Last week, lawmakers in the U.S. introduced the CARE For Moms Act in Congress. That bill would increase healthcare for expecting and new mothers, while also exponentially increasing the taxes for vaping, roll-your-own, cigars and other tobacco products.
The tobacco tax language in the CARE Act was copied and pasted out of the Tobacco Tax Equity Act, a bill that has been introduced as a rider in bills introduced in previous sessions of Congress but it failed to gain any traction, according to halfwheel.
That could change after Sen. Ron Wyden and Sen. Dick Durbin have now introduced the Tobacco Tax Equity Act of 2023 in the Senate as a standalone bill, while Rep. Raja Krishnamoorthi introduced the bill in the House of Representatives.
The tobacco tax-related language includes:
New taxes for e-cigarettes;
Doubling the tax on roll-your-own tobacco;
A more than 16x increase on pipe tobacco;
Doubling the tax on small cigars;
A massive tax hike for premium cigars;
For premium cigars, the language removes the existing federal excise tax of 52.75 percent, capped at 40.26 cents per cigar, and replaces it with a weight-based tax of $49.56 per pound.
Because it’s a weight-based tax, the difference between the existing tax and the new taxes would vary depending on how heavy the cigar is. For cigars robusto or larger, it would likely more than triple the current federal tax rate.
The premium cigar industry recently declared victory in the fight against oversight by the U.S. Food and Drug Administration. Celebrations may have been premature.
The lawsuit was filed by the Cigar Association of America, the Cigar Rights of America (CRA) and the Premium Cigar Association. The case focused in part on the rulemaking process, which requires the FDA to inform the public about upcoming regulations and solicit feedback on those proposed rules.
In last month’s decision in Cigar Association of America et al. v. United States Food and Drug Administration, Judge Amit P. Mehta made a sweeping, albeit expected, ruling that granted relief to the three cigar industry trade groups that sued the regulatory agency in 2016 on behalf of the premium cigar industry.
The news confirms industry fears that warning labels, premarket tobacco product application (PMTA) review of cigars and other limitations that have impeded the ability of cigarmakers are still a possibility.
Recently, the FDA acknowledged the decision and one of its impacts, telling cigar companies that it did not plan to assess user fees for “premium cigars” sold during Q4 FY23.
The Department of Justice, which represents FDA on legal matters, had 60 days to appeal the ruling. It’s unclear whether the agency will ask a court for a stay, which could reenact the deeming regulations for “premium cigars” as the appeal process works itself out.
“The more things change, the more they stay the same,” is an expression that has been around for almost two centuries, and it speaks to the fact that the small picture(s) of life may change, but the larger one does not. The vape industry and all the challenges and changes that have happened in the past decade are totally contrary to that famous saying.
A decade ago, the vape industry was the epidemy of the Wild, Wild West, full of vape shops springing up on every corner, and any/everyone creating e-liquids in their bathtubs at home. Regulation and competition changed all that and brought some semblance of “orderliness” to the market, but as state and federal regulations bombarded the industry, and with the FDA creating onerous and unattainable guidelines, the vape space has truly become one of survival.
I recently attended a vape event in Phoenix which brought together several dozen top manufacturers, distributors, and buyers, and universally everyone lamented the same concern: business is down.
Why is business down?
The reasons are many, including strict regulations, and now, even more enforcement of those regulations, but overall, the cause was much simpler. The huge COVID-19 rebound in 2020-22 put more money in consumers’ pockets and more time on their hands. Those issues combined created an artificial bubble that many thought would last. But time has passed. Add in the inflation that has pushed up food and other cost of living expenses, and some former necessities are now becoming unaffordable luxuries.
“It’s a balancing act between the addictive nature of some nicotine products and the limitations of buyer’s budgets,” said Jamie Reed with Simple Vape Supply from Orange County California. “I’ve been in the industry for over ten years, and this is evolution in its purest form and based around ’survival of the fittest.’”
Simple manufactures and distributes over 100 different assortments of nicotine cartridges, including disposables, including various iterations of CBD, Delta-8 and Kratom.
