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Joint Comment Seeking Exception

Cigar Industry’s Biggest Manufacturers File a Joint Comment Seeking Exemption from FDA Regulation

July 23rd, 2019

Proposed Substantial Equivalence Rules are inappropriate as applied to premium cigars.

In a move opposing the Federal Drug Administration’s Proposed Substantial Equivalence (“SE”) Rule, six of the world’s biggest cigar manufacturers filed joint comments with the agency signifying the debilitating effects SE will have on the premium cigar industry. The Rule, if enforced, would require manufacturers to submit to a lengthy application and testing process for premium handmade cigars that entered the market after February 15, 2007. Under the current guidelines, cigars released before February 15, 2007 are exempt.

The joint comment was filed by General Cigar Company, Drew Estate, Davidoff of Geneva USA, Perdomo Cigars, Tabacalera USA, and C.L.E. Cigar Company, all of whom call for full exemption from FDA Regulation, and more specifically, exemption from application of the Proposed SE Rule for premium cigars.

The industry’s comments come in the wake of the FDA’s comment period on substantial equivalence. This period is one of the ways cigar manufacturers can receive approval from the agency for their products. Currently in the process of streamlining its substantial equivalence process to make it easier for both the manufacturers and the agency, the FDA is required to solicit comments from the public and the tobacco industry about how it should proceed. However, the joint comment has little or nothing to do with streamlining. Rather, it calls for the agency to exempt premium cigars from going through the equivalence process entirely.

Referring to the criticism cited in the joint comment, President of Davidoff of Geneva USA, Dylan Austin, said that the FDA’s Proposed SE Rule presents “an overly broad and unjustifiably costly set of regulations that are so lacking in scientific substantiation as to be nothing more than an illegal economic ban on handmade premium cigars that will cripple the manufacturers and retailers in this important industry.”

All six companies are members of the Cigar Association of America (CAA), which has been battling with the agency on tobacco regulation for over a decade. With regard to CAA’s efforts, President and CEO of Tabacalera USA, Javier Estades, said, “We fully support CAA’s incredible work in challenging current FDA regulations, which are wrong for all cigars, and recognize that certain aspects of FDA’s regulations uniquely and disproportionately impact premium cigars. We therefore decided to come together to address these issues head on.”

The arguments made in the comments refer to three specific areas of contention. For one, that premium handmade cigars should be exempt from regulation for both scientific and legal reasons. Secondly, that the Proposed SE Rule as written is unworkable for premium cigars and does not account for the unique aspects of the product. And finally, that the economic impact of the Proposed SE Rule would result in a ban on much of the premium cigar category.

Then there are the prohibitive costs to the industry. Substantial equivalence also requires manufacturers to apply for each different product count within the same product line. For example, if a manufacturer sells a specific cigar in a box of 20 and also offers it in a package of four cigars, the manufacturer has to apply for substantial equivalence for each product individually; in this case, doubling the cost, while a third version would triple the cost, and so on.

Currently, little information is available on the actual costs that will result from SE. However, in 2016 the FDA estimated that a full SE report would cost $22,787, which the manufacturers claim is far from accurate. For example, testing numbers for cigarettes and smokeless tobacco like snus run from $80,000 to $100,000 per product. According to one lab report, the estimated testing process cost for premium cigars could run as high as $20,000 per SKU. Plus, the companies argue that each completed report could take anywhere from 87 to 300 hours. One company which already has experience with the filing process reported a number closer to 900 hours.

Due to the fact that they are made by hand, even more challenging is the actual testing of premium cigars. Unlike cigarettes, premium cigars have no additional additives; the only ingredient is cured and fermented tobacco. And since curing and fermentation methods vary across the industry by manufacturer, they can’t necessarily meet the FDA standard for the required anaerobic process, a process that is based on the scientifically accurate definition of “fermentation.”

Since no two premium handmade cigars are exactly identical, test results can differ. In their comments the manufacturers refer to a 2017 FDA study that examined cigars for product size, nicotine content, and tobacco pH. Not surprisingly, the researchers found it impossible to replicate the results of the initial tests between the first and second tests. Therefore, the variance for a box of cigars is expected to be much different than what the FDA usually sees in their data. Subsequently, the manufacturers contend that even more testing may be required, which would create a greater negative impact on the industry’s economy.

“The Premium Cigar Manufacturers have called upon FDA to look at their own research and reach the only conclusion their own data can support,” said, Nick Perdomo, CEO of Perdomo Cigars. “The Proposed SE Rules are simply inappropriate as applied to premium cigars, and [for that reason], premium cigars should be exempt from FDA regulation.”

CEO of Drew Estate, Glenn Wolfson added, “Our joint comment to FDA is very powerful because it is based on data. The FDA has undertaken extensive research about the usage patterns of premium cigars and their impact on public health. The resulting data from this scientific research is clear and unambiguous as to two critical facts: First, premium cigars are not used by youth. Second, based on the usage patterns of adult premium cigar smokers, there is no statistically significant difference in mortality rates or disease rates between the overwhelming majority (over 95%) of premium cigar smokers and non-smokers. Said differently, the FDA’s own data makes clear that FDA regulation of premium cigars will neither impact what is virtually non-existent youth usage or materially benefit the public health. On the other hand, due to the unique nature of this artisanal, handmade industry, the costs of FDA regulation of premium cigars will be devastating, particularly to small businesses.”

Due to a recent court case, the substantial equivalence due date is set for May 12, 2020, which the cigar industry is appealing in separate court filings. Originally, the reports were not due until August of 2021.

At the conclusion of the comments, Regis Broersma, President of General Cigar Company stated, “As the leading manufacturers in the premium cigar industry, all of us proudly stand together today to protect all premium cigar manufacturers regardless of size, retailers and consumers from what can only be described as unduly burdensome, grossly over-reaching, and wholly improper regulation. We invite all industry members to review our joint comment and to speak to your local representatives about the devastating impacts of FDA’s proposed regulations on your businesses. Together we can make a difference.”