Author: Taco Tuinstra

Hong Kong: Record Cigarette Seizures

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Hong Kong customs seized 730 million illicit cigarettes in 2022, 76 percent more than in 2021 and the highest annual figure in more than two decades, reports The Standard.
Officers processed 7,148 cases last year, including 3,436 involving cigarette smuggling and 931 involving drug trafficking.
The illicit cigarettes confiscated in 2022 had a market value of HKD2.01 billion ($256.07 million) and a taxable value of around HKD1.4 billion, according to Customs and Excise Commissioner Louise Ho Pui-shan.
Customs officials attributed the spike in illicit cigarettes to the rising tobacco price under inflation.
The increased seizures follow a relaxation of immigration measures in multiple countries after the Covid-19 pandemic, Ho added, noting Customs would recruit 90 inspectors and 170 officers to strengthen the city’s enforcement capability.
March 1, 2023
Industry Unimpressed by CTP ‘Reset’

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Vaping industry representatives are unimpressed by the U.S. Food and Drug Administration’s plan, announced Feb. 24, to address the shortcomings in the operations of its Center for Tobacco Products (CTP) identified by independent evaluators working through the Reagan-Udall Foundation.
“While the devil is in the details, nothing in today’s announcement hinted at any material shift in FDA’s perpetual attack on every nicotine-containing product,” Tony Abboud of the Vapor Technology Association told AP News.
The CTP has come under fire from various sides, with health advocates urging the agency to more aggressively police regular cigarettes and flavored e-cigarettes, and tobacco companies complaining that the FDA is unwilling to approve new products, including e-cigarettes, which might help adults quit smoking.
To address such criticisms, FDA Commissioner Robert Califf in July 2022 ordered an independent investigation into the CTP’s operations.
On Dec. 19, 2022, the Reagan-Udall panel issued a blistering report. Evaluators described the FDA as “reactive and overwhelmed,” with a demoralized workforce that struggles to oversee both traditional tobacco products and a freewheeling e-cigarette market.
In response, the FDA pledged a reset to the agency’s tobacco program. The CTP director promised to develop a five-year plan by the end of 2023 outlining priorities, including efforts to clean up a sprawling market of largely unauthorized electronic cigarettes. The agency also said it would provide more transparency to companies about its decisions, following the rejection of more than 1 million applications from e-cigarette makers seeking to market their products as alternatives for adult smokers.

Nothing in today’s announcement hinted at any material shift in FDA’s perpetual attack on every nicotine-containing product.
Tony Abboud, executive director, Vapor Technology Association
Vaping industry representatives expressed disappointment with the FDA announcement, which they said would continue to result in denials for most vaping products.
“After the scorching findings from the Reagan-Udall report, the FDA should be issuing a mea culpa to the American public for the calamity created by the agency’s insistence on crushing the nicotine vaping market,” the American Vapor Manufacturers Association wrote in a statement.
“But instead of taking responsibility, the agency is proposing yet more task forces, more bureaucrats and even a so-called ‘five-year plan,’ which is government shorthand for punt, retreat, and see you later. It’s not good enough, not by a long shot, and the millions of Americans relying on vaping products to stay off cigarettes have once again been bast to the wind by the FDA’s chronic negligence and indifference.”
Americans for Tax Reform described the CTP’s response as “inadequate,” saying it fails to address the critical issues highlighted by the Reagan-Udall Foundation. “Since [CTP] Director King and FDA are clearly unwilling to step in and fix the problems plaguing the Center for Tobacco Products, this falls upon Congress, and specifically the new Republican House Majority, to use oversight powers to reestablish trust in FDA and improve public health,” the group wrote in a statement.
While welcoming the CTP’s new commitment to transparency, the Premium Cigar Association (PCA) expressed concern that the CTP continues to view industry engagement as an afterthought rather than a means to better understand how its approach can be better designed in the developmental phase of regulations, guidance or strategic planning.
The PCA also questioned the CTP’s desire to increase its workforce and raise more funds through user fees. “Until the systemic failures are addressed, growing an agency that already spans over 1100 employees will only complicate and compound its problems,” the PCA wrote in a statement. “Rather, CTP should embrace Congressional oversight, as does every other Federal Agency, to ensure that its ongoing efforts remain in-line with its statutory mission and public demands.
February 27, 2023
ITC shares Surge on Adani Worries

