The House Committee on Appropriations Subcommittee on Agriculture has passed a bill for the 2017 fiscal year appropriations bill. Included in it is language that exempts premium cigars from regulation by the U.S. Food & Drug Administration (FDA).
Wednesday afternoon, the bill passed via a voice vote meaning it now heads to the larger House Appropriations Committee where the finalized bill will be crafted.
— Kip Talley (@IPCPR_KipTalley) April 13, 2016
When a vote on the larger bill will take place remains unknown as House Speaker Paul Ryan, R-Wis., has said that first the House must pass a budget, something that seems unlikely to happen by a self-imposed Friday deadline.
This is the second year in a row where language friendly towards cigars is included as part of the earlier parts of the Appropriations Bill, though things are a bit different this year.
Last year, language was included that would have changed the date in which all deemed tobacco products—cigars, pipe tobacco, electronic cigarettes and others—would be grandfathered. This time around, there’s no language that would change the predicate date, rather, only language that would exempt premium cigars from FDA regulation.
The language as follows:
SEC. 749. None of the funds made available in this Act may be used to finalize, implement, administer, or enforce the proposed rule with the regulation identifier number 0910–AG38 published by the Food and Drug Administration in the Federal Register on April 25, 2014 (79 Fed. Reg. 23142) if such rule would apply to traditional large and premium cigars. For the purposes of this section, the term traditional large and premium cigar means—
(1) any roll of tobacco that is wrapped in 100 percent leaf tobacco, bunched with 100 perfect tobacco filler, contains no filter, tip or non-tobacco mouthpiece, weighs at least 6 pounds per 1,000 count, and—
(A) has a 100 percent leaf tobacco binder and is hand rolled;
(B) has a 100 percent leaf tobacco binder and is made using human hands to lay the leaf tobacco wrapper or binder onto only one machine that bunches, wraps, and caps each individual cigar; or
(C) has a homogenized tobacco leaf binder and is made in the United States using human hands to lay the 100 percent leaf tobacco wrapper onto only one machine that bunches, wraps, and caps each individual cigar; and
(2) is not a cigarette or a little cigar (as such terms are defined in paragraphs (3) and (11), respectively, of section 900 of the Federal Food, Drug, and Cosmetic Act).
“The House Appropriations Committee has worked tirelessly to protect the premium cigar retailers that make up main street America,” said John Anderson, 2nd vice-president IPCPR and owner of W. Curtis Draper Tobacconist, in a press release. “As a retailer in Washington, D.C, I am proud to see the Agriculture subcommittee take a bi-partisan leadership role in standing up against unreasonable government regulation which is simply aimed at shutting down small businesses. This provision, if signed into law, will keep the doors to my business open.”
It is expected that FDA will announce its regulations, which could include the regulation of premium cigars, by May 17. If the new rules are introduced after May 17, FDA would risk Congressional review that could delay the implementation until next year, after the new president takes office. At that point, FDA would also be risk having a new president with different views on how the executive agency should handle regulation, potentially comprising the entire regulation process.
The subcommittee is chaired by Rep. Robert Aderholt, R-Ala.
“Once again, Congressman Aderholt has proven essential as a friend to small businesses in the state of Alabama,” said Harris Saunders, president of the Alabama Tobacconist Association and owner of Birmingham Cigars, in a press release. “His leadership will allow me and small businesses to continue creating jobs throughout the state. Misguided efforts by the FDA have threatened our livelihoods for too long. We are encouraged that Rep. Aderholt continues to watch out for the little guy”.
Multiple sources have told halfwheel the FDA process is near complete, with the White House Office of Management and Budget (OMB) returning the proposed regulations to FDA. Now the two agencies will work to find agreements over their respective differences, once all those disagreements have been resolved, FDA would be able to announce the rules.
This is not the first attempt for either language—both the cigar exemption and date change—to be inserted in legislation. There were attempts by separate groups to include both in the Omnibus bill passed in December though neither made it into the final bill.
In 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act which gave FDA authority to regulate any product derived from tobacco. In Aril 2014, FDA unveiled its preliminary plans for regulation of cigars, pipe tobacco, e-cigarettes and vapor products, hookah and shisha and tobacco gels. In it, FDA proposed two different paths of regulation for cigars.
Under Option 1, cigars of all shapes and sizes would be regulated like any of the other products mentioned in the deeming regulation. This would mean that products being marketed prior to Feb. 15, 2007 would be grandfathered in—subject to almost no regulation—while products marketed after the 2007 date would need FDA approval to remain on the market.
In this scenario, most cigar makers would likely apply under a substantial equivalence doctrine. In short, cigar makers would argue that their products did not pose any greater health risk than already approved products, including grandfathered products. For example, Arturo Fuente could potentially argue that its post-2007 Casa Cuba poses no greater than risk than the Hemingway line, which would be grandfathered in under the regulations.
To date, FDA has neither announced the cost of the application, nor how it planned on responding to the flood of new applications in a timely manner.
FDA’s own estimates indicate that as much as 50 percent of the cigars on shelves today would need to be removed because the added regulation and costs under Option 1.
The April 2014 document carved out another path, Option 2.
This would establish a new definition of “premium cigar” which included a minimum $10 price, no additive flavors and a requirement they primarily contain long filler tobacco, amongst others. Those cigars which could meet all eight requirements would be exempted from FDA regulation. This exemption was not related to any market date and would work in tandem with the grandfather clause.
In other words, Padrón’s 3000 Series would be grandfathered in because it was being marketed prior to Feb. 15, 2007, while the company’s Family Reserve Series would be exempted because it would meet all eight requirements.
When it unveiled the proposed deeming regulations, held a comment period which allowed people to voice their opinions about how it should regulation premium cigars amongst a myriad of other issues. It has spent much of the last year reviewing those comments and applying the feedback garnered from those comments to the finalized version of those regulations.
In November, following an alleged leak, FDA issued a statement announcing that it had submitted the proposed deeming document to the OMB on Oct. 19. This started a 90-day period for OMB to review the FDA document and make changes based on costs and potential economic impact.
Those 90 days have now come and gone without any real update.
Fortunately for the cigar industry, OMB has been one place where the premium cigar industry has found a sympathetic ear.
OMB actually changed the original FDA proposed prior to its April 2014 publishing to include Option 2 as a full exemption. While the alleged leaked document showed an index that would indicate FDA choose the harsher Option 1, that was widely expected by many insiders who then hoped OMB would overrule FDA.
Update (April 13, 2016) — This post was originally published on April 12. It has been updated to include information that the bill passed.