[Federal Register Volume 79, Number 132 (Thursday, July 10, 2014)]
[Rules and Regulations]
[Pages 39302-39311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-16153]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 1150

[Docket No. FDA-2012-N-0920]
RIN 0910-AG81


Tobacco Products, User Fees, Requirements for the Submission of 
Data Needed To Calculate User Fees for Domestic Manufacturers and 
Importers of Tobacco Products

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Food and Drug Administration (FDA or we) is issuing a 
final rule that requires domestic tobacco product manufacturers and 
importers to submit information needed to calculate the amount of user 
fees assessed under the Federal Food, Drug, and Cosmetic Act (the FD&C 
Act). The United States Department of Agriculture (USDA) has been 
collecting this information and providing FDA with the data FDA needs 
to calculate the amount of user fees assessed to tobacco product 
manufacturers and importers. USDA intends to cease collecting this 
information starting in fiscal year 2015 (October 2014). Consistent 
with the requirements of the FD&C Act, the final rule requires the 
submission of this information to FDA instead of USDA.

DATES: This rule is effective August 11, 2014.

FOR FURTHER INFORMATION CONTACT: Nancy Boocker or Annette Marthaler,

[[Page 39303]]

Food and Drug Administration, Center for Tobacco Products, Document 
Control Center, Bldg. 71, Rm. G335, 10903 New Hampshire Ave., Silver 
Spring, MD 20993-0002; 1-877-287-1373, [email protected].

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose of the Final Rule

    The final rule will provide FDA with the information it needs to 
calculate the amount of user fees assessed for each domestic 
manufacturer and importer of tobacco products subject to chapter IX of 
the FD&C Act. The total amount of user fees for each fiscal year is 
specified in section 919(b)(1) of the FD&C Act. That total is divided 
into four equal quarterly assessments. The FD&C Act provides for the 
total quarterly assessment to be allocated among classes of tobacco 
products and then, within each class of tobacco products, among 
individual domestic manufacturers and importers. In specifying how to 
determine each of these two allocations--to a class of tobacco products 
and then to a domestic manufacturer or importer within a particular 
class of tobacco products--section 919 of the FD&C Act references the 
Fair and Equitable Tobacco Reform Act of 2004 (FETRA, Pub. L. 108-357 
(7 U.S.C. 518 et seq.)), which is administered by USDA. To date, FDA 
has received the information needed to calculate user fees from USDA. 
When the USDA program sunsets at the end of fiscal year 2014 (September 
30, 2014), FDA, as required by the FD&C Act, will need to provide for 
an alternative source of the information necessary to calculate user 
fees.

Legal Authority

    This rule is being issued based upon FDA's authority to calculate, 
assess, and collect tobacco product user fees pursuant to section 919 
of the FD&C Act as well as FDA's rulemaking authority under sections 
909(a) and 701(a).

Summary of the Major Provisions

    The final rule applies to domestic manufacturers and importers of 
four classes of tobacco products: Cigarettes, snuff, chewing tobacco, 
and roll-your-own tobacco. Beginning October 2014, the rule requires 
each domestic manufacturer or importer of these four product classes to 
submit to FDA specific information regarding units of product removed 
\1\ into domestic commerce and Federal excise taxes paid for each class 
of tobacco product. The information must be submitted on a monthly 
basis, even in months when no tobacco product is removed into domestic 
commerce. This final rule specifies that FDA will continue to follow 
the current method for allocating the total fees among classes of 
tobacco product. We will calculate the appropriate allocation by 
multiplying the total units removed (sticks or pounds) for the class by 
the 2003 maximum excise tax rate for that class and then calculating 
each class' percentage of the total quarterly assessment. The final 
rule also specifies that FDA will continue to use the current method of 
assessing user fees within each tobacco product class--by multiplying 
the total amount assessed to the class times the percentage share of 
Federal excise taxes paid by each domestic manufacturer and importer 
using information required to be provided to FDA under this final rule. 
If additional classes of tobacco products are deemed subject to FDA's 
tobacco regulation, FDA will conduct a new rulemaking to subject those 
classes to this user fee rule. In addition, the final rule includes 
provisions about notification of assessments, payment of assessments, 
procedures for disputing an assessment, and penalties for failure to 
report required information to FDA or failure to pay tobacco product 
user fees.
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    \1\ Removal is defined at 26 U.S.C. 5702 as ``the removal of 
tobacco products or cigarette papers or tubes, or any processed 
tobacco, from the factory or from internal revenue bond under 
section 5704, as the Secretary [of Treasury] shall by regulation 
prescribe, or release from customs custody, and shall also include 
the smuggling or other unlawful importation of such articles into 
the United States.''
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Costs and Benefits

    Under our primary baseline, starting in fiscal year 2015, FDA would 
obtain the information necessary for collecting user fees directly from 
Federal Agencies (other than USDA) that collect such information. 
Compared with this baseline, the final rule will impose private costs 
on industry to submit data to FDA on a monthly basis, with an 
approximately offsetting reduction in government information collection 
costs. The net effect may be a small social cost or benefit. This final 
rule also allows FDA to be in control of the data needed for 
calculating and billing user fees and resolves impediments that may 
otherwise exist to FDA's ability to use the data for its intended 
purpose.

Table of Contents

I. Background
II. Overview of the Final Rule
III. Comments on the Proposed Rule
    A. Tobacco Products Not Currently Subject to FDA Regulation
    B. Use of the FETRA Framework
    C. FDA's Implementation
IV. Legal Authority
V. Environmental Impact
VI. Analysis of Impacts
VII. Paperwork Reduction Act of 1995
VIII. Federalism
IX. References

I. Background

    The Family Smoking Prevention and Tobacco Control Act (Tobacco 
Control Act) was enacted on June 22, 2009 (Pub. L. 111-31), amending 
the FD&C Act and providing FDA with the authority to regulate tobacco 
products. Section 101(b) of the Tobacco Control Act amends the FD&C Act 
by adding new chapter IX (sections 900-920 (21 U.S.C. 387-387u)). 
Chapter IX provides FDA with tools and funds to regulate tobacco 
products and imposes certain obligations on domestic tobacco product 
manufacturers and importers. Included among FDA's authorities are the 
authorities to assess and collect user fees.
    In enacting the Tobacco Control Act, Congress found that tobacco 
use is the single most preventable cause of disease, disability, and 
death in the United States. Each year, over 400,000 people die 
prematurely from smoking or exposure to secondhand smoke. Approximately 
8.6 million people in the United States live with a serious illness 
caused by smoking. A consensus exists within the scientific and medical 
communities that tobacco products are inherently dangerous and cause 
cancer, heart disease, and other serious adverse health effects 
(section 2(2), (3), and (13) of the Tobacco Control Act).
    The Tobacco Control Act grants FDA the authority to regulate 
tobacco products and to protect the public from the harmful effects of 
tobacco use. Section 901(b) of the FD&C Act provides that chapter IX 
applies to cigarettes, cigarette tobacco, roll-your-own tobacco, and 
smokeless tobacco. It also permits FDA to issue a regulation to deem 
other tobacco products subject to the FD&C Act.\2\ More specifically, 
the Tobacco Control Act gives FDA the authority to, among other things:
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    \2\ On April 25, 2014, FDA published a notice of proposed 
rulemaking to propose that additional tobacco products be deemed 
subject to chapter IX of the FD&C Act (79 FR 23142).
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     Restrict cigarettes and smokeless tobacco retail sales to 
youth;
     Require owners and operators of tobacco companies to 
register annually and be subject to biennial inspection by FDA (section 
905 of the FD&C Act);
     require manufacturers and importers who wish to market a 
new tobacco product to obtain a marketing