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Shares in tobacco manufacturer ITC have increased more than 75 percent as investors seek stability in the Indian stock market, which has been churning with concerns about corporate governance following Hindenburg Research’s allegations against the Adani Group.
“ITC’s stable cash flow and dividends have won hearts of investors in this volatile environment amid Adani’s troubles and inflation,” Sameer Kalra, founder of Target Investing in Mumbai, told Bloomberg. “The company is also expected to unlock value of its noncigarette businesses.”
ITC not only offers attractive dividend yields and returns on equity, but it also ranks top in a Bloomberg Economics analysis of governance, liquidity and leverage at Indian conglomerates.
ITC has gotten a further boost from stronger-than-expected third-quarter earnings. In early February, ITC reported a profit of INR50.31 billion ($614.52 billion) in the October–December quarter, up from INR40.56 billion in the comparable 2021 period. The company attributed the increase to strong cigarette sales and steady demand for its packaged foods.
February 27, 2023
General Cigar Appeals Cohiba Ruling

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Scandinavian Tobacco Group’s (STG) General Cigar Co. has appealed the Trademark Trial and Appeal Board’s (TTAB) December 2022 cancelation of the Cohiba trademark registration in the United States.
“By initiating this lawsuit to appeal the TTAB decision and to obtain a declaration of its rights, General Cigar expects the court will ultimately rule it has exclusive U.S. rights to the Cohiba marks,” Regis Broersma, president of STG’s North America and Rest of the World division was quoted as saying by Cigar Journal.
STG and Empresa Cubana del Tabaco (Cubatabaco) have fought over the U.S. rights to the Cohiba trademark since 1997. The TTAB sided in favor of the Cuban cigar conglomerate in its claim on the name, saying that General Cigar Co.’s registrations on the Cohiba trademark are to be canceled due to a violation of an international agreement that dates back to 1929.
However, General Cigar believes the TTAB decision is improperly based on the re-litigation of a claim that was decided in General Cigar’s favor by a U.S. Court of Appeals for the 2nd Circuit more than a decade ago.
In February 2005, the 2nd Circuit Court of Appeals in New York ruled unanimously in favor of General Cigar.
While there are more trademark conflicts between Cuban and American cigar companies, Cohiba is a unique case due to both its prominence on the global stage and its creation by the state-run tobacco company after the Cuban Revolution, whereas other brands with Cuban roots that General Cigar Co. owns, such as Partagas, Hoyo de Monterrey and La Gloria Cubana, were assumed by the Cuban government in 1959.
While the lawsuit moves forward, General Cigar said it will continue to manufacture, market, sell and enforce its Cohiba trademarks.
February 27, 2023
Texas Court to Hear Exploding Battery Case

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The Supreme Court of Texas has agreed to hear a lawsuit by a vaper burnt by an exploding battery to determine if Texas courts have jurisdiction over LG Chem America, a subsidiary of South Korea-based LG Chem, which made the battery, reports Law360.
In 2016, Texas resident Tommy Morgan bought an 18650 lithium-ion battery manufactured by LG Chem. He claims it unexpectedly exploded and caught on fire, leading to him suffering permanent and severe injuries, according to his lawsuit filed in 2019 in Brazoria County District Court.
The companies are facing other lawsuits by Texas residents with similar claims concerning batteries exploding. But intermediate appeals courts have come to different conclusions on whether LG Chem has enough contacts in the state to face claims.
LG Chem America and LG Chem have argued that Texas courts lack jurisdiction because the companies don’t sell individual batteries in Texas nor directly to Texas customers. LG has consistently stated in litigation throughout the country that this battery was never intended to be used in e-cigarettes or vaping devices.
Morgan told the Texas high court that the company deliberately shipped its products to Texas customers who were later injured, therefore Texas courts have jurisdiction.
February 27, 2023
Investors Press KT&G on Ginseng Spinoff

