Document ID: FDA-2010-N-0646-0001
Agency: fda
Document Type: Proposed Rule
Title: Tobacco Products: Exemptions From Substantial Equivalence Requirements
Posted Date: 2011-01-06T05:00Z

[Federal Register Volume 76, Number 4 (Thursday, January 6, 2011)]
[Proposed Rules]
[Pages 737-744]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-34]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 16 and 1107

[Docket No. FDA-2010-N-0646]
RIN 0910-AG39

Tobacco Products, Exemptions From Substantial Equivalence 
Requirements

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA) is issuing this 
proposed rule to establish procedures for requesting an exemption from 
the substantial equivalence requirements of the Family Smoking 
Prevention and Tobacco Control Act (Tobacco Control Act). The proposed 
rule would describe the process and statutory criteria for requesting 
an exemption and explain how FDA would review requests for exemptions. 
Once finalized, this regulation will satisfy the requirement in the 
Tobacco Control Act that FDA issue regulations implementing the 
exemption provision.

DATES: Submit either electronic or written comments on the proposed 
rule by March 22, 2011. Submit comments on information collection 
issues under the Paperwork Reduction Act of 1995 by February 7, 2011, 
(see the ``Paperwork Reduction Act of 1995'' section of this document).

[[Page 738]]

ADDRESSES: You may submit comments, identified by [Docket No. FDA-2010-
N-0646 and/or RIN number 0910-AG39], by any of the following methods, 
except that comments on information collection issues under the 
Paperwork Reduction Act of 1995 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. and Regulatory Information Number (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, 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: Annette Marthaler, Center for Tobacco 
Products, Food and Drug Administration, 9200 Corporate Blvd., 
Rockville, MD 20850-3229, 877-287-1373, annette.marthaler@fda.hhs.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Tobacco Control Act, enacted on June 22, 2009, amends the 
Federal Food, Drug, and Cosmetic Act (the FD&C Act) and provides FDA 
with the authority to regulate tobacco products (Pub. L. 111-31, 123 
Stat. 1776). Among other things, the Tobacco Control Act requires that, 
before a new tobacco product may be introduced or delivered for 
introduction into interstate commerce, one of the following must occur: 
(1) A premarket application under section 910(b) of the FD&C Act (21 
U.S.C. 387j(b)) must be submitted to FDA, and FDA must issue an order 
finding that the new product may be introduced or delivered for 
introduction into interstate commerce under 910(c) of the FD&C Act; or 
(2) a report under section 905(j) of the FD&C Act (21 U.S.C. 387e(j)) 
demonstrating the new tobacco product's substantial equivalence to an 
appropriate predicate product (as defined in the FD&C Act) must be 
submitted and FDA must issue an order finding the new product to be 
substantially equivalent to the predicate product and in compliance 
with the requirements of the Tobacco Control Act (section 910(a)(2) of 
the FD&C Act). Section 905(j)(3) of the FD&C Act, as amended, states 
that FDA may exempt tobacco products that are modified by adding or 
deleting a tobacco additive, or increasing or decreasing the quantity 
of an existing tobacco additive, from the requirement of demonstrating 
substantial equivalence if the Agency determines that: (1) Such 
modification would be a minor modification of a tobacco product that 
can be sold under the FD&C Act, (2) a report demonstrating substantial 
equivalence is not necessary to ensure that permitting the product to 
be marketed would be appropriate for the protection of the public 
health, and (3) an exemption is otherwise appropriate. Section 
905(j)(3)(B) of the FD&C Act requires FDA to issue regulations 
implementing this provision by July 1, 2011.
    ``Additive'' is defined at section 900(1) of the FD&C Act, as ``any 
substance the intended use of which results or may reasonably be 
expected to result, directly or indirectly, in its becoming a component 
or otherwise affecting the characteristic of any tobacco product 
(including any substances intended for use as a flavoring or coloring 
or in producing, manufacturing, packing, processing, preparing, 
treating, packaging, transporting, or holding), except that such term 
does not include tobacco or a pesticide chemical residue in or on raw 
tobacco or a pesticide chemical'' (21 U.S.C. 387(1)).
    The proposed rule, if finalized, would establish a pathway for 
manufacturers, including importers, to request exemptions from the 
substantial equivalence requirements of the Tobacco Control Act. It 
would not establish categories of minor modifications, or identify 
specific modifications, that meet the statutory criteria for 
exemptions. As FDA acquires more information about the additives in 
tobacco products from which to establish such categorical exemptions, 
it may issue additional regulations or guidance. FDA requests comment 
on how best to establish categories for these exemptions.
    A manufacturer who obtains an exemption under the procedures of 
this proposed rule is also required to report to FDA under 
905(j)(1)(A)(ii) of the FD&C Act (this requirement is not addressed in 
this proposed rule). Section 905(j)(1)(A)(ii) of the FD&C Act requires 
the manufacturer to report at least 90 days prior to introducing or 
delivering for introduction into interstate commerce the tobacco 
product that is the subject of the exemption, the basis for the 
manufacturer's determination that ``the tobacco product is modified 
within the meaning of [section 905(j)(3)], the modifications are to a 
product that is commercially marketed and in compliance with the 
requirements of this Act, and all of the modifications are covered by 
exemptions granted by FDA pursuant to [section 905(j)(3)]'' (section 
905(j)(1)(A)(ii) of the FD&C Act). In addition, this submission must 
describe ``action taken by [the applicant] to comply with the 
requirements under section 907 that are applicable to the tobacco 
product'' (section 905(j)(1)(B) of the FD&C Act).
    The proposed rule includes a procedural mechanism for rescinding an 
exemption where necessary to protect the public health. Before 
rescinding an exemption, FDA proposes to provide the manufacturer 
notice of the proposed rescission and an opportunity for an informal 
hearing under part 16 (21 CFR part 16), unless the continuance of the 
exemption presents a serious risk to public health. If the continuance 
of the exemption presents a serious risk to public health, FDA would 
rescind the exemption prior to giving notice and an opportunity for a 
hearing, and provide notice and opportunity for an informal hearing 
under part 16 as quickly as possible following the rescission.

