Tobacco

On Menthol & Tax Evasion

FDA panel continues flavor debate as Obama signs federal PACT Act
WASHINGTON -- On the same day tobacco retailers and manufacturers won one major battle to end cigarette tax evasion, those same manufacturers were pleading their case before a newly formed panel of the Food and Drug Administration, primarily defending menthol cigarettes.

The panel is trying to determine whether the cigarettes' minty additive lures people into smoking and makes it harder for them to quit.

Representatives of Altria Group Inc., Lorillard Inc. and Reynolds American Inc., citing public literature, told the panel that menthol cigarettes aren't more harmful [image-nocss] than traditional cigarettes and don't induce people to smoke, according to a report in the Wall Street Journal.

On Wednesday, the industry officials spoke during the second day of a two-day meeting on the public-health effects of menthol in cigarettes. The panel is trying to help the FDA determine how to regulate menthol cigarettes, which account for roughly one-third of the $70 billion U.S. cigarette market. The main issue is whether menthol cigarettes are different from traditional cigarettes, and, if so, should menthol be banned as other tobacco flavorings already are. The industry's stance, echoed by several company representatives, according to the report, is that cigarettes containing menthol are no different and aren't more or less harmful than regular cigarettes.

"This isn't the tobacco industry's spin; the data is the data," said Jonathan D. Heck of Newport cigarette-maker Lorillard. Heck is one of three industry, nonvoting members on the panel.

The industry avoided directly answering the most-charged questions, including one from Patricia Nez Henderson, the panel's public representative, about whether menthol masks the harmful effects of smoking.

"We were here to talk about the scientific information," said James Dillard, a senior vice president at Altria, parent company of Marlboro cigarette maker Philip Morris. "We're not in the best position today to talk about that."

Dillard said the industry would be willing to entertain all direct questions from the FDA in preparation for the next meeting of the panel, expected to be sometime in the summer.

Henderson also pressed a representative from Camel cigarettes maker RJ Reynolds on whether menthol is considered a flavoring, according to the report.

"It is an ingredient by definition of the act and does have flavor," said RJR's Michael Ogden, referring to the tobacco act signed into law last year. "So, yes."

On Tuesday, the first day of the hearing, panel members heard from multiple government health officials on the health effects of menthol, and much of the information was mixed, the newspaper reported.

An analyst from Concept Capital, summing up Tuesday's meeting in a note to investors, said: "We did not see a dagger to the heart of menthol revealedat least not on day one."

Meanwhile Wednesday, President Barack Obama signed the federal Prevent All Cigarette Trafficking (PACT) Act, effectively putting an end to cigarette tax evasion via the Internet, telephone and other means of purchasing tobacco products other than face-to-face transactions.

The new law, passed overwhelmingly by Congress earlier in March, requires Internet and other mail-order sellers of cigarettes and smokeless tobacco, including Indian retailers, to:
Pay all applicable federal, state and local taxes and affix related tax stamps before delivering cigarettes or smokeless tobacco to any customer.
Comply with state and local laws as if the sellers were tobacco product retailers located in the same jurisdiction as their customers.
Register with the state and make periodic reports to state tax collection officials.
To stop sales to minors, check the age and ID of customers at both points of purchase and delivery. The law, which takes effect in 90 days, makes tobacco products nonmailable matter, meaning that the U.S. Postal Service cannot be used to deliver them.

In a press release, NACS called the signing a "huge win" for convenience store retailers.

"[The] signing by President Obama caps a 10-plus year effort by retailers to close loopholes that placed significant competitive disadvantages on brick-and-mortar retailers," the association wrote.

Added Lyle Beckwith, senior vice president of government relations for NACS, "We applaud Congress and the president for standing up for American taxpayers and small businesses and look forward to working with the administration to implement the provisions of this new law."

NACS is the international association for convenience and petroleum retailing, representing more than 2,200 retail and 1,800 supplier member companies.

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