Remember to RSVP for the NATO Annual Awards Dinner

Bill Introduced to Raise 
Federal Pipe Tobacco Tax to $24.78 Per Pound  

Jan. 22, 2010

Within the past week, a bill was introduced in Congress that would increase the federal pipe tobacco tax from $2.8311 per pound to $24.78 per pound.  Last year, when Congress expanded the State Children’s Health Insurance Program (known as SCHIP), the federal excise tax on pipe tobacco was increased from $1.0969 per pound to the current $2.8311 per pound.  At the same time, the federal tax on roll-your-own tobacco was raised from $1.0969 per pound to the current $24.78 per pound.

  The new bill pending in Congress, H.R. 4439, would amend federal law to make the tax rate on pipe tobacco equal to the tax rate on roll-your-own tobacco.  A copy of H.R. 4439. 

NATO Urges U.S. Senate to Pass PACT Act

This week, NATO has issued a commentary letter to the editor urging the U.S. Senate to take a final vote on passage of the Prevent All Cigarette Trafficking Act.  The letter is being sent to major Washington , DC newspapers for publication.  A copy of the commentary letter.

  The PACT Act would implement new regulations aimed at the illegal sale of cigarettes and smokeless tobacco products over the Internet and from other “remote sellers”.  Specifically, the PACT Act would do the following:

• Require payment of state and local cigarette and tobacco taxes on Internet sales.
• Regulate delivery methods, including age verification of the person at a residence.
• Prohibit the U.S. Postal Service from delivering cigarettes and smokeless tobacco products to consumers through the mail.
• Give the Federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) the authority to inspect records and inventories of Internet tobacco sellers.
• Increase the penalty for violating these federal tobacco regulatory laws from a misdemeanor to a felony.

CSP Group Conference Session Focuses on Tobacco Issues

At the upcoming 2010 CSP Convenience Retailing University to be held in early February, NATO Executive Director Tom Briant will be moderating a panel discussion on changes in the tobacco industry. The panelists include NATO members Jim Colucci of Altadis, USA, Doug Hynek of American Snuff Company (formerly known as Conwood Sales Company), Bill Greiwe of Cheyenne International, and John Mayer of McLane Company.

Guide issued by CSP Group regarding this tobacco panel discussion.

Register Now for the 2010 Tobacco Plus Expo!  

The 2010 Tobacco Plus Expo will be held in Las Vegas , Nevada on March 3-4, 2010 at the Las Vegas Convention Center .  The Tobacco Plus Expo is a premier tobacco retailing trade show for tobacco outlets, tobacconist stores, liquor stores, grocery stores, convenience stores and wholesalers.  In addition, the 2010 NATO Annual Awards Dinner will take place on the evening of Tuesday, March 2^nd at the Las Vegas Hilton Hotel.  Formal invitations for the NATO Annual Awards Dinner are being mailed to NATO members this week.  

Free Retail Seminars for NATO Retail Members

A major benefit for NATO members who attend the trade show will be free admission to the retail seminars for two people from each retail member.  There are three educational sessions on Wednesday, March 3^rd, including a choice between: “Driving Sales and Growing Profitability through Store Design and Visual Merchandising” or “El Elefante in Your Aisles: What you Need to Understand About America’s Largest Minority”, followed by the keynote session titled “Skeptics Guide to Positive Thinking in Business”.  Then, on Thursday, March 4^th, retailers can choose between sessions titled “Strategy Gaming and Competitive Intelligence 101” or “Conducting Background Checks” followed by the keynote session “Tobacco Regulation: A Brave New World”.

See the Latest Products and Take Advantage of Show Deals (Please, Smoke!)

The Tobacco Plus Expo offers retailers and distributors the opportunity to see the latest tobacco products and accessories available in the marketplace all under one roof.  Smoking is allowed on the exhibit floor and many of the exhibitors offer show only special pricing on tobacco products and accessories.

Register On-Line or By Phone!

