T H E I N D U S T R Y A U T H O R I T Y O N T O B A C C O R E T A I L I N GOfficial Publication of the International Premium Cigar & Pipe Retailers Association (IPCPR) APRIL 2012

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52 SMOKESHOP April 2012

T he 2009 Family Smoking Pre-vention and Tobacco Control Act(“Tobacco Control Act”) signifi-

cantly changed the regulatory landscapefor tobacco products, giving the Foodand Drug Administration immediatejurisdiction over certain tobacco prod-ucts. Specifically, the Tobacco Control Actrequires FDA to regulate cigarettes, roll-your-own tobacco and smokeless tobac-co and permits FDA to regulate othertobacco products, such as cigars, pipetobacco and electronic cigarettes. FDAmust issue regulations to assert authorityover the latter group.

All signs indicate that FDA regula-tion of these tobacco products will comelater this year. In April 2011, FDA wrotea letter to industry stakeholders indicat-ing that FDA intended to assert authori-ty over all “tobacco products,” whichare defined under the Tobacco ControlAct as any product “made or derivedfrom tobacco that is intended for humanconsumption” but that is not a “drug,”

“device” or combination product underthe Food, Drug and Cosmetic Act(“FD&C Act”). FDA’s action came onthe heels of the District of ColumbiaCircuit Court of Appeals’ decision inSottera, Inc. v. Food & DrugAdministration, (D.C. Cir. 2010), inwhich the court concluded that FDAlacked authority to regulate electroniccigarettes under the FD&C Act, but thatFDA had authority to regulate electron-ic cigarettes as “tobacco products”under the Tobacco Control Act. FDA’sletter to stakeholders advised that FDAintended to propose a regulation thatwould extend the agency’s “tobaccoproduct” authority to other tobaccoproducts. Those tobacco products pre-sumably would include electronic ciga-rettes, pipe tobacco, cigars and dissolv-able tobacco (which FDA has deter-mined is not covered by its existingauthority over smokeless tobacco).

Later that year, in July 2011, FDAadvised interested parties that it antici-

pated issuing so-called “deeming” regu-lations, subjecting these additionaltobacco products to its jurisdiction, byOctober 2011. FDA did not issue the reg-ulations in October, and on October 14,2011, Senators Richard Blumenthal (D-CT), Frank Lautenberg (D-NJ) andSherrod Brown (D-OH) wrote to FDACommissioner Dr. Margaret Hamburg torequest FDA’s action to regulate thesetobacco products. The Senators urgedFDA to “move swiftly” to issue thedeeming regulations, and requested thatFDA update its progress on the regula-tions and its timeline for releasing theregulations. The Senators also requesteda meeting with Commissioner Hamburgto discuss the matter in more detail.

Based on FDA’s prior commitment toissue the regulations in October, and theSenators’ urgent request, industryobservers expected that FDA wouldissue the regulations shortly. However,as of mid-March 2012, FDA still had notissued the deeming regulations.

In April 2012, FDA further reaffirmedits intent to issue deeming regulations,when it sent letters to electronic cigarettemanufacturers requesting informationregarding the safety of electronic ciga-rettes. The letters note that FDA hasauthority under the Tobacco Control Actto regulate electronic cigarettes, and thatit intends to do so. The letters requestedinformation from manufacturers regard-ing consumer complaints and “adverseevent issues,” reports of “consumer mis-use,” descriptions of product labelingand systems in place to review consumercomplaints and adverse events.

In the meantime, there is legislationpending in Congress that would exemptso-called “traditional large and premiumcigars” from FDA’s reach. The bill, whichhas been introduced in both the Senateand House of Representatives,” defines a“traditional and premium cigar” as a rollof tobacco wrapped in leaf tobacco, con-taining no filter, and weighing at least sixpounds per 1,000 count. The bill wouldremove such cigars from FDA’s potentialauthority under the Tobacco Control Act.Thus, under the legislation, “traditional”cigars would not be subject to FDA’sauthority, whereas smaller cigars that are

REGULATION FOCUS>

FDA: On the Verge of RegulatingCigars, Pipe Tobacco, & E-Cigarettes?The wheels are turning and all signs point to the likelihood of the FDAasserting jurisdiction over additional tobacco products by regulation. >BY TROUTMAN SANDERS TOBACCO TEAM

54 SMOKESHOP April 2012

more similar to cigarettes would bepotentially subject to FDA’s authority.The bill, which was introduced in 2011,remains in committee and has not beenscheduled for a hearing.

