INDUSTRY EXPERTS WEIGH IN AS THE POTENTIAL BAN IS INDEFINITELY DELAYED — FOR NOW
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EDITORIAL
EDITOR-IN-CHIEF Linda Lisanti llisanti@ensembleiq.com
Industry experts weigh in as the potential ban is indefinitely delayed — for now
By Renée M. Covino
POSTPONED NEWS is good news when it comes to regulation in the tobacco arena. In late April, the Biden Administration announced it would be delaying the decision on whether to issue a final rule that would ban menthol cigarettes and flavored cigars; no timeline was given. The administration said the rule had “garnered historic attention” and it would take more time to consider feedback, including from civil rights groups and the criminal justice movement.
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“It’s clear that there are still more conversations to have, and that will take significantly more time.”
— U.S.
Health and Human Services
Secretary Xavier Becerra
“It’s clear that there are still more conversations to have, and that will take significantly more time,” U.S. Health and Human Services Secretary Xavier Becerra said in a statement.
In April 2022, the U.S. Food and Drug Administration (FDA) proposed two product standards, one to prohibit menthol as a characterizing flavor in cigarettes and the other to prohibit all characterizing flavors (other than tobacco) in cigars. The public comment period ended on July 5, 2022, and after reviewing the submitted comments, the FDA submitted the final proposals to the White House Office of Management and Budget (OMB) in October 2023. The OMB reviews potential regulations to assess their economic impact — a necessary step before a new FDA rule can be implemented.
“During the comment period of the proposed rule, close to 200,000 comments were filed and the overwhelming majority of those submitted opposed the ban,” noted David Spross, executive director of the National Association of Tobacco Outlets (NATO). Additionally, Spross said approximately 150 stakeholder meetings took place with the OMB.
Politics is clearly at play now, industry experts say. The Biden Administration was “certainly considering the political implications of a ban in an election year,” Spross stated.
This was a topic discussed at this year’s Tobacco Plus Expo, noted Bryan Haynes, a partner with the national law firm Troutman Pepper who sat on the panel. “It’s quite clear this is politically motivated, that’s my belief,” he told Convenience Store News.
If Vice President Kamala Harris wins the presidential election in November, Haynes expects the menthol ban will go forward shortly after, whereas he believes the likelihood of a menthol ban under the Trump Administration is low.
Agustin Rodriguez, another partner specializing in tobacco at Troutman Pepper, agrees with Haynes’ assessment of a Harris Administration, but views it slightly differently if Trump were to win. “It really depends. I think FDA officials will still be in favor of it under Trump, just based on history, although it might not be as much of a priority,” he said.
Action at the Local Level
The postponement has garnered attention at the local regulatory level. Recently, it has been reported that more than 380 localities across 13 states and Washington, D.C., have passed their own restrictions on the sale of flavored tobacco products, with at least 190 limiting the sale of menthol cigarettes, according to the Campaign for Tobacco-Free Kids.
But the way Spross sees it, this is not a new phenomenon for localities and states to look to ban menthol and other flavored tobacco products. “In any given year, there has been a collection of 15 to 20 states that have considered this kind of legislation or regulation,” he said. “Similar to what is happening at the federal level, state and local legislators are being educated on the unintended consequences of such bans.”
These include taking away sales from licensed and
regulated tobacco retailers, such as convenience stores. “This results in a negative economic impact for these stores and the community,” Spross continued. He also cited the rising awareness surrounding bans inevitably leading to illicit sales with significant law enforcement implications.
While Rodriguez agrees that states and localities have been pursuing this type of regulation since the pandemic on their own volition, independent of the FDA, there is something else taking precedence over flavor bans, he said. “At the state level, there are other priorities at the moment with respect to tobacco, principally these product registries that are being driven by an industry interest in enforcement against unlawful vaping products,” he explained.
Dead or Alive?
With no concrete deadline in sight for the decision on whether a final rule banning menthol cigarettes will be issued, the industry might question whether the potential ban is dead or alive.
“It’s very much alive,” said Rodriguez, “but the genie has been put back in the bottle for at least a little while.”