To register online, visit www.tobaccoplusexpo.com and click on the red “Register Now Click Here” seal.  Registering only takes a few minutes.  You can also register by calling the Expo Trade Show Office at 1-888-737-3976.  Making hotel reservations is also easy and only takes one toll-free phone call to VIP Meetings at 800-926-3976.  Several hotels are offering special discounts during the Tobacco Plus Expo including the Las Vegas Hilton Hotel (the hotel where the 2010 NATO Annual Dinner will be held) and the Encore at Wynn Hotel .

Judge Issues Key Ruling Overturning FDA Ban on Color Advertising

On January 5, 2010 , a federal district court judge issued a key decision and overturned the FDA tobacco regulation which bans color advertising of cigarettes and smokeless tobacco products in retail stores and in magazines.  In this decision, U.S. District Court Judge Joseph McKinley, Jr. ruled that the regulation requiring all cigarette and smokeless tobacco advertisements be in black text on a white background violated the longstanding constitutional free speech protections afforded to commercial advertisements.   

In the decision, the judge states that the plaintiffs Commonwealth Brands, Conwood Company, NATO retail member Discount Tobacco City and Lottery, Lorillard Tobacco Company, National Tobacco Company, and R.J. Reynolds Tobacco Company “are clearly right when they say that images of packages of their products, simple brand symbols, and some uses of color communicate important commercial information about their products, i.e., what the product is and who makes it.  The government’s contrary suggestion—that all use of images in tobacco labels and advertising create non-informative associations of the sort likely to encourage minors to use a tobacco product—is plainly wrong.”

Federal Ruling Includes Decision on Other FDA Regulations

The opinion by Judge McKinley (link to copy of ruling) included rulings on a number of additional issues in the lawsuit including the following decisions:

Ø      Struck down a provision that would prevent cigarette and smokeless tobacco manufacturers from making statements that their tobacco products are safe or less harmful by virtue of the FDA regulations or by the product complying with requirements set by the FDA. 

Ø      Agreed with the plaintiffs that the FDA regulation banning tobacco advertisements within 1,000 feet of a school or playground is unconstitutional, but declined to make a final ruling on this issue because the FDA must issue a final regulation on the outdoor advertising ban by March 22, 2010 .

Ø      Upheld the regulation that requires the top 50% of the front and rear panels of a cigarette package and 30% of the two display panels of a smokeless tobacco product to include updated warnings and color graphics depicting the health consequences of smoking and tobacco use.

Ø      Upheld the regulations that prohibit cigarette and smokeless tobacco manufacturers from  including a brand name or brand logo on merchandise or sponsoring an athletic, social or cultural event in the brand name of a tobacco product.

An Invitation to a First Class Dinner Affair

The 2010 NATO Annual Awards Dinner will be held on the evening of Tuesday, March 2nd at 6:00 P.M. at the Las Vegas Hilton Hotel, 3000 Paradise Road , Las Vegas , Nevada .  Formal invitations to this first class dinner affair will be mailed to NATO members in mid-January.  If you will be attending the 2010 Tobacco Plus Expo Trade Show to be held on March 3-4, 2010 at the Las Vegas Convention Center , plan to arrive in Las Vegas on the afternoon of Tuesday, March 2^nd so that you can attend the NATO Annual Awards Dinner.  NATO members will need to return a RSVP card that will accompany the formal invitation to reserve a place at this annual dinner affair.   NATO members attend the dinner event on a complimentary basis courtesy of these generous sponsors:

Retail Seminars for NATO Retail Members

January 4, 2010

A major benefit for NATO members who attend the 2010 Tobacco Plus Expo trade show will be free admission to the retail seminars for two people from each retail member.  Since NATO pays a seminar fee to the Tobacco Plus Expo for each retail member that attends the educational sessions, the Tobacco Plus Expo staff has requested that NATO advise its members to register for the seminars only if they will actually attend the sessions.  That is, those NATO members who are either unsure if they will attend the sessions or do not plan to attend the seminars should not register for the seminars.  NATO members can register to attend the Tobacco Plus Expo at www.tobaccoplusexpo.com.

