Blog - Tobacco Reporter

Flavor Ban Will Create Unregulated Markets

The Cigar Association of America (CAA) has published a new analysis showing the significant negative impacts the Food and Drug Administration’s proposed ban on flavored cigars would have on public health and law enforcement activities.

“Making flavored cigars illegal will not eliminate the demand for flavored cigars; it will only criminalize their sale and create illicit markets,” said CAA President David M. Ozgo in a statement. “The nation has seen this with marijuana and our failed experiment in alcohol prohibition in the 1920s.”

Earlier this month, the House Agriculture Appropriations Subcommittee approved language in the FDA’s 2024 appropriation that would effectively block the agency from enforcing the proposed ban, Ozgo said. “We applaud the appropriators for recognizing how damaging FDA’s proposed ban on flavored cigars would be.”

According to the CAA, the existing regulatory system for flavored cigars was designed to ensure that legal tobacco products are manufactured to meet established standards, undergo quality control measures, and prevent inclusion of unregulated ingredients that could pose health hazards to consumers.

Criminals, however, do not care about regulatory standards or quality control, Ozgo noted. The analysis shows how illicit tobacco products sold through criminal enterprises often contain dangerous contaminants such as asbestos and rat droppings.

“Further, FDA claims it will only enforce the flavored cigar ban against manufacturers and retailers, not against individuals,” the CAA wrote in a press note. “However, the report notes that nearly all states have cigar excise taxes, and all 50 states have laws that treat unlicensed tobacco sales as a serious crime.”

In written comments submitted to FDA, many law enforcement groups opposed the ban, including the National Association of Police Organizations, Federal Law Enforcement Officers Association Foundation, National Narcotics Officers Association Coalition, National Troopers Coalition and the National Organization of Black Law Enforcement Executives.

The groups pointed out they don’t enforce FDA law, but they do enforce state laws requiring that excise taxes be paid on cigars. Shifting resources to police a new crime—sale of untaxed flavored cigars—will mean reduced efforts to combat other criminal activity, according to the law enforcement groups.

The analysis also raises concerns that law enforcement efforts would fall disproportionately on minority populations. The National Black Chamber of Commerce stated in its FDA comments: “…enforcement of local laws against these transactions (flavored cigars) will certainly bring African Americans, already the subject of over policing, into further confrontations with law enforcement personnel.”

The Congress of Racial Equality also opposed the ban in its public comments, noting that the deaths of Eric Garner and Michael Brown at the hands of police involved tobacco enforcement. Michael Brown’s initial infraction was related to cigars and Garner’s to the sale of untaxed tobacco.

May 29, 2023

Innokin and Breeze Warned

The U.S. Food and Drug Administration has warned the manufacturers of two popular disposable e-cigarette brands that their products are unauthorized for sale in the United States.

The product involved are Esco Bars, which is manufactured by Shenzhen Innokin Technology Co., and Breeze, which is imported into the U.S. by Breeze Smoke. Esco Bars and Breeze are presently among the most commonly sold brands of disposable products in the country, according to the FDA.

“The science clearly shows that a majority of youth who use e-cigarettes report that the products they are using are disposable and flavored” said Brian King, director of the FDA’s Center for Tobacco Products, in a statement. “Given their appeal to youth, these products are a priority for FDA compliance and enforcement action.”

The recent FDA actions could signal that the agency will no longer consider pending premarket tobacco product applications (PMTAs) when deciding which companies to enforce against. Esco Bar is believed to have a pending PMTA, according to Vaping360. Breeze Smoke reportedly received marketing denials orders for several products in 2021.

Thousands of other products remain on the market awaiting PMTAs without facing enforcement actions.

Innokin and Breeze Smoke have 15 days to dispute the allegations in the FDA’s warning letters.

May 26, 2023

Traders Hit With Tax-Evasion Charges

The Philippines’ Bureau of Internal Revenue (BIR) has filed 69 complaints for tax evasion worth PHP1.8 billion ($32.25 million) against tobacco traders, reports Business World.

During a nationwide raid in January, authorities confiscated numerous countless cigarette products.

