Document ID: FDA-2012-N-0920-0001
Agency: fda
Document Type: Proposed Rule
Title: Tobacco Products, User Fees, Requirements for the Submission of Data Needed to Calculate User Fees for Domestic Manufacturers and Importers of Tobacco Products
Posted Date: 2013-05-31T04:00Z

[Federal Register Volume 78, Number 105 (Friday, May 31, 2013)]
[Proposed Rules]
[Pages 32581-32594]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12927]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 1150

[Docket No. FDA-2012-N-0920]
RIN 0910-AG81

Tobacco Products, User Fees, Requirements for the Submission of 
Data Needed To Calculate User Fees for Domestic Manufacturers and 
Importers of Tobacco Products

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA or we) is issuing this 
proposed rule that would require domestic tobacco product manufacturers 
and importers to submit information needed to calculate the amount of 
user fees assessed under the Federal Food, Drug, and Cosmetic Act (the 
FD&C Act). The United States Department of Agriculture (USDA) has been 
collecting this information and providing FDA with the data FDA needs 
to calculate the amount of user fees assessed to tobacco product 
manufacturers and importers. USDA intends to cease collecting this 
information starting in fiscal year 2015 (October 2014). Consistent 
with the requirements of the FD&C Act, we are proposing to require the 
submission of this information to FDA instead of USDA. We are taking 
this action to ensure that FDA continues to have the information we 
need to calculate, assess, and collect user fees.

DATES: Submit either electronic or written comments on the proposed 
rule by August 14, 2013. Submit comments on information collection 
issues under the Paperwork Reduction Act of 1995 by July 1, 2013 (see 
the ``Paperwork Reduction Act of 1995'' section of this document).

ADDRESSES: You may submit comments, identified by Docket No. FDA-2012-
N-0920 and/or Regulatory Information Number (RIN) 0910-AG81, by any of 
the following methods, except that comments on information collection 
issues under the Paperwork Reduction Act of 1995 (the PRA) must be 
submitted to the Office of Regulatory Affairs, Office of Management and 
Budget (OMB) (see the ``Paperwork Reduction Act of 1995'' section of 
this document).

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.

Written Submissions

    Submit written submissions in the following ways:
     Fax: 301-827-6870.
     Mail/Hand Delivery/Courier (for paper, disk, or CD-ROM 
submissions): Division of Dockets Management (HFA-305), Food and Drug 
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
    Instructions: All submissions received must include the Agency name 
and Docket No(s). and RIN for this rulemaking. All comments received 
may be posted without change to http://www.regulations.gov, including 
any personal information provided. For additional information on 
submitting comments, see the ``Comments'' heading of the SUPPLEMENTARY 
INFORMATION section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov and insert the 
docket number(s), found in brackets in the heading of this document, 
into the ``Search'' box and follow the prompts and/or go to the 
Division of Dockets Management, 5630 Fishers Lane, Rm. 1061, Rockville, 
MD 20852.

FOR FURTHER INFORMATION CONTACT: Nancy Boocker or Annette Marthaler, 
Center for Tobacco Products, Food and Drug Administration, 9200 
Corporate Blvd., Rockville, MD 20850-3229, 877-287-1373. 
Nancy.Boocker@fda.hhs.gov or Annette.Marthaler@fda.hhs.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Two-Step Process To Calculate Quarterly Assessments
    B. Specific Considerations and Processes for User Fees Under 
Section 919 of the FD&C Act
II. Description of the Proposed Rule
    A. General Principles
    B. Scope and Definitions
    C. Required Information
    D. Methodology
    E. Notification of Assessments
    F. Payments
    G. Disputes
    H. Penalties
III. Effective Date
IV. Legal Authority
V. Environmental Impact
VI. Analysis of Impacts
    A. Introduction
    B. Baseline
    C. Number of Affected Entities

[[Page 32582]]

    D. Impact of the Proposed Rule
    E. Alternative Baselines
    F. Impact on Small Entities
    G. Conclusion
VII. Paperwork Reduction Act of 1995
VIII. Federalism
IX. Comments
X. References

I. Background

    The Family Smoking Prevention and Tobacco Control Act (Tobacco 
Control Act) was enacted on June 22, 2009, amending the FD&C Act and 
providing FDA with the authority to regulate tobacco products (Public 
Law 111-31, 123 Stat. 1776). Section 919(a) of the FD&C Act (21 U.S.C. 
387s(a)) requires FDA to ``assess user fees on, and collect such fees 
from, each manufacturer and importer of tobacco products'' subject to 
the tobacco product provisions of the FD&C Act (chapter IX of the FD&C 
Act). The total amount of user fees for each fiscal year is specified 
in section 919(b)(1) of the FD&C Act, and under section 919(a) we are 
to assess and collect a proportionate amount each quarter of the fiscal 
year. The FD&C Act provides for the total assessment to be allocated 
among the classes of tobacco products identified in the statute: 
cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-
your-own tobacco.\1\ The class allocation is based on each tobacco 
product class' volume of tobacco products removed \2\ into commerce. 
Within each class of tobacco products, an individual domestic 
manufacturer or importer is assessed a user fee based on its share of 
the market for that tobacco product class.
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    \1\ As discussed later in this section, two of these classes 
(cigars and pipe tobacco) are not currently subject to regulation 
under chapter IX of the FD&C Act. Domestic manufacturers and 
importers are not required to pay user fees for these classes of 
tobacco products unless, by regulation, FDA deems them subject to 
FDA's jurisdiction.
    \2\ Removal is defined at 26 U.S.C. 5702 as ``the removal of 
tobacco products or cigarette papers or tubes, or any processed 
tobacco, from the factory or from internal revenue bond under 
section 5704, as the Secretary [of Treasury] shall by regulation 
prescribe, or release from customs custody, and shall also include 
the smuggling or other unlawful importation of such articles into 
the United States.''
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    In specifying how to determine each of these two allocations--to a 
class of tobacco products and then to a domestic manufacturer or 
importer within a particular class of tobacco products--section 919 of 
the FD&C Act references the Fair and Equitable Tobacco Reform Act of 
2004 (FETRA, Public Law 108-357 (7 U.S.C. 518 et seq.)). In determining 
the user fees to be assessed on each class of tobacco products, section 
919(b)(2)(B)(ii) of the FD&C Act provides that the applicable 
percentage for each tobacco product class ``shall be the percentage 
determined under section 625(c) of [FETRA] for each such class of 
product for such fiscal year.'' The classes of tobacco products 
identified in section 919 of the FD&C Act are the same classes subject 
to assessments under FETRA. In determining the user fee to be paid by 
each company, section 919(b)(4) of the FD&C Act directs that we use 
percentage share information ``determined for purposes of allocations 
under subsections (e) through (h) of section 625 of [FETRA].''
    FETRA provides for a Tobacco Transition Payment Program (TTPP) 
through which eligible former tobacco quota holders and tobacco 
producers receive payments in 10 equal installments in each fiscal year 
2005 through 2014. The Farm Service Agency (FSA) of the USDA has been 
the organization responsible for implementing FETRA on behalf of the 
Commodity Credit Corporation (CCC) of the USDA. FETRA provides for the 
establishment of quarterly assessments on each domestic manufacturer 
and importer of tobacco products to fund the 10-year TTPP. The last 
assessment under FETRA will be in September 2014, which will encompass 
the 39th and 40th quarterly TTPP assessments. The issuance of the 40th, 
or last, quarterly assessment, will be on September 1, 2014, rather 
than on December 1, 2014, in accordance with statutory requirements 
specified in section 625(d)(3)(A) of FETRA. This 40th quarterly 
assessment will be determined by using the same adjusted market share 
of an entity that was used to determine the 39th quarterly assessment 
(market activity during April 1 to June 30, 2014).
    Under a Memorandum of Understanding between FDA and USDA (Ref. 1), 
USDA has been providing FDA with the information on percentage share by 
class of tobacco products and by individual company within each tobacco 
product class. Under FETRA, the authority to collect assessments ends 
September 30, 2014; however, USDA will still collect the July, August, 
and September 2014 monthly reports with the same established monthly 
deadline, so the 40th quarter's assessment can later be ```trued-up''' 
or adjusted to reflect the actual market share of domestic tobacco 
manufacturers and importers for the 40th quarter. Section 919(b)(7) of 
the FD&C Act requires that no later than fiscal year 2015, we ensure we 
are able to make the determinations necessary for assessing tobacco 
product user fees.

A. Two-Step Process To Calculate Quarterly Assessments

    Both the USDA TTPP program and FDA's user fee program follow a two-
step process to calculate quarterly assessments:
     Step A allocates assessments among the six classes of 
tobacco products specified in those programs--cigarettes, cigars, 
snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco--based 
on each class' volume of tobacco products removed into commerce 
(section 625(c) of FETRA; 7 CFR 1463.4 and 1463.5; and section 
919(b)(2)(B) of the FD&C Act).
     Step B allocates the assessment for each class of tobacco 
products among the domestic manufacturers and importers in that class, 
so that each domestic manufacturer's or importer's assessment is 
proportional to its percentage share within that class (sections 625(e) 
through (h) of FETRA; 7 CFR 1463.7; and sections 919(b)(3) through 
(b)(5) of the FD&C Act).
1. Step A
    For Step A, FETRA specified the initial allocation among the six 
classes of tobacco products. For this initial calculation, USDA has 
determined that Congress used publicly available calendar year 2003 
relevant class volume numbers (sticks \3\ for cigarettes and cigars, 
pounds for the other classes) from the Treasury Department's Alcohol 
and Tobacco Tax and Trade Bureau (TTB) and multiplied those numbers by 
the maximum 2003 Federal excise tax rates for each class of tobacco 
products (Ref. 2). In this fashion, the volume of each tobacco product 
class was converted from differing bases (sticks and pounds) to a 
common metric: Tax dollar amounts. The tax dollar amounts were added 
together for a six class total. The allocation for each class of 
tobacco products was its percentage contribution to the six-class total 
(Ref. 2 at pp. 4-7). As directed by FETRA, USDA adjusts these 
allocations annually to reflect changes in the gross domestic volume of 
each tobacco product class, and it does so using the same methodology 
that Congress used to make the initial allocation (Ref. 2 at pp. 8-10). 
Specifically, USDA determines the gross domestic volume of each tobacco 
product class by multiplying the maximum 2003 Federal excise tax rate 
for each class by the volume information from TTB for the most recent 
full calendar year. In other words, for fiscal year 2012, USDA