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A group of activist funds has filed an injunction at the Deajeon District Court in South Korea demanding that KT&G address their demand to spin off its lucrative ginseng business, appoint certain outside directors and strengthen its shareholder return policy, reports The Korea Times.
Led by the Singaporean activist private equity fund Flashlight Capital, the group has repeatedly demanded that the ginseng business be spun off for to recover corporate value and share prices.
However, during an investor relations event last month, KT&G rebuffed the request. “The spinoff will have little to no benefit to the company’s corporate value and shareholders from a long-term perspective,” said KT&G Senior Executive Vice President Bang Kyung-man.
Bang expressed concern that KT&G would potentially lose “synergy” in the event of the ginseng unit’s separation.
During the meeting, KT&G also dismissed the funds’ demand to strengthen KT&G’s shareholder return policy. The cigarette and ginseng product manufacturer said the current policy “should hold for now.”
Flashlight Capital founder Lee Sang-hyun believes KT&G’s share price will bounce back to over KRW140,000, a level last seen in 2016, once the firm reorients its investment portfolio to better achieve environmental, social and governance goals.
KT&G’s share price hit a low of KRW87,100 on Feb. 17 but has recovered since.
February 27, 2023
Study: Filter Ban Only Way to Halt Pollution

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Banning cigarette filters is the only way to stop tobacco product pollution, according to a new study published by the Dutch sustainability think tank CE Delft and reported by Dutch News.
Every year, Dutch smokers discard an estimated 200 million to 7.1 billion cigarette butts into the environment.
The current policy of limiting toxic waste by discouraging smoking is not working, according to CE Delft. The organization is also skeptical about the potential of butt deposit schemes. Consumer research has shown that just over one quarter of smokers said they would be willing to hold on to their butts until they had an opportunity to discard them at a collection point.
Dutch Junior Environment Minister Vivianne Heijnen wants to reduce the number of discarded filters, which contain plastics and chemicals, by 70 percent in 2026. The current measures, which include general awareness campaigns and a smoking ban on beaches, have resulted in only a 15 percent decrease, CE Delft found.
In 2022 alone, volunteers collected almost 90,000 cigarette butts during a two-week cleanup of the Dutch beaches, amid 4,400 kilos of waste left by beachgoers.
A ban on cigarette filters will become feasible in 2026 when the European Union will review its rules on single-use plastics, the report noted.
February 27, 2023
Mativ Holdings Reports Results

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Mativ Holdings reported sales of $660.1 million in the fourth quarter of 2022, up 69 percent over those reported in the comparable 2021 quarter, reflecting 6 percent constant currency organic sales growth and the benefit of the merger between Neenah and Schweitzer-Mauduit International that created the holding. GAAP Income was $2.5 million and GAAP operating profit was $26.9 million, which all included significant expenses related to the Neenah merger integration.
For the full year 2022, sales increased 51 percent to $2.17 billion, reflecting 11 percent constant currency organic sales growth and the benefit of the merger. GAAP loss was $6.6 million and GAAP operating profit was $51.4 million, which all included significant expenses related to the Neenah merger closing and integration.
“2022 was a historic year for Mativ, bringing together two strong companies to leverage our combined technologies and products to drive value for all of our stakeholders,” said Mativ Holdings CEO Julie Schertell in a statement. “We closed out the year with strong year-over-year fourth-quarter growth for the combined company from continued positive price/cost performance, and we enter 2023 with clear momentum on integration and synergy execution.
“Despite macro uncertainties, our conviction in the opportunities ahead for Mativ is unwavering. We have significant controllable actions to enable strong performance as we enter 2023, specifically cost synergies, innovation and programs focused on commercial and operational excellence, as well as broader, longer term decisions and actions to capitalize on our increased scale.”
February 27, 2023
FDA Appeals Rejection of Graphic Warnings