NATO Article:  Concern, Confusion and Complaints over FDA Regulations

In the November/December, 2009 issue of CSP Magazine, an “Industry View” article by NATO Executive Director Thomas Briant was published which discusses the concerns of retailers regarding the new FDA tobacco regulations, the confusion caused by the FDA in implementing certain regulations, and the industry’s need to sue the FDA in an attempt to prevent certain tobacco regulations from going into effect.  A copy of the two page article accompanies this E-news bulletin.

  The article also highlights the activist role being taken by the FDA in implementing various tobacco regulations and that one of the underlying goals of the FDA and other anti-tobacco organizations is to prohibit the sale of tobacco products.  The ramifications of FDA regulations are wide sweeping and each NATO member is encouraged to read the NATO article. Links: Page 1, Page 2.

FDA Seeks Comments on Retail Clerk Training Programs

The FDA has issued a request for comments to obtain information on suggested elements for approved tobacco retailer training programs.  The tobacco regulatory bill signed into law this summer includes civil fines against retailers for violating the restrictions on promoting, advertising and selling tobacco products.  However, the fines are less if a retailer has an “approved training program” in place for store clerks.  The new law requires that the FDA develop standards for retail training programs.

  NATO is working with representatives of the “We Card” Coalition and will be submitting comments to the FDA in response to this request for training methods that are effective in verifying the age of a customer and preventing the sale of tobacco products to underage youth.  The comments need to be submitted to the FDA by January 8, 2010 .

Tobacco Plus Expo March 3-4, 2010 
at the Las Vegas Convention Center

Nov. 20, 2009

The 2010 Tobacco Plus Expo will be held in Las Vegas , Nevada on March 3-4, 2010 at the Las Vegas Convention Center .  The Tobacco Plus Expo is a premier tobacco retailing trade show for tobacco outlets, tobacconist stores, liquor stores, grocery stores, convenience stores and wholesalers. 

Free Retail Seminars for NATO Retail Members

A major benefit for NATO members who attend the trade show will be free admission to the retail seminars for two people from each retail member.  There are six educational sessions plus a cigar blending demonstration each afternoon of the show by Jose Blanco of La Aurora.  The three sessions on Wednesday, March 3^rd, include a choice between: “Driving Sales and Growing Profitability through Store Design and Visual Merchandising” or “El Elefante in Your Aisles: What you Need to Understand About America’s Largest Minority”, followed by the keynote session titled “Skeptics Guide to Positive Thinking in Business”.  Then, on Thursday, March 4^th, retailers can choose between sessions titled “Strategy Gaming and Competitive Intelligence 101” or “Conducting Background Checks” followed by the keynote session “Tobacco Regulation: A Brave New World”.

See the Latest Products and Take Advantage 
of Show Deals (Please, Smoke!)

With tobacco products an important source of sales and profits for many kinds of retailers and wholesalers, the Tobacco Plus Expo offers retailers and distributors the opportunity to see the latest tobacco products and accessories available in the marketplace all under one roof.  Smoking is allowed on the exhibit floor.  Another important reason to attend the trade show is to place orders from many of the exhibitors that offer show only special pricing. 

Register Now!

To register online, visit www.tobaccoplusexpo.com and click on the red “Register Now Click Here” seal.  Registering only takes a few minutes.  You can also register by calling the Expo Trade Show Office at 1-888-737-3976.  Making hotel reservations is also easy and only takes one toll-free phone call to VIP Meetings at 800-926-3976.  Several hotels are offering special discounts during the Tobacco Plus Expo including the Las Vegas Hilton Hotel (the hotel where the 2010 NATO Annual Dinner will be held) and the Encore at Wynn Hotel .

The 2010 NATO Annual Awards Dinner will be held on the evening of Tuesday, March 2nd at the Las Vegas Hilton Hotel.  Invitations to this complimentary evening will be mailed to NATO members in January.