II. Overview of the Proposed Rule

    As required by section 905(j)(3)(B) of the FD&C Act, this rule 
would implement section 905(j)(3) of the FD&C Act. Specifically, the 
rule would provide that FDA may exempt tobacco products that are 
modified by adding or deleting a tobacco additive, or increasing or 
decreasing the quantity of an existing tobacco additive, if FDA 
determines that the modification would be a minor modification of a 
tobacco product that can be sold under the FD&C Act; a 905(j) report 
demonstrating

[[Page 739]]

substantial equivalence to a predicate tobacco product is not necessary 
to ensure that permitting the tobacco product to be marketed would be 
appropriate for protection of the public health; and an exemption is 
otherwise appropriate. These criteria are specified in the statute.
    The proposed rule also explains that an exemption request may be 
made only by the manufacturer of a legally, commercially marketed 
tobacco product for a minor modification to that manufacturer's 
product. FDA is proposing this requirement because it believes that 
only the manufacturer of the product being modified will have, and be 
able to provide to FDA, sufficient and complete information about the 
product and the proposed modification. This includes information about 
a tobacco product that is trade secret or confidential commercial 
information and available only to the manufacturer of the product. Such 
information is necessary to allow FDA to determine whether the tobacco 
product and modification satisfy the criteria for exemption.
    The proposed rule would also require that the exemption request 
(and supporting information) be submitted in an electronic format that 
FDA can process, review, and archive. FDA intends to provide and update 
information on its website on how manufactures may provide the 
electronic submission to FDA (e.g., information on electronic media and 
methods of transmission). The proposed rule would also require that the 
exemption request be legible (FDA must be able to read the document) 
and in English. These requirements would ensure that FDA could review 
the exemption request expeditiously and appropriately. Electronic 
submission of information is consistent with the Government Paperwork 
Elimination Act (Pub. L. 105-277) requirement that Federal agencies 
allow individuals or entities to submit information or transact 
business with the agency electronically. Because of the broad 
availability of the Internet, FDA does not anticipate any need to 
submit an exemption request and supporting information in a non-
electronic format. However, a company that is not able to submit an 
exemption request in an electronic format may submit a written request 
to the Center for Tobacco Products explaining in detail why the company 
cannot submit the request in an electronic format and requesting an 
alternative format.
    The proposed rule would require that an exemption request be 
submitted with supporting documentation and contain the manufacturer's 
address and contact information; a detailed explanation of the purpose 
for the modification; a detailed description of the modification, 
including whether the modification involves adding or deleting a 
tobacco additive, or increasing or decreasing the quantity of an 
existing tobacco additive; a detailed explanation of why the 
modification is considered a minor modification of a tobacco product 
that can be sold under the FD&C Act; a detailed explanation of why a 
report intended to demonstrate substantial equivalence is not necessary 
to ensure that permitting the tobacco product to be marketed would be 
appropriate for the protection of public health; a certification by a 
responsible official of the company, such as the chief executive 
officer, summarizing the supporting evidence and providing the 
rationale for the official's determination that the modification will 
not increase the product's toxicity, addictiveness, or appeal to or use 
by minors; and other information justifying an exemption.
    The rule would require the submission of this information, along 
with supporting documentation, to enable FDA to determine whether an 
exemption from having to demonstrate substantial equivalence to an 
appropriate predicate product would be appropriate for the protection 
