Are We Seeing the Beginning of the End of Buying Cigars On-Line?
FedEx Corporation is an American global courier delivery service headquartered in Memphis, Tennessee. In FedEx’s early days, Federal Express, (as it was called then) their owner and founder Fred Smith took the company’s last $5,000 to a Las Vegas blackjack table, after they were denied a business loan and won $27,000. In his first 26 months in business Smith racked up $29 million in losses and Fred resorted to gambling. Desperate to pay bills, his big gamble in Vegas paid off and it saved his company. I tell you the history because it appears FedEx is not taking any chances any longer. This could be the beginning of the end of mail-order and on-line cigar sales.
Today, FedEx is a Corporation that is publicly traded (FDX) and it states that it is committed to producing superior financial returns for its shareholders and ships more than 10 million packages daily. Starting January 1, 2016 FedEx will no longer ship packages containing any tobacco products including premium cigars.
Prohibited items not allowed to be shipped via FedEx now include Human Corpses, Live Animals (unless special arrangements are made) and Cigars. Another very odd one prohibited is postage stamps. Imagine you need a postage stamp to mail a letter or package via U.S. Postal but you are not allowed to ship a package from FedEx that contains a Postage Stamp in it, I find that very weird but I digress.
Hazardous Materials are alright, you can ship up to 100 pounds of black powder for ammunition and explosives, but not a stamp or a cigar. A legal product (Cigars) will soon be outlawed at FedEx. I’m talking on-line retailers to consumer and even from B to B (Business to Business). No longer can a cigar manufacturer ship to the cigar shop. So why is this happening?
I first noticed something was beginning to happen this year at the 2015 IPCPR in New Orleans when manufacturers went to ship products via FedEx they were asked if the packages contained tobacco due to restrictions prohibiting the shipment of tobacco. I witnessed it myself. What is going on I thought?
It appears the reason stated for such a ban stems from a lawsuit in which FedEx was sued by the state of New York for $70 million dollars. The New York Attorney General filed a $70 million lawsuit last year against Federal Express Corporation for unlawfully shipping nearly 80 million contraband cigarettes to consumers across New York State in violation of federal and state laws. These cigarettes are contraband because they were sold into New York without New York getting the tax. The same thing happens with cigars every day.
New York State believes it is entitled to damages from FedEx under the federal Racketeer Influence and Corrupt Organizations Act, the RICO act of all things and FedEx is concerned N.Y. may be correct.
What about cigars? Yes, this too says FedEx, and FedEx has made their final decision and will not gamble like its founder once did. FedEx has been subject to penalties for breaking the federal Contraband Cigarette Trafficking Act (CCTA) and the Prevent All Cigarette Trafficking (PACT) Act in the past. Despite these being cigarette related, FedEx has decided to no longer accept shipments of all tobacco including Cigars and this begins in less than 100 days.
What’s next and who’s next? The U.S Postal Service has been sued by N.Y. too, for shipping 80,000 shipments of cigarettes untaxed. There has been rumblings that UPS is concerned and looking into the matter themselves.
Are we looking at the end of mail-order and internet cigar sales? Is this the end of shipping cigars across State borders? Are we looking at the end of retail cigar sales as manufacturers will not be able to get their cigars to the retail shops? Will it go back to the days of trucks delivering cigars to wholesale companies who then feed the retail shops with cigars? This happens already in other countries… why not the U.S.? That’s the way it was when I got into the cigar business in 1985, there were very few retailers who got cigars “direct” from any manufacturer. We got weekly deliveries via truck from wholesale companies who sold a whole array or items including cigars and we sold face to face to our customers only.
As the FDA takes complete control over cigars, the rules will change and the cigar world will not be as it is today. Put your seatbelt on and go pick up your cigars at your local brick and mortar shop because FedEx will not be delivering them to you anymore and others may follow. Are we seeing the beginning of the end for buying cigars on-line?