(a) In general
A funding agreement for a grant under section 300x–21 of this title is that the State involved will—

(1) annually conduct random, unannounced inspections to ensure that retailers do not sell tobacco products to individuals under the age of 21; and

(2) annually submit to the Secretary a report describing—

(A) the activities carried out by the State to ensure that retailers do not sell tobacco products to individuals under the age of 21;

(B) the extent of success the State has achieved in ensuring that retailers do not sell tobacco products to individuals under the age of 21; and

(C) the strategies to be utilized by the State to ensure that retailers do not sell tobacco products to individuals under the age of 21 during the fiscal year for which the grant is sought.

(b) Noncompliance of State

(1) In general
Before making a grant under section 300x–21 of this title to a State, the Secretary shall make a determination of whether the State has maintained compliance with subsection (a). If, after notice to the State and an opportunity for a hearing, the Secretary determines that the State is not in compliance with such subsections, the Secretary shall reduce the amount of the allotment under such section for the State for the fiscal year involved by an amount up to 10 percent of the amount determined under section 300x–33 of this title for the State for the applicable fiscal year.

(2) Limitation

(A) In general
A State shall not have funds withheld pursuant to paragraph (1) if such State for which the Secretary has made a determination of noncompliance under such paragraph—

(i) certifies to the Secretary by May 1 of the fiscal year for which the funds are appropriated, consistent with subparagraph (B), that the State will commit additional State funds, in accordance with paragraph (1), to ensure that retailers do not sell tobacco products to individuals under 21 years of age;

(ii) agrees to comply with a negotiated agreement for a corrective action plan that is approved by the Secretary and carried out in accordance with guidelines issued by the Secretary; or

(iii) is a territory that receives less than $1,000,000 for a fiscal year under section 300x–21 of this title.

(B) Certification

(i) In general
The amount of funds to be committed by a State pursuant to subparagraph (A)(i) shall be equal to 1 percent of such State's substance abuse allocation determined under section 300x–33 of this title for each percentage point by which the State misses the retailer compliance rate goal established by the Secretary.

(ii) State expenditures
For a fiscal year in which a State commits funds as described in clause (i), such State shall maintain State expenditures for tobacco prevention programs and for compliance activities at a level that is not less than the level of such expenditures maintained by the State for the preceding fiscal year, plus the additional funds for tobacco compliance activities required under clause (i). The State shall submit a report to the Secretary on all State obligations of funds for such fiscal year and all State expenditures for the preceding fiscal year for tobacco prevention and compliance activities by program activity by July 31 of such fiscal year.

(iii) Discretion
The Secretary shall exercise discretion in enforcing the timing of the State obligation of the additional funds required by the certification described in subparagraph (A)(i) as late as July 31 of such fiscal year.

(C) Failure to certify
If a State described in subparagraph (A) fails to certify to the Secretary pursuant to subparagraph (A)(i) or enter into, or comply with, a negotiated agreement under subparagraph (A)(ii), the Secretary may take action pursuant to paragraph (1).

(c) Implementation of reporting requirements

(1) Transition period
The Secretary shall—

(A) not withhold amounts under subsection (b) for the 3-year period immediately following December 20, 2019; and

(B) use discretion in exercising its authority under subsection (b) during the 2-year period immediately following the 3-year period described in subparagraph (A), to allow for a transition period for implementation of the reporting requirements under subsection (a)(2).

(2) Regulations or guidance
Not later than 180 days after December 20, 2019, the Secretary shall update regulations under part 96 of title 45, Code of Federal Regulations ¹ or guidance on the retailer compliance rate goal under subsection (b), the use of funds provided under section 300x–21 of this title for purposes of meeting the requirements of this section, and reporting requirements under subsection (a)(2).

(3) Coordination
The Secretary shall ensure the Assistant Secretary for Mental Health and Substance Use coordinates, as appropriate, with the Commissioner of Food and Drugs to ensure that the technical assistance provided to States under subsection (e) is consistent with applicable regulations for retailers issued under part 1140 of title 21, Code of Federal Regulations.

(d) Transitional grants

(1) In general
The Secretary shall award grants under this subsection to each State that receives funding under section 300x–21 of this title to ensure compliance of each such State with this section.

(2) Use of funds
A State receiving a grant under this subsection—

(A) shall use amounts received under such grant for activities to plan for or ensure compliance in the State with subsection (a); and

(B) in the case of a State for which the Secretary has made a determination under subsection (b) that the State is prepared to meet, or has met, the requirements of subsection (a), may use such funds for tobacco cessation activities, strategies to prevent the use of tobacco products by individuals under the age of 21, or allowable uses under section 300x–21 of this title.

(3) Supplement not supplant
Grants under this subsection shall be used to supplement and not supplant other Federal, State, and local public funds provided for activities under paragraph (2).

(4) Authorization of appropriations
To carry out this subsection, there are authorized to be appropriated $18,580,790 for each of fiscal years 2020 through 2024.

(5) Sunset
This subsection shall have no force or effect after September 30, 2024.

(e) Technical assistance
The Secretary shall provide technical assistance to States related to the activities required under this section.