Tobacco Product Manufacturers Escrow Act
In 1999, the Maryland General Assembly enacted the Tobacco Product Manufacturers
Escrow Act (Escrow Act), Maryland Code Annotated Business
Regulations Article Bus.
Reg. § 16-401 et seq. Under the Escrow Act,
a tobacco product manufacturer must either a) become a "Participating
Manufacturer" or "PM" by joining the MSA and
generally comply with its financial obligations, or b) establish
an escrow account as a "Nonparticipating Manufacturer" or "NPM," and
pay into it pursuant to Bus. Reg. § 16-403(a)(2).
Under the Escrow Act, NPMs must establish a "qualified escrow account," meeting
the requirements of Bus. Reg. § 16-402(g), and obtain approval from the Attorney
General of the escrow account's governing agreement. Maryland has a model escrow
agreement to assist NPMs with properly establishing their escrow.
NPMs must also certify to the Attorney General by April 15 of
each year that they have complied with the Escrow Act by depositing
the appropriate amount into escrow for all sales during the
prior year. NPMs that sold cigarettes or "roll-your-own" tobacco
in Maryland during 2009 are required to submit a 2009 Certificate
of Compliance to the Attorney General by April 15, 2010.
A tobacco product manufacturer that sells its products in Maryland
and fails to either join the MSA or comply with the escrow
provisions is subject to litigation and civil penalties. The
penalties to which tobacco product manufacturers may be subject
are set forth in Bus. Reg. § 16-403(c)(3)-(6) and include a
prohibition on the sale of cigarettes and "roll-your-own" tobacco
to consumers within Maryland, whether directly or through a
distributor, retailer or similar intermediary or intermediaries,
for a period of up to two years, as well as fines of up to
300% of the original amount improperly withheld from escrow.