Legislative Update: December-March 2017

Introduction

There has been a lot of activity on the legislative front for the cigar industry. We have a new Congress and a new president which has led to these changes. I’ve been a little lax in updating our readers on legislative issues and will make up for it via this post. Below is summary of the legislative activity for the last couple of months. This does not cover all the legislative activities but provides a summary of the most important activities. To summarize, FUFDA! This post covers the following legislative topics:

• Submission of Warning Plans for Cigars
• Reintroduction of the “Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017” in House of Representatives
• Free Cigars
• Letter to Vice President Pence
• Reintroduction of the “Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017” in Senate
• Lawsuit Against FDA Deeming Rule

Submission of Warning Plans for Cigars

On December 29, 2016, the Food and Drug Administration (FDA) announced guidance for industry entitled “Submission of Warning Plans for Cigars.” As a refresher, the FDA now requires warning labels on cigar boxes, cigars, and at retail shops. In short, their guidance will ruin the artistic value of cigar box and is a royal pain for manufacturers, distributors, and retailers. Thanks for nothing, FUFDA. Here’s what the FDA has to say about the guidance:

“The guidance explains how to submit warning plans to the FDA. The guidance will help those involved in the manufacture, distribution, and sale of cigars in the United States understand the new cigar warning plan requirements under FDA’s final rule deeming these products to be subject to the tobacco product authorities in the Federal Food, Drug, and Cosmetic Act (the FD&C Act). The guidance reiterates the health warning statements and display and distribution requirements that should be provided in cigar warning plans and will help persons determine who should submit a warning plan, when a plan must be submitted, and what information should be included when submitting a plan. The guidance discusses the regulatory requirements to submit warning plans, who submits a warning plan, the scope of a warning plan, when to submit a warning plan, what information should be submitted in a warning plan, where to submit a warning plan, and what approval of a warning plan means.”

You can view the guidance by clicking this link: Submission of Warning Plans for Cigars.

Reintroduction of the “Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017” in House of Representatives

On January 13, 2017, U.S. Representative Bill Posey (R-FL) reintroduced a house bill, called the “Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017.” The Bill seeks to exempt premium cigars from FDA regulation. This is the 87th time the bill has been introduced as so far, the bill has never passed in the House of Representatives. OK, I am exaggerating a bit about the number of times the bill has been introduced but damn, this has been a long trek.  The Bill was first introduced in 2015. “This is about freedom for adults to enjoy a legal product and preventing small businesses from getting caught up in regulations that were never intended for them,” said Posey in an official release. “The FDA is overstepping their authority and ignoring congressional intent by applying these burdensome regulations to premium cigars, which are not marketed to children.” As of March 10, 2017, there are 79 cosponsors to the Bill, including 16 Democrats. Given the current regulatory environment of the new administration, there is a real chance this Bill could pass this time around. Interestingly, Posey has no reference to his support of this Bill on his official website. I guess he wants to support his cigar constituents but does not want the rest of his constituents to know about it.

You can view the Bill by clicking this link: HR 564-Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017.

Free Cigars

On January 18, 2017, the FDA released draft guidance providing rules on the distribution of free samples. According to the FDA, “This guidance is intended to help tobacco product manufacturers, distributors, and retailers understand the prohibition of distributing free samples of tobacco products set forth in Title 21, Code of Federal Regulations (CFR), Part 1140 and to explain what you should do in order to comply with the regulations. The document explains, among other things, what activities and which persons are subject to the regulations, as well as how the prohibition of distributing free samples applies to the distribution of tobacco products through: non-monetary exchanges, membership and rewards programs, contests and games of chance, and business-to-business exchanges. FDA is requesting public comments regarding its interpretation of the free sample ban set forth in this guidance.”

