On August 24, 2011, the Alcohol Tobacco Tax and Trade Bureau (“TTB”) reopened the comment period for proposed regulations that would draw additional distinctions between pipe tobacco and roll-your-own cigarette tobacco.   Interested parties have until October 24, 2011 to submit comments.

Under federal law, loose tobacco is deemed to be RYO if, “because of its appearance, type, packaging, or labeling, [it] is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars.”  TTB currently applies a standard that distinguishes between the two based primarily on the product’s labeling.

Since the April 2009 CHIPRA legislation, which increased the federal excise tax rate for RYO to $24.78 per pound but only increased the pipe tobacco rate to $2.83 per pound, TTB has been looking for additional ways to differentiate between the two types of tobacco, and presumably additional ways to reclassify pipe tobacco as RYO.

TTB’s prior comment period yielded 24 comments.  In addition, TTB apparently met with representatives of Liggett Vector Brands and their lobbyists in June 2011 to discuss additional standards based on the physical characteristics of loose tobacco.  Liggett’s proposal is available online, and TTB has specifically encouraged comments on Liggett’s proposed standard.  Other proposals would distinguish between pipe tobacco and RYO based on the date of the product’s introduction into the market.  This standard presumably would reclassify newer pipe tobacco brands as RYO, and thereby subject those brands to higher taxes.

Interested parties are encouraged to submit comments on the proposed regulations, as the outcome could have the effect of reclassifying entire product lines.

For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.