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February,
2004

TOBACCO INDUSTRY NEWS

Direct Mail Tobacco Retailers Dodge
U.S. Mail Ban in Pair of Federal Bills...


Washington, DC - A Senate Bill passed in December contained language that sent up red flags for online cigar retailers and continues to pose real problems for online cigarette merchants.

The bill, named the "Prevent All Cigarette Trafficking Act" (PACT Act) gives backbone and enforcement powers to the 1949 Jenkins Act, which regulates the interstate shipping of cigarettes. The Senate bill focuses on the interstate traffic of cigarettes, RYO, and smokeless tobacco and requires any company selling these products across state lines to inform the respective state of the incoming shipment, to pay all state taxes up front, and to affix necessary stamps to any products. The goal of the proposed legislation is to combat cigarette counterfeiting.

But it was language that was inserted into the bill at a very late stage that alarmed catalog and online cigar retailers. The Bill stated that "the transmission in the mails of any tobacco product, including cigarettes and smokeless tobacco, is prohibited, and tobacco products are non-mailable and shall not be deposited in or carried through the mails."

Norm Sharpe, president of the Cigar Association of America, was "cautiously optimistic" that the non-mailability language in the Senate Bill would be removed from the final version. "We were told by all parties that it was a mistake and that it is just a matter of getting it changed in conference committee," Sharpe told Smokeshop.

The sister bill - H.R. 2824 or "Internet Tobacco Sales Enforcement Act" in the House of Representatives, remained free from any references to cigars as well as any type of shipping ban for tobacco products through the U.S. Mail following markup and favorable voice vote by the House Judiciary Committee. The bill remained focused on cigarettes, smokeless tobacco, and RYO, and at press time has been referred to the full House.

Major catalog retailers including J.R. Cigars were quite to notify customers of the potential ban, distributing contact lists of legislators and urging individuals to register their disapproval of a mail-order ban.

Both Bills must be still be reconciled one single piece of legislation, however, and even though the House version should take precedence over the Senate Bill, the cigar industry remains on alert as there are no guarantees as to the outcome.


...But Cigarette Retailers Still Face Plenty of Problems

"HR 2824 would require interstate tobacco retailers to comply with multiple and discriminatory state excise, sales, and use taxes for cigarettes and smokeless tobacco products sold directly to consumers over the Internet or through the mail," says OLTRA (Online Tobacco Retailers Association. "No other legal product sold over the Internet would be subject to the same regulations." OLTRA's contentions:

  • HR 2824 will reduce customer choice, and increase the cost of cigarettes and smokeless tobacco, to the benefit of large tobacco companies and powerful convenience store lobbying interests. The bill would allow states to blacklist companies for selling tobacco products in interstate commerce.

  • The bill will impose harsh criminal and civil penalties on online retailers, as well as carriers (such as UPS, Federal Express and Airborne Express).

  • If passed, HR 2824 will drive responsible Internet tobacco retailers out of business, giving large tobacco companies a monopoly and leaving the door open to organized crime, contraband smugglers and other undesirable groups.

  • Manning to Create Ashton Humidors Exclusively

    Philadelphia - Ashton Distributors, Inc. and Manning Humidors of Ireland have signed an agreement that will bring about the first line of Ashton humidors. Manning will effectively cease production of their own brand to begin manufacturing Ashton's products exclusively.

    The agreement went into effect this February, and the unveiling of the new Ashton humidors is set for the 2004 RTDA trade show in Las Vegas in July.

    Ashton president Rob Levin explained that the agreement is part of a continuing strategy to build the Ashton brand worldwide. "I have always wanted a top-quality Ashton humidor, but could never find the right formula," he reports. "Our good fortune with Ashton cigars opened up opportunities to grow the name in other related areas and now we hope to slowly build the new Ashton humidor line into the top brand worldwide. With the quality, craftsmanship, and experience of the Manning production facility working for us, we can actually see our way to success. Everything we've seen from Manning leads us to believe we've partnered with a first-class company and first-class people.

    Ashton Distributors, Inc., Philadelphia, PA., Toll-free: (800) 327-4886, Fax: (215) 676-0335, Web: www.ashtoncigar.com.


    Sellers of Cuban Replicas to Pay Altadis USA $900,000

    Ft. Lauderdale - Altadis U.S.A. has been awarded a $900,000 federal judgment against a Miami cigar manufacturer, Tabacalera Cubana Corp., and a Miami retailer, Tabacalera Cubana, Inc., who were caught selling "Cuban replica" Montecristo, H. Upmann, and Romeo y Julieta cigars.

    In a ruling that sends an important message to sellers of so-called "Cuban replica" cigars, Federal Judge Ungaro-Benages ruled that the individuals who operated these businesses - Pedro Gomez and his sons Edel and Joel Gomez - are personally liable for the $900,000 damage award.

    In addition, the counterfeiters were enjoined from any further manufacture or distribution of "Cuban replicas" of the Altadis U.S.A. brands.

    This case sends two important messages to those who produce and sell so-called "Cuban replica" cigars.

    "Any unauthorized use of Altadis U.S.A.'s trademarks is illegal," the company noted in a statement. "Labeling the cigars 'Habana' or calling them 'Cuban replicas' does not make them legal.

    "Individuals who participate in the manufacture, distribution, or sale of 'Cuban replica' cigars will be held personally liable for their counterfeiting activities," the company further stated.

    The November 26, 2003 judgment in Altadis U.S.A. v. Tabacalera Cubana Corp. is the latest victory in Altadis U.S.A.'s aggressive anti-counterfeiting campaign which is proceeding full throttle on both the civil and criminal fronts.


    New York Adopts First Fire-Safe Cigarette Rules

    Albany - New York state has adopted the nation's first rules mandating that cigarettes sold in the state must be rolled with lower-ignition paper.

    The so-called "fire-safe" cigarettes will extinguish by themselves if not puffed on, and advocates say they will prevent many of the fires now triggered by smokers who leave cigarettes unattended.

    The regulations, first unveiled in December 2002 a were adopted in December by the Department of State. "If New York goes ahead, it will drive a national debate because tobacco companies are not going to make one set of cigarettes for New York and one for the rest of the U.S.," said Blair Horner, legislative director for the N.Y. Public Interest Research Group.

    The New York regulations call for cigarettes to be wrapped in banded paper. The bands essentially serve as speed bumps to inhibit the burning down of paper on cigarettes that are not being puffed on. All cigarette brands offered for sale in New York must be tested to determine if they self-extinguish at least 75 percent of the time. Only those brands that meet the states performance standard will be certified and permitted to be sold in New York. Those cigarettes must be marketed in New York starting June 28.

    Manufacturers who falsely certify that their cigarettes have met the standard face fines of up to $10,000. Retailers who sell uncertified brands face fines of up to $500 per sale for sales under 1,000 cigarettes and up to $1,000 per sale for sales over 1,000 cigarettes.



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