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Cigar Industry Lobbying Groups File in U.S District Court on FDA Deeming Rules

October 11th, 2017

Warning Labels and User Fees are Listed Among Biggest Objections

On Tuesday, October 3, the Cigar Association of America (CAA), Cigar Rights of America (CRA) and the International Premium Cigar & Pipe Retailers Association (IPCPR). filed a preliminary injunction and a motion for partial summary judgement with the U.S. District Court regarding, among other concerns, how warning labels will be applied to cigar packaging, and the FDA’s collection of user fees.

The lobbying groups contend that the FDA’s warning label plan, which requires cigar manufacturers and retailers to submit their advertising plans and the associated warning labels one year in advance, is unconstitutional under the First Amendment. The proposed labels, which would take-up 30% of a cigar box’s area and 20% of cigar advertisement space are scheduled to go into effect approximately 10 months from now. That means the warning labels on cigar packaging will be three times larger, and therefore, much more conspicuous than the single cigarette warning label which takes up less than 5% of a cigarette pack.

The Motion for Preliminary Injunction argues: “The agency failed to make the findings required by the (Tobacco Control Act) to justify imposition of warning requirements, imposed the new warning requirements without accounting for the efficacy of existing label regimes, and insisted on a warning scheme that imposes greater burdens on cigar and pipe tobacco than cigarettes, despite the fact that the agency recognizes that cigarettes carry a greater public health risk.”

To emphasize the impact these labels would have on the industry and consumers, Craig Cass, Owner of Tinderbox of the Carolinas retail chain and a member of the IPCPR Executive Committee stated: “Manufacturers have to order boxes, bands, etc., well in advance of that 2018 date, and, in fact, it has been quoted to be a nine month or longer lead time. . .Our industry is known for its beautiful artwork that has been unchanged, in some cases, for generations. To take 30-percent of that space for a warning label would destroy the beauty of the product.”

Then there is the issue of user fees. Since October 2016, in compliance with the FDA’s Deeming Rule, cigar makers and importers must submit federal excise tax information on a monthly basis by which the user fees are then determined by the FDA. For Fiscal Year 2018, the cigar industry’s cut comes to about $66.4 million out of the expected $672 million total for all tobacco products combined, which includes cigarettes, pipe tobacco, snuff, and roll-your-own tobacco. The complaint cited in the new Partial Summary Judgement is that “e-cigarettes,” which are not currently regulated, have been excluded from user fees, and that this violates the “equal protection” clause of the Fifth Amendment. As a result, the motion asserts that, “charging only some regulated products turns what Congress designated as a ‘user fee’ into a ‘tax,’ which the FDA lacks the authority to do.”

As reported by Cigar Aficionado, attorney Michael Edney, a partner at Norton Rose Fulbright, the law firm representing the cigar lobbying groups, said: “[E-cigarettes] are getting regulated, but they don’t have to pay for it. If you look to the future, this will become a big deal because the e-cigarette market is booming.” The result could mean that user fees collected by all of the other tobacco products will not be enough to cover regulation for the currently a multibillion dollar e-cig business. Mr. Edney added that the current situation is “not only unfair, it’s unstable,” and is also “likely to upend the entire regulatory system.”

The lobbying groups also argued that the Tobacco Control Act wrongly classifies retailers who blend pipe tobacco as “tobacco product manufacturers.” In other words, tobacconists that blend their own pipe tobaccos are subject to manufacturer regulations which are specifically designed for bigger companies who are primarily in the business of making tobacco products. Additionally, the groups argued that tobacco pipes, themselves, should not be considered tobacco “components” under the deeming regulations.

Should the U.S District Court decide to grant a temporary restraining order based on the complaints, that would temporarily bar the FDA from enforcing some parts of the deeming rule until a later ruling. However, the FDA will have their day in court to respond before such a ruling could be ordered.