New Tobacco Regulation

It has been a little bit since we have done an update on potential upcoming legislation for the cigar industry. Since our last update there has been two major proposals by the FDA that will significantly affect the cigar industry.

FDA Wants To Regulate Cigar Factories

The FDA has proposed regulating cigar factories the same way they regulate other tobacco product (ie. Vapes and Cigarettes) factories. This would be the most significant regulation of cigars ever proposed by the FDA. While they are not located domestically, factories would still have to comply with these rules in order to legally sell their products in the United States. While some larger factories already meet these standards that the FDA is proposing, some smaller factories simply do not have the budget to meet these proposed standards. These proposed regulations would not change the cigars themselves, but it would change how they are made and could remove some of the cigars from the US market.

It is important to note that this proposal does not change anything in the cigar industry today.

Due to the pending court case, there is a chance that “premium cigars” would be exempt from this proposed regulation. However, this is not set in stone. It is also only a temporary solution to regulation, as the FDA would most likely have to start from square one when it comes to regulating premium cigars. The lawsuit simply buys the Premium Cigar Association time and moves “premium cigars” down the FDA’s “to-do list”.

This proposed regulation is quite broad, focusing mostly on vape products but some would affect the cigar industry directly. The regulation does however open a wide door for enforcement actions to be taken against cigar makers and even tobacco growers. If this proposed rule goes into affect it will eliminate many of the boutique producers of the industry and favor large corporate entities.

Currently, this rule is open to public comment and I invite you to make your voices heard (there is also a public hearing scheduled for April 12th).

Senators want to make it even harder to advertise tobacco products

In the past we have discussed how marketing in the cigar industry is already extremely challenging. Proposed legislation is making it even harder to do so, could damage some of the industry publications and even eliminate some things that make the industry special.

The No Tax Subsidies for E-Cigarette and Tobacco Ads act would modify the Internal Revenue Code to no longer allow companies to deduct expenses of “direct to consumer advertising of tobacco products and electronic nicotine delivery systems”. This means that any form of marketing expense these companies incur instantly gets more expensive and can become cost prohibitive. This even includes all form of swag given away at sales events, any expenses for the events themselves and potentially even the salaries of those involved in marketing.

Right now, one of the very few ways that cigar makers can advertise their products is through publications such as Cigar Aficionado and Halfwheel. This advertising spend makes up a very significant portion of their revenue. This proposed legislation is a direct attack on the livelihoods of these publications as well as the people who work there.

While statements given by the senators proposing the change in tax code relate to preventing vape companies advertising to young people, the bill is much wider reaching. Instead of specifically targeting the e-cig industry, the language is much broader and far reaching. Previous studies have shown that young people do not consume premium cigars and as such this proposal is a vast overreach. As of right now, this bill is in Committee and has not been up for debate. It is however important to address this potential legislation before it goes any father. The proposed bill was submitted by Sen. Jeanne Shaheen, D-N.H and Sen. Richard Blumenthal, D-Conn.; Sen. Sherrod Brown, D-Ohio; Sen. Dick Durbin, D-Ill.; Sen. Jeff Merkley, D-Ore.; and Sen. Jack Reed, D-R.I. are listed as co-sponsors.

I invite you to reach out to your representatives and make your voices heard!

If you are interested in helping fight governments involvement in the cigar industry check out the Cigar Rights of America website