The Stogie Guys

There is no getting around the fact that the final FDA rule released last week is a nightmare for premium handmade cigars.

Although premium cigars represent just 2.1% percent of all cigars smoked in the United States (according to the FDA, 300 million of the 14 billion total cigars sold), the vibrant creativity that has come to represent this small handmade portion of the cigar market will be hit with the overwhelming burden of complying with rules that require FDA approval for every cigar not on the market before February 15, 2007.

Within each brand, every size of that blend that was introduced after that date will have to apply for FDA approval, or be off the market, by August 2018. So literally thousands of blends would have to apply, something no one (including the FDA) expects to happen.

In its public statements regarding the rule and within the 499-page rule itself, the FDA repeatedly alludes to the need to regulate cigars to protect children. But a closer look shows the facts don’t support the claim. In fact, at least one of the statements the FDA told the public about this is demonstrably false.

FDA Misstates Current Law

In its press announcement of the new rule, the FDA made the following statement: “Before today, there was no federal law prohibiting retailers from selling e-cigarettes, hookah tobacco, or cigars to people under age 18.”

This claim struck me as odd, at least in respect to cigars, so I asked an FDA spokesman for clarification. Despite multiple emails back and forth, I never got a substantive answer to my question: Does the FDA know of anywhere in the U.S. where the sale of cigars to minors (under 18) was not already illegal?

At one point in the exchange, I was referred to the “CDC [Center for Disease Control] or a group like the Campaign for Tobacco-Free Kids,” which seemed strange given that the FDA had just designated itself the chief regulator of cigars.

Despite that, I asked both groups that the FDA referred me to. The Campaign for Tobacco-Free Kids confirmed that every state prohibits sales to minors (and that Alabama currently also prohibits sales to those age 19). The CDC spokesman made it even more clear that the FDA was wrong in its announcement that prior to these rules federal law did not prohibit sales of cigars to minors.

The CDC spokesman wrote the following back to me: “In response to your question about selling tobacco products to persons under the age of 18. The federal minimum age of sale for tobacco products is 18. States are free to make it higher, but not lower.”

In other words, the federal agency that the FDA referred me to directly contradicted the statement put out by the FDA. Of course, by then the FDA’s misstatement had already been repeated in numerous news accounts of the new regulation.

FDA Cites 29-Year-Old Adults as Evidence of Youth Usage

But the FDA’s deception on this issue doesn’t end there. Within the rules, especially in the justification for not exempting premium cigars, the FDA repeatedly conflates underage use of cigars with choices made by adults.

The final FDA rule repeatedly uses the phrase “youth and young adult(s),” 56 times to be exact, within the rule. So I asked the FDA how they defined young adults and “what would be the oldest a person could be and still be considered a ‘young adult’ by the FDA?”

I was told “young adults” and other references to age groups depended on the specific studies being cited. A look at those studies show that some used 25 while others used 29 as the upper limit for “young adults.”

So while the FDA is using the age-old justification that their rules are necessary “for the children,” the fact is they are citing studies about the choices made by 29-year-old adults, men and women who could have legally served in the U.S. military for over a decade, to do it.

New Rule Really About Restricting the Choices of Adults

At other times, the FDA drops the pretense of the regulations being about youth access all together. At one point in the rule (page 178), the FDA states that it agrees with the proposition that if premium cigars are exempt from the rule, “the current population of premium cigar users would be left unprotected, potentially decreasing the likelihood that they would quit.”

Further, in the FDA’s announcement, a quote from Health and Human Services Secretary Sylvia Burwell specifically states that the aim of the rule goes far beyond children: “Today’s announcement is an important step in the fight for a tobacco-free generation.” So if anyone had any doubts that the FDA wants to totally eliminate tobacco, that statement by a cabinet-level appointee should erase them.