of the public health, as required by the statute (section 905(j)(3) of 
the FD&C Act). FDA requests comment on what supporting information 
would be necessary for us to make these determinations. The proposed 
rule would also require a certification in the form of a signed 
statement by a responsible official of the company, summarizing the 
supporting evidence and providing the rationale for the official's 
determination that the modification will not increase the product's 
toxicity, addictiveness, or appeal to or use by minors. Because of the 
importance of this information to an exemption determination, FDA is 
proposing to require that a responsible official of the company, such 
as the chief executive officer, certify that the modification will not 
have these effects.
    The proposed regulation explains that FDA would review the 
information submitted in support of the request and determine whether 
to grant or deny the request for an exemption based on whether the 
criteria in the statute are satisfied. The proposed rule also provides 
that, if FDA determines that the information submitted by the 
manufacturer is insufficient to enable it to determine whether an 
exemption is appropriate, FDA may request additional information from 
the manufacturer. The rule would also provide that if the manufacturer 
fails to respond within the timeframe requested, FDA will consider the 
exemption request withdrawn. An exemption determination will be 
publicly available consistent with the requirements of part 20 (21 CFR 
part 20); trade secret and confidential commercial information are 
exempted from disclosure requirements consistent with Sec.  20.61.
    As discussed earlier in this document, the proposed rule includes a 
provision expressly permitting FDA to rescind an exemption if the 
Agency determines that rescission is necessary to protect the public 
health. FDA believes it is important that it be able to rescind 
exemptions in circumstances where the exemption is not appropriate for 
the public health, such as when FDA's decision to grant an exemption 
was based on false or incomplete information. FDA is proposing to 
provide notice and an opportunity for an informal hearing under part 16 
to the manufacturer who requested the exemption prior to rescinding an 
exemption. If, however, the continuance of the exemption presents a 
serious risk to public health, the proposed rule provides that FDA 
could rescind the exemption before providing notice and an opportunity 
for a hearing. In that case, FDA would provide the manufacturer notice 
and an opportunity for a hearing as soon as possible after the 
rescission.
    Consistent with the requirements of the FD&C Act, FDA intends to 
provide technical and other nonfinancial assistance to small tobacco 
product manufacturers in complying with the premarket requirements of 
sections 905 and 910 of the FD&C Act, along with other requirements 
(section 901(f) of the FD&C Act). FDA requests comment on what 
technical assistance or guidance would be helpful to small 
manufacturers in complying with these requirements. Small tobacco 
product manufacturers may contact FDA at smallbiz.tobacco@fda.hhs.gov 
for assistance.

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 905(j)(3)(B) of the FD&C Act requires that FDA issue 
regulations to implement the provision on exemptions from the 
substantial equivalence requirements of the Tobacco Control Act. 
Section 905(j)(3)(A) of the FD&C Act provides that FDA may exempt from

[[Page 740]]

the requirements relating to the demonstration of substantial 
equivalence tobacco products that are modified by adding or deleting a 
tobacco additive, or increasing or decreasing the quantity of an 
existing tobacco additive, if FDA determines the modification would be 
a minor modification of a tobacco product that can be sold under the 
FD&C Act; a report is not necessary to ensure that permitting the 
tobacco product to be marketed would be appropriate for protection of 
the public health; and an exemption is otherwise appropriate. FDA is 
issuing this proposed rule as required by section 905(j)(3)(B) of the 
FD&C Act. Additionally, section 701(a) of the FD&C Act (21 U.S.C. 371) 
gives FDA general rulemaking authority to issue regulations for the 
efficient enforcement of the FD&C Act.

