Document ID: FDA-2012-N-0920-0016
Agency: fda
Document Type: Rule
Title: Requirements for the Submission of Data Needed To Calculate User Fees
for Domestic Manufacturers and Importers of Cigars and Pipe Tobacco
Posted Date: 2016-05-10T04:00Z

[Federal Register Volume 81, Number 90 (Tuesday, May 10, 2016)]
[Rules and Regulations]
[Pages 28707-28716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10688]

[[Page 28707]]

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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

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

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Food and Drug Administration (FDA or we) is issuing a 
final rule that requires domestic manufacturers and importers of cigars 
and pipe tobacco to submit information needed to calculate the amount 
of user fees assessed under the Federal Food, Drug, and Cosmetic Act 
(the FD&C Act). FDA recently expanded its authority by issuing a final 
rule, ``Deeming Tobacco Products To Be Subject to the Federal Food, 
Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and 
Tobacco Control Act; Restrictions on the Sale and Distribution of 
Tobacco Products and Required Warning Statements for Tobacco Products'' 
(Deeming rule), deeming all products that meet the statutory definition 
of ``tobacco product,'' except accessories of the newly deemed tobacco 
products, to be subject to the FD&C Act. The Deeming rule, among other 
things, subjected domestic manufacturers and importers of cigars and 
pipe tobacco to the FD&C Act's user fee requirements. Consistent with 
the Deeming rule and the requirements of the FD&C Act, this final rule 
requires the submission of the information needed to calculate user fee 
assessments for each manufacturer and importer of cigars and pipe 
tobacco to FDA.

DATES: This rule is effective August 8, 2016. Domestic manufacturers 
and importers of cigars and pipe tobacco must begin submitting data 
required by Sec.  1150.5 (21 CFR 1150.5) to FDA no later than the 20th 
day of August, 2016.
    Because FDA can perform class allocations only on a full fiscal 
year basis, domestic manufacturers and importers of cigars and pipe 
tobacco will become subject to user fee assessments on October 1 of the 
first full fiscal year following the effective date of this rule.

FOR FURTHER INFORMATION CONTACT: Paul Hart, Food and Drug 
Administration, Center for Tobacco Products, Document Control Center, 
Bldg. 71, Rm. G335, 10903 New Hampshire Ave., Silver Spring, MD 20993-
0002; 1-877-287-1373, CTPRegulations@fda.hhs.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Overview of the Final Rule
III. Comments on the Proposed Rule
IV. Legal Authority
V. Environmental Impact
VI. Economic Analysis of Impacts
VII. Paperwork Reduction Act of 1995
VIII. Federalism
IX. References

I. Background

    The Family Smoking Prevention and Tobacco Control Act (Tobacco 
Control Act) was enacted on June 22, 2009 (Pub. L. 111-31), amending 
the FD&C Act and providing FDA with the authority to regulate tobacco 
products. Section 101(b) of the Tobacco Control Act amends the FD&C Act 
by adding chapter IX (sections 900 through 920 (21 U.S.C. 387 through 
387u)). Chapter IX provides FDA with tools and funds to regulate 
tobacco products and imposes certain obligations on domestic tobacco 
product manufacturers and importers. Included among FDA's authorities 
are the authorities to assess and collect user fees.
    In enacting the Tobacco Control Act, Congress found that tobacco 
use is the single most preventable cause of disease, disability, and 
death in the United States. Each year, over 400,000 people die 
prematurely from smoking or exposure to secondhand smoke. Approximately 
8.6 million people in the United States live with a serious illness 
caused by smoking. A consensus exists within the scientific and medical 
communities that tobacco products are inherently dangerous and cause 
cancer, heart disease, and other serious adverse health effects 
(sections 2(2), (3), and (13) of the Tobacco Control Act).
    The Tobacco Control Act grants FDA the authority to regulate 
tobacco products and to protect the public from the harmful effects of 
tobacco use. Section 901(b) of the FD&C Act automatically provides that 
chapter IX applies to cigarettes, cigarette tobacco, roll-your-own 
tobacco, and smokeless tobacco. It also permits FDA to issue a 
regulation to deem other tobacco products subject to the FD&C Act, 
which FDA has done, by publishing elsewhere in this issue of the 
Federal Register, the Deeming rule to bring all products meeting the 
definition of tobacco product under its FD&C Act authority. More 
specifically, the Tobacco Control Act gives FDA the authority to, among 
other things:
     Restrict tobacco product retail sales to youth;
     require owners and operators of tobacco companies to 
register annually and be subject to biennial inspection by FDA (section 
905 of the FD&C Act);
     require manufacturers and importers who wish to market a 
new tobacco product to obtain a marketing order from FDA prior to 
marketing that product (section 910 of the FD&C Act);
     require each manufacturer or importer to report all 
constituents, including smoke constituents as applicable, identified by 
FDA as harmful or potentially harmful to health in each tobacco 
product, and as applicable in the smoke of each tobacco product, by 
brand and by quantity in each brand and subbrand (section 904(a)(3) of 
the FD&C Act);
     establish tobacco product standards if FDA finds that it 
is appropriate for the protection of the public health (section 
907(a)(3) of the FD&C Act);
     conduct compliance-check inspections of tobacco product 
retailers to determine a retailer's compliance with Federal laws and 
regulations;
     establish science and research programs to inform the 
development of tobacco product regulations and better understand the 
risks associated with tobacco use;
     educate the public about the harmful effects of tobacco 
use; and
     assess and collect user fees from each domestic 
manufacturer and importer of tobacco products subject to section 919 of 
the FD&C Act.
    Section 919(c)(2) of the FD&C Act provides that tobacco product 
user fees are the sole source of funding for FDA's regulation of 
tobacco products. Therefore, FDA considers these fees to be critical to 
the Agency's ability to achieve its mission to protect and promote the 
public health. User fees provide FDA with a source of stable, 
consistent funding that has made possible our implementation of the 
Tobacco Control Act. The revenues from these fees fund the Agency's 
regulation of tobacco products and the tobacco industry, as described 
previously.
    In the Federal Register of May 31, 2013 (78 FR 32581), FDA issued a 
notice of proposed rulemaking (User Fee proposed rule) to add 21 CFR 
part 1150 to require domestic tobacco product manufacturers and 
importers to submit information needed to calculate the amount of user 
fees assessed under the FD&C Act. FDA finalized portions of the User 
Fee proposed rule relating to tobacco products under FDA's jurisdiction 
at that time in the final rule

[[Page 28708]]