[[Page 32583]]

calculates gross domestic volume for each class of tobacco products 
based on information for calendar year 2010.
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    \3\ In this document, the number of ``sticks'' is used to refer 
to the number of individual cigarettes or cigars.
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    As discussed previously in this document, section 919(b)(2)(B)(ii) 
of the FD&C Act provides that the applicable percentage of each class 
of tobacco products will be the percentage determined under section 
625(c) of FETRA.
2. Step B
    Once the allocation to each class of tobacco products is 
determined, Step B determines the user fee to be assessed and collected 
from each domestic manufacturer and importer within that class. So it 
can allocate the assessment for each class of tobacco products among 
the domestic manufacturers and importers in each class, USDA collects 
information from each domestic manufacturer and importer on the volume 
of taxable removals \4\ (sticks or pounds) and the resulting excise 
taxes it has paid for those removals (7 CFR 1463.6). USDA collects this 
information monthly using a form it has developed (http://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/CCC974.PDF) (Ref. 
3). Along with this form, each domestic manufacturer and importer is 
also required to submit certified copies of specified tax returns and 
forms (see section 625(h) of FETRA). For domestic manufacturers, these 
documents are TTB Form 5000.24 (Excise Tax Return) and TTB Form 5210.5 
(Report, Manufacturer of Tobacco Products or Cigarette Papers and 
Tubes). For importers, these documents are Department of Homeland 
Security, U.S. Customs and Border Protection (CBP) Form 7501 (Importer 
Entry Summary) and TTB Form 5220.6 (Monthly Report, Tobacco Products or 
Processed Tobacco Importer). In accordance with FETRA, USDA calculates 
the percentage share of a domestic manufacturer or importer within a 
class of tobacco products by dividing the volume of tobacco products 
(in either sticks or pounds, depending on the class) attributable to an 
entity by the total volume of tobacco products (in either sticks or 
pounds) for that class. Excise taxes paid can be used as a proxy for 
volume when the tax rate by volume (sticks or pounds) is uniform for 
the whole class (which is the case for all classes except cigars). USDA 
then multiplies the percentage by the assessment amount attributed to 
the class of tobacco products to determine the specific firm's 
assessment. (See Ref. 2 at pp. 10-15.)
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    \4\ FETRA defines removal with reference to 26 U.S.C. 5702 (see 
7 U.S.C. 518d(a)(2)).
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    For Step B, section 919(b)(4) of the FD&C Act requires FDA to 
allocate the assessment of user fees for each class of tobacco products 
among the tobacco product manufacturers and importers in those classes 
using the percentages determined under section 625(e) through (h) of 
FETRA.

B. Specific Considerations and Processes for User Fees Under Section 
919 of the FD&C Act

    The calculation of user fees under section 919 of the FD&C Act does 
differ from FETRA in some important respects. First, we may not assess 
a user fee on a class of tobacco products unless that class of tobacco 
products is either listed in section 901(b) of the FD&C Act (21 U.S.C. 
387a(b)) (cigarettes, cigarette tobacco, roll-your-own tobacco, 
smokeless tobacco \5\) or has been deemed by FDA in a regulation under 
section 901(b) to be subject to chapter IX of the FD&C Act. For those 
classes of tobacco products that are not deemed by FDA to be subject to 
chapter IX of the FD&C Act, with respect to Step A of the assessment 
calculation, the amount of user fees that otherwise would be assessed 
to such class is reallocated to the classes of tobacco products that 
are subject to chapter IX of the FD&C Act (section 919(b)(2)(B)(iv) of 
the FD&C Act).
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    \5\ Smokeless tobacco, as defined in section 900(18) of the FD&C 
Act, includes snuff and chewing tobacco as these classes are defined 
in 26 U.S.C. 5702; thus, the classes of snuff and chewing tobacco 
are currently subject to user fees.
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    Second, with respect to Step B of the assessment calculation, 
section 919 of the FD&C Act provides that if a user fee assessment is 
imposed on cigars, the percentage share of each domestic manufacturer 
and importer of cigars shall be based on the excise taxes paid by such 
domestic manufacturer or importer during the prior fiscal year (section 
919(b)(5) of the FD&C Act).
    As required by the FD&C Act, user fees are to be assessed and 
collected each quarter of each fiscal year and the total amount 
assessed and collected is the amount specified in section 919(b). FDA 
makes a determination of the total user fee to be paid by each domestic 
manufacturer and importer each fiscal quarter (four times a year), 
using the information FDA currently receives from USDA, and notifies 
each entity of its quarterly assessment by invoice. The invoice from 
FDA currently includes information about how to remit payments and 
accrual of interest if a payment is not received by the date due.
    The authority to collect the last assessment under FETRA ends 
September 30, 2014; however, USDA plans to provide the original market 
share activity for the 39th and 40th quarter as well as the ``trued-
up'' or revised market share to FDA on the same time schedule as any 
other quarterly assessment. Because we anticipate that after USDA's 
40th quarterly assessment FDA will no longer receive the information 
from USDA that we currently use to calculate the tobacco product user 
fee assessments,\6\ we are issuing this proposed rule that would 
require the submission of information to FDA.
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    \6\ With respect to the quarterly assessments issued by USDA on 
September 1, 2014, the user fee allocations will be based on 
percentage share during the April 1 to June 30, 2014, quarter (7 CFR 
1463.6). The original 40th quarter's market share will be ``trued-
up'' or revised after receipt of the July, August, and September 
2014 monthly reports during the 2014 annual revision and this 
information will then be provided to FDA.
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II. Description of the Proposed Rule

    As discussed in section I of this document, section 919 of the FD&C 
Act establishes a user fee assessment and collection process that 
references the FETRA framework for determining allocations among 
classes of tobacco products and among individual domestic manufacturers 
and importers within each class. The proposed rule is intended to 
ensure that FDA collects from domestic manufacturers and importers 
information necessary to make these allocations and to assess user fees 
for domestic manufacturers and importers. The following sections 
discuss in more detail the proposed rule and FDA's rationale for the 
proposed sections.

A. General Principles

    This proposed rule uses the TTPP framework, as implemented by USDA. 
We believe that adopting an approach similar to the TTPP regulations is 
consistent with the direction of section 919 of the FD&C Act. For 
example, section 919(b)(2)(B)(ii) of the FD&C Act directs that when 
allocating user fee assessments to classes of tobacco products (Step 
A), FDA shall use the percentage as determined under section 625(c) of 
FETRA. Similarly, section 919(b)(4) of the FD&C Act directs that when 
determining the user fee by company (Step B), FDA shall use the 
percentage as determined under subsections (e) through (h) of section 
625 of FETRA. Thus, the proposed rule uses the same approach as USDA 
for collecting data and making allocations among firms. Because 
domestic manufacturers and importers are

[[Page 32584]]

familiar with the TTPP, using this approach should help minimize 
confusion about the submission requirements and the methodology used to 
make the calculations of user fee assessments. While the proposed rule 
uses the TTPP framework to a large extent, it provides additional 
explanation of precisely how FDA intends to make the Step A and Step B 
calculations.
    This proposed rule varies from USDA's regulation implementing the 
TTPP in certain respects to reflect differences between FETRA and the 
FD&C Act. These differences, however, do not affect the types of data 
that domestic manufacturers and importers would submit to FDA. For 
example, one difference reflected in the proposal is that the total 
yearly user fee is specified in the FD&C Act (section 919(b)(1) of the 
FD&C Act), whereas for the TTPP, USDA calculates the total assessments 
for a year based on actual annual program costs (section 625(b)(2) of 
FETRA). Another example relates to disputes. FETRA provides a specific 
hearing process related to challenges of TTPP assessments (see section 
625(i) of FETRA and 7 CFR 1463.11). Section 919 of the FD&C Act neither 
references this section of FETRA nor provides a particular dispute 
process. Thus, while the proposed rule contains some provisions 
relating to disputes regarding the amount of the fee assessments 
(discussed in more detail in section II.G of this document), the 
proposed provisions differ from those in the TTPP program.

