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Skip Navigation HomeHelpResourcesContact Us Advanced Search Start of Main Content Tobacco Products, User Fees, Requirements for the Submission of Data Needed to Calculate User Fees for Domestic Manufacturers and Importers of Tobacco Products This Proposed Rule document was issued by the Food and Drug Administration (FDA) For related information, Open Docket Folder Show agency attachment(s) DEPARTMENT OF HEALTH AND HUMAN SERVICES
[Docket No. FDA-2012-N-0920]
RIN 0910-AG81
SummaryThe Food and Drug Administration (FDA or we) is issuing this proposed rule that would require domestic tobacco product manufacturers and importers to submit information needed to calculate the amount of user fees assessed under the Federal Food, Drug, and Cosmetic Act (the FD&C Act). The United States Department of Agriculture (USDA) has been collecting this information and providing FDA with the data FDA needs to calculate the amount of user fees assessed to tobacco product manufacturers and importers. USDA intends to cease collecting this information starting in fiscal year 2015 (October 2014). Consistent with the requirements of the FD&C Act, we are proposing to require the submission of this information to FDA instead of USDA. We are taking this action to ensure that FDA continues to have the information we need to calculate, assess, and collect user fees.
DatesSubmit either electronic or written comments on the proposed rule by August 14, 2013. Submit comments on information collection issues under the Paperwork Reduction Act of 1995 by July 1, 2013 (see the “Paperwork Reduction Act of 1995” section of this document).
AddressesYou may submit comments, identified by Docket No. FDA-2012-N-0920 and/or Regulatory Information Number (RIN) 0910-AG81, by any of the following methods, except that comments on information collection issues under the Paperwork Reduction Act of 1995 (the PRA) must be submitted to the Office of Regulatory Affairs, Office of Management and Budget (OMB) (see the “Paperwork Reduction Act of 1995” section of this document).
Mail/Hand Delivery/Courier (for paper, disk, or CD-ROM submissions): Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852. Instructions: All submissions received must include the Agency name and Docket No(s). and RIN for this rulemaking. All comments received may be posted without change to , including any personal information provided. For additional information on submitting comments, see the “Comments” heading of the SUPPLEMENTARY INFORMATION section of this document.
For Further Information ContactNancy Boocker or Annette Marthaler, Center for Tobacco Products, Food and Drug Administration, 9200 Corporate Blvd., Rockville, MD 20850-3229, 877-287-1373. or . Supplementary InformationTable of ContentsI. Background
X. ReferencesI. BackgroundThe Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act) was enacted on June 22, 2009, amending the FD&C Act and providing FDA with the authority to regulate tobacco products (Public Law 111-31, 123 Stat. 1776). Section 919(a) of the FD&C Act (21 U.S.C. 387s(a)) requires FDA to “assess user fees on, and collect such fees from, each manufacturer and importer of tobacco products” subject to the tobacco product provisions of the FD&C Act (chapter IX of the FD&C Act). The total amount of user fees for each fiscal year is specified in section 919(b)(1) of the FD&C Act, and under section 919(a) we are to assess and collect a proportionate amount each quarter of the fiscal year. The FD&C Act provides for the total assessment to be allocated among the classes of tobacco products identified in the statute: cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco. (1)
The class allocation is based on each tobacco product class' volume of tobacco products removed (2)
into commerce. Within each class of tobacco products, an individual domestic manufacturer or importer is assessed a user fee based on its share of the market for that tobacco product class.
Under a Memorandum of Understanding between FDA and USDA (Ref. 1), USDA has been providing FDA with the information on percentage share by class of tobacco products and by individual company within each tobacco product class. Under FETRA, the authority to collect assessments ends September 30, 2014; however, USDA will still collect the July, August, and September 2014 monthly reports with the same established monthly deadline, so the 40th quarter's assessment can later be “`trued-up'” or adjusted to reflect the actual market share of domestic tobacco manufacturers and importers for the 40th quarter. Section 919(b)(7) of the FD&C Act requires that no later than fiscal year 2015, we ensure we are able to make the determinations necessary for assessing tobacco product user fees.A. Two-Step Process To Calculate Quarterly AssessmentsBoth the USDA TTPP program and FDA's user fee program follow a two-step process to calculate quarterly assessments: Step A allocates assessments among the six classes of tobacco products specified in those programs—cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco—based on each class' volume of tobacco products removed into commerce (section 625(c) of FETRA; 7 CFR 1463.4 and 1463.5; and section 919(b)(2)(B) of the FD&C Act).
