Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 1114 entitled:

begs leave to report as follows:

The purpose of this bill is to refine the enforcement responsibilities of the Department of the Attorney General (AG) regarding enforcement of the tobacco master settlement agreement (MSA), cigarette tax stamping, "gray market", and tobacco reporting requirements.

The AG testified in strong support of this measure.

Your Committee is aware that continued and enhanced monitoring, enforcement, and diligent administration of the MSA and of tax stamping, gray market, and tobacco reporting requirements under state law, are necessary to curb the sale of contraband cigarettes and ensure that Hawaii's fair share of the MSA settlement each year is not jeopardized.

Your Committee further finds that chapter 675, Hawaii Revised Statutes, applies to tobacco companies who did not sign the tobacco master settlement agreement and refused to participate in settlement payments to the states. The chapter requires these nonsignatories to pay a fraction of moneys from their cigarette sales into a contingency fund from which the State would satisfy any judgment against the company in the event the State elects to litigate against it. MSA requires states to diligently enforce statutes like chapter 675, and failure to do so may have an adverse effect on the amount of settlement dollars a state receives in any year--payments which will likely be made for decades into the future.

This bill provides AG with a strong mechanism for enforcement of chapter 675. It makes compliance with chapter 675 a pre-requisite for nonsignatory companies to place tax-stamps on their cigarettes, and thus, to legally sell their products in Hawaii.

It is also anticipated that this bill will allow the State to collect a higher percentage of revenues from the stamp tax, which will be paid into the state general fund.

Your Committee notes that this bill is not intended to amend chapter 675 or affect MSA.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1114 and recommends that it pass Second Reading and be referred to the Committee on Judiciary.