Regulation & Legislation Continue to Shape the Tobacco Business
NATIONAL REPORT — Tobacco regulation and legislation are under review constantly at the local, state and federal levels.
During the recent 2021 Convenience Distribution Marketplace Virtual event, National Association of Tobacco Outlets (NATO) Executive Director Tom Briant provided a "State of the Industry" update on current federal tobacco regulation and legislation, as well as an overview of local, state and federal tobacco issues.
PMTA Application Status
Tobacco companies had until Sept. 9, 2020 to file premarket tobacco product applications (PMTAs) for many newly deemed products, including electronic cigarettes, and certain cigars and hookah products. Applications were not needed for products on the market prior to the grandfathered date of Feb. 15, 2007.
As of mid-January, the Food and Drug Administration (FDA) had completed the processing step of applications for more than 4.8 million products from tobacco companies.
Once the agency has completed processing all PMTA submissions, it plans to release a list of the products submitted under all three pathways for FDA approval: PMTA, Substantial Equivalence (SE) and Substantial Equivalence Requests (EX REQ).
Graphic Cigarette Health Warnings
The FDA requested a 120-day extension for tobacco companies to incorporate new cigarette warning labels and graphics into their packaging and advertising. With the change, the new effective date for the cigarette labeling and health warning rule would move from June 18, 2021 to Oct. 16, 2021.
The FDA's request followed a pending legal challenge by several tobacco companies against the cigarette health warnings. On April 3, 2020, R.J. Reynolds Tobacco Co., Santa Fe Natural Tobacco Co., ITG Brands, Liggett Group and five tobacco retailers filed a lawsuit in the Federal District Court for the Eastern District of Texas against the FDA. The plaintiffs sought a preliminary injunction.
Earlier this month, a U.S. District Court judge ruled on the case and further pushed back the implementation deadline to April 14, 2022. The companies had argued that the FDA deadline was too onerous given the impact of the COVID-19 pandemic.
As of that date, one of the 11 new warnings must appear on the top 50 percent of the front and back of cigarette packages and at least 20 percent of the top of ads. In addition, the warnings must be "randomly and equally displayed and distributed on cigarette packages and rotated quarterly in cigarette advertisements," the FDA said.
Any cigarette manufacturer, packager or importer wishing to sell cigarettes within the United States must submit a plan to the Federal Trade Commission (FTC) explaining how it will comply with the Surgeon General health warning display requirements, and have that plan approved by the FTC.
The kinds of advertisements that need warnings include:
- Newspapers, magazines, brochures, catalogs and display racks;
- Posters, placards, signs, billboards and POS;
- Website pages (including retail ordering pages);
- Social media websites/pages;
- Digital platforms and digital banner ads;
- Mobile applications, mobile coupons and loyalty rewards;
- E-mail correspondence and direct mail advertisements; and
- Text-only advertisements without any images.
Requirements for a Rotational Plan include a cover letter transmitting the rotational plan, the rotational plan, and FDA guidance documents. Samples of advertisements with each of the 11 images and text warnings must also be submitted, in addition to digital-ready copies and specifications for each warning.
PACT Act
As part of the Consolidated Appropriations Act of 2021, included in the COVID-19 relief bill signed into law on Dec. 27, 2020, Congress amended the Prevent All Cigarette Trafficking (PACT) Act to soon apply to e-cigarettes and all vaping products as well.
Originally passed in 2009, the PACT Act amended the existing Jenkins Act of 1949, which required interstate shippers to report cigarette sales to state tobacco tax administrators in order to combat illicit sales and tax avoidance.
Among other provisions, the PACT Act prohibits the use of the U.S. Postal Service to deliver covered tobacco products directly to consumers.
In addition to the non-mailing provisions, the PACT Act requires anyone who sells covered tobacco products to register with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the tobacco tax administrators of the states into which a shipment is made or in which an advertisement or offer is disseminated.
Effective March 28, 2021, PACT Act requirements will extend to electronic nicotine delivery systems (ENDS), which include e-cigarettes and vaping products.
Corrective Statements Update
On May 1, 2018, the U.S. District Court for the District of Columbia entered a consent order requiring major U.S. cigarette companies to begin posting corrective statements on their websites starting June 18, 2018. The order — part of a long-running lawsuit against the cigarette companies — also requires them to attach the same statements to cigarette packages for two weeks at a time for a total of 12 weeks over two years, according to the U.S. Department of Justice (DOJ).
The corrective statements must address the effects of cigarette smoking and the fact that cigarettes are deliberately designed to create and sustain addiction. The corrective statements specifically state, among other things, that:
- Smoking cigarettes causes numerous diseases and on average 1,200 American deaths every day;
- The nicotine in cigarettes is highly addictive and that cigarettes have been designed to create and sustain addiction;
- So-called light, low-tar and natural cigarettes are just as harmful as regular cigarettes; and
- Secondhand smoke causes disease and death in people who do not smoke.
The corrective statements were ordered as part of a 2006 permanent injunction against cigarette companies, including Altria Group Inc., its Philip Morris USA subsidiary, and R.J. Reynolds Tobacco Co., to "prevent and restrain" further deception of the American people regarding tobacco use, according to the DOJ.
An Evidentiary Hearing is scheduled for July 2021.
State Regulation: Flavor Bans
All 50 states have been hurt by COVID-19-related deficiencies, resulting in 2021 state budget deficits. Over the next three years, shortfalls in revenue could total $765 billion. As of Feb. 5, bills were introduced in 14 states to raise cigarette and tobacco tax rates to make up for these deficits, Briant explained during his presentation.
In addition to pandemic-related deficiencies, states are measuring and monitoring flavor ban enactments. Currently, 14 states are extending the flavor ban to a state level. As of February, Connecticut and Maryland were looking to follow the lead of Massachusetts and California. However, California's flavored tobacco ban is on hold as it prepares to appear before voters in the November 2022 election.
According to the New England Convenience Store & Energy Marketers Association, excise tax losses in Massachusetts from menthol cigarettes have continued to mount at a rate of more than $10 million per month since the state's flavor ban went into effect in June.
Local Tobacco Ordinances
More than 30 states have seen local activity when it comes to tobacco ordinances considered by cities, towns and counties.
NATO's Local Ordinance Tracker Spreadsheet, which is updated weekly, lists critical information about local ordinances that are currently pending or previously acted upon. It is available here.
Presented by the Convenience Distribution Association (CDA), the 2021 Convenience Distribution Marketplace Virtual was held Feb. 15-17. As the only national conference and trade show dedicated to convenience wholesalers, the program provided attendees with a number of insightful and inspiring keynotes and sessions, along with networking and business-building opportunities.
The CDA is a trade organization working on behalf of convenience products distributors in the U.S. Its distributor members represent more than $102 billion in U.S convenience product sales, serving a wide variety of small retail formats. Associate members include leading convenience product manufacturers, brokers, retailers, suppliers and others allied to the industry.
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