Step B allocates the assessment for each class of tobacco products among the domestic manufacturers and importers in that class, so that each domestic manufacturer's or importer's assessment is proportional to its percentage share within that class (sections 625(e) through (h) of FETRA; 7 CFR 1463.7; and sections 919(b)(3) through (b)(5) of the FD&C Act).1. Step AFor Step A, FETRA specified the initial allocation among the six classes of tobacco products. For this initial calculation, USDA has determined that Congress used publicly available calendar year 2003 relevant class volume numbers (sticks (3)
for cigarettes and cigars, pounds for the other classes) from the Treasury Department's Alcohol and Tobacco Tax and Trade Bureau (TTB) and multiplied those numbers by the maximum 2003 Federal excise tax rates for each class of tobacco products (Ref. 2). In this fashion, the volume of each tobacco product class was converted from differing bases (sticks and pounds) to a common metric: Tax dollar amounts. The tax dollar amounts were added together for a six class total. The allocation for each class of tobacco products was its percentage contribution to the six-class total (Ref. 2 at pp. 4-7). As directed by FETRA, USDA adjusts these allocations annually to reflect changes in the gross domestic volume of each tobacco product class, and it does so using the same methodology that Congress used to make the initial allocation (Ref. 2 at pp. 8-10). Specifically, USDA determines the gross domestic volume of each tobacco product class by multiplying the maximum 2003 Federal excise tax rate for each class by the volume information from TTB for the most recent full calendar year. In other words, for fiscal year 2012, USDA calculates gross domestic volume for each class of tobacco products based on information for calendar year 2010.
As discussed previously in this document, section 919(b)(2)(B)(ii) of the FD&C Act provides that the applicable percentage of each class of tobacco products will be the percentage determined under section 625(c) of FETRA.2. Step BOnce the allocation to each class of tobacco products is determined, Step B determines the user fee to be assessed and collected from each domestic manufacturer and importer within that class. So it can allocate the assessment for each class of tobacco products among the domestic manufacturers and importers in each class, USDA collects information from each domestic manufacturer and importer on the volume of taxable removals (4)
(sticks or pounds) and the resulting excise taxes it has paid for those removals (7 CFR 1463.6). USDA collects this information monthly using a form it has developed () (Ref. 3). Along with this form, each domestic manufacturer and importer is also required to submit certified copies of specified tax returns and forms (see section 625(h) of FETRA). For domestic manufacturers, these documents are TTB Form 5000.24 (Excise Tax Return) and TTB Form 5210.5 (Report, Manufacturer of Tobacco Products or Cigarette Papers and Tubes). For importers, these documents are Department of Homeland Security, U.S. Customs and Border Protection (CBP) Form 7501 (Importer Entry Summary) and TTB Form 5220.6 (Monthly Report, Tobacco Products or Processed Tobacco Importer). In accordance with FETRA, USDA calculates the percentage share of a domestic manufacturer or importer within a class of tobacco products by dividing the volume of tobacco products (in either sticks or pounds, depending on the class) attributable to an entity by the total volume of tobacco products (in either sticks or pounds) for that class. Excise taxes paid can be used as a proxy for volume when the tax rate by volume (sticks or pounds) is uniform for the whole class (which is the case for all classes except cigars). USDA then multiplies the percentage by the assessment amount attributed to the class of tobacco products to determine the specific firm's assessment. (See Ref. 2 at pp. 10-15.)
