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House Bill H.R. 2339 Passes Exempting Premium Cigars, but Many Burdensome Restrictions Remain

March 5th, 2020

On Friday, February 28th, the U.S. House of Representatives passed the hotly debated H.R. 2339, the Reversing the Youth Tobacco Epidemic Act of 2019, by a vote of 213 to 195 with 22 abstentions. Although the bill mainly targets concerns over e-cigarettes and vape-oriented products, if it eventually receives the President’s signature, which is unlikely, the new law would amend how the Federal Food, Drug and Cosmetic Act treats the sales and marketing of tobacco products.

Of major concern to the tobacco industry is the ban on flavors in deemed tobacco products and a potential ban of online cigar sales. With regard to the latter, the bill would prohibit the sale of all tobacco products with the exception of retail sales made only via direct, face-to-face exchange between retailers and consumers. The primary reason for that is to keep youths from going around retailers to purchase e-cigarettes and vape products online.

With the bill’s passage, there is a small but significant victory for premium cigars, in that, the House has officially recognized premium handrolled cigars as a unique tobacco category, which the cigar industry and its lobbyists have been fighting for. As a result, the bill creates an exemption for online sales of premium cigars, including an exemption from the pre-market, “Substantial Equivalence” (SE) review process, which levees exorbitantly high costs to premium cigar manufacturers. SE reports must be filed in order to prove that, for example, new cigar brands have virtually the same characteristics as brands that are defined as “predicate” brands. Predicate brands are brands that were on the market prior to February 15, 2007.

Even though the bill’s passage may have quelled some fears among the industry, H.R. 2339 still carries with it a number of burdensome restrictions. As executive director of Cigar Rights of America, Glynn Loope put it: “This bill facilitates the recognition that there is, in fact, a class of cigars recognized as ‘premium.’ However, an arbitrary price point does nothing to highlight these unique differences and only serves to cause confusion, which ultimately will lead to economic harm to the premium cigar industry.”

For example, the bill defines a “premium cigar” as a cigar with a suggested retail price of $12 or more. According to the FDA’s own data, cigars that fall into that price range only account for less than 25-percent of all premium cigars sold in the U.S. Additionally, premium cigars would be subject to the same marketing and advertising restrictions as cigarettes. Those restrictions state that cigar manufacturers would also no longer be able to sell or hand out branded collateral merchandise which includes ashtrays, lighters, shirts, or gifts with purchases. Moreover, manufacturers would be legally banned from sponsoring events, including cigar festivals.

“Although it is not perfect, this is a historic bill and a huge step forward for the premium cigar industry,” said Drew Newman, general counsel of J.C. Newman Cigar Co. “For the first time, the U.S. House of Representatives has recognized that premium cigars are unique, are not used by children, and should be exempt from unnecessary regulation.” But Mr. Newman also added, “The bill’s minimum price and advertising and marketing restrictions would severely harm the premium cigar industry. It is important to remember that this bill is not final. Today’s vote in the House is a step forward. As the bill moves to the Senate, we look forward to working to improve this legislation and remove those and other restrictions for premium cigars.”

Prior to the vote on H.R. 2339, arguments for and against the bill were given a substantial hearing from both sides of the aisle.

Rep. Anna G. Eshoo (D-CA) perceived the bill as a reversal of progress regarding tobacco use, mostly due to flavored tobacco products and tobacco companies targeting youths with these products, while Rep James Comer (R-KY) said the bill doesn’t so much deal with youth vaping as it does reduce the freedom and choice of law abiding adults.

Democrat Reps. Bobby L. Rush and Robin L. Kelly, both of Illinois, addressed the issue of tobacco companies marketing and targeting African Americans, mostly males, to push menthol cigarettes, and that banning menthol products would save lives in many African American communities.