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. Analysis of Impacts

A. Introduction

    FDA has examined the impacts of the proposed rule under Executive 
order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive 
Order 12866 directs 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). The agency believes that 
this proposed rule is not a significant regulatory action as defined by 
the Executive order.
    The Regulatory Flexibility Act requires Agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. The Tobacco Control Act requires that tobacco 
product manufacturers obtain either a marketing authorization order 
under section 910(c) or an order under section 910(a)(2) finding the 
new tobacco product to be substantially equivalent to an appropriate 
predicate tobacco product before introducing a new product into 
interstate commerce. Although this requirement is costly, the option of 
requesting an exemption as set forth in this proposed rule provides a 
mechanism for potentially reducing costs. If manufacturers of new 
tobacco products do not expect this option to reduce costs associated 
with their new product submissions, they will choose not to use it. The 
Agency therefore proposes to certify that the rule will not 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 $135 million, using the most current (2009) 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

    FDA compares the effects of this rule to a baseline we will refer 
to as the post-statute baseline. Under the Tobacco Control Act, in the 
absence of this or other rulemaking under section 905(j)(3), tobacco 
product manufacturers must submit to FDA either a premarket application 
or a report under section 905(j) demonstrating substantial equivalence 
to an appropriate predicate product, and FDA must issue the appropriate 
corresponding order before a new tobacco product may be introduced or 
delivered for introduction into interstate commerce. Although 
substantial equivalence requirements are not yet in effect, the 
statutory grace period ends on March 22, 2011. The statutory deadline 
for issuing regulations under section 905(j)(3) is July 1, 2011, after 
the end of the grace period. Therefore, under the post-statute baseline 
we assume that requirements to report under 905(j) will be in effect. 
Compared with the cost associated with the post-statute baseline, this 
rule may result in cost savings if some tobacco manufacturers request, 
and are granted, substantial equivalence exemptions. If for any reason 
this proposed rule is finalized before the substantial equivalence 
requirements go into effect, it would simply have no effect until such 
time that they do.

C. Number of Affected Entities

    This proposed rule may potentially apply to any tobacco product 
manufacturer or importer whose products are regulated under the Tobacco 
Control Act. Statistics of U.S. Businesses data indicate that there are 
20 cigarette manufacturers and 46 other tobacco product manufacturers 
(U.S. Census, 2009). Because other tobacco product manufacturers would 
include cigar and pipe tobacco manufacturers, not all 46 firms 
represent manufacturers that are currently regulated under the Tobacco 
Control Act.\1\ An unknown number of importers would be affected.\2\ 
Not all new tobacco products are expected to meet the statutory 
requirements for an exemption. Furthermore, FDA is not establishing 
categories of minor modifications, or identifying specific 
modifications, that meet the statutory criteria for exemptions. It is 
therefore likely that only a subset of the potentially affected 
manufacturers and importers would choose to request an exemption.
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    \1\ A possible offsetting factor is that these data only include 
firms with payroll, and there could be some small tobacco product 
manufacturers without payroll.
    \2\ Manufacturers, wholesalers, and retailers could all 
theoretically import tobacco products. Census data do not 
distinguish firms that import from firms that do not.
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D. Number of Exemption Requests

    The number of new products introduced in a given year is the 
theoretical maximum number that could be introduced under a substantial 
equivalence exemption. However, some new products may not be 
substantially equivalent to an appropriate predicate tobacco product 
and will require premarket authorization under section 910(c), in which 
case they would not be eligible for a substantial equivalence 
exemption. The remaining products would require 905(j) reports, 
including demonstration of substantial equivalence. Under this proposed 
rule, an unknown number of those new 905(j) products would be eligible 
for possible introduction into interstate commerce under a substantial 
equivalence exemption.
    FDA uses scanner data covering late 2007 to late 2009 from AC 
Nielsen to estimate the number of new tobacco products introduced in a 
year. A Universal Product Code (UPC) is deemed to be introduced in 2008 
if total dollar sales over the final weeks of 2007 were zero, but total 
dollar sales over 2008 were greater than zero. Because unique UPCs are 
assigned to different types of packaging for otherwise identical 
products, most new UPCs do not represent new products, but rather 
different ways of packaging existing products. To address this issue, 
FDA