For Step B, section 919(b)(4) of the FD&C Act requires FDA to allocate the assessment of user fees for each class of tobacco products among the tobacco product manufacturers and importers in those classes using the percentages determined under section 625(e) through (h) of FETRA.B. Specific Considerations and Processes for User Fees Under Section 919 of the FD&C ActThe calculation of user fees under section 919 of the FD&C Act does differ from FETRA in some important respects. First, we may not assess a user fee on a class of tobacco products unless that class of tobacco products is either listed in section 901(b) of the FD&C Act (21 U.S.C. 387a(b)) (cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco (5)
) or has been deemed by FDA in a regulation under section 901(b) to be subject to chapter IX of the FD&C Act. For those classes of tobacco products that are not deemed by FDA to be subject to chapter IX of the FD&C Act, with respect to Step A of the assessment calculation, the amount of user fees that otherwise would be assessed to such class is reallocated to the classes of tobacco products that are subject to chapter IX of the FD&C Act (section 919(b)(2)(B)(iv) of the FD&C Act).
The authority to collect the last assessment under FETRA ends September 30, 2014; however, USDA plans to provide the original market share activity for the 39th and 40th quarter as well as the “trued-up” or revised market share to FDA on the same time schedule as any other quarterly assessment. Because we anticipate that after USDA's 40th quarterly assessment FDA will no longer receive the information from USDA that we currently use to calculate the tobacco product user fee assessments, (6)
we are issuing this proposed rule that would require the submission of information to FDA.II. Description of the Proposed RuleAs discussed in section I of this document, section 919 of the FD&C Act establishes a user fee assessment and collection process that references the FETRA framework for determining allocations among classes of tobacco products and among individual domestic manufacturers and importers within each class. The proposed rule is intended to ensure that FDA collects from domestic manufacturers and importers information necessary to make these allocations and to assess user fees for domestic manufacturers and importers. The following sections discuss in more detail the proposed rule and FDA's rationale for the proposed sections.A. General PrinciplesThis proposed rule uses the TTPP framework, as implemented by USDA. We believe that adopting an approach similar to the TTPP regulations is consistent with the direction of section 919 of the FD&C Act. For example, section 919(b)(2)(B)(ii) of the FD&C Act directs that when allocating user fee assessments to classes of tobacco products (Step A), FDA shall use the percentage as determined under section 625(c) of FETRA. Similarly, section 919(b)(4) of the FD&C Act directs that when determining the user fee by company (Step B), FDA shall use the percentage as determined under subsections (e) through (h) of section 625 of FETRA. Thus, the proposed rule uses the same approach as USDA for collecting data and making allocations among firms. Because domestic manufacturers and importers are familiar with the TTPP, using this approach should help minimize confusion about the submission requirements and the methodology used to make the calculations of user fee assessments. While the proposed rule uses the TTPP framework to a large extent, it provides additional explanation of precisely how FDA intends to make the Step A and Step B calculations.
This proposed rule varies from USDA's regulation implementing the TTPP in certain respects to reflect differences between FETRA and the FD&C Act. These differences, however, do not affect the types of data that domestic manufacturers and importers would submit to FDA. For example, one difference reflected in the proposal is that the total yearly user fee is specified in the FD&C Act (section 919(b)(1) of the FD&C Act), whereas for the TTPP, USDA calculates the total assessments for a year based on actual annual program costs (section 625(b)(2) of FETRA). Another example relates to disputes. FETRA provides a specific hearing process related to challenges of TTPP assessments (see section 625(i) of FETRA and 7 CFR 1463.11). Section 919 of the FD&C Act neither references this section of FETRA nor provides a particular dispute process. Thus, while the proposed rule contains some provisions relating to disputes regarding the amount of the fee assessments (discussed in more detail in section II.G of this document), the proposed provisions differ from those in the TTPP program.B. Scope and DefinitionsThe proposed rule includes a scope section (proposed § 1150.1 (21 CFR 1150.1)) that explains how the regulation would relate to the collection and assessment of user fees and how it would apply to domestic manufacturers and importers of tobacco products. In addition, the proposal includes a definitions section that would help clarify the meaning of terms used throughout the proposed rule. Several of the terms are similar to terms used in the TTPP regulations (7 CFR part 1463).