The guidance relaxes the explicit prohibition on handing out free samples to consumers and retailers. The draft guidance provides some breathing room for the cigar industry. The guidance allows the following:

• Coupons and Discounts: The free sample ban does not prohibit manufacturers, distributors, and retailers from selling cigars at a discount or accepting coupons. Buy one get one free or other discounts are permitted. However, cigar retailers are not allowed to give a free cigar sample without some kind of monetary transaction occurring.
• Membership and Rewards Programs: Programs that provide discounts for cigars are allowed as long as there is a monetary transaction involved.
• Contests and Games of Chance: Contests are allowed as long as there is a monetary transaction involved. As an example, a retailer cannot have a cigar raffle that results in a winner received free cigars unless the winner also purchases cigars with it. This is an easy one. The winner could simply purchase a POS cigar for a couple of bucks and take his winnings out the door.
• Business-to-Business Exchanges: This one is pretty funny. It appears the FDA acknowledges that this is against FDA regulation, however the, “FDA does not intend to enforce this regulation with respect to businesses distributing free samples in a limited quantity (i.e., no more than necessary to achieve a business or marketing goal, such as awareness of and exposure to the product for the purposes of product or inventory selection) to another business as part of a genuine effort to sell or market a tobacco product to that business.”

You can view the draft guidance by clicking this link: Prohibition of Distributing Free Samples of Tobacco Products.

Letter to Vice President Mike Pence

On January 23, 2017, Representatives Bill Posey (R-FL), Lou Barletta (R-PA), and Duncan Hunter (R-CA) sent a letter to Vice President Mike Pence urging the Trump administration to review the FDA’s regulation of premium cigars and suspend enforcement of premium cigar regulations. The letter states in part, “When Congress passed the Family Smoking Prevention and Tobacco Control Act in 2009, its stated intent was to prevent youth access to tobacco products and the negative health effects of smoking addiction. Neither of these concerns applies to premium cigars which are consumed in moderation by adult consumers.” The letter also highlights that Vice President Pence supported the original legislation exempting FDA regulation of premium cigars in 2015. C’mon VP, give us a lifeline!

You can view the letter by clicking this link: Letter to Vice President Pence

Reintroduction of the “Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017” in Senate

On February 2, 2017, U.S. Senator Bill Nelson (R-FL) reintroduced a Senate Bill, called the “Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017.” The Bill seeks to exempt premium cigars from FDA regulation. As of March 12, 2017, there are 12 cosponsors to the Bill, including 5 Democrats. Both the Senate and House Bill define a “premium cigar” and exempt premium cigars from FDA regulation. Thank you Senator Nelson for keeping up the good fight!

You can view the Bill by clicking this link: S 294-Traditional Cigar Manufacturing and Small Business Jobs Preservation Act of 2017.

Lawsuit Against FDA Deeming Rule

On February 13, 2017, the Cigar Association of America (CAA), Cigar Rights of America (CRA), and International Premium Cigar and Pipe Retailers Association (IPCPR) filed a Motion for Summary Judgment against the FDA requesting the U.S. District Court for the District of Columbia set aside the Deeming Rule and User Fee Rule. The lawsuit states the regulations are “arbitrary, capricious, an abuse of discretion, and not in accordance with law; are contrary to constitutional right, power, privilege, or immunity; and exceed statutory jurisdiction, authority, or limitations, or are short of statutory right.” A hearing is scheduled for July 28, 2017. The lawsuit is filled with legalese (duh) so hang on tight when you read it. The lawsuit alleges the following issues with the FDA cigar regulation:

• Regulations subjecting cigars to all aspects of the premarket review scheme Congress applied to cigarettes and smokeless tobacco is arbitrary, capricious, and contrary to law;
• Premarket review without clarifying the substantial equivalence pathway for cigars is arbitrary, capricious, and an abuse of discretion;
• FDA arbitrarily denied cigars the same stay of enforcement pending approval of their substantial equivalence applications provided to cigarettes;
• Rejection of “Option 2” exempting premium cigars from regulation is arbitrary, capricious, and contrary to law;
• Decision to impose user fees on some but not all newly deemed products is contrary to law and in excess of statutory authority;
• Regulations were based on a flawed cost-benefit analysis and impose an unreasonable burden on small businesses without adequate explanation;
• Warning label requirements violate the First Amendment; and
• The FDA unreasonably imposed new warning label requirements without making the statutorily-mandated findings.

You can read the details of the lawsuit by clicking this link: Motion for Summary Judgment.