Cyberspace´´, setting forth five cybersecurity priority areas, including the development of a cybersecurity response team, a threat and vulnerability reduction program, and awareness and training programs, as well as plans for securing government computers and developing national security and international cooperation. Implementation of the plan has been delayed for nearly a year and two Presidential advisors on cybersecurity have left the government, one after only two months."

It also criticizes the administration for not making Yoran's position more important. The report states that "The top cybersecurity position in the government is now the Director of the National Cyber Security Division, buried deep within DHS. There is no longer a Presidential advisor or senior official with the authority to direct all the agencies responsible for cybersecurity should a cyber-crisis occur."

House Judiciary Committee Approves Bill to Repeal 88 Year Old Anti-Dumping Statute

1/28. The House Judiciary Committee approved HR&nbps;1073, without amendment, by voice vote. This is an untitled bill to repeal Section 801 of the Revenue Act of 1916.

This bill would repeal section 801 of the Revenue Act of 1916, which is codified at 15 U.S.C. § 72. The bill was introduced on March 4, 2003 by Rep. James Sensenbrenner (R-WI) and Rep. Bill Thomas (R-CA). It was referred to the House Judiciary Committee, of which Rep. Sensenbrenner is the Chairman.

15 U.S.C. § 72 provides, in part, that "It shall be unlawful for any person importing or assisting in importing any articles from any foreign country into the United States, commonly and systematically to import, sell or cause to be imported or sold such articles within the United States at a price substantially less than the actual market value or wholesale price of such articles, at the time of exportation to the United States, in the principal markets of the country of their production, or of other foreign countries to which they are commonly exported after adding to such market value or wholesale price, freight, duty, and other charges and expenses necessarily incident to the importation and sale thereof in the United States: Provided, That such act or acts be done with the intent of destroying or injuring an industry in the United States, or of preventing the establishment of an industry in the United States, or of restraining or monopolizing any part of trade and commerce in such articles in the United States."

Rep. John Conyers (D-MI), the ranking Democrat on the Committee, opposes the bill. He argued in a prepared statement that "repeal of this law will have a detrimental effect on U.S. jobs. The Act empowers companies to bring private antitrust suits against foreign companies that import their goods at below-market prices. If we take away this ability, and foreign companies are allowed to dump their products, U.S. companies will not be able to compete, will lose market share, and will have to cut jobs."

The TLJ Daily E-Mail Alert will not be published on Friday, January 30.
Washington Tech Calendar
New items are highlighted in red.
Thursday, January 29

11:00 AM. The Cato Institute will host a panel discussion titled "Antitrust in the High-Tech Marketplace: The Real Irrational Exuberance?". The speakers will be Lawrence Lindsey (Lindsey Group), Fred Smith (Competitive Enterprise Institute), Jonathan Zuck (Association for Competitive Technology), and Ed Black (Computer and Communications Industry Association). See, notice. The event will be webcast. Lunch will follow the program. Location: Cato, 1000 Massachusetts Avenue, NW.

2:00 - 4:00 PM. The State Department's International Telecommunication Advisory Committee --Radiocommunication Sector (ITAC-R) will hold a meeting to discuss "matters related to the preparations for ITU-R study group meetings taking place in 2004". See, notice in the Federal Register, January 15, 2004 Vol. 69, No. 10, at Page 2380. Location: The Boeing Company, Harry C. Stonecipher Conference Center, 1200 Wilson Boulevard, Arlington, VA.

TIME? Rosemary Coombe (York University) will give a lecture titled "The Globalization of Intellectual Property: Informational Capital and Its Cultures". This is a part of Georgetown University Law Center's (GULC) Colloquium on Intellectual Property & Technology Law Series. For more information, contact Julie Cohen at 202 662-9871. Location: GULC, 600 New Jersey Ave., NW.

6:00 - 8:15 PM. The Federal Communications Bar Association (FCBA) Wireless Practice Committee will host a Continuing Legal Education (CLE) program titled "Political Broadcasting Regulations". Bobby Baker (Assistant Chief of the FCC's Media Bureau's Policy Division), Jack Goodman (General Counsel of the National Association of Broadcasters), and Dawn Sciarrino. The prices to attend range from $50 to $125. Location: 8th Floor Conference Room, Dow Lohnes & Albertson, 1200 New Hampshire Ave., NW.

Friday, January 30

10:00 AM - 12:00 NOON. The Federal Communications Commission's (FCC) Advisory Committee for the 2007 World Radiocommunication Conference will hold its first meeting. See, FCC notice and agenda [PDF] and notice in the Federal Register, December 22, 2003, Vol. 68, No. 245, at Page 71106. See also, TLJ story titled "Powell Appoints Nancy Victory to WRC-07 Post". Location: FCC, Commission Meeting Room (TW-C305), 445 12th Street, SW.