Thank You to NATO Members for Efforts on PACT Act

Nov. 20, 2009

On Nov. 19th, it took less than a minute for the U.S. Senate Judiciary Committee to discuss and pass Senate Bill Number 1147, the Prevent All Cigarette Trafficking Act (PACT Act).  The fact that the bill had such widespread support by senators on the Judiciary Committee is due, in part, to all of the telephone calls that NATO members made to their U.S. Senators who are members of the Senate Judiciary Committee.  A special thank you to all NATO members for contacting their U.S. Senators.  Your voice is heard and your opinion counts.

  Now, the effort focuses on urging Senate leadership to schedule the bill to be debated and voted upon by the full U.S. Senate.  As you may recall, a similar bill passed the U.S. House this past May.  NATO will continue to keep members informed of further action on this important legislation.  

TTB Drafting Revised Definitions 
for Pipe and RYO Tobacco

In a newspaper story published this week, the Associated Press reports that the U.S. Department of Treasury through the Alcohol and Tobacco Tax and Trade Bureau (TTB) is revising the federal definitions for pipe and roll-your-own tobacco.   According to the AP story, this change in the definitions of these tobacco products is a result of a significant shift in tax collections for pipe and RYO tobacco after the federal tobacco tax increases took effect on April 1^st of this year.

  Under the new tax rates, pipe tobacco is taxed at a rate of $2.83 per pound while roll-your-own tobacco carries a tax rate of $24.78 per pound.  The TTB statistics indicate that the amount of pipe tobacco produced in the month of April, 2009 more than doubled, increasing from an average of 270,000 pounds per month to more than 566,000 pounds.  As of August, 2009, the most recent month for tobacco production data, the TTB reports that 1.7 million pounds of pipe tobacco were produced compared with 660,000 pounds of roll-your-own tobacco.  Prior to the tax increase on April 1^st, approximately 1.5 million pounds of RYO tobacco were produced each month.  The newspaper story also states that the U.S. Treasury may be losing as much as $32 million due to this significant shift in the amount of pipe tobacco produced.

San Francisco May Consider 
Reducing Number of Retailers Selling Tobacco

The San Francisco Examiner reported this week that a proposal is being considered by some San Francisco city officials with the support of anti-tobacco groups to limit the number of permits issued to retailers for the sale of tobacco products.  Currently, there are 1,097 stores which have permits to sell tobacco products in the city.  An initial proposal would limit that number to 385 total permits citywide, a reduction of some 712 retail tobacco sale permits.

The proposal would make this reduction through attrition (stores closing) and a prohibition on current retailers transferring tobacco permits if a store is sold.  Small business groups in San Francisco are opposing any such plan because the value of a retail store would be reduced substantially if a retailer was not allowed to transfer a tobacco retail permit to a new buyer.  In 2008, San Francisco passed a local law banning the sale of tobacco products in pharmacies.

Lawsuit Filed Against FDA Ban 
on Flavored Cigarette Papers

Oct. 14, 2009

Last week, BBK Tobacco & Foods, doing business as HBI International, filed a federal lawsuit seeking to overturn the U.S. Food and Drug Administration’s ban on flavored cigarette rolling papers that are sold in separate packages.  Specifically, according to a representative of the company, "HBI is only seeking to protect its brands, namely Juicy Jays and Skunk."  This is the third lawsuit that has been filed against the FDA in the past six weeks regarding new tobacco regulations.

In the lawsuit, BBK Tobacco & Foods d/b/a HBI International argues that while the new FDA law bans flavored cigarettes and the components parts of a flavored cigarette, such as the tobacco, paper and filter, the law does not mention that the ban extends to flavored cigarette rolling papers packaged separately.  Below is a newspaper story published by the Courthouse News Service on October 9^th which reports on the filing of the lawsuit:  

                                                              By Jamie Ross 

PHOENIX (CN) - The Food & Drug Administration overstepped its authority to regulate flavored cigarettes by banning the flavored rolling papers that are sold separately, a tobacco retailer claims in a federal lawsuit. BBK Tobacco & Foods, a distributor and seller of flavored papers, says the FDA is trying to "expand its authority to regulate cigarettes containing 'characterizing flavors' under the Family Smoking Prevention and Tobacco Control Act."  

