TOBACCO: Defending the Industry

Source from:  awmanet.org by Bob Gatty 07/30/2007

AWMA members fight anti-tobacco efforts during annual Day on the Hill lobbying effort As AWMA members met with members of the U.S. House of Representatives and Senate during the association's second annual Day on the Hill in May, one mission was paramount: to smother initiatives that would be harmful to tobacco sales and thus have adverse affects on profits over the years. Initiatives are coming from several fronts, and AWMA's objective is to protect one of its members' most important sources of revenue and profit. "AWMA members met with dozens of legislators and/or their staff. We had several tough issues to address, but we all feel very confident that we got our messages across to the folks who count," said AWMA President Scott Ramminger, reflecting on the day's successes. "It's vital our members of Congress know where our industry, and their constituents, stands and where we need their help." Tops on the Day on the Hill agenda were these key tobacco issues: Opposition to legislation (S. 625 and HR 1108) giving regulatory authority over tobacco products to the Food and Drug Administration (FDA). Opposition to legislation increasing the federal excise tax on cigarettes. Support of legislation to establish a national standard for low ignition propensity (LIP) cigarettes that includes a federal preemption. Support for legislation to promote restrictions on remote sales of cigarettes. In addition to these federal initiatives, many states are taking steps to restrict and/or profit from tobacco use - efforts that are also being opposed by AWMA. However, the Day on the Hill lobbying efforts were confined to issues pending at the federal level. "Our members did an outstanding job of bringing our issues to Capitol Hill," says Anne Holloway, AWMA director of government affairs. "We had over 50 meetings with legislators and staff, and we believe they understood our concerns with respect to these important issues impacting our industry." Holloway points out that "tobacco is very much in the cross-hairs in this new Congress," now controlled by Democrats. "AWMA will continue to work - through programs like the 'Day on the hill' to ensure that our voice is heard on these issues in order to promote the economic vitality of our industry." FDA Authority AWMA opposes S. 625, sponsored by Sen. Edward M. Kennedy (D-MA) and HR 1108 by Rep. Henry Waxman (D-CA) because it gives unprecedented authority to the FDA to regulate the sale, marketing, distribution and manufacturer of tobacco products in the United States. The bills give "overly broad" authority to the FDA, an AWMA "issue brief" points out, noting that "even the chief of the FDA has expressed his opposition, indicating that the agency is ill-suited to police the already heavily regulated tobacco industry. The issue brief, provided to members of the House and Senate during the Capitol Hill meetings, also notes that: The bills give FDA authority to dramatically reduce the amount of nicotine in cigarettes, which could significantly affect consumer acceptability of tobacco products - thus jeopardizing the entire category at both the retail and wholesale levels. The bills would allow for numerous and continuous product design changes as well as marketing and advertising restrictions that would work a hardship on distributors. Moreover, a lack of federal pre-emption language over marketing and advertising provisions means that states could adopt even more stringent laws creating a patchwork of different regulations nationwide. AWMA is concerned over the apparent "rush" to adopt legislation on this issue that is extremely complicated and deserves careful, objective deliberation - not just political posturing. Many AWMA members have small, family-owned businesses and the burdensome recordkeeping requirements and regulations that would result from this legislation would work a tremendous hardship on them with little, or no real benefit. There are real concerns that this legislation could create a "back door" ban on tobacco products through onerous restrictions on the approval, sale, distribution, advertising and promotion of tobacco products. Tobacco is a legal and important product that AWMA members distribute to convenience stores. AWMA members understand they have a serious responsibility to ensure this age-restricted product stays out of the hands of minors, and they employ a variety of effective methods - including firm company policies, employee training and signage - to ensure tobacco products do not get into the hands of minors. AWMA's issue brief also stressed that the legislation "would severely curtail the livelihoods of many law-abiding small business owners across the country by imposing costly layers of regulation and significantly curtailing the availability of a legal product" that is important to their economic viability. Federal Excise Tax AWMA opposes language contained in the 2008 federal budget proposal that expresses support for increasing the federal excise tax on cigarettes by