[[Page 39304]]

order from FDA prior to marketing that product (section 910 of the FD&C 
Act);
     require each manufacturer or importer to report ``all 
constituents, including smoke constituents as applicable, identified by 
[FDA] as harmful or potentially harmful to health in each tobacco 
product, and as applicable in the smoke of each tobacco product, by 
brand and by quantity in each brand and subbrand'' (section 904(a)(3) 
of the FD&C Act);
     establish tobacco product standards if FDA finds that it 
is appropriate for the protection of the public health (section 
907(a)(3) of the FD&C Act);
     conduct compliance check inspections of tobacco product 
retailers to determine a retailer's compliance with Federal laws and 
regulations;
     establish science and research programs to inform the 
development of tobacco product regulations and better understand the 
risks associated with tobacco use;
     educate the public about the harmful effects of tobacco 
use; and
     in accordance with section 919, assess and collect user 
fees from each domestic manufacturer and importer of tobacco products 
subject to the tobacco product provisions of the FD&C Act.
    Section 919(c)(2) of the FD&C Act provides that tobacco product 
user fees are the sole source of funding for FDA's regulation of 
tobacco products. Therefore, FDA considers these fees to be critical to 
the Agency's ability to achieve its mission to protect and promote the 
public health. User fees provide FDA with a source of stable, 
consistent funding that has made possible our implementation of the 
Tobacco Control Act. The revenues from these fees fund the Agency's 
regulation of tobacco products and the tobacco industry, as described 
previously.
    In the Federal Register of May 31, 2013 (78 FR 32581), FDA issued a 
notice of proposed rulemaking (NPRM) to add 21 CFR part 1150 to require 
domestic tobacco product manufacturers and importers to submit to FDA 
information needed to calculate the amount of user fees assessed under 
the FD&C Act. This final rule requires domestic tobacco product 
manufacturers and importers to submit that information beginning 
October 2014.
    The final rule is issued under section 919(a) of the FD&C Act, 
which requires FDA, in accordance with that section, to ``assess user 
fees on, and collect such fees from, each manufacturer and importer of 
tobacco products'' subject to the tobacco product provisions of chapter 
IX of the FD&C Act. The total amount of user fees for each fiscal year 
is specified in section 919(b)(1) of the FD&C Act, and under section 
919(a) we are to assess and collect a proportionate amount each quarter 
of the fiscal year. The FD&C Act provides for the total assessment to 
be allocated among classes of tobacco products. The class allocation is 
based on each tobacco product class' volume of tobacco products removed 
into commerce. Within each class of tobacco products, an individual 
domestic manufacturer or importer is assessed a user fee based on its 
market share for that tobacco product class.
    In specifying how to determine each of these two allocations--to a 
class of tobacco products and then to a domestic manufacturer or 
importer within a particular class of tobacco products--section 919 of 
the FD&C Act references the Fair and Equitable Tobacco Reform Act of 
2004 (FETRA, Public Law 108-357 (7 U.S.C. 518 et seq.)). In determining 
the user fees to be assessed on each class of tobacco products, section 
919(b)(2)(B)(ii) of the FD&C Act provides that the applicable 
percentage for each tobacco product class ``shall be the percentage 
determined under section 625(c) of [FETRA] for each such class of 
product for such fiscal year.'' In determining the user fee to be paid 
by each company, section 919(b)(4) of the FD&C Act directs that we use 
percentage share information ``determined for purposes of allocations 
under subsections (e) through (h) of section 625 of [FETRA].''
    FETRA provides for a Tobacco Transition Payment Program (TTPP), 
administered by the USDA, through which eligible former tobacco quota 
holders and tobacco producers receive payments in 10 equal installments 
in each fiscal year 2005 through 2014. FETRA provides for the 
establishment of quarterly assessments on each domestic manufacturer 
and importer of tobacco products to fund the 10-year TTPP. The last 
assessment under FETRA will be in September 2014, which will encompass 
the 39th and 40th quarterly TTPP assessments. The issuance of the 40th, 
or last, quarterly assessment will be on September 1, 2014, rather than 
on December 1, 2014, in accordance with statutory requirements 
specified in section 625(d)(3)(A) of FETRA (see 78 FR 46905, August 2, 
2013). Because section 919 refers to FETRA information and calculations 
that are currently being made by USDA, FDA has been relying on USDA 
information for its tobacco product user fee calculations. In light of 
the sunset of the TTPP program, we are issuing this final rule 
consistent with section 919(b)(7) of the FD&C Act, which requires that 
no later than fiscal year 2015, we ensure we are able to make the 
determinations necessary for assessing tobacco product user fees.
    Both USDA's TTPP program and FDA's user fee program follow a two-
step process to calculate quarterly assessments:
     Step A allocates assessments among the six classes of 
tobacco products statutorily identified in those programs--cigarettes, 
cigars, snuff, chewing tobacco, pipe tobacco, and roll-your-own 
tobacco--based on each class' volume of tobacco products removed into 
commerce (section 625(c) of FETRA; 7 CFR 1463.4, 1463.5; and section 
919(b)(2)(B) of the FD&C Act). To make this allocation, we will use the 
same approach and publicly available TTB data that is currently used by 
USDA (see 78 FR 32581 at 32585 and 32586; 70 FR 7007 at 7007 and 7008, 
February 10, 2005). The volume of tobacco products removed into 
domestic commerce for each class is multiplied by the maximum 2003 
Federal excise tax rate for that class to generate a dollar figure for 
the class of tobacco products. The dollar figures for each of the six 
classes of tobacco products are added, and this aggregate dollar figure 
is the denominator. The dollar figure for each class of tobacco 
products is the numerator, and when divided by the aggregate dollar 
figure, the resulting quotient is the percentage attributable to the 
class. By using a fixed excise tax rate as a conversion factor, this 
calculation bases changes in user fee assessments solely on changes in 
volume of tobacco products removed. As discussed in the NPRM, cigars 
and pipe tobacco are two classes of products that are not currently 
regulated under chapter IX of the FD&C Act; as such, they are not 
currently assessed user fees by FDA. Section 919 provides that the 
allocation of fees that otherwise would be assessed to unregulated 
classes of tobacco products are to be reallocated to the classes of 
tobacco products currently subject to chapter IX of the FD&C Act. 
Therefore, the total dollar amount of allocations that would be 
assessed for cigars and pipe tobacco is reallocated, based on relative 
percentages already calculated, to the four classes of currently 
regulated tobacco products: Cigarettes, snuff, chewing tobacco, and 
roll-your-own tobacco.
     Step B allocates the assessment for each class of tobacco 
products among the domestic manufacturers and importers in that class, 
so that each domestic manufacturer's or importer's assessment is 
proportional to its percentage share within that class (section 625(e) 
through (h) of FETRA; 7

[[Page 39305]]

CFR 1463.7; and section 919(b)(3) through (b)(5) of the FD&C Act).

