The Stogie Guys

Every two years, a flurry of new bills are introduced in Congress and, as has been the case every two years since 2011, a bill was again introduced in the Senate to protect handmade cigars from damaging Food and Drug Administration (FDA) regulations.

Senate Bill 9, the “Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2019,” was introduced January 3, 2019, by Florida Senator Marco Rubio. Five Senators signed on as original co-sponsors: Cory Gardner (R-CO), Joe Manchin (D-WV), Tom Cotton (R-AR), Robert Menendez (D-NJ), and Joni Ernst (R-IA).

In the previous Congress, Florida Senator Bill Nelson introduced the legislation, while longtime-supporter Rubio had been an original co-sponsor who supported the bill from its initial introduction. The change takes place after Nelson, a Democrat, was defeated in November by then Republican Governor Rick Scott.

Although Scott is not one of the original co-sponsors, as governor he did send a letter to the FDA Commissioner opposing FDA regulation of handmade cigars. A later report claimed Scott personally lobbied Vice President Mike Pence about the issue of how FDA regulations would be applied to cigars already on the market. The discussion was revealed in a report that noted that Swisher, which now owns Drew Estate, had made significant contributions to Scott’s campaign.

Other past supporters who were defeated in November include Senator Dean Heller (R-NV) and Joe Donnelly (D-IN), though many others were re-elected. Cigar industry groups will now have to build support for the legislation in both the Senate and House.

According to Congress.gov, a companion House bill has not yet been introduced to protect handmade cigars from the FDA. Florida Republican Bill Posey, who easily won re-election in November, has traditionally introduced that bill.

Despite the House changing hands in the 2018 elections, most previous supporters of the bill survived re-election. The cigar industry did lose some champions, including Florida Representative Ileana Ros-Lehtinen, who retired after being a longtime advocate for cigar rights.

Trump-appointed FDA Commissioner Scott Gottlieb was initially seen by many as a positive change when it came to FDA policies towards cigars compared to the Obama FDA. However, despite delaying the implementation of some cigar regulations, some experts worry his subsequent actions are step towards a stealth ban on tobacco products, including cigars.

–Patrick S

photo credits: Stogie Guys

Judge Amit P. Mehta of the U.S. District Court for the District of Columbia issued a 70-page decision yesterday in CAA v. FDA, largely ruling against the cigar industry groups that brought the legal challenge to the U.S. Food and Drug Administration’s (FDA) regulation of premium cigars and other tobacco products.

The Cigar Association of America, International Premium Cigar & Pipe Retailers Association, and Cigar Rights of America filed the legal challenge last year claiming the FDA’s move to extend tobacco regulations to cigars and other tobacco products violated the Administrative Procedures Act, as well as the First and Fifth Amendments to the Constitution.

The one win for the industry groups relates to pipe tobacco. The Obama-appointed judge found the FDA was “arbitrary and capricious” when it designated tobacco retailers who blend pipe tobaccos in-store as domestic manufacturers under that Tobacco Control Act. That issue was remanded back to the FDA for further consideration.

The judge rejected claims that the FDA violated the Administrative Procedures Act when enacting the deeming rule, putting cigars under the Tobacco Control Act. He also rejected claims that the large cigar warning labels violate the Constitutional rights of cigar manufacturers who were required by the law to put health warnings on products and advertisements for cigars. (The picture above is of required warning labels in France, which are only slightly larger and more colorful than what is required under the FDA.)

Although the judge noted the “basic unfairness” of enforcing the warning labels and associated costs while the FDA was reconsidering the regulations and may soon change them, he ultimately deferred to the agency’s authority.

Judge Mehta’s decision can (and very likely will) be appealed to the U.S. Court of Appeals for the District of Columbia Circuit. An adverse ruling by a three-judge panel of that court could then be petitioned for review “en banc” by the full court, after which the U.S. Supreme Court could be asked to review that decision.

