Premium cigar makers could catch a break from the FDA as White House applies pressure*
By May, the FDA must decide whether they will stick to an Obama-era regulation that would force cigar-makers to abide by the same compliance rules as all other tobacco products.
If they do, the compliance costs could put nearly 90% of U.S. cigar manufacturers out of business and destroy 5,300 jobs, according to data compiled by Mangum Economic Consulting and provided by Cigar Rights of America.
But the FDA last week gave the regulation’s opponents reason to be optimistic.
Under pressure from the White House, the US Food and Drug Administration (FDA) gave premium cigar-makers and importers a win last week, indicating it may spare the industry from costly regulation set to go into effect this spring.
The premium cigar industry is facing a May deadline that requires all new tobacco products to obtain regulatory clearance from the FDA. Those that do not will be technically marketed illegally and subject to enforcement. But the mom-and-pop shops that dominate the premium cigar industry have said the required compliance costs would effectively put them out of business. The premium cigar industry, like the wine industry, relies on releasing new varieties to sustain the interests of its connoisseurs.
According to data compiled by Mangum Economic Consulting and provided by Cigar Rights of America, the rules would put 88% of U.S. cigar manufacturers and importers out of business and destroy 5,300 U.S. jobs.
The White House has pushed the FDA to carve out premium cigars from the regulations, two people familiar with the situation told CNBC, requesting anonymity because the conversations are confidential. White House budget director Mick Mulvaney has been a particularly strong opponent of its inclusion in regulation, one of the people said.
Premium handmade cigars are more expensive than the mass-produced cigars sold in convenience stores and are bought less frequently. The cigar industry is strong in Florida, a swing state whose 29 Electoral College votes is tied with New York for third place among states.
The FDA last week offered a small concession. While it did not go so far as to give the industry what it wants — exemption from the regulation — it implied it may turn a blind eye to cracking down on premium cigar companies not in compliance.
“FDA will make enforcement decisions on a case-by-case basis, recognizing that it is unable, as a practical matter, to take enforcement action against every illegally marketed tobacco product, and that it needs to make the best use of Agency resources,” the agency wrote.
Its “lowest priority among these products will include relatively expensive, large hand-rolled cigars that do not have flavors (e.g., fruit, candy, or mint), given what FDA understands to be their comparatively lower youth usage rates.”
The news was cautiously welcomed by the premium cigar industry.
“We appreciate the recognition of being on the lower end of risk,” said J. Glynn Loope, executive director of Cigar Rights of America. “But we’d like to not be subject to this regulation at all.”
To officially exempt premium cigars from the regulation, the FDA