[Senate Hearing 116-48]
[From the U.S. Government Publishing Office]
S. Hrg. 116-48
KEEPING SMALL, PREMIUM CIGAR BUSINESSES ROLLING
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FIELD HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
APRIL 5, 2019
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Printed for the Committee on Small Business and Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
36-840 PDF WASHINGTON : 2019
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SIXTEENTH CONGRESS
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MARCO RUBIO, Florida, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
Michael A. Needham, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
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Opening Statements
Page
Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida......... 1
Castor, Hon. Kathy, a U.S. Representative from Florida........... 3
Bilirakis, Hon. Gus, a U.S. Representative from Florida.......... 5
Witnesses
Maresca, Charles, Director of Interagency Affairs, Office of
Advocacy, U.S. Small Business Administration................... 6
Rodu, Dr. Brad, Endowed Chair, Tobacco Harm Reduction Research,
University of Louisville....................................... 31
Borysiewicz, Jeff, President and Founder, Corona Cigar Company... 44
Newman, Drew, General Counsel and Great-Grandson of the Founder,
J.C. Newman Cigar Company...................................... 51
Alphabetical Listing
Bilirakis, Hon. Gus
Opening statement............................................ 5
Borysiewicz, Jeff
Testimony.................................................... 44
Prepared statement........................................... 47
The Boutique Cigar Association of America
Letter dated April 3, 2019................................... 128
Castor, Hon. Kathy
Opening statement............................................ 3
Cigar Association of America
Statement dated April 19, 2019............................... 132
Cigar Rights of America
Comments dated July 16, 2018................................. 390
Comments dated July 25, 2018................................. 411
Cigar Rights of America and State of Florida letters of support.. 380
Coalition of American Cigar Rollers and supporting documents
Letter dated April 4, 2019................................... 412
Drew Estate
Statement dated April 19, 2019............................... 422
International Premium Cigar and Pipe Retailers
Statement dated April 5, 2019................................ 436
Maresca, Charles
Testimony.................................................... 6
Prepared statement........................................... 9
Newman, Drew
Testimony.................................................... 51
Prepared statement........................................... 53
Rocky Patel Premium Cigars
Statement dated April 19, 2019............................... 438
Addendum..................................................... 446
Rodu, Dr. Brad
Testimony.................................................... 31
Prepared statement........................................... 33
Rubio, Hon. Marco
Opening statement............................................ 1
KEEPING SMALL, PREMIUM CIGAR BUSINESSES ROLLING
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FRIDAY, APRIL 5, 2019
United States Senate,
Committee on Small Business
and Entrepreneurship,
Tampa, FL.
The Committee met, pursuant to notice, at 1:00 p.m., in the
Performing Arts Building Auditorium, Hillsborough Community
College, Ybor City Campus, 1411 East 11th Avenue, Hon. Marco
Rubio, Chairman of the Committee, presiding.
Present: Senator Rubio.
Also present: Representatives Bilirakis and Castor.
OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A U.S. SENATOR
FROM FLORIDA
Chairman Rubio. I call this hearing to order.
I want to thank our witnesses for being here to discuss an
important and an historic industry for the State of Florida and
for this part of our state.
Before I do, I want to recognize Dr. Atwater, the President
of Hillsborough Community College, and Dr. Ginger Clark, the
Ybor campus president. They have been fine to work with, and we
appreciate very much all the help they've given us in setting
this up today.
As the Chairman of this committee, I'm pleased to bring
more awareness to this iconic industry and the regulatory
assault that threatens it, and there really is no better
location in this state to do it than here in Tampa, in this
area known as Cigar City.
Florida's premium cigar industry is one that is rooted in
small, family-run businesses. These are businesses that have
been handed down generation by generation, and many are
representatives of the cultural history of the Cuban community
that has made Florida their home way back, even before the
current migration, going into the 1800s and in this very part
of our state, near Ybor City.
One such example of that is J.C. Newman Cigar Company
represented by one of our witnesses, Drew Newman, the founder's
great-grandson. The company is a fourth-generation business
that has spanned an impressive 124 years. Unfortunately,
manufacturers like J.C. Newman, retailers like Corona Cigars,
and the rest of the premium cigar industry are under attack.
A 2009 law, and a subsequent final rule by the previous
administration, allowed the Food and Drug Administration to
regulate the manufacture, import, packaging, labeling,
advertisement, promotion, sale, and distribution of premium
cigars, a move that was intended to protect children from
cigarettes and other tobacco products.
I fully support laws which prohibit minors from smoking and
to prevent people from falling into that habit. But tobacco is
a legal product, and small manufacturers and retailers of
premium cigars are wrongfully being targeted when they were
never supposed to be the target of this to begin with. It's
simply not right for government to unfairly place detrimental
fees and regulations on an entire industry simply because some
do not like the product that they are manufacturing.
It must also be noted that the rule, issued in 2016,
encompassed tobacco products on the market since 2007, a full
two years before the authorizing legislation became law. The
regulatory cost of compliance would give preference to foreign-
made products and destroy this American industry.
For instance, J.C. Newman sells about $10 million worth of
products every year. It would cost them approximately three
times that amount just to comply with the proposed regulation.
FDA has calculated that 90 percent of the businesses affected
by this rule are considered to be small. But think about it, to
comply with these regulations it would cost them three times
what they make in any given year, and you don't need to be a
business major to figure out pretty quickly you cannot survive
when the cost of compliance is three times your annual revenue
as a company.
This over-regulation, it's not necessary. It's already
illegal to sell tobacco products to anyone under the age of 18.
In fact, the State of Florida is looking to raise that age in
the legislature. First regular use is on average, 24-and-a-half
years old. The FDA NIH research was unable to provide any data
at all on youth that consumed traditional cigars frequently or
daily. This is because, as they said, premium cigars are not
made for children, they're not marketed to children, they're
not consumed by children. So this begs the question of why
premium cigars are wrongly being regulated under a law that's
aimed to reduce youth consumption of tobacco if it is not a
product that youth are consuming.
So what can we do to stop this overreach? In Congress I
have a bill, Senate Bill 9, the Traditional Cigar Manufacturing
and Small Business Jobs Preservation Act, which would exempt
just this industry from FDA regulations. This legislation,
which I introduced on the first day of the Congress, would only
apply to the premium cigar industry. It has the bipartisan
support of 11 senators.
I am pleased that I'm joined here today by my colleagues
Congressman Castor and also Congressman Bilirakis, who led the
House effort with 35 bipartisan co-sponsors. For each of the
three fiscal years since 2016, when the final rule was
finalized, the House of Representatives passed legislation
exempting premium cigars from harmful FDA regulations through
annual appropriations bills. Unfortunately, these provisions
were dropped when the House and Senate went to conference, and
it's unfortunate that it went in that direction, and we hope
that we can change that moving forward.
At the FDA, we must ensure that the next commissioner is
well educated on the unique nature of the premium cigar
industry. This is why this hearing is important. We are
furthering the record that this industry is unlike the other
regulated tobacco industries.
We are committed--I know I am, and everyone up here is--to
helping this iconic industry and will advocate on behalf of
members of the Administration and with our colleagues in
Congress, giving premium cigar makers and retailers the clarity
and the assurances needed to continue with their craft as a top
priority of ours. At a time in which both parties express
concern for small businesses and manufacturers and the American
working class, this is not an issue that should be
controversial.
I hope today's hearing will shed light on how proposed
regulations from the FDA will impact this iconic industry, one
that is so rooted in our state's history.
On a personal note, I have often told the story of my
grandfather, who grew up in Cuba. He was disabled as a young
child because he had polio, one of 17 kids in a farming family.
And because he couldn't work in the fields, this led him to go
to school, where he learned how to read, and I would guess he
was one of a few of the 17 who learned how to do so.
And one of the jobs in town for people that knew how to
read was a lectore, who would sit in the front of the room as
cigars were being rolled in the days before radio and TV and
Internet and Siri and all this other stuff, and read them the
news, and then he would read novels. If you visit here, you'll
see many of the historic cigar rolling rooms where you can
envision where the lectore would have sat and would have read.
So it's an industry that's near and dear to my heart for that
reason as well, and I hope to make a difference for this
industry, particularly here in our home state of Florida.
I want to thank, as I said, my two colleagues from the
House for being here, for their steadfast support, and I want
to recognize Congresswoman Castor to go first. This is her
district, and she is the sponsor of this bill in the House.
Thank you so much for being here.
STATEMENT OF HON. KATHY CASTOR, A U.S. REPRESENTATIVE FROM
FLORIDA
Representative Castor. Good afternoon. Buenas tardes.
Thank you, Chairman Rubio, for holding this hearing, and
thank you for your leadership. I want everyone to know that
Senator Rubio did have a Tampa Cuban sandwich before this
hearing, and he gave the thumbs up on the bread, maybe the best
in the state.
Chairman Rubio. It is.
[Laughter.]
Representative Castor. Okay, it's on the record now. It's
on the record.
Chairman Rubio. There are no Miami TV stations here, are
there?
[Laughter.]
Representative Castor. Well, thanks again for your
leadership.