The irony is, even if the new rules were actually designed just to restrict use by minors, the grandfather date set by the legislation that empowered the FDA to regulate cigars means that, barring a sweeping act from Congress, there will always be pre-2007, non-FDA regulated tobacco products out there for lawbreaking minors to find ways to illegally acquire. Better enforcement of laws already on the books might fix that, but the regulations announced last week won’t.

Meanwhile, thousands of premium handmade cigars will be wiped off the market in just over two years, serving no purpose except to restrict the choices available to the adults who choose to enjoy them.

–Patrick S

photo credit: Stogie Guys

As we have since July 2006, each Friday we’ll post a mixed bag of quick cigar news and other items of interest. Below is our latest Friday Sampler.

1) Yesterday the FDA issued a 499-page final rule subjecting cigars to FDA regulation. The regulation will officially be published on May 10 and will take legal effect on August 8 with various requirements being phased in thereafter. Notably, the FDA rejected an option that would have created an exemption for premium handmade cigars that met certain criteria, which the handmade cigar industry had made the focus of lobbying efforts. Because the regulation doesn’t alter the 2007 grandfather date (cigars introduced after that date will have to go through the FDA approval process), the regulation means that, should Cuban cigars ever become legal, they would not be exempt from the approval process. FDA officials admit that process could cost hundreds of thousands of dollars per each size of each blend.

2) Cigar Rights of America blasted he rule in a press release: “Unfortunately, the FDA and the Obama Administration have rejected and cast aside any rationally objective approach to developing this regulation. When Congress gave FDA the authority to regulate tobacco products in 2009, they did so specifically with the stipulation that in order to subject a product to regulation FDA must demonstrate that the specific product(s) possess issues of underage consumption and health and mortality impact through addiction, both which have never been associated with premium cigars… As a result of today’s announcement by FDA, the board of Cigar Rights of America will be convening an emergency meeting to evaluate all legal and legislative options moving forward.”

3) The International Premium Cigar and Pipe Retailers Association (IPCPR) also slammed the devastating impact of the rule in a statement: “The FDA’s regulation of premium cigars, if left unchecked, would have a devastating impact on retailers and manufacturers alike. Consumers will have less choice. Youth access is simply not an issue in the premium cigar space where 35,000 Americans earn their living along with over 300,000 employees in the Caribbean Basin.”

4) From the Archives: Since 2007, StogieGuys.com has covered the issue of FDA regulation of cigars. In 2009, after the FDA tobacco regulation bill was signed into law, we reported on the potential impact, noting it was “a major threat to cigar manufacturers and the choices available to cigar smokers.” Later, in the same article, we reported on the reaction from various cigar makers. One comment was particularly striking: “Jaime Garcia, son of famed cigar-maker Don José ‘Pepin’ Garcia, and a top maker in his own right, told me through a translator that coming from Cuba, he couldn’t believe that in America so much power would be given to the government to control his business.”

5) Deal of the Week: If you’re not already a member, the events of yesterday should motivate you to join Cigar Rights of America. Joining not only supports professional lobbyists who fight for cigar freedom, but also affords discounts at cigar shops, free cigars, and more. One great way to join is by purchasing a Cigar Rights of America sampler. Each sampler includes CRA membership, plus ten exclusive cigars. Buy one at your CRA-supporting local cigar retailer or purchase one online here.

–The Stogie Guys

photo credit: CRA

Today the Food and Drug Administration (FDA) announced the final rule regulating cigars. We will have more coverage in tomorrow’s Friday Sampler and in the coming weeks but, for now, here are some key points about the impact of the 499-page rule on handmade cigars.

The FDA Rejected Pleas for an Exemption for Premium Cigars

In its initial proposed rule, the FDA offered two options for regulating cigars: option one (which covers all cigars), and option two (which exempts handmade cigars over $10). In its final rule, the FDA rejected option two, meaning a $12 handmade premium cigar will be treated exactly the same under the rule as “little cigars” that are manufactured on the same machines that produce cigarettes.