B. Scope and Definitions

    The proposed rule includes a scope section (proposed Sec.  1150.1 
(21 CFR 1150.1)) that explains how the regulation would relate to the 
collection and assessment of user fees and how it would apply to 
domestic manufacturers and importers of tobacco products. In addition, 
the proposal includes a definitions section that would help clarify the 
meaning of terms used throughout the proposed rule. Several of the 
terms are similar to terms used in the TTPP regulations (7 CFR part 
1463).
    The following terms are defined in proposed Sec.  1150.3:
    Class of tobacco products. We are proposing to define ``class of 
tobacco products'' as cigarettes, cigars, snuff, chewing tobacco, pipe 
tobacco, and roll-your-own tobacco. These are the classes of tobacco 
products named in section 919(b)(2)(B)(i) of the FD&C Act. They are 
also the same six classes of tobacco products that have been subject to 
TTPP assessments under FETRA and, as such, the classes for which there 
is a method for determining the applicable percentages under FETRA, 
both for the classes and individual entities within the classes. The 
FETRA percentage is based on gross domestic volume, which is defined as 
the volume of tobacco products removed within the meaning of the 
Internal Revenue Code (section 625(a)(2) of FETRA). Under the Internal 
Revenue Code, the six classes are the only ones defined as ``tobacco 
products'' that are removed and that are subject to the excise tax 
requirements (26 U.S.C. 5701 and 5702(c) and (j)). Therefore, we are 
not including other classes of tobacco products in the proposed rule, 
even though these six classes do not encompass all tobacco products as 
that term is defined in section 201(rr) of the FD&C Act (21 U.S.C. 
321(rr)).\7\ While some of these classes have definitions in the FD&C 
Act, such as the definition of ``cigarette'' in section 900(3) of the 
FD&C Act, we are proposing to use the definitions in 26 U.S.C. 5702 
because these are the definitions currently used in determining the 
applicable percentages for the purpose of user fee assessments.\8\
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    \7\ Section 201(rr)(1) of the FD&C Act states: ``The term 
`tobacco product' means any product made or derived from tobacco 
that is intended for human consumption, including any component, 
part, or accessory of a tobacco product (except for raw materials 
other than tobacco used in manufacturing a component, part, or 
accessory of a tobacco product).''
    \8\ Although FDA has not deemed cigars to be subject to its 
jurisdiction, roll-your-own tobacco for cigars is part of the roll-
your-own tobacco class, as defined in 26 U.S.C. 5702. Thus, we have 
considered roll-your-own tobacco for cigars to be subject to user 
fees under the roll-your-own tobacco class.
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    Domestic manufacturer and importer. We are proposing to define the 
term ``domestic manufacturer'' as a person who is required to obtain a 
permit from TTB with respect to the production of tobacco products 
under title 27 of the Code of Federal Regulations (CFR). We are 
proposing to define ``importer'' as a person who is required to obtain 
a permit from TTB with respect to the importation of tobacco products 
under title 27 of the CFR. The proposed use of two separate definitions 
would differ from some FD&C Act provisions that use the single term 
``tobacco product manufacturer'' to refer to both manufacturers and 
importers. FDA views use of the terms domestic manufacturer and 
importer in this proposed rule as consistent with the language of 
section 919 of the FD&C Act, which uses the terms manufacturer and 
importer throughout. FDA is proposing to use the term ``domestic 
manufacturer'' instead of ``manufacturer'' in proposed part 1150 
because the tobacco industry is familiar with the former term in the 
context of submitting information for assessment purposes.
    Fiscal year quarter and total assessment. We are proposing to 
define the term ``fiscal year quarter'' as a quarter in a fiscal year 
(the fiscal year is October 1 through September 30). We are proposing 
to define ``total assessment'' as the total amount of user fees (in 
dollars) authorized to be assessed and collected for a specific fiscal 
year under section 919 of the FD&C Act. Both terms are specific to 
FDA's implementation of section 919 of the FD&C Act.
    Units of product and units of product removed and not tax exempt. 
We are proposing to define ``units of product'' as the number of sticks 
for cigarettes and cigars, or the weight measured in pounds for snuff, 
chewing tobacco, pipe tobacco, and roll-your-own tobacco. We are 
proposing to define ``units of product removed and not tax exempt'' as 
the units of product: (1) Removed (as defined by 26 U.S.C. 5702) and 
(2) not exempt from Federal excise tax under chapter 52 of title 26 at 
the time of their removal under that chapter or the Harmonized Tariff 
Schedule of the United States.
    Yearly class allocation. We are proposing to define the term 
``yearly class allocation'' as the amount of user fees (in dollars) to 
be assessed for a class of tobacco products for a particular year.

C. Required Information

    The proposed rule includes a section (proposed Sec.  1150.5) 
describing the information that domestic manufacturers and importers 
would be required to submit to FDA. The proposed requirement would 
provide continuity to domestic manufacturers and importers as it would 
require them to submit essentially the same information to FDA that 
they are currently submitting to USDA. This information would provide 
FDA with the information we need to calculate the user fee amount to be 
assessed and collected from each domestic manufacturer and importer.
    To determine the percentage share allocated to each class of 
tobacco products and then to determine the percentage share allocated 
to each domestic manufacturer and importer within each class, we need 
the same information that USDA uses to determine these percentages. 
USDA requires each domestic manufacturer and importer to submit certain 
summary information each month, which is reported on form CCC-974 (see 
7 CFR 1436.6 and Ref. 3). USDA also requires

[[Page 32585]]

that each domestic manufacturer and importer of tobacco products submit 
a certified copy of certain returns or forms filed with a Federal 
Agency. The returns or forms described are those that relate to: (1) 
The removal of tobacco products into domestic commerce (as defined by 
section 5702 of the Internal Revenue Code of 1986) and (2) the payment 
of the taxes imposed under chapter 52 of the Internal Revenue Code 
(section 625(h) of FETRA).
    Domestic manufacturers and importers are not required to pay user 
fees for the classes of tobacco products that have not been deemed, by 
regulation, to be subject to FDA's jurisdiction (i.e., cigars, pipe 
tobacco). We are proposing that these domestic manufacturers and 
importers would not be required to submit information under proposed 
Sec.  1150.5 unless and until they are deemed by regulation to be 
subject to chapter IX of the FD&C Act. We tentatively conclude that we 
can assess and collect the appropriate user fee amounts without such 
information.
1. Identifying Information
    We are proposing to require domestic manufacturers and importers of 
tobacco products to provide to FDA summary information each month. Each 
domestic manufacturer or importer would submit identifying information, 
including its name and address, the name and telephone number of a 
contact, an email address or postal address for FDA notifications, its 
TTB permit number, and its Employer Identification Number (EIN).
2. Removals
    We are proposing to require the submission of information regarding 
the total amount of tobacco products removed into domestic commerce in 
the prior month and the Federal excise taxes paid for those removals. 
The proposed rule would require monthly reports from all domestic 
manufacturers and importers. As is currently required by USDA, entities 
that had no removals subject to tax during the reporting period would 
be required to report that they had no removals. This type and 
frequency of reporting would be almost identical to what USDA currently 
collects on its CCC-974 form. Moreover, FDA intends to have available 
to domestic manufacturers and importers a form similar to USDA's CCC-
974 but with changes reflecting that the information is submitted to 
FDA (Ref. 8).
3. Certified Copies of Returns and Forms
    We are proposing to require domestic manufacturers and importers to 
submit each month certified copies of the returns or forms related to 
the removal of tobacco products into domestic commerce and the payment 
of excise taxes. The proposed rule refers to the reports and forms by 
reference to the applicable Internal Revenue Code authority. Because 
the specific names of reports and forms may change over time, we did 
not name reports or forms in the proposed rule. We instead intend to 
specify the form names in our quarterly notification of assessments to 
domestic manufacturers and importers and on our Web site (www.fda.gov/TobaccoProducts). Currently, the forms are: TTB Form 5220.6; TTB Form 
5210.5; TTB Form 5000.24; and CBP Form 7501.
    Collecting the required information would enable FDA to determine 
allocations and verify the monthly summary information on which the 
allocations are based so we can accurately assess and collect user fees 
from domestic manufacturers and importers. As has been USDA's approach, 
submission of the information in a summary form along with the 
supporting documents (copies of the relevant tax forms) would help 
ensure that we are able to efficiently and accurately identify the 
amount of tobacco product removed and subject to Federal excise tax. We 
believe the information proposed to be required would provide the 
information the Agency needs to effectively implement section 919 of 
the FD&C Act. The burden on reporting entities should be relatively low 
because they would be submitting a form they are already required to 
submit under separate laws along with a summary of information from 
that form.
    The proposed rule would require that these entities submit to FDA 
this information beginning with the October 2014 monthly report to 
ensure that we continue to be able to accurately determine the tobacco 
product class allocation and the amount owed by each domestic 
manufacturer and importer. We specify this date in the proposed rule 
because we anticipate USDA will cease collecting the information after 
the September 2014 monthly report. We do not intend to overlap in the 
collection of this information because the information collected by 
USDA will continue to be available to FDA.

D. Methodology

1. Yearly Class Allocations
    The proposed rule includes a section (proposed Sec.  1150.7) 
describing how we would allocate the total assessment among each class 
of tobacco products (Step A). As described in the proposed rule, FDA 
would determine the yearly class allocation using publicly available 
tax data and information published by TTB about volumes of products 
removed. If the TTB information is no longer available, we would rely 
on information from copies of the returns or forms that would be 
submitted to FDA under proposed Sec.  1150.5 (information provided on 
certified FDA forms or certified copies of the returns or forms filed 
with another Federal Agency, such as the Department of Treasury). The 
yearly class allocation would be based on the methodology USDA 
currently uses in determining the tobacco product class allocations for 
the TTPP.
    Under the proposed rule, the total assessment (the total amount of 
user fees for a fiscal year) would be allocated among the six classes 
of tobacco products based on the units of tobacco products removed into 
domestic commerce. To make this allocation, FDA would multiply the 
volume of tobacco products removed for each class by the maximum 2003 
Federal excise tax rate for each class to generate a dollar figure for 
each class of tobacco products. The volume of tobacco products removed 
would be the ``unit'' that is used for excise tax purposes. For snuff, 
roll-your-own tobacco, chewing tobacco, and pipe tobacco, the unit 
would be weight, measured in pounds. For cigarettes and cigars, the 
unit would be the number of sticks. In making the allocation for a 
particular fiscal year, we would use data about removals covering the 
most recent full calendar year. For example, in fiscal year 2014 
(beginning October 1, 2013), we would use data about removals occurring 
during calendar year 2012 (beginning January 1, 2012).
    To account for the different excise tax rates for cigars (which 
differ for small and large cigars), we would do two subcalculations. 
First, for small cigars, the number of sticks would be multiplied by 
the maximum 2003 Federal excise tax rate for small cigars to generate a 
dollar amount for small cigars. Second, for large cigars, the number of 
sticks would be multiplied by the maximum 2003 Federal excise tax rate 
for large cigars to generate a dollar amount. The dollar amounts for 
small and large cigars would be added to generate a dollar figure for 
the cigar class as a whole. This is consistent with USDA's methodology 
(Ref. 2, p. 7).
    We would use the dollar figures for each of the six classes of 
tobacco products to calculate the percentages attributable to each 
class of tobacco products. To arrive at percentages, we