Class of tobacco products. We are proposing to define “class of tobacco products” as cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco. These are the classes of tobacco products named in section 919(b)(2)(B)(i) of the FD&C Act. They are also the same six classes of tobacco products that have been subject to TTPP assessments under FETRA and, as such, the classes for which there is a method for determining the applicable percentages under FETRA, both for the classes and individual entities within the classes. The FETRA percentage is based on gross domestic volume, which is defined as the volume of tobacco products removed within the meaning of the Internal Revenue Code (section 625(a)(2) of FETRA). Under the Internal Revenue Code, the six classes are the only ones defined as “tobacco products” that are removed and that are subject to the excise tax requirements (26 U.S.C. 5701 and 5702(c) and (j)). Therefore, we are not including other classes of tobacco products in the proposed rule, even though these six classes do not encompass all tobacco products as that term is defined in section 201(rr) of the FD&C Act (21 U.S.C. 321(rr)). (7)
While some of these classes have definitions in the FD&C Act, such as the definition of “cigarette” in section 900(3) of the FD&C Act, we are proposing to use the definitions in 26 U.S.C. 5702 because these are the definitions currently used in determining the applicable percentages for the purpose of user fee assessments. (8)
Yearly class allocation. We are proposing to define the term “yearly class allocation” as the amount of user fees (in dollars) to be assessed for a class of tobacco products for a particular year.C. Required InformationThe proposed rule includes a section (proposed § 1150.5) describing the information that domestic manufacturers and importers would be required to submit to FDA. The proposed requirement would provide continuity to domestic manufacturers and importers as it would require them to submit essentially the same information to FDA that they are currently submitting to USDA. This information would provide FDA with the information we need to calculate the user fee amount to be assessed and collected from each domestic manufacturer and importer.
To determine the percentage share allocated to each class of tobacco products and then to determine the percentage share allocated to each domestic manufacturer and importer within each class, we need the same information that USDA uses to determine these percentages. USDA requires each domestic manufacturer and importer to submit certain summary information each month, which is reported on form CCC-974 (see 7 CFR 1436.6 and Ref. 3). USDA also requires that each domestic manufacturer and importer of tobacco products submit a certified copy of certain returns or forms filed with a Federal Agency. The returns or forms described are those that relate to: (1) The removal of tobacco products into domestic commerce (as defined by section 5702 of the Internal Revenue Code of 1986) and (2) the payment of the taxes imposed under chapter 52 of the Internal Revenue Code (section 625(h) of FETRA).
Domestic manufacturers and importers are not required to pay user fees for the classes of tobacco products that have not been deemed, by regulation, to be subject to FDA's jurisdiction (i.e., cigars, pipe tobacco). We are proposing that these domestic manufacturers and importers would not be required to submit information under proposed § 1150.5 unless and until they are deemed by regulation to be subject to chapter IX of the FD&C Act. We tentatively conclude that we can assess and collect the appropriate user fee amounts without such information.1. Identifying InformationWe are proposing to require domestic manufacturers and importers of tobacco products to provide to FDA summary information each month. Each domestic manufacturer or importer would submit identifying information, including its name and address, the name and telephone number of a contact, an email address or postal address for FDA notifications, its TTB permit number, and its Employer Identification Number (EIN).2. RemovalsWe are proposing to require the submission of information regarding the total amount of tobacco products removed into domestic commerce in the prior month and the Federal excise taxes paid for those removals. The proposed rule would require monthly reports from all domestic manufacturers and importers. As is currently required by USDA, entities that had no removals subject to tax during the reporting period would be required to report that they had no removals. This type and frequency of reporting would be almost identical to what USDA currently collects on its CCC-974 form. Moreover, FDA intends to have available to domestic manufacturers and importers a form similar to USDA's CCC-974 but with changes reflecting that the information is submitted to FDA (Ref. 8).3. Certified Copies of Returns and FormsWe are proposing to require domestic manufacturers and importers to submit each month certified copies of the returns or forms related to the removal of tobacco products into domestic commerce and the payment of excise taxes. The proposed rule refers to the reports and forms by reference to the applicable Internal Revenue Code authority. Because the specific names of reports and forms may change over time, we did not name reports or forms in the proposed rule. We instead intend to specify the form names in our quarterly notification of assessments to domestic manufacturers and importers and on our Web site (). Currently, the forms are: TTB Form 5220.6; TTB Form 5210.5; TTB Form 5000.24; and CBP Form 7501.