Date for Grandfathered Products Remains Unchanged

While the so-called Family Smoking Prevention and Tobacco Control Act (FSPTC)—the bill giving the FDA the power to regulate cigars—didn’t pass until June 2009, the legislation sets February 15, 2007 as the cutoff date for tobacco products to be grandfathered in as exempt from needing FDA approval before being sold or marketed in the United States. There were hopes that the FDA would modify that date, but they did not. As a result, products introduced past that date will be subjected to the FDA approval process. Cigars currently on the market will be treated differently from those introduced after the regulation officially takes effect.

Regulations Take Effect August 8

While the text of the rule was released today, it will not be officially published to the Federal Register until May 10, at which point a 60-day clock will start until the regulation officially goes into effect. Cigars introduced after August 8 will have to get FDA pre-approval before being marketed or distributed. Non-grandfathered (post-February 15, 2007) cigars on the market before August 8 can be sold until August 8, 2018, after which they must apply for FDA approval to remain on the market. Notably, the 2016 IPCPR Trade Show is set to take place in Las Vegas at the end of July, meaning it will effectively be the last chance cigar makers have to introduce new cigars before the August 8 date for pre-approval is required.

FDA Approval Process Still Murky

The need for FDA approval of new cigars is the biggest reason why industry experts predict the rule will devastate the handmade cigar industry, including 30,000 Americans who work in the industry and over 300,000 employees abroad. While subjecting all cigars to a pre-approval process where they must prove the new product is “substantially equivalent” to a grandfathered or approved product, the exact standards the FDA will use to make this determination, or exactly what scientific data would need to be included with the application, is far from clear. The FDA also doesn’t seem to address if it has the capacity to deal with new applications in a timely manner.

Rule Enacts Sample Ban, Mandated Warning Labels

Starting on August 8, distribution of samples will be prohibited, meaning cigar shop events where attendees get to try a new product free of charge will be prohibited. Full implementation of warning labels on cigars has also been mandated, with warnings “to appear on at least 30 percent of the two principal display panels of the package, and at least 20 percent of the area of advertisements.”

FDA Intends to Ban Flavored Cigars Next

In the finalized rule, the FDA states the following regarding demands by anti-tobacco lobbyists that it include a ban on flavored tobacco products: “To address concerns with the growing flavored cigar market and its impact on youth and young adult initiation with tobacco products, FDA is announcing here that it intends to issue in the future a proposed product standard that would prohibit characterizing flavors in all cigars, including cigarillos and little cigars.” To date the exact definition of a flavored cigar is unknown, and depending on the definition such a ban could include many premium handmade cigars not commonly identified as flavored.

Legal Challenges Are Inevitable

Barring an Act of Congress, only a federal court case can stop enforcement of this rule. Legal actions to executive orders generally come in the form of either a facial challenge to the rule, or an as applied challenge. A facial challenge could ask for an injunction to stop implementation of part of the rule or the entire rule, although the standard for getting one is very high. An “as applied” legal challenge would allege that the FDA violated either a federal law or the Constitution in how it applied the regulations to a specific party. With such a major expected impact, multiple federal lawsuits are likely.

The entire text of the 499-page rule can be found here.

–Patrick S

photo credits: Stogie Guys

In April 2014, the Food and Drug Administration (FDA) took the first major step towards invoking its authority to regulate premium cigars. At the time, it seemed likely that by the end of 2014—if not certainly in 2015—the FDA would finalize its rule subjecting cigars to FDA regulation, including a pre-approval process for cigars introduced after 2007 that would cost cigar makers up to a projected $400,000 per new cigar brought to market.

The comment period for the proposed regulation closed in August 2008 after nearly 55,000 submitted comments, with over half of them from cigar smokers concerned about the impact of the new regulations. Since then, the rule-making process has slowed considerably.