[[Page 32586]]

would add the dollar figures for each of the six classes of tobacco 
products together; this aggregate dollar figure would be the 
denominator. The dollar figure for each class of tobacco products would 
be the numerator, and when divided by the aggregate dollar figure, the 
resulting quotient would be the percentage attributable to that class.
    FETRA specifies that tobacco product class allocations must be 
adjusted periodically to reflect changes in the share of gross domestic 
volume held by a class of tobacco products, defining ``gross domestic 
volume'' as the volume of tobacco products removed and not exempt from 
Federal excise tax (section 625(a)(2) and (c)(2) of FETRA). FETRA does 
not specify that any changes should be made to tobacco product class 
allocations to reflect changes in tax rates. Accordingly, USDA does not 
adjust the tobacco product class allocations to include changes in tax 
rates. At least one company has questioned the continued use of the 
2003 tax rates because those tax rates have changed (75 FR 76921, 
December 10, 2010). USDA has considered this issue and determined that 
fluctuations in excise tax rates do not affect class allocations (see 
http://www.fsa.usda.gov/Internet/FSA_File/tobacco_determ_11162011.pdf). FDA is proposing to adopt the same approach because, 
with respect to the tobacco product class allocations, section 919 of 
the FD&C Act specifies that, except for reallocations as discussed in 
the paragraphs that follow, percentages of each class are those 
determined under FETRA.
    Consistent with section 919(b)(2)(B)(iv) of the FD&C Act, the 
proposed rule also provides that the amount of user fees otherwise 
assessed to any class of tobacco products not currently regulated under 
chapter IX of the FD&C Act would be reallocated to the classes of 
tobacco products that are currently regulated under chapter IX of the 
FD&C Act. Of the six classes, only the cigar and pipe tobacco classes 
are not currently regulated under chapter IX and, thus, are not subject 
to user fees. Under the proposed rule, the user fees that would be 
assessed to domestic manufacturers and importers of cigars and pipe 
tobacco would be reallocated to the classes of tobacco products 
currently subject to chapter IX of the FD&C Act.
    FDA is allocating fees among the classes of tobacco products 
specified in section 919(b)(2)(B)(i) of the FD&C Act. These are the 
same classes of tobacco products that have been subject to TTPP 
assessments under FETRA and, as such, the classes for which there is a 
method for determining the applicable percentages, for class and 
individual domestic manufacturers and importers within the classes 
under FETRA. The FETRA percentage is based on gross domestic volume, 
which is defined as the volume of tobacco products removed within the 
meaning of the Internal Revenue Code (section 625(a)(2) of FETRA). 
Under the Internal Revenue Code, the six classes are the only ones 
defined as ``tobacco products'' that are removed and that are subject 
to the excise tax requirements (26 U.S.C. 5701 and 5702(c) and (i)). 
Thus, under the proposed rule, if a tobacco product that is not 
included in one of the six classes specified in section 919(b)(2)(B)(i) 
of the FD&C Act is deemed by regulation to be subject to chapter IX of 
the FD&C Act, fees would not be allocated to such product. If you 
disagree with this reading, FDA invites comments on what the additional 
classes would be; how user fee calculations would be made if additional 
classes were to be added, particularly if added classes were not 
subject to Federal excise taxes; and support for your view.
2. Individual Domestic Manufacturer or Importer Assessment
    As described in the proposed rule (proposed Sec.  1150.9), each 
quarter we would calculate the assessment imposed on each domestic 
manufacturer and importer of tobacco products (see section I.A.2 of 
this document). Information submitted under proposed Sec.  1150.5 would 
be used along with any other available information in making these 
calculations. Under the proposed rule, for each class of tobacco 
products except cigars, we would calculate the domestic manufacturer's 
or importer's percentage share. This percentage share would be 
calculated by dividing the Federal excise taxes that the domestic 
manufacturer or importer paid for the class for the prior quarter by 
the total excise taxes that all domestic manufacturers and importers in 
that class paid for the class for that same quarter.\9\
---------------------------------------------------------------------------

    \9\ As previously noted, except for cigars, section 919(b)(4) of 
the FD&C Act requires FDA to determine percentage share for each 
entity in the same manner described in subsections (e) through (h) 
of section 625 of FETRA.
---------------------------------------------------------------------------

    This proposed calculation is the same as that used by USDA for all 
classes of tobacco products subject to user fees except for cigars. 
Although USDA uses volume of cigars removed in the preceding quarter to 
calculate percentage share, section 919(b)(5) of the FD&C Act specifies 
that ``if a user fee assessment is imposed on cigars, the percentage 
share of each manufacturer or importer of cigars shall be based on the 
excise taxes paid by such manufacturer or importer during the prior 
fiscal year.'' Thus, if a user fee assessment were to be applied to 
cigars we would calculate the percentage share for each domestic 
manufacturer and importer by dividing the Federal excise taxes that it 
paid for the class for the prior fiscal year by the total excise taxes 
that all domestic manufacturers and importers in the cigar class paid 
for the prior fiscal year. We are requesting comment on this proposed 
calculation for cigars and have reserved Sec.  1150.9(a)(2) should a 
user fee assessment be applied to cigars.
    The proposed rule also provides that the percentage share would be 
truncated to the fourth decimal place. Thus, if the percentage share 
calculated is less than 0.0001 percent, the domestic manufacturer or 
importer would be excluded from the assessment for that class of 
tobacco products.
    Once the percentage share is calculated, we would then determine 
the amount of assessment to be collected from a domestic manufacturer 
or importer each fiscal quarter. FDA would multiply each entity's 
percentage share by the quarterly assessment for that class of tobacco 
products (i.e., the total yearly class allocation divided by four). 
Because the assessments are based on past activity, a domestic 
manufacturer or importer may be assessed a user fee regardless of 
whether it removed into domestic commerce any tobacco products during 
the quarter in which it received an invoice.
3. Annual Adjustment
    Proposed Sec.  1150.9(b) provides that annually FDA would make any 
adjustment to individual domestic manufacturer and importer assessments 
if needed to account for any corrected assessments and to include those 
entities that were not assessed in previous quarterly assessments for 
that fiscal year. The adjustment would help ensure that no domestic 
manufacturer or importer pays a user fee in excess of its percentage 
share (section 919(b)(3)(B) of the FD&C Act). FDA intends to use 
information we have from registrations, along with any other available 
information, to help ensure that domestic manufacturers and importers 
are providing the information that would be required under the proposed 
rule.

E. Notification of Assessments

    Proposed Sec.  1150.11 would describe the notification that we 
would provide each domestic manufacturer and importer of tobacco 
products. Section

[[Page 32587]]

919(b)(6) of the FD&C Act requires that FDA notify each domestic 
manufacturer or importer of tobacco products of the amount of the 
quarterly assessment imposed no later than 30 days prior to the end of 
the quarter for which the assessment is made. Consistent with this 
requirement, the proposed rule would require FDA to notify each 
domestic manufacturer and importer of tobacco products of the amount of 
the quarterly assessment imposed on the domestic manufacturer or 
importer for each quarter of a fiscal year not later than 30 days 
before the end of the quarter for which the assessment is made. As 
proposed, the notification would also include information about the 
allocation of the yearly assessment among each class of tobacco 
products (Step A) and the percentage share of each class allocated to 
the domestic manufacturer or importer (Step B).
    The notification would also include information on any adjustment 
FDA made for corrections or any adjustment to include entities that 
were not assessed in previous quarterly assessments for that fiscal 
year. In addition, the proposed notification would provide information 
about how the domestic manufacturer or importer is to pay the user fee 
and information on accrual of interest if a payment is late. Payment 
methods currently include check, wire transfer, and online payment. We 
expect that over time different methods of payment, such as other 
methods of electronic funds transfer, may develop.

F. Payments

    In accordance with section 919(b)(6) of the FD&C Act, proposed 
Sec.  1150.13 would require that a domestic manufacturer and importer 
pay an assessment by the last day of the quarter involved. If we have 
not notified the domestic manufacturer or importer of the amount that 
is required to be remitted 30 calendar days before the end of a fiscal 
year quarter, the proposed rule provides that no interest would be 
assessed until 30 calendar days after the date that we sent 
notification of the amount owed. Proposed Sec.  1150.13 would also 
require that payments be submitted in U.S. dollars and in the manner 
specified in the notification (e.g., check or online payment). As 
noted, over time the manner of receiving payments may change, such as 
by check, electronic funds transfer, or online transaction.
    Consistent with 31 U.S.C. 3717, the proposed rule also states that 
interest would begin accruing if payment of the assessment is not made 
by the last day of the quarter involved. The accrual of interest would 
begin the next day. For example, if payment is due March 31 but is not 
received by March 31, then interest would begin to accrue on the unpaid 
amount on April 1. The proposed rule also explains that if a domestic 
manufacturer or importer disputes the amount of the assessment, the 
domestic manufacturer or importer would still be required to pay the 
assessment by the date due or be subject to interest.

G. Disputes

    We are proposing that a domestic manufacturer or importer would be 
required to submit a dispute in writing regarding an assessment within 
45 days of the date of the assessment notification (proposed Sec.  
1150.15). If FDA determines there was an error in the amount of the 
assessment, FDA would refund the amount that was incorrectly assessed. 
Any subsequent appeals of the dispute would also need to be submitted 
in writing within 30 days of the date of FDA's response to the dispute. 
To ensure finality in FDA's accounts and potential refund obligations, 
we believe it is necessary to have a time limit on disputes over user 
fee assessments. We believe the proposed timeframes identified are 
adequate to detect a dispute and prepare a written submission to FDA. 
The notification of assessment would provide information regarding 
where to send a dispute and when it needs to be sent. Domestic 
manufacturers or importers may contact the Center for Tobacco Products 
(CTP) Ombudsman for further information on dispute options and 
resolution (www.fda.gov/CTPOmbudsman).