As one of the witnesses here, Mr. Newman, knows, there's
not a better place in the country to hold a hearing titled,
``Keeping Small Premium Cigar Businesses Rolling'' than Tampa,
the Cigar City. Premium cigar manufacturing defines Tampa. Over
130 years ago, Vicente Martinez Ybor moved his factory right
here to the heart of my hometown, and his fellow factory owners
followed suit. From all over the world, immigrants looking for
a better life moved here to work in premium cigar factories.
They came from Italy, they came from Spain, from Cuba, indeed
from all over the world seeking the American Dream.
And as the industry grew, it became the center of a
flourishing multicultural society and the reason that Tampa has
become such a proud melting pot. All aspects of life revolved
around the business of making premium cigars. Workers would
pool their pennies--and I also love the story of the lectore
reading to them, providing the news of the day, hearing the
great works of fiction to learn English and provide
intellectual stimulation. Workers' pennies added up to build
the various clubs, the Italian Club, the Cuban Club, Centra
Espanol, Centra Historiano, to name a few, which set the
cultural identity of Tampa, provided a place to go to see the
doctor or the dentist, or even meet your wife or husband.
Premium cigar manufacturing built Tampa and weaved our
sweet, strong social tapestry, and we want to keep it that way.
It was in 2016 when the Food and Drug Administration
adopted a rule that applied onerous and burdensome regulations
to our city's premium cigar manufacturers. The FDA said it was
based on a law to stop the scourge of marketing tobacco
products to kids, but I had worked on that law, and the intent
was not to include premium cigars. Premium cigars have never
been marketed to kids, and I've worked tirelessly in the House
of Representatives to help FDA stay focused to protect the
public health and to ensure children have adequate, affordable
health care, and to ensure that they do not have access to
tobacco products. However, the FDA rule went too far, went
beyond congressional intent, ignored the distinction between
traditional handcrafted premium cigars whose retail model mom-
and-pop stores and expensive products ensured that they are not
marketed to kids.
This is why I have reintroduced in the House this year my
bill, along with my partner, Representative Posey, from the
East Coast. This year it's H.R. 1854, the Traditional Cigar
Manufacturing and Small Business Jobs Preservation Act of 2019.
My bipartisan legislation narrowly focused on premium cigars
and reinforces that the FDA does not have the authority to
regulate traditional premium cigars, and it will protect mom-
and-pop businesses here in Tampa and across the country. The
bill currently has 36 bipartisan cosponsors, and I promise to
continue my work with my colleagues and community stakeholders
to get it across the finish line.
So thank you again, Senator Rubio, Mr. Chairman, and thank
you to my good friend and colleague, Congressman Bilirakis. I
look forward to working with both of you to ensure that my
hometown's premium cigar industry continues to thrive. Thank
you very much.
Chairman Rubio. Thank you, and thank you for hosting this
hearing in your district today.
My good friend, Congressman Bilirakis, joins us.
STATEMENT OF HON. GUS BILIRAKIS, A U.S. REPRESENTATIVE FROM
FLORIDA
Representative Bilirakis. Thank you very much. Thank you,
Senator Rubio, Representative Castor. It's great to work with
you all in a bipartisan fashion. Let's get this legislation
through as soon as possible.
Thank you, Mr. Chairman, for holding this field hearing and
for allowing us to participate in this very important
discussion. I also wanted to thank the witnesses for their
testimony this afternoon.
Small businesses are the backbone of the American economy.
They're generating 3.3 million jobs in Florida alone,
accounting for over 40 percent of our state's workforce. I have
always said that our nation's small businesses are too
frequently burdened with increased regulations, and this is a
good example of that.
Too often, Federal agencies fail to understand how their
regulations and policies harm small businesses across the
country, and it is clear to me that the one-size-fits-all
approaches to regulate rarely produce the intended results.
My phone is ringing; I'll shut it off. Sorry about that.
Chairman Rubio. The FDA is calling.
[Laughter.]
Representative Bilirakis. As seen by the testimonies this
afternoon, the tobacco market is no different. While I'm
certainly an advocate for public health, by no means are all
products created equal. That's so very important. As we will
hear today, the deeming rule's compliance costs have been
particularly burdensome for the premium cigar industry, one
that is dominated by small businesses, many of which are here
in Florida, particularly here in Tampa. Even by FDA's
conservative estimates, compliance costs are too much to bear
for these small businesses, as Senator Rubio pointed out, all
while producing, at best, minimal public health effects.
I'm grateful for the Small Business Administration's Office
of Advocacy, which has been a strong voice for small businesses
in Florida, promoting regulatory flexibility in the Federal
rulemaking process. I firmly believe we can strike a balance to
both achieve the goals of FDA to promote public health and
safety while at the same time not imposing undue burden on
small businesses, such as those here today in the low-volume
premium cigar industry.
While the deeming rule was an example of the lack of
flexibility, I'm hopeful that we can work in a bipartisan
manner, and I know we will, to provide better clarity and less
burdensome regulation in the future.
And I yield back, Mr. Chairman. Thank you again for having
me here today.
Chairman Rubio. And thank you for being here.
So, we'll turn to our witnesses. We have a lot of questions
for you, I know, so we ask, if possible--I know you've all
written statements. Those will all be in the record. If we can
keep each one to 4 or 5 minutes so we can get right to the
questions, I know the members of Congress that are here may
have to leave at some point.
So let's start with Mr. Charles Maresca, the Director of
Interagency Affairs for the Office of Advocacy at SBA, the
Small Business Administration. He leads a team of attorneys
that's responsible for reviewing regulations like this one that
are issued by other Federal agencies to ensure compliance with
the Regulatory Flexibility Act, and obviously to see what
impact they have on small business.
Dr. Brad Rodu is the Endowed Chair of the Tobacco Harm
Reduction Research Program at the University of Louisville,
where he published a book on his research on reducing smoking
in Sweden, and he has more than 150 articles and abstracts in
peer-reviewed journals attesting to us here of his knowledge of
reducing the harmful use of tobacco.
Mr. Jeff Borysiewicz is President and Founder of Corona
Cigar Company, which is not only a chain of premium cigar
stores and bars, but he also has revived the practice of
tobacco growing in Florida, with the Florida Sun-Grown Farm in
Claremont. In his spare time, he also co-founded the Cigar
Rights of America, and he continues to serve on the board of
that group.
And finally Mr. Drew Newman, who is the General Counsel of
J.C. Newman Cigar Company, the oldest family-owned cigar
company in America, the last of the over 150 active cigar
manufacturing facilities that once called Ybor City home. He is
also part of that family that founded the company. His great-
grandfather founded J.C. Newman in 1895.
So thank you all for being here. We look forward to hearing
from all of you.
Let's begin with you, Mr. Maresca.
STATEMENT OF CHARLES MARESCA, DIRECTOR OF INTERAGENCY AFFAIRS,
OFFICE OF ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION
Mr. Maresca. Chairman Rubio, Representative Castor,
Representative Bilirakis, I am honored to be here today on
behalf of the U.S. Small Business Administration Office of
Advocacy to present testimony to you about the Food and Drug
Administration's regulation of premium cigars. As the Director
of Interagency Affairs, I manage a team of attorneys who work
with Federal Government agencies during the rulemaking process
to reduce regulatory burdens on small businesses and to
implement the requirements of the Regulatory Flexibility Act.
The RFA requires Federal agencies to consider the effects of
their proposed rules on small businesses and other small
entities, including small governments and small non-profits.
Advocacy is an independent office within the SBA that speaks on
behalf of the small business community before Federal agencies,
Congress, and the White House. The views in my testimony do not
necessarily reflect the views of the Administration or the SBA,
and this statement has not been circulated to the Office of
Management and Budget for clearance.
On April 24th, 2014, FDA issued a proposed rule known as
the deeming rule that would deem formerly unregulated or
uncovered tobacco products subject to FDA regulation, including
premium cigars. The rule became final in May 2016. Advocacy and
small businesses in the industry are concerned about the impact
this rule would have on the premium cigar industry. Advocacy
submitted a comment letter on the deeming rule to FDA on June
11th, 2014. Because the rule was even then expected to have a
significant economic impact on a substantial number of small
entities, the FDA included an initial regulatory flexibility
analysis, as required by Section 603 of the RFA.
Advocacy's letter stated that FDA's IRFA, Initial
Regulatory Flexibility Analysis, was deficient because it
neither adequately described the impacts on all the types of
newly covered small entities nor explained significant
alternatives that might reduce those impacts. Advocacy urged
that FDA publish a supplemental IRFA for public comment before
proceeding with the deeming rule. FDA did not publish a
supplemental IRFA prior to the 2016 final rule. However, on
March 26th, 2018, it published an advance Notice of Proposed
Rulemaking requesting more information related to the
regulation of premium cigars. Specifically, FDA requested
comments related to the definition of premium cigars, the use
patterns of premium cigars, and the public health
considerations associated with premium cigars.
On July 25th, Advocacy submitted a comment letter on the
AMPRM reiterating our 2014 comment letter urging FDA to include
a more robust economic analysis of the rule's impact on small
business and to include a description of significant
alternatives that would minimize that impact when it publishes
an IRFA for its proposed rule on the regulation of premium
cigars.
Since June 2017, Advocacy has traveled to 24 states to host
regional roundtables and to hear from small businesses about
the regulatory issues with which they are most concerned. We
hosted three of those roundtables in Florida, including one
here in Tampa, and we heard compelling stories from small
business owners in the premium cigar industry at many of those
roundtables.
