5 Things You Should Do If ATF Comes Knocking

“Hi, we’re with the Bureau of Alcohol, Tobacco and Firearms, and we’d like to take a look at your tobacco product sales invoices, shipping records, and PACT Act reports.”

For those in the business of selling or shipping tobacco products, hearing these words during a visit from ATF can be worrisome. In recent months, ATF has stepped up its efforts to enforce the Prevent All Cigarette Trafficking (“PACT”) Act, and the penalties for noncompliance can be steep.

For example, omitting a single transaction on a PACT Act report to a state involving a covered product, such as cigarettes, roll-your-own tobacco, cigarette and cigar wrappers, electronic nicotine delivery systems (“ENDS”) and ENDS components, and smokeless tobacco, theoretically could result in a civil penalty of up to $5,000 in the case of a first violation or $10,000 for any other violation.

Potential penalties can accrue quickly. Moreover, those who knowingly violate the PACT Act could face criminal fines and/or imprisonment of up to three years.

Here are five steps to take when the ATF visits your tobacco business:

1. Be Prepared

The best defense is proactive compliance. Regularly review your compliance with the PACT Act and all other relevant regulations. Maintain organized, up-to-date records of all transactions, and ensure that all required reports are filed on time. This will not only help you stay in compliance, but it will also make the ATF’s visit go more smoothly. For more tips on ensuring your compliance with the PACT Act, check out our prior post, PACT Act Basics: Five Things Tobacco Sellers and Shippers Should Know.

2. Cooperate

When the ATF arrives, it’s important to be cooperative. This doesn’t mean you have to volunteer information beyond what’s requested, but you should answer all questions honestly and, after following Step 3 below, provide requested documents promptly. In our experience, the ATF’s goal is to ensure compliance with the law, not to penalize businesses unnecessarily.

3. Consult with Legal Counsel

Don’t hesitate to consult with your legal counsel. They can provide guidance on how to respond and can help protect your rights during the investigation. For example, we’re aware that ATF has taken a novel position that certain little cigars could be considered “cigarettes” subject to the PACT Act. It’s important to have seasoned counsel available to provide guidance on these types of nuanced issues.

4. Review Findings Carefully

After the visit (and potentially many months later), the ATF will likely provide a letter summarizing any allegations of non-compliance. Review this correspondence carefully, and if there are any discrepancies or issues, address them promptly. Note that ATF may not initially volunteer its detailed findings. If necessary, consult with your legal counsel to understand the implications of the allegations and to develop a plan for requesting any follow-up clarification from ATF, responding to ATF, and addressing any identified issues.

5. Implement Corrective Actions

If you identify any areas of non-compliance, it’s crucial to take corrective action promptly. This may involve revising your procedures, providing additional training to your staff, or making other changes to your operations. Document these actions carefully, as you may need to provide evidence of your corrective actions in the future.

Remember, the ATF’s goal is to ensure compliance with the law. By being prepared, cooperative, and proactive, you can help ensure that your business remains in good standing.

Please note that this blog post is intended to provide general guidance related to the PACT Act and does not constitute legal advice. For specific questions or concerns about the PACT Act and how it may impact your business, please contact us.

Written by: Michael Jordan, Bryan Haynes & Agustin Rodriguez