Trump HHS Pick Pleases Cigar Makers

Fought destructive FDA regs that would kill small businesses

December 1, 2016

Cigar smokers and makers are hopeful that President-elect Donald Trump will provide relief to the industry, which is facing an uncertain future after the Obama administration adopted regulations that threatened the industry with crippling costs.

The Food and Drug Administration announced new rules in May that would subject premium, hand-rolled cigars to comply with product-testing and label requirements similar to those cigarettes and smokeless tobacco undergo. The agency adopted those rules, despite a letter from the Obama administration's Small Business Administration saying that it would cost small businesses between $390,000 and $759,000 upfront and present employers with $450,000 to $540,000 in additional costs annually.

SBA Chief Counsel of Advocacy Winslow Sargeant said in a letter that the FDA did not conduct a cost-benefit analysis to these costly rules.

"The [agency] does not adequately describe the costs of the proposed rule on small entities," the letter says.

Mark Pursell, president and CEO of International Premium Cigar and Pipe Retailers Association, said that the rules, which are nearly 500 pages long, ignore the differences between the premium cigar market and more common tobacco products. The FDA was granted the right to regulate the tobacco market after Congress passed the Tobacco Control Act of 2009, legislation that focused on youth access and specifically cigarettes and smokeless tobacco.

The agency floated the idea of bringing premium cigars, which have a much older user base, under its regulatory authority in 2014.

"They brought the hammer down on us and want to expose a small, artisanal industry to the full compliance, burden, and expenses that Big Tobacco deals with everyday," Pursell said. "Small manufacturers will not be able to afford the expense of bringing products to market."

The rules would force all cigar makers to present the FDA with all new blends and products introduced; only product lines introduced before February 2007 would be exempt. Purcell said that premium cigars—"the type you see at weddings"—make up just 300 million of the 14 billion cigars sold in the United States each year and the FDA said that "approximately 90 percent of domestic entities affected by this rule are estimated to be small."

These products are hand-rolled, typically in Nicaragua, Honduras, or the Dominican Republic, and do not have the vast user-base and extensive revenues that cigarette makers enjoy. He said the agency overreached in treating cigars on the same plane as cigarettes.

"Our category does not have the problem of youth access that the rest of the industry has. These cigars are sold in specialty shops that you have to be 18 [years old] to enter," he said. "You're putting 35,000 American main street jobs at risk."

Trump's selection of congressman and surgeon Tom Price (R., Ga.) to lead the Department of Health and Human Services has given the cigar industry hope that it can avoid the full implementation of those rules. Price, who declined to comment on the story, twice cosponsored unsuccessful legislation that would have clarified that premium cigars are exempt from the rules.

If confirmed, Price would have the ability to block implementation on the industry through a non-enforcement directive from the White House.

Glynn Loope, executive director of Cigar Rights of America, said his group is "hopeful that a moratorium and re-evaluation of regulations" will occur within the opening months of the Trump administration. He said the FDA "went beyond congressional intent" when it grouped cigars with cigarettes and supported the legislation that Price co-sponsored. Even large cigar companies introduce new blends or limited releases based on a specific climate or crop output; subjecting them to bureaucratic overview that is generally applied to billions of mass-produced cigarette products would "make it unaffordable to get product to market," Loope said.

"The FDA failed or didn't care about the impact this was going to have," Loope said. "We're hoping it's a new day in the neighborhood. We are heartened by what we've seen with this administration."

Pursell also welcomed the nomination, saying that Price's record in congress reflected a cautious approach to regulation.

"He takes a commonsense approach to government regulation in general," he said. "We need rules that make sense for consumers, for the public health, and for manufacturers. We don't have that right now."

The agency began implementing the new rules in August. Cigar makers have until the end of the year to register with the FDA and will begin submitting ingredient lists of products in February if the rules go into full effect.