H. Penalties

    Proposed Sec.  1150.17 would include an explanation that failure to 
pay a user fee would result in the tobacco product being deemed 
adulterated under section 902(4) of the FD&C Act. Because a firm would 
not be able to pay a user fee if it does not submit to FDA the 
information the Agency needs to be able to calculate the amount of fees 
assessed to such firm, under the proposed rule failure to submit such 
information would also result in the tobacco product being deemed 
adulterated. An adulterated tobacco product is subject to enforcement 
action by FDA, including injunction, seizure, and civil money penalties 
(sections 302, 303, and 304 of the FD&C Act (21 U.S.C. 332, 333, and 
334)). The failure to submit information that is required so FDA can 
calculate assessments and fees owed--to help assure the product is not 
adulterated--would also be a violation of section 909 of the FD&C Act 
(21 U.S.C. 387i), and the failure to make a report required by section 
909 is a prohibited act under section 301 of the FD&C Act (21 U.S.C 
331). The proposed rule also explains that any person who knowingly 
fails to provide required information or provides false information may 
be subject to the criminal penalties prescribed in 18 U.S.C. 1001.

III. Effective Date

    FDA proposes that any final rule that issues based on this proposal 
become effective 30 days after the final rule publishes in the Federal 
Register.

IV. Legal Authority

    Section 919(b)(7) of the FD&C Act requires FDA to ensure that we 
are able to determine the applicable percentages described in section 
919(b)(2) and the percentage shares described in section 919(b)(4). 
Section 909(a) authorizes FDA to issue regulations requiring tobacco 
product manufacturers or importers to make such reports and provide 
such information as may be reasonably required to assure that their 
tobacco products are not adulterated or misbranded and to otherwise 
protect public health. Under section 902(4), a tobacco product is 
deemed to be adulterated if the manufacturer or importer of the tobacco 
product fails to pay a user fee assessed to it under section 919. In 
addition, section 701(a) of the FD&C Act (21 U.S.C. 371(a)) gives FDA 
general rulemaking authority to issue regulations for the efficient 
enforcement of the FD&C Act. Consistent with these authorities, FDA is 
issuing this proposed rule, which is intended to ensure that we are 
able to make the determinations required by section 919 of the FD&C Act 
and assess and collect tobacco product user fees.

V. Environmental Impact

    The Agency has determined under 21 CFR 25.30(h) that this proposed 
rule is of a type that does not individually or cumulatively have a 
significant effect on the human environment. Therefore, neither an 
environmental assessment nor an environmental impact statement is 
required.

VI. Analysis of Impacts

A. Introduction

    FDA has examined the impacts of the proposed rule under Executive 
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 
U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Public 
Law 104-4). Executive Orders 12866 and 13563 direct Agencies to assess 
all costs and benefits of available regulatory

[[Page 32588]]

alternatives and, when regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety, and other advantages; 
distributive impacts; and equity). The Agency believes that this 
proposed rule is not a significant regulatory action as defined by 
Executive Order 12866.
    The Regulatory Flexibility Act requires Agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. The potential impact on small entities is uncertain, 
and FDA is unable to rule out the possibility that this proposed rule 
may have a significant economic impact on a substantial number of small 
entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that Agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $139 million, using the most current (2011) Implicit 
Price Deflator for the Gross Domestic Product. FDA does not expect this 
proposed rule to result in any 1-year expenditure that would meet or 
exceed this amount.

B. Baseline

    Section 919 of the FD&C Act establishes a system of collecting user 
fees, starting from the enactment of the Tobacco Control Act on June 
22, 2009. This general system for collecting user fees has already been 
implemented and has been operational for more than 2 years.
    In order to bill user fees, FDA must have data on the domestic 
manufacturers and importers required to pay. Currently, the necessary 
information is provided by USDA through a Memorandum of Understanding 
(Ref. 1). Section 919(b)(7)(B) of the FD&C Act requires the Secretary, 
starting no later than fiscal year 2015, to ensure that FDA is able to 
determine the yearly class allocations and the shares of each domestic 
manufacturer and importer within each class. This rule, when finalized, 
would provide a mechanism for obtaining the information necessary for 
these user fee calculations. Without this proposed rule, the Agency 
would have to gather the information in some other way. Our forecast of 
the method by which FDA would obtain this information in the absence of 
rulemaking provides the baseline for this proposed rule. While it is 
difficult to determine exactly how this would be done without a 
regulation establishing the process, section 919(b)(7)(B) of the FD&C 
Act would be implemented in some way and FDA would continue to collect 
user fees. It is important to note that without a regulation in place, 
implementation of the user fee provision might require new legislation, 
without which there would be potentially severe difficulties.
    Methods for FDA to ensure that it can obtain the information needed 
to calculate or collect user fees starting in fiscal year 2015 could 
include obtaining the information from a Federal Agency (or Agencies) 
other than USDA or forming an agreement under which USDA continues to 
collect this information as they currently do, even though USDA will 
not need the information after fiscal year 2014. Either of these 
options might require new legislation to implement. Another possibility 
is for Congress to pass legislation explicitly requiring firms to 
submit the requisite information but without the need for an 
implementing regulation. We assume that in the absence of regulation, 
FDA would most likely obtain the information from Federal Agencies 
other than USDA, and we use this as our primary baseline. This provides 
the greatest contrast to the proposed rule from the perspective of 
regulated industry. We also discuss how the proposed rule would compare 
to the other possible baseline scenarios.
    Under our primary baseline, starting in fiscal year 2015, FDA would 
obtain the information necessary for collecting user fees directly from 
Federal Agencies (other than USDA) that collect such information. FDA 
could obtain raw data with which to calculate user fees, or another 
Agency could compile the information, perform the calculations, and 
possibly even issue user fee bills on behalf of FDA; in either case, 
government Agencies would compile the information from existing 
sources. The form currently used by USDA requests information from 
forms submitted to the TTB and CBP. Therefore, agreements between 
multiple agencies would likely have to be put into place because it is 
not clear that either TTB or CBP has all of the necessary information. 
The government (whether FDA or another Agency) would bear the costs of 
compiling all of the information from the various TTB and CBP forms. 
The difficulty of this task depends on the current format of the 
information and the amount of work that would be required to put it 
into a format that can be used by FDA. Because of statutes governing 
TTB and CBP, without additional legislation, this system could limit 
FDA's ability to disclose information supplied by another Agency when 
taking enforcement action or even when sending bills.

C. Number of Affected Entities

    This proposed rule would apply to all entities that manufacture or 
import any tobacco product that is regulated under the FD&C Act and 
belongs to one of the classes of tobacco products listed in section 919 
of the FD&C Act. Currently, manufacturers and importers of cigarettes, 
snuff, chewing tobacco, and roll-your-own tobacco fit these criteria. 
Based on discussions with another Federal Agency, FDA estimates that 
200 such entities would be affected by this proposed rule.

D. Impact of the Proposed Rule

    Under the proposed rule, manufacturers and importers would have to 
submit information to FDA on a monthly basis, whereas under the primary 
baseline they would not have to submit any information to FDA. Although 
FDA is proposing an information collection very similar to that 
currently conducted by USDA, there would be some private sector costs 
associated with the transition from USDA to FDA collection. 
Manufacturers and importers would need to read the regulation or any 
notification potentially sent to them to explain the transition. They 
would need to switch forms and update the address for submission. To 
the extent that the form changes,\10\ they would have to learn how to 
use the new form. FDA estimates that this transition would take 3 hours 
per manufacturer or importer. Valuing time at the average tobacco 
manufacturing industry wage of $25.27 \11\ per hour, doubled to $50.54 
per hour to account for benefits and overhead, this transition cost 
would be $151.62 per manufacturer or importer. Table 1 shows that the 
total transition cost would be approximately $30,000.
---------------------------------------------------------------------------

    \10\ The current draft FDA form is very similar to the USDA 
form.
    \11\ May 2011 National Industry-Specific Occupational Employment 
and Wage Estimates for NAICS 312200--Tobacco Manufacturing. http://www.bls.gov/oes/

                 Table 1--Private Sector Transition Cost
------------------------------------------------------------------------
 
------------------------------------------------------------------------
No. of entities................................................      200
No. of hours...................................................        3
------------------------------------------------------------------------

[[Page 32589]]

 
Cost ($).......................................................   30,324
------------------------------------------------------------------------

    All of the entities affected by this proposed rule would be 
required on a monthly basis to submit the proposed FDA form containing 
certain identifying information, the number of units introduced into 
domestic commerce \12\ in the prior month, and excise taxes paid for 
such introduction into domestic commerce, by tobacco product class. 
This form is estimated to take 3 hours to complete. In addition, each 
entity would be required on a monthly basis to submit certified copies 
of the returns and forms that relate to the introduction of tobacco 
products into domestic commerce and the payment of Federal excise taxes 
imposed. Submitting copies of these forms is estimated to take 1 hour 
each month. These submissions are required even if the quantity 
introduced into domestic commerce during the month in question is 0. We 
do not consider any time cost associated with remitting payment for 
user fees (or the distributional effect of the aggregate amount of the 
user fees shifted from tobacco manufacturers and importers to 
government) because user fees will be assessed and paid regardless of 
how section 919(b)(7)(B) of the FD&C Act is implemented. Similarly, we 
do not consider the time cost of disputing or appealing user fee 
assessments because similar mechanisms would be in place regardless of 
how section 919(b)(7)(B) is implemented.
---------------------------------------------------------------------------

    \12\ The technical term for this is ``removal,'' which is 
defined in footnote 2.
---------------------------------------------------------------------------

    Table 2 shows the annual private sector costs of complying with 
this proposed rule, compared with the primary baseline, would be 
approximately $485,000.