It took over a year after the close of the comment period for the FDA to submit a proposed rule to the Office of Management and Budget (OMB), which finally took place last fall. Normally, the OMB review process is completed in 90 days, but nearly six months later there has been no further action. Now, rumors suggest the process is frozen. So why the delay?

The most likely answer may be Cuba.

After seemingly ignoring Cuban-American relations for most of his presidency, President Obama has taken significant steps toward normalizing relations with Cuba in the final years of his final term, culminating with the historic visit to Cuba earlier this month. With Cuban cigars being one of Cuba’s most notable and economically important exports, one can reasonably infer that thawing diplomatic relations may be throwing a wrench into FDA efforts to regulate cigars.

Consider the impact of the proposed regulations on Cuban cigars. The FDA has taken the position that, because of the text of the law that authorizes the agency to regulate cigars, it cannot exempt cigars introduced to the U.S. market after February 15, 2007. (We covered this in significant detail last year.)

For non-Cuban cigars, the impact would be huge. For Cuban cigars, none of which can be legally sold or marketed in the U.S. as long as the embargo remains law, the impact would be total.

As you should know by now, the FDA had two options in its proposal for regulating cigars. Option one would treat all cigars the same. Option two would create an exemption for premium cigars that meet certain criteria, including being composed mostly with long-filler tobacco, not being flavored, and having a suggested retail price of at least $10. (One estimate projected that 85% of cigars fall under the arbitrary $10 point.)

One open question about the FDA rules under either option is how cigars introduced after the 2007 cutoff, but already on the market when the rule goes into effect, would be treated—especially those introduced before the FDA took any action towards regulating cigars, or even before the bill authorizing the regulation was signed into law in 2009. Immediately pulling those cigars off the market would be extremely disruptive, not to mention impractical and grossly unfair. Therefore, a grace period where the cigars could remain on the market pending an application for FDA approval seems likely. Of course, non-Cuban cigars, like Cuban cigars, that are not currently on the market wouldn’t be helped by such an accommodation, and options for specifically exempting one country’s imports but not another would not be justified by the legislation (and also could violate international trade commitments, not to mention basic fairness).

For Cuban cigars, the majority of which would probably meet the premium definition, especially with likely price hikes due to increased demand should they become legal in the U.S., option two would allow Cuba’s most famous product to be sold almost immediately if and when the embargo ends. Option one, on the other hand, would keep Cuban cigars off the world’s largest cigar market until they undergo the pre-approval process. Considering that the FDA has taken years to rule on a small percentage of the pending tobacco products already waiting for FDA approval, that wait could be almost indefinite when they go to the back of the line after thousands of non-Cuban cigars.

Unfortunately, indications are the FDA has resisted option two (a purported leaked copy of the rule the FDA transmitted to OMB didn’t include a premium cigar exemption). Further rumors suggest the White House and OMB favored an exemption for premium cigars while FDA opposed one, which has contributed to the likely delay at OMB.

All of which brings about more questions than answers. But  now there’s certainly a compelling case that changing relations between Washington and Havana, and the potential impact on Cuban cigars, could be a significant reason for the delay in implementing a final rule regulating cigars.

If true, then possibly only the president’s unilateral desire to re-establish trade with Cuba is stopping the U.S. government from devastating American cigar retailers, non-Cuban cigar companies, and the tens of thousands of people in the Dominican Republic, Honduras, Nicaragua, and elsewhere that depend on making cigars for the American market. What does it say that the only thing that might save non-Cuban cigars is the desire to not harm the Cuban government-owned cigar industry?

In many ways, the question is as troubling as the answer. But given the destructive impact of FDA regulation on cigars, any reason for delay or possible reprieve would be most welcome.

–Patrick S

photo credits: IIP Photo Archive

One of my 2016 resolutions is to ensure we update our Question of the Month (found in our right-hand sidebar) monthly. Last year, far too often our reader poll got neglected. So I recently took down January’s question and, as I updated it, noted the results of the voting, which I present to you below:

What do you think is the most likely impact of forthcoming FDA regulations on premium cigars?

