The Food and Drug Administration announced tough new regulations on the entire U.S. tobacco industry, including the segment that makes and markets premium, handmade cigars.
Despite previous hopes, the premium cigar industry did not get the exemption it—and thousands of cigar lovers across the United States—had lobbied for. The FDA chose Option One, the tougher of the two routes, casting aside any exemption for premium cigars.
If left unchecked, the rulings issued today would take effect in 90 days, or August 8, 2016. The premium cigar industry is preparing a legal response to challenge the FDA ruling.
The ruling includes:
• Establishing a federally mandated minimum of 18 years for the purchase of any tobacco product, including sales made online, and age verification made by photo ID.
• The banning of free tobacco samples.
• The requirement of products released after February 15, 2007 to be verified by the FDA before going to market.
In a conference call to the media early this afternoon, Mitch Zeller, J.D., Director, Center for Tobacco Products for the FDA, said the FDA intended to also target flavored cigars, including flavored premium cigars.
The FDA has said this new product verification will be done "under staggered timelines, the FDA expects that manufacturers will continue selling their products for up to two years while they submit—and an additional year while the FDA reviews—a new tobacco product application. The FDA will issue an order granting marketing authorization where appropriate; otherwise, the product will face FDA enforcement."
This last item has been the one most feared by premium cigarmakers. In an industry where new products are an important part of the market, product verification and government approval prior to release would radically slow the process of getting new product to store shelves, as well as adding to the cost of business.
The FDA confirmed that all required applications could “cost hundreds of thousands of dollars” per application. "It's an average and there's a range," said a representative from the FDA during the conference call.
This ruling comes a little more than two months prior to the industry's biggest trade show, the International Premium Cigar & Pipe Retailers trade show, taking place in Las Vegas, in which cigar samples are an integral part.
Premium, handmade cigars account for roughly 315 million units a year in the United States, a mere fraction of the nearly 12 billion cigars sold annually in America, the vast majority of which are made by machine.
"We are deeply disappointed that the Food and Drug Administration has decided to regulate premium cigars," said Eric and Bobby Newman, owners of the J.C. Newman Cigar Co. of Tampa, Florida, in a joint statement. "The premium cigar industry is made up of dozens of small, family-owned cigarmakers, like us, along with thousands of small, independent specialty cigar stores across the country. The cost and burdens of onerous regulations threaten the entire industry. We are closely studying the 499 pages of regulations that the FDA issued this morning and are hopeful that we can find a way to save our historic cigar factory in Tampa."
"The FDA's regulation of premium cigars, if left unchecked, would have a devastating impact on retailers and manufacturers alike," said Mark Pursell, CEO of the International Premium Cigar & Pipe Retailers Association. "Fortunately, the industry's legislative strategy continues to be implemented, including language recently adopted by the Appropriations Agricultural Subcommittee disallowing any funding of FDA regulation of premium cigars and negating the arbitrary predicate date of February 2007, after which any tobacco product would be considered new, and have to go through an expensive and time consuming compliance process. Bills H.R. 662 and S. 441, exempting premium cigars and pipe tobacco, continue to gain co-sponsors as we pursue a legislative solution to unneeded and harmful government intrusion."
Said Hans-Kristian Hoejsgaard, chief executive officer of Oettinger Davidoff AG, owner of Davidoff and other cigar brands: "We are very disappointed to note that the FDA seems to have ignored the compelling logic to treat premium cigars differently from cigarettes, and to also have further harmed the premium cigar category by requiring a predicate date that goes back over 10 years."
While the FDA's ruling is certainly harsh on the industry, it's not clear if this will become law. And the Cigar Rights of America is preparing to fight against the FDA.
"We're going to be totally concentrating our efforts on a two-front war right now. One is advancing the legislation that was adopted by the House Appropriations Committee, which calls for an exemption on premium and large cigars, and getting that through the full House of Representatives and adopted by the Senate, which probably won't happen until after this year," said J. Glynn Loope, executive director of the Cigar Rights of America. "Secondly, we're going to be evaluating immediately all of our legal options for litigation. We spent a lot of the last six weeks interviewing law firms for just such a contingency."
During the FDA's official media conference call, it was made clear that Congress still has the power to enact the previous riders proposed by the House Appropriations Committee last month. The two riders would cut funding for the FDA to regulate premium cigars and push the predicate date from February 15, 2007 to 2016. The FDA vehemently opposes these riders.
"If the rider were to be enacted, it would have an enormous impact on public health," said a representative from the FDA during the conference call.