14
TOBACCO BUSINESS
JANUARY/FEBRUARY 2014
NEWS & TRENDS
JANUARY/FEBRUARY 2014
HigHligHts
NYC Sues Fedex
Over Cig Delivery
City seeks $52 million from the
company.
New York City is suing FedEx for allegedly deliver-
ing millions of contraband cigarettes to people’s
homes, thereby depriving the city of tax revenue.
The lawsuit reportedly seeks $52 million in fines
and unpaid taxes. According to the city, package
delivery company FedEx created a “public nui-
sance” through a partnership with Shinnecock In-
dian Nation reservation’s Shinnecock Smoke Shop
in Southampton, New York, which involved ship-
ping untaxed cigarettes to residential homes.
According to city officials, FedEx was engaging
in that activity while also negotiating a 2006 agree-
ment with New York state’s then-attorney general
Eliot Spitzer to stop such deliveries in the state,
an agreement later expanded to cover deliveries
throughout the country. The city alleges that Fe-
dEx deprived it of a $15 excise tax on 55,000 car-
tons of cigarettes that it delivered to city residents
in 9,900 shipments from 2005 to 2012, and that the
deliveries violated various federal and state laws,
including an anti-racketeering statute.
The city seeks $49.5 million in fines, equal to
$5,000 per shipment, plus $2.48 million represent-
ing triple the lost tax revenue from FedEx, which
has stopped doing business with known shippers
of untaxed cigarettes.
“Through its contracts with customers, FedEx
prohibits the shipment of tobacco direct[ly] to
consumers and believes the claims made by the
city are overstated and not founded in law,” says
the statement. “FedEx intends to defend this case
while continuing to work with authorities to stop
prohibited tobacco shipments.”
PMI and Altria Augment
Reduced-Risk Efforts
The tobacco giant is gearing up
for forthcoming regulation.
Philip Morris International has announced establishment of
a strategic framework with Altria Group to commercialize
reduced-risk products and e-cigarettes. Under the terms of
a set of licensing, supply and cooperation agreements, Al-
tria will make its e-cigarette products available exclusively to
PMI for commercialization outside the United States, while
PMI will make two of its candidate reduced-risk tobacco
products available exclusively to Altria for commercializa-
tion in the United States.
“In the United States it is envisaged that PMI’s products
would be regulated as modified-risk tobacco products and
any commercialization would be subject to U.S. Food and
Drug Administration (FDA) authorization,” says a company
spokesperson. The agreements also provide for coopera-
tion on the scientific assessment, regulatory engagement
and authorization related to these products with the FDA,
and for a similar framework for e-cigarettes with the relevant
regulatory authorities in international markets. In addition,
the agreements provide for the sharing of improvements to
the existing generation of products.
“PMI firmly believes that reduced-risk tobacco products,
as well as e-cigarettes, represent an important step toward
achieving the public health goal of harm reduction, a poten-
tial paradigm shift for the industry, and a significant growth
opportunity for the company. Further to our plans for inter-
national test market introduction of our candidate reduced-
risk products as of the second half of 2014, this agreement
establishes a roadmap for com-
mercialization in the U.S., sub-
ject to FDA authorization. At the
same time, it provides us with a
platform to accelerate our en-
try into international e-cigarette
markets while we continue
to develop future versions,”
says André Calantzopoulos,
PMI’s CEO.