A. Large manufacturers will adapt, but boutiques will close down.
B. Blends introduced after 2007 will be recalled.
C. The floor price for a premium cigar will rise to $10.
D. All of the above.
E. The industry will see few impacts.

“All of the above” led the voting with close to 40% followed by—and this was shocking to me—“the industry will see few impacts,” which got a whopping 22% of the vote. I was so struck by the realization that so many of our readers don’t see the FDA as a major threat to premium cigars that I felt compelled to address the topic today.

As you probably know, StogieGuys.com has written about the FDA extensively since at least 2007. Currently, we’re right on the cusp of learning how this will impact the industry. To bring you up to speed:

• FDA regulations would be devastating to the thriving handmade premium cigar industry, even though there is no indication that such regulations would have any impact on youth smoking or public health.

• Currently, the FDA has officially sent the latest version of its deeming rule on cigars to the Office of Management and Budget (OMB) at the White House for economic review. Now, the OMB is conducting its review of the FDA rule, and will then hand down the final regulations for implementation. This could happen any day, and it’s almost guaranteed to occur before the end of the Obama Administration.

• Cigar Rights of America (CRA) and the International Premium Cigar & Pipe Retailers Association (IPCPR) have directed their lobbying efforts to OMB, which is charged with examining the economic impact of proposed FDA rules. The groups will attempt to show the potentially devastating economic impact the proposed regulations would have on cigars, including costing jobs both in the U.S. and abroad.

• In its initial proposed rule, the FDA offered two options for regulating cigars: option 1 (which covers all cigars) and option 2 (which exempts handmade cigars over $10). Although the proposed rules transmitted to the OMB presumably include the agency’s decision on that important issue, it is unlikely the OMB will make public the agency’s intentions on the issue of a possible exemption.

• While the OMB review may seem like a formality, those familiar with the creation of the initial proposed rule say the OMB was critical in advancing the option of an exemption for some cigars. If the OMB feels the FDA’s final version insufficiently addressed its previous concerns, it could request further revisions.

Now, I’ll be the first to admit the whole process is convoluted, drawn-out, and rife with complexities and other undesirables that render this story a difficult (and sad) one to follow. But I’m quite surprised 22% of our readers—folks who, by and large, regularly smoke cigars and love tobacco enough to read industry blogs and online reviews—could think the forthcoming FDA regulations will have few impacts.

Have they forgotten the FDA might wipe out every cigar introduced after February 15, 2007? Or that cigar innovation would likely come to a screeching halt? Or that cigar prices might rise considerably, as cigar options become exponentially more limited?

As far as cigars are concerned, the FDA is the defining issue of our era. Let’s try to keep in mind how important this is. And let’s not lose sight of what’s at stake: a thriving industry that caters exclusively to consenting adults and provides thousands of American jobs.

–Patrick A

photo credit: Stogie Guys

While the clock counts down until the FDA deeming rule regulating premium cigars and OTP (other tobacco products) becomes law, tobacco industry groups impacted by the forthcoming rule continue to work to lessen the damage of FDA regulation.

The long-term stifling of innovation by FDA regulation would be devastating given the cost of bringing new cigars to market, but in the short-term the impact would be even more drastic. As we’ve explained before, FDA regulation could likely wipe out every new cigar introduced since February 15, 2007, which would retroactively be subject to FDA approval.

Given the constant innovation and hundreds of new products introduced every year, estimates claim 80% or more of the handmade cigars sold every day could be wiped out by the rule. (In theory, such products could be approved as “substantially equivalent” to products that were already on the market in 2007, but the process is extremely complicated and the FDA hasn’t shown any ability or willingness to approve new tobacco products.)

For other tobacco products, like e-cigarettes, for which there were virtually no substantially equivalent products on the market prior to 2007, the impact would be even larger. Because of this, a variety of industry groups have coordinated a push to change any grandfathered date in the deeming rules.