II. Overview of the Final Rule

    We considered all of the comments to the NPRM. We are finalizing 
portions of the proposed rule with only minor changes. In response to 
the comments, we have revised Sec.  1150.15, regarding disputes, to 
clarify how initial disputes concerning fees and any subsequent 
requests for further Agency review are to be submitted, the date on 
which they are due, and that domestic manufacturers and importers are 
eligible to dispute an assessment. We also clarify that a dispute and 
any subsequent request for further review must be legible and in 
English. Although not raised by comments, we have also made minor 
clarifying edits to Sec. Sec.  1150.3, 1150.5 and 1150.7. We have also 
revised Sec.  1150.7(a)(1) to recognize that cigarettes are divided 
into subclasses for excise tax purposes (small and large cigarettes) 
and to clarify that our Step A calculations will use the maximum 2003 
excise tax rate for small cigarettes for that subclass, rather than 
using the maximum 2003 excise tax rate (i.e., the excise tax rate for 
large cigarettes) for all cigarettes. This revision applies only for 
cigarettes because there are separate excise tax subclasses for 
cigarettes, and, therefore does not apply to chewing tobacco, roll-
your-own tobacco, or snuff. We are not finalizing the portions of the 
proposed rule relating to the assessment of fees on cigars and pipe 
tobacco. As described more fully in section III.A of this document, we 
will revise our user fee regulations in the future if FDA deems cigars 
or pipe tobacco subject to FDA's authority under chapter IX of the FD&C 
Act. In addition, as discussed in section III.A, we may revise our user 
fee regulations if FDA deems additional tobacco products, other than 
cigars and pipe tobacco, subject to FDA's authority.

III. Comments on the Proposed Rule

    We received 12 comments on the proposed rule. Comments were 
received from tobacco product manufacturers, trade associations, and 
individuals. To make it easier to identify comments and our responses, 
the word ``Comment,'' in parentheses, will appear before each comment, 
and the word ``Response,'' in parentheses, will appear before each 
response. We have numbered the comments to make it easier to 
distinguish between comments; the numbers are for organizational 
purposes only and do not reflect the order in which we received the 
comments or any value associated with them. We have combined similar 
comments under one numbered comment. In addition to the comments 
specific to this rulemaking that we address in the following 
paragraphs, we received two general comments: One expressing a view 
that all cigarettes should be prohibited, and one expressing a view 
that too much attention has been focused on the regulation of tobacco 
products. These comments express broad policy views and do not address 
specific points related to this rulemaking. Therefore, these general 
comments do not require a response.

A. Tobacco Products Not Currently Subject to FDA Regulation

    (Comment 1) Multiple comments addressed FDA's authority to assess 
and collect user fees from domestic manufacturers and importers of 
products that, in the future, may be deemed subject to FDA's 
jurisdiction, particularly electronic cigarettes. Some comments stated 
that FDA must assess and collect fees because no ``free riders'' are 
allowed under section 919(a) of the FD&C Act. These comments relied on 
the language in section 919(a) of the FD&C Act that FDA shall ``assess 
user fees on, and collect such fees from, each manufacturer and 
importer of tobacco products subject to [chapter IX].'' The comments 
asserted that, unless deemed products are subject to user fees, ``some 
regulated manufacturers and importers would have to pay the cost of 
their regulation plus the cost of regulating the nonpaying 
manufacturers and importers,'' which would provide the nonpaying 
manufacturers and importers a significant competitive advantage in 
terms of reduced costs and prices for their products. Several of the 
comments claimed that failure to assess user fees on deemed products 
would violate the Fifth Amendment. Some comments also contended that 
exempting some products from user fees would be unfair to existing 
classes, arbitrary and capricious, and violate the Administrative 
Procedure Act (5 U.S.C. Subchapter II).
    In contrast, other comments stated that FDA does not have the 
authority to assess user fees for any class other than the six classes 
named in section 919(b)(2)(B) of the FD&C Act and in FETRA. These 
comments noted that section 919(a) provides that fees must be assessed 
and collected ``in accordance with this section'' and, therefore, that 
FDA can assess fees only on those classes identified in section 919 and 
FETRA. One of these comments also noted that the reallocation provision 
in section 919(b)(2)(B)(iv) permits reallocation only to regulated 
classes of the six FETRA classes. Similarly, another comment stated 
that FDA cannot deem electronic cigarette manufacturers to meet the 
definition of domestic manufacturer because FDA ``is bound under the 
FD&C Act to follow the allocation procedures established under FETRA.''
    Other comments focused on the burden of regulation more generally 
to say that their products should be exempt from user fee assessments. 
One comment argued that premium cigars should be exempt from FDA 
regulation generally and user fees specifically because FDA regulation 
would be disproportionately burdensome, as exemplified by the new 
product requirements in section 910 of the FD&C Act, which would be 
triggered by the often minor variations intended to alter the taste and 
aroma of a premium cigar.
    (Response) Because these comments are related to tobacco products 
that are not currently subject to FDA's regulation under chapter IX of 
the FD&C Act, we do not need to address them at this time. This final 
rule applies to only domestic manufacturers and importers of the 
classes of tobacco products identified in section 919 that are 
currently subject to FDA's regulation under chapter IX of the FD&C Act.
    We are not finalizing the portions of the proposed rule relating to 
the assessment of fees on the cigar and pipe tobacco classes. Instead, 
we have reserved Sec.  1150.7(a)(2) and Sec.  1150.9(a)(2) should a 
user fee assessment be applied to cigars and pipe tobacco and limited 
the definition of ``units of product'' in Sec.  1150.3 by removing the 
reference to cigars or pipe tobacco. We did not delete cigars and pipe 
tobacco from the definition of ``class of tobacco products'' because 
that term is used in Sec.  1150.7(b) describing our reallocation of 
user fees for any class of tobacco products (such as cigars or pipe 
tobacco) that is not deemed by FDA to be subject to regulation under 
chapter IX of the FD&C Act. If FDA deems cigars or pipe tobacco, we 
will respond to comments regarding these provisions and revise these 
user fee regulations.
    We recognize that the issue of whether FDA has authority to assess 
user fees on future deemed products, other than cigars and pipe 
tobacco, is controversial. FDA intends to further explore issues 
related to user fee assessments on tobacco products that may be deemed 
subject to chapter IX of the FD&C Act by soliciting public comment. FDA 
will make any appropriate changes to the user fee regulations in a new 
rulemaking.
    (Comment 2) Other comments raised concerns regarding user fee 
calculations

