Since 2009, the Food and Drug Administration has overseen the United States tobacco industry under the Family Smoking Prevention and Tobacco Control Act, and while it has adopted new regulations for cigarettes and other tobacco products, premium cigars have largely been left alone. However, in April 2014, the agency released a set of deeming regulations that proposed extending the rules of the FSPTCA to include cigars, pipe tobacco and e-cigarettes. Two sets of rules were offered in that measure: Option 1, which would extend agency authority over all tobacco products; and Option 2, which would exempt premium cigars.
To bring readers up to speed on the impending FDA ruling and other cigar legislation issues, associate editor Andrew Nagy spoke with J. Glynn Loope, the executive director of the Cigar Rights of America, a national advocacy organization whose mission is to to protect the rights of manufacturers, retailers, and consumers of premium cigars.
NAGY: The cigar industry is anxiously awaiting the FDA's decision on cigars. What do you think is going to happen?
LOOPE: We have information that the rule was sent back to the FDA due to flawed cost-benefit analysis: the benefits of the rule don't outweigh the cost of the rule. And this rule on the cigar industry is estimated to cost over $100 million, which gives it the banner of what's called "economically significant" rules. Economically significant is anything with over $100 million economic impact. So [the FDA] has to be very careful of that when crafting [the ruling].
Q: This was kicked back to the FDA by the OMB (Office of Budget and Management)?
A: Yes, that's the story we've heard. And there's all kinds of stories floating around. We had heard that the president's trip to Cuba was a factor in slowing down the process. And I said publicly that we do know for a fact, based on a conference call that I was a part of, that the subject of cigar regulation was included in preparation for his trip to Cuba. So between cost-benefit analysis, the Cuba question, the potential for litigation on certain questions within the deeming rule, it's all had an impact on slowing down the process, which is not a bad thing.
Q: Do you know what the current status is and do you have any idea when a decision might be announced?
A: I was asked the question at the TAA (Tobacconists Association of America) meeting last month: What are the best-case and worst-case scenarios? Best-case scenario is absolutely nothing happens. And that's not beyond the realm of possibility given the timing of what's left in [President Obama's] administration. It could get caught up in the bureaucratic malaise of the back-and-forth between the OMB and FDA. It could get caught up in terms of the potential rule raising legal questions that the administration is not prepared to either litigate or doesn't stand prepared to be sued over. We got a clear set of items within the deeming regulations that we think the industry can live with [with Option 2]. But we've got a collection of items that the industry absolutely cannot live with [with Option 1].
Q: What's the absolute best-case scenario?
A: That nothing happens. The date of May 17 could kick in a Congressional review of any new precedents or regulations—it doesn't matter what they are, whether it's energy, financial services, water, air or tobacco. We don't think the administration wants to risk having that type of Congressional review of new regulations. But by the same token they could issue something anytime they want before they leave the Oval Office.
Q: What does that May 17 date refer to exactly?
A: Because of the number of legislating days left in this calendar year, if the president doesn't issue new regulations by May 17, a Congressional review for new regulations could kick in. It's not a certainty, but it could kick in. That could bring additional scrutiny to anything the president proposes. Scrutiny that they probably don't want. [Ed. Note: Loope is referring to the Congressional Review Act, which grants Congress the power to rescind federal regulations through an expedited procedure.]
Q: So can consumers, tobacconists and manufacturers be doing anything in the meantime to help?
A: The Cigar Rights of America's legislation to exempt premium cigars (Ed. Note: bills H.R. 662 and S. 441) is still very alive, through the rest of 2016. And that legislation will take on special significance if the industry is hit with a harsh rule.
Q: How's that exactly?
A: There will be greater pressure for Congress to act on that legislation if the FDA slaps a harsh rule on the industry. The harshest pieces of the potential rule are pre-market approval of new blends, changing the predicate date from February 2007 until the time of the final rule.
Q: The predicate date refers to what?
A: If a product was not on the market prior to February 2007, it would have to go through what's called a "Substantial Equivalency" application instead of a "new product" application. It's absolutely insane to think that just because a cigar was put on the market after February 2007 that it is somehow a new product. It's the same [tobacco]. Just because the manufacturer changes the wrapper, binder or filler doesn't make it a different product. But in the eyes of the FDA, it does.
Q: And right now, with those pieces of legislation, how much support do you actually have in Congress?
A: Right now there are 163 members of the House of Representatives who support H.R. 662 and there are 21 members of the Senate supporting S. 441.
Q: So how does the CRA legislation exactly apply pressure and force Congress' hands?
A: If the FDA comes out with a harsh regulation we will take that message to our supporters in Congress and tell them that they have to act, and that it's critical that they act on that legislation to exempt [premium cigars] in order to save the industry. If the FDA comes out with a harsh rule it will take effect in 60 days with a two-year implementation window. We then go to our allies in Congress and say "Look what the FDA just did to us. You have to act on 662 and 441 in order to provide the needed protections that this industry needs from those regulations."
Q: There's been a recent wave, at the state and municipality level, of legislation that seeks to raise the minimum purchasing age for tobacco products to 21. What's going on?
A: A couple of different things. One, on the federal level, the FDA issued a report to Congress on the perceived benefits of raising the national age to acquire tobacco products to 21—and they're even having the same consulting group that is working on that study to do an analysis on the impact of raising the age to 25. It's purely analysis and research at this juncture, but that type of activity has a way of taking on a life of its own sometimes.
Q: You have said in the past that the industry needs to go on offense. What do you mean?
A: Initiate legislation, such as the licensed smoking bills. Also, initiate legislation that serves as a means of pre-emption against smoking bans in cigar shops and lounges. The idea of planting, initiating legislation to protect the ability to enjoy cigars in a cigar shop is something that we need to take a closer look at. To prevent it on the front end, instead of waking up one day and all of a sudden there's a bill in your given state that says "Legislator Smith wants to ban smoking in cigar shops." Well, let's go and initiate legislation that would prevent that legislator from doing that. If you want to protect this industry and protect these small businesses, I think we are going to have to think more along those lines.
This article first appeared in the April 5, 2016 issue of Cigar Insider.