Rep. Greg Walden (R-OR) blamed the Obama Administration for not taking proper actions against e-cigarette products, leading to the problem among youths, and said that the Trump Administration has taken steps to address the situation. He added that if the bill was passed, it would ban legal products used by adults, and the bill should address marijuana-based vaping products. Walden also pointed out how easy it is for youth to get access to THC and marijuana-based products, which has led to the current vaping crisis. Banning flavored tobacco products would only give rise to a black market and put even more Americans at risk. Not only would the passing of the federal Tobacco 21 law have an even greater impact on adults and their access to legal products, but a ban on flavored tobacco products could lead to a ban on other flavored products, including alcohol and even certain foods, creating a very slippery slope.

Rep. Earl Blumenauer (D-OR) stated that taxation is the most effective way of keeping vaping and e-cigarette products out of the hands of youth, while Rep. Carol D. Miller (R-WV) called the bill a new effort to tax many adults who are trying to stop smoking, and added that the real problem is the sale of illicit THC products.

Rep. Drew Ferguson (D-GA) spoke about how H.R. 2339 is being promoted as a youth vaping bill but is actually a veiled anti-tobacco bill that would remove legal products if passed and would take away choices of tobacco products such as snus, cigarettes, and cigars from adults, citing the bill also has overall tones of socialism.

Also opposed to H.R. 2339 is the Office of Management and Budget, who stated that if the bill was submitted to the President in its current form, President Trump’s senior advisors would recommend it be vetoed. Following are the concerns addressed by the OMB in a recent statement:

  • The Administration is encouraged by legislative efforts to protect American youth from the harms of addiction and unsafe tobacco products, and it also acknowledges that H.R. 2339 exempts premium cigars, which have comparatively lower youth usage rates, from certain regulatory burdens. Unfortunately, however, this bill contains provisions that are unsupported by the available evidence regarding harm reduction and American tobacco use habits and another provision that raises constitutional concerns. Accordingly, the Administration cannot support H.R. 2339 in its current form.
  • The Administration cannot support H.R. 2339’s counterproductive efforts to restrict access to products that may provide a less harmful alternative to millions of adults who smoke combustible cigarettes. This includes the bill’s prohibition of menthol e-liquids, which available evidence indicates are used relatively rarely by youth. It also includes the bill’s approach to remote retail sales. At this time, problems surrounding such sales should be addressed through the application of age verification technologies rather than, as this bill would do, prohibiting such sales entirely.
  • The Administration is also concerned about the constitutionality of a provision in the bill that prohibits certain advertising practices with respect to electronic nicotine delivery system (ENDS) products. The bill would prohibit marketing and advertising that “appeals to an individual under 21 years of age.” This standard may not satisfy the stringent vagueness test applied to regulations of speech under the Constitution’s Due Process Clause.
  • The Administration is committed to protecting the Nation’s youth from the harms of tobacco and has already taken several steps to do so. This includes signing legislation to raise the minimum age of sale for tobacco products to 21. In January 2020, moreover, the Administration issued guidance to prioritize enforcement against the unauthorized marketing of certain ENDS products to youth. And the Food and Drug Administration (FDA) is conducting regular surveillance of—and, when appropriate, taking enforcement measures against—websites, social media, and other publications that advertise regulated tobacco products.
  • The bill takes the wrong approach to tobacco regulation. Rather than continuing to focus on the FDA’s Center for Tobacco Products, Congress should implement President Trump’s Budget proposal to create a new, more directly accountable agency within the Department of Health and Human Services to focus on tobacco regulation. This new agency would be led by a Senate-confirmed Director and would have greater capacity to respond to the growing complexity of tobacco products and respond effectively to tobacco-related public health concerns.
  • If presented to the President in its current form, the President’s senior advisors would recommend that he veto the bill.

“It is important for the association to send a loud and clear message that we appreciate efforts made to distinguish premium cigars from other tobacco products, but we cannot support or remain neutral to provisions that will cripple the industry and eliminate significant lines of business for our members,” said Premium Cigar Association executive director, Scott Pearce.

H.R.2339 will now go to the Republican majority Senate where a potentially equally heated debate will ensue. In the meantime, tobacco retailers, manufacturers, and consumers are being encouraged to contact their respective state’s senators urging them to oppose the bill when it arrives.