“It’s interesting,” Reed added. “When I got hired, I was told that there was an ‘expiration date,’ and we all knew that this industry might not last, and that the cream would rise (to the top). We planned to be one of those surviving companies, and we’ve been able to adapt to the times.”
Her company, along with many that are still around, were mostly run by rebels, radicals, and envelope pushers; and many have in fact changed accordingly, but some have merely learned how to “play the game” and outwardly appear to be toeing the line, but the reality may be different.
“We were aware that the COVID blip was a one-time event. People were home, they had government money to spend, and no one was checking in on them or requiring any urine tests. The Delta (8,10) boom really added to that, and everyone jumped on that bandwagon,” she said excitedly.
That line of CBD was an example of how the industry has and continues to push back. The FDA says you can’t do this, so the industry says, “F-you, then we’ll do that.”
With regulation eliminating or reducing product selection, almost any industry will do the same thing: adapt; repurpose, or reposition.
Of the dozens of people I spoke with at the event, the numbers (from shop owners and manufacturers) were pretty consistent, and most of them were down 20 to 30 percent. Many were saying that purchase sizes were lower than normal and a typical ten-thousand-dollar order was now half that. They saw some shops closing, but most were working on smaller revenues.
Manager J-K Thorne holds some of the flavored products that are no longer available at Wild Impulse vape shop. (Shane Hennessey/CBC)
Meanwhile, on the other side of the equation, vape liquid manufacturers who are trying to “play the game” right and submitting premarket tobacco product applications (PMTAs) to the U.S. Food and Drug Administration are frustrated at the amount of time it takes and how much money is being thrown into a (seemingly) dark hole.
I spoke with one of the owners of a large vape manufacturing business and distribution company in Idaho, and he shared some facts and figures about their process of trying to make their products “legal.” Legal, in the eyes of the FDA, has caused his company to squander over $5 million in the past few years trying to get authorization.
Mike Larsen is a detailed and focused vape guy who has been in the industry for over a decade and is with Lotus Vaping Technology, which started in 2011. As a partner and director of sales, he is on the front line of everything the company does to stay legal and compliant and is riding the roller coaster ride on a daily basis.
“Disposables have really changed the game,” he said, “and they have reduced the role of vape shops where people used to come for education and guidance. Consolidations and closures have also reduced the shop numbers by 30 to 40 percent, and now you have larger conglomerates doing the work of the multitude of shops.”
We spoke about a possible flavor ban nationally, and he said he was skeptical.
“The PMTA process has already reduced or eliminated flavors, so it may not be necessary to go to that length. There have been between six and seven million submissions by thousands of companies, and so far, just 23 have been approved. I know of a few companies that submitted over a million applications themselves. And here’s the irony: everyone approved has been a Big Tobacco company, and they make up just a fraction of the total vaping market.”
The second irony on top of that, is that those so-called approved products are ones that no one wants.
We talked about whether those approvals were fair or were the result of favoritism and bias, and he smiled since we both knew the answer.
“When you look at the PMTA process and the rigid requirements, it seems pretty obvious that they were written to the advantage of the larger, established companies, and the “small guy” had very little chance in this skewed game. You can’t even budget for something like this,” he continued. “The original filing costs over a million dollars, and I know several companies that have put another ten million in, only to get denied. Who has deep pockets like that? In 2016 I could have named over 150 liquid companies doing good business; today I can name about three dozen.”
And that is why the number of companies manufacturing tobacco and vape products is half what it was and is getting smaller every year. The FDA changes the rules of the game continually.
“There’s something happening here, but what it is ain’t exactly clear,” is the beginning line of a song that speaks to changes going on in society. That song by Buffalo Springfield may have nothing to do with vape, but the message says the same thing: there is something happening here although it may be clearer than we realize. We all knew this would happen; it was predicted a decade ago.
In the vape space, the more things change…the more things change.
Norm Bour is the founder of VapeMentors and works with vape businesses worldwide. He can be reached at norm@VapeMentors.com.