The Act, signed on June 22, provides that "a cigarette or any of its component parts ... shall not contain, as a constituent or additive, an artificial or natural flavor," but allegedly made no mention of flavored papers that are sold separately.  According to BBK Tobacco, the Act's definition of cigarette includes products that contain tobacco. Flavored paper sold separately does not include tobacco, BBK Tobacco argues, and therefore should not be included in the Act. 

The company says its sales of flavored papers comprise a "significant portion" of annual profits, and the Act has had a "devastating impact" on its business.  It seeks an order declaring that U.S. agencies "have no authority to regulate flavored papers sold separately under the Act," plus an injunction blocking the government from banning the papers.  The U.S. Department of Health and Human Services, FDA Commissioner Margaret A. Hamburg and DHHS Secretary Kathleen Sebelius are also named as defendants.

FDA Responds to Lawsuit Challenging 
Advertising and Labeling Restrictions

The Associated Press has reported in a story issued on October 1^st that the Food and Drug Administration has responded to the lawsuit brought by several major cigarette manufacturers and a NATO member retailer challenging the constitutionality of the ban on color tobacco advertising and the new cigarette packaging health warning requirements. 

As you may recall, the lawsuit seeks to have declared as unconstitutional the new FDA regulations that would:

Ø      Prohibit color lettering, trademarks, brand logos and images on all retail point-of-sale advertising and direct mail advertising.

Ø      Restrict tobacco product advertising in retail stores to the use of black letters on a white background to list the brand name, product size, price, etc. (also known as “tombstone” advertising).

Ø      Prohibit any color imagery on the packaging of cigarettes and smokeless tobacco products while requiring graphic health warnings on the top half of the front and back of cigarette packages.

Ø      Prohibit tobacco manufacturers from making any statements about tobacco products in scientific, public policy or political debates.

In the Associated Press story, the FDA claims that the tobacco advertising restrictions in the new law do not violate free speech and serve a greater public health interest.  In addition, the AP article reports that “eleven public health and consumer advocacy groups…also asked the federal court to reject the lawsuit, saying the provisions are narrowly tailored to satisfy First Amendment constitutional requirements."

As stated previously, the U.S. Constitution protects free speech, including speech in the form of product advertising.  Moreover, there have been several U.S. Supreme Court decisions on product advertising that support the case challenging the FDA tobacco advertising restrictions.  A fairly recent case was decided by the U.S. Supreme Court in 2001.  In Lorillard Tobacco Co. v. Reilly, the Supreme Court struck down a Massachusetts law restricting outdoor tobacco advertising. 

The Supreme Court in the Lorillard case acknowledged that a government has an important public health interest in preventing minors from using tobacco.  However, the Supreme Court held that “[t]he state’s interest in preventing underage tobacco use is substantial, and even compelling, but it is no less true that the sale and use of tobacco products by adults is a legal activity…[and] so long as the sale and use of tobacco is lawful for adults, the tobacco industry has a protected interest in communicating information about its products and adult consumers have an interest in receiving that information.”   In other words, the law is on the industry’s side.

Kretek International Sues FDA on Flavored Cigar Issue

Kretek International has sued the Food and Drug Administration in a declaratory judgment action which seeks a ruling from the Federal District Court in Washington , DC declaring that the new FDA ban on flavored cigarettes does not extend to flavored cigars.  Below is a press release from Kretek International:

  September 23, 2009 - Moorpark, CA:  Kretek International, Inc., importer and distributor of Djarum clove cigars, today filed a request for declaratory judgment against the Food & Drug Administration in Federal District Court in Washington , DC . The Kretek filing comes after the FDA signaled its intention to exceed its legislative authority to regulate flavored cigarettes in order to ban other tobacco products as well.

