As expected, the amount of money per cigar manufacturers will have to pay the U.S. Food & Drug Administration (FDA) will increase slightly beginning next month.
User fees paid to FDA will increase from an estimated 4.31 cents per cigar to 4.74 cents per cigar per halfwheel estimates.
It should be noted that halfwheel’s estimate of 4.31 cents per cigar was slightly higher than what at least some companies were charged with at least one company reporting paying user fees closer to 4.24 cents per cigar. halfwheel uses the full SCHIP cap of 40.26 cents per cigar to produce a high-end estimate, if a manufacturer were to not hit the 40.26 cent cap, its user fee bill will be less.
FDA collects user fees to pay for the regulation of tobacco products through the Center for Tobacco Products (CTP). Six categories of tobacco products—cigarettes, roll-your-own, snuff, chewing tobacco, cigars and pipe tobacco—pay user fees.
CTP has a set amount of money to be collected from the six—it was $635 million in FY2017, $672 million for FY2018 and will increase to $712 million for FY2019.
From there, it divides the amount based on how the amount of excise taxes each category pays compared to one another. Cigars will pay an estimated $563.7 million in excise taxes in FY2018 based on a rate of 52.75 percent of the wholesale price, capped at 40.26 cents per cigar.
That $563.7 million represents 9.88 percent of the $5.7 billion in estimated excise taxes paid for FY2018. That’s actually an increase from 9.69 percent in FY2017, largely based in declines in cigarettes, which pay the bulk of excise taxes.
Earlier this month, a bill has passed the U.S. House of Representatives that would exempt premium cigars from FDA regulation. If passed by the Senate and signed into law, it would likely mean that any cigar that is not exempted, i.e. little cigars and cigarillos, would be on the hook for a disproportionate amount of user fees as the cigar category itself would still be liable for $16.6 million in user fees per quarter, despite the exemption of premium cigars.
FY2018 begins Oct. 1.