as much as 61 cents to $1 per pack. The current tax is 39 cents. Funds generated by the increase would be earmarked to fund the State Children's Health Insurance Program, and the Senate has already approved by a vote of 59 to 40 a non-binding amendment by Sen. Gordon Smith (R-OR) expressing the sense of the Senate in support of the increase. That development indicates that the Senate will eventually support such a hike, which has not occurred since January 2002. In an issue brief provided to congressmen and senators, AWMA expressed opposition to any increase in cigarette excise taxes "because of the unintended consequences of such action." The association pointed out that tax increases provide additional incentives for smokers to find alternative avenues to purchase cigarettes, many of which are illegal such as the Internet, where taxes are avoided. Moreover, AWMA said, excessive excise taxes can lead to increased traffic in other forms of illegal cigarette activity. "Tobacco products are already very heavily taxed in the United States and this legislation would adversely impact the wholesale distribution industry while providing no real benefit," AWMA told Congress. Remote Cigarette Sales During Capitol Hill meetings, AWMA members stressed that one of the organization's top priorities is supporting federal legislation to combat the illegal sale of cigarettes through the Internet. AWMA representatives pointed out that such remote sellers regularly violate state and local laws imposing taxes on cigarettes. AWMA members said that as states continue to increase excise taxes, smokers increasingly are turning to such remote sellers for illegal-tax-free cigarettes, providing those sellers with an unfair competitive advantage and necessitating federal legislation to "level the playing field." States are losing more than $1 billion a year in unpaid cigarette excise taxes for cigarettes, many of which end up in the hands of underage smokers because of the lack of age verification standards inherent in these kinds of sales, AWMA reminded lawmakers. AWMA called on Congress to consider legislation similar to the Prevent All Cigarette Trafficking Act introduced in the last Congress by Sen. Herb Kohl (D-WI), which would have increased reporting requirements on remote tobacco sales, including Internet and mail order, and generated millions of dollars in state tax revenue that is now being lost. The objective of the legislation was to ensure that tax burdens are equal for all retailers of cigarettes and smokeless tobacco, to protect underage smokers, and make certain that states receive tax money that is due. A Slip of the LIP A growing number of states have either passed or are considering legislation requiring that cigarettes sold within their borders meet the standards of Low Ignition Propensity (LIP), and are less likely to ignite bedding and upholstered furniture, such as sofas and mattresses. Eight states - New York, Vermont, Massachusetts, New Hampshire, Illinois, Kentucky, Utah and California - have adopted such laws, and 19 other states are currently considering similar legislation. As a result, AWMA is concerned that as states adopt differing LIP cigarette laws, distributors will face an impossible challenge in managing their inventory of different cigarettes - LIP and non-LIP - that meet the specific requirements of specific states. "The patchwork effect of differing state laws would be extremely burdensome to many of our distributors," AWMA said in an issue brief for Congress. As a result, the organization supports adoption of the New York state model as a nationwide standard that would prevent individual states from creating their own, differing laws. In the last Congress, bills were introduced by Rep. Edward Markey (D-MA) and Sen. Richard Durbin (D-IL) to create a national standard based on the New York law. However, because they did not include a federal preemption provision, they were not supported by AWMA. AWMA said any state or federal legislation on this issue should include a provision allowing for the "sell through" of current inventory during any transition period to LIP from non-LIP cigarettes. The Santa Fe Natural Tobacco Company, recognizing the complexities involved for distributors who serve LIP and non-LIP states, announced that beginning June 1 it would discontinue Medium Filter soft pack and Ultra Light Filter soft back for both standard and LIP products. Noting that there has been increasing customer demand for hard packs, John Collins, Santa Fe's sales planning manager, explained that by delisting Medium and Ultra Light soft packs, "we hope to help wholesalers maximize warehouse space and provide products with the greatest demand." He said the increased number of states enacting so-called "fire-safe" laws are forcing many wholesalers to carry multiple inventories to deal with varying state requirements. Santa Fe urged wholesalers carrying the Medium and Ultra Light only in soft packs to convert to hard packs as soon as possible, sell-out soft packs and increase their hard pack inventory. Enditem