WASHINGTON, D.C. – Today, Congressman Roger Williams (R-TX), Chairman of the House Committee on Small Business, along with Rep. Dan Meuser (R-PA), penned a letter to Director Young at the Office of Management and Budget (OMB) and Administrator Revesz of the Office of Information and Regulatory Affairs (OIRA) regarding the FDA’s new rule that would implement product standard regulations to prohibit the manufacture and sale of menthol flavored cigarettes. Chairman Williams issued the following quote:

“Unfortunately, the Biden administration has proposed another rule that would disproportionally harm our nation’s small businesses,” said Chairman Williams. “Banning menthol cigarettes would result in an estimated loss of $2 billion dollars in sales at convenience stores across the country and would simply create a black market for these products. It is my hope that Director Young and Administrator Revesz reject this rule and allow small business to operate without government interference.”

Read the full letter here.

Read excerpts from the letter below:

“The House Committee on Small Business (Committee) writes to express its concern about the Food and Drug Administration’s (FDA) proposed rule that would implement product standard regulations to prohibit the manufacture and sale of menthol flavored cigarettes (Rule), which is currently under review by the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA). The Committee has followed the FDA’s process as it relates to this rulemaking and seeks to ensure OMB/OIRA is considering both the significant economic impacts on small entities and the fueling of illicit markets that would result from implementation of this Rule.

“The Regulatory Flexibility Act (RFA) requires agencies to analyze proposed rules to determine if they will have a significant economic impact on a substantial number of small businesses. The FDA found that this Rule would have such an impact on small manufacturers, wholesale, and retail firms—triggering compliance costs dwarfed by losses in revenue. The National Association of Convenience Stores (NACS), which represents more than 150,000 convenience stores in the U.S., reports that tobacco products are a vital source of revenue for the convenience store industry, 60 percent of which are single-store operators. If implemented, this Rule would cause a single convenience store to lose $72,285 a year in non-tobacco sundry sales (nearly 4 percent of inside sales) on top of the $160,107 lost due to the reduction in sales of tobacco products. Small operators in the convenience industry would collectively lose $2.16 billion in sales, representing $232,392 in lost sales per store. This is just the convenience stores that would be impacted. While the FDA anticipates that consumers of menthol cigarettes would simply pivot to regular cigarettes and retailers would retain revenue, this unsubstantiated claim does not rectify the impact on small manufacturers who would have their revenue stream from menthol cigarettes completely wiped out. While well intentioned, the FDA’s ban of menthol cigarettes will deliver a significant blow to the small businesses in this country and will not be successful in eradicating menthol cigarettes from the United States.

“Menthols make up 37 percent of all retail cigarette sales in this country. Disallowing the legal sale of menthol cigarettes will only incentivize the illicit tobacco market. A coalition of approximately 700,000 law enforcement officers commented on the proposed Rule saying that the ban “will increase multiple categories of crimes in our communities. The data is clear that illicit tobacco attracts gangs and organized crime.” Rather than continuing to have oversight of the production and sale of menthol cigarettes while generating tax revenue, the government will instead leave the production and sale to unregulated criminal enterprises and foreign producers.

“This is not an unsubstantiated fear; after California implemented a state-wide ban on menthol cigarettes in 2022, a study found that roughly one in five cigarettes smoked were menthols even six months later, of which 27.6 percent were imported. The conclusion of that report is clear: the tax losses from these policies are substantial, and illicit smuggling operators appear capable of filling the demand prohibited by legal market transactions. Similar results were found in Massachusetts after it passed a state-wide ban in 2019. As we saw with the FDA’s attempt at tackling e-vapor products, foreign and illegal products replaced the regulated market; FDA Commissioner Califf acknowledged this failure before the House Appropriations Subcommittee on Agriculture, Rural Development, and Food and Drug Administration on March 29, 2023.”

Background:

Signatories include Chairman Roger Williams (R-TX) and Rep. Dan Meuser (R-PA).

###