The retailers selling illegal flavored disposable vapes are under scrutiny. The U.S. Food and Drug Administration issued complaints for civil money penalties (CMPs) against 22 retailers for the illegal sale of Elf Bar/EB Design.
The FDA previously warned each retailer in the form of a warning letter to stop selling unauthorized tobacco products, according to the agency. During follow-up inspections, the FDA observed the retailers had not corrected the violations, which resulted in the civil money penalty actions.
“The FDA has been abundantly clear that we are committed to using the full scope of our authorities, as appropriate, to hold those who break the law accountable,” said Brian King, director of the FDA’s Center for Tobacco Products (CTP). “These retailers were duly warned of what could happen if they failed to correct their violations. They chose inaction and will now face the consequences.”
The complaints seek the maximum civil money penalty of $19,192 for a single violation from each retailer. While the FDA has issued civil money penalty complaints to retailers for selling unauthorized tobacco products in the past, this is the first time the agency is seeking CMPs for the maximum amount against retailers for selling illegal flavored disposable vapes.
The retailers can pay the penalty, enter into a settlement agreement, request an extension of time to file an answer to the complaint or file an answer and request a hearing. Those that do not take action within 30 days after receiving the complaint risk a default order imposing the full penalty amount.
Courtesy: US FDA
In addition to the CMP complaints, today the FDA announced an additional 168 warning letters to brick-and-mortar retailers for illegally selling Elf Bar/EB Design products. These warning letters were the result of a coordinated nationwide retailer inspection effort conducted throughout the month of August, according to the agency.
Warning letter recipients have 15 working days to respond with the steps they have taken to correct the violation and ensure compliance with the law. Failure to promptly correct the violations can result in additional FDA actions such as injunction, seizure or civil money penalties.
“We continue to monitor closely all those in the supply chain, including retailers, for compliance with federal law,” said Ann Simoneau, director of the Office of Compliance and Enforcement in the CTP. “This includes follow-up inspections and surveillance of those who have received a warning letter, and taking additional action, as appropriate, to enforce the law.”
The Cigar Association of America (CAA) has released a report showing that U.S. imports of premium cigars from January-July 2023 are down 3.4 percent compared to the record pace that was set in 2022.
Through the end of July, CAA estimates the U.S. imported 252.81 million cigars, compared to 261.63 million in the same period during the year before.
While the numbers are down compared to last year, the trend line for the first seven months of the year is actually closer to 2022 than the Q1 numbers. More importantly, the numbers are still significantly above pre-Covid-19 levels, reports Halfwheel.
On a month-by-month basis, imports rose in four of the seven months, though March and April were down a combined 11.7 million cigars, or 14.41 percent compared to 2022. Addittionally, there were 6.5 million more cigars imported in May and July, or 8.33 percent over last year.
Nicaragua remains the dominant supplier of premium cigars to the U.S., accounting for roughly 55 percent of imports through the first seven months, according to CAA. However, those imports are down 4.2 percent compared to last year.
The CAA breaks down individual imports from seven countries and all were down except the Dominican Republic, which the group estimates has shipped 3.37 million more cigars compared to the same period last year, an increase of 4.8 percent.
BAT has released a blueprint for how regulators and governments could better regulate vapor products and help smokers switch to less risky products.
During DTNF 2023, held from Sept 18-20 in Seoul, BAT’s global head of business communications, Jonathan Atwood, told attendees how BAT’s five-step plan for regulation could support achieving the right balance between harm reduction and the unintended consequences of access, including underage use.
Speaking on behalf of Kingsley Wheaton, BAT’s chief strategy & growth officer, Atwood said that reckless players in the market need to be penalized when they do not abide by the rules. He said the five suggestions are the areas that regulators should explore and establish “smart regulation” that is right for their market.
“First, on-device technology and functionality: vapor products should be accessible only to adults. Both underage prevention and restriction is crucial. On-device technology, when applied and enforced across entire markets, could help in this regard.
“Second, more recognition is needed that flavors are an important driver of adoption for smokers seeking alternatives. However, flavors in vapor products should not particularly appeal to anyone underage.