Advocacy believes that small businesses dominate the
premium cigar industry. There are at least 50 manufacturers of
premium cigars across 19 states or more, all small businesses.
Over 20 of those manufacturers are in Florida alone.
Additionally, there are over 3,000 retailers of premium cigars
located in all 50 states, some of which also roll their own
cigars and are considered manufacturers under FDA's deeming
rule.
According to FDA's own estimates, the deeming rule's
compliance costs will have significant impacts on small
businesses. Specifically, FDA states that some low-volume cigar
manufacturers may end their domestic operations entirely.
Although many small businesses have argued that the costs will
be much higher than FDA's estimates, the costs foreseen by the
agency's own numbers will prove to be too much for most small
businesses to pay to continue to manufacture premium cigars.
The premium cigar industry has argued that one report under
the rule could cost up to $250,000. For manufacturers who
cannot afford the deeming rule's compliance costs and are
forced to shutter their factories, there will be thousands of
employees who will no longer be employed. Cigar Rights of
America estimates that there are approximately 35,000 jobs
associated with the premium cigar industry, which includes
manufacturing and retail employees.
While FDA has stated the objectives of the deeming rule
under the authorizing statute, it is still required by the RFA
to require significant alternatives to the rule that would
minimize the impact on small businesses, and we again reiterate
our 2014 recommendations in that regard.
Thank you for this opportunity to testify on behalf of
small businesses, and I would be happy to answer any questions
you might have.
[The prepared statement of Mr. Maresca follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Rubio. Thank you very much.
Dr. Rodu.
STATEMENT OF DR. BRAD RODU, ENDOWED CHAIR, TOBACCO HARM
REDUCTION RESEARCH, UNIVERSITY OF LOUISVILLE
Dr. Rodu. Chairman Rubio, members of Congress, thank you
very much for the invitation to participate.
As an oral pathologist at a major cancer center 25 years
ago, I discovered that Americans, including doctors, are
grossly misinformed about the health risks of cigarettes versus
the vastly lower risks of dip and chew products; that is,
smokeless tobacco. This launched my tobacco research program
that has produced the publications that Chairman Rubio referred
to in the peer-reviewed medical literature.
My research established that smokeless tobacco use is 98
percent less hazardous than smoking, and that extends to the
risk for mouth cancer. This was confirmed by a large recent
study from Federal and Federally-funded investigators. They
found that men who dipped or chewed tobacco had no excess risk
for mouth cancer--zero.
Differences in health effects are also well documented for
combustible products. First, some basic principles. When you
burn tobacco, you release nicotine and about 7,000 other
chemicals. Twenty to 30 years of 10 deep puffs on 20 to 30
cigarettes a day builds high risks for cancers, circulatory
diseases, and emphysema, leading to a high death toll.
Cigars also involve burning tobacco, but patterns of use
are completely different. The FDA knows that the cigar category
encompasses a wide spectrum of products. One is premium cigars.
The rest of the category consists of machine-made, mass-
produced cigarillos, little cigars and filtered cigars, and I
will refer to all of those as little cigars.
In 2014, FDA staff estimated that less than 1 percent of
Americans smoked premium cigars. Most light up infrequently.
Consumers of little cigars smoke a lot more often, and they
also tend to smoke cigarettes.
Premium cigar smokers fit another FDA label, primary; that
is, they never smoked cigarettes, as opposed to former smokers
who have switched over to cigars and dual users of both
products, again mostly little cigars. This is important because
adding cigarettes adds risk.
In my submitted testimony I present detailed information
from a published FDA analysis of 22 epidemiologic studies of
the causes of death among cigar smokers, most of whom, of
course, are men. The FDA study listed many diseases associated
with cigarette smoking. The biggest killers are cancers, heart
disease, stroke and emphysema. Consumption of one or two cigars
per day was not associated with significantly increased deaths
from any of these diseases in the FDA study.
To be clear, puffing or inhaling the smoke of burning
tobacco is not a healthy activity. But the FDA researchers
misstated the facts when they concluded that, quote, ``Cigar
smoking carries many of the same risks as cigarette smoking,''
end quote.
All tobacco consumers deserve truthful information and
guidance. The sweeping FDA indictment ignores scientific
evidence and misleads cigar smokers. The following facts are
indisputable.
In the U.S., the prevalence of cigar use, especially
premium cigars, is very low.
Number two, premium products are used infrequently and in
small numbers.
And number three, they are puffed rather than inhaled.
Low prevalence, infrequent use, and reduced exposure
translates into minimal harm at the population level.
Conflation of cigarette smoking with dip and chew, vaping,
cigar and pipe smoking falsely informs consumers that all
tobacco products are equally dangerous. When Congress gave the
FDA regulation of tobacco products 10 years ago, it did not
direct the agency to treat all tobacco products as equally
hazardous. Unfortunately, the FDA's regulatory actions have
done just that.
The FDA's current posture wastes government resources,
undermines public health, and does nothing to address the half-
million deaths caused by cigarette smoking.
Thank you.
[The prepared statement of Dr. Rodu follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Rubio. Thank you very much.
Mr. Borysiewicz.
STATEMENT OF JEFF BORYSIEWICZ, PRESIDENT AND FOUNDER, CORONA
CIGAR COMPANY
Mr. Borysiewicz. My name is Jeff Borysiewicz, and I'm the
President and Founder of Corona Cigar Company, which is a
retailer of premium cigars. In 1996, I started Corona Cigar
Company as a mail order business operating out of an extra
bedroom in my house. With hard work, passion, determination,
loyal customers, and a great team of employees, over the past
22 years we have been able to grow Corona Cigar Company into
one of the world's most recognized cigar retailers. We own and
operate four brick and mortar stores with cigar bars in Orlando
and Tampa. We employ over 125 wonderful people.
Running any business is a challenge. There are challenges
of making payroll, paying the rent, growing your business, and
staying ahead of the competition. However, the greatest threat
to my business and to the thousands of other premium cigar
retailers just like me is the heavy hand of government
regulations being pushed forward by the FDA.
For hundreds of years, America's premium cigar retailers
have been a part of our culture. Watch any old Western movie
and you will see the iconic wooden cigar store Indian posted in
front of the local cigar shop. This is an industry where most
retail cigar stores are locally owned and operated mom-and-pop
shops. The store clerks and shop owners know their customers by
name, and the customers trust the retailer for information on
what's the latest and greatest in the world of cigars. But if
premium cigars are not exempted from FDA regulations, our
industry will definitely shrink and it will even be more
difficult for a retailer to survive.
In 2018, the Small Business Administration hosted
roundtables to gather feedback about the issues facing
businesses across all industries. Fellow premium cigar
retailers from five states and seven cities spoke out at these
meetings and voiced their concern on how the current FDA cigar
regulations, if left unchecked, will cause great harm to their
businesses.
Some of the new rules from the FDA leaves one shaking her
head in disbelief. For example, if a cigar retailer assembles
an assortment of cigars and puts them in a package like a bag
and sells this as an assortment or gift pack, the retailer must
register as a manufacturer. If a cigar shop owner receives a
new brand and wants to give a customer a cigar as a gift
because he thinks he might enjoy that brand, he is now breaking
the law because of the FDA's sampling ban. If a cigar maker
wants to donate cigars to our troops, he can't because of the
FDA cigar regulations.
The new FDA regulations require that 33 percent of a cigar
box lid to be covered with a health warning label. One of the
most beautiful features of premium cigars is the handcrafted
wooden boxes that these products are packed in. Some of the
cigar box art dates back more than 150 years. People buy cigars
to celebrate special occasions, like the birth of a child, a
graduation, a wedding, or the return home of a soldier. When
you walk into a cigar store, our aisles are adorned with
beautiful cigar boxes representing the various brands. When
every cigar box has a huge health warning sticker covering a
third of that box, our stores will look like you are walking
into a dangerous minefield rather than a beautiful humidor.
If a cigar store has a private label brand that bears the
name of the store, the FDA regulation states that all printed
and electronic ads carry the same health warnings covering one-
third of the ad. So essentially, if we run a full-page ad in,
let's say, Golf Digest, we would essentially be paying for one-
third of that page to advertise a health warning. This is
forced, compelled speech and is currently being challenged in
court.
The manufacturer's cost of constituent testing and
submitting the FDA's substantial equivalent applications will
cause most smaller cigar manufacturers to go out of business.
For many brands, the testing alone will cost more than the
gross annual sales of the boutique brands. One of the most
appealing aspects of the cigar industry is the diversity of our
suppliers. This is an industry where literally a cigar maker or
tobacco farmer could escape communist Cuba on a raft and start
a cigar company in America. This is a true scenario; I've seen
it happen. FDA regulations will narrow our manufacturers down
to just a few suppliers, big multinational companies that can
afford an army of lawyers to navigate the complicated rules of
the FDA.
One of the main arguments for FDA regulation of tobacco
centers around youth access. As a premium cigar retailer and a
father, I can tell you firsthand that kids aren't coming into a
cigar shop trying to buy premium cigars. It hasn't been a
problem in the past and it isn't a problem now. A recent study
by the New England Journal of Medicine that was funded by the
FDA proves this with ``no discernible percentage of youths
frequently using traditional cigars'' and less than 1 percent
of all youths had ever used a traditional cigar within the last
30 days.
