The U.S. Food and Drug Administration has warned retailers against misbranding RYO and MYO tobaccos as pipe tobacco. Pipe tobaccos are taxed at significantly lower rates than are cigarette and rolling tobaccos.
In recent warning letters to retailers, the FDA stated that while the products are promoted or labeled as pipe tobacco, “the overall presentation of these products strongly suggests that they are intended for use in a cigarette.” If these violations are not corrected, the retailers face sanctions that include monetary penalties, seizure of the product, no-tobacco-sale orders and criminal prosecution.
In 2009, Congress substantially increased the federal excise tax on cigarettes and RYO tobacco and equalized the tax rates on these products. However, pipe tobacco was taxed at a much lower rate. In response, some tobacco manufacturers changed the label but not the content of tobacco previously labeled RYO. From 2008 to 2011, sales of RYO tobacco fell by more than 76 percent, while sales of “pipe tobacco” increased by 573 percent, according to the Centers for Disease Control and Prevention. There is no evidence of any increase in actual pipe smoking.
The CDC last year found that the mislabeling of RYO tobacco as pipe tobacco cost federal and state governments $1.3 billion in revenue from April 2009 to August 2011.