DEEMING REGULATIONS—A SQUARE PEG IN A ROUND HOLE?When FDA issues the deeming regula-tions, the proposed regulations will be

followed by a period of notice and com-ment, during which stakeholders willhave an opportunity to shape how FDAwill regulate these additional tobaccoproducts. As FDA considers its deemingregulations, it will need to considerwhether the existing regulatory land-scape for cigarettes, roll-your-owntobacco, and smokeless tobacco can orshould apply in the same ways to cigars,pipe tobacco and electronic cigarettes. Indoing so, FDA will need to address sev-eral areas in which the current require-ments may be ill-suited for these prod-ucts. These issues are discussed below.

TOBACCO CONTROL ACT’S PURPOSEAs FDA considers its regulations, it willbe important to consider the TobaccoControl Act’s purpose, as outlined in thelaw’s preamble. The preamble addressesthe health effects of tobacco use, and dis-cusses court proceedings in which themajor cigarette companies were found tohave continued “to target and market toyouth,” to have “dramatically increased

their advertising and promotionalspending in ways that encourage youthto start smoking subsequent to the sign-ing of the Master Settlement Agree-ment,” and to have “designed their ciga-rettes to precisely control nicotine deliv-ery levels and provide doses of nicotinesufficient to create and sustain addictionwhile also concealing much of their nico-tine-related research.” One could arguethat Congress’ rationale for enacting theTobacco Control Act is inapplicable, oronly partially applicable to other tobaccoproducts. For example, Congress enact-ed the Tobacco Control Act in light of the

undisputed health effects of cigarettesand the prior marketing conduct by themajor cigarette companies. This ration-ale is arguably inapplicable to othertypes of tobacco products, such as elec-tronic cigarettes, where the evidence ofadverse health effects is scant and therehas been no demonstrated pattern ofmarketing conduct.

NEW PRODUCT REQUIREMENTS Under Section 905 of the Tobacco ControlAct, if a company proposes to sell a newtobacco product (one that was not com-mercially marketed as of February 15,2007, or a product that has been changedsince February 15, 2007), the companymust first show that the product is “sub-stantially equivalent” to a pre-February15, 2007 tobacco product or that anymodifications to a pre-February 15, 2007tobacco product are minor changes thatdo not present different public healthissues. The product cannot be sold toconsumers unless FDA has approved theproduct, although there was a limitedexemption for products introduced priorto March 22, 2011.

The ostensible purpose of the “sub-stantial equivalence” requirements is tomake sure that any new tobacco prod-ucts are not more harmful than existingtobacco products. The substantial equiv-alence requirements prompted the intro-duction of several new tobacco productsafter the Tobacco Control Act’s passage

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>The FDA will need to consider whether theexisting regulatory landscape for cigarettes, roll-your-own tobacco, and smokeless tobacco can orshould apply in the same ways to cigars, pipetobacco and electronic cigarettes.

but before the March 22, 2011 deadline.Any products introduced after March 22,2011 are subject to FDA approval beforethey can be sold to consumers.Manufacturers that introduced productsbefore March 22, 2011 were required onlyto submit a substantial equivalencereport, but FDA did not have to approvethe products prior to their introduction.

