Across the country, COVID-19 has decimated small businesses in nearly every industry —limiting sales, requiring new protocols, shuttering stores, and resulting in droves of people heading to the unemployment line. The Federal government has provided several beneficial programs to mitigate the negative economic effects of the pandemic such as the Paycheck Protection Program (PPP) that has saved Main Street businesses during the downturn, but many of the challenges remain. As the country continues to reopen and address the far-reaching consequences of COVID-19, policymakers must create favorable conditions for mom and pop businesses to revitalize, rebuild, and recover. Easing the regulatory burden on small businesses is an essential ingredient in the recipe for recovery.
The Trump Administration has affirmed its commitment to deregulation and acknowledged it as a necessary action to fuel economic recovery and create market certainty. The administration has an opportunity to save 3,000+ brick and mortar premium cigar retailers and over 30,000 retail jobs by addressing an unduly burdensome regulation in the Substantial Equivalence Rule (SE). Despite infrequent usage patterns, negligible youth usage, and no significant public health threat according to the FDA/NIH PATH Study, premium cigars will become subject to costly (millions of dollars) and time-consuming testing and product marketing authorizations in September per the Substantial Equivalence Rule. This FDA regulation intended for mass market tobacco products poses an extreme threat to the sustainability of the artisanal craft of premium cigar making.
In January, the FDA acknowledged that premium cigars are the lowest enforcement priority for premarket review, but nonetheless the requirements of the SE rule remain. In March, FDA Commissioner Dr. Stephen Hahn testified before a House Appropriations subcommittee and was asked about the SE rule as it relates to premium cigars. He affirmed that these products would have to undergo premarket review but indicated that additional guidance and a more streamlined process would be put forth by FDA for these products. Ultimately, the original deadline for SE was moved from May 12th to September 9th by court order due to the COVID-19 pandemic. The Trump Administration and the FDA now have an opportunity to provide regulatory relief and the rightsizing of an overreaching rule to prevent closure of small businesses.
The premium cigar industry cannot survive if this rule goes into effect. Many brands and blends that are enjoyed by adults would be forced off the shelves and tens of millions of dollars would have to be spent by manufacturers to comply with a rule never meant for premium products. Consumer choice would also be significantly limited, and the market would be constricted to very few corporate powers at the price of family owned companies and small businesses. Exemption from the Substantial Equivalence rule, or at the very least, tailoring it to premium cigars, is a perfect example of where the administration can support small business recovery over regulation to spur economic recovery and retain jobs following a difficult time for the retail industry.
Whether you enjoy a premium cigar socially or only for celebratory occasions, this is a rule that will have far reaching consequences for consumers as well as the retail and manufacturers in the industry. Unfortunately, the clock is running out and if action isn’t taken by the administration many of the cherished premium cigar brands will have their last dance.
Scott Pearce is the executive director of the Premium Cigar Association, which represents the interests of the premium cigar and pipe industry. Joshua Habursky is the head of federal affairs for the Premium Cigar Association.