Category — News & Updates
In a recent letter to the National Association of Attorneys General (“NAAG”) and in the latest iteration of the Obama Administration’s Unified Regulatory Agenda, the FDA shed some light on the likely content of its “deeming” regulations that will subject additional tobaccco products to regulation under the Family Smoking Prevention and Tobacco Control Act. The deeming regulations have been drafted, but are not yet public, pending review by the White House Office of Management and Budget under Executive Order 12866.
The FDA’s November 14, 2013 letter to NAAG came in response to a recent request, signed by 42 state and territorial Attorneys General, urging the FDA to immediately regulate electronic cigarettes. The FDA’s response agrees that e-cigarettes should be regulated, citing evidence showing a purportedly “dramatic” rise in youth usage of the products. The letter indicates that the deeming regulations will apply all generally-applicable provisions of the Tobacco Control Act to the newly deemed tobacco products, which would include e-cigarettes that fall within the definition of “tobacco products” (products made or derived from tobacco). For example, e-cigarettes and other tobacco products would be subject to FDA premarket review of new products, which includes not only new brands but existing products whose formulations have changed. The letter notes that any regulations restricting flavors in e-cigarettes would need to be covered in a separate rulemaking, based on a determination that such regulations would be appropriate for the protection of public health.
The latest entry in the White House’s Unified Regulatory Agenda provides more information regarding the content of the proposed “deeming” regulations. The Unified Regulatory Agenda is a broad outline of federal agencies’ priorities and plans for future regulations. The compilation of agendas and regulatory plans covers everything from workplace safety, employee benefits, health care standards and yes, tobacco regulation.
The notice indicates that FDA is subjecting all tobacco products (which would necessarily include cigars, pipe tobacco, and e-cigarettes with nicotine derived from tobacco) to the generally-applicable requirements of the Tobacco Control Act. This also suggests that other, non-generally-applicable requirements will be applied on a case-by-case basis. Although FDA indicates that it has considered the costs and benefits of alternative approaches – including exempting certain products from all or certain requirements – FDA’s statement that it is deeming “all tobacco products to be subject to the FD&C Act” suggests that it rejected the idea of exempting certain types of tobacco products from all or part of the generally-applicable requirements.
November 30, 2013 Comments Off
In an earlier blog post, we discussed a case pending before the United States Court of Appeals for the Fourth Circuit in which the United States District Court for the Eastern District of Virginia evaluated the methodology used by the United States Department of Agriculture (the “USDA”) to determine the amount of assessments levied against tobacco product manufacturers and importers under the Fair and Equitable Tobacco Reform Act (“FETRA”). Philip Morris sued the USDA, claiming that the USDA had improperly calculated the FETRA assessments.
Under FETRA, Congress adopted a two-step process for the USDA to determine assessments owed by tobacco product manufacturers and importers. The two-step process administered by the USDA is known as Step A and Step B. Step A allocates assessments among six classes of tobacco products – cigarettes, cigars, chewing tobacco, pipe tobacco, snuff and roll-your-own tobacco. Step B then allocates the assessments on a pro-rata basis among the manufacturers and importers within each of the six classes of tobacco products.
The District Court’s review was limited to whether the USDA properly administered the elements of Step A. Step A is intended to allocate the assessments among the six classes of tobacco products based on each class’s current share of the overall market. The USDA calculates overall market share by multiplying the volume of taxable units per class by the maximum federal excise tax rate per class from 2003. Based on this calculation, the volume of taxable units may vary but the federal excise tax rate will remain the same. That is, regardless of what the federal excise tax rate is for the current year, the Step A calculation is based on the maximum federal excise rates from 2003.
The District Court held that the USDA’s methodology for determining each class’s share under Step A was reasonable because: (1) FETRA explicitly requires the USDA to periodically adjust the assessments based on changes in volume; and (2) FETRA does not require or prohibit the USDA make adjustments based on changes to the federal excise tax rate.
On appeal, the Fourth Circuit evaluated the District Court’s ruling with respect to the USDA’s calculation of Step A. In reviewing an agency’s interpretation of a statute, courts apply a two-part test to assess Congressional intent. First, a court considers whether Congress has answered the question – meaning, whether the statute, in this case FETRA, directly addresses the question at issue. If the question is resolved within the plain meaning of the statute, a court does not move to the second portion of the two-part test. Second, if a court concludes that the statute addresses the question at issue, the court considers if the agency’s interpretation, in this case the USDA, is based on a permissible construction of the statute.
Philip Morris argued that the USDA’s methodology for calculating the assessments allocated to each class under Step A is improper. Philip Morris did not dispute that the volume of taxable units will change when sales in the six classes fluctuate. Rather, Philip Morris argued that, under FETRA, the rate must also vary based on changes in a particular year’s maximum federal excise tax rate. However, in applying the first part of the test, the Fourth Circuit concluded that there was “no clear statement of Congressional intent.”