It is important to note that even before the FDA had the
authority to regulate tobacco, cigar retailers have been
federally regulated by the ATF and state regulated by the
Division of Alcohol, Beverage & Tobacco. At any time a Federal,
state, or local law enforcement agency can run a sting
operation where they send in a minor and attempt to buy
tobacco. Premium cigar retailers are responsible vendors and no
one wants to sell tobacco to a minor.
Lastly, I'd like to talk about the impact of FDA
regulations on the American cigar tobacco farmer. No other
group in the agriculture industry has been hit as hard as the
American cigar tobacco farmer. At one time, Florida was the
second largest grower of premium cigar tobacco in the U.S.
After 150 years of tobacco growing history, the last crop was
planted in 1977 in Gadsden County, Florida. In Connecticut,
which used to be America's number-one grower of Connecticut
Shade tobacco, only one farm is left that still grows Shade.
Connecticut and Pennsylvania still grow broadleaf premium cigar
tobacco wrappers, but I can tell you firsthand FDA regulations
will jeopardize the future of this industry as well, as new
cigar blends get harder and harder to introduce and as the
industry is forced to consolidate due to FDA regulations. In
2013, we started a small 20-acre cigar tobacco farm in
Clermont, Florida to bring back an American farming tradition.
However, if premium cigars are not exempted from the FDA
regulations, this too will likely fade away.
In closing, I appreciate the efforts of Senator Rubio,
Representatives Kathy Castor, Bill Posey, Gus Bilirakis, and
the hundreds of other representatives that have co-sponsored
legislation in the past to exempt premium cigars from FDA
regulations. However, this issue must get resolved quickly as I
am watching a very small industry running out of the financial
resources that it takes to fund lawsuits against the FDA, the
legal expenses to navigate the existing complicated FDA
regulations, and the costs of lobbying in D.C. to save this
historic industry.
Thank you.
[The prepared statement of Mr. Borysiewicz follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Rubio. Thank you.
Mr. Newman.
STATEMENT OF DREW NEWMAN, GENERAL COUNSEL AND GREAT-GRANDSON OF
THE FOUNDER, J.C. NEWMAN CIGAR COMPANY
Mr. Newman. Thank you very much. Good afternoon, Mr.
Chairman and members of Congress.
In 1895, my great-grandfather, J.C. Newman, founded our
family business. Four generations and 124 years later, we are
the oldest family-owned, premium cigar company in America.
Right here in the Cigar City of Tampa, we proudly roll
premium cigars the exact same way that my great-grandfather did
100 years ago, both by hand and by hand-operated, antique
machines. We have 136 hard-working and dedicated employees.
Premium cigars are an old-world, handmade craft enjoyed by
adults infrequently for celebration and relaxation, and they
are just like fine wines. Just as the soil and sunlight and
wind and rain can cause a grape grown in California to taste
differently than a grape grown in Oregon, the same is true of
premium cigar tobacco. As with wines, certain vintages or years
are better than others. And aging both wines and premium cigars
enhances their taste. Many winemakers blend different grapes
together to create unique tasting wines. As a cigar maker, we
do the exact same thing with premium cigar tobacco. We harness
the natural variation in premium cigar tobacco to make
interesting blends for low-volume, limited-edition releases.
None of this is standardized. None of this is written down.
There is no formula. It is not a science. It is an art and
tradition that has been passed down from generation to
generation to generation.
Premium cigars are just 3 percent of the American cigar
industry and are 0.7 percent of the tobacco industry as a
whole. We are a tiny sliver of the tobacco world.
We are deeply concerned that the FDA is regulating our
small industry out of business by treating our handcrafted,
premium cigars like cigarettes.
In 2016, FDA adopted a one-size-fits-all policy for tobacco
and applied the same massive and costly regulations developed
for cigarettes onto our handcrafted, premium cigars. This
approach simply does not work for several reasons.
First, to create a new cigar, FDA requires it to be
substantially equivalent to one sold 12 years ago in 2007. The
process laid out by FDA is so exhaustive that it is expected to
cost $250,000 for a single new cigar. Moreover, the concept
simply does not work either, because no two premium cigars are
alike, and they change over time. A cigar that was rolled in
2007 tastes different today than it did when it was first
rolled a decade ago, just like fine wines mature over time as
well.
FDA is requiring us to redesign our packaging to apply
massive health warning labels that would turn beautiful stores
like Jeff's into walking billboards for compelled speech.
FDA is requiring us to test every new type of cigar. Not
only are there no standards or machines or ways for testing
premium cigars, but costs so far, at $18,000 per size, are just
enormous. This is particularly a problem because whereas
cigarettes are made in large volumes and are standardized,
handcrafted premium cigars are made in small batches, just like
craft beer.
We are paying thousands of dollars a day in user fees so
that FDA can regulate us.
As Chairman Rubio mentioned, current estimates are that it
will cost our historic cigar factory here in Tampa around $30
million just to comply with FDA regulations, which is why FDA
itself estimated that regulation would force up to 50 percent
of the American cigar industry to go out of business.
Unlike Big Tobacco, the American premium cigar industry is
made up almost entirely of small family businesses like ours.
We sell our premium cigars to 3,000 specialty cigar retailers
all across the country. These are mom-and-pop, small family
businesses with just a handful of employees. Our boutique
premium cigar industry simply cannot absorb the cost of
regulation.
In 2009, Congress gave FDA authority to regulate tobacco
for two reasons: one, to address youth usage; and two, to
address addictiveness. However, FDA's own research has found
that children simply do not choose to enjoy premium cigars; and
two, the premium cigar consumer, the typical one, consumes 1.7
premium cigars per month. That is not a frequency consistent
with addiction.
We do respect FDA's important mission and the important
work that it does to protect public health. However, there is
no scientific basis for the FDA to regulate premium cigars.
We are extremely grateful to Chairman Rubio and to
Congresswoman Castor for their leadership in reintroducing
bipartisan legislation to exempt premium cigars from FDA
regulation. The entire premium cigar industry, including the
Cigar Association of America, Cigar Rights of America, and the
International Premium Cigar and Pipe Retailers Association,
supports exemption.
Mr. Chairman, our one goal as a family business is to
continue my great-grandfather's legacy and hand-roll premium
cigars in America for another four generations and 125 years.
We are not here today because we want a handout or tax
breaks from the government. We simply want the government to
allow us to continue this tradition for another 100 years.
Thank you so much for giving us the opportunity to share
our story, and we're very grateful. We're happy to answer any
questions.
[The prepared statement of Mr. Newman follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Rubio. Thank you.
Thank you all for being here.
I'm going to recognize Congresswoman Castor for her
questions.
Representative Castor. Thank you, Mr. Chairman.
Thank you all for your testimony today.
For Mr. Newman and Mr. Borysiewicz, how many jobs are at
stake here? You're running a factory, and I've met some of the
hard-working employees, many who have been employed there for
how long?
Mr. Newman. Our average age--we have 103 employees here in
the Cigar City of Tampa. Their average age is 49, and the
median tenure is over a decade. We have long-term employees,
and they're like a family to us. We're a family business, and
that's how the cigar industry here in Tampa has developed over
the last 100-plus years.
Mr. Borysiewicz. For us, we have 122 employees, and we have
fellow retailers all across the country, and I think that's an
important part of this, that this is a national issue. My
colleagues are as nervous as I am, whether you're in New York
or California or Washington. The path forward, we can see that
the path forward is a long-term--it's just going to clamp down
on this industry where long term it's going to wither on the
vine, it's going to go away.
I think it's important to note, this industry back in the
`70s had a big problem too where it was very small. Because the
product is not addictive, it's an industry that can get
squeezed out of business very easily.
Representative Castor. Thank you.
Chairman Rubio. Congressman Bilirakis.
Representative Bilirakis. Thank you.
Mr. Newman, you mentioned in your testimony there is no
scientific basis for FDA to regulate premium cigars. If you
could elaborate, I'd appreciate that.
Mr. Newman. Sure. Thank you very much, Congressman.
FDA's mandate in the Tobacco Control Act was to address
youth usage and to address addictiveness, and FDA's own
research on patterns of use for all tobacco products shows that
there is use by children of other tobacco products. However,
FDA's own research has shown there is an insignificant use of
premium cigars by children.
We know this anecdotally as cigar makers, but to have FDA's
own data showing that kids don't smoke cigars we think is very
powerful. And then on top of that, Dr. Rodu's research that he
mentioned showing that the health effects of premium cigars are
limited and vastly different than cigarettes, in large part
because our typical consumer smokes 1.7 premium cigars per
month for celebration, relaxation, weddings, birthdays. It's
just a very different approach.
So the FDA's decision to take a one-size-fits-all policy
for tobacco products simply doesn't work for our handcrafted
premium cigars.
Representative Bilirakis. Thank you very much.
I thought we were taking turns. Oh, she's leaving?
Chairman Rubio. Yes, she had to depart. She had another
event.
Representative Bilirakis. Oh, okay. Go ahead. You go, and
then I'll go again.
Chairman Rubio. No, no, go ahead. I have to be here until
the end.
