Aug. 12 2013
WASHINGTON, DC – The Food and Drug Administration has taken important steps to protect public health and fight tax evasion by initiating enforcement action against several online tobacco sellers who are illegally misbranding roll-your-own (RYO) cigarette tobacco as pipe tobacco. This misbranding is aimed at evading higher federal taxes imposed on RYO tobacco in 2009 and FDA tobacco regulations, which currently apply to RYO tobacco but not pipe tobacco. These blatant efforts to evade the law increase smoking by reducing the price of RYO tobacco and cost the government significant revenue.
In recent warning letters to retailers, the FDA stated that while the products are promoted or labeled as pipe tobacco, “the overall presentation of these products strongly suggests that they are intended for use in a cigarette.” If these violations are not corrected, the retailers face sanctions that include monetary penalties, seizure of the product, no-tobacco-sale orders and criminal prosecution.
The Campaign for Tobacco-Free Kids urged the FDA to address the misbranding of RYO tobacco as pipe tobacco in an August 2012 letter. We applaud the FDA for taking these actions and sending a clear message to retailers that it is committed to enforcing the law and pursuing violations. The FDA’s letters also cited other violations of the agency’s tobacco regulations, including the use of prohibited cigarette flavorings and banned terms such as “light” that imply some cigarettes are less harmful.
In 2009, Congress substantially increased the federal excise tax on cigarettes and RYO tobacco and equalized the tax rates on these products. However, pipe tobacco was taxed at a much lower rate. Almost immediately, tobacco manufacturers began to change the label but not the content of tobacco previously labeled RYO in a clear effort to evade the higher tax rate. From 2008 to 2011, sales of RYO tobacco fell by more than 76 percent, while sales of “pipe tobacco” increased by 573 percent, according to the Centers for Disease Control and Prevention. There is no evidence of any increase in actual pipe smoking.
The CDC last year found that the mislabeling of RYO tobacco as pipe tobacco cost federal and state governments $1.3 billion in revenue from April 2009 to August 2011. (The 2009 federal tax changes also taxed large cigars – those weighing more than three pounds per 1,000 – at far lower rates than small cigars and cigarettes, leading some manufacturers to increase the weight of small cigars to qualify for the lower tax rate.)
While the FDA’s enforcement actions are welcome steps, Congress can stop these tax evasion schemes by increasing tax rates on all tobacco products to the same rate as cigarettes. U.S. Sen. Richard Durbin (D-IL) has introduced legislation to do so.