The proposed rule would require that these entities submit to FDA this information beginning with the October 2014 monthly report to ensure that we continue to be able to accurately determine the tobacco product class allocation and the amount owed by each domestic manufacturer and importer. We specify this date in the proposed rule because we anticipate USDA will cease collecting the information after the September 2014 monthly report. We do not intend to overlap in the collection of this information because the information collected by USDA will continue to be available to FDA.D. Methodology1. Yearly Class AllocationsThe proposed rule includes a section (proposed § 1150.7) describing how we would allocate the total assessment among each class of tobacco products (Step A). As described in the proposed rule, FDA would determine the yearly class allocation using publicly available tax data and information published by TTB about volumes of products removed. If the TTB information is no longer available, we would rely on information from copies of the returns or forms that would be submitted to FDA under proposed § 1150.5 (information provided on certified FDA forms or certified copies of the returns or forms filed with another Federal Agency, such as the Department of Treasury). The yearly class allocation would be based on the methodology USDA currently uses in determining the tobacco product class allocations for the TTPP.
We would use the dollar figures for each of the six classes of tobacco products to calculate the percentages attributable to each class of tobacco products. To arrive at percentages, we would add the dollar figures for each of the six classes of tobacco products together; this aggregate dollar figure would be the denominator. The dollar figure for each class of tobacco products would be the numerator, and when divided by the aggregate dollar figure, the resulting quotient would be the percentage attributable to that class.
FETRA specifies that tobacco product class allocations must be adjusted periodically to reflect changes in the share of gross domestic volume held by a class of tobacco products, defining “gross domestic volume” as the volume of tobacco products removed and not exempt from Federal excise tax (section 625(a)(2) and (c)(2) of FETRA). FETRA does not specify that any changes should be made to tobacco product class allocations to reflect changes in tax rates. Accordingly, USDA does not adjust the tobacco product class allocations to include changes in tax rates. At least one company has questioned the continued use of the 2003 tax rates because those tax rates have changed (75 FR 76921, December 10, 2010). USDA has considered this issue and determined that fluctuations in excise tax rates do not affect class allocations (see ). FDA is proposing to adopt the same approach because, with respect to the tobacco product class allocations, section 919 of the FD&C Act specifies that, except for reallocations as discussed in the paragraphs that follow, percentages of each class are those determined under FETRA.
FDA is allocating fees among the classes of tobacco products specified in section 919(b)(2)(B)(i) of the FD&C Act. These are the same classes of tobacco products that have been subject to TTPP assessments under FETRA and, as such, the classes for which there is a method for determining the applicable percentages, for class and individual domestic manufacturers and importers within the classes under FETRA. The FETRA percentage is based on gross domestic volume, which is defined as the volume of tobacco products removed within the meaning of the Internal Revenue Code (section 625(a)(2) of FETRA). Under the Internal Revenue Code, the six classes are the only ones defined as “tobacco products” that are removed and that are subject to the excise tax requirements (26 U.S.C. 5701 and 5702(c) and (i)). Thus, under the proposed rule, if a tobacco product that is not included in one of the six classes specified in section 919(b)(2)(B)(i) of the FD&C Act is deemed by regulation to be subject to chapter IX of the FD&C Act, fees would not be allocated to such product. If you disagree with this reading, FDA invites comments on what the additional classes would be; how user fee calculations would be made if additional classes were to be added, particularly if added classes were not subject to Federal excise taxes; and support for your view.2. Individual Domestic Manufacturer or Importer AssessmentAs described