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TOBACCO OUTLET BUSINESS
JULY/AUGUST 2012
TMA Highlights
35-Month Review of FDA Regulation
The burden of compliance costs on small manufacturers,
an increasingly uneven competitive playing field and
unintended consequences of FDA regulation (i.e. a
growing illicit market) were among the concerns cited
by industry representatives participating in a TMA panel
reviewing FDA regulation over the past 35 months.
The issue of the “cost of compliance is well known,”
noted Carl Ioos of RYO manufacturer Top Tobacco. “For
us it’s been millions with millions more to come,” he
asserted, noting that compliance costs are more difficult
for smaller companies, which have fewer resources to
devote and bear. “The burden for us as a [relatively] small
company has been disproportionate as opposed to larger
companies.”
Ioos cited the PACT Act as an example. Intended to
prevent product trafficking through Internet sales and
home delivery, the PACT Act amended the Jenkins Act
(15 U.S.C. 375), a 1949 federal law requiring anyone who
ships cigarettes nationally to file monthly reports with
each state tax collector listing “the name and address of
the person to whom the shipment was made, the brand,
and the quantity thereof.” The PACT Act redefined
“cigarette” to include RYO products and sought to
provide government enforcement officials with more
effective enforcement tools to combat tobacco smuggling
and illicit sales. “Our company has never sold directly to
consumers, however, in accordance to the PACT Act…
we have registered our product and reported monthly
sales to all 50 states separately and as a result we have had
to hire [additional accounting staff ],” said Ioos.
Bill Greiwe at CheyenneTobacco,a cigarette,smokeless,
RYO and cigar company, also expressed concern about
the regulatory burden being placed on smaller companies.
He noted that despite acknowledgement by legislators
shaping the final draft of the Tobacco Control Act that
small businesses would need assistance in complying
with the requirements, more than a year passed before
the FDA established a Small Business Office—and then
that office consisted of an e-mail inbox. “In the past,
Cheyenne has presented a number of questions to the
agency through e-mails to the initial ‘Small Business’
e-mail inbox, direct e-mails to agency staff, webinars and
meeting with agency staff, and many times our questions
have gone unanswered,” he said. “This is unfortunate
and not consistent with what we believe the legislators
envisioned; nor does it make good pragmatic sense, as
not answering questions about how to comply does not
facilitate compliance.”
Greiwe went on to outline three questions currently
front-of-mind for small businesses:
What does the Center consider to be the scope of
“providing technical and other non-financial assistance
to small tobacco product manufacturers to assist them
in complying with the requirements of the TCA” under
901(f )?
How is the Center balancing its obligations to execute
its stated public health mission with its obligations to
assist small businesses?
How is the Center ensuring that its own actions are
consistent with what Congress intended?
In addition to noting that the cost of compliance is
a bigger burden for small manufacturers, both Ioos and
Greiwe pointed to unintended consequences affecting
their businesses. “We believe there are a number of non-
compliant companies and products in the RYO category,
and in a small industry the effects of that competition
are significant for legitimate companies,” said Ioos,
who noted that after the FDA flavor ban, his company
recalled its Wildfire strawberry-flavored product, while
some of its competitors simply added a warning to their
packaging that the product was meant only for use with
herbs and “not for use with or sold for use with tobacco.”
“Some companies have complied and others have not,
and realized significant gain as a result,” he said.
Cheyenne’s Greiwe also referenced the growth of
illegal products in the marketplace,
and pointed out that supporting
legitimate small manufacturers
can help address that issue.
“A robust, compliant group
of small manufacturers will
serve in part to control the
influx and success of illegal
products; effectively we
are both the ‘canary in the
coal mine’ and providers of
choices that moderate inroads by
illegal products,” he said. “Working
together with both the industry as a whole
a n d
small manufacturers specifically will benefit the Center
in many ways and help it achieve its mission more easily
than a contentious relationship.”
Manufacturers voiced concerns about the FDA’s implementation of regulatory oversight.
Cheyenne’s
Bill Greiwe