             Table 2--Annual Private Sector Compliance Cost
------------------------------------------------------------------------
 
------------------------------------------------------------------------
FDA form:
    No. of entities...........................................       200
        Annual submissions....................................        12
        Hours per submission..................................         3
    Cost ($)..................................................   363,888
Copies of other forms:
    No. of entities...........................................       200
        Annual submissions....................................        12
        Hours per submission..................................         1
    Cost ($)..................................................   121,296
                                                               ---------
    Total Cost ($)............................................   485,184
------------------------------------------------------------------------

    Under the primary baseline, government workers (at FDA or another 
Agency) would do the work of compiling the information contained in 
various TTB and CBP forms that is needed to calculate and bill user 
fees. Therefore, government costs would decrease with this proposed 
rule in an amount that would approximately offset the private sector 
costs discussed previously. Government setup costs for learning how to 
compile the necessary data from the various relevant forms would be 
reduced or eliminated, partly offsetting the private sector transition 
cost. In addition, government costs for actually compiling this 
information on an ongoing basis would be eliminated. If the government 
is not able to perform these functions as efficiently as manufacturers 
and importers, the reduction in government costs would exceed the 
increase in private compliance costs, resulting in a net benefit to 
society. If government is able to perform these functions more 
efficiently, the increase in private costs would exceed the reduction 
in government costs, resulting in a net cost to society. Therefore, 
requiring industry to compile this information and submit it to FDA 
could result in either a net societal cost or benefit, the size of 
which is expected to be very small.
    This proposed rule would have other impacts. It would allow FDA to 
be in control of the information used for calculating and billing user 
fees. This would be beneficial for resolving disputes and taking 
enforcement action if a firm fails to pay. By contrast, under the 
baseline (in which FDA obtains information from Federal Agencies other 
than USDA), taking enforcement action or even billing for user fees 
could be more challenging without additional legislation. In addition, 
because FDA would not have to rely on cooperation from another Agency, 
this proposed rule would likely result in greater efficiency. Under the 
primary baseline, the possibility would exist that at some time in the 
future the other Agencies would no longer be willing or able to provide 
the necessary data. FDA would then face the same question it faces 
today as to how to ensure that it can obtain the relevant data. 
Therefore, compared with the primary baseline, this proposed rule can 
be expected to eliminate the potential need for additional legislation 
and allow the collection of user fees after 2014 to proceed more 
smoothly than it would without legislation.

E. Alternative Baselines

    The primary baseline assumes that starting in fiscal year 2015, FDA 
would obtain the information necessary for collecting user fees 
directly from another Federal Agency (or Agencies) other than USDA. 
However, there are other ways that FDA might obtain the necessary data.
    Under one alternative baseline, USDA would continue to collect the 
information and perform market share calculations as it does today. 
Compared with this baseline scenario, the only industry cost of this 
proposed rule would be the cost of the transition. This would be a 
social cost (there would be no offsetting cost reduction) because if 
USDA were to continue to collect the information as it does today, 
there would be no learning or transition cost for government or 
industry. Because industry would be responsible for compiling and 
submitting the necessary information under either this baseline or the 
proposed rule, there would be no ongoing incremental cost to industry 
or to society as a whole. However, because USDA's program sunsets after 
fiscal year 2014, it is not clear that they could continue to collect 
this information without new legislation. Therefore, the proposed rule 
would eliminate the potential need for new legislation or the 
potentially severe problems that would be faced without new 
legislation. Finally, if the information is collected for FDA's sole 
use, it would arguably be more efficient over the long run for FDA to 
collect the information itself. Combining the information collection 
and use in one Agency would yield some societal benefit in the form of 
cost savings.
    Under another possible baseline, Congress could pass legislation 
explicitly requiring firms to submit the information we propose to 
collect in this rule without the need for issuing an implementing 
regulation. In terms of the mechanics of the process (the transition of 
the information collection to FDA and the ongoing need for industry to 
compile and submit the data), the proposed rule would have no effect 
under this scenario. However, issuance of this rule would make such 
legislation unnecessary.

F. Impact on Small Entities

1. Numbers Affected
    Under the primary baseline, this proposed rule would impose costs 
on domestic tobacco product manufacturers and importers. U.S. Census 
data provide some insight into the proportion of such entities that may 
be small. All cigarette manufacturers would be affected by this rule, 
while an unknown proportion of other tobacco product manufacturers 
would be affected. Importers are not identified in the Census, but 
instead may be designated as wholesalers or retailers. Most tobacco 
product-importing

[[Page 32590]]

wholesalers would be classified as ``tobacco and tobacco product 
merchant wholesalers.'' Although many different categories of retailers 
(such as grocery and convenience stores) may sell tobacco products, 
those most likely to import them are specialty tobacco shops and non-
store retailers operating electronically or through delivery services. 
Table 3 shows the Small Business Administration (SBA) size thresholds 
for small businesses in each of these categories, as well as the most 
comparable size categories available from the U.S. Census (Refs. 4, 5, 
and 6).\13\ For cigarette manufacturers and tobacco product retailers, 
the proportion found to be small will be underestimated because the 
Census size category is lower than the SBA threshold.
---------------------------------------------------------------------------

    \13\ Tobacco product manufacturers (and importers) are 
considered small under the FD&C Act if they employ fewer than 350 
people. This definition is used in determining the deadline for 
compliance with certain requirements under the FD&C Act. However, 
the SBA's definition of small is applicable to the small entity 
analysis required under the Regulatory Flexibility Act.

     Table 3--SBA Size Standards and Census Size Categories for Tobacco Product Manufacturers and Importers
----------------------------------------------------------------------------------------------------------------
                                                                                                  Census size
                                                     Description of NAICS   SBA Size Standard       category
                                         NAICS             category            (employees or     (employees or
                                                                                $million)          $million)
----------------------------------------------------------------------------------------------------------------
Tobacco Product Manufacturers:
                                           312221  Cigarette Manufacturing              1,000                500
                                           312229  Other Tobacco Product                  500                500
                                                    Manufacturing.
Potential Tobacco Product Importers:
    Wholesalers.....................       424940  Tobacco and Tobacco                    100                100
                                                    Product Merchant
                                                    Wholesalers.
    Retailers.......................       453991  Tobacco Stores.........               $7.0              $5.00
                                           454111  Electronic Shopping....              $30.0             $25.00
                                           454113  Mail[dash]Order Houses.              $35.5             $25.00
----------------------------------------------------------------------------------------------------------------

    Table 4 shows the number of businesses with employees in each of 
the categories described previously, the number qualifying as small 
according to the Census size standard, and the percent qualifying as 
small. Statistics of U.S. Businesses data from 2008 indicate 79 percent 
of cigarette manufacturing and 89 percent of other tobacco product 
manufacturing businesses with employees are small (Ref. 5). These data 
also show that 91 percent of ``tobacco and tobacco product merchant 
wholesalers'' qualify as small. Data from the 2007 Economic Census show 
that 94 percent of tobacco shops with payroll are small, while 98 
percent of ``electronic shopping'' and 94 percent of ``mail-order'' 
retailers are small (Ref. 6). We do not know what proportion of 
affected entities would fall into each of these categories, but based 
on the percentages found in Table 4 and the small number of 
manufacturing firms relative to the total number expected to be 
affected by this proposed rule (200), it is likely that about 90 
percent of the affected entities would be small. This implies that 
approximately 180 (0.9x200) small entities would be affected.

                     Table 4--Estimated Percentage of Small Firms Among Firms With Employees
----------------------------------------------------------------------------------------------------------------
                                                                             Number of firms
              NAICS                Description of NAICS   Number of firms   below census size    Percentage of
                                         category                                standard       small firms  (%)
----------------------------------------------------------------------------------------------------------------
312221...........................  Cigarette                            19                 15                 79
                                    Manufacturing.
312229...........................  Other Tobacco                        44                 39                 89
                                    Product
                                    Manufacturing.
424940...........................  Tobacco and Tobacco               1,118              1,019                 91
                                    Product Merchant
                                    Wholesalers.
453991...........................  Tobacco Stores......              4,025              3,793                 94
454111...........................  Electronic Shopping.             11,646             11,374                 98
454113...........................  Mail[dash]Order                   5,645              5,281                 94
                                    Houses.
----------------------------------------------------------------------------------------------------------------

2. Costs for Small Entities
    Table 5 shows the potential effect of this rule on small tobacco 
product manufacturers. Compliance costs are compared to average value 
of shipments, determined for establishments based on 2002 Census data 
(Ref. 7). We assume that most small manufacturers operate a single 
establishment. We use 2002 data rather than 2007 data because 2007 data 
suppress most information about value of shipments by tobacco product 
establishment size in order to safeguard confidentiality. The 
distribution of small tobacco product manufacturing establishments by 
employment size and the average value of shipments by employment size 
may have changed since 2002. Therefore, we are uncertain whether the 
effect of this proposed rule would be the same today as estimated in 
table 5. With that caveat in mind, we see that the annual compliance 
cost equals 0.71 percent of average value of shipments for other 
tobacco product manufacturing establishments with 1 to 4 employees, 
which could be a substantial portion of profits. There were 38 such 
other tobacco product manufacturing establishments in 2002, but we do 
not have enough information to determine how many manufactured 
cigarettes, snuff, chewing tobacco, or roll-your-own tobacco and would 
therefore be affected by the proposed rule. Therefore, we are unable to 
rule out the possibility that this proposed rule would have a 
significant economic

[[Page 32591]]

impact on a substantial number of small entities.

                      Table 5--Potential Impact on Tobacco Product Manufacturers (by Size)
----------------------------------------------------------------------------------------------------------------
                                                                            Annual compliance   Transition cost
                                                          Average value of  cost as a percent   as a percent of
          Type of manufacturing establishment                shipments       of average value   average value of
                                                            (million $)        of shipments        shipments
----------------------------------------------------------------------------------------------------------------
Cigarette (All)........................................              2,304               0.00               0.00
Other Tobacco Product (All)............................                 44               0.01               0.00
1 to 4 employees.......................................                0.3               0.71               0.04
5 to 9 employees.......................................                  2               0.16               0.01
10 to 19 employees.....................................                  4               0.06               0.00
20 to 49 employees.....................................                 12               0.02               0.00
50 to 99 employees.....................................                 17               0.01               0.00
100 to 249 employees...................................                 64               0.00               0.00
250 to 499 employees...................................                273               0.00               0.00
----------------------------------------------------------------------------------------------------------------

3. Regulatory Relief
    An alternative that might reduce costs for small entities would be 
to exempt firms from reporting in a particular month if they did not 
introduce any units of any tobacco products for which user fees are 
assessed into domestic commerce. A drawback to this approach is that 
FDA would be unable to distinguish a firm that failed to report from a 
firm that introduced zero units into domestic commerce in a particular 
month.