[[Page 39306]]

under section 919 in relation to specific products or classes of 
products that may be deemed subject to FDA's jurisdiction. For example, 
one comment stated that FDA should not adopt USDA's retrospective 
calculation method for determining class percentage allocations at Step 
A because of concerns that a regulation deeming additional products 
subject to FDA regulation could dramatically alter class allocations 
from year to year and that class allocation calculations using this 
method will not be an accurate reflection of each class's current share 
of the market. This comment stated that small businesses may no longer 
be able to sell affected products, including dissolvables, electronic 
cigarettes, and cigars, but may still have to pay their share of their 
respective classes' user fees.
    (Response) As discussed, certain tobacco products (including two 
classes--cigars and pipe tobacco--that are listed in section 919), are 
not currently subject to FDA's regulation under chapter IX of the FD&C 
Act. These comments relate to tobacco products that are not currently 
subject to chapter IX of the FD&C Act. Because this final rule is only 
addressing tobacco products that are currently subject to FDA's 
regulation, we do not address these comments at this time.

B. Use of the FETRA Framework

    (Comment 3) One comment stated that FDA should calculate the 
applicable percentages for class and individual manufacturers on the 
basis of net domestic volume rather than gross domestic volume. The 
comment noted that ``FETRA's reliance on gross domestic volume 
overestimates the actual amount of product ultimately removed into 
domestic commerce, thereby producing inaccurate user fee assessments at 
both the class and individual [m]anufacturer levels.'' The comment 
indicated that inaccurate user fee assessments may result in 
overpayment by some manufacturers.
    (Response) We disagree with this comment and will continue to rely 
on gross domestic volume in our user fee calculations. Section 919 of 
the FD&C Act directs us to calculate the applicable percentages of each 
class, and of each domestic manufacturer or importer within each class, 
by reference to FETRA (section 919(b)(2)(B)(ii) and (b)(4) of the FD&C 
Act). FETRA defines and relies on ``gross domestic volume'' to 
determine class assessments and allocations to each domestic 
manufacturer and importer within each class (7 U.S.C. 518d(a), (c)(2), 
and (e)(1)). We note that, while the use of gross rather than net 
domestic volume might increase an individual company's numerator, it 
would also increase the denominator for the class. We, therefore, do 
not think that use of gross domestic volume is likely to significantly 
affect an individual domestic manufacturer or importer unless there is 
a disproportionately large difference between a company's net domestic 
volume and its gross domestic volume as compared to other companies in 
the class.
    (Comment 4) One comment stated that FDA should use the current 
Federal excise tax rate in Step A, not the 2003 excise tax rate used by 
USDA. The comment noted that, at the time the comment was submitted, 
this issue was the subject of ongoing litigation, and the comment urged 
FDA to make its own determination about which tax rate to use. This and 
other comments urged FDA to instead compute each class' percentage of 
the user fees based on the actual Federal excise taxes paid by each 
class during the relevant fiscal year. One comment supported the 
continued use of the 2003 excise tax rate, saying that FDA is bound by 
the FD&C Act to use those rates.
    (Response) We disagree with the comments that suggested we use a 
method other than the 2003 maximum excise tax rate to determine the 
class allocation. Section 919(b)(2)(B)(ii) of the FD&C Act directs us 
to use, for the class allocations, the percentage determined under 
section 625(c) of FETRA (7 U.S.C. 518d). As discussed in the preamble 
to the proposed rule (78 FR 32581 at 32582), USDA determines the 
percentages under section 625(c) of FETRA by using the 2003 maximum 
Federal excise tax rate to convert the volume of each tobacco product 
class measured in different units (sticks and pounds) to a common 
metric: Dollar amounts. USDA used 2003 maximum excise tax rates because 
it determined that Congress used them as a conversion factor to create 
a common unit across all six classes of tobacco products subject to 
assessments under FETRA when Congress set the initial class allocations 
under FETRA. The 2003 maximum excise tax rate has been used since the 
inception of the TTPP to convert the volume of each tobacco product 
class to dollar amounts, from which USDA calculates the percentage for 
each class. This has been upheld as a reasonable interpretation of 
FETRA (Philip Morris USA, Inc. v. Vilsack, 736 F.3d 284 (4th Cir. 
2013)).
    Since the inception of FDA's tobacco user fee program, FDA has been 
using the class percentages calculated by USDA using this methodology. 
In this final rule, FDA is adopting the same approach as USDA for class 
allocations. Because section 919 relies on the FETRA class allocation 
methodology and provides for class allocation among the same tobacco 
product classes, it is reasonable for FDA to continue using the 2003 
maximum Federal excise tax rates as a conversion factor (converting 
sticks and pounds to dollars). Continuing to use the 2003 rates also 
allows FDA, just as it allows USDA, to allocate the total user fees 
among the classes based on changes in each class' percentage of gross 
domestic volume over time. Because it is a fixed conversion factor, it 
will limit changes in user fee assessments to changes in volumes. 
Moreover, the changes from the 2003 rates to the 2009 rates were not 
proportionate among the classes. Thus, if FDA were to start using the 
2009 rates after USDA's program sunsets, this would cause a change in 
class allocations that would not be limited to the changes in volume 
among the classes.
    (Comment 5) One comment stated that FDA should use the actual units 
(e.g., sticks for cigarettes and cigars) removed from bonded storage to 
calculate market share within those classes of tobacco products (Step 
B) instead of the amount of Federal excise tax paid. The comment noted 
that using excise taxes to determine market share favors importers over 
domestic manufacturers because importers can sell cigars to 
distributors at a lower price than domestic manufacturers due to lower 
wages, taxes, and regulatory costs. The comment also noted that using 
excise taxes to calculate market share within a class of tobacco 
products (Step B) favors companies that do not accurately calculate 
excise tax.
    (Response) This issue is relevant primarily for imposing user fees 
on cigar manufacturers and importers, which is not addressed in this 
final rule. Cigars are currently the only tobacco product for which 
variable excise taxes may be based on price of the product rather than 
a flat tax based on sticks or weight.\3\ In accordance with FETRA, USDA 
calculates the percentage share of a domestic manufacturer or importer 
within a class by dividing the volume of tobacco products (in either 
sticks or pounds) for the manufacturer or importer by the total volume 
of tobacco products (in either sticks or pounds) for