Extended deadline to submit comments to the Federal Communications Commission (FCC) regarding BellSouth's request for a declaratory ruling that the state commissions may not regulate broadband internet access services by requiring BellSouth to provide wholesale or retail broadband services to voice service customers of competitive local exchange carriers (CLECs) using unbundled network elements (UNEs). BellSouth submitted its 334 page filing on December 9, 2003. See, "Emergency Request for Declaratory Ruling" (without attachments) [35 pages in PDF]. This is WC Docket No. 03-251. See, FCC notice [PDF].

Saturday, January 31

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding the first public draft [238 pages in PDF] of NIST Special Publication (SP) 800-53, titled "Recommended Security Controls for Federal Information Systems". See, NIST release, and story titled "NIST Releases Draft Information Security Guidelines for Federal Agencies", in TLJ Daily E-Mail Alert No. 777, November 12, 2003.

Deadline to submit comments to the Internal Revenue Service (IRS) regarding its notice in the Federal Register stating that it "will provide the ability for IRS e-file program participants to use approved encryption methods for the 2005 and later filing seasons, beginning with the Acceptance Testing System (ATS) in late 2004. For the 2005 filing season, IRS intends to begin discontinuing support of non-encrypted transmissions whether by dedicated or dial-up links on the Public Switched Telephone Network (PSTN)." See, Federal Register, December 29, 2003, Vol. 68, No. 248, at Pages 75022 - 75023.

Tuesday, February 3

Presidential primaries will be held in the states of Arizona, Delaware, Missouri, Oklahoma, and South Carolina. New Mexico will hold presidential caucuses.

2:00 PM. The House Ways and Means Committee will hold a hearing on the President's FY 2005 budget proposal. The witness will be Secretary of the Treasury John Snow. Location: Room 1100, Longworth Building.

Day one of a two day Continuing Legal Education (CLE) program titled "Communications Law 101: Everything You Wanted (or Didn't Want) to Know About Communications Technology". The event is sponsored by the Federal Communications Bar Association (FCBA) and the Georgetown University Law Center (GULC). Location: GULC.

The Department of State's (DOS) ITU-T Study Group 13 will meet from February 3 through February 13, 2004. See, notice in the Federal Register, October 31, 2003, Vol. 68, No. 211, at Pages 62158.

Deadline to register to attend the National Institute of Standards and Technology's (NIST) event titled "Spam Technology Workshop". The price to attend is $70. See, notice in the Federal Register, November 25, 2003, Vol. 68, No. 227, at Pages 66075 - 66076.

Deadline to submit comments to the Federal Bureau of Investigation (FBI) regarding its document titled "Final notice of capacity". This pertains to the FBI's implementation of  the Communications Assistance for Law Enforcement Act (CALEA), which is codified at 47 U.S.C. § 1001, et seq. The FBI published this notice in the Federal Register, December 5, 2003, Vol. 68, No. 234, at Pages 68112 - 68121. See also, story titled "FBI Publishes CALEA Final Notice of Capacity" in TLJ Daily E-Mail Alert No.797, December 11, 2003.

Deadline to register for the National Institute of Standards and Technology's (NIST) Computer Security Division's (CSD) and Advanced Network Technologies Division's (ANTD) one day conference titled "Spam Technology Workshop", to be held on February 17. See, notice and conference website.

Wednesday, February 4

10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "The Current State of Competition in the Communications Marketplace". The hearing will be webcast. See, notice. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location: Room 2322, Rayburn Building.

10:00 AM. The House Financial Services Committee's Subcommittee on Capital Markets will hold a hearing titled "The Role of Attorneys in Corporate Governance". Location: Room 2128, Rayburn Building.

10:30 AM. The House Ways and Means Committee will hold a hearing on the President's FY 2005 budget proposal. The witness will be Office of Management and Budget (OMB) Director Joshua Bolten. Location: Room 1100, Longworth Building.

10:30 AM - 12:00 NOON. The Department of State's (DOS) U.S. International Telecommunication Advisory Committee (ITAC) will hold a meeting to discuss matters related to the International Telecommunications Union's (ITU) World Summit on the Information Society (WSIS), which took place on December 10-12, 2003, in Geneva, Switzerland, including the follow-up to the WSIS. See, notice in the Federal Register, January 16, 2004, Vol. 69, No. 11, at Pages 2643 - 2644. Location: auditorium, Historic National Academy of Science Building, 2100 C St. NW.

1:00 PM. The House International Relations Committee will hold a hearing titled "L Visas: Losing Jobs Through Laissez-Faire Policies?" Location: Room 2172, Rayburn Building.

1:30 PM - 3:30 PM. The Federal Communications Commission's (FCC) World Radioconference 2007 (WRC-07) Advisory Committee, Informal Working Group 2: Satellite Services and HAPS, will meet. See, notice [PDF]. Location: Room 6-B516, 6th Floor, South Conference Room, 445 12th Street, SW.