“This is a warning against all illicit traders,” Internal Revenue Commissioner Romeo D. Lumagui Jr. was quoted as saying. “The BIR will not only raid your stores and warehouses, but we will also file criminal cases against you. This will not be the last.”

According to Lumagui, the widespread peddling of illegal tobacco products is hampering government efforts to meet its excise tax collection target of PHP352.9 billion this year.

Lumagui said his agency would partner with online platforms and merchants to impose stricter guidelines on illicit cigarettes.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the state should enforce stricter tax collection measures to reach its collection target this year.

“Through intensified collections based on current tax laws, the government can further structurally increase its recurring tax revenue collections,” he said in a Viber message.

The BIR set a collection target of PHP2.6 trillion this year, 11 percent higher than last year.

May 26, 2023

Waiting Period Expires for Njoy Purchase

The waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired for Altria Group’s acquisition of Njoy Holdings.

This means no further regulatory review by the federal antitrust authorities is required in connection with the Transaction.

“Subject to the satisfaction of other customary closing conditions, we expect to complete the transaction in the second quarter of 2023,” Altria wrote in a statement.

May 26, 2023

VCF to Distribute EPC Cigars in Italy

VCF will start distributing EPC cigars in Italy.

Fred Vandermarliere of VCF and EPC founder Ernesto Perez-Carrillo will officially announce the partnership on June 23 in Florence.

EPC’s cigars include acclaimed brands such as Encore Celestial, Majestic (voted cigar of the year by Cigar Aficionado in 2018), Pledge Prequel (Cigar Aficionado cigar of the year in 2020) and Pledge Sojourn, along with a sampler of three cigars called Triumph.

Each of these was created by Perez-Carrillo, who VCF describes as one of the best master blenders in the world

Created out of the merger between J. Cortes and Oliva in 2016, VCF has cooperated with EPC in the past. For example, Perez-Carrillo helped VFC resurrect the cult hero brand Aliados by recreate the original blend from his mentor Rolando Reyes Sr.

VFC has great expectations of the partnership between its leaders. “It is no coincidence that these titans share a vision and cooperate on several projects,” the company wrote in a press release. “It reflects a similarity in the way in which both parties look at the craft and its heritage, at the industry that is built on it, and on the answers that may guide its future.”

May 25, 2023

Universal Reports ‘Good’ 2023

Universal Corp. reported sales and other operating revenue of $2.57 billion in 2023, up 22 percent over that recorded in the previous fiscal year. Operating income rose 13 percent to $181.1 million. Tobacco operations contributed $2.26 billion to the company’s sales and operating revenues compared with $1.84 billion in 2022. Operating income for the tobacco operations segment increased by $15.1 million to $172.9 million.

“Fiscal year 2023 was a good year for Universal,” said Universal chairman, President and CEO George C. Freeman III in a statement. “Tobacco shipments were strong as logistical constraints eased in fiscal year 2023, and despite tight tobacco supply conditions, we were able to secure the leaf tobacco needed by our customers. Our plant-based ingredients platform continued to perform well, and we are excited about our progress in integrating our ingredients companies and executing our strategies.

“During fiscal year 2023, we enhanced and increased the scope of our platform by adding sales and research and development resources, and we recently announced plans to expand our plant-based ingredients platform’s manufacturing capabilities.

“Our results for fiscal year 2023 and the quarter ended March 31, 2023, included a favorable final ruling on a legal case involving one of our subsidiaries in Brazil regarding the exclusion of certain tax credits on exported goods in the calculation of taxable income. As a result of the favorable ruling, we recognized $5 million of interest income and a $24.2 million net income tax benefit in the quarter ended March 31, 2023.”

May 25, 2023

Switzerland to Ban Youth Advertising

Switzerland will ban advertising of tobacco and vapor products to young people, the government announced on May 24, report Reuters and Swiss Info.

In February 2022, Swiss voters backed a proposal to limit tobacco promotions seen by minors. Following the referendum, the government had to adjust Switzerland’s tobacco product law to incorporate the proposal.