[[Page 39307]]

that class. USDA uses excise taxes as a proxy for volume for all 
classes except cigars because the tax rate by volume is uniform within 
each of those classes. This final rule, in Sec.  1150.9, follows that 
approach. For products for which excise taxes do not vary, there should 
be no difference in calculating individual assessments using excise 
taxes or actual units because a firm's percentage of the total class 
will remain the same. In addition, FDA will have information regarding 
both excise taxes paid and actual units removed for each domestic 
manufacturer and importer from information provided in Form FDA 3852 
(Ref. 1). Therefore, FDA could check that excise taxes were calculated 
accurately.
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    \3\ Under section 919(b)(5) of the FD&C Act, if user fee 
assessments were to be imposed on cigars, the statute requires that 
the percentage share of each domestic manufacturer or importer of 
cigars must be based on the excise taxes paid by a domestic 
manufacturer or importer over the course of the prior fiscal year 
rather than during the prior fiscal quarter.
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C. FDA's Implementation

    (Comment 6) Several comments urged FDA to consider the impact of 
the proposed rule on small manufacturers and importers. These comments 
suggested that FDA take steps to recognize ``differences in the scale 
and resources of regulated entities.''
    (Response) FDA does recognize that domestic manufacturers and 
importers have varying levels of resources available. In an effort to 
minimize the need for additional resources and for continuity, the rule 
requires that domestic manufacturers and importers submit essentially 
the same information to FDA that they are currently submitting to USDA. 
In addition, actual user fee assessments are based on relative market 
share so that small domestic manufacturers and importers with fewer 
products in commerce will pay a relatively smaller share of the total 
assessment for the fiscal year.
    (Comment 7) One comment recommended that FDA ``develop a schedule 
for periodically reevaluating and adjusting user fee percentage 
allocations'' for tobacco product classes as well as manufacturers and 
importers to ensure that allocations are fair and equitable.
    (Response) FDA agrees, and our rule provides for adjustments for 
percentage allocations for both tobacco product classes and individual 
domestic manufacturers and importers. For tobacco product classes, 
Sec.  1150.7 provides for yearly class allocations among the regulated 
classes of tobacco products. Also, Sec.  1150.9(a) provides for 
calculation of assessments within each class on a quarterly basis, 
based on information from the prior quarter. In addition, Sec.  
1150.9(b) explains that on an annual basis, FDA will make any necessary 
adjustments for individual domestic manufacturers and importers if 
needed to account for any corrections, such as the addition of one or 
more domestic manufacturers or importers that were not included in 
relevant calculations under Sec.  1150.9(a).
    (Comment 8) Several comments stated that refunds for overpayment of 
user fees should include interest on the amount that was incorrectly 
assessed. Some comments indicated that the Internal Revenue Code 
provides for interest on overpayments (26 U.S.C. 6611(a)) and that FDA 
should adopt this approach or a similar approach to refunds.
    (Response) FDA disagrees with these comments. In order to recover 
interest from the United States, there must be an explicit waiver of 
sovereign immunity related to interest payments (see, e.g., United 
States v. N.Y. Rayon Importing Co., 329 U.S. 654, 659 (1947)). Congress 
alone has authority to waive the government's sovereign immunity. The 
Internal Revenue Code provision cited by some comments is specific to 
the payment of internal revenue tax and provides that interest ``shall 
be allowed and paid upon any overpayment in respect of any internal 
revenue tax.'' The TTPP also explicitly requires that interest be paid 
on refunded amounts (7 U.S.C. 518d(j)). In contrast, the FD&C Act does 
not require FDA to pay interest on refunds for overpayment of tobacco 
product user fees. Moreover, the FD&C Act does not require FDA to pay 
interest on refunds for overpayment in any other user fee context, and 
FDA does not pay interest on such refunds.
    (Comment 9) Several comments indicated that FDA should clarify the 
process by which manufacturers and importers may appeal a user fee 
assessment. One comment detailed the provisions that FDA should include 
in an appeals process (e.g., establishing timeframes for such 
challenges as well as FDA review and response, putting the disputed fee 
in an escrow account pending appeal). This comment also requested that 
the rule specifically permit judicial review in U.S. district court of 
FDA's decisions regarding disputes. Another comment suggested that FDA 
adopt USDA's dispute resolution process for user fees.
    (Response) To address some of the concerns raised by the comments, 
FDA has added information to Sec.  1150.15 on how to submit a dispute. 
FDA has also revised Sec.  1150.15 to clarify that the dispute must be 
received by FDA within 45 days of the date on FDA's invoice. However, 
we believe that establishing additional requirements to the appeals 
process is unnecessary at this time. To date, FDA has received few 
requests for corrections regarding individual user fees. Accordingly, 
FDA has provided a framework in Sec.  1150.15 on where, when, and how 
to submit a dispute and request for additional review under Sec.  
10.75. Should the need arise, FDA may issue additional information 
through a guidance document specific to tobacco product user fee 
assessment disputes.
    In addition, and of its own initiative, FDA has added the 
requirements that disputes be legible (FDA must be able to read the 
document) and in English. These requirements will help expedite FDA's 
review of the dispute and request for additional review.
    (Comment 10) One comment stated that FDA should clarify the data 
verification provisions for user fees. The comment indicated support 
for the use of third-party data sources for the purpose of identifying 
manufacturers and importers who are not providing FDA with market share 
information (nonreporters) or who understate that information 
(underreporters). However, the comment noted that third-party data 
should be used only to identify nonreporters and underreporters within 
the six classes and should not be used to calculate actual market 
shares (which must be calculated using excise tax data). This comment 
also asked FDA to clarify that third-party data could be used to 
calculate market share for tobacco products not within the six classes 
if FDA determines there is no better alternative available.
    (Response) FDA agrees that it can use information available to the 
Agency to help ensure that domestic manufacturers and importers are 
providing the information required under this rule. As stated in Sec.  
1150.5(a) FDA will use information submitted to FDA as required under 
Sec.  1150.5 and any other available information, as the Agency 
determines appropriate, to make user fee assessments. We do not agree 
that it is necessary to describe or limit the sources of data that FDA 
might use.
    (Comment 11) One comment suggested that FDA obtain data about 
product removals directly from the Treasury Department's Alcohol and 
Tobacco Tax and Trade Bureau (TTB). The comment stated that monthly 
data submissions are unnecessary and unduly burdensome since this 
information is already collected by TTB. The comment indicated that FDA 
should require manufacturers to execute a release or waiver permitting 
TTB to report this information to FDA and that failure to execute such 
a release or waiver could be construed as an admission of adulteration 
under section 902(4) of the FD&C Act. However, the comment noted that 
manufacturers of regulated tobacco products that do not fit within 
TTB's excise tax structure

[[Page 39308]]

could submit information directly to FDA. Another comment suggested 
that FDA seek a legislative amendment to ensure that FDA has access to 
excise tax data. In contrast, one comment supported FDA's transition 
plan for submitting data and noted that it should not be burdensome 
because manufacturers and importers are familiar with the reporting of 
this information and the submissions will continue to be made to a 
single Federal Agency.
    (Response) We agree with the comment that, because the rule 
requires that domestic manufacturers and importers submit to FDA the 
same information that they have been submitting to USDA (i.e., a 
summary form supported by the relevant tax forms), the impact of this 
rule should be minimal and not unduly burdensome. We also note that 
there are statutory limitations on the access and use by other Federal 
Agencies of the data collected by TTB, and those limitations preclude 
us from solely using that data to implement section 919 of the FD&C 
Act. The summary form will enable us to efficiently identify the amount 
of tobacco product removed and subject to Federal excise tax, and the 
supporting tax forms will enable us to verify the accuracy of the 
information on the summary form. We believe that submission of 
information directly to FDA regarding removals and imports is important 
to ensuring that we have the information necessary to efficiently and 
accurately calculate the amount of user fees assessed.

