Three years ago Congress passed the Family Smoking Prevention and Tobacco Control Act giving the Food and Drug Administration authority to regulate the marketing, manufacture, and sale of tobacco products. Shortly thereafter the agency announced its intention to regulate cigars as it has the cigarette industry.
Now legislation has been introduced to block the move. The Traditional Cigar Manufacturing and Small Business Jobs Preservation Act (HR 1639) seeks to exempt cigars from FDA regulatory jurisdiction. HR 1639 has 221 cosponsors and 14 cosponsors in the Senate. The original sponsor is Bill Posey (R-FL).
However, tobacco litigators, the American Cancer Society, and the American Lung Association are expressing concerns any exemption will weaken the intent of the Tobacco Control Act and are working hard to defeat the measure if it comes to a vote in Congress.
The FDA has not yet proposed regulations. Speculation in the cigar industry is that that the FDA may use Canadian regulations as a model, plus regulations that have been imposed on the cigarette industry. Regulations could include
- a ban on walk-in humidors;
- limits on marketing cigars;
- a ban on flavored cigars;
- a requirement that cigar companies submit new cigar blends to the FDA before they can be sold; and
- required warning pictures to cover ornately covered cigar boxes and possibly a ban mail order and internet sales.
More than 70,000 jobs in the United States, including mom and pop retailers, depend at least in part on the cigar industry. There is concern in the industry about the economic harm that could result from an aggressive regulatory environment.
Harm to Retailers, Customers
Budget and Tax News spoke with two retailers to gauge the impacts tighter cigar restrictions could have on their businesses, one in Arizona and another in Georgia.
“The ban on walk-in humidors alone would put me out of business,” said Michael Brady, who last year bought the longtime Scottsdale, Arizona tobacco retailer Ford and Haig.
Cigar retailers like Ford and Haig operate on small profit margins with a handful of employees, most of whom work part-time. Once the FDA regulations are implemented, the purchasing habits of customers likely will be altered.
Most customers of another cigar retailer, Old Havana, located in downtown Rome, Georgia said they were not aware of the new FDA oversight or the proposed rules, and they were strongly opposed to FDA having that much say in what a legitimate business could sell.
Old Havana offers a self-serve walk-in humidor with a popular selection of cigars that customers may enjoy on the premises over drinks from the bar. All the customers we spoke to wondered what would happen to the employees if the store had to close because of the regulations.
Canada’s Regulations Increase Costs
Ford and Haig knows firsthand from its Canadian customers what retailers endure in maple leaf country. Michael Brady explains: “Canadian customers tell me they have to look at a sheet presented to them by the retailer on the type and style of cigar they wish to purchase, then the retailer retrieves the cigar from a restricted humidor with employee access.”
Customers are prohibited from entering the walk-in humidor, and retailers can be fined for violations.
Canadian cigar buyers have seen the costs rise and the selection of cigars dwindle as the regulations took effect. Stogiereview.com stated a $5 cigar in the United States costs $20 in Canada and attributed the price difference to taxes and regulatory costs.
Jeff Edgen ([email protected]) is an assistant professor of political science at East Georgia State College in Statesboro and an adjunct scholar with the Competitive Enterprise Institute.