“Third is at the manufacturing and import level: ensuring that non-compliant products cannot reach the market in the first place.
“Fourth, where no restrictions exist already, regulators may want to look at who should be able to sell vapor products and where. Reasonable safeguards at the point-of-sale would help ensure these products are sold only to adult consumers. Solutions such as retail licensing and facial recognition technologies should be seriously considered.
“Lastly, enforcement and penalties: governments must wield their power and ensure consumers are purchasing legitimate products. Such measures should be rigorously enforced and those who fail to comply should face meaningful sanctions.”
Atwood said BAT was calling upon governments, regulators, and industry peers to rally towards a sustainable and progressive environment in which vaping products are sold and marketed responsibly.
The latest in vaping industry innovations made its debut during InterTabac 2023, held from September 14-16, as FEELM, a leading closed system solution provider, unveiled its OS Vape in a partnership with OS.
It is the first time FEELM has co-exhibited with its local partner during the world’s largest nicotine and tobacco trade show held in Dortmund, Germany.
OS, a major player in Germany’s shisha product market, recently ventured into the disposable vaping product market.
A representative from the FEELM booth said that collaborating with clients for exhibitions is a new strategy aimed at bolstering the client’s brand presence in local markets.
The FEELM spokesperson said the company intends to continue its co-exhibition format at major global exhibitions, joining forces with clients from various regions in a collective march towards a global presence.
OS Vape introduced a disposable vaping solution that delivers an elevated puff count, cost-efficiency, and unmatched vapor consistency, promising German consumers a rich vaping experience reminiscent of their cherished beers.
The OS Vape uses FEELM Max ceramic coil technology, disposable product the ability to provide 800+ puffs, a more than 30% enhancement in puff count compared to other common disposable products.
This establishes a new standard under TPD compliance, according to the FEELM spokesperson.
“Beyond puff count, OS Vape offers an exceptional vapor and taste consistency of over 95%. These groundbreaking advancements have undoubtedly propelled the vaping industry to new zeniths,” the spokesperson said. “Additionally, the signature transparent e-liquid tank not only alleviates e-liquid concerns but also adds a touch of aesthetic sophistication.”
UPDATE: The order has been granted. First reports are due May 16.
The U.S. Food and Drug Administration is asking the U.S. District Court of Maryland for a 14-day extension to file the first status report required by the Court’s revised remedial order.
The plaintiffs in the case consent to the requested extension, according to the motion filed today.
“The extension request is supported by good cause. Compiling the information needed for the status report has required considerable time and effort, and Defendants have been working with Plaintiffs to resolve any ambiguities about which applications will be covered in the status report,” the motion states. “Also, a number of FDA employees helping to prepare the status report were out of the office on pre-planned leave last week, and a key FDA employee responsible for the status report will be out of the country on pre-planned leave next week.
“Defendants do not seek to modify any other deadline, and the FDA’s second status report would remain due July 28, 2022. Defendants are prepared to have this letter serve as their consent motion for a 14-day extension.”
Judge Grimm is expected to grant the motion’s request. The new deadline for first PMTA status reports would be May 16 if motion is granted.
Japan Tobacco on Thursday announced it was considering selling its Russian operations after suspending investment and marketing activities in the country last month following Moscow’s invasion of Ukraine.
The statement by JT, market leader in Russia, came after it said in March it would continue manufacturing in the country, where it has four factories and 4,000 employees.
That announcement drew criticism after many global brands pulled out over the invasion of Ukraine and governments, including Japan, levied heavy sanctions against Moscow. Russia calls its action in Ukraine a “special operation,” according to Reuters.
Japan Tobacco’s move to explore a sale of its Russia operations makes it the last major international cigarette-maker to speak publicly about potentially leaving Russia, the world’s fourth-biggest cigarette market.
Marlboro owner Philip Morris, the No.2 biggest player in the country, said last month that it plans to scale down manufacturing operations in Russia and that it is working on options to exit the market.
Japan Tobacco on Thursday announced it was considering selling its Russian operations after suspending investment and marketing activities in the country last month following Moscow’s invasion of Ukraine.