Representative Bilirakis. Okay, very good.
Again for Mr. Newman, we all recognize the issues with
youth access to tobacco products and would like to work with
FDA and other stakeholders to curb youth access, and I
understand the age is 18, as the Senator said, and the
legislature is thinking about 21.
Who is your typical customer? Again, you did say this. You
may want to elaborate, if you'd like. How does their behavior
differ from non-premium cigars?
Mr. Newman. Thank you, Congressman. You know, the FDA has
done some really tremendous research on adult and youth tobacco
users, and the FDA's own research has shown that the typical
age that an adult first smokes premium cigars is 24.5 years
old. These aren't teenagers. These aren't kids. These are young
adults, and that's why there is not a youth access problem with
premium cigars, as there may be with other types of products.
Representative Bilirakis. Yes, and they're more costly,
aren't they, the premium cigars?
Mr. Newman. Absolutely, Congressman. Our typical premium
cigar retails for $5, $6, $7, $8 or more, depending upon the
state and the tax levels, and they're sold in adult-only
premium cigar shops. So from the marketing to the branding to
the packaging to how these cigars are put together, they're
just completely different than every other type of tobacco
product, and we need the FDA to recognize that they're
different.
Representative Bilirakis. Thank you, Mr. Newman.
Question for Dr. Rodu. Recent studies have shown a dramatic
increase in youth usage of e-cigarettes and vaping products--
you hear it all the time--many of which come in youth-appealing
flavors. This is a real concern.
Do you believe the FDA's inclusion of premium cigars in the
deeming rule detracts from its ability to focus on these
products?
Dr. Rodu. Congressman, no, I don't. I don't. There's
clearly increased use of vaping products among teenagers. I
actually just downloaded the NYTS, the National Youth Tobacco
Survey data last week and published a blog on that use.
It's interesting because the FDA portrays it as an
epidemic. However, most kids get tobacco products, not premium
cigars but other tobacco products from their social sources,
their friends, their family, and others. They don't buy them at
retail, and the FDA has been actually obsessed with the youth
issue as a retailer's issue.
So, no, they're not buying premium cigars, and there's no
issue here whatsoever.
Representative Bilirakis. Okay, very good.
Mr. Borysiewicz, in your testimony you briefly touched on
the detrimental downstream effects of the deeming rule on other
stakeholders like our farmers in Florida and nationally. Could
you expand on that? I know that you touched on it, but expand
on it. That's very important.
Mr. Borysiewicz. There's a lot of pressure on American
tobacco farmers because of cost. It's very expensive to grow
cigar tobacco. It's totally different than cigarette tobacco.
It's not a mechanized harvest. It's all hand labor, and it's a
long tradition of doing it. In Connecticut they've been doing
it over 150 years, as well.
So there's huge external pressure to be able to compete
against countries like Ecuador, Nicaragua, Honduras and the
Dominican Republic, which are the primary growers of that
tobacco.
So as this industry faces the additional costs of FDA
regulation, the owners of these companies or the folks in
Europe that own the bigger ones, they're looking at ways to cut
costs every way they can, and it's a lot cheaper to go ahead
and buy wrapper from Ecuador than it is from Connecticut.
So you're seeing these cost-cutting measures, and you're
seeing--what's really important on premium cigars is that new
brands are critical to this business, and I'll use it in
comparison, let's say, to the liquor business. When I was a
kid, the popular brands were Seagram's 7, Canadian Club. Those
brands, I don't even know if they make them anymore. You have
to have new products that continue to keep the interest of the
consumer, and if you don't have those new products that are
introduced into this industry, you will eventually--it becomes
boring and folks just aren't going to come in and buy these
different cigars, and there's no opportunity. If you're growing
Connecticut broadleaf tobacco and there's no new brands that
are ever going to use it, these guys are going to get squeezed
out. They're going to get squeezed out because they can't grow
it as cheaply as you can grow it in other countries.
Representative Bilirakis. Okay, thank you.
One last question for Mr. Maresca. SBA's letter notes FDA's
estimates that approximately 90 percent of the entities
affected by the regulations are small businesses. We know that.
Do you believe if the regulations remain in effect there's
likelihood that what remains of the industry could end up
consolidated under a few large companies rather than many small
entities, as is the case currently?
And again, are we going to get shut out? These big
companies might not even want to produce these cigars because
they're so expensive under these regulations.
But if you could comment on that, Mr. Maresca, I'd
appreciate it.
Mr. Maresca. We believe that there is that danger. One of
the costs that FDA failed to consider was the cost to these
small businesses. Even if they could comply with the premarket
approval process and the substantial equivalence tests, they
generally would have to hire someone from outside, a
specialist, attorneys, just to get through the application
process. They're not set up to do that. Bigger companies are.
They can do that in-house, or they have people on retainer who
do that. So, sure, that's a danger.
Representative Bilirakis. Thank you very much.
I yield back, Mr. Chairman.
Chairman Rubio. Thank you.
Let me start first with the industry, Mr. Borysiewicz and
Mr. Newman.
First of all, I think somebody cited that the average cigar
smoker was smoking 1.7 cigars per month. I think it begs the
question, why are they letting that 0.3 percent go to waste?
[Laughter.]
Mr. Newman. It's a great question.
Chairman Rubio. I just don't know how to smoke right,
that's what it is.
[Laughter.]
Mr. Newman. Mr. Chairman, the frequency of cigar usage
changes by the season. In the wintertime when it's colder, our
consumers smoke fewer cigars because up north it's colder
outside----
Chairman Rubio. And no one will let you smoke inside their
house, cigars especially.
Mr. Newman. That's right, that's right.
Chairman Rubio. That was my second question. How do you
achieve that? But I don't know the answer to it either.
But all kidding aside, there was a comment made--maybe I'll
start with Dr. Rodu because the comment was made about the
uniqueness of this product.
I think one of the reasons why you see a lot of concern--
I'm the father of adolescents, and an adult daughter now at 19,
and I've seen this phenomenon of vaping. It's caught on fire,
everybody is seeing it. It's all over the place. And one of the
concerns about it is that it delivers a high volume of nicotine
very quickly, and nicotine is addictive, a very addictive
substance. And the concern is not the vaping per se, although
there's some additives that have been brought into this vaping
issue that are problematic, meaning non-vaping material that's
been put in there.
But in addition to it is once someone is that addicted to
nicotine, they have to find other sources to get the same
amount of nicotine, and the concern is that people migrate over
to some of the other products, et cetera.
But cigar smoking, does it carry the same risks? We've seen
the health outcomes, but what about the addiction aspect of
cigar smoking? Because it does deliver, I imagine, a high
content of nicotine, but it does so--but not equivalent to 20
cigarettes, or 25 a day.
I want you to comment, is there evidence in the research--
did you do research into the addiction portion of it?
Dr. Rodu. Yes, there is. To put it simply, there's no
better and more addictive product than cigarettes. The smoke's
pH and its characteristics for deep inhalation provides a rapid
nicotine impact on the brain. There's no better way to deliver
nicotine.
Cigars, on the other hand, are----
Chairman Rubio. Because it's inhaled into the lungs and
into the bloodstream, as opposed to cigar smoke where, if you
inhaled it into your lungs, you wouldn't last long. It's not a
pleasant experience. You hold it in the mouth and you exhale
it. You may be consuming, or I should say you may be producing
a high amount of nicotine, but it's not going directly into
your lungs and therefore into your blood.
Dr. Rodu. That's correct. Cigar smoke is puffed, and there
is some absorption across the lining of the mouth and upper
airway, but it's not nearly the same impact as with cigarette
smoking.
Chairman Rubio. And therefore we don't see--in your expert
opinion, if you were just a cigar smoker, that's all you did,
and you smoked two of them a day, or let's say 1.7 a month,
would you be a nicotine addict?
Dr. Rodu. You know, nicotine addiction is a very difficult
concept to define. Our discussion groups, they go around and
around about nicotine and----
Chairman Rubio. So let me ask it a different way, and I
apologize. This might be exactly what I'm trying to get at.
Could smoking 1.7 cigars a month become a gateway to
cigarettes? Is there evidence that cigar, premium cigar smoking
becomes a gateway to cigarette smoking?
Dr. Rodu. No, not at all.
Chairman Rubio. Okay. Let me go to the industry real quick
on this. The rule was designed to test a product. That's the
other hard thing to explain to people who don't understand
about cigars, because even within the product there can be
great variety, right? So it's not like something that's
produced in a factory which is standardized and machine
produced and with all kinds of additional artificial additives
to sort of make it almost the same. You can open two different
boxes of cigarettes, but with the same label you're going to
get a very comparable product.
With cigars, you can be buying the same company's brand
with the same product, meaning you have the same band on it,
but one is from two years ago and one is from this year, and
there can be great variety given the fact that it is not a
processed product. It is in many ways more like wine, dependent
on weather conditions, soil conditions, and every other thing
that may have happened in that particular year. I mean, you can
explain, both of you I guess, how much variety there is, even
among the same box, potentially even in the same year, but
certainly across periods of time.