``Requirements for the Submission of Data Needed to Calculate User Fees 
for Domestic Manufacturers and Importers of Tobacco Products,'' which 
was published in the Federal Register of July 10, 2014 (79 FR 39302) 
(User Fee final rule). Elsewhere in this issue of the Federal Register, 
FDA is publishing the Deeming rule to deem all products meeting the 
statutory definition of ``tobacco product,'' except accessories of the 
newly deemed tobacco products, to be subject to the FD&C Act. This rule 
is being issued in response to FDA's user fee authority over cigars and 
pipe tobacco, and finalizes portions of the User Fee proposed rule that 
relate to domestic manufacturers and importers of cigars and pipe 
tobacco, requiring them to submit information needed to calculate user 
fee assessments to FDA.
    The final rule, issued under section 919(a) of the FD&C Act, 
requires FDA to assess user fees on, and collect such fees from, each 
manufacturer and importer of tobacco products subject to 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. The class allocation is based on each tobacco 
product class' volume of tobacco products removed \1\ into commerce 
that is not exempt from certain taxes. Within each class of tobacco 
products, an individual domestic manufacturer or importer is assessed a 
user fee based on its statutorily defined ``percentage share'' for that 
tobacco product class.
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    \1\ 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, Pub. L. 108-357 (7 U.S.C. 518 et seq.)). In determining 
the user fees to be allocated to 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 
within a given class, except the cigar class, section 919(b)(4) of the 
FD&C Act directs that we use percentage share information determined 
for purposes of allocations under paragraphs (e) through (h) of section 
625 of FETRA. With regards to cigars, section 919(b)(5) of the FD&C Act 
directs that the percentage share for each domestic manufacturer and 
importer be based on the excise taxes paid during the prior fiscal 
year, rather than the prior quarter.
    FETRA provided for a Tobacco Transition Payment Program (TTPP) 
through which eligible former tobacco quota holders and tobacco 
producers received payments in 10 equal installments in each fiscal 
year 2005 through 2014. FETRA provided 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 was in September 2014, which encompassed the 39th and 40th 
quarterly TTPP assessments. The issuance of the 40th, or last, 
quarterly assessment, was on September 1, 2014, rather than on December 
1, 2014, in accordance with statutory requirements specified in section 
625(d)(3)(A) of FETRA. We are issuing this final rule consistent with 
section 919(b)(7) of the FD&C Act, which requires we ensure that we are 
able to make the determinations necessary for assessing tobacco product 
user fees.

II. Overview of the Final Rule

    We are finalizing portions of the proposed rule with only minor 
changes. We amended Sec.  1150.7(a)(1) and (2) to include language from 
the proposed rule specifying the calculations that FDA will perform to 
determine the yearly class allocation for cigars. Moreover, we added 
Sec.  1150.9(a)(2) to codify the method by which FDA will calculate the 
percentage share for each domestic manufacturer and importer of cigars. 
In the proposed rule, we specifically discussed this proposed 
methodology, requested comment, and reserved Sec.  1150.9(a)(2) for the 
purpose of including the calculations for manufacturers and importers 
in the cigar class if they became subject to chapter IX of the FD&C 
Act. After reviewing comments on the proposed rule, FDA is adding this 
methodology for cigars to Sec.  1150.9(a)(2) without changes.
    We added paragraph (c) to Sec.  1150.5 to require that domestic 
manufacturers and importers of cigars report data for each prior month 
in the fiscal year in their first submission under this rule. Once 
deemed, cigars and pipe tobacco will be subject to user fees under 
section 919 of the FD&C Act. However, domestic manufacturers and 
importers of cigars and pipe tobacco will start being assessed fees 
only at the start of the fiscal year following the effective date of 
this rule because we can only perform class allocations on a full 
fiscal year basis. As we discussed in section I.B. of the User Fee 
proposed rule (78 FR 32583), section 919(b)(5) of the FD&C Act requires 
FDA to allocate user fees within the cigar class to cigar firms based 
on the amount of excise taxes those firms paid in the prior fiscal 
year. This addition to Sec.  1150.5 will ensure that FDA has data for 
the prior fiscal year necessary to calculate, assess, and collect user 
fees for domestic manufacturers and importers of cigars in the first 
fiscal year in which they are assessed fees. We do not need data for 
the full prior fiscal year from domestic manufacturers and importers of 
other tobacco products subject to user fees, including pipe tobacco, 
because percentage share calculations for those classes only requires 
prior fiscal quarter data.
    We added paragraph (d) to Sec.  1150.5 to require that domestic 
manufacturers and importers of pipe tobacco begin their monthly 
reporting of data in August 2016. As noted previously, FDA makes 
percentage share calculations for tobacco products other than cigars 
using prior fiscal quarter data. Because FDA will begin making 
percentage share calculations for domestic manufacturers and importers 
of pipe tobacco beginning in the first fiscal quarter of 2017, FDA does 
not need pipe tobacco firms to submit data for months prior to the 
fourth fiscal quarter of 2016. Requiring domestic manufacturers and 
importers of pipe tobacco to make their first submission of prior month 
data by August 20, 2016, ensures FDA will have data for each month of 
the fourth fiscal quarter in 2016 and will be able to complete 
percentage share calculations for pipe tobacco firms for the first 
fiscal quarter of 2017.
    Further, in light of the Deeming rule subjecting cigars and pipe 
tobacco to user fee requirements, we added 21 U.S.C. 387a and 21 CFR 
1100.1 to the authority section. Finally, we amended Sec.  1150.5(a) by 
removing the phrases ``that are part of a class of tobacco products 
that is subject to regulation

[[Page 28709]]

under chapter IX of the Federal Food, Drug, and Cosmetic Act'' and 
``beginning October 2014.'' We made these changes because all classes 
of tobacco products that are included in the definition of ``class of 
tobacco products'' are subject to chapter IX of the FD&C Act and it is 
no longer necessary to make such a distinction, and because the October 
2014 compliance date has passed.