IV. Legal Authority

    Section 919(b)(7) of the FD&C Act requires FDA to ensure that we 
are able to determine the applicable percentages described in section 
919(b)(2) and the percentage shares described in section 919(b)(4). 
Section 909(a) of the FD&C Act authorizes FDA to issue regulations 
requiring tobacco product manufacturers or importers to make such 
reports and provide such information as may be reasonably required to 
assure that their tobacco products are not adulterated or misbranded 
and to otherwise protect public health. Under section 902(4) of the 
FD&C Act, a tobacco product is deemed to be adulterated if the 
manufacturer or importer of the tobacco product fails to pay a user fee 
assessed to it under section 919. In addition, section 701(a) of the 
FD&C Act (21 U.S.C. 371(a)) gives FDA general rulemaking authority to 
issue regulations for the efficient enforcement of the FD&C Act. 
Consistent with these authorities, FDA is issuing this rule, which is 
intended to ensure that we are able to make the determinations required 
by section 919 of the FD&C Act and to assess and collect tobacco 
product user fees.

V. Environmental Impact

    The Agency has determined under 21 CFR 25.30(h) that this action is 
of a type that does not individually or cumulatively have a significant 
effect on the human environment. Therefore, neither an environmental 
assessment nor an environmental impact statement is required.

VI. Analysis of Impacts

    FDA has examined the impacts of the final rule under Executive 
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 
U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4). Executive Orders 12866 and 13563 direct Agencies to assess all 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety, and other advantages; distributive impacts; and 
equity). The Agency believes that this final rule is not a significant 
regulatory action under Executive Order 12866.
    The Regulatory Flexibility Act requires Agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. The potential impact on small entities is uncertain, 
and FDA is unable to rule out the possibility that this final rule may 
have a significant economic impact on a substantial number of small 
entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that Agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $141 million, using the most current (2012) Implicit 
Price Deflator for the Gross Domestic Product. FDA does not expect this 
final rule to result in any 1-year expenditure that would meet or 
exceed this amount.
    Under our primary baseline, starting in fiscal year 2015, FDA would 
obtain the information necessary for collecting user fees directly from 
Federal Agencies (other than USDA) that collect such information. 
Compared with this baseline, this final rule will impose private costs 
on industry to submit data to FDA on a monthly basis, with an 
approximately offsetting reduction in government information collection 
costs. The net effect of this may be a small social cost or benefit. 
This final rule also allows FDA to be in control of the data needed for 
calculating and billing user fees and resolves impediments that may 
otherwise exist to FDA's ability to use the data for its intended 
purpose. Compared with other possible baseline scenarios, this final 
rule can be expected to eliminate the potential need for additional 
legislation and allow the collection of user fees after 2014 to proceed 
more smoothly than it could without legislation.
    Compared to the primary baseline, the estimated one-time private 
sector transition cost is $159.60 per manufacturer or importer, 
including small manufacturers and importers, and the annual compliance 
cost is $2,553.60. One option for regulatory relief would be to exempt 
firms from reporting in a particular month if they did not introduce 
any units of any tobacco products for which user fees are assessed into 
domestic commerce. Another option for regulatory relief would be to 
require submission of either the FDA form or copies of forms submitted 
to other Agencies. The full analysis of economic impacts is available 
as Ref. 2 in Docket No. FDA-2012-N-0920 and at http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

VII. Paperwork Reduction Act of 1995

    This final rule contains information collection provisions that are 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The title, 
description, and respondent description of the information collection 
provisions are shown in the following paragraphs with an estimate of 
the annual reporting burden. Included in the estimate is the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing each 
collection of information.
    Title: Tobacco Products, User Fees, Requirements for the Submission 
of Data Needed to Calculate User Fees for Domestic Manufacturers and 
Importers of Tobacco Products.
    Description: This final rule requires each tobacco product domestic 
manufacturer and importer to submit to FDA information needed to 
calculate

[[Page 39309]]

and assess user fees under the FD&C Act.
    The USDA has been collecting information from manufacturers and 
importers to calculate percentage share for its purposes, and providing 
FDA with the data FDA needs to determine user fee assessments under the 
FD&C Act. USDA will cease collecting this information starting in 
fiscal year 2015. Consistent with the requirements of the FD&C Act, 
this final rule would continue the submission of this information, but 
to FDA rather than USDA, and thus would ensure that FDA continues to 
have the information needed to calculate the amount of user fees 
assessed to each entity and collect those fees. Section 919 of the FD&C 
Act establishes the user fee allocation and collection process, which 
references the FETRA framework for determining tobacco product class 
allocations and individual domestic manufacturer or importer 
allocations. As is now required by USDA under FETRA, in this final rule 
FDA requires domestic manufacturers and importers of tobacco products 
to submit a form each month with summary information and copies of the 
reports or forms that relate to the tobacco products removed into 
domestic commerce.
    Description of Respondents: Domestic manufacturers and importers of 
tobacco products.

                                 Table 1--Estimated Annual Reporting Burden \1\
----------------------------------------------------------------------------------------------------------------
                                                     Number of
         21 CFR Section              Number of     responses per   Total annual      Hours per      Total hours
                                    respondents     respondent       responses       response
----------------------------------------------------------------------------------------------------------------
1150.5(a), (b)(1), (b)(2), and               200              12           2,400               3           7,200
 FDA Form 3852; General
 identifying information
 provided by manufacturers and
 importers of FDA regulated
 tobacco products and
 identification and removal
 information (monthly)..........
1150.5(b)(3) Certified Copies                200              12           2,400               1           2,400
 (monthly)......................
1150.13 Submission of user fee               100               4             400               1             400
 information with user fee
 payment (identifying
 information, fee amount, etc.)
 (quarterly)....................
1150.15(a) Submission of user                 10               1              10              10             100
 fee dispute (annually).........
1150.15(d) Submission of request               5               1               5              10              50
 for further review of dispute
 of user fee (annually).........
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............  ..............  ..............          10,150
----------------------------------------------------------------------------------------------------------------
 \1\There are no capital costs or operating and maintenance costs associated with this collection of
  information.

