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California and NYC accuse U.S. Postal Service of shipping foreign cigarettes

California and New York City filed suit Tuesday against the U.S. Postal Service to stop tens of thousands of cigarette packages from being mailed from foreign countries to U.S. residents, alleging overseas smugglers are engaging in tax evasion while postal workers look the other way.

The lawsuit in Brooklyn federal court blames the Postal Service for deliveries from Vietnam, China, Israel and other countries, saying the failure to enforce a federal law aimed at banning cigarette mail deliveries costs California an average of $19 million annually in tax revenue and New York City and New York state more than $21 million each year.

The lawsuit seeks a court order to force the Postal Service to intercept and destroy packages believed to contain cigarettes.

"Accepting and delivering contraband cigarettes is not only a health hazard for our citizens but a detriment to our state's economy," California Attorney General Xavier Becerra said Tuesday.

The Postal Service does not comment on active litigation, spokesman David Coleman said in an email.

"Cigarette smuggling doesn't just break the law - it endangers the health of countless Americans and enriches terrorists and organized crime," New York Mayor Bill de Blasio said in a news release. "Yet despite all of this, our nation's own postal service has ignored the practice and enabled one of the biggest killers in our country. It needs to end, and we intend to be the ones to end it."

Federal law ignored, suit claims

Postal service officials' failure to enforce the 2010 Prevent All Cigarette Trafficking law "thwarts each and every goal expressed by Congress in the statute," including its desire to stop terrorist organizations such as al-Qaida from benefiting from large profits produced by cigarettes distributed through the mail, the lawsuit said.

Georgia M. Pestana, New York City's acting corporation counsel, said the Postal Service has ignored its inspector general's warning that it violates the law by, in some cases, returning illegal shipments to senders instead of destroying them.

New York City and California officials said "officials at the highest levels of the USPS have known for years of the USPS's illegal transport and nationwide delivery of cigarettes from international sellers."

"The Postal Service has turned a blind eye to the illegal shipment of cigarettes through its facilities, undermining our health laws and causing millions of dollars of tax losses to New York City," Pestana said.

The lawsuit said smugglers capitalize on widely varying tax rates on cigarettes, while the Postal Service ignores cigarette shipments sometimes labeled as "cigarettes" and fails to ban commercial cigarette shippers identified by the U.S. Justice Department.

"The USPS knows or has reasonable cause to believe that a package contains cigarettes when any person states on a publicly available website or an advertisement that the person will mail cigarettes in return for payment," the lawsuit states. 

Millions of cigarettes illegally delivered

The lawsuit noted that cigarette sales through the mail increased dramatically with online retailers. Prior to the PACT law's passage, Congress was told internet vendors selling cigarettes and smokeless tobacco to U.S. buyers numbered about 40 in 2000, through it ballooned to over 500 by 2005.

Authorities estimate as many as 6 million packs of cigarettes are illegally delivered by mail each year to California and 5 million packs to New York City and state.

They estimate the quantity from audits conducted last year by investigators at Brooklyn's John F. Kennedy International Mail Facility, the lawsuit said. The audit, it added, concluded that more than 100,000 cartons of cigarettes at the facility were destined for 48 states.

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