Cigar Business Buckles Down To Beat FDA Deadline

Jul 21, 2016 | By David Clough
Cigar Business Buckles Down To Beat FDA Deadline

Many manufacturers of premium cigars are concentrating their efforts to get all new cigar products to the market before August 8. This is the deadline imposed by the Food & Drug Administration, which will begin regulating the cigar industry on the same date. Cigar producers that make the deadline will be allowed to put their new products on the market and await FDA approval over a one-to-three year grace period, in which FDA compliance and approval can take place while products are simultaneously on the market. Those who don't make the deadline will not be entitled to the grace period and prohibited from selling their new products until they've fully undergone the FDA's lengthy, costly evaluation and authorization process.

Because of this new rule, many cigarmakers are pushing new products to market before the deadline hits in order to take advantage of the FDA's compliance period for premarket review. This means a cigar company can continue to sell its new cigars while FDA reviews the new product applications—but the cigars must be on the market soon.

"Of course there is an advantage to having your cigars on the market before the rule goes into effect," Manuel Quesada of Quesada Cigars told Cigar Aficionado. "There are certain brands that will not be grandfathered. For new cigars, you will at least be allowed to continue marketing them for a while."

The FDA considers cigars that were commercially available on February 15, 2007 as grandfathered and exempt from the premarket review process. Cigars that were introduced after this date are considered new products. If new cigars have entered into commerce before the new regulations go into effect (August 8, 2016) they are allowed to stay on the market for a set amount of time (12 months or longer), a phase that the FDA calls an "initial compliance period." The cigarmaker must follow one of three premarket review pathways in order to continue marketing the new products beyond this initial phase.

Even though the new products will be on sale, cigarmakers will be mandated to find an FDA-approved pathway to market. That will require them to either submit a Substantial Equivalence (SE) application, request an Exemption from Substantial Equivalence (SE Exemption) or submit a Premarket Tobacco Application (PMTA). Those that don't make the deadline will have to submit the same applications, but the products cannot be sold until they are fully approved by the FDA. As of now, there is no clear indication as to how long that approval process will take, so members of the cigar industry are intent on making the August 8 deadline.

Because many cigarmakers wish to see their new products on store shelves without delay, multiple industry representatives have confirmed with Cigar Aficionado that they plan on releasing new cigars into stores over the next few weeks.

Asked if her company plans to introduce any new cigars before the deadline, Lissette Perez-Carrillo, of EPC Cigar Co., said "Yes, we are launching several new products."

Manuel Quesada confirmed: "We are bringing new products to market under the Quesada, Fonseca and Casa Magna names."

Kyle Gellis of Warped Cigars also confirmed his intention to bring new products to market before August 8. Gellis recently announced the launch of Villa Sombra, a cigar line that was originally slated for a late fall release but moved forward to meet the FDA deadline.

"Villa Sombra was planned to come out but it was moved up ahead of our planned schedule in terms of the FDA deadline," he said. "No cigar was rushed, nor the blend, but as you know brands have release schedules and it wasn't set to release till late this fall...obviously that changed. We have one to two more [brands] that we are looking to move on to establish commerce and we are already ahead in that process."

After the FDA's initial compliance period ends, cigarmakers can benefit from an additional 12-month compliance
period if premarket review applications for new cigars have successfully been submitted to the FDA within the initial compliance period timeframe. This compliance period extension only applies to new cigars that were introduced into commerce before August 8, 2016. The FDA calls this 12-month extension a "continued compliance period."

After the continued compliance period ends, the FDA says that unauthorized cigar products must be removed from the market. The FDA claims it will seek enforcement action to deal with unauthorized products after the continued compliance period ends.

According to FDA's Final Rule: "As a result of FDA's compliance policy, we expect that many manufacturers will keep their products on the market beyond the effective date of this Final Rule. However, if a manufacturer of a product is unable to support an SE claim for its product...and does not obtain authorization under one of the other available marketing pathways before the end of an applicable compliance period, such products remaining on the market will be subject to enforcement (e.g., seizure, injunction)."

While many cigar companies are bulking up their brand portfolios before the new rules go into effect, others, such as Christian Eiroa of CLE Cigar Co., plan on implementing a different strategy.

"We are actually doing the opposite," Eiroa said. "We are eliminating items from our portfolio. Except for a couple of new packaging ideas [and a new brand], we are focusing on the items we introduced earlier in 2016 such as Asylum 13 Connecticut, CLE Prieto, CLE Chele and CLE Azabache. We will also introduce new packaging for the original CLE line."

Eiroa also noted that, on a personal level, it wouldn't feel right to rush a new cigar brand to market if it wasn't ready.

"It takes me a lot of time to develop a cigar with the right tobacco and the right blend. As much as I would have liked to, I could not have developed a new cigar to beat the deadline. I feel very comfortable that we have a very strong portfolio and that we will be able to introduce many customers to our brands. Being that this is only our fourth year, I feel most of our lines are still new."

Gellis expressed a similar sentiment: "I am not someone to rush a cigar, my process is extremely organic. If we don't meet a deadline for new product, so be it. We don't rush things. We are committed to the excellence and integrity of the art of cigar making from all aspects of blend to its identity."

Some cigarmakers chose not to comment when asked about expedited product launch plans, intending to keep certain new releases and brand names a secret for the time being. Overall, however, cigar industry representatives have expressed a consistent feeling of uncertainty about the new rules, and a desire for more information from the FDA, which has stated on many occasions that it will be issuing "guidance" to the industry in order to facilitate compliance.

"FDA has not reached out to us," Perez-Carrillo confirmed.

"There's still a lot of questions left unanswered," added Quesada. "We have not heard from FDA, and are awaiting more information."

According to the FDA, manufacturers who make the deadline are entitled to different grace periods depending on the type of application they seek:

• Those seeking a SE exemption request are entitled to a 12-month initial compliance period.

• Those seeking a SE application are entitled to an 18-month initial compliance period.

• Those seeking a PMTA are entitled to a 24-month initial compliance period.

So long as manufacturers cooperate with the FDA and submit the applications during their respective compliance periods, the FDA will extend the initial compliance period by 12-months, no matter the type of application. The industry will be awaiting further guidance during that time.

This article first appeared in the July 19, 2016 issue of Cigar Insider.

"Kyle Gellis makes some great cigars, but his and other manufacturers/marketers comments that they are nut rushing anything seems a bit circumspect. All are trying to meet the FDA deadline, for which I don't blame any of them, but to do so some corners have to be cut. I and others in my smoking circles are concerned that there will be some significant quality issues when the IPCPR releases hit the market. Heck, I saw a PR yesterday that a manufacturer is launching multiple new lines with over 40 vitolas! " —July 22, 2016 13:19 PM

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