The simple fix would make it clear that a product cannot be subject to pre-market review by the FDA if it is introduced to market before that type of product is deemed a tobacco product for purposes of FDA regulation. The language has been introduced as House Bill 2058, but to improve the odds of it being codified into law advocates have been trying to attach the legislation to the appropriations bill that covers FDA funding.

With rumors swirling that the FDA rule sent to the White House for final approval doesn’t contain “Option 2,” which would at least exempt cigars with a retail price above $10 from FDA pre-approval, a change of the grandfathered date is particularly important. Otherwise, cigars ranging from San Cristobal (introduced in 2007) to Sobermesa (introduced last month) could be wiped out.

Currently, the FDA maintains the date cannot be changed from the 2007 date, which was included in the bill that ordered the agency to regulate cigarettes. While others have questioned that interpretation, the stance makes a legislative fix necessary.

The language has already been attached to the House appropriations bill. Now advocates are hoping to attach it to the accompanying Senate appropriations act, with hope, if it passes, pressure would prevent President Obama from vetoing the large bill over this one relatively small issue.

–Patrick S

photo credits: Stogie Guys

Two weeks ago, e-cigarette trade group Tobacco Vapor Electronic Cigarette Association (TVECA) said it was in possession of a copy of the the deeming rule sent from the Food and Drug Administration (FDA) to the Office of Management and Budget (OMB) for final review before publication and implementation. Initially, the group leaked a copy of the table of contents and promised to leak the full document soon after.

Although the documents were never fully authenticated, every indication points to the document being legitimate. The FDA even took the unusual step of issuing a statement acknowledging the leak and stating they had an understanding that no more of the document would be made public.

While TVECA was focused on e-cigarette regulation aspects of the draft, included in the leaked table of contents was a line—”Regulation of Cigars and Selection of Option 1″—that caught the attention of cigar industry groups. The line was a strong indication that the FDA had transmitted to the OMB a deeming rule that included Option 1 for the regulation of cigars with no exemption for premium cigars.

Unlike Option 2, which exempted certain cigars that meet a definition of premium—including that they are handmade and have a retail price of at least $10—Option 1 would subject all cigars introduced after February 15, 2007 to an FDA approval process. It is a nightmare scenario that industry lobbying has been focused against since the FDA started the process of regulating cigars.

The OMB will now decide whether to proceed with the FDA draft of the rule or request more changes. Speculation is that it was the OMB that asked for Option 2 in the earlier stages of the process, so just because the FDA has moved forward with Option 1, that doesn’t guarantee Option 2 won’t be in the finalized rule.

The leak has raised other questions about the FDA process. Anti-tobacco politicians have already called for a probe of the leak, but the reality is the leak raises more fundamental questions about the FDA process.

Assuming they are authentic, the documents TVECA received could only have come from within FDA or OMB, meaning someone in the rulemaking process violated their confidentiality requirements. Contrary to the insinuations by those calling for a probe, it is the leaker who may have violated regulations, not the trade association that was within its rights to share the documents with the public or media. (Curiously, TVECA seems to have agreed not to disclose the full documents now, and has alluded to using what they have as leverage towards changes to the final document.)

If TVECA received the leaked documents others may have as well, and given that people within FDA and OMB tend to be pro-regulation, it is seems likely that anti-tobacco groups or politicians may have received leaked documents too. This might explain why anti-tobacco senators were so quick to call for OMB to accept FDA’s final version of the rule without changes or deliberations.

Either way, what is clear from the leak is at least one person with access to internal FDA documents is willingly disseminating those documents to people outside the agency. It makes you wonder how the agencies can be trusted with regulations that could determine the future of an industry that provides jobs for tens of thousands around the world, when they cannot even be trusted not to leak their own internal documents.

–Patrick S

photo credits: Stogie Guys