Analysis

Legal precedent is stacked against those challenging executive agency rules. The “Chevron Doctrine” gives wide deference to executive branch agencies when it comes to interpreting the law. As a result, an agency like the FDA gets the benefit of the doubt in the eyes of federal courts when it comes to interpreting the limits of its authority.

The good news is, in addition to a likely appeal, this isn’t the only legal challenge to the FDA rules. A lawsuit filed by Global Premium Cigars in Florida includes additional claims that the FDA’s actions violate the Regulatory Flexibility Act, designed to protect small businesses from over-burdensome regulations. And an additional lawsuit brought by El Cubano Cigars and the Texas Cigar Merchants Association in Texas challenges the regulations including the warning label requirements.

If any of the various appellate courts split on an issue, it increases the likelihood the U.S. Supreme Court could weigh in on the issue. Although the odds are still long, legal experts believe there is an increasing skepticism on the Supreme Court for the deference afforded executive branch agencies under the Chevron Doctrine.

Ultimately, though, the best hope for stopping FDA regulations of cigars remains outside the courts. Short term, the FDA’s restarted rulemaking process could provide relief for the cigar industry, as the Trump-appointed FDA commissioner has already initiated a new direction for tobacco regulations.

The more fundamental, if difficult, solution is to repeal the FDA’s authority over premium cigars. Once the FDA was granted the power in 2009 to extend its authority over cigars, it was inevitable that eventually the agency would exercise that power.

Back in 2009, some in the cigar industry weren’t particularly worried about the FDA’s new powers over tobacco because the law’s primary target was cigarettes. While it may have been true that cigarettes were the primary target, it was short-sited to think FDA regulation wouldn’t eventually expand to cigars.

Cigar maker Steve Saka provided his reaction to yesterday’s ruling in a Facebook post: “Basically the court is saying that what the FDA is doing is wrong and unjust, but legal… This is a byproduct of an inept Congress that lacks the moral fortitude to fix the colossal mistake they created and bureaucracy run amok. It is beyond frustrating and infuriating.”

In short, if you’re looking for someone to blame for yesterday’s ruling, don’t focus on the judge, but on the Congress that authorized the FDA’s regulation of cigars in the first place. And don’t forget: Today’s Congress still has the power to repeal it.

–Patrick S

photo credit: Stogie Guys

Handmade cigar industry groups supported President Trump’s appointment of Dr. Scott Gottlieb as the head of the U.S. Food & Drug Administration (FDA). Now they will see if that support was deserved.

On Friday, the agency announced its intent to seek comments about reconsidering existing regulations of premium cigars. The 90-day comment period opens today (Monday, March 26) and runs through June 25.

Here is the FDA’s summary of its action:

The Food and Drug Administration (FDA) is issuing this advance notice of proposed rulemaking (ANPRM) to obtain information related to the regulation of premium cigars under the Federal Food, Drug, and Cosmetic Act (FD&C Act), as amended by the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act), and regulations regarding the sale and distribution of tobacco products. Specifically, this ANPRM is seeking comments, data, research results, or other information that may inform regulatory actions FDA might take with respect to premium cigars.

In the notice, the FDA asks for “comments, data, research results, and other information related to the following topics: (1) definition of premium cigars, (2) use patterns of premium cigars, and (3) public health considerations associated with premium cigars.”

The request for comments also zeros in on an issue regarding the definition of youth (something we raised about the original 499-page deeming document): “Please provide any evidence or other information supporting your comments. Also, provide the definition of ‘premium cigar,’ ‘youth,’ and ‘young adult’ used for the studies, information, or views provided in your responses.”

The document specifically asks for additional research that might not have been considered when the FDA made the decision to not exempt premium cigars from their deeming rules in 2016. It specifically notes the PATH study published last September that reinforced the idea that different types of cigars have vastly different usage patterns.

Simply considering a premium cigar exemption, of course, doesn’t guarantee that the FDA will ultimately adopt one. The FDA notably considered and rejected such an exemption in its original regulation of cigars.