Mr. Borysiewicz. I'll start with that on the growing side,
as a grower of premium cigar tobacco. One of the reasons you
have variations also is just the position on the plant that the
leaf comes off of. That's why I was saying that cigar tobacco
harvesting is not mechanized. It's done by hand. It's done the
same way it was done 200 years ago. So you can take a leaf off
the bottom of a plant; it tastes different than one that comes
off the top of the plant.
We have variations just in the field, meaning that if you
can have one section of your field that may have better
drainage than the other section, these plants have variations
in them. And because cigar tobacco is not thrashed, meaning
it's not ground up and homogenized, meaning you're not taking
tobacco from all over and just kind of shredding it and
combining it, there is very much uniqueness in each leaf, and
you will have some variation in the cigars.
Manufacturers try to keep it somewhat consistent, but I can
tell you there is definite variation, and that's one of the
problems the FDA has had when they're trying to test these
cigars. They're all over the place, and that's one of the
things they can't get their hands wrapped around because
they're trying to use the same type of regulations that were
designed for cigarettes. Cigarettes do use tobacco that's very
consistent because you're mixing thousands and thousands of
pounds together, and there's casing what's called, where you
add things to the tobacco.
When you take cigar tobacco--I can tell you right now what
comes out of our farm, nothing but dried brown tobacco leaves.
There's nothing added to it. It's simply moisture and humidity
during the day, in the morning that we use so we can pack
tobacco, but there's absolutely nothing added to that.
Mr. Newman. Jeff is right. We harness the natural variation
to create unique blends, and not only within the same fields
and within the same plants is there great variation, but from
season to season or crop to crop, depending upon the amount of
wind or rain, which give great variances. So with the FDA
trying to create a scientific standard and holding our products
to a manufacturing--like when somebody manufactures Tylenol,
it's just inconsistent because of the extreme natural variation
that we use in premium cigar tobacco.
Chairman Rubio. I'm sorry to inform you but since you held
up that cigar, we're going to have to seize it as evidence.
[Laughter.]
Mr. Newman. Happy to submit it.
Chairman Rubio. We've got to follow the rules.
[Laughter.]
On the testing side, is there such a thing as a standard
test to test cigars?
Mr. Newman. Not at all, Mr. Chairman. There's been great
science developed over decades for testing cigarettes, and the
reason is because cigarettes come in just a couple of standard
sizes, and they're consumed the same way.
We make cigars that are long, that are short, this one has
a torpedo end on it, some are thicker, some are thinner.
There's just an enormous variety in cigars because premium
cigars are an all-natural, handcrafted product. So unlike
cigarettes, there are no machines to test products like these,
and there are no standards for them to address the variability
in the size and the length.
An FDA study three years ago showed that there is enormous
variation in how much of a cigar a consumer smokes. Some people
will smoke half of it; some people will smoke all of it; others
smoke an inch. So trying to standardize that in a scientific
way to create a rigorous testing regime just doesn't work and
hasn't been developed for premium cigars like exists for other
types of tobacco products.
Chairman Rubio. I guess what I'm getting at is, if even
within the same brand and product there isn't uniformity the
way there is in a mass-produced product, and there doesn't
exist a test that can accurately measure these products in
general, not to mention because of these varieties, are we
talking about a rule that can't even be complied with? Even if
you wanted to comply, could you even comply? Could anyone
comply with the rules as currently written, unless you went to
machine-produced cigars?
Mr. Newman. You're absolutely right, Mr. Chairman. There's
no way to comply with the rule as developed. My grandfather
used to tell me that the reason why we've been in business so
long is because we get along, we follow the rules, we don't
take any shortcuts, and if there was a way for us to comply, we
would do our very best to comply. But what keeps us up at night
is that the FDA is imposing requirements on us that we have no
way of being able to comply with, and that's what's so scary
about the FDA regulation on premium cigars.
Chairman Rubio. I guess the way you both described it, it's
apparent that both the cost and complexity of compliance means
that the small businesses that largely comprise this industry,
that there is no way that they would be able to comply with
this. So to the extent that the industry--I'm sorry; you were
going to add?
Mr. Borysiewicz. Yes, I want to add to that, because one of
the interesting things that I've seen as a retailer, when I
talk about the big multi-national companies that have an army
of lawyers and the funds to do this, they have submitted what
the FDA is requiring, and there's a very good chance that what
they're even submitting--because the FDA's testing does not
work. So what happens is the smaller companies that could never
afford to do this anyway--these guys are sort of in limbo right
now, and it's literally their business--they're taking it a day
at a time. And there's a lot of folks that look at this saying,
you know what, there's always good versus evil and things kind
of work out, and they just feel like there's no way that we're
going to be put out of business by this rule because it's just
so unfair, it's just so undeserved. And a lot of folks are like
Congress is going to save us, somebody is going to step in
because this is so wrong what's being done.
But I'm afraid that--I will tell you one of the quotes that
I heard when I was up in D.C., is that Congress doesn't work
that way. Generally they start needing to see businesses go out
of business before they see something is wrong. There's the
famous words of unintended consequences, and I can tell you
what's happening. The unintended consequences in this business
are going to be the little guy sitting here in Ybor City that
has three cigar rollers, the guy that's got a place in Miami
that has 15 rollers. It's all these little guys that are going
to be the unintended consequence, and we've got to fix this
because it's just not right.
No one came to this country, or no one started a business
thinking they were going to lose it because of the United
States Government, and that's exactly what's happening right
now, that's what's going through everybody's mind. The
government is not supposed to be the enemy of a small business,
or of any business.
Chairman Rubio. So, who will be in business? Are products
that are made abroad covered by this?
Mr. Borysiewicz. I'll answer the question. The guys who
will be in business are the ones who have the deep pockets, the
ones that can figure this stuff out. Listen, when you even read
what is required--I mean, I'm educated, but I read what the FDA
is asking, and I don't understand it. Half of our industry
doesn't understand it. We have trade association meetings and
we ask questions: Well, what does this regulation mean? What
does this do? Just last week the FDA put out another rule
supposedly clarifying the other one that no one understood.
[Laughter.]
Nobody figures this out. They don't even know what's going
on. So what's happening is you're trying to run a business and
you keep saying in your head, do you invest the money in this
factory, do you invest the money building this store? Imagine
trying to run a business when you just don't know what's going
on, and that's the biggest problem that's facing us.
Chairman Rubio. As you understand it, or the general
counsel for a company, the products that are being manufactured
abroad, will they have to meet the same regulation?
Mr. Newman. They will eventually. The regulation process is
being phased in. Domestic manufacturers right now are required
to register their brands and report ingredients. Those
requirements have not yet been extended to foreign
manufacturers yet. So the FDA, in effect, has a higher standard
for domestic American small businesses making premium cigars
than it has on foreign factories.
Mr. Borysiewicz. I want to add to that, though. There is a
little bit of a curve ball in the sense that if the embargo
were to end with Cuba, and if Cuban cigars were brought into
the United States, none of those were on the market before
2007, so none of those are grandfathered cigars. The question
is whether they can get through the premarket approval process,
which is what a lot of the biggest problem is.
So what I think, if the embargo were to end today, the way
the FDA regulations are, those brands, I don't see how they can
even enter the country because they haven't registered with the
FDA and are not a grandfathered brand.
Chairman Rubio. So, in essence, there would be no premium--
unless someone is willing to undertake this price and go
through that, there would be no premium cigar industry in the
United States. It would become almost a contraband product.
Mr. Newman. I think so, Mr. Chairman. We're such a tiny
industry. As you pointed out, we're 0.7 percent of the tobacco
industry in America right now. It would be very easy for the
bureaucracy in Washington just to smoosh us like a bug.
Chairman Rubio. All right. I want to get real quick to the
health part of it. Let me ask you, Mr. Maresca. I'll start with
this. Did the FDA work with the Office of Advocacy prior to
finalizing the regulations?
Mr. Maresca. Prior to the publication of the Notice of
Proposed Rulemaking in 2014, we had minimal contact with the
FDA.
Chairman Rubio. I'm sorry. Minimal?
Mr. Maresca. Minimal.
Chairman Rubio. So what data did you provide them when you
ultimately did have that contact?
Mr. Maresca. The most information we were able to provide
FDA was in our comment letter. We have offered the resources of
our office since that time to help the agency acquire data and
help the agency to use that data in any future rulemaking.
That's the extent of our contact.
Chairman Rubio. Do you have any indication that the FDA
considered the feedback that you provided?
Mr. Maresca. I think the rule speaks for itself, Senator.
The agency declined to exempt premium cigars even though they
did suggest that they were considering exempting premium
cigars.
Chairman Rubio. So while the FDA's proposed rule considered
exempting premium cigars, the final rule suddenly included
them. As an expert on regulation, do you think this proposed
rule provided adequate notice to the industry that was affected
by the rule?
Mr. Maresca. Well, it's a unique industry, as you know, and
as Mr. Borysiewicz said, many people in the industry relied on
FDA or somebody to save the industry. I don't think that the
notice was quite enough, and I think many in the industry,
especially many smaller members, were led to think that they
were not going to be regulated.
Chairman Rubio. On the health care aspect, I'd like to go
back to that. On the health cost of it, I guess 0.7 percent of
all smokers are premium cigar smokers. Of that amount, only 7
percent of that small less than 1 percent of all smokers, only
7 percent of that amount are daily users, meaning one or two a
day.