III. Comments on the Proposed Rule

    We received 12 comments on the proposed rule. We addressed a 
majority of the comments in the User Fee final rule. We declined to 
address comments relating to cigars, pipe tobacco, and other deemed 
products in that document because they were outside of FDA's 
jurisdiction at the time. Now that the Deeming rule has expanded FDA's 
authority to cover those products, we address the comments on assessing 
user fees on tobacco products that FDA deemed subject to chapter IX of 
the FD&C Act in this section.
    Comments were received from tobacco product manufacturers, trade 
associations, and individuals. To make it easier to identify comments 
and our responses, the word ``Comment,'' in parentheses, will appear 
before each comment, and the word ``Response,'' in parentheses, will 
appear before each response. We have numbered the comments to make it 
easier to distinguish between comments; the numbers are for 
organizational purposes only and do not reflect the order in which we 
received the comments or any value associated with the comment. We have 
combined similar comments under one numbered comment.
    (Comment 1) Multiple comments addressed FDA's authority to assess 
and collect user fees from domestic manufacturers and importers of 
products that have been deemed subject to FDA's jurisdiction, 
particularly e-cigarettes. Some comments stated that FDA must assess 
and collect fees because no ``free riders'' are allowed under section 
919(a) of the FD&C Act. These comments relied on the language in 
section 919(a) of the FD&C Act that FDA shall assess user fees on, and 
collect such from, each manufacturer and importer of tobacco products 
subject to chapter IX. The comments asserted that, unless deemed 
products are subject to user fees, ``some regulated manufacturers and 
importers would have to pay the cost of their regulation plus the cost 
of regulating the non-paying manufacturers and importers,'' which would 
provide the non-paying manufacturers and importers a significant 
competitive advantage in terms of reduced costs and prices for their 
products. Several of the comments claimed that failure to assess user 
fees on deemed products would violate the Fifth Amendment. Some 
comments also contend that exempting some products from user fees is 
unfair to existing classes, arbitrary and capricious, and would violate 
the Administrative Procedure Act.
    In contrast, other comments stated that FDA does not have the 
authority to assess user fees for any class other than the six classes 
named in section 919(b)(2)(B) of the FD&C Act and in FETRA. These 
comments noted that section 919(a) provides that fees must be assessed 
and collected ``in accordance with this section'' and, therefore, FDA 
can assess fees only on those classes identified in section 919 and 
FETRA. One of these comments also noted that the reallocation provision 
in section 919(b)(2)(B)(iv) permits reallocation only to regulated 
classes of the six FETRA classes. Similarly, another comment stated 
that FDA cannot deem electronic cigarette manufacturers to meet the 
definition of domestic manufacturer because FDA ``is bound under the 
FD&C Act to follow the allocation procedures established under FETRA.''
    (Response) Section 919(b)(2) of the FD&C Act lists six classes of 
tobacco products for the purpose of allocating among the classes--
cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-
your-own tobacco. The comments raise the question of whether Congress 
intended FDA to assess fees for manufacturers and importers of tobacco 
products of only these six classes or intended that FDA create 
additional classes for other tobacco products and assess fees for them 
as well. In construing section 919 of the FD&C Act, FDA is confronted 
with two questions. First, has Congress directly spoken to the precise 
question presented? (``Chevron step one''); Chevron, U.S.A., Inc. v. 
NRDC, Inc., 467 U.S. 837, 842 (1984). To find no ambiguity, Congress 
must have clearly manifested its intention with respect to the 
particular issue (Young v. Community Nutrition Institute, 476 U.S. 974, 
980 (1986)). If Congress has spoken directly and plainly, the Agency 
must implement Congress' unambiguously expressed intent (Chevron, 467 
U.S. at 842 to 843). If, however, section 919 is silent or ambiguous as 
to whether FDA must impose assessments on manufacturers and importers 
of only those classes of tobacco products listed in section 919(b)(2), 
FDA may determine whether section 919 should be interpreted to contain 
such a limitation, and FDA's interpretation must be upheld if it is 
reasonable (``Chevron step two''); Chevron, 467 U.S. at 842 to 843; FDA 
v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000).
    We have determined that, in enacting section 919 of the FD&C Act, 
Congress clearly manifested its intention that FDA only assess fees for 
manufacturers and importers of tobacco products in the six enumerated 
classes.
    Section 919(a) of the FD&C Act states that FDA must assess fees 
``in accordance with this section,'' and section 919 provides a clear 
two-step process for assessing fees. The first step requires FDA to 
allocate fees to each class of tobacco products, which it does by 
multiplying the total amount of fees per year by the ``applicable 
percentage'' for each class. Section 919(b)(2)(A) of the FD&C Act. 
Section 919(b)(2)(B) of the FD&C Act sets forth how to calculate these 
applicable percentages, but only for the six classes enumerated in 
section 919(b)(2). The applicable percentage is the percentage 
determined under section 625(c) of Pub. L. 108-357, which is FETRA. 
Section 919(b)(2)(B)(ii) of the FD&C Act. Section 625(c) of FETRA 
provides initial percentages for each of the six classes, totaling 100 
percent, and mandates that subsequent allocations be made only among 
these same classes. See sections 625(c)(1) and (2) of FETRA. Because 
the percentage of the total user fee assessment for each class under 
section 919 of the FD&C Act is the FETRA percentage, the sum of the 
percentages for all six classes will always total 100 percent. Since 
the six classes must comprise 100 percent of the allocation of the 
total user fee assessment under section 919(b)(2) of the FD&C Act, 
adding a class of tobacco product beyond the six would increase the 
total to over 100 percent. This is a result that Congress could not 
have intended, because it would require FDA to assess and collect user 
fees beyond the total amount permitted by section 919(b)(1) of the FD&C 
Act. Moreover, even assuming that under section 919 of the FD&C Act the 
applicable percentage for a class could be something other than the 
FETRA percentage, nothing in section 919 sets forth how FDA must, or 
even could, determine that percentage. Thus, this first step shows that 
section 919 is limited to the six classes enumerated in section 
919(b)(2) of the FD&C Act.
    The second step in the process for assessing fees is to determine 
the share of fees for each manufacturer and importer within each class 
of tobacco products. Except for the cigar class, this percentage shall 
be the percentage

[[Page 28710]]