[[Page 741]]

sorts the data by brand description, and by product description within 
each brand description. The product description varies by UPC and 
contains information about both product characteristics and packaging. 
Therefore, the product description of every new UPC can be compared 
with the product descriptions preceding and following it to determine 
whether the new UPC represents a new package for an existing product or 
a new product altogether.
    Using the scanner data, FDA finds that of 628 new UPCs for 
cigarettes in 2008, 151 represent new products not present in the 2007 
data. Of 215 new UPCs for chewing tobacco, 43 represent new products. 
Of 36 new UPCs for smoking tobacco (excluding pipe tobacco), 20 
represent new products.\3\ Of 36 new UPCs for cigarette paper, 19 
represent new products. This leads to an estimated 233 new products in 
2008. We assume the same average number of new products will continue 
to be introduced every year going forward. However, it is also possible 
that requirements imposed by the Tobacco Control Act will lead 
manufacturers to introduce new products at a lower rate in the future.
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    \3\ The smoking tobacco category refers to tobacco products, 
other than cigarettes, cigars and accessories, which are intended to 
be smoked. Smoking tobacco products are further identified in the 
data as cigarette tobacco (roll-your-own), smoking tobacco, or pipe 
tobacco. Since pipe tobacco is not currently subject to the Tobacco 
Control Act, products clearly identified as such are excluded from 
the analysis.
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    As outlined previously, some of the estimated 233 new products 
introduced annually may require premarket authorization under section 
910(c), and exemptions would be requested for an unknown number of the 
remaining products. Although in theory the maximum number of requests 
equals the number of new products, based on the requirements for an 
exemption and experience with other regulated products, FDA estimates 
that in the first years after the procedure is in place, only 50 
exemption requests will be submitted per year. This may increase over 
time as learning takes place. FDA anticipates requesting additional 
information to support 40 of those requests.

E. Benefits and Costs

    The main effect of this proposed rule would be a potential 
reduction in the costs of introducing new tobacco products compared 
with the post-statute baseline. Under the baseline scenario, all new 
products that do not undergo premarket review under section 910(c) must 
submit a report under section 905(j) that includes the basis for 
manufacturer's determination that the new tobacco product is 
substantially equivalent to an appropriate predicate tobacco product. 
If an exemption request is submitted and granted, a manufacturer would 
be able to submit a different and potentially shorter 905(j) report in 
which, under 905(j)(1)(A)(ii), a discussion of the exemption is used in 
place of the demonstration of substantial equivalence. On a per-product 
basis, any potential cost savings for the 905(j) report, net of the 
cost of requesting the exemption, would be the savings attributable to 
this rule.
    FDA estimates that it would take 360 hours to prepare an exemption 
request. Based on the requirements set forth in the codified language, 
FDA anticipates that preparation of most sections would require 
technical scientific and engineering expertise. Legal input and review 
would also play a role. Therefore, in valuing the time cost, FDA uses 
the weighted average of tobacco manufacturing industry-specific hourly 
wages for life, physical, and social science occupations ($30.91), 
architecture and engineering occupations ($40.93), and legal 
occupations ($71.83) (Ref. U.S. BLS, 2010). FDA assigns these 
occupational categories weights of 40 percent, 40 percent, and 20 
percent. The resulting composite wage is $43.10. FDA then doubles this 
amount to $86.20 to account for benefits and overhead. Multiplying by 
360 hours yields a cost per exemption request of $31,033. FDA 
anticipates that when it asks a manufacturer to provide additional 
information in support of an exemption request, it will take an average 
of 50 hours to prepare the additional information. Using the same 
hourly cost of labor, providing additional information is estimated to 
result in an additional cost of $4,310. These are elective costs. Firms 
will not choose to submit a request unless any potential cost savings 
in a 905(j) report justifies the cost.
    Using FDA's estimate that we expect to receive 50 requests per 
year, the total cost of all exemption requests submitted would be 
$1,551,700. There would be an additional cost of $172,400 if, as 
anticipated, we ask for additional information supporting 40 of the 50 
requests. FDA requests comment on these cost estimates.
    Because substantial equivalence report requirements are not yet 
being enforced, and there is no guidance beyond the contents of the 
Tobacco Control Act, FDA does not attempt to estimate the cost of 
preparing a 905(j) report that includes the demonstration of 
substantial equivalence or the cost of preparing a 905(j) report citing 
an exemption. Some manufacturers may find that, for a particular 
product, preparing a 905(j) report that includes the basis for the 
manufacturer's determination that its new tobacco product is 
substantially equivalent to an appropriate predicate tobacco product 
would be costlier than submitting an exemption request and citing the 
exemption in a 905(j) report. Such a manufacturer may consider 
submitting an exemption request. If a manufacturer finds that the 
exemption process would not reduce costs for legally introducing a new 
tobacco product, it would maintain the post-statute status quo and 
submit a 905(j) that includes the basis for the manufacturer's 
determination that its new tobacco product is substantially equivalent 
to an appropriate predicate tobacco product. FDA requests comment on 
these conclusions.
    In order to grant an exemption, FDA must find, among other things, 
that a report demonstrating substantial equivalence would not be 
necessary to ensure that permitting the tobacco product to be marketed 
would be appropriate for protection of the public health. Furthermore, 
an exemption could be rescinded if found to be inappropriate, and the 
process for rescission would depend on whether there is a serious risk 
to public health. Therefore, FDA does not anticipate that setting up a 
mechanism for obtaining substantial equivalence exemptions would result 
in costs to public health. FDA requests comment on this approach.
    Under this proposed rule, there may be uncertainty on the part of 
manufacturers as to what kinds of product modifications may be granted 
an exemption and how much supporting evidence will be required as the 
basis for an exemption. If some manufacturers are more conservative in 
requesting exemptions than FDA would be in granting them, they may not 
fully avail themselves of any potential cost savings. Alternatively, if 
some manufacturers are too optimistic about what types of modifications 
will be exempt, they will incur higher costs because they will have to 
demonstrate substantial equivalence in their 905(j) reports in addition 
to having submitted unsuccessful exemption requests.
    FDA acknowledges the theoretical possibility that overall 
submission costs could increase as the result of this uncertainty. This 
would happen if so many unsuccessful exemption requests were submitted 
that the excess costs