in the proposed rule (proposed § 1150.9), each quarter we would calculate the assessment imposed on each domestic manufacturer and importer of tobacco products (see section I.A.2 of this document). Information submitted under proposed § 1150.5 would be used along with any other available information in making these calculations. Under the proposed rule, for each class of tobacco products except cigars, we would calculate the domestic manufacturer's or importer's percentage share. This percentage share would be calculated by dividing the Federal excise taxes that the domestic manufacturer or importer paid for the class for the prior quarter by the total excise taxes that all domestic manufacturers and importers in that class paid for the class for that same quarter. (9)
Once the percentage share is calculated, we would then determine the amount of assessment to be collected from a domestic manufacturer or importer each fiscal quarter. FDA would multiply each entity's percentage share by the quarterly assessment for that class of tobacco products (i.e., the total yearly class allocation divided by four). Because the assessments are based on past activity, a domestic manufacturer or importer may be assessed a user fee regardless of whether it removed into domestic commerce any tobacco products during the quarter in which it received an invoice.3. Annual AdjustmentProposed § 1150.9(b) provides that annually FDA would make any adjustment to individual domestic manufacturer and importer assessments if needed to account for any corrected assessments and to include those entities that were not assessed in previous quarterly assessments for that fiscal year. The adjustment would help ensure that no domestic manufacturer or importer pays a user fee in excess of its percentage share (section 919(b)(3)(B) of the FD&C Act). FDA intends to use information we have from registrations, along with any other available information, to help ensure that domestic manufacturers and importers are providing the information that would be required under the proposed rule.E. Notification of AssessmentsProposed § 1150.11 would describe the notification that we would provide each domestic manufacturer and importer of tobacco products. Section 919(b)(6) of the FD&C Act requires that FDA notify each domestic manufacturer or importer of tobacco products of the amount of the quarterly assessment imposed no later than 30 days prior to the end of the quarter for which the assessment is made. Consistent with this requirement, the proposed rule would require FDA to notify each domestic manufacturer and importer of tobacco products of the amount of the quarterly assessment imposed on the domestic manufacturer or importer for each quarter of a fiscal year not later than 30 days before the end of the quarter for which the assessment is made. As proposed, the notification would also include information about the allocation of the yearly assessment among each class of tobacco products (Step A) and the percentage share of each class allocated to the domestic manufacturer or importer (Step B).
The notification would also include information on any adjustment FDA made for corrections or any adjustment to include entities that were not assessed in previous quarterly assessments for that fiscal year. In addition, the proposed notification would provide information about how the domestic manufacturer or importer is to pay the user fee and information on accrual of interest if a payment is late. Payment methods currently include check, wire transfer, and online payment. We expect that over time different methods of payment, such as other methods of electronic funds transfer, may develop.F. PaymentsIn accordance with section 919(b)(6) of the FD&C Act, proposed § 1150.13 would require that a domestic manufacturer and importer pay an assessment by the last day of the quarter involved. If we have not notified the domestic manufacturer or importer of the amount that is required to be remitted 30 calendar days before the end of a fiscal year quarter, the proposed rule provides that no interest would be assessed until 30 calendar days after the date that we sent notification of the amount owed. Proposed § 1150.13 would also require that payments be submitted in U.S. dollars and in the manner specified in the notification (e.g., check or online payment). As noted, over time the manner of receiving payments may change, such as by check, electronic funds transfer, or online transaction.