determined for the purposes of allocations under subsections (e) 
through (h) of section 625 of FETRA. Section 919(b)(4) and (5) of the 
FD&C Act. This directive makes clear Congress' intent that all classes 
except cigars (as discussed in the next paragraph) look to FETRA when 
calculating the percentage share of manufacturers and importers within 
a class. However, FETRA only yields, and by its text and structure can 
only yield, percentages for firms within the six listed classes. First, 
sections 625(e)(1) and (f) of FETRA provide allocations for each 
manufacturer and importer of tobacco products in each class ``specified 
in subsection (c)(1),'' which are the same six classes from section 
919(b)(2) of the FD&C Act. Second, the FETRA allocations are based on 
each firm's share of the gross domestic volume for the class. Gross 
domestic volume is the volume of tobacco products ``removed'' and not 
exempt for Federal excise tax purposes. Section 625(a)(2) of FETRA. 
Thus, section 625(h) of FETRA sets forth the information required to be 
submitted to calculate the domestic volume of each manufacturer and 
importer, which relates to the removal of tobacco products for Federal 
excise tax purposes and the payment of such taxes. However, tobacco 
products outside the six classes listed in section 919 are not subject 
to Federal excise taxes, nor can such products be ``removed'' for 
Federal excise tax purposes. See 26 U.S.C. 52 and 26 U.S.C. 5702. 
Third, section 625(g) of FETRA provides measurement parameters to 
determine the volume of products removed, but they are explicitly 
limited to the six listed classes. The volume of domestic sales within 
a class are measured for the cigarette and cigar classes based on the 
number of cigarettes or cigars; for the remaining four classes 
specified in section 625(c)(1) of FETRA, they are measured based on the 
number of pounds. Because FETRA does not, and cannot, have allocations 
in the second step for products outside the six enumerated classes, it 
is clear that Congress intended only manufacturers and importers of 
tobacco products within those classes to be subject to user fees under 
section 919 of the FD&C Act.
    This is reinforced by section 919(b)(5) of the FD&C Act, which sets 
forth a somewhat different process for calculating allocations among 
firms in the cigar class that is based on excise taxes paid during the 
prior fiscal year rather than the prior quarter. That provision says 
that the allocation among firms in the cigar class is 
``notwithstanding'' section 919(b)(4) of the FD&C Act, showing that 
Congress intended the modified process for cigars to be an exception to 
the rule of using the FETRA framework to determine each firm's share of 
the class assessment. Because section 919 of the FD&C Act does not 
provide any other exceptions, the FETRA percentages must be used for 
the allocations within all other classes.
    Section 919(b)(7)(A) of the FD&C Act likewise limits the assessment 
of fees under section 919 to the six listed classes. This provision 
requires FDA to obtain, from the appropriate Federal Agency, all 
necessary information regarding all tobacco product manufacturers and 
importers required to pay user fees in order to make percentage 
calculations for each class (i.e., ``applicable percentages of each 
class'' under the statute, Section 919(b)(2)) and percentage share 
calculations within each class. As directed, FDA entered into a 
Memorandum of Understanding with the U.S. Department of Agriculture 
(USDA) to provide all the necessary information to FDA, and did so only 
for firms manufacturing or importing products in the six classes listed 
in section 919.\2\ USDA could not provide ``all necessary information'' 
to FDA to make percentage share calculations for tobacco products in 
any other classes, nor could any other Federal Agency.
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    \2\ USDA's authority to collect assessments under FETRA has 
sunset. Section 919(b)(7)(B) of the FD&C Act requires FDA to ensure 
that it is able to determine the applicable percentages described in 
section 919(b)(2) and the percentage shares described in section 
919(b)(4). Thus, FDA issued a rule in July 2014, as well as this 
rule to require the submission of the necessary information to 
determine these percentages, which enables FDA to assess and collect 
the tobacco product user fees.
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    The reallocation provision in section 919 of the FD&C Act also 
shows that user fees cannot be imposed on products outside the six 
listed classes. This provision requires that the amount of user fees 
that would be otherwise be assessed to classes of tobacco products that 
are not subject to chapter IX of the FD&C Act must be reallocated to 
classes that are subject to chapter IX. Section 919(b)(2)(B)(iv) of the 
FD&C Act. This reallocation must be done in the same manner and based 
on the same relative percentages otherwise determined under section 
919(b)(2)(B)(ii). By its terms, section 919(b)(2)(B)(ii) of the FD&C 
Act can provide the applicable percentages for only the six classes in 
section 919(b)(2)(B)(i) because those percentages are determined under 
section 625(c) of FETRA. Accordingly, FDA is unable to reallocate any 
user fees to a class outside of the six. Thus, the only way that FDA 
could reallocate fees to classes that are subject to chapter IX of the 
FD&C Act is for the tobacco product classes to be limited to those 
listed in section 919(b)(2)(B)(i) of the FD&C Act and in FETRA. Any 
other interpretation would render the reallocation provision's express 
linkage to FETRA superfluous and contravene the clear intent of 
Congress.
    Generally, comments that asserted that FDA should assess fees on 
all deemed tobacco products, including those outside the six classes, 
point to section 919(a) of the FD&C Act, which says that FDA shall 
assess user fees on, and collect such from, each manufacturer and 
importer of tobacco products subject to chapter IX. They argue that if 
electronic nicotine delivery systems (ENDS) and other tobacco products 
are deemed to be subject to chapter IX, then each manufacturer and 
importer of such products is subject to these fees. These comments, 
however, fail to take into account section 919(a)'s mandate that the 
assessment shall be done ``in accordance with this section.'' As 
described previously, when the assessments are made in accordance with 
section 919's two-step process, they yield assessments only for tobacco 
products in the six classes.
    Moreover, it is clear that, for the purposes of section 919 of the 
FD&C Act, including 919(a), the term ``each manufacturer and importer 
of tobacco products'' is limited to the tobacco products in the six 
classes. By its terms, Congress intended section 919 to work in 
accordance with the FETRA framework. Section 625 of FETRA, like section 
919 of the FD&C Act, applies to each ``tobacco product manufacturer'' 
and ``tobacco product importer'' and to each class of tobacco products. 
The terms manufacturer, importer, and tobacco product in section 919 of 
the FD&C Act and FETRA flow from the Internal Revenue Code (IRC). 26 
U.S.C. 5702. Just as section 919 requires FDA to make the allocations--
both for each class and within each class--based on FETRA, the FETRA 
allocations are based on removals for the purposes of Federal excise 
taxes. Thus, section 919 of the FD&C Act and FETRA, and their 
respective implementing regulations, use the same terms used in the IRC 
relating to Federal excise taxes. The classes of tobacco products are 
likewise consistent among the IRC, FETRA, and section 919 of the FD&C 
Act. The IRC defines six classes of tobacco products for Federal excise 
tax purposes.\3\ The

[[Page 28711]]

same six classes are enumerated in FETRA and section 919 of the FD&C 
Act for use in assessing the TTPP and tobacco user fees, respectively. 
Accordingly, in the IRC, FETRA, and section 919 of the FD&C Act, 
tobacco manufacturers are those who manufacture tobacco products in 
those six classes subject to Federal excise taxes. Any other approach 
to the term ``each manufacturer and importer of tobacco products'' in 
section 919 of the FD&C Act would lead to absurd results that Congress 
could not have intended. For example, section 900(20) of the FD&C Act 
defines ``tobacco product manufacturer'' as any person, including any 
repacker or relabeler, who manufactures, fabricates, assembles, 
processes, or labels a tobacco product. Relying on the section 900(20) 
definition would require FDA to assess user fees on each firm in the 
supply chain that, among other things, repacks, relabels, or 
distributes tobacco. However, doing so is impossible under the FETRA 
calculus mandated for the six classes under section 919 of the FD&C Act 
because FETRA calculates the relevant percentages based on the volume 
of product removed into domestic commerce (as defined by section 5702 
of the IRC), and not tax exempt. Section 625(a)(2) and (3), (c)(2), (e) 
and (g) of FETRA. Some firms included in the section 900(20) of the 
FD&C Act definition of manufacturer, such as repackers and relabelers, 
do not ``remove'' products into domestic commerce as defined by the IRC 
because they are not removing products from a factory or bonded 
warehouse. Accordingly, these firms would not have a calculable volume 
of product removed into domestic commerce; as such, FDA could not 
calculate the user fees those firms would be assessed under section 
919(b)(4) of the FD&C Act, nor could it determine how those firms 
affect class allocations under section 919(b)(2)(B) of the FD&C Act.
---------------------------------------------------------------------------