[[Page 742]]

associated with them exceeded any cost savings from exemptions that 
were granted. This situation is unlikely to occur, especially as time 
goes on and manufacturers gain information on submission costs and the 
requirements that must be met for exemptions. Manufacturers might 
continue to submit unsuccessful exemption requests, but it would 
increasingly be a well-informed choice based on an accurate estimation 
of the probability of being granted an exemption and the excess cost of 
preparing an unsuccessful request compared with the cost savings 
attributable to an exemption. Moreover, it is possible that some of the 
information compiled for an exemption request would be reused as part 
of a demonstration of substantial equivalence, thus reducing the effort 
expended in preparing both types of submissions.

F. Conclusion

    In summary, the substantial equivalence exemption requirements laid 
out in this proposed rule offer an additional channel for legally 
introducing new tobacco products that result from minor modifications 
of tobacco products that can be sold under the Tobacco Control Act. 
Introducing a new product through this channel may potentially reduce 
costs. If manufacturers find that obtaining an exemption would not 
reduce costs, or if they do not want to risk having to demonstrate 
substantial equivalence in their 905(j) reports in addition to having 
submitted unsuccessful exemption requests, they may choose to maintain 
the post-statute status quo and not pursue substantial equivalence 
exemptions.

VII. Paperwork Reduction Act of 1995

    This proposed rule contains information collection provisions that 
are subject to review by OMB under the Paperwork Reduction Act of 1995 
(the PRA) (44 U.S.C. 3501-3520). A description of these provisions is 
given below with an estimate of the annual reporting burden. Included 
in the estimate is the time for reviewing instructions, searching 
existing data sources, gathering the data needed, and completing and 
reviewing each collection of information. FDA requests comment on the 
burden and practical utility of the information being requested. 
Comment is also requested on whether the information being requested is 
duplicative of other collections.
    Title: Exemptions From Substantial Equivalence Requirements for 
Tobacco Products.
    Description: In this proposed rule, a pathway would be established 
by FDA for manufacturers to request exemptions from the substantial 
equivalence requirements of the Tobacco Control Act. As it acquires 
more information about the additives in tobacco products from which to 
establish categories of exemptions, FDA may issue additional 
regulations or guidance on this subject.
    This rule would implement section 905(j)(3) of the FD&C Act, 
allowing FDA to exempt tobacco products that are modified by adding or 
deleting a tobacco additive, or increasing or decreasing the quantity 
of an existing tobacco additive, if FDA determines that the 
modification would be a minor modification of a tobacco product that 
can be sold under the FD&C Act. The rule also explains that an 
exemption request may be made only by the manufacturer of a legally 
marketed tobacco product for a minor modification to that 
manufacturer's product and the request (and supporting information) 
must be submitted in an electronic format that FDA can process, review, 
and archive. In addition, the request and all supporting information 
must be legible and in (or translated into) the English language.
    Under the proposal, an exemption request must be submitted with 
supporting documentation and contain the manufacturer's address and 
contact information, information about the modification; and an 
explanation of why a report intended to demonstrate substantial 
equivalence is not necessary. The request must also contain a 
certification by a responsible official summarizing the supporting 
evidence and providing the rationale for the official's determination 
that the modification will not increase the product's toxicity, 
addictiveness, or appeal to/use by minors; and include other 
information justifying an exemption. This information would enable FDA 
to determine whether the exemption request would be appropriate for the 
protection of the public health.
    This proposed rule also includes a procedural mechanism for 
rescinding an exemption where necessary to protect the public health. 
In general, FDA would rescind an exemption only after providing the 
manufacturer notice of the proposed rescission and an opportunity for 
an informal hearing under part 16. However, FDA may rescind an 
exemption prior to notice and opportunity for a hearing under part 16 
if the continuance of the exemption presents a serious risk to public 
health. In that case, FDA would provide the manufacturer an opportunity 
for a hearing as soon as possible after the rescission.
    FDA would review the information submitted in support of the 
request and determine whether to grant or deny the request based on 
whether the criteria specified in the statute are satisfied. If FDA 
determines that the information submitted is insufficient to enable it 
to determine whether an exemption is appropriate, FDA may request 
additional information from the manufacturer. If the manufacturer fails 
to respond within the timeframe requested, FDA would consider the 
exemption request withdrawn.
    Description of Respondent: Manufacturers of tobacco products who 
are requesting an exemption from the substantial equivalence 
requirements of the FD&C Act, as amended by the Tobacco Control Act.