Because FETRA did not directly address which tax rates should be used, the Fourth Circuit then evaluated the second step of the two-part test. That is, whether the USDA’s interpretation is permissible. The Fourth Circuit stated that many of the arguments Philip Morris made in support of its view that the USDA’s position was inconsistent with the law are reiterations of arguments it had previously made. In evaluating the USDA’s decision to use the 2003 maximum federal excise tax rates, the Fourth Circuit stated that “[w]e defer to an agency’s interpretation – even if it constitutes a change of position – so long as that decision resulted from a deliberate exercise of the agency’s judgment and expertise.”
The Fourth Circuit concluded that the USDA’s decision to utilize 2003 tax rates was a permissible interpretation of FETRA. The Fourth Circuit affirmed the District Court’s ruling in favor of the USDA.
November 29, 2013 Comments Off
An article by the Troutman Sanders Tobacco practice appears in the October issue of Smokeshop Magazine. The article, titled “The Uncertain Future of E-Cigarette Marketing”, discusses how major players in the e-cigarette market are building brand awareness and market share by using forms of advertisement that are unavailable to cigarette companies. [Read more →]
November 7, 2013 Comments Off
Troutman Sanders tobacco team partner Bryan Haynes was quoted in an October 29th Washington Post article titled “Awaiting FDA, states pursue their own e-cigarette rules.” [Read more →]
October 29, 2013 Comments Off
Troutman Sanders Tobacco Practice to Attend the Tobacco Merchants Association Conference on FDA Regulation of E-Cigarettes
The Troutman Sanders Tobacco practice is proud to be participating in the Tobacco Merchants Association (“TMA”) FDA Regulation of E-Cigarettes Conference. This one-day conference will focus on the latest developments in FDA’s proposed e-cigarette regulation. The program will host industry experts as well as members of the legal field as they discuss the e-cigarette market and the impact of regulations similar to FDA’s current regulations regarding cigarettes and other tobacco products. [Read more →]
October 25, 2013 Comments Off
Troutman Sanders Tobacco Practice to Attend the Food and Drug Law Institute Conference on FDA Regulation of Tobacco Products
The Troutman Sanders Tobacco practice is proud to be participating in the Food and Drug Law Institute’s (“FDLI”) FDA Regulation of Tobacco Products Conference. This one-day conference will focus on latest developments in FDA tobacco product regulation, both in review for 2013 and in the future. The program will host government, industry and public interest experts in order to provide updates on various issues, such as changing product standards and current and future research efforts, in addition to a discussion of the regulation of modified-risk tobacco products, especially in reference to electronic cigarettes. [Read more →]
October 25, 2013 Comments Off
On April 4, 2013, the Supreme Court of Mississippi declared unconstitutional the imposition of a nonsettling-manufacturer (“NSM”) fee on cigarettes that are distributed through Mississippi for sale to a retailer outside of the state. In 2009, the Mississippi Legislature enacted a law imposing a fee for nonparticipating manufacturers on the sale, purchase, and distribution in Mississippi of cigarettes “including cigarettes sold, purchased or otherwise distributed in [Mississippi] for sale outside of this state.” Miss. Code Ann. § 27-70-5 (Rev. 2010) (emphasis added). [Read more →]
October 15, 2013 Comments Off
As mentioned in a previous blog post, on September 11, 2013, a three-member federal arbitration panel decided the on-going dispute among three participating manufacturers (“PMs”) and 15 states involving the 2003 payment obligations under the Master Settlement Agreement (“MSA”). [Read more →]
October 3, 2013 Comments Off
In a blog post on January 26, 2013, we discussed a decision from the United States District Court for the District of Rhode Island where several tobacco companies challenged the constitutionality of two local ordinances. The lawsuit sought to overturn two Providence, Rhode Island ordinances, which ban certain promotional discounts and severely restrict the sale of flavored tobacco products. [Read more →]
October 3, 2013 Comments Off
Department of Justice Settlement with Yakama Nation Requires Law Enforcement to Provide Prior Notice before Entering Tribal Lands
On August 26, 2013, the Confederated Tribes and Bands of the Yakama Nation (the “Yakama Nation”) in Washington State announced that it had reached a settlement with the United States Department of Justice (“DOJ”), in a lawsuit involving the federal authorities’ right to enter tribal lands to enforce a warrant against a tobacco manufacturer owned by a member of the tribe. The lawsuit was styled Confederate Tribes and Bands of the Yakama Nation v. Holder, No. 2:11-cv-3028-RMP, filed in the United States District Court for the Eastern District of Washington. [Read more →]
September 28, 2013 Comments Off