    \3\ The IRC definition of tobacco product includes five classes, 
including `smokeless tobacco,' which is further defined to comprise 
two classes of tobacco products: Chewing tobacco and snuff. 21 
U.S.C. 5702(c), (m).
---------------------------------------------------------------------------

    In contrast, using the definitions for manufacturer and importer in 
the IRC, and as adopted in USDA's and FDA's implementing regulations, 
allows FDA to make the necessary user fee allocations. This approach 
limits the entities to be assessed fees to those that must obtain a 
permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB) because 
they meet the definition of manufacturer of tobacco products or 
importer under the IRC and its implementing regulations (27 CFR 40.11 
and 41.11). Only these entities are subject to Federal excise taxes 
under chapter 52 of the IRC and can ``remove'' tobacco products into 
domestic commerce. Thus, only these entities have a volume of domestic 
sales under FETRA and can be assessed user fees under section 919 of 
the FD&C Act.
    Additionally, section 919 of the FD&C Act directly contradicts the 
section 900(20) definition in the manner it treats manufacturers and 
importers of tobacco products. Whereas the former treats manufacturers 
and importers as distinct entities for the purpose of assessments and 
collections, the section 900(20) definition includes importer as a 
subset of manufacturer, since the latter includes any person who 
imports a finished tobacco product for sale or distribution in the 
United States. Thus, Congress did not intend FDA to use the section 
900(20) definition for the purposes of section 919.
    Likewise, Congress could not have intended section 919 of the FD&C 
Act to incorporate the definition of ``tobacco product'' in section 
201(rr) (21 U.S.C. 321(rr)) or the tobacco product definitions from 
section 900 of the FD&C Act. The former includes any ``component, part, 
or accessory'' of a tobacco product, which is significantly broader 
than the definitions for the different types of tobacco products in the 
IRC and FETRA. Similarly, the definition of ``cigarette'' in section 
900(3) of the FD&C Act includes roll-your-own tobacco for cigarettes. 
If FDA calculated user fee assessments relying the definitions of 
``cigarette'' and ``roll-your-own'' found in section 900(3) and 900(15) 
of the FD&C Act, respectively, manufacturers and importers of roll-
your-own cigarettes would be required to pay fees both as part of the 
cigarette class and as part of the roll-your-own class. Such 
duplicative assessments would run contrary to section 919(b)(3)(B) of 
the FD&C Act, which expressly precludes manufacturers and importers 
from paying a user fee in excess of their percentage share. To prevent 
this, tobacco product classes must be distinct, and cannot overlap. 
Using the tobacco product definitions found in section 5702 of the IRC 
avoids double-billing firms because the classes are structured such 
that they are distinct and non-overlapping. Thus, for the term ``each 
manufacturer and importer of tobacco products,'' Congress intended FDA 
to use the term in the IRC and FETRA.
    While the definitions in sections 201(rr) and 900 of the FD&C Act 
say they apply for the purposes of the FD&C Act and chapter IX of the 
FD&C Act, respectively, this cannot be the case when doing so would run 
counter to the statutory purpose of a particular provision. Although 
there may be ``a natural presumption that identical words used in 
different parts of the same act are intended to have the same meaning 
[citation omitted] . . . the presumption is not rigid. . . .'' 
(Atlantic Cleaners & Dryers, Inc. v. U.S., 286 U.S. 427, 433 (1932); 
(accord: Yates v. U.S., 135 S. Ct. 1074, 1082 (2015)). Thus, the same 
words may be given different meanings, even in the same statute, if 
Congress intended different interpretations (at Chevron step one) or if 
such different interpretations are reasonable (at Chevron step two) 
(Atlantic Cleaners & Dryers, Inc., supra). See also Lawson v. Suwannee 
S.S. Co., 336 U.S. 198, 201 (1949); Nw. Austin Mun. Util. Dist. No. One 
v. Holder, 557 U.S. 193, 205 to 206 (2009). For the reasons given, it 
is clear that Congress intended the terms in section 919 to be 
consistent with the counterpart terms in FETRA and the IRC.
    Nothing in the legislative history of section 919 of the FD&C Act 
undermines this view that user fees are limited to the six enumerated 
classes. To the contrary, this interpretation is reinforced by the 
legislative history of the Tobacco Control Act, which states that the 
method of assessing fees shall be the same as that currently used by 
United States Department of Agriculture for all tobacco manufacturers 
and importers to fund the 2004 legislation providing transitional 
payments to tobacco grower quota holders. H. Rpt. 111-58, p. 47. 
Because products other than those in the six listed classes are not 
``removed'' and are not subject to a Federal excise tax, a user fee 
methodology for them could not be the same as that used by USDA under 
FETRA.
    Having concluded that the statutory scheme precludes FDA from 
assessing user fees on classes of tobacco products beyond the six 
listed in section 919 of the FD&C Act, the Chevron analysis need not 
proceed further. However, in the alternative, even if section 919 of 
the FD&C Act is ambiguous as to whether classes beyond the six may be 
subject to user fee assessments, FDA would adopt the same 
interpretation of the statute in an exercise of its discretion. In 
conducting this Chevron step two analysis, the Agency has based its 
conclusion on the same considerations discussed previously as well as 
the considerations discussed later in this document (Bell Atlantic 
Telephone Co. v. FCC, 131 F.3d 1044, 1049 (D.C. Cir. 1997); Chevron 
U.S.A., Inc. v. FERC, 193 F. Supp. 2d 54, 68 (D.D.C. 2002)). FDA's 
interpretation of section 919 of the FD&C Act as assessing user fees 
only on the six classes of tobacco products listed