                                   Table 1--Estimated Annual Reporting Burden
----------------------------------------------------------------------------------------------------------------
                                                      Annual
         21 CFR Section              Number of     frequency per   Total annual      Hours per      Total hours
                                    respondents      response        responses       response
----------------------------------------------------------------------------------------------------------------
1107.1(b).......................              50               1              50             360          18,000
1107.1(c).......................              40               1              40              50           2,000
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............  ..............  ..............          20,000
----------------------------------------------------------------------------------------------------------------

    Table 1 describes the annual reporting burden as a result of the 
provisions set forth in this proposed rule. Based on information 
related to premarket provisions for other FDA-regulated products and 
anticipated interest from industry in this provision, FDA estimates 
that it would receive 50 exemption requests annually and that it

[[Page 743]]

would take a manufacturer 360 hours to prepare an exemption request. 
FDA estimates that it would need to request additional data for 40 of 
these requests, and that it will take 50 hours to prepare this data. 
FDA anticipates using the rescission authority to respond to one issue 
of concern related to an exemption determination each year (the burden 
hours for 21 CFR 1107.1(d) are included under part 16 hearing 
regulations, and are not included in the burden estimates in table 1 of 
this document).
    The information collection provisions of this proposed rule have 
been submitted to OMB for review. Interested persons are requested to 
fax comments regarding information collection (see ADDRESSES) 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 
e-mailed to oira_submission@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 to the Division of Dockets Management 
(see ADDRESSES) either electronic or written comments regarding this 
document. It is only necessary to send one set of comments. It is no 
longer necessary to send two copies of mailed 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.

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. 
(FDA has verified the Web site addresses, but we are not responsible 
for any subsequent changes to the Web sites after this document 
publishes in the Federal Register.)
    1. U.S. Census Bureau, 2007 Economic Census, ``Sector 31: EC0731I1: 
Manufacturing: Industry Series: Detailed Statistics by Industry for the 
United States: 2007.'' Release Date: October 30, 2009, Access Date: 
August 30, 2010, (http://factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name=EC0731I1&-NAICS2007=312210/312221/312229&-ib_type=NAICS2007&-geo_id=&-_industry=312221&-_lang=en&-fds_name=EC0700A1)
    2. U.S. Bureau of Labor Statistics, ``Occupational Employment 
Statistics: May 2009 National Industry-Specific Occupational Employment 
and Wage Estimates NAICS 312200--Tobacco Manufacturing,'' May 14, 2010, 
http://data.bls.gov/cgi-bin/print.pl/oes/current/naics4_312200.htm.

List of Subjects

21 CFR Part 16

    Administrative practice and procedure.

21 CFR Part 1107

    Tobacco products, Substantial equivalence, Exemptions.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, it is 
proposed that 21 CFR parts 16 and 1107 be amended to read as follows:

PART 16--REGULATORY HEARING BEFORE THE FOOD AND DRUG ADMINISTRATION

    1. The authority citation for 21 CFR part 16 continues to read as 
follows:

    Authority: 15 U.S.C. 1451-1461; 21 U.S.C. 141-149, 321-394, 
467f, 679, 821, 1034; 28 U.S.C. 2112; 42 U.S.C. 201-262, 263b, 364.

