Premium Cigars’ Unlikely Advocate: The White House

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Premium Cigars' Unlikely Advocate: The White House

Since the announcement of the Deeming Rules back in 2016, the premium cigar industry has been under immense pressure from the U.S. Food and Drug Administration (FDA) as regulations, and the cost of business, has increased. According to recent reports, however, those tobacco businesses involved in cigars could find relief from an unlikely source–the White House.

According to a recent story from CNBC, the FDA has been under pressure from the White House to spare the premium cigar industry from regulations and compliance requirements such as the Substantial Equivalence (SE) applications set to go into effect in May 2020. Part of the regulations that were introduced after 2016, including substantial equivalence, requires premium cigar manufacturers to receive approval from the FDA before releasing new products. This process is costly and has yet to clearly be defined, meaning the process of getting a new product approved will be an expensive and potentially long one. The premium cigar manufacturers are accustomed to releasing new products throughout the year and regularly, similar to the wine industry, meaning any disruption to this could grind innovation to a halt and leave retailers and consumers with fewer options in the humidor. It also could lead to a shortage of product, as cigars incorporate tobaccos grown and harvested in different years, meaning even an established cigar brand could be considered new depending on when it is released.

According to the Cigar Rights of America and data provided by Magnum Economic Consulting, should the full regulations outlined by the FDA be implemented, 88 percent of the U.S. cigar manufacturers and importers would be put out of business, leading to a loss of at least 5,300 U.S. jobs. This has been an argument premium cigar retailers, manufacturers and trade organizations have all been arguing for the past several years in an attempt to show lawmakers the cost of regulations. Similar to how the vapor industry was able to stave off a fourth quarter flavor ban proposed by the Trump Administration in 2019 [read more here], the White House appears to have taken notice to the advocacy and arguments made and is now putting pressure on the FDA to spare premium cigar manufacturers from regulations. CNBC based this report on two sources that are familiar with the situation but these two individuals have requested anonymity. One person reportedly in favor of a premium cigar exemption is Mick Mulvaney, the White House’s budget director.

In response to mounting pressure from the White House, the FDA implied that it may be in favor of not cracking down on those premium cigar manufacturers that do not comply with the regulations, saying that it will make enforcement decisions on a case-by-case basis due to the inability to monitor and catch every illegally marketed tobacco product. The FDA went on to state that its “lowest priority among these products will include relatively expensive, large hand-rolled cigars that do not have flavors (e.g. fruit, candy, or mint), given what FDA understands to be their comparatively lower youth usage rates.”

The FDA has been re-examining premium cigar regulation for some time, even down to how it defines a premium cigar. Plans to regulate flavored cigars, however, remain unchanged. Given the continuing increase in teens who are using e-cigarettes and vaping, regulating and monitoring these products appears to remain the FDA’s top priority.

For all the latest legislation and FDA news impacting the tobacco industry, click here.