Day two of a two day Continuing Legal Education (CLE) program titled "Communications Law 101: Everything You Wanted (or Didn't Want) to Know About Communications Technology". The event is sponsored by the Federal Communications Bar Association (FCBA) and the Georgetown University Law Center (GULC). Location: GULC.

4:00 PM. Stacey Dogan (Northeastern University School of Law) will present a paper titled "The Social Norms of Copyright: Sticky or Stuck". For more information, contact Robert Brauneis at 202 994-6138 or Location: George Washington University Law School, Faculty Conference Center, Burns Building, 5th Floor, 716 20th Street, NW.

Thursday, February 5

10:30 AM - 12:00 NOON. The Federal Communications Commission's (FCC) World Radioconference 2007 (WRC-07) Advisory Committee, Informal Working Group 1: Terrestrial and Space Science Services, will meet. See, notice [PDF]. Location: Room 8-B516, 8th Floor, South Conference Room, 445 12th Street, SW.

Day one of a two day event hosted by the U.S. Chamber of Commerce titled "Strategic Leadership Forum: Mitigating the Impact of Intellectual Property Theft and Counterfeiting". This is an invitation only event; for more information, contact Aaron Guiterman or Scott Griset at 202 463-5500. See, notice.

Friday, February 6

Day two of a two day event hosted by the U.S. Chamber of Commerce titled "Strategic Leadership Forum: Mitigating the Impact of Intellectual Property Theft and Counterfeiting". This is an invitation only event; for more information, contact Aaron Guiterman or Scott Griset at 202 463-5500. See, notice.

SEC Files Complaint Against Presto Telecommunications

1/27. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (SDCal) against Presto Telecommunications, Inc., and Alfred Louis Vassallo, Jr. aka Bobby Vassallo alleging violation of federal securities law in connection with the alleged sale of unregistered securities in a purported telecommunications company.

The SEC stated in a release that the District Court granted emergency relief; it "granted the relief that the Commission sought, ordering the freezing of Presto's and Vassallo's assets, the appointment of a temporary receiver over Presto, and other relief."

The complaint alleges that this case "involves the ongoing, fraudulent, unregistered offer and sale of at least $11 million worth" of Presto Telecommunications common stock by Vassallo. It further alleges that "Presto purports to be an international telecommunications company ``positioned to become Latin America's Premier Integrated Communications Provider....´´"

The complaint states that "From at least 1998 to the present, Presto and Vassallo have offered and sold Presto common stock to some 800 investors in 42 states and raised at least $11 million. The defendants have falsely represented that (1) Presto has business relationships with telecommunications companies such as AT&T Corporation ("AT&T"), Sprint Corporation ("Sprint"), MCI Corporation ("MCI"), and Qwest Communications International, Inc. ("Qwest"), and that one or more of those companies have expressed interest in acquiring Presto or making a capital investment in Presto; (2) Presto has "alliances" or is a "partner" with telecommunications equipment makers Cisco Systems, Inc. ("Cisco") and Unisys Corporation ("Unisys"); (3) the United States Department of Commerce ("Commerce Department") was making a "push" with Mexican telecommunications regulators on Presto's behalf; and (4) investor funds would be used to build and operate Presto's network in Mexico."

The three count complaint alleges unregistered offer and sale of securities in violation of Sections 5(a) and 5(c) of the Securities Act, fraud in the offer or sale of securities in violation of Section 17(a) of the Securities Act, and fraud in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

More News

1/28. The Federal Communications Commission (FCC) closed early on Tuesday, January 27, 2004. The FCC issued a statement [PDF] regarding the effect on filings. "According to Section 1.4(e)(1) of the Commissions rules, 47 C.F.R. Section 1.4(e)(1), all filings, paper and electronic, that were due on January 27 are due on the Commission’s next official business day after closing. In addition, January 27 does not count in computing filing periods that are less than seven days. See 47 C.F.R. Section 1.4(g). Please direct all questions and comments to Bill Caton, Deputy Secretary, at (202)418-0300."

1/28. The U.S. Court of Appeals (DCCir) heard oral argument in USTA v. FCC. This argument was on petitions for review of the Federal Communications Commission's (FCC) triennial review order [576 pages in PDF] (TRO), released on August 21, 2003. This is A.C. No. 00-1020.

1/27. The Federal Communications Commission (FCC) filed its brief [31 pages in PDF] with the U.S. Court of Appeals (DCCir) in City and County of San Francisco v. FCC, an appeal of a final order of the FCC. This is Case No. 03-1186. The FCC states that it "granted microwave applications over the objection of appellant City of San Francisco, dismissed the City’s competing applications as untimely, disallowed a settlement agreement between the City and the successful applicant that would have violated Commission processing rules, and denied the City’s request for waiver of the processing rules. The issues presented are:
  1. Whether the City suffered a violation of its rights to due process, and
  2. Whether the FCC’s licensing decisions, the disapproval of the settlement agreement, and the denial of the waiver request were an abuse of agency discretion."

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