Sec.  16.1  [Amended]

    2. In Sec.  16.1 (b)(2) add in numerical sequence ``Sec.  
1107.1(d), relating to rescission of an exemption from the requirement 
of demonstrating substantial equivalence for a tobacco product.''
    3. Add part 1107 to subchapter K to read as follows:

PART 1107--ESTABLISHMENT REGISTRATION, PRODUCT LISTING, AND 
SUBSTANTIAL EQUIVALENCE REPORTS

Subpart A--Exemptions

Sec.
1107.1 Exemptions.

    Authority: 21 U.S.C. 387e(j) and 387j.

Subpart A--Exemptions

Sec.  1107.1  Exemptions.

    (a) General requirements. Under section 905(j)(3) of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 387e(j)(3)), FDA may exempt 
from the requirements relating to the demonstration that a tobacco 
product is substantially equivalent within the meaning of section 910 
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 387j), tobacco 
products that are modified by adding or deleting a tobacco additive, or 
increasing or decreasing the quantity of an existing tobacco additive, 
if FDA determines that:
    (1) Such modification would be a minor modification of a tobacco 
product that can be sold under the Federal Food, Drug, and Cosmetic Act 
(legally marketed tobacco product);
    (2) A report under section 905(j)(1) intended to demonstrate 
substantial equivalence is not necessary to ensure that permitting the 
tobacco product to be marketed would be appropriate for protection of 
the public health; and
    (3) An exemption is otherwise appropriate.
    (b) Request for an exemption under section 905(j)(3) of the Federal 
Food, Drug, and Cosmetic Act. A request for an exemption from the 
requirement of demonstrating substantial equivalence may be made only 
by the manufacturer of a legally marketed tobacco product for a minor 
modification to that tobacco product. To request an exemption, the 
manufacturer must submit the request and all information supporting the 
request in an electronic format that FDA can process, review, and 
archive. If the manufacturer is unable to submit an exemption request 
in an electronic format, the manufacturer may submit a written request 
to the Center for Tobacco Products explaining in detail why the company 
cannot submit the request in an electronic format and requesting an 
alternative format. Such request must include an explanation of why an 
alternative format is necessary. In addition, the request and all 
supporting information must be legible and in the English language. An 
exemption request must contain:

[[Page 744]]

    (1) The manufacturer's address and contact information;
    (2) A detailed explanation of the purpose for the modification;
    (3) A detailed description of the modification, including a 
statement as to whether the modification involves adding or deleting a 
tobacco additive, or increasing or decreasing the quantity of an 
existing tobacco additive;
    (4) A detailed explanation of why the modification is a minor 
modification of a tobacco product that can be sold under the Federal 
Food, Drug, and Cosmetic Act;
    (5) A detailed explanation of why a report under section 905(j)(1) 
of the Federal Food, Drug, and Cosmetic Act intended to demonstrate 
substantial equivalence is not necessary to ensure that permitting the 
tobacco product to be marketed would be appropriate for protection of 
the public health;
    (6) A certification (i.e., a signed statement by a responsible 
official of the company) summarizing the supporting evidence and 
providing the rationale for the official's determination that the 
modification does not increase the tobacco product's appeal to/use by 
minors, toxicity, or addictiveness/abuse liability; and
    (7) Other information justifying an exemption.
    (c) Exemption determination. FDA will review the information 
submitted and determine whether to grant or deny an exemption request 
based on whether the criteria in section 905(j)(3) of the Federal Food, 
Drug, and Cosmetic Act are met. FDA may request additional information 
if necessary to make a determination. FDA will consider the exemption 
request withdrawn if the information is not provided within the 
requested timeframe.
    (d) Rescission of an exemption. FDA may rescind an exemption if it 
finds that the exemption is not appropriate for the protection of 
public health. In general, FDA will rescind an exemption only after 
notice and opportunity for a hearing under 21 CFR part 16 of this 
chapter is provided. However, FDA may rescind an exemption prior to 
notice and opportunity for a hearing under 21 CFR part 16 of this 
chapter if the continuance of the exemption presents a serious risk to 
public health. In that case, FDA will provide the manufacturer an 
opportunity for a hearing as soon as possible after the rescission.

    Dated: January 3, 2011.
Leslie Kux,
Acting Assistant Commissioner for Policy.
[FR Doc. 2011-34 Filed 1-5-11; 8:45 am]
BILLING CODE 4160-01-P