Beginning September 22, 2009 a new FDA law prohibits cigarettes with a characterizing flavor other than tobacco or menthol, but cigars are not covered by the FDA’s new authority. The purpose of Kretek’s action is to prevent the FDA from moving against Kretek’s Djarum cigar products.

The Djarum cigars in question are the latest in a succession of clove cigar products distributed in the U. S. dating back to the 1990s. With the banning of market shipments of Djarum cigarettes, Kretek’s cigars have taken on additional prominence with distributors and retailers.

In 2007, the current Djarum cigars were classified by the Tobacco Tax and Trade Bureau (TTB) of the U. S. Department of the Treasury as cigars under the code of federal regulations and an advanced ruling stating that they met the legal test as a cigar product was issued. The difference between cigarettes and cigars has been clearly defined by standing law for more than 30 years. This longstanding legal distinction between cigarettes and cigars was included as part of the new FDA law.

  “We have made every effort to meet the letter and spirit of the law, and to ensure that these products are displayed in the cigar section of the tobacco counter. The Djarum product is clearly labeled as a cigar in at least seven places on the pack, in addition to clear merchandising messaging,” said John Geoghegan of Kretek.  

NATO Representatives Make Other Comments 
during FDA Listening Session

In addition, NATO Vice-President Mary Szarmach provided comments on the need for the FDA to consider different regulations for tobacco stores that do not allow minors to enter the premises.  With tobacco stores selling legal tobacco products to adults only, this unique situation may call for different regulations.  Also, NATO board member Fred Hoyt spoke about the need for the FDA to regulate the Internet sale of tobacco products to avoid an increase in black market sales.  NATO Executive Tom Briant stated that the FDA should place on hold the in-store black on white advertising restrictions because of the pending lawsuit filed last week against the FDA seeking to declare the restrictions as unconstitutional.  

FDA Retail Listening Session Comments

2009 State Tobacco Legislative  Wrap Up

 OTP Tax Increases: OTP tax increases were defeated or failed in 15 states and passed in 14 states.  The states where OTP taxes failed included Georgia, Indiana, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Montana, New Mexico, North Dakota, South Dakota, Utah, Virginia, Washington and West Virginia.

The fourteen states that enacted higher OTP taxes or changed the method of moist snuff taxation included Arkansas, Florida, Hawaii, Kentucky, Maine, Nebraska, New Hampshire, New York, Oregon, Rhode Island, Texas, Vermont, Wisconsin and Wyoming.

 State Smoking Restrictions: 4 states enacted new or modified smoking restrictions whereas bills to restrict smoking failed in 7 states.  The smoking restrictions were passed in North Carolina (public places; workplaces), Vermont (extended ban to all workplaces), Virginia (bars, restaurants or lounges except ventilated rooms) and Wisconsin (bars, restaurants and workplaces except outdoor patios).  Proposed smoking restrictions failed in Alabama, Kansas, Louisiana, Missouri, Oregon, Texas and Wyoming.  In South Dakota, a statewide smoking ban passed but must now be placed as a question on an upcoming general election ballot.

SCHIP Cigarette and Tobacco Tax Rates  

New federal cigarette and tobacco tax rates went into effect on April 1, 2009 as a means to fund the expansion of the State Children’s Health Insurance Program (SCHIP).  The new federal cigarette and tobacco tax rates are shown below:

NATO Manufacturers & Distributors Directory

The NATO website now includes a directory filled with manufacturer and distributor company logos, contact information, product summaries and hotlinks to each member’s website. Retail members are encouraged to visit this directory to learn about NATO manufacturer and distributor members and the products they offer. This is a unique service to assist NATO retail members find manufacturer and distributor websites. For those manufacturers and distributors that have not yet sent in their logo, contact information and website address, please forward that information to NATO at info@natocentral.org.