[[Page 28712]]

in section 919(b)(2)(B)(ii) of the FD&C Act is reasonable. (Chevron, 
USA, Inc. v. NRDC, Inc., supra at 843).
    FDA's interpretation is consistent with the text and statutory 
structure of section 919. The statute requires FDA to use the FETRA 
percentages, and thus the FETRA formula, to determine the applicable 
percentages of the six classes listed in section 919(b)(2)(B)(i) of the 
FD&C Act, but it gives no indication of the manner under which FDA 
could or should determine user fee allocations for any additional 
classes. By using the FETRA framework, the applicable percentages for 
the six classes listed in section 919(b)(2)(B)(ii) are determined by a 
basic and predictable calculation. In addition, the user fee 
calculation is based on the share of gross domestic volume, which is 
inextricably linked to the volume of tobacco products removed that are 
subject to Federal excise taxes--information that was readily available 
to FDA at the time the Tobacco Control Act was enacted. For these six 
classes, Congress thus provided an easy-to-implement system that gives 
FDA relatively little discretion in determining the assessments.
    As discussed previously, the class percentage for classes beyond 
the six cannot be determined pursuant to the FETRA framework since 
those classes do not have volumes as defined in section 625(a) of 
FETRA. Thus, in order to assess any user fees on any class of tobacco 
products beyond the six listed in section 919 of the FD&C Act, FDA 
would need to demarcate a new set of tobacco product classes among 
newly deemed tobacco products, and fashion an entirely novel framework 
for determining class percentage allocations and allocations within 
each class of tobacco product. It would have to do this against the 
backdrop of the range of tobacco products, including various types of 
ENDS (such as e-cigarettes, e-cigars, e-hookah, vape pens, personal 
vaporizers, and electronic pipes), as well as nicotine gels, nicotine 
toothpicks, etc.
    Even if section 919 of the FD&C Act somehow allowed FDA to allocate 
percentages to and among additional classes, nothing in section 919 
sets forth the methodology FDA must, or even could, use to calculate 
these percentages or how FDA would obtain the necessary information for 
doing so. Since 100 percent of the total amount of user fees to be 
assessed are allocated among the six classes listed in section 
919(b)(2)(B)(ii) of the FD&C Act, FDA would need to devise a common 
metric for comparing each of these novel tobacco product classes to 
those six listed in order to adjust the relative class percentages (and 
find authority under section 919 to make such adjustments). FDA could 
not use the common metric adopted by USDA and, subsequently, by FDA in 
its 2014 final rule. This is based on the 2003 maximum Federal excise 
tax rates, which do not exist for tobacco products beyond the six 
classes. Further, because section 919(b)(2)(B)(ii) of the FD&C Act 
states that the applicable percentages for the six listed classes are 
the percentages from FETRA, for FDA to adjust those percentages based 
on a novel common metric external to FETRA would violate the statutory 
terms of that section.
    Some commenters argued that FDA could and should abandon the tax-
based methodology from FETRA altogether and create an entirely novel 
system unrelated to taxes or tax rates for determining the applicable 
percentages for both new and existing tobacco product classes. However, 
this suggestion also falters against the plain language of section 
919(b)(2)(B)(ii) of the FD&C Act, which requires FDA to use the FETRA 
percentages for the six listed classes; deviating from FETRA's 
methodology for allocations would contradict the clear intent of 
Congress. Moreover, it is reasonable to conclude that Congress did not 
intend FDA to develop a new system that departs from the methodology 
mandated by FETRA. Any such system would necessarily be subjective, 
especially relative to the system Congress established for the 
enumerated six classes. As such, FDA's interpretation is a reasonable 
construction of the FD&C Act.
    We disagree with commenters that a failure to assess fees on all 
deemed tobacco products is arbitrary and capricious. FDA is 
implementing the system established by Congress, which does not allow 
FDA to assess user fees for products outside the six classes. Even 
assuming section 919 of the FD&C Act is ambiguous regarding this point, 
for the reasons previously stated, FDA's interpretation here is 
reasonable. We also disagree with comments that argued that FDA's 
proposed scheme amounts to a tax because there is no tangible benefit 
to manufacturers and importers required to make user fee payments vis-
[agrave]-vis those that are not, as required under the Independent 
Offices Appropriations Act (IOAA). Because Congress granted FDA 
independent statutory authority to assess user fees, the requirements 
of the IOAA do not apply. See American Medical Ass'n v. Reno, 857 F. 
Supp. 80, 84 (D.D.C. 1994); National Cable Television Ass'n, Inc. v. 
United States, 415 U.S. 336 (1974). Finally, we do not need to address 
commenters' Fifth Amendment arguments here because the FD&C Act itself 
differentiates between the six classes listed in section 
919(b)(2)(B)(ii) and other tobacco product classes. As explained, FDA 
is merely following Congress' intent as expressed in section 919 of the 
FD&C Act.
    (Comment 2) One comment stated that FDA should formulate a 
reasonable common metric to assess user fees on all regulated tobacco 
products, including those not subject to excise taxes. This comment 
said that a common metric was needed to compare new classes of tobacco 
products with existing classes and suggested that FDA ``could base its 
calculations on total sales (in units) of each tobacco product, using 
traditional selling-sizes or weights of packages (e.g., 20 cigarettes = 
1 e-cigarette cartridge = 1 standard container of moist snuff = 4 large 
cigars) to derive the conversion factor necessary for market share 
calculations.'' Another comment stated that FDA should develop a method 
for calculating user fees for deemed products, not within the six 
classes, before any deeming regulation takes effect.
    (Response) FDA disagrees with these comments. As discussed in the 
response to comment 1, section 919 of the FD&C Act prevents FDA from 
assessing and collecting user fees from manufacturers and importers of 
deemed products other than cigars and pipe tobacco. Creating a common 
metric among all product classes subject to FDA regulation would not 
change the requirements of section 919 of the FD&C Act that prevent FDA 
from assessing user fees for deemed products other than cigars and pipe 
tobacco.
    (Comment 3) One comment stated that FDA should not adopt the USDA's 
retrospective calculation method for determining class percentage 
allocations at Step A because of concerns that a regulation deeming 
additional products subject to FDA regulation could dramatically alter 
class allocations from year to year, and that class allocation 
calculations using this method will not be an accurate reflection of 
each class' current percentage allocation. This comment stated that 
small businesses may no longer be able to sell deemed products 
withdrawn from the market due to premarket authorization requirements, 
but may still have to pay their share of their respective classes' user 
fees. Other companies that market grandfathered deemed products, the 
comment argued, would be forced to pay a disproportionate share based 
upon a class determination that was calculated before the deeming 
regulation. The comment requested that

[[Page 28713]]

