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NYC files suit against FedEx for continuing to ship contraband cigarettes

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Although Fed Ex claims to have a policy of “not delivering cigarettes to private residences,” New York City has accused the company of making exceptions when it comes to delivering more than 20 tons (from 2005-2012 alone) of untaxed packs sold by the Shinnecock Indian reservation in Southampton.

Because of their non-tax status smoke shops on the reservation are able to offer consumers huge discounts of close to $6 per pack, giving them an “unfair” advantage over other (non-Indian) retailers and wholesalers throughout the state.

Fed Ex previously agreed to pay New York City $2.4 million in this past March to avoid more expensive litigation to fight charges that it had violated a 2006 agreement with then State attorney general Eliot Spitzer to cease all deliveries of mail order cigarettes to residents here. At the same time, however, it apparently also continued to take on shipments of more than 70 tons of cigarettes from a now defunct Kentucky mail-order company.

As a result, the City filed suit against Fed Ex yesterday in US District Court in Manhattan and is now seeking $52 million in fines (amounting to $5,000 per shipment) as well as unpaid taxes. The suit also demands that FedEx “hire an independent monitor to ensure future compliance.”

In the meantime, the shipping giant released a statement saying that while it “supports the city’s efforts to stop the shipment of contraband cigarettes and will continue to work with authorities to end prohibited tobacco shipments", FedEx corporate officers also believe that the City’s claims against the company are “overstated and not founded in law.”

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