So if you can just repeat what you went through in your
testimony, what do we know about the health impacts of someone
who smokes cigars, not concomitant with cigarettes or other
products? Do we have information on that subset and what the
health impacts are?
Dr. Rodu. One of the problems with studying a very rare
behavior is that you don't have large numbers, so you have to
combine populations from many different places. That's been
done to a certain extent, and yet the results of those studies
have not found any or hardly any significantly elevated risks
among those cigar smokers. So the public health impact of low
prevalence and low disease risk is miniscule.
Chairman Rubio. In your opinion, are the numbers we know
about that user, if any other product on the market didn't
involve the word ``tobacco,'' would it be something that we
would be regulating given the figures that you're seeing?
Dr. Rodu. Not a chance.
Chairman Rubio. Then I would imagine that if the numbers
are negligible among daily users of the product, which
represent a very small sliver of a very small sliver of all
smokers, it would stand to reason or perhaps the data says that
people that smoke less than once a day, including the average
1.7, to the extent this product causes harm--it's
scientifically valid to argue that if something is harmful, the
more you use it, the more harmful it is. The people who are
smoking less would be having less of a problem?
Dr. Rodu. In my review of the FDA study, I found virtually
no impact from one to two cigars per day. That's what they
defined as the lowest cigar consumption. If you smoke higher
numbers, yes, the risks tend to go up somewhat. But at one to
two cigars a day, there was virtually no health impact. So
smoking less is going to be essentially not measureable.
Chairman Rubio. Let me ask you, are there differences in
health outcomes between premium cigar smokers that have never
smoked cigarettes and those who have?
Dr. Rodu. Generally speaking, the data is not that
detailed.
Chairman Rubio. So we don't have the detail. My sense of it
is that, as noted in your testimony, 40 percent of premium
cigar smokers have never smoked cigarettes. So the notion that
you have a significant percentage of this, again, very small
sliver of a very small sliver, it's not a supplement to their
cigarette smoking. It's a unique habit unto itself.
Dr. Rodu. That's correct.
Chairman Rubio. Do you have anything else?
Representative Bilirakis. Well, again, the basic question
is give me a definition. I know that we know. But, first of
all, a definition of a premium cigar. And secondly, go through
the process, what does it take to produce a premium cigar as
opposed to a non-premium cigar, and the cost process as well.
And why do folks only smoke two a day, as opposed to a pack of
cigarettes a day? Is it the cost solely? Give me your opinion
on that.
Mr. Newman. Thank you, Congressman. Well, to your first
point, I think the universally agreed upon definition of a
premium cigar is in Senate bill 9. It's in Chairman Rubio's
bill that defines the premium cigar as a handcrafted product.
But we roll cigars today just like my great-grandfather did 100
years ago, and one of the reasons why our consumers smoke so
few of them is because they use them for relaxation and for
enjoyment, whether playing a round of golf or going fishing or
in a fire pit in the backyard.
We live in such a fast-paced world these days, Congressman,
with this hearing being live-streamed over the Internet, that a
premium cigar is one of the few things you can light up and
enjoy just for relaxation. You can't rush enjoying a cigar.
You've got to sit down and be able to just take a few minutes
and slow down and relax, and it's a great way to do that. But
our consumers, given the hectic pace of life these days, can't
do that every hour, every day, every week. It's an infrequent
enjoyment.
And something else that I really appreciate about premium
cigars is that they transcend all barriers. If you walk into
one of Jeff's shops and you pick up a handcrafted premium
cigar, and you sit down and light it up, it doesn't matter your
race, your age, your background, your education, your religion;
everyone is friends. It's a social relaxation tool. It's a way
to slow things down.
And the fact that this is a handcrafted product on the team
in your field, Jeff, who plant the tobacco and grow and harvest
it and actually cure and age and ferment and sort it and roll
it and band it and box it, from start to finish, it's all
handcrafted, and there just aren't many things left in the
world like that anymore, and that's what makes premium cigars,
I think, so special and what a great thing to have, to be able
to continue this tradition for relaxation and celebration.
Representative Bilirakis. Okay. Let me ask Mr. Borysiewicz,
are you in the business of non-premium cigars as well?
Mr. Borysiewicz. No, and that's a great question because
there are two categories. The large category is volume of
cigars, what are called mass-market cigars. That's the term in
our industry. Mass-market cigars are the ones you see in the
convenience stores, drug stores, usually two in a foil pack.
Those don't require humidification. You don't have to cut the
end off of it. It's not a natural wrapper on the outside. The
outside of that leaf is what's called homogenized tobacco,
meaning it takes--it's sort of like when you make paper out of
wood pulp, except you're making the wrapper out of tobacco
instead of paper.
So those cigars that are sold in those convenience stores
and drug stores, that's a big part of the industry when you use
the general word ``cigar.''
Premium cigars are the ones that are sold typically by your
tobacconist in your neighborhood cigar shop. They require to be
humidified. You need to keep them in a humidor, use a cigar
cutter to cut the end. They burn usually for 45 minutes to an
hour-and-a-half. They burn real slow, and the reason being is
that the wrapper is a whole leaf of tobacco. When I talk to you
about why it's so expensive to grow tobacco that goes on the
outside of the cigar, let me tell you, as a farmer it is
extremely hard to grow a leaf and get it through the entire
process where a bug doesn't eat a hole in it, where someone
doesn't put a finger through the wrapper, or it doesn't have a
stain on it.
So the wrapper is the most expensive part of the cigar, and
that's what we call a natural leaf wrapper. It's literally a
piece of leaf that's wrapped around it. So when you go into a
cigar shop, we sell only premium, handmade cigars. The folks
that walk in--first off, you can't compete anyway with a 7-11
or something like that that sells the mass-market cigars.
That's a totally different industry. So we're selling premium
handmade cigars. What I think is interesting is it's two
totally different customers, two totally different experiences,
and two totally different prices.
Representative Bilirakis. What about the health risks? Are
they the same? Anyone can answer that.
Mr. Borysiewicz. The other thing is that size is important,
too. So one of the phenomena that happened in the industry,
they have these filtered cigars too. They're classified as
little cigars in the filtered cigar. That's a different product
too that is not the same as what we call premium cigars. You
don't inhale a premium cigar, and they're just totally smoked
for different reasons.
Dr. Rodu. It's really not about the smoke. It's about how
they're used. Disease risk is based on dose--that is, how much
you consume--and duration, how long you do that. Premium cigars
are just consumed in an entirely different manner than machine-
made cigars and manufactured cigarettes.
Mr. Borysiewicz. There's one more clarification I'd like to
bring up, too. The mass-market cigar category is not driven by
new brands as much as the handmade cigar. If you walk into our
cigar store, I literally have over 1,000 different brands, over
1,000. So when you walk into a 7-11 and you look at the slots
where the mass-market cigars are, you might see 25. So it's a
totally different industry. And of the 25 of those mass-market
cigars, they're generally produced by three companies.
So that's why I say those guys have the resources and the
lawyers and everything else to work through that. I mean, they
still have issues to work with the FDA, but it's totally
different when you're looking at an industry that sells
billions of units and there's the money that they can handle
regulation. The big difference is the premium cigar industry is
tiny and it cannot handle it financially, and honestly they
can't figure it out.
Chairman Rubio. That's important. I'm sorry to interject,
but the products you just described is what you'd see at a gas
station, right? I mean, I've seen some gas stations that have
the humidor, but you're talking about the gas station that has
a box with three or four what look like cigars, long and thin.
I don't want to attack any brand, but Dutch Masters or
something like that, these little things that are out there
that are mass manufactured, people may think that's what we're
talking about here.
Mr. Borysiewicz. That is not what we're talking about.
Chairman Rubio. What we're talking about here is the
premium cigar that is sold either as a unit in a box or
individually in a cellophane wrapper. These are the practical
things about cigar smoking. If you're not a cigar smoker, you
don't know. Number one, the time it takes. It does not lend
itself to quick usage. I mean, it's not like a cigarette that's
done in X number of minutes. You can't just go out on the
corner and puff a cigar. Depending on the cigar, and depending
on how often you puff on it, it could take anywhere from 35
minutes to an hour-and-a-half, if you're doing it the right
way.
Second, these things have to be stored. You can't just put
them in a box or put them in your pocket. If they're not
stored, over time, because they're a natural product, it dries
out. You can't leave them in your car. Not everybody has to
have one of these expensive humidors, but you can't just leave
this stuff laying around. So there's care involved in it.
And that's why I wanted to ask. In your time just in the
retail side, when was the last time you had someone 17 or 16
years old come in and try to buy a box of premium cigars for
themselves?
Mr. Borysiewicz. I would say it's never happened. For
example, this box of cigars right here is $250, okay?
Chairman Rubio. We will have to seize that as well, by the
way.
[Laughter.]
Mr. Borysiewicz. If you're a kid, do you want to spend $20
on Fortnight or whatever these guys are playing, or do they
want to go try to buy a premium cigar?
I'll tell you the other thing that's true, especially in
our cigar stores. We have such a great group of folks that
enjoy these cigars, they come from all walks of life. If you're
a college graduate, sure, go put your profile on LinkedIn. But
you know what? Go hang out at the cigar shop, because you're
going to meet some real interesting people there. These are
folks that own businesses. These are folks that are
politicians, industry leaders, community leaders.