FDA include safeguards against inequitable retrospective user fee 
requirements or allow for the continued marketing of deemed products 
while their corresponding premarket applications are pending review.
    (Response) FDA disagrees with this comment. FDA is unable to alter 
the user fee calculations required by section 919 of the FD&C Act. 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. Relying on the initial allocation 
percentages in section 625(c) of FETRA, USDA calculated the yearly 
class allocations for each fiscal year based on data about removals 
covering the most recent full calendar year (see 70 FR 7007). As such, 
FDA's class allocations are calculated in the same manner. Section 919 
also requires FDA to calculate assessments on each manufacturer and 
importer within a class on a quarterly basis using the prior quarter's 
tax removal data for products other than cigars and the prior fiscal 
year's tax removal data for cigars. While it is true that class 
allocations between product classes and percentage shares between 
companies within product classes can fluctuate throughout the year, FDA 
cannot alter the required method of user fee calculations.
    (Comment 4) One comment argued that premium cigars should be exempt 
from FDA regulation generally and user fees specifically because FDA 
regulation would be disproportionately burdensome for the product 
segment, as exemplified by the new product (or premarket) requirements 
that would be triggered by the often minor ingredient variations 
intended to alter the taste and aroma of a premium cigar.
    (Response) FDA disagrees with this comment. In the Deeming rule, 
FDA concluded that all cigars should be deemed subject to chapter IX of 
the FD&C Act and, in doing so, took into account the concerns about 
premarket authorization requirements raised in this comment. All cigars 
have been deemed subject to FDA's regulation and, as such, are subject 
to user fees under section 919 of the FD&C Act. Furthermore, FDA lacks 
the authority to exempt any portion of a class that has been deemed 
subject to chapter IX of the FD&C Act from user fee requirements.
    (Comment 5) FDA received comments addressing the calculation of 
user fee assessments for domestic manufacturers and importers of 
cigars. One commenter asserted that using the amount of excise tax paid 
to determine percentage share within the cigar class would favor 
importers over domestic manufacturers because importers ``can typically 
sell cigars to distributors at a lower price'' because they benefit 
from lower wages, taxes, and regulatory costs. The commenter stated 
that actual units (sticks) would better reflect true market share and 
using excise taxes paid to calculate percentage share would increase 
incentives to move production and jobs off-shore.
    Another comment suggested that FDA consider the differences in 
taxation of cigars compared with other taxable classes of tobacco 
products and assess the rule's ``potentially inequitable impact on 
cigar manufacturers and importers.'' The comment asserted that the 
different excise tax rates applied within the cigar class would have 
the ``unintended consequence'' of causing manufacturers and importers 
of similar products to pay dramatically different amounts in user fees. 
The commenter further stated that large cigars have different first 
wholesale prices, and that some of these pricing differences are due to 
economies of scale or other efficiency factors. Companies with 
significant economies of scale would benefit by paying lower user fees 
due to their products being produced at lower cost, while small 
manufacturers and importers would be disadvantaged.
    (Response) FDA disagrees with the suggestion that it can use 
something other than excise taxes to calculate the percentage share of 
manufacturers and importers in the cigar class. 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.'' We acknowledge that this 
method of calculating cigar manufacturers' and importers' percentage 
share depends on the excise tax rate and would result in manufacturers 
and importers of small cigars paying a lower dollar amount of user fees 
per stick than manufacturers and importers of large cigars because 
large cigars are taxed at a higher rate than small cigars. However, we 
disagree that this would favor importers over domestic manufacturers 
and that it would encourage manufacturers to move abroad. Low volume, 
higher priced cigars are both more expensive and largely manufactured 
abroad. Importers of the higher priced cigars would pay more in user 
fees under the FD&C Act methodology than under a system in which volume 
was determined based on sticks.
    In addition, we disagree that differences in user fee assessments 
across cigar types would be an unintended consequence of the FD&C Act 
methodology and that it would be inequitable. Cigars are a 
heterogeneous group of products, differing in such attributes as size 
and quality. The market for cigars is sufficiently competitive that 
price differences primarily reflect these product differences. It is 
not inequitable for products that differ greatly, as measured by market 
price, to pay different amounts of user fees. Moreover, the statute 
expressly states that each cigar manufacturer's or importer's 
percentage share must be calculated based on excise taxes paid. 
Congress thus clearly intended that user fees for cigars would vary 
depending on the excise taxes imposed on cigars, which in turn vary 
depending on the price and size of cigars.

IV. Legal Authority

    Section 901 of the FD&C Act provides that chapter IX of the FD&C 
Act applies to all cigarettes, cigarette tobacco, roll-your-own 
tobacco, and smokeless tobacco and to any other tobacco products that 
the Secretary of Health and Human Services by regulation deems to be 
subject to this chapter. In accordance with section 901, FDA is issuing 
the Deeming rule (published elsewhere in this issue of the Federal 
Register) to extend FDA's ``tobacco product'' authorities to products 
that meet the statutory definition of ``tobacco product'' in section 
201(rr) of the FD&C Act, except the accessories of these tobacco 
products. Section 919(b)(7) of the FD&C Act requires that FDA ensure 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) of the FD&C Act 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 of the FD&C Act. 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

[[Page 28714]]

authorities, FDA is issuing this 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 action 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. Economic Analysis of Impacts

    FDA has examined the impacts of the final rule under Executive 
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 
U.S.C. 601 to 612), and the Unfunded Mandates Reform Act of 1995 (Pub. 
L. 104-4). Executive Orders 12866 and 13563 direct Agencies to assess 
all costs and benefits of available regulatory 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). FDA has determined that this final rule is a significant 
regulatory action under 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 final 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 $144 million, using the most current (2014) Implicit 
Price Deflator for the Gross Domestic Product. FDA does not expect this 
final rule to result in any 1-year expenditure that would meet or 
exceed this amount.
    Under our baseline, FDA would obtain the information necessary for 
collecting cigar and pipe tobacco user fees directly from other Federal 
Agencies that collect such information. Compared with this baseline, 
this final rule would impose both initial transition costs and monthly 
information submission costs on industry. There would also be an 
approximately offsetting reduction in government information collection 
costs. The net effect of this may be a small social cost or benefit. 
This final rule would also allow FDA to have full access to the data 
needed for calculating and billing user fees and would resolve 
impediments that may otherwise exist concerning FDA's ability to use 
the data for its intended purpose. This final rule can be expected to 
eliminate the potential need for additional regulatory mechanisms to 
collect information and allow user fee assessment to proceed more 
smoothly than it could otherwise.
    Compared to the baseline, the estimated one-time private sector 
transition cost is $159.36 per manufacturer or importer, including 
small manufacturers and importers, and the annual compliance cost is 
$2,549.76. One option for regulatory relief 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. Another option for regulatory relief would be to 
require submission of either the FDA form or copies of forms submitted 
to other Agencies. The full analysis of economic impacts is available 
as Ref. 1 in Docket No. FDA-2012-N-0920 and at http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

