The Tobacco Act: Wasted Taxpayer Dollars and the new Tobacco Black Market

The best of intentions carry unintended consequences. In the case of The Tobacco Act of 2009 giving FDA control over tobacco products, the intentions weren’t even praise-worthy. The Tobacco Act was pure political pandering to both Anti-Tobacco Zealots and Big Tobacco at the same time. As usual, “the children” were mentioned often. The Family Smoking Prevention and Tobacco Control Act, as it was called up until about 20 minutes after President Obama signed it into law, is now just called The Tobacco Act. No need to hide behind the family or children once the Big Guy made this travesty the law of the land.

“Unintended Consequences” were big on the mind of Bill Greiwe, CEO of Cheyenne International, when we spoke a little over a month ago. Much has happened in the short time between then and now which makes Mr. Greiwe’s thoughts more prophetic than speculative.

Bill Greiwe, Cheyenne International, FDA tobacco regulation, stupidity…and snus

Founded in 2002, Cheyenne International is a leader in independent brand name cigarettes and cigars in the United States. They are a full line tobacco manufacturer currently offering a variety of cigarette, small cigar/cigarillo, regular cigar, and ROY tobacco products and brands. With the tantalizing header “coming soon”, Cheyenne is also heading into the smokeless tobacco arena. In fact, my original reason for calling Cheyenne was for information on a new snus they are test-marketing called ‘ASAP’. I learned nothing of substance on ASAP Snus but in fairness, Greiwe told me up front he wasn’t going to reveal anything I wanted to know about ASAP Snus or Cheyenne’s plans for it. I’ve got to give him points for being a man of his word.

Bill Greiwe is also very involved and concerned in the implementation of The Tobacco Act. He has reason to be. His philosophy is that all parties: large manufacturers to small, FDA, and advocacy groups pro and con working together can and should design rational, meaningful, regulation of the tobacco industry. Unfortunately, these groups are not working together and are at cross-purposes most of the time. More bluntly, he places a good portion of the blame on “mass stupidity in the American tobacco industry”. Each segment and size company in the industry has their own agenda and are only “looking out for #1”. Instead of the tobacco industry banding together in a unified front and as an industry in working with FDA on rational tobacco regulation, Greiwe states that “a toxic environment has been created and must be stopped.”

Big Tobacco has their own agenda and it doesn’t pay much attention to the welfare of medium and small tobacco companies unless they are acquiring or crushing them. Even Big Tobacco is not united on a strategy (at least publicly); instead each is trying to use FDA regulation to increase their own individual market-shares at the expense of their Big to Small Tobacco company competitors.

The fact that lobbyists for both Altria/Philip Morris USA and anti-all-tobacco fringe group Campaign for Tobacco Free Kids wrote a good portion of The Tobacco Act’s enabling legislation should not only have set off alarm bells, but this unholy union may even have been the first peek since New Testament days of Armageddon itself!

FDA has been biased against tobacco from the start. According to Greiwe, FDA spends much more time working and collaborating with Anti-All-Tobacco groups then they do with the very industry they are going to regulate. I would take that a step further and add that FDA has publicly stated on various occasions that they have a steep learning curve when it comes to the tobacco industry and tobacco regulation Phrases such as “trial and error” and FDA is “in uncharted territory” have been used on more than one occasion in response to questions.

The above are the new labels which will be appearing on the Thunder Xtreme line from V2 tobacco by Jun 22nd 2010. These warning are mandated by FDA and with the exception of the last one, are absolute falsehoods and outright lies when it comes to REAL Steam-Pasteurized Swedish/Scandinavian snus. Despite that, FDA has decided to lump all smokeless tobacco; pasteurized and fermented; air cured and fire cured, all together until they can figure out the part of Tobacco Act addressing Modified Risk Tobacco products; or Reduced Harm tobacco products as they are more commonly known.

REAL Snus does NOT cause mouth cancer. The Swedish Government, which has regulated Swedish Snus as a food product since 1970, removed the cancer warning labels from their snus a few years ago when the evidence overwhelming demonstrated that Swedish snus does NOT cause mouth or other cancers. The 40 year living laboratory of Scandinavia as well as current scientific evidence shows that Swedish Snus has the same nitrosamine levels, cancer and health risks as a cup of French Roast Coffee.
REAL Snus does NOT cause gum disease and tooth loss.
REAL Snus is a MUCH safer alternative for smokers than cigarettes.
REAL Snus HAS nicotine so obviously it is addictive. That’s why no responsible person or company would ever recommend a non-tobacco user start using REAL Snus. Nicotine addiction is not fun. REAL Snus does make it possible for the nicotine-addicted to lead normal, enjoyable, non-persecuted lives without cigarettes with minimal health risks to themselves and NONE to others.

An unintended consequence of mandating labels is that cigarette smokers who would otherwise be open to switching from cigarettes to REAL Snus won’t. They are already and will be even more confused by the mixed message of warning labels for REAL Snus that are identical to those on fermented moist smokeless tobacco products and virtually identical to cigarette warning labels. And so these victims of nicotine-addiction will continue smoking and dying unnecessarily. Worse, they may continue smoking AND start using American under-nicotined, snus-like products. American snus is marketed as a complement to smoking; not a replacement as is the case with REAL Swedish Snus.

Once FDA quantifies what Modified Risk Tobacco products (MRT) are and creates factual labels for them, much of the confusion existing today among American cigarette smokers and users of fermented/fire cured oral tobacco products will fade. Unfortunately, the MRT application and product approval process is also one of FDA’s “learning curve” challenges. FDA Tobacco Czar Dr. Lawrence Dayton has stated the approval process for the first MRT applications will move slowly as FDA “learns as it goes”. I both appreciate and am dismayed at Dr. Dayton’s candor.