“It’s very much alive, but the genie has been put back in the bottle for at least a little while.”
— Agustin Rodriguez, Troutman Pepper
NATO’s Nay
As part of the public comment process, and in meetings with multiple federal officials, the National Association of Tobacco Outlets (NATO) advocated that the menthol ban not be finalized for the following reasons:
• It would have a substantial negative economic impact on reputable, licensed and related businesses.
• It would severely negatively impact government revenues and the public programs they fund.
• It would result in significant unintended consequences, including that the supply of menthol products will shift from licensed and regulated retailers to an already flourishing illicit market.
• It does not consider that licensed and regulated retailers sell tobacco products responsibly and comply with all laws and regulations, which already prevents youth access to menthol cigarettes and flavored cigars.
“The patient can be resuscitated at any time,” quipped Haynes, in agreement. “It reminds me of the old ‘Friday the 13th’ movies. None of these proposals are ever truly dead.”
Spross agrees and summed it up this way: “The FDA has been considering a menthol cigarette ban since it was granted regulatory authority over tobacco products in 2009. I expect that debate to continue in the years to come.”
For Now, Remain Calm
So, does all this mean that convenience store operators can carry on with business as usual regarding their stocking/merchandising of menthol cigarettes?
Haynes said he’s said it before and will say it again: “Don’t panic.”
“If I was a retailer, I would not be doing anything differently right now. I think this is stalled until after the November election. It would be quite surprising if anything happened before that,” he reasoned.
And even once the rule is promulgated, assuming it is, “there will be time to deal with inventory, not to mention the inevitable litigation challenges that will further delay things,” he added.
Spross agrees that from a timing perspective, the current administration has delayed a final decision until “at least after the election.” Moreover, any final rule would not be effective for at least one year, and “likely litigation could delay implementation even further,” he said. CSN
2024 Tobacco & Nicotine Regulatory Update
It’s been a very dynamic year on both the federal and
By David Spross, NATO
AS EXPECTED, 2024 has been a very dynamic year in the tobacco legislative and regulatory space.
Federal Regulation
In April, the White House administration announced it was delaying a decision on whether to issue a final rule that would ban menthol cigarettes. “This rule has garnered historic attention, and the public comment period has yielded an immense amount of feedback, including from various elements of the civil rights and criminal justice movement,” Xavier Becerra, the Health and Human Services secretary, said in a statement. “It’s clear that there are still more conversations to have, and that will take significantly more time.”
A rule banning flavored cigars also remains to be finalized.
Additionally, the U.S. Food and Drug
state sides
Administration (FDA) Center for Tobacco Products (CTP) has been under increased scrutiny over the lack of transparency and delays in its regulatory processes and the influx of illicit vapor products in the marketplace.
In April, FDA Commissioner Robert Califf testified before the U.S. House Oversight & Accountability Committee over concerns about the CTP’s operations. U.S. House members from both parties questioned Commissioner Califf about the CTP’s handling of tobacco regulations, including the unreasonable delays in the premarket tobacco product application (PMTA) process. Since that hearing, a few more e-cigarette products have received marketing authorization orders, including the first flavored (menthol) e-cigarette products. Still, only 34 e-cigarettes have been approved.
In June, the U.S. Senate Committee on the Judiciary held a hearing on youth vaping and increasing enforcement against illicit e-cigarettes. In the first portion of the hearing, senators questioned both Dr. Brian King, director of the CTP, and Arun Rao, deputy assistant attorney general for the Civil Division’s Consumer Protection Branch in the Department of Justice (DOJ), on why
unauthorized vaping products are still widely available.
Chairman Dick Durbin and other senators implored FDA and DOJ to better enforce federal laws against the unlawful sale of unauthorized e-cigarette products. King and Rao cited the multiagency task force to combat the illegal distribution and sale of e-cigarettes. The task force brings together multiple law enforcement partners, including the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the U.S. Marshals Service (USMS), the U.S. Postal Inspection Service (USPIS) and the Federal Trade Commission (FTC), to coordinate and streamline efforts to bring to bear all available criminal and civil tools against illicit e-cigarettes.