    Table 1 describes the annual reporting burden of 10,150 hours as a 
result of the provisions set forth in this final rule. Our estimated 
number of respondents is based on information we received from USDA on 
the number of reports it receives from domestic manufacturers and 
importers each month. The estimate of 200 respondents reflects both 
reports of no removal into domestic commerce and reports of removal of 
tobacco product into domestic commerce. The estimate of 100 respondents 
reflects an average number of domestic manufacturers and importers who 
may be subject to the payment of fees each fiscal quarter. Although 
there were no comments on the number of appeals and requests for 
further review, after discussing internally, we increased our estimate 
of the number of appeals from 1 to 10, and requests for further review 
from 1 to 5 in an abundance of caution in case there is an increase in 
requests for review during the transition from USDA to FDA.
    For Sec.  1150.5(a), (b)(1), and (b)(2), FDA estimates that 200 
domestic manufacturers and importers will each submit identifying 
information (e.g., mailing address, telephone number, email address) 
and summarized tax information on a monthly basis (12 submissions 
annually) on Form FDA 3852, resulting in a total burden of 7,200 hours. 
For Sec.  1150.5(b)(3), FDA estimates that 200 domestic manufacturers 
and importers will each submit, on a monthly basis (12 times annually), 
certified copies of the returns and forms that relate to the removal of 
tobacco products into domestic commerce and the payment of Federal 
excise taxes imposed under chapter 52 of the Internal Revenue Code of 
1986, resulting in a total burden of 2,400 hours.
    For Sec.  1150.13, FDA estimates that 100 domestic manufacturers 
and importers will be submitting user fee payments on a quarterly 
basis. Therefore, the number of burden hours for this section is 400 
hours. FDA estimates that approximately 10 of those respondents 
assessed user fees will dispute the amounts under Sec.  1150.15(a), for 
a total amount of 100 hours. FDA also estimates that of those who 
dispute their user fees, five will ask for further review by FDA under 
Sec.  1150.15(d), for a total amount of 50 hours. Total burden hours 
for this rule are 10,150 hours (7,200 + 2,400 + 400 + 100 + 50).
    The information collection provisions in this final rule have been 
submitted to OMB for review as required by section 3507(d) of the 
Paperwork Reduction Act of 1995. The requirements were approved and 
assigned OMB control number 0910-0749. This approval expires on June 
30, 2017. An Agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.

VIII. Federalism

    FDA has analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132. FDA has determined that the final 
rule does not contain policies that have substantial direct effects on 
the States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Accordingly, the Agency has concluded 
that the final rule does not contain policies that have federalism 
implications as defined in the Executive order and, consequently, a 
federalism summary impact statement is not required.

IX. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons between 9 a.m. and 4 p.m., Monday through Friday, 
and are available electronically at http://www.regulations.gov. (FDA 
has verified

[[Page 39310]]

the Web site address in this reference section, but FDA is not 
responsible for any subsequent changes to the Web site after this 
document publishes in the Federal Register.)
    1. Form FDA 3852.
    2. Regulatory Impact Analysis. Available at: http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

List of Subjects in 21 CFR Part 1150

    Tobacco products, User fees.


0
Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, chapter I of 
title 21 is amended by adding part 1150 to subchapter K to read as 
follows:

PART 1150--USER FEES

Sec.
1150.1 Scope.
1150.3 Definitions.
1150.5 Required information.
1150.7 Yearly class allocation.
1150.9 Domestic manufacturer or importer assessment.
1150.11 Notification of assessments.
1150.13 Payment of assessments.
1150.15 Disputes.
1150.17 Penalties.

    Authority:  21 U.S.C. 371, 387b, 387i, 387s.


Sec.  1150.1  Scope.

    This part establishes requirements related to tobacco product user 
fees under section 919 of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 387s). The total amount of user fees may not exceed the amount 
specified for that fiscal year in section 919(b) of the Federal Food, 
Drug, and Cosmetic Act. All domestic manufacturers and importers of 
tobacco products are required to pay to FDA their percentage share of 
the total assessment for a fiscal year.


Sec.  1150.3  Definitions.

    The following definitions are applicable to this part:
    Class of tobacco products means each of the following types of 
tobacco products as defined in 26 U.S.C. 5702 and for which taxes are 
required to be paid for the removal of such into domestic commerce: 
Cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-
your-own tobacco.
    Domestic manufacturer means a person who is required to obtain a 
permit from the Alcohol and Tobacco Tax and Trade Bureau of the 
Department of the Treasury with respect to the production of tobacco 
products under title 27 of the Code of Federal Regulations.
    Fiscal year quarter means a quarter in a fiscal year (the fiscal 
year is October 1 through September 30). The fiscal year quarters are 
October 1-December 31, January 1-March 31, April 1-June 30, and July 1-
September 30.
    Importer means a person who is required to obtain a permit from the 
Alcohol and Tobacco Tax and Trade Bureau of the Department of the 
Treasury with respect to the importation of tobacco products under 
title 27 of the Code of Federal Regulations.
    Total assessment means the total amount of user fees (in dollars) 
authorized to be assessed and collected for a specific fiscal year 
under section 919 of the Federal Food, Drug, and Cosmetic Act.
    Units of product means:
    (1) The number of sticks for cigarettes, or
    (2) The weight (measured in pounds) for snuff, chewing tobacco, and 
roll-your-own tobacco.
    Units of product removed and not tax exempt means the units of 
product:
    (1) Removed (as defined by 26 U.S.C. 5702), and
    (2) Not exempt from Federal excise tax under chapter 52 of title 26 
of the United States Code at the time of their removal under that 
chapter or the Harmonized Tariff Schedule of the United States.
    Yearly class allocation means the amount of user fees (in dollars) 
assessed for a class of tobacco products for a particular fiscal year.


Sec.  1150.5  Required information.

    (a) General. Each domestic manufacturer and importer of tobacco 
products that are part of a class of tobacco products that is subject 
to regulation under chapter IX of the Federal Food, Drug, and Cosmetic 
Act must submit the information described in this section for such 
products each month beginning October 2014, and the information must be 
received by FDA no later than the 20th day of each month. The 
information must be submitted using the form that FDA provides. The 
information must be submitted even if the domestic manufacturer or 
importer had no removals subject to tax during the prior month. FDA 
will use the information submitted under this section and any other 
available information, as FDA determines appropriate, to make tobacco 
product user fee assessments.
    (b) Contents. Each domestic manufacturer and importer must submit 
the following:
    (1) Identification information. (i) Its name and the mailing 
address of its principal place of business;
    (ii) The name and a telephone number including area code of an 
office or individual that FDA may contact for further information;
    (iii) The email address and postal address at which it wishes to 
receive notifications FDA sends under this part;
    (iv) The Alcohol and Tobacco Tax and Trade Bureau (TTB) Permit 
Number(s); and
    (v) The Employer Identification Number(s) (EIN).
    (2) Removal information. The units of product, by class, removed 
and not tax exempt for the prior month and the Federal excise tax it 
paid, by class, for such removal.
    (i) This information must be reported for each TTB tobacco permit.
    (ii) If the domestic manufacturer or importer did not remove any 
amount of tobacco product, it must report that no tobacco product was 
removed into domestic commerce.
    (3) Certified copies. Certified copies of the returns and forms 
that relate to:
    (i) The removal of tobacco products into domestic commerce (as 
defined by section 5702 of the Internal Revenue Code of 1986); and
    (ii) The payment of the Federal excise taxes imposed under chapter 
52 of the Internal Revenue Code of 1986.