G. Conclusion

    Compared with the primary baseline, this proposed rule would impose 
private costs on industry to submit data to FDA on a monthly basis, 
with an approximately offsetting reduction in government information 
collection costs. The net effect of this may be a small social cost or 
benefit. This proposed rule would also allow FDA to be in control of 
the data needed for calculating and billing user fees and would resolve 
impediments that may otherwise exist to FDA's ability to use the data 
for its intended purpose. Compared with other possible baseline 
scenarios, this proposed rule can be expected to eliminate the 
potential need for additional legislation and allow the collection of 
user fees after 2014 to proceed more smoothly than it could without 
legislation.

VII. Paperwork Reduction Act of 1995

    This proposed rule contains information collection provisions that 
are subject to review by OMB under the PRA (44 U.S.C. 3501-3520). A 
description of these provisions is given in the paragraphs that follow 
with an estimate of the annual reporting burden. Included in the 
estimate is the time for reviewing instructions, searching existing 
data sources, gathering and maintaining the data needed, and completing 
and reviewing each collection of information. FDA invites comments on 
these topics: (1) Whether the proposed collection of information is 
necessary for the proper performance of FDA's functions, including 
whether the information will have practical utility; (2) the accuracy 
of FDA's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (3) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (4) ways to minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques, when appropriate, and other forms of 
information technology.
    Title: Tobacco Products, User Fees, Requirements for the Submission 
of Data Needed to Calculate User Fees for Domestic Manufacturers and 
Importers of Tobacco Products.
    Description: This proposed rule would require each tobacco product 
domestic manufacturer and importer to submit to FDA information needed 
to calculate and assess user fees under the FD&C Act.
    The USDA has been collecting information to calculate percentage 
share for its purposes, and providing FDA with the data FDA needs to 
determine user fee assessments under the FD&C Act. USDA will cease 
collecting this information starting in fiscal year 2015. Consistent 
with the requirements of the FD&C Act, this proposed rule would 
continue the submission of this information, but to FDA rather than 
USDA, and thus would ensure that FDA continues to have the information 
needed to calculate the amount of user fees assessed to each entity and 
collect those fees. Section 919 of the FD&C Act establishes the user 
fee allocation and collection process, which references the FETRA 
framework for determining tobacco product class allocations and 
individual domestic manufacturer or importer allocations. As is now 
required by USDA under FETRA, the proposed rule would require domestic 
manufacturers and importers of tobacco products to submit to FDA each 
month a form with summary information and copies of the reports or 
forms that relate to the tobacco products removed into domestic 
commerce.
    Description of Respondents: Domestic manufacturers and importers of 
tobacco products.

[[Page 32592]]

                                 Table 6--Estimated Annual Reporting Burden \1\
----------------------------------------------------------------------------------------------------------------
                                                     Number of
         21 CFR Section              Number of     responses per   Total annual      Hours per      Total hours
                                    respondents     respondent       responses       response
----------------------------------------------------------------------------------------------------------------
1150.5(a), (b)(1), (b)(2), and               200              12           2,400               3           7,200
 FDA Form 3852 General
 identifying information
 provided by manufacturers and
 importers of FDA regulated
 tobacco products and
 Identification and removal
 information (monthly)..........
1150.5(b)(3) Certified Copies                200              12           2,400               1           2,400
 (monthly)......................
1150.13 Submission of user fee               100               4             400               1             400
 information (Identifying
 information, fee amount, etc.
 (quarterly)....................
1150.15(a) Submission of user                  1               1               1              10              10
 fee dispute (annually).........
1150.15(d) Submission of request               1               1               1              10              10
 for further review of dispute
 of user fee (annually).........
    Total.......................  ..............  ..............  ..............  ..............          10,020
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of
  information.

    Table 6 describes the annual reporting burden of 10,020 hours as a 
result of the provisions set forth in this proposed rule. Our estimated 
number of respondents is based on information we received from USDA on 
the number of reports it receives from domestic manufacturers and 
importers each month. The estimate of 200 respondents reflects both 
reports of no removal into domestic commerce and reports of removal of 
tobacco product into domestic commerce. The estimate of 100 respondents 
reflects an average number of domestic manufacturers and importers who 
may be subject to fees each fiscal quarter. Based on our experience 
with the assessment of user fees for other FDA-regulated products, we 
estimate that approximately 1 percent might appeal an assessment.
    For proposed Sec.  1150.5(a), (b)(1), and (b)(2), FDA estimates 
that 200 manufacturers and importers will each submit identifying 
information (e.g., mailing address, telephone number, email address) 
and summarized tax information on a monthly basis (12 submissions 
annually) on Form FDA 3852, resulting in a total burden of 7,200 hours 
(200 respondents x 12 months x 3 hours). For proposed Sec.  
1150.5(b)(3), FDA estimates that 200 domestic manufacturers and 
importers will each submit, on a monthly basis (12 times annually), 
certified copies of the returns and forms that relate to the removal of 
tobacco products into domestic commerce and the payment of Federal 
excise taxes imposed under chapter 52 of the Internal Revenue Code of 
1986, resulting in a total burden of 2,400 hours (200 respondents x 12 
months x 1 hour per response).
    For proposed Sec.  1150.13, FDA estimates that 100 domestic 
manufacturers and importers will be submitting user fees on a quarterly 
basis. Therefore, the number of burden hours for this section is 400 
hours (100 respondents x 4 times per year submission x 1 hour per 
response). FDA estimates that approximately 1 percent of those 
respondents assessed user fees will dispute the amounts under proposed 
Sec.  1150.15(a), for a total amount of 10 hours (100 respondents x 
0.01 x 1 dispute submission x 10 hours per response.) FDA also 
estimates that of those who dispute their user fees, one will ask for 
further review by FDA under proposed Sec.  1150.15(d), for a total 
amount of 10 hours (1 dispute submission x 10 hours per response.) 
Total burden hours for this rule are 10,020 hours (7,200 + 2,400 + 400 
+ 10 + 10).
    The information collection provisions of this proposed rule have 
been submitted to OMB for review. Interested persons are requested to 
fax comments regarding the proposed information collection to the 
Office of Information and Regulatory Affairs, OMB. To ensure that 
comments on the information collection are received, OMB recommends 
that written comments be faxed to the Office of Information and 
Regulatory Affairs, OMB, Attn: FDA Desk Officer, FAX: 202-395-7285, or 
emailed to oira_submissions@omb.eop.gov.

VIII. Federalism

    FDA has analyzed this proposed rule in accordance with the 
principles set forth in Executive Order 13132. FDA has determined that 
the proposed rule, if finalized, would not contain policies that would 
have substantial direct effects on the States, on the relationship 
between the National Government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
Accordingly, the Agency tentatively concludes that the proposed rule 
does not contain policies that have federalism implications as defined 
in the Executive order and, consequently, a federalism summary impact 
statement is not required.

IX. Comments

    Interested persons may submit either written comments regarding 
this document to the Division of Dockets Management (see ADDRESSES) or 
electronic comments to http://www.regulations.gov. It is only necessary 
to send one set of comments. Identify comments with the docket number 
found in brackets in the heading of this document. Received comments 
may be seen in the Division of Dockets Management between 9 a.m. and 4 
p.m., Monday through Friday, and will be posted to the docket at http://www.regulations.gov.

X. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons between 9 a.m. and 4 p.m., Monday through Friday, 
and are available electronically at http://www.regulations.gov. (FDA 
has verified the Web site addresses, but FDA is not responsible for any 
subsequent changes to Web sites after this document publishes in the 
Federal Register.)

1. Memorandum of Understanding on the Sharing of Tobacco Market 
Share Information Between the Food and Drug Administration, U.S. 
Department of Health and Human Services and the Commodity Credit 
Corporation and Farm Service Agency, U.S. Department of Agriculture, 
August 2009.
2. U.S. Department of Agriculture, ``Determination of the 
Administrator of the Farm Service Agency and Executive Vice 
President of the Commodity Credit Corporation Regarding the Current 
`Step A' and `Step B' Assessment Methods in the Tobacco Transition 
Payment Program,'' http://www.fsa.usda.gov/Internet/FSA_File/tobacco_determ_11162011.pdf]).
3. U.S. Department of Agriculture, Commodity Credit Corporation, 
Form

[[Page 32593]]

CCC-974, ``Report of Tobacco Product Removals Subject to Tax for the 
Tobacco Transition Assessment Program (TTAP).''
4. U.S. Small Business Administration, 2010, Table of Size 
Standards. http://www.sba.gov/content/table-small-business-size-standards, accessed July 2011.
5. U.S. Census Bureau, Statistics of U.S. Businesses (SUSB), Latest 
SUSB Annual Data, U.S., All Industries, 2008, http://www.census.gov/econ/susb/accessed July 2011.
6. U.S. Census Bureau, American FactFinder, Establishment and Firm 
Size: Summary Statistics by Sales Size of Firms for the United 
States: 2007, 2007 Economic Census, Retail Trade, Subject Series, 
http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2007_US_44SSSZ4&prodType=table.
7. U.S. Census Bureau, American FactFinder, ``2002 Economic Census, 
Manufacturing: Industry Series: Industry Statistics by Employment 
Size: 2002,'' http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2002_US_31I4&prodType=table.
8. Draft Form FDA 3852.

List of Subjects in 21 CFR Part 1150

    Tobacco products, User fees.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, it is 
proposed that chapter I of title 21 be amended by adding part 1150 to 
read as follows:

PART 1150--USER FEES

Sec.
1150.1 Scope.
1150.3 Definitions.
1150.5 Required information.
1150.7 Yearly class allocation.
1150.9 Domestic manufacturer or importer assessment.
1150.11 Notification of assessments.
1150.13 Payment of assessments.
1150.15 Disputes.
1150.17 Penalties.

    Authority: 21 U.S.C. 371, 387b, 387i, 387s.

Sec.  1150.1  Scope.

    This part establishes requirements related to tobacco product user 
fees under section 919 of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 387s). The total amount of user fees may not exceed the amount 
specified for that fiscal year in section 919(b) of the Federal Food, 
Drug, and Cosmetic Act. All domestic manufacturers and importers of 
tobacco products are required to pay to FDA their percentage share of 
the total assessment for a fiscal year.

