Market Overview

FDA Proposes New Regulations For The Cigar Industry

FDA Proposes New Regulations For The Cigar Industry

A new proposal from the FDA might put a serious burden on the cigar-making industry, removing up to 50 percent of cigars from the market. The FDA's proposed regulations have attracted criticism from cigar shops around the country.

According to Tom Kakadelis of Charlotte, NC's Outland Gift and Cigar, the new proposal might result in local cigar shops having to close down. The reason? The FDA's new rules would put onerous regulations on the cigar industry, increasing costs.

The proposed new regulations would mean that cigar manufacturers would have to submit listings of ingredients and products to the FDA, as well as changing the rules with respect to health warning labels. The FDA recognizes that the new rules would burden the cigar industry, but justifies this with a statement that tobacco continues to be the main cause of preventable disease and death in the US.

Kakadelis, on the other hand, says that responsible adults should decide whether or not they want to smoke cigars, not government officials.

The FDA proposal goes all the way back to the Tobacco Control Act of 2009, which gave the FDA authority to regulate all tobacco and tobacco-derived products. The FDA's proposed new rules were finally published in April, and include three rules which have attracted particular criticism from the cigar industry.

First, many new cigars would be subjected to a process of pre-market review, similar to the process used for reviewing new pharmaceutical products. Each new cigar would require an application to the FDA, in a process that requires about 5,000 hours of work and needs to be completed perfectly. Hiring a lawyer to take care of this paperwork would cost around $1 million per cigar type.

Since the FDA is currently behind on around 4,000 applications for other types of smokeless tobacco and cigarettes, the new rules would put an even larger burden on the FDA's reviewers. According to the cigar industry, the FDA would have to deal with around 10,000 additional applications each year, which would significantly delay approvals.

On the other hand, new cigars have become a major tobacco industry driver. Cigar companies issue several new products each year, in a manner similar to the craft-beer market.

The second FDA rule aimed at cigars would ban the practice of free cigar samples. While the cigar industry doesn't give kids free cigars, it does use sample cigars extensively to retain old customers and bring in new ones. Manufacturers want to be sure their customers like the new products, and customers want to be able to try the cigar before they spend $250 or more on a box of them.

Lastly, the FDA's rules would exempt certain so-called premium cigars from the onerous process of pre-market review. Unfortunately, the FDA's definition of "premium" is extremely restrictive, including eight separate standards (such as full-leaf tobacco wrapping and no infused flavors). No cigar under $10 would qualify as "premium," yet cigar industry observers point out most of the premium handmade cigar market is under the $10 per cigar price point.

Since the FDA looks at the "cash register" price, state-to-state tobacco tax variations would affect which cigars qualify. Manufacturers and shops might have to hike prices all around in order to bypass the cut-off.

The FDA estimates that around 10 to 50 percent of cigars currently on the market would go off the market following the new regulations, thanks to the high costs imposed by these regulations.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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