The substantial equivalence require-ments for “new tobacco products” pres-ent unique issues for other tobacco prod-ucts that would be subject to FDA author-ity under the deeming regulations. Forexample, as applied to traditional ciga-rettes, any pre-February 15, 2007 ciga-rettes are grandfathered, and productsthat are substantially equivalent or haveminor modifications to the pre-February15, 2007 products may continue to be soldas long as the manufacturer submitted anappropriate and timely substantial equiv-alence report. As applied to other tobaccoproducts, such as electronic cigarettes,few were sold before the grandfather dateof February 15, 2007, and the productshave changed since since they were firstintroduced. A showing of substantialequivalence may therefore be difficult.

A more significant problem is thefact that, under a literal application of

the Tobacco Control Act’s substantialequivalence requirements, no post-February 15, 2007 product (or any prod-uct that has changed since then) can besold without FDA approval unless: (1)the product was sold before March 22,2011, and (2) the manufacturer submit-ted a substantial equivalence reportbefore March 22, 2011. This was impossi-ble for manufacturers of cigars, pipetobacco and electronic cigarettes, whichwere not subject to the Tobacco ControlAct on March 22, 2011. If these require-ments are strictly applied to these tobac-co products, all post-February 15, 2007products would have to be removedfrom the market, and could not be solduntil FDA has approved the substantialequivalence filing. However, no suchreport could be filed or considered byFDA until FDA has promulgated finalregulations governing these tobaccoproducts. In order to avoid a severe dis-ruption in the market for these products,FDA’s deeming regulations will need toaccount for this issue.

NICOTINE CARTRIDGE VERSUS E-CIGARETTE ELECTRONICS The Tobacco Control Act applies only to“tobacco products,” and as discussed

above, a “tobacco product” is defined asa product made or derived from tobaccoand intended for human consumption,including any component, part or acces-sory of a tobacco product. This wouldclearly encompass the nicotine car-tridges in electronic cigarettes to theextent they contain nicotine derivedfrom tobacco. However, an open ques-tion is whether FDA will also assertjurisdiction over the electronic ciga-rette’s electronic components, a task thatthe agency may be ill-suited to face.

REMOTE SALES Section 906 of the Tobacco Control Actrequires FDA to issue regulations gov-erning the remote sale of tobacco prod-ucts, such as through the Internet. FDAhas not yet issued those regulations,apparently concluding that such regula-tions may be moot in light of the PreventAll Cigarette Trafficking (“PACT”) Act’srestrictions on the remote sale of ciga-rettes, smokeless tobacco and roll-your-own tobacco. However, the PACT Act isinapplicable to other tobacco products,such as cigars, pipe tobacco and elec-tronic cigarettes. It is therefore possiblethat FDA will consider issuing regula-tions governing these products. An

REGULATION FOCUS>

argument can be made that the rationalefor limiting remote sales of cigarettes,smokeless and roll-your-own does notapply to these products, although pre-sumably there should at least be mecha-nisms for ensuring that the remote pur-chaser of these products is not a minor.FDA’s consideration of this issue is criti-cal for electronic cigarettes, which aresold primarily outside typical distribu-tion channels, but also for cigars andpipe tobacco, where sales on the Internetappear to have increased since the PACTAct’s passage.

FLAVORINGUnder Section 907 of the Tobacco ControlAct, cigarettes cannot have a “character-izing flavor” (other than tobacco or men-thol), such as strawberry, cinnamon,grape, etc. In other words, although ciga-rettes can have licorice flavoring (as mostdo), the licorice flavoring cannot predom-inate, nor could the product be describedas a “licorice” cigarette. Smokeless tobac-co is not subject to the characterizing fla-vor prohibition. Since the characterizingflavor prohibition took effect, sales of fla-vored cigars, pipe tobacco, and othertobacco products appear to have flour-ished. Although it is unclear whether

FDA would have authority to limit char-acterizing flavors of these products, FDAwill likely consider these issues in draft-ing its deeming regulations.

ADVERTISING AND MARKETING RESTRICTIONS The Tobacco Control Act required theFDA to re-promulgate advertising andmarketing regulations that FDA hadoriginally issued in 1996. (The SupremeCourt vitiated those regulations afterdetermining that FDA lacked congres-sional authority to regulate tobaccoproducts.) Those regulations specificallyapply only to cigarettes and smokelesstobacco. FDA presumably will considerwhether to apply those requirements toother tobacco products.

