Thursday, June 21, 2018
Business

U.S. fans of Cuban cigars still have long wait before they can be sold here

TAMPA — For American cigar aficionados, Cuban tobacco is the forbidden fruit, long-blocked from the United States market by its five-decade-old embargo on the island nation.

But in this new era of normalizing relations, the prospect of the embargo being lifted is rising. That excites Americans who now are restricted to bringing in just $100 of the high-quality cigars, and then only if they buy them on the island.

There's just one hitch: Regulations recently announced by the U.S. Food and Drug Administration could keep Cuban cigars out of local tobacco shops for at least two years after the economic blockade ends. And even then, smokers may not find the full catalogue available in other countries.

"This administration is talking out of both sides of its mouth," said Bryan Haynes, a partner with the Atlanta-based law firm Troutman Sanders, which represents tobacco companies. "While building a better relationship with Cuba, it's effectively banned its most famous product."

Under the new FDA rules, electronic cigarettes, personal vaporizers and cigars introduced into the U.S. market after February 15, 2007, must submit detailed accounts of their ingredients and the process used to manufacture them. It is a regulatory process similar to how the FDA governs the cigarette industry.

The FDA estimates the application process would take up to 1,700 hours for cigar manufacturers. The tobacco industry counters it could be as high as 5,000. In all, it could take as long as two years to complete this work.

Cigars for sale in the United States can remain on the market as they apply. New products cannot be sold until FDA approval is received.

While some brands of Cuban cigars were on U.S. shelves before the embargo, they will still have to fully comply with the new regulations, said Haynes.

"Something produced in the '50s or '60s and not sold since then is not grandfathered in the FDA's eyes," he said.

So if the embargo were to be lifted in 2017, for instance, Cuban cigars may not be available for purchase until 2019. And that is if Habanos — Cuba's state-owned company that runs its cigar industry — began the FDA process the very moment the embargo ends.

The premium hand-rolled cigar industry — a category that would include most Cubans — is lobbying to be exempt from the regulations. Industry leaders claim their products use pure tobacco and no dangerous chemicals.

Among the locals affected by these regulations is Ybor City's J.C. Newman Cigar Co., which rolls premium cigars using tobacco from Cameroon.

"We are disappointed in the FDA's decision to treat premium cigars as cigarettes," said Eric Newman, the company's president. "This will be a real challenge for us long term, but we are ready to fight."

Different types of cigars sold by the same brand are considered separate products and each must comply with the regulations.

To do so will cost up to $330,000 per product, the FDA estimates, while the tobacco industry argues that number is closer to $1 million.

Either way, said J. Glynn Loope, executive director of the advocacy group Cigar Rights of America, it is doubtful that boutique operations can afford the bill. Larger companies, he said, may cut back on the number of new cigars they produce and pull some cigars already on the market to avoid the regulatory costs. Newman said that's a possibility for his company.

Expect Cuba to initially engage the U.S. market in a limited fashion, said Jeff Borysiewicz, founder of Cigar Rights of America.

"At best I could see Cuba bringing its two top brands to the U.S.," he said.

But it may be worth it for Cuba to go all in.

Richard Feinberg, a senior fellow in the Latin America Initiative at the Brookings Institute, has estimated that the U.S. cigar market could inject an extra $200 million into the Cuban economy, although that projection was made before the new FDA regulations.

Simon Evans, a spokesman for London-based Imperial Tobacco, which is the international distribution partner of Habanos, acknowledged that the new FDA policy will provide obstacles.

"The regulations will undoubtedly have an impact in the market and will increase some operating cost," he said. "It would be foolish to speculate on the timing of any potential lifting of the embargo. Nevertheless, the Habanos team continues to work hard to be fully prepared for that eventuality."

Americans visiting Cuba are allowed to bring back cigars for personal use, capped at $100 worth. It's among the policies passed by the Obama administration over the past 18 months.

But that doesn't buy much, said Borysiewicz. A box costs between $200 and $500.

Even though Cuban cigars are not FDA-approved, the new regulations aren't expected to affect imports of small amounts for personal use.

"Because the amount of merchandise imported into the United States in personal shipments is normally small, both in size and value, comprehensive coverage of these imports is normally not justified," FDA spokesman Michael Felberbaum said in an email.

If the embargo is lifted, the U.S. law governing the importation of tobacco for personal use from Cuba will then be the same as it is for every other country, increasing what can be brought back to as many as 100 cigars with a price capped at $800.

Still, Borysiewicz said that doesn't include the cost and time of the trip to Cuba.

What American cigar aficionados expect, he said, is to be able to visit their local tobacco shop and choose from a full catalog of Cuban cigars. But it seems they'll have to wait longer than expected.

"When the embargo is lifted we would be celebrating a new day in U.S.-Cuba relations" said Haynes, the attorney. "The symbol of that should be the Cuban cigar."

     
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