VII. Paperwork Reduction Act of 1995

    This final rule contains information collection provisions that are 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3501-3520). 
The title, description, and respondent description of the information 
collection provisions are shown in the following paragraphs 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.
    Title: Tobacco Products, User Fees, Requirements for the Submission 
of Data Needed to Calculate User Fees for Domestic Manufacturers and 
Importers of Cigars and Pipe Tobacco.
    Description: This final rule requires each domestic manufacturer 
and importer of cigars and pipe tobacco to submit to FDA information 
needed to calculate and assess user fees under the FD&C Act.
    The USDA collected information to calculate percentage share for 
its purposes and provided FDA with the data FDA needs to determine user 
fee assessments under the FD&C Act. USDA ceased collecting this 
information at the end of fiscal year 2014. Consistent with the 
requirements of the FD&C Act, this rule continues the submission of 
this information, but to FDA rather than USDA, and thus ensures 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 was required by USDA under FETRA, the final 
rule requires 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 
newly deemed tobacco products.
    The information collection provisions in this final rule have been 
submitted to OMB for review as required by section 3507(d) of the PRA. 
The requirements were approved and assigned OMB control number 0910-
0749. This approval expires on July 31, 2017.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number.

[[Page 28715]]

                                 Table 1--Estimated Annual Reporting Burden \1\
----------------------------------------------------------------------------------------------------------------
                                                      No. of
         21 CFR section               No. of       responses per   Total annual      Hours per      Total hours
                                    respondents     respondent       responses       response
----------------------------------------------------------------------------------------------------------------
1150.5(a), (b)(1), (b)(2), and               135              12           1,620               3           4,860
 FDA Form 3852 (Ref. 2) 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                135              12           1,620               1           1,620
 (monthly)......................
1150.13 Submission of user fee            \2\ 68               4             272               1             272
 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.......................  ..............  ..............  ..............  ..............           6,772
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of
  information.
\2\ This figure was rounded to the nearest tenth.

    Table 1 describes the annual reporting burden of 6,772 hours as a 
result of the provisions set forth in this proposed rule. Our estimated 
number of 135 newly deemed respondents (335 total tobacco entities) is 
based on 2013 summary information obtained from the Alcohol and Tobacco 
Tax and Trade Bureau (TTB) regarding the number of permitted 
manufacturers and importers. As referenced previously, the PRA burden 
for currently regulated products was previously approved by OMB. The 
burden analysis for that collection assumed 200 respondents would 
submit user fees. Therefore given our updated estimate of 335 entities, 
the total number of new deemed tobacco entities is 135 (335 - 200 = 
135). FDA estimates that there are 113 cigar manufacturers and 74 pipe 
tobacco manufacturers, as well as 216 importers of cigars and 43 
importers of pipe tobacco. However, these estimates from TTB reflect 
that in 2013 there were 135 total permitted manufacturers and 200 
permitted importers over all tobacco product types for which TTB 
collects excise taxes (including cigarettes, cigars, snuff, chewing 
tobacco, pipe tobacco, and roll-you-own tobacco, excluding electronic 
nicotine delivery systems). This total is less than the sum across all 
tobacco product types because some manufacturers and importers produce 
or import more than one type of tobacco product (we subsequently refer 
to these entities as polymanufacturers and polyimporters). As the 
number of cigar and pipe tobacco manufacturers cannot exceed the number 
of permitted entities, we use 335 as an upper bound estimate of the 
number of affected entities. The estimate of 135 respondents reflects 
both reports of no removal into domestic commerce and reports of 
removal of tobacco product into domestic commerce. The estimate of 68 
respondents reflects an average number of domestic manufacturers and 
importers who may be subject to fees each fiscal quarter. FDA assumes 
half the number of respondents will submit quarterly payments to the 
Agency. Based on our experience with the assessment of user fees for 
other FDA-regulated products, we estimate that approximately one 
respondent might appeal an assessment, and one respondent will request 
for further review of their dispute.

VIII. Federalism

    FDA has analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132. FDA has determined that the rule 
does 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 has concluded 
that the 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. References

    The following references have been placed on display in the 
Division of Dockets Management (HFA-305), Food and Drug Administration, 
5630 Fishers Lane, rm. 1061, Rockville, MD 20852, 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 address, as of the date this document publishes 
in the Federal Register, but Web sites are subject to change over time.

    1. Regulatory Impact Analysis. Available at: http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.
    2. 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, 21 CFR part 
1150 is amended to read as follows:

PART 1150--USER FEES

0
1. The authority citation for part 1150 is revised to read as follows:

    Authority:  21 U.S.C. 371, 387a, 387b, 387i, 387s, 21 CFR 
1100.1.

0
2. In Sec.  1150.3, revise the definition for ``Units of product'' to 
read as follows:

Sec.  1150.3  Definitions.

* * * * *
    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.
* * * * *

Sec.  1150.5  [Amended]

0
3. Amend Sec.  1150.5 by:
0
a. Removing from the first sentence of paragraph (a) the phrases ``that 
is subject to regulation under chapter IX of the Federal Food, Drug, 
and Cosmetic Act'' and ``beginning October 2014''.
0
b. Adding paragraphs (c) and (d) to read as follows:

Sec.  1150.5  Required Information.

* * * * *
    (c) First report for cigars. Domestic manufacturers and importers 
of cigars must submit the information described in this section 
beginning no later than

[[Page 28716]]

the 20th day of August, 2016. Domestic manufacturers and importers of 
cigars must submit the information described in this section for each 
of the prior months of fiscal year 2016 as their first monthly 
submission. The previous sentence only applies for the first report in 
fiscal year 2016.
    (d) First report for pipe tobacco. Domestic manufacturers and 
importers of pipe tobacco must submit the information described in this 
section beginning no later than the 20th day of August, 2016.
* * * * *

0
4. In Sec.  1150.7, revise paragraph (a)(1) and add paragraph (a)(2) to 
read as follows:

Sec.  1150.7  Yearly class allocation.

* * * * *
    (a) * * *
    (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 dollar 
figure).
    (2) For cigars, FDA will:
    (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 dollar 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 for large cigars (large cigar subclass dollar figure).
    (iii) Add the small cigar subclass dollar figure and the large 
cigar subclass dollar figure (cigar class dollar figure).
* * * * *

0
5. In Sec.  1150.9, revise paragraph (a)(1) and add paragraph (a)(2) to 
read as follows:

Sec.  1150.9  Domestic manufacturer or importer assessment.

* * * * *
    (a) * * *
    (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) For the cigar class, 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 fiscal year by 
the total excise taxes that all domestic manufacturers and importers 
paid for the class for the prior fiscal year.
* * * * *

    Dated: May 3, 2016.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2016-10688 Filed 5-5-16; 8:45 am]
 BILLING CODE 4164-01-P