However, the willingness of the new FDA leadership to spend time and resources considering rolling back its regulations is a good sign for those who make, sell, and enjoy handmade cigars. Over the next 90 days, expect a big push from the handmade cigar industry for comments urging the agency to adopt a premium cigar exemption.

–Patrick S

photo credits: Stogie Guys

Each Saturday and Sunday we’ll post a Quick Smoke: not quite a full review, just our brief verdict on a single cigar of “buy,” “hold,” or “sell.”

About a year ago, both of my colleagues praised the Robusto (5.5 x 50) from the new (at the time) Partagas Ramon y Ramon line. This cigar sports a Cameroon wrapper around a Dominican binder and filler tobaccos from Nicaragua (Jalapa) and the Dominican Republic (Piloto Cubano). The profile starts mild and ramps up to medium-bodied with flavors of sweet cream, cedar, oak, toast, and melon. Construction is solid. This is an easy recommendation at about $8.

Verdict = Buy.

–Patrick A

photo credit: Stogie Guys

Each Saturday and Sunday we’ll post a Quick Smoke: not quite a full review, just our brief verdict on a single cigar of “buy,” “hold,” or “sell.”

It’s not widely known, but when PG was creating a cigar to celebrate its 15th Anniversary, the decision came down to two final blends. The runner-up became the PG Soiree. Although I think they made the correct decision, the Soiree is also a very fine cigar. It starts out with intense black pepper and wood spice and soon develops an almost maple sweetness to go along with dry oak, hay, and some mushroom-y funk. Not as balanced as the the PG 15th Anniversary cigar, but a blast of enjoyable medium- to full-bodied flavors with flawless combustion.

Verdict = Buy.

–Patrick S

photo credit: Stogie Guys

In two weeks the annual International Premium Cigar and Pipe Retailers (IPCPR) Trade Show will be in full swing. In more than one ways, this year’s show represents a new era. Here’s why:

New Venue

Although the Trade Show isn’t held every year in Las Vegas, there is little question the Las Vegas Sands Expo Center has been its de facto home for the past decade. The convention was originally set to return there again this year. However, late last year IPCPR announced not only was the show being moved up five days, it was moving up The Strip (and a block off it) to the Las Vegas Convention Center (LVCC).

While the LVCC is larger than Sands Expo, it is also off The Strip, meaning transportation to and from the venue is more challenging. The Sands Expo is attached to both the Venetian and Palazzo hotels. While the LVCC isn’t attached to a hotel, it is across from the Westgate Resort and Casino (formerly called the Las Vegas Hilton), which is the primary hotel for this year’s event and host to most of the opening day seminars and the breakfast featuring former New York mayor and presidential candidate Rudy Giuliani. If the new location goes off without a hitch, it could be a win in the long run for IPCPR since they would have two proven locations in Las Vegas.

New Regulations

Last year’s Trade Show took place weeks before the FDA regulations went into effect. Now, even though some enforcement has been delayed, the rules are in effect. The IPCPR has announced that the FDA’s ban on samples for consumers doesn’t effect samples at the convention since the show is only open to the industry and not to the public.

The biggest part of the rules, however, will have a large impact on the event. Usually, numerous new cigars are announced or debuted at the Trade Show, but the FDA rules mean cigars introduced after August 8, 2016, need to go through an FDA approval process before they can legally be sold. It also means cigars introduced since early 2007 will eventually need to either win FDA approval or be removed from the market. One of the interesting things to watch for is how many post-2007 cigars are removed from manufacturers’ offer sheets, especially in light of some hope in the industry that the regulations could be scaled back by the new administration or through litigation.

New Releases

Since any new cigars will need to go through a yet-to-be-defined FDA approval process, there won’t be any new cigars at the Trade Show, right? Not exactly. Since last August, and especially in the past few months, we’ve seen a steady number of “new” cigars announced, with many scheduled to debut at the upcoming show.