Sec.  1150.3  Definitions.

    The following definitions are applicable to this part:
    Class of tobacco products means each of the following types of 
tobacco and tobacco products as defined in 26 U.S.C. 5702 and for which 
taxes are required to be paid for the removal of such into domestic 
commerce: Cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and 
roll-your-own tobacco.
    Domestic manufacturer means a person who is required to obtain a 
permit from the Alcohol and Tobacco Tax and Trade Bureau of the 
Department of the Treasury with respect to the production of tobacco 
products under title 27 of the Code of Federal Regulations.
    Fiscal year quarter means a quarter in a fiscal year (the fiscal 
year is October 1 through September 30). The fiscal year quarters are 
October 1-December 31, January 1-March 31, April 1-June 30, and July 1-
September 30.
    Importer means a person who is required to obtain a permit from the 
Alcohol and Tobacco Tax and Trade Bureau of the Department of the 
Treasury with respect to the importation of tobacco products under 
title 27 of the Code of Federal Regulations.
    Total assessment means the total amount of user fees (in dollars) 
authorized to be assessed and collected for a specific fiscal year 
under section 919 of the Federal Food, Drug, and Cosmetic Act.
    Units of product means:
    (1) The number of sticks for cigarettes and cigars, or
    (2) The weight (measured in pounds) for snuff, chewing tobacco, 
pipe tobacco, and roll-your-own tobacco.
    Units of product removed and not tax exempt means the units of 
product:
    (1) Removed (as defined by 26 U.S.C. 5702), and
    (2) Not exempt from Federal excise tax under chapter 52 of title 26 
of the United States Code at the time of their removal under that 
chapter or the Harmonized Tariff Schedule of the United States.
    Yearly class allocation means the amount of user fees (in dollars) 
assessed for a class of tobacco products for a particular fiscal year.

Sec.  1150.5  Required information.

    (a) General. Each domestic manufacturer and importer of tobacco 
products that are part of a class of tobacco products that is subject 
to regulation under chapter IX of the Federal Food, Drug, and Cosmetic 
Act must submit the information described in this section for such 
products each month beginning October 2014. The information must be 
submitted using the form that FDA provides. The information must be 
submitted even if the domestic manufacturer or importer had no removals 
subject to tax during the prior month. FDA will use the information 
submitted under this section and any other available information to 
make tobacco product user fee assessments.
    (b) Contents. Each domestic manufacturer and importer must submit 
the following:
    (1) Identification information. (i) Its name and the mailing 
address of its principal place of business;
    (ii) The name and a telephone number including area code of an 
office or individual that FDA may contact for further information;
    (iii) The email address and postal address at which it wishes to 
receive notifications FDA sends under this part;
    (iv) Its Tobacco Tax and Trade Bureau (TTB) Permit Number(s);
    (v) Its Employer Identification Number(s) (EIN); and
    (2) Removal information. The units of product, by class, removed 
and not tax exempt for the prior month and the Federal excise tax it 
paid, by class, for such removal.
    (i) This information must be reported for each TTB tobacco permit.
    (ii) If the domestic manufacturer or importer did not remove any 
amount of tobacco product, it must report that no tobacco product was 
removed into domestic commerce.
    (3) Certified copies. Certified copies of the returns and forms 
that relate to:
    (i) The removal of tobacco products into domestic commerce (as 
defined by section 5702 of the Internal Revenue Code of 1986); and
    (ii) The payment of the Federal excise taxes imposed under chapter 
52 of the Internal Revenue Code of 1986.

Sec.  1150.7  Yearly class allocation.

    For each fiscal year, FDA will allocate the total assessment among 
the classes of tobacco products.
    (a) Calculation. FDA will calculate the percentage shares for each 
class as follows:
    (1) Except for cigars, FDA will multiply the units of product 
removed and not tax exempt for the most recent full calendar year by 
the 2003 maximum Federal excise tax rate for that class (class figure).
    (2) For cigars, FDA will calculate the percentage share as follows:
    (i) Multiply the units of small cigars removed and not tax exempt 
for the most recent full calendar year by the 2003 maximum Federal 
excise tax rate for small cigars (small cigar subclass figure).
    (ii) Multiply the units of large cigars removed and not tax exempt 
for the most recent full calendar year by the 2003 maximum Federal 
excise tax rate

[[Page 32594]]

for large cigars (large cigar subclass figure).
    (iii) Add the small cigar subclass figure and the large cigar 
subclass figure (cigar class figure).
    (3) FDA will total the class figures for all tobacco classes for 
the most recent full calendar year (total figure).
    (4) FDA will divide the class figure by the total figure to 
determine the percentage share for each class.
    (5) FDA will calculate the allocation for each class of tobacco 
products by multiplying the percentage share for each class by the 
total assessment.
    (b) Reallocation. For any class of tobacco products that is not 
deemed by FDA to be subject to regulation under chapter IX of the 
Federal Food, Drug, and Cosmetic Act, the amount of user fees that 
would otherwise be assessed to such class of tobacco products will be 
reallocated to the classes of tobacco products that are subject to 
chapter IX of the Federal Food, Drug, and Cosmetic Act in the same 
manner and based on the same relative percentages otherwise determined 
under paragraph (a) of this section.

Sec.  1150.9  Domestic manufacturer or importer assessment.

    Each quarter, FDA will calculate the assessment owed by each 
domestic manufacturer or importer for that quarter.
    (a) Calculation. (1) For each class of tobacco products except 
cigars, FDA will calculate the percentage share for each domestic 
manufacturer and importer by dividing the Federal excise taxes that it 
paid for the class for the prior quarter by the total excise taxes that 
all domestic manufacturers and importers paid for the class for that 
same quarter.
    (2) [Reserved]
    (3) If the percentage share calculated for a domestic manufacturer 
or importer in this section, as applicable, is less than 0.0001 
percent, the share is excluded from the assessment for that class of 
tobacco products.
    (4) Within each class of tobacco products, the assessment owed by a 
domestic manufacturer or importer for the quarter is the yearly class 
allocation, determined as described in Sec.  1150.7, divided by four 
and then multiplied by the domestic manufacturer's or importer's 
percentage share, truncated to the fourth decimal place, for that class 
of tobacco products.
    (b) Adjustments. Annually, FDA will make any necessary adjustments 
to individual domestic manufacturer or importer assessments if needed 
to account for any corrections (for example, to include domestic 
manufacturers or importers that were not included in a relevant 
assessment calculation).

Sec.  1150.11  Notification of assessments.

    (a) Notification. No later than 30 calendar days before the end of 
each fiscal year quarter, FDA will notify each domestic manufacturer 
and importer of the amount of the quarterly assessment imposed on the 
domestic manufacturer or importer.
    (b) Content of notification. The notification under paragraph (a) 
of this section will include the following:
    (1) The amount of the quarterly assessment imposed on the domestic 
manufacturer or importer and the date that payment of the assessment 
must be received by FDA;
    (2) Class assessment information, including each class' initial 
percentage share, the reallocation amount (if any) and each class' 
percentage share after any such reallocation, and the quarterly 
assessment for each class;
    (3) Domestic manufacturer or importer assessment information, 
including the domestic manufacturer's or importer's percentage share of 
each relevant class of tobacco products and invoice amount;
    (4) Any adjustments FDA has made under Sec.  1150.9(b);
    (5) The manner in which assessments are to be remitted to FDA;
    (6) Information about the accrual of interest if a payment is late; 
and
    (7) Information regarding where to send a dispute and when it needs 
to be sent.

Sec.  1150.13  Payment of assessments.

    (a) Payment of an assessment must be received by FDA no later than 
the last day of each fiscal year quarter.
    (b) Payments must be submitted to FDA in U.S. dollars and in the 
manner specified in the notification.
    (c) Except as provided in paragraph (d) of this section, if an 
assessment is not received by the last day of the fiscal year quarter, 
FDA will begin assessing interest on the unpaid amount in accordance 
with 31 U.S.C. 3717.
    (d) If FDA does not send the notification described in Sec.  
1150.11(a) 30 calendar days before the end of a quarter, no interest 
will be assessed by FDA under paragraph (c) of this section until 30 
calendar days have elapsed from the date FDA sent notification of the 
amount owed.
    (e) If a domestic manufacturer or importer disputes the amount of 
an assessment, it must still pay the assessment in accordance with 
paragraphs (a) and (b) of this section.

Sec.  1150.15  Disputes.

    (a) An entity must submit in writing any dispute regarding an 
assessment within 45 days of the date on the assessment notification.
    (b) If FDA determines that there was an error related to the 
assessment and the assessment was too high, FDA will refund the amount 
assessed in error to the domestic manufacturer or importer.
    (c) FDA will provide a dated, written response, and its response 
will provide information about how to submit a request for further 
Agency review.
    (d) A request for further Agency review must be submitted in 
writing within 30 days from the date on FDA's response.

Sec.  1150.17  Penalties.

    (a) Under section 902(4) of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 387b), a tobacco product is deemed adulterated if the 
domestic manufacturer or importer of the tobacco product fails to pay a 
user fee assessed to such manufacturer or importer by the later of the 
date the assessment is due, 30 days from the date FDA sent notification 
of the amount owed, or 30 days after final Agency action on a 
resolution of any dispute as to the amount of the fee.
    (b) Under section 902(4) of the Federal Food, Drug, and Cosmetic 
Act, a tobacco product is deemed adulterated if the domestic 
manufacturer or importer of the tobacco product fails to report the 
information required by Sec.  1150.5 to calculate assessments under 
this part.
    (c) The failure to report the information required by Sec.  1150.5 
to calculate assessments under this part is a prohibited act under 
section 301(e) of the Federal Food, Drug, and Cosmetic Act.
    (d) Information submitted under Sec.  1150.5 is subject to 18 
U.S.C. 1001 and other appropriate civil and criminal statutes.

    Dated: May 24, 2013.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2013-12927 Filed 5-30-13; 8:45 am]
BILLING CODE 4160-01-P