I testified and expressed strong support for a well-functioning regulatory system in which FDA oversight leads to accelerated reductions in underage use and tobaccorelated harm, as well as the need to enhance enforcement against illicit vapor products, emphasizing that illicit markets pose a threat to the responsible retail community.
A well-functioning regulatory system also requires a more coherent compliance framework that clearly communicates FDA’s enforcement priorities — what categories of products it wants immediately removed from the marketplace and what categories can remain on the market pending review of timely filed applications. The National Association of Tobacco Outlets (NATO) additionally advocated for more vapor product marketing authorizations to support the growing adult demand for smokefree products.
State Regulation
There are also some noteworthy tobacco and nicotine legislative developments at the state capitols.
The year started off with the Ohio Legislature’s override of the governor’s 2023 veto of statewide preemption of the sale of tobacco and other nicotine products. The legislation was in response to some Ohio cities banning flavors in these products. The legislature recognized
that regulating tobacco and nicotine products is a matter of statewide concern and that prohibiting youth access is best accomplished with a uniform statewide policy. Some cities have filed a lawsuit seeking to overturn the legislation.
Banning tobacco and nicotine flavors continues to be considered by state legislatures. Utah passed legislation to ban flavored vapor products other than menthol. In Vermont, flavor ban legislation was vetoed by Gov. Phil Scott, who cited inconsistencies in banning flavored tobacco products while the state has recently legalized other adult-oriented products such as cannabis. Michigan and Pennsylvania are considering proposals to ban all flavored tobacco products; similar legislation failed in Hawaii, Maine, Minnesota and New Mexico.
On the tax front, Maryland increased the cigarette tax from $3.75 to $5 per pack, the other tobacco products (OTP) tax from 53% to 60% and vaping liquid from 12% to 20% of the retail price. A significant tax increase on all tobacco products is currently under consideration in Michigan, but tobacco tax increase bills failed in Hawaii, New Mexico and Nebraska.
An emerging issue in the states is the creation of state e-cigarette registries. The introduction of these bills is in response to the uncertainty around the PMTA process and the proliferation of flavored disposable e-cigarettes that are on the market. The FDA has not completed processing applications for thousands of e-cigarette and other nicotine products. The FDA has only approved the marketing of a few dozen products, making the regulatory status unclear to retailers and the public for a large number of products, such as those for which a PMTA was never filed, those for which a PMTA was timely filed and the application is awaiting an order, and those for which a PMTA was denied but the application remains pending for legal reasons.
These registry bills create a state-based directory that requires e-cigarette manufacturers to submit information to state tobacco regulators demonstrating that the sale of their e-cigarette products in the state complies with FDA regulations and guidance. Florida, Iowa, Kentucky, Utah and Virginia enacted registry legislation thus far in 2024, while approximately 15 states have rejected this legislation. Alabama, Louisiana, Oklahoma and Wisconsin have enacted legislation in previous years.
NATO remains engaged on these issues and at all levels of government to help protect its retail members. NATO is proud to serve its retail members and to communicate to legislators and regulators how its members sell tobacco products responsibly and in compliance with all applicable laws and regulations. CSN
David Spross is executive director of the National Association of Tobacco Outlets (NATO), a national retail trade association that represents members operating more than 66,000 stores throughout the country. He comes to the position with 23 years of tobacco industry experience, previously working in the government affairs departments at UST Inc. and Reynolds American Inc.
Convenience Channel Tobacco Trends
Five-Year Trend: Cigarettes
Cigarettes’ share of in-store sales fell to a new five-year low of 21.51% in 2023.
Cigarette Share By Segment
Despite declining dollar and unit share, premium/super premium cigarettes remain the overwhelming category leader.
Five-Year Trend: Other Tobacco Products
While OTP sales remained on the plus side last year, the category’s unit volume declined for the third consecutive year.
OTP Share By Segment
The smokeless tobacco alternatives segment gained around 4 points in both dollar share and unit share last year.
Source: Convenience Store News 2024 Industry Report