Cigar manufacturers knew the regulations were coming and they’ve planned to mitigate the regulations as best they can. One of the ways they’ve done this is though stealth cigar releases prior to the August 2016 deadline. While these cigars may have been sold to a friendly retailer to establish they were on the market in advance of the cutoff date, they haven’t been formally or widely released. This will account for many of the “new” cigars that will be available for the first time at the Trade Show. That said, the number of new releases compared to previous years will be something many observers will be watching closely.

–Patrick S

photo credit: IPCPR

Although no one knew it at the time, one of most important dates for cigars sold within the United States would be February 15, 2007. Under the Tobacco Control Act and subsequent rulemaking, cigars marketed before that date are grandfathered in as exempt from FDA regulations, while those introduced afterwards will eventually need FDA approval to be legally sold and marketed within the U.S.

Although a determination of grandfather status isn’t yet needed for a cigar to be sold without going through one of the FDA approval tracks, the FDA has begun accepting submissions requesting a grandfathered status review of a tobacco product regulated under the deeming regulations that went into effect last year. Earlier this month, the FDA issued the first such determinations for 13 handmade cigars.

Two companies had cigar products established as grandfathered and thus exempt from FDA approval rules: Altadis USA, one of the largest sellers of handmade cigars in the United States, and Ortega Premium Cigars, a boutique company.

Altadis submitted five cigars from five different brands, each in a corona format: Montecristo Classic Collection Especial No. 1, Romeo y Julieta 1875 Exhibicion No. 1, H. Upmann Vintage Cameroon Corona, Saint Luis Rey Corona, and Don Mateo Natural No. 5 (a bundle cigar). The approach of establishing one size first may be a legal strategy, with the company likely to next seek to expand grandfather determinations to other formats.

Ortega Premium Cigars received grandfather determinations for four sizes in each of two brands: VIBE and REO. In 2007, VIBE and REO were under EO Brands, then co-owned by current VIBE and REO owner Eddie Ortega with his former business partner Erik Espinoza. Both cigars were collaborations between EO and Rocky Patel.

The Ortega determinations were shepherded through by attorney Frank Herrera, whose boutique law firm specializes in cigar trademark and FDA compliance issues. Ninety-eight other cigars have also received grandfather determinations, but those cigars would not be considered handmade or premium cigars.

FDA-Funded Study Confirms Minors Not Smoking Premium Cigars

One of the main arguments against the deeming rules that regulate premium cigars in a similar manner as cigarettes is that youth smoking of premium cigars is not an issue. This is also a reason frequently cited for the need for legislation exempting handmade cigars from FDA regulations.

Even the studies cited by the FDA when they rejected a proposed exemption for premium cigars over a certain price did not point to handmade cigar usage by minors, but relied on a more nebulous “youth and young adults.” As we noted at the time, that included usage rates for adults as old as 29.

A recent study published in the prestigious New England Journal of Medicine buoys the arguments made by opponents of FDA regulation of traditional cigars. The study was funded by the National Institute on Drug Abuse and the Food and Drug Administration and conducted by the Department of Health Behavior of the Roswell Park Cancer Institute in Buffalo, New York.

As reported elsewhere, the study shows extremely low usage rates (2.3%) among those aged between 12 and 18, even with  extremely broad definitions of usage (even just “one or two puffs” ever). Fewer than one percent of the 13,651 youth surveyed said they used a cigar once (even “just one or two puffs”) in the 30 days prior to being surveyed.

A deeper look at the study’s numbers shows even less cause for concern for youth smoking of cigars. Of the tiny percentage of those who claim to use traditional cigars virtually all used other tobacco products too, while the number who exclusively used traditional cigars was so small that “estimates were suppressed” because the number was not statistically significant.

Though the conclusion that youth smoking of traditional cigars is virtually zero came as no surprise to those in the handmade cigar community, having FDA-funded research to back up these claims may prove useful in lobbying for the FDA to ease regulations on handmade cigars and for pushing Congress to pass an exemption.

–Patrick S

photo credits: Stogie Guys