To understand the looming regulations set forth by the U.S. Food and Drug Administration (FDA) and their impact on the cigar industry, Cigars & Leisure interviewed Kevin “Kip” Talley, part of the International Premium Cigar & Pipe Retailers Association’s (IPCPR) federal legislative affairs department. Talley discussed the impact the new regulations will have on manufacturers, retailers, and consumers; what you can do to help in the fight against these restricting laws; and what to expect from this year’s IPCPR Annual Convention & International Trade Show in Las Vegas.
Cigars & Leisure: What is the IPCPR, and what does it do?
Kevin Talley: The IPCPR represents over 5,000 tobacco retail stores throughout the United States. Our members include manufacturers and engage with consumers congressionally on the federal level, state level, and the local level as well. We are a trade organization that hosts the world’s largest tobacco trade show annually; this year it will be in Las Vegas. We have a governmental affairs team that engages on the federal, state, and local levels on issues important to premium retail tobacconists, brick-and-mortar stores, manufacturers, and consumers.
How would you describe what’s happened in the past few weeks with the regulations threatening the cigar industry?
It’s definitely not ideal and is possibly the worst-case scenario. There’s a number of provisions that will not only hurt small business but also the manufacturers that we represent. These new regulations will keep the manufacturers from being able to provide diverse products and new releases, especially the boutique blends, limited editions, and seasonal releases.
There’s a number of things the regulations will do. First, there’s the prohibition of free samples, which could affect cigar events that a lot of the retailers hold in their stores where consumers can meet the manufacturers and try a new product before they decide to buy a box—which is a great driver of business for our retailers.
Second, manufacturers are required to register and list products, which is a tremendous burden, especially for the smaller businesses to comply with. It’s a regulation that could cost several hundred thousand dollars per size or shape, even if it’s the same blend. If it’s a Robusto or a Toro, that’s considered an entirely different product. When registering their products, manufacturers must do ingredient listing and harmful-constituent testing. It includes a premarket review for any product that was not on the market Feb. 15, 2007—it has to go through different pathways as a new product. We estimate that could be 80 percent of the walk-in humidor at a typical cigar shop. The regulations would have a huge impact on those products. If approval isn’t done in a timely manner, those products could come off the shelves, which of course would affect our retailers’ abilities to stay in business.
They put a minimum age verification requirement; in the past, tobacco age has been set at the state level. This doesn’t pre-empt anyone from moving to 21 or 19 or an age above 18, but it does set a minimum age of 18 nationally. It also says you’re not allowed to say or imply in labeling or advertising that a product has a lower risk of disease, is less harmful, or has a lower level of nicotine or any type of substance. It requires warning labels on 30 percent of two facings of the box and 20 percent in all advertising, which obviously would affect your magazine as well.
The one thing they do not go into regulating is cigar accessories, humidors, lighters, cutters, ashtrays, but components and parts are deemed to be subject to regulation, like a pipe or a tobacco pouch. It also requires retailers to put up point-of-sale warnings next to their cash registers.
If these regulations go forward as they are, what are you predictions for what’s ahead?
I hate to make any market predictions for what may happen within the industry, but what I can tell you is that the FDA has within the rules made a consideration for small companies that have under 150 employees and under $5 million in revenue annually to allow them more time to complete the process and provide resources at their offices to help them fill out forms that may be complicated or complex. That being said, it doesn’t necessarily bring the costs down for them, so there will be some companies that decide that particular lines of cigars that they may have released after 2007 are just not worth keeping on the market, in the United States at least.
Under this regulation we may see some consolidation, but I hate to make any predictions because this is really just the beginning—it’s not the end by any means. We want to encourage people to properly comply with the regulations, and as an association we’re here to help with that process.
What’s the IPCPR doing right now in response to these looming regulations?
We’re working on a few things. We’re working on getting through the explicit details of the rules to figure out exactly what everything means. We’re engaging on Capitol Hill with our congressional allies to work on the appropriations process where there is a provision that prevents the FDA from regulating premium cigars. We’re looking at other vehicles for any type of stand-alone legislation supporting a change to that February 2007 predicate date to move it to the date of enactment of any new regulation. That would move the predicate date to May 10, 2016, the official day the rules were finalized.
A lot of these requirements go into effect on Aug. 8, 2016, so we’re working on educating our retailers, manufacturers, and consumers on how they can take action and what it might mean for their business or cigar pleasure. We’ll have petitions for our retailers that’ll be at the point of sales that we’ll use in our efforts on Capitol Hill. From there, we’ll have to explore any further options for litigation if that exists—but that’s something as an industry we’ll be discussing over the next several weeks.
What can consumers in particular do?
I would recommend they visit ipcprlegislative.org. We’ve launched an FDA toolbox that has all the information you need as far as understanding what’s in the rule, understanding the history of the rules. We also have a section on how to comply for our manufacturers and retailers and another section on how to take action. There will be an easy way for you to contact your member of Congress to encourage them to support premium cigars.
What can people look forward to with this year’s trade show in Las Vegas?
The show is going to be fantastic this year. We have our second annual Cigar Bash toward the end of the show with a big live concert and party. We’re introducing what’s called a Lunch Time Learning Series, so on the show floor each day during the lunch hour we’ll have different presentations and educational seminars. The day before the show opens we will have a seminar that covers everything FDA legislative that will be a popular seminar. Additionally, the IPCPR political action committee will have a private lounge for PAC owners on the show floor, which will provide a comfortable space to sit back and enjoy the game and relax a little bit.
I think the show will be as energetic as ever, especially with these regulations coming out. I think we’re going to see really good attendance as a result, and it should be a great show. We will be happy to be back in Vegas.
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