29 Sep 2015
Last week news broke that, starting in January, FedEx would no longer be shipping tobacco. The company cited the “complex regulatory environment” as part of the reason for its decision to cease shipments.
While consumers are unlikely to notice the change, since FedEx is used mostly by manufacturers and distributors to ship cigars to retailers, the change is part of a larger trend that is making it harder for legal businesses that sell tobacco products. (Currently, UPS and USPS are used for most consumer shipments of tobacco sales.)
But almost certainly the same “regulatory environment” that led FedEx to stop shipments will spread. FedEx faced a massive lawsuit from the state of New York for shipping untaxed cigarettes into the state even though the company has no way of knowing the contents of the millions of packages it transports every day. UPS is currently facing a similar lawsuit.
And the ability to ship products is only one way in which legal tobacco sales are under pressure. Tobacco retailers’ access to banking services, which are critical for running any business, are also under attack.
Starting in 2013, the Department of Justice began an initiative called Operation Choke Point with the goal of cutting off financial services to “high risk businesses” for fraud. But critics have said Choke Point has been used by the Justice Department to target many legal businesses deemed undesirable by the current administration.
Multiple cigar retailers have already been dropped by their credit card processors or banks, according to IPCPR. And a Department of Justice list, since taken down from its website, lists “tobacco sales” as one of the targeted businesses.
What makes these attacks so challenging is ultimately banks or shipping companies should be able to decide for themselves what types of businesses they want to do business with. But when activist attorneys general or Department of Justice officials are pressuring them, the result is regulation by fiat, without meaningful oversight or legislative authorization. While the cigar industry faces potentially devastating regulations from the FDA, those regulations are at least authorized by an act of Congress. That gives the industry the opportunity for input in the rulemaking process and the ability to challenge the regulations in court.
Policies like Operation Choke Point and pressure on shippers from lawsuits represent an entirely different challenge. Tobacco is a legal product in America, but there are many elected officials who don’t want it to be and they have initiated a stealth attack on cigars with the potential to be just as devastating as the formal regulations pending at the FDA.
photo credit: Washington Times