Co says judge finds gray market cigarettes violate U.S. law
NEW YORK, Aug 15 (Reuters) - A judge's finding that the import of gray market cigarettes, intended for export but sold domestically, violates U.S. laws, a move that may help thwart illegal U.S. cigarette distribution, Brown & Williamson Tobacco said on Tu
International Trade Commission Administrative Law judge Debra Morriss found that the importation of gray market cigarettes, which end up being sold tax-free domestically, violates U.S. laws, Brown & Williamson said.
If Judge Morriss' findings are adopted by the full ITC, U.S. Customs will stop the entry of gray market Kool and Lucky Strike cigarettes into the United States, the company said.
The finding is based on a case brought before the ITC by Brown & Williamson Tobacco Corp., a unit of British American Tobacco Plc.
Louisville, Ky.-based Brown & Williamson is the third largest U.S. cigarette maker, with brands such as Kool, Lucky Strike and Gpc.
Brown & Williamson charged that importers unlawfully and without its authorisation imported and sold Kool and Lucky Strike cigarettes in the United States, while the cigarettes had been made for sale outside the country.
Importers involved in the case included Carson, Calif.-based PTI Inc.; Miami-based Allstate Cigarette Distributors Inc. and R.E. Tobacco Sales Inc.; Ft. Lauderdale-based Prestige Storage & Distribution Inc.; and Los Angeles-based Dood Enterprises Inc., Brown & Williamson said.
Judge Morriss recommended ``that a general exclusion order be issued, that a cease and desist order against (the importers) be issued, and that a bond of $7 per carton of repatriated Kool and Lucky Strike cigarettes imported during the presidential review period be imposed,'' the company said.
The company said the ITC's final decision is expected in October. Any ITC order would be enforced at all ports of entry and against all importers of gray market Kool and Lucky Strike cigarettes, not just those involved in the investigation, according to Brown & Williamson.
``We are obviously pleased with this finding,'' Susan Gernert, an attorney for Brown & Williamson, said in a statement.
Judge Morriss found that gray market cigarettes differed materially in many ways from those sold domestically, which can lead to consumer confusion, Brown & Williamson said.
Gray market cigarettes do not include the cost of the large settlement between the states and tobacco manufacturers, thus reducing the money the states are entitled to under the agreement, the company noted. This price advantage can hurt legitimate retailers and wholesalers, who lose sales to those who engage in the gray market, it said.
British American Tobacco's American depositary shares last traded off 1/8 at 13-13/16 on the American Stock Exchange.