Sec.  1150.7  Yearly class allocation.

    For each fiscal year, FDA will allocate the total assessment among 
the classes of tobacco products.
    (a) Calculation. FDA will calculate the percentage shares for each 
class as follows:
    (1) FDA will multiply the units of product removed and not tax 
exempt for the most recent full calendar year by the 2003 maximum 
Federal excise tax rate for that applicable class or subclass (class 
dollar figure).
    (2) [Reserved]
    (3) FDA will total the class dollar figures for all tobacco classes 
for the most recent full calendar year (total dollar figure).
    (4) FDA will divide the class dollar figure by the total dollar 
figure to determine the percentage share for each class.
    (5) FDA will calculate the allocation for each class of tobacco 
products by multiplying the percentage share for each class by the 
total assessment.
    (b) Reallocation. For any class of tobacco products that is not 
deemed by FDA to be subject to regulation under chapter IX of the 
Federal Food, Drug, and Cosmetic Act, the amount of user fees that 
would otherwise be assessed to such class of tobacco products will be 
reallocated to the classes of tobacco products that are subject to 
chapter IX of the Federal Food, Drug, and Cosmetic Act in the same 
manner and based on

[[Page 39311]]

the same relative percentages otherwise determined under paragraph (a) 
of this section.


Sec.  1150.9  Domestic manufacturer or importer assessment.

    Each quarter, FDA will calculate the assessment owed by each 
domestic manufacturer or importer for that quarter.
    (a) Calculation. (1) For each class of tobacco products, FDA will 
calculate the percentage share for each domestic manufacturer and 
importer by dividing the Federal excise taxes that it paid for the 
class for the prior quarter by the total excise taxes that all domestic 
manufacturers and importers paid for the class for that same quarter.
    (2) [Reserved]
    (3) If the percentage share calculated for a domestic manufacturer 
or importer in this section, as applicable, is less than 0.0001 
percent, the share is excluded from the assessment for that class of 
tobacco products.
    (4) Within each class of tobacco products, the assessment owed by a 
domestic manufacturer or importer for the quarter is the yearly class 
allocation, determined as described in Sec.  1150.7, divided by four, 
multiplied by the domestic manufacturer's or importer's percentage 
share, truncated to the fourth decimal place, for that class of tobacco 
products.
    (b) Adjustments. Annually, FDA will make any necessary adjustments 
to individual domestic manufacturer or importer assessments if needed 
to account for any corrections (for example, to include domestic 
manufacturers or importers that were not included in a relevant 
assessment calculation).


Sec.  1150.11  Notification of assessments.

    (a) Notification. No later than 30 calendar days before the end of 
each fiscal year quarter, FDA will notify each domestic manufacturer 
and importer of the amount of the quarterly assessment imposed on the 
domestic manufacturer or importer.
    (b) Content of notification. The notification under paragraph (a) 
of this section will include the following:
    (1) The amount of the quarterly assessment imposed on the domestic 
manufacturer or importer and the date that payment of the assessment 
must be received by FDA;
    (2) Class assessment information, including each class' initial 
percentage share, the reallocation amount (if any) and each class' 
percentage share after any such reallocation, and the quarterly 
assessment for each class;
    (3) Domestic manufacturer or importer assessment information, 
including the domestic manufacturer's or importer's percentage share of 
each relevant class of tobacco products and invoice amount;
    (4) Any adjustments FDA has made under Sec.  1150.9(b);
    (5) The manner in which assessments are to be remitted to FDA;
    (6) Information about the accrual of interest if a payment is late; 
and
    (7) Information regarding where to send a dispute and when it needs 
to be sent.


Sec.  1150.13  Payment of assessments.

    (a) Payment of an assessment must be received by FDA no later than 
the last day of each fiscal year quarter.
    (b) Payments must be submitted to FDA in U.S. dollars and in the 
manner specified in the notification.
    (c) Except as provided in paragraph (d) of this section, if an 
assessment is not received by the last day of the fiscal year quarter, 
FDA will begin assessing interest on the unpaid amount in accordance 
with 31 U.S.C. 3717.
    (d) If FDA does not send the notification described in Sec.  
1150.11(a) 30 calendar days before the end of a quarter, no interest 
will be assessed by FDA under paragraph (c) of this section until 30 
calendar days have elapsed from the date FDA sent notification of the 
amount owed.
    (e) If a domestic manufacturer or importer disputes the amount of 
an assessment, it must still pay the assessment in accordance with 
paragraphs (a) and (b) of this section.


Sec.  1150.15  Disputes.

    (a) A domestic tobacco manufacturer or importer may dispute an FDA 
assessment. The dispute must include the basis for the dispute, and the 
dispute must be:
    (1) Submitted in writing;
    (2) Received by FDA no later than 45 days after the date on the 
assessment notification;
    (3) Legible and in English; and
    (4) Sent to the address found on our Web site (http://www.fda.gov/tobaccoproducts).
    (b) If FDA determines that there was an error related to the 
assessment and the assessment was too high, FDA will refund the amount 
assessed in error to the domestic manufacturer or importer.
    (c) FDA will provide a dated, written response, and its response 
will provide information about how to submit a request for further 
Agency review.
    (d) A request for further Agency review under Sec.  10.75 of this 
chapter may be submitted. Such a request must be submitted in writing 
by the domestic manufacturer or importer and received by FDA within 30 
days from the date on FDA's response. The request for further Agency 
review must be legible, in English, and submitted to the address found 
on our Web site (http://www.fda.gov/tobaccoproducts).


Sec.  1150.17  Penalties.

    (a) Under section 902(4) of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 387b), a tobacco product is deemed adulterated if the 
domestic manufacturer or importer of the tobacco product fails to pay a 
user fee assessed to such manufacturer or importer by the later of the 
date the assessment is due, 30 days from the date FDA sent notification 
of the amount owed, or 30 days after final Agency action on a 
resolution of any dispute as to the amount of the fee.
    (b) Under section 902(4) of the Federal Food, Drug, and Cosmetic 
Act, a tobacco product is deemed adulterated if the domestic 
manufacturer or importer of the tobacco product fails to report the 
information required by Sec.  1150.5 to calculate assessments under 
this part.
    (c) The failure to report the information required by Sec.  1150.5 
to calculate assessments under this part is a prohibited act under 
section 301(e) of the Federal Food, Drug, and Cosmetic Act.
    (d) Information submitted under Sec.  1150.5 is subject to 18 
U.S.C. 1001 and other appropriate civil and criminal statutes.

    Dated: July 7, 2014.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2014-16153 Filed 7-9-14; 8:45 am]
BILLING CODE 4164-01-P