The new law will come into force from mid-2026 and will also strengthen restrictions on packaging and advertising on tobacco and e-cigarettes due to take effect from next year.

In the future, no advertising for tobacco products or e-cigarettes will be allowed in print media, shops or events that can be visited by minors. In addition, sponsorship of events that people under 18 attend will be banned. Online advertising will still be permitted provided that age control systems are in place.

The tobacco industry will also be made to collectively disclose its advertising expenditure, but companies will not be required to individually reveal this information. The government believes advertising plays an important role in the decision to start smoking.

Smoking remains relatively widespread in Switzerland with 9,500 people dying prematurely every year as a result of tobacco consumption, according to the government. In 2022, 6.9 percent of Swiss 11-year-olds to 15-year-olds had smoked cigarettes in the past 30 days while 5.7 percent of youths aged 15 to 24 had used electronic cigarettes at least once a month, the government said.

Switzerland is home to several tobacco multinationals, including Philip Morris International and Japan Tobacco International.

May 25, 2023

Zimbabwe Fights Land Reform Ruling

Zimbabwe has urged a Washington, D.C., federal judge to deny a German and Swiss family’s bid to enforce a multimillion-dollar arbitration award that stems from the country’s controversial land reform program, reports Law360.

After gaining independence in 1980, Zimbabwean officials looked to give land owned by white farmers back to the country’s indigenous communities.

When the white farmers refused to sell their land, Zimbabwe enacted legislation in 1992 that enabled it to seize control of properties in exchange for “fair compensation.” Frustrated with the slow progress of the land reform program, officials in 2000 unsuccessfully attempted to pass legislation that would allow them to seize land without compensation.

Ultimately, Zimbabwe enacted a “fast track” version of the program that required the government only to compensate landowners for “improvements” made to agricultural properties rather than for the land itself.

Before the reform program was enacted, the von Pezold family owned three estates in Zimbabwe comprising tens of thousands of acres, including the country’s largest tobacco growing and curing operation.

The family initiated arbitration in 2010 under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, also known as the ICSID Convention, claiming Zimbabwe’s reform program violated two treaties the country had signed with Germany and Switzerland.

In 2015, a ICSID tribunal issued the $277 million award in the family’s favor, finding that Zimbabwe had expropriated the von Pezolds’ property and breached international law through its land reform program.

After Zimbabwe’s failed to pay the reward, the family filed the current D.C. federal court enforcement action in July 2021.

Zimbabwe accuses the family of trying to increase its litigation burden and costs by filing a premature judgment motion.

May 25, 2023

Scandinavian Tobacco Reduces Share Capital

Scandinavian Tobacco Group will reduce its share capital from DKK93 million ($13.4 million) to DKK87 million by canceling some of its treasury shares, the company announced on its website. The board of directors resolved to complete the capital reduction on May 25, 2023, and the reduction of the share capital has been registered with the Danish Business Authority.

Following the capital reduction, the company’s share capital amounts to nominally DKK87 million divided into 87 million shares of DKK1 each. The total number of voting rights is 87 million.

May 25, 2023

Tobaccoville Announces Water Recycling Facility

Reynolds American Inc. will build a water reclamation plant at the Reynolds Operations Center in Tobaccoville, North Carolina, USA.

To be constructed by NextEra Energy Resources, the WaterHub facility is projected to reclaim more than 60 million gallons of water a year, equivalent to the annual water supply of approximately 550 average U.S. households.

“We are so proud to embark on the WaterHub project with NextEra Energy Resources at our flagship operations center in the U.S.,” said Bernd Meyer, executive vice president of operations at Reynolds, in a statement. “This project is not only a first for Reynolds but for the entire global BAT Group and is an important step toward reaching Reynolds’ water stewardship targets for 2025. Through the WaterHub, Reynolds is playing its part in the BAT Group’s progress against its goal of 35 percent less water withdrawn across global operations.”

NextEra Energy Resources’ WaterHub installation includes plans to break ground on the project in Tobaccoville in the fall of 2023. The project is forecasted to be finalized and fully operational by the end of 2024.

May 25, 2023