Those requirements include: (1)Samples—free samples of cigarettes areprohibited, and free samples of smoke-less tobacco are permitted in limited cir-cumstances; (2) Sales to Minors—theregulations have restrictions on sales tominors, such as age verification require-ments and limitations on self-service dis-plays; (3) Minimum Package Size—ciga-rettes may be sold only in packages of atleast 20; (4) Advertising—the regulationshave a number of prohibitions regarding

outdoor and color advertising, althougha First Amendment challenge by a num-ber of cigarette manufacturers resultedin an injunction against these prohibi-tions; and (5) Gift Restrictions—the reg-ulations prohibit manufacturers for dis-tributing non-tobacco items bearing atobacco brand name, or giving free items(such as hats, t-shirts, etc.) in exchangefor tobacco purchases.

Assuming FDA has the authority toapply these advertising and marketingrestrictions to additional tobacco prod-ucts (and it is not clear it does), FDA willneed to consider how these restrictionswill apply to other products. The case forprohibiting sales to minors seems clear,but will FDA limit self-service displaysof cigars or e-cigarettes? Will FDA seekto ban sampling of e-cigarettes, which isarguably critical for a growing industry,or will it seek to limit sampling as it doeswith smokeless tobacco? Minimumpackage size requirements seem inap-propriate for more expensive productslike cigars and e-cigarettes.

HEALTH WARNINGS The Tobacco Control Act mandates anumber of new warning labels for ciga-rettes and smokeless tobacco, including

58 SMOKESHOP April 2012

graphic pictures for cigarettes. There areno defined warning labels for othertobacco products, such as cigars, pipetobacco, and e-cigarettes, although FDApresumably will consider mandatingsuch labels through regulations.

USER FEES FDA’s enforcement of the TobaccoControl Act is funded by user fees paid

by tobacco manufacturers and importers.Since FDA currently regulates only ciga-rettes, smokeless and roll-your-own, theuser fees are currently paid by manufac-turers and importers of those products.As FDA expands its jurisdiction to coverother tobacco products, manufacturers

and importers of those products will besubject to their proportionate share of theuser fees. The user fees are calculatedbased on federal excise tax payments.

This presents an issue for electroniccigarettes, upon which no federal excisetaxes are levied. There is therefore no wayunder current law to subject electroniccigarettes to FDA user fees. AssumingFDA has the authority—and it is not clear

it does—FDA may consider ways torequire e-cigarette manufacturers to pay ashare of FDA administration costs.

CONCLUSIONSince the Tobacco Control Act’s passagein 2009, and certainly since FDA first

specifically signaled its intent to regulateother tobacco products in April 2011, theindustry has apprehensively awaitedthese regulations. Such apprehension isjustified. As manufacturers of cigarettes,roll-your-own tobacco and smokelesstobacco can already attest, FDA authorityhas added significant regulatory burdensin an already heavily-regulated industry.Manufacturers of cigars, pipe tobaccoand electronic cigarettes will soon seethose same regulatory burdens.

However, potentially even more dis-concerting for the industry is the fact thatcurrent FDA requirements may be ill-suited for other tobacco products, and ifapplied literally, could result in a severedisruption in these companies’ business-es. The industry will no doubt evaluateFDA’s forthcoming regulations with acritical eye, and would be well-advised toparticipate actively in that process.

Troutman Sanders Tobacco Team,Troutman Sanders LLP, 1001 HaxallPoint, Richmond, Va. 23219, Tel: (804)697-1317, Fax: (804) 697-1339; Email:tobacco@troutmansanders.com, Web: www.troutmansanders.com.

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>As manufacturers of cigarettes, RYO, and smoke-less tobacco can already attest, FDA authority hasadded significant regulatory burdens in an alreadyheavily-regulated industry. Manufacturers of cigars,pipe tobacco and electronic cigarettes will soon seethose same regulatory burdens.

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