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The U.S. Food and Drug Administration has appealed a court ruling that found the agency’s graphic health warning rule unconstitutional, reports CSP.
On Dec. 7, a federal judge in Texas blocked the FDA from enforcing a rule requiring tobacco companies to print graphic health warnings on their products, saying they violated free speech protections under the First Amendment.
The graphic cigarette health warning rule required manufacturers and retailers who sell cigarettes to rotate 11 health warnings on cigarette packs, which consisted of textual statements and color graphics depicting the negative health consequences of cigarette smoking.
The Texas court said the graphic cigarette health warnings would have compelled manufacturers and retailers to speak by displaying cigarette packages on store shelves and advertising cigarettes when, if given the choice, manufacturers and retailers would choose not to do so. The court also said the warnings were not purely factual and were open to interpretation by consumers and more extensive than necessary.
The FDA appealed that decision on Feb. 1 in the U.S. Court of Appeals for the Fifth Circuit, according to court documents.
The Family Smoking Prevention and Tobacco Control Act of 2009 instructs the FDA to create visual health warnings, but the D.C. Circuit in 2012 blocked the agency’s first attempt, saying that regulators had not convincingly demonstrated that the warnings would actually reduce smoking.
In March 2020, the FDA released the final rule requiring new graphic warnings for cigarettes that feature some of the lesser known but still serious health risks of smoking, such as diabetes, on the top half of the front and back of cigarette packages and at least 20 percent of the area on the top of cigarette advertisements.
Several tobacco companies, including R.J. Reynolds Tobacco Co., filed a First Amendment challenge in April 2020. The rule was set to take effect in November 2023 after the deadline was repeatedly pushed back by court.
According to health groups, the U.S. has fallen behind other countries with its tobacco control policies. Prior to 2009, when Congress passed the Tobacco Control Act, only 18 countries required graphic warnings for tobacco products, they pointed out. Today, more than 120 countries require them.
February 24, 2023
Malaysia PM Urges Regulation E-liquids

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The government of Malaysia wants to regulate and tax nicotine liquids, reports New Straits Times, citing Prime Minister Anwar Ibrahim.
Speaking during the presentation of the government’s 2023 buget, Anwar said that although vape with nicotine is illegal, the product is still being sold widely with an estimated market size of more than MYR2 billion. “Would it not be great if it is monitored and taxed to discourage the usage of vape,” asked Anwar, who is also the finance minister.
While welcoming the proposal to introduce a regulatory and taxation framework for e-cigarettes, industry groups insisted on consultations. “Regulations and tax rates need to be balanced given it will impact local industry players,” said The Malaysian Vape Chamber of Commerce.
In his presentation, Anwar also expressed support for the Generational Endgame (GEG) bill, which would make it illegal for people born after 2007 to buy tobacco products, including e-cigarettes.
The Advanced Centre for Addiction Treatment Advocacy (ACATA) said the government must conduct more studies on the GEG proposal before making any decision.
While ACATA is encouraged by the government is taking steps to regulate vape, the agency said prohibition was likely to backfire. “There is substantial and credible evidence to prove that vape products are less harmful than smoking cigarettes,” the organization stated. It also cited evidence showing that vaping is effective in helping smokers to quit smoking cigarettes without attracting many never-smokers. ACATA cited a 2020 study, which found that only 0.6 percent of Malaysian nonsmokers vape.
The Malaysian Vapers Alliance, meanwhile, expressed disappointment that the government supported the GEG proposal, saying that cigarettes and vapor products should be treated differently, given the vast difference in risk they present.
February 24, 2023