I run Corona Cigars. This is a very interesting phenomenon
that we do, that if a child were to see their father sitting
outside a Corona Cigar store smoking a cigar, that they
shouldn't be ashamed. This is an environment where adults are
gathering, and I call it the modern-day coffee shop, with the
exception that our customers, instead of sitting there with
their faces buried in a cell phone or a laptop, they're
engaging in the lost art of conversation, and that's what goes
on in the cigar shop.
So if you even had a kid that came in, that walked in,
looked like he was a kid, chances are there's probably a
customer who is going to stop him and say, hey kid, what are
you doing in here? It's just not the environment for that. This
is not a 7-11 where you're going in to buy a milkshake or
whatever, a Slurpee. Cigar shops are a very traditional type of
business that cater to an adult crowd, and it's just not
attractive to a kid.
Chairman Rubio. The statistics bear this out, do they not?
In studies that were done? Dr. Rodu, they found that among
youth, the consumption of premium cigars, they couldn't even
score it.
Dr. Rodu. That's correct. It's very rare among children.
Chairman Rubio. You both have been interacting, both from
the association and individually from business, with the FDA
and the regulators. All this has been presented to them. What
have they said to you as justification for this application?
One of the things they cannot argue, in my view, is that they
don't have the legislative flexibility to reach a different
conclusion. They most certainly do. In fact, the regulation
calls for them to provide the appropriate level of regulation,
appropriate to the risk of the intention of the law.
How are they--what is their justification?
Mr. Newman. Mr. Chairman, we've had the privilege of
meeting with the FDA many times, met with Commissioner Gottlieb
and his staff over at the Center as well, and I actually like
them, and I like the FDA. They make sure that the water we
drink in bottles is safe and the sandwiches we eat are safe,
too. And when we've talked to them about premium cigars, we had
a senior official tell us, well, you're not the problem, we're
not worried about you, but the agency has limited resources,
and they've been focusing their resources on other areas, such
as e-cigarettes, that are of greater concern to them.
So we've been left in limbo for years waiting for them to
just recognize that our issue is serious to us and to America's
handcrafted historic premium cigar industry, and we need
relief. They just haven't had the capacity or the ability to
provide the relief that we need.
Chairman Rubio. But--oh, go ahead. I'm sorry.
Mr. Borysiewicz. I'd love to add to that, and I don't mean
this in disrespect, but I've been dealing with this since 2007.
In my opinion, what's going to happen is we're never going to
see relief through the FDA, ever. And it's sad, and I'll tell
you why.
They understand that we are not the problem. They totally
understand that. But you have to look at the end game if you're
working for the FDA. What happens when you leave the agency?
Who is going to hire you? Big health, big pharma, somebody in
that realm is going to hire you, a drug company. It will ruin
your resume if you are the head of the FDA and you exempted
premium cigars.
I believe that is our biggest challenge, and that's why we
have to have somebody from the business sector, whether it's
OMB, Small Business, Congress, that weighs in and says listen,
this has to be fixed, because I think if we leave it up to
them, we're kidding ourselves. That's just my take on the
situation.
I've been in many of those meetings. They understand what
we're doing. They understand what they're doing is--they're
having a hard time with this. I'm telling you right now, they
can't figure it out. That's why they're re-issuing these rules.
I met with FDA at one of our trade shows and explained to
the lady, who was a senior fellow, by the way, a Ph.D. I took
the cigar apart. My wife was with me and we showed her exactly
what it is, the definition of a premium cigar, the wrapper/
binder/filler, and how they're smoked and everything else, and
she was absolutely amazed. As a matter of fact, at the end she
said it sounds like I should try a cigar myself, it's very
nice.
But I don't believe it's the individuals. I believe it's
the system, and that's why we have to have some correction.
It's not the individuals, but it's the system.
Chairman Rubio. What you've described is the legislative
impediment, and that is, number one, some of the things we're
highlighting here are the reasons why we're having a tough
time, and that is the overwhelming majority of Americans are
not premium cigar smokers. So what they know about premium
cigars is they remember their uncle that used to smoke these or
what they've seen in movies.
I had a colleague of mine talk about--made reference to
pinky rings. I don't know what that has to do with cigars. I
guess he saw some movie where a gangster had a pinky ring
smoking a cigar. And my point is that there are a lot of people
who just don't understand what the product is.
The second is they don't understand the impact that the
rules have, and their view of it is, well, it's just notice
that it could be harmful to your health; what's the big deal? I
don't think they realize some of the unique attributes of the
product. Number one, the testing and all that goes into it.
There's nothing you can comply with. What they're actually
doing is they're going to leave the whole industry to the
people who can comply with it, which is the mass producers.
Number two, part of the overall experience is the
packaging, and the packaging is not conducive to having a third
of the entire box be some warning label with a skull and
crossbones on it, or whatever it may be. Not that people
wouldn't buy it. The premium cigar smokers aren't going to walk
away, but just doing it, just producing it in that way would be
extraordinarily difficult.
So I think our blessing is our curse in this regard, and
that is that because not enough people are familiar with the
premium cigar industry, they're not consumers of it, it's a
unique niche within the broader sector, it's tough to explain
it to people. The safe place to be is against anything that has
to do with smoking and tobacco and everything else.
And then we have interest groups who do great work on
getting people to stop smoking, documenting clearly that
cigarette smoking and tobacco consumption of that kind in
America is a leading cause of premature death, heart disease,
cancer of various types. We know that, and the efforts that
have been put forth by many of these organizations have made a
tremendous contribution. But many of them feel like there has
to be a bright line that they are not willing to cross, even
for something as unique as this, because it could be the
beginning of a trend to rollback others.
So that's why we continue to believe that the legislative
fix reaffirms the true intent of the law, and we've had
difficulty because of a handful of our colleagues that have
made it controversial. When you're dealing with 1,000 issues a
day, it's hard to get people to bear down on this level of
detail like what we discussed here.
We're making progress, but it's been difficult. One of the
resources we tried to use is both manufacturers and the retail
outlets that are in every state in the country, and that have a
presence in every state in the country.
We will continue to work on it because I think what you're
basically telling us here today is if this rule takes place and
goes into effect, there are not going to be any premium cigar
manufacturers, if any, left in the United States, and
ultimately we're going to have a product that eventually, the
only way to consume it is to somehow smuggle into the United
States some product that's made somewhere else where those
regulations are not required to be put on, and the outlets, all
the retail outlets that sell it, there's no way they can
survive. I mean, they won't have any product to sell.
I don't foresee how, not only on the manufacturing side but
on the retail side, I just don't know how any of these places
survive if this goes into effect. Is that Draconian,
apocalyptic vision, is that really where we're headed in your
opinion?
Mr. Newman. Mr. Chairman, you're absolutely right, this is
what keeps us up at night and worries us. We urgently need
relief, and we've been in limbo for so long, and if we don't
get relief, the tradition of handcrafting premium cigars here
in Florida and America and right here in Ybor City is going to
go away like a puff of smoke.
Chairman Rubio. Well, I want to thank all of you here.
We've almost exceeded the time that we promised, but I do want
to thank everybody for being a part of this. I want to thank
all of our witnesses. It's an honor to chair this committee. I
want to thank Congresswoman Castro for coming today. This is
her district. I know this is very important to her. She
sponsored the legislative fix in the House. And to be fair, the
House has actually done this. It's been on the Senate side that
we've had some problems, but we continue to work through it. Of
course I thank my friend, Congressman Bilirakis, for coming
over to be a part of this hearing as well, and to host it here
in Ybor City is a very unique place whose entire history is
tied around this industry and gives character to this
community.
So I'm grateful that all of you were able to make it here
today and the contributions that you've provided. Each of your
testimonies offered an important perspective. The record that
was created by this hearing, people said it was only two
Congress members and a Senator, and they're all with us now, so
what does it matter. But this record is important. It's what we
can point to and we can cite to the staffs of other senators
when we make the push again. We put all of this into the Senate
record.
We're going to keep working on this. We're not going to let
this happen. We're going to do everything we possibly can to
prevent this from happening because it's one of those things
that no one understands why it's happening but it's happening
anyway, and we've got to correct it.
So the record for this hearing will remain open for two
weeks in case any of my colleagues on the committee or anyone
else on the panel wanted to offer any additional statements for
the record, or questions that may come in from members of the
committee that were not here today. If they do, we'll forward
them to you. We ask you to help us over the next few weeks to
answer those questions. We may have some of our own just to get
them into the record.
Again, I want to thank all of you for being here, everybody
who came.
Do you have anything to say before----
Representative Bilirakis. No. I just want to say it's all
about education, and what I'll do is I'm on the Energy and
Commerce Committee, so we'll try to see if we can get my
colleagues to set up--the Chairman, and also the Ranking
Member, to set up a hearing in the House. This is all about
education. People want these cigars, no question, and they
should have a right to have them. That's all.
Chairman Rubio. Thank you. Thank you so much.
I ask unanimous consent that the statements for the record
here today be submitted.
Since I'm the only one here, there's no objection to that.
[Laughter.]
And with that, the hearing is adjourned.
[Applause.]
[Whereupon, at 2:35 p.m., the hearing was adjourned.]
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