Bottom line; it could take up to five years for FDA to sort out the MRT bureaucratic red tape…..conservatively. Dr. Lars-Erik Rutqvist, Senior Vice President of Scientific Affairs for Swedish Match has stated that the first products to win FDA approval to be classified in the MRT category could conceivably not occur in our lifetimes. To answer your unspoken question, he was serious.

The elephant in the room here is the whole flavored tobacco issue. On September 22, 2009, clove cigarettes were banned. Violation letters were sent out by FDA to anyone caught marketing them in the USA. Actually, all flavored cigarettes were effectively banned except Menthol. Clove was banned because it was considered an entry level flavor to entice new smokers. FDA got away with it because the tiny clove cigarette market has no voice.

Menthol, which is known to be an entry level flavor to hook new smokers is still here. Congress bowed especially to urban area outrage when a menthol ban was on the table. Too many menthol smokers vote. Interestingly, we learned from FDA that menthol was only exempted from being banned for a year. Dr. Deyton also stated matter-of-factly that FDA would take up menthol once they were allowed by law later this year. By coincidence, Congress wrote the law so that FDA won’t have time to propose or implement anything concerning banning menthol prior to the 2010 mid-term elections.

Once FDA finally does get around to banning menthol, Congress will simply throw up their hands and say “It’s not our fault, it’s the FDA!”. Americans have short memories. Then the real litigation fun starts. Lawsuits have already been filed by Big Tobacco stating that marketing restrictions in The Tobacco Act violate their First Amendment rights.

New York City approved and was about to begin enforcing this very week a draconian ban on ALL flavors (except menthol and mint) in ALL tobacco products sold in NYC: cigarettes, cigars, pipe tobacco, moist smokeless tobacco (dip) and yes, even REAL Snus! Altria of course filed suit in Federal Court against NYC and now NYC has ‘put off’ enforcement’ of this unconstitutional ordnance at this time.

These lawsuits are defended against with taxpayer dollars. By the time you factor in appeals; some all the way up to the US Supreme Court, it will be a huge amount of taxpayer dollars wasted. It seems once again the big winners will be lawyers. The losers? Look in the mirror.

This brings us to what Bill Greiwe considers to be the most dangerous Unintended Consequence of The Tobacco Act: the Black Market. As Prohibition of alcohol in particular but not exclusively demonstrated in the US, if Americans want something, they will find a way to get it. During Prohibition, bathtub gin, moonshine, and liquor smuggled across the border from Canada not only made black marketeers rich and started Organized Crime as we know it today, but killed and blinded too many consumers with unsafe products.

Until The Tobacco Act, we had no idea what was in cigarettes. We still don’t and won’t but theoretically FDA will protect us. I was present on an FDA conference call concerning the new regulations where the first phone comment was from Altria/Philip Morris USA. They thanked FDA for keeping the general public from ever seeing the complete ingredient list or manufacturing process of their tobacco products of which they were now required to share with FDA. After that brief; it seemed more like a reminder than a thank you, Altria hung up.

For those concerned about tobacco-related illness and death, Big Tobacco products will look down-right friendly compared to what will available on the black market. There will be no ingredients or manufacturing process controls. Black market shoppers won’t even know how much actual tobacco is in the products they buy…or what is being used in its place. They won’t know what chemicals are used for flavoring and shelf-life. They won’t know the amount of rodent feces or cockroach pieces mixed into the black market products they buy.

What they will know is that the black market will be able to deliver FDA-banned flavors and because of ever-increasing and insane tobacco taxes at all levels of Government, tobacco products on the black market will be affordable as well. For those who can’t afford it….burglaries of convenience stores and supermarkets targeting cigarettes have already jumped.

As during Prohibition, every American will also know someone connected to the black market or how to obtain black market goods in short order. That or even with our education system’s deficiencies over the last few decades, pretty much everyone can figure out which direction North is…or afford a GPS system to find it for them. You literally can’t go north in the United States without eventually reaching Canada.

Our friend Canada; whose Cuban Cigar importers, distributors and retailers will all go out of business the very day some American President finally gets around to lifting the Cold War relic known as the Cuban Trade Embargo. Does anyone seriously think Canada, with economic problems of it’s own, is going to make any real effort to stop cigarettes and other tobacco products from crossing their huge and porous border into the United States? I refer you back to the almost exclusively American customer base which accounts for Canadian sales of Cuban Cigars.

Also consider the size of the Cuban Cigar consumer community in the United States compared to the cigarette/all other forms of tobacco market here. We’re talking a bucket of water compared to the Atlantic Ocean. There is just too much money at stake. Distribution of tobacco products will become a massive black market the likes of which this country has never seen.

Tax Collectors and Ivory Tower, zero-sum-game Politicians who thought Indian Reservations were their primary bane in collecting tobacco tax so-called revenue are in for a very rude awakening. It has become apparent the question is no longer IF but WHEN will the tobacco black market will really explode in the United States.

What does Washington do then? Start a War Against Tobacco far dwarfing the scope and cost of the money-pit PACT legislation currently sitting in the Senate? Let’s see….that means America will be fighting the War on Tobacco to the north, the War on Drugs to the south, and two foreign wars across the pond to the east. Factor in a quantum leap in criminal activity. With a $13-$17 trillion deficit already plus the huge loss at the State and Federal level of future tobacco tax money to the black market….how exactly are we going to pay for all this?

I have no idea. What I do know is that somehow the lawyers will profit from all this as usual. I’m also pretty sure the American tobacco industry and FDA are not going to heed Bill Greiwe’s words of warning. I will have to seek asylum in Sweden. As for America, God help all of us….except the lawyers.

From the SnusCENTRAL Bunker,

LARRY WATERS