New Study Documents Economic Harm of Premium Cigar Regulation

The following is a press release submitted by the Cigar Rights of America.

A new report by Mangum Economics updates the out-of-date economic analysis of the Food and Drug Administration’s (“FDA”) regulation of premium handmade cigars, and estimates the number of U.S. jobs that will be lost because of the regulations.

The report uses FDA’s own assumptions about the effects of the regulations and updates the calculations to use more recent government data. It also depicts that compliance with the regulation will be so difficult and costly that it threatens the very existence of almost all handmade U.S. cigar manufacturers and importers based in the United States.

According to the report’s author, Dr. David Zorn, “Using FDA’s own cost estimates, the regulations will likely cause 85 to 90 percent of domestic cigar manufacturers and importers (320-338 small businesses) to go out of business, leading to the loss of over 3,500 U.S. manufacturing jobs and almost 1,800 jobs at U.S. importers.

David Zorn, Ph.D., is a consultant with Mangum Economics and an adjunct professor at Antonin Scalia Law School. Previously, he was an economist with the U.S. Food & Drug Administration.

Dr. Zorn continued, “Because handmade cigars have the highest cost of compliance per cigar, almost all of the cigar manufacturers and importers that go out of business because of this rule will be manufacturers and importers of premium handmade cigars. The expected reduction in the number of handmade cigars on the market due to the rule is also likely to cause the closure of approximately 500 tobacco retailers and the loss of as many as 19,800 U.S. retail jobs.

Dr. Zorn noted, “FDA could achieve the same level of public health protection by not regulating handmade cigars in the same way that it regulates cigarettes. At the same time, the agency could allocate the $198 million of cost savings to apply against other FDA regulations that could actually improve public health.

Rocky Patel, President of Rocky Patel Premium Cigars and a CRA board member stated, “This study brings to life the cost benefit analysis that should have been done before the previous administration adopted cigar regulations. This tells us the specific number of jobs and small businesses, manufacturers, distributors and retail businesses that are directly threatened by these regulations. We hope that the Trump Administration will take this study to heart, and recognize that these are real jobs, supporting real families and local entrepreneurs, in a supply chain that spans this nation.

J. Glynn Loope, executive director of Cigar Rights of America noted, “This report is the first of its kind to quantify the domestic economic consequences of premium cigar regulation. From the manufacturers, headquarters operations and the supply chain based in Florida, to family farms of Pennsylvania and Connecticut, to community tobacconists from Seattle to Boston, these regulations threaten jobs, families, and small businesses that dot Main Street America. Coupled with the international trade implications of these regulations, something as simple as enjoying a cigar results in true economic harm, that carries commerce and national security implications.

Scott Pearce, executive director of the International Premium Cigar and Pipe Retailers Association stated upon the release of the report, “There is no question that the current regulations will be catastrophic for the hundreds of premium cigar and pipe retailers across the country, putting small, family-owned stores out of business and thousands more looking for new jobs. What is important to note is that the goal of improving health outcomes and reducing underage consumption of cigarettes and e-cigarettes and providing a fair and just path forward for premium retailers and manufacturers are not mutually exclusive. We can do both.

The report will be distributed to the Trump administration through applicable regulatory reform task forces within various agencies and cabinet offices, in addition to congressional committees that have oversight on regulatory and small business issues.