Consistent with 31 U.S.C. 3717, the proposed rule also states that interest would begin accruing if payment of the assessment is not made by the last day of the quarter involved. The accrual of interest would begin the next day. For example, if payment is due March 31 but is not received by March 31, then interest would begin to accrue on the unpaid amount on April 1. The proposed rule also explains that if a domestic manufacturer or importer disputes the amount of the assessment, the domestic manufacturer or importer would still be required to pay the assessment by the date due or be subject to interest.G. DisputesWe are proposing that a domestic manufacturer or importer would be required to submit a dispute in writing regarding an assessment within 45 days of the date of the assessment notification (proposed § 1150.15). If FDA determines there was an error in the amount of the assessment, FDA would refund the amount that was incorrectly assessed. Any subsequent appeals of the dispute would also need to be submitted in writing within 30 days of the date of FDA's response to the dispute. To ensure finality in FDA's accounts and potential refund obligations, we believe it is necessary to have a time limit on disputes over user fee assessments. We believe the proposed timeframes identified are adequate to detect a dispute and prepare a written submission to FDA. The notification of assessment would provide information regarding where to send a dispute and when it needs to be sent. Domestic manufacturers or importers may contact the Center for Tobacco Products (CTP) Ombudsman for further information on dispute options and resolution ().H. PenaltiesProposed § 1150.17 would include an explanation that failure to pay a user fee would result in the tobacco product being deemed adulterated under section 902(4) of the FD&C Act. Because a firm would not be able to pay a user fee if it does not submit to FDA the information the Agency needs to be able to calculate the amount of fees assessed to such firm, under the proposed rule failure to submit such information would also result in the tobacco product being deemed adulterated. An adulterated tobacco product is subject to enforcement action by FDA, including injunction, seizure, and civil money penalties (sections 302, 303, and 304 of the FD&C Act (21 U.S.C. 332, 333, and 334)). The failure to submit information that is required so FDA can calculate assessments and fees owed—to help assure the product is not adulterated—would also be a violation of section 909 of the FD&C Act (21 U.S.C. 387i), and the failure to make a report required by section 909 is a prohibited act under section 301 of the FD&C Act (21 U.S.C 331). The proposed rule also explains that any person who knowingly fails to provide required information or provides false information may be subject to the criminal penalties prescribed in 18 U.S.C. 1001.III. Effective DateFDA 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 AuthoritySection 919(b)(7) of the FD&C Act requires FDA to ensure that we are able to determine the applicable percentages described in section 919(b)(2) and the percentage shares described in section 919(b)(4). Section 909(a) authorizes FDA to issue regulations requiring tobacco product manufacturers or importers to make such reports and provide such information as may be reasonably required to assure that their tobacco products are not adulterated or misbranded and to otherwise protect public health. Under section 902(4), a tobacco product is deemed to be adulterated if the manufacturer or importer of the tobacco product fails to pay a user fee assessed to it under section 919. In addition, section 701(a) of the FD&C Act (21 U.S.C. 371(a)) gives FDA general rulemaking authority to issue regulations for the efficient enforcement of the FD&C Act. Consistent with these authorities, FDA is issuing this proposed rule, which is intended to ensure that we are able to make the determinations required by section 919 of the FD&C Act and assess and collect tobacco product user fees.V. Environmental ImpactThe Agency has determined under 21 CFR 25.30(h) that this proposed rule is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.VI. Analysis of ImpactsA. IntroductionFDA has examined the impacts of the proposed rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive Orders 12866 and 13563 direct Agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Agency believes that this proposed rule is not a significant regulatory action as defined by Executive Order 12866.
Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that Agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $139 million, using the most current (2011) Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this proposed rule to result in any 1-year expenditure that would meet or exceed this amount.B. BaselineSection 919 of the FD&C Act establishes a system of collecting user fees, starting from the enactment of the Tobacco Control Act on June 22, 2009. This general system for collecting user fees has already been implemented and has been operational for more than 2 years.
Under our primary baseline, starting in fiscal year 2015, FDA would obtain the information necessary for collecting user fees directly from Federal Agencies (other than USDA) that collect such information. FDA could obtain raw data with which to calculate user fees, or another Agency could compile the information, perform the calculations, and possibly even issue user fee bills on behalf of FDA; in either case, government Agencies would compile the information from existing sources. The form currently used by USDA requests information from forms submitted to the TTB and CBP. Therefore, agreements between multiple agencies would likely have to be put into place because it is not clear that either TTB or CBP has all of the necessary information. The government (whether FDA or another Agency) would bear the costs of compiling all of the information from the various TTB and CBP forms. The difficulty of this task depends on the current format of the information and the amount of work that would be required to put it into a format that can be used by FDA. Because of statutes governing TTB and CBP, without additional legislation, this system could limit FDA's ability to disclose information supplied by another Agency when taking enforcement action or even when sending bills.C. Number of Affected EntitiesThis proposed rule would apply to all entities that manufacture or import any tobacco product that is regulated under the FD&C Act and belongs to one of the classes of tobacco products listed in section 919 of the FD&C Act. Currently, manufacturers and importers of cigarettes, snuff, chewing tobacco, and roll-your-own tobacco fit these criteria. Based on discussions with another Federal Agency, FDA estimates that 200 such entities would be affected by this proposed rule.D. Impact of the Proposed RuleUnder the proposed rule, manufacturers and importers would have to submit information to FDA on a monthly basis, whereas under the primary baseline they would not have to submit any information to FDA. Although FDA is proposing an information collection very similar to that currently conducted by USDA, there would be some private sector costs associated with the transition from USDA to FDA collection. Manufacturers and importers would need to read the regulation or any notification potentially sent to them to explain the transition. They would need to switch forms and update the address for submission. To the extent that the form changes, (10)
they would have to learn how to use the new form. FDA estimates that this transition would take 3 hours per manufacturer or importer. Valuing time at the average tobacco manufacturing industry wage of $25.27 (11)
per hour, doubled to $50.54 per hour to account for benefits and overhead, this transition cost would be $151.62 per manufacturer or importer. Table 1 shows that the total transition cost would be approximately $30,000.
No. of entities200
No. of hours3
Cost ($)30,324
All of the entities affected by this proposed rule would be required on a monthly basis to submit the proposed FDA form containing certain identifying information, the number of units introduced into domestic commerce (12)
in the prior month, and excise taxes paid for such introduction into domestic commerce, by tobacco product class. This form is estimated to take 3 hours to complete. In addition, each entity would be required on a monthly basis to submit certified copies of the returns and forms that relate to the introduction of tobacco products into domestic commerce and the payment of Federal excise taxes imposed. Submitting copies of these forms is estimated to take 1 hour each month. These submissions are required even if the quantity introduced into domestic commerce during the month in question is 0. We do not consider any time cost associated with remitting payment for user fees (or the distributional effect of the aggregate amount of the user fees shifted from tobacco manufacturers and importers to government) because user fees will be assessed and paid regardless of how section 919(b)(7)(B) of the FD&C Act is implemented. Similarly, we do not consider the time cost of disputing or appealing user fee assessments because similar mechanisms would be in place regardless of how section 919(b)(7)(B) is implemented.
FDA form: No. of entities200
Annual submissions12
Hours per submission3
Cost ($)363,888
Copies of other forms: No. of entities200
Hours per submission1
Cost ($)121,296
Total Cost ($)485,184
This proposed rule would have other impacts. It would allow FDA to be in control of the information used for calculating and billing user fees. This would be beneficial for resolving disputes and taking enforcement action if a firm fails to pay. By contrast, under the baseline (in which FDA obtains information from Federal Agencies other than USDA), taking enforcement action or even billing for user fees could be more challenging without additional legislation. In addition, because FDA would not have to rely on cooperation from another Agency, this proposed rule would likely result in greater efficiency. Under the primary baseline, the possibility would exist that at some time in the future the other Agencies would no longer be willing or able to provide the necessary data. FDA would then face the same question it faces today as to how to ensure that it can obtain the relevant data. Therefore, compared with the primary baseline, this proposed rule can be expected to eliminate the potential need for additional legislation and allow the collection of user fees after 2014 to proceed more smoothly than it would without legislation.E. Alternative BaselinesThe primary baseline assumes that starting in fiscal year 2015, FDA would obtain the information necessary for collecting user fees directly from another Federal Agency (or Agencies) other than USDA. However, there are other ways that FDA might obtain the necessary data.
Under another possible baseline, Congress could pass legislation explicitly requiring firms to submit the information we propose to collect in this rule without the need for issuing an implementing regulation. In terms of the mechanics of the process (the transition of the information collection to FDA and the ongoing need for industry to compile and submit the data), the proposed rule would have no effect under this scenario. However, issuance of this rule would make such legislation unnecessary.F. Impact on Small Entities1. Numbers AffectedUnder the primary baseline, this proposed rule would impose costs on domestic tobacco product manufacturers and importers. U.S. Census data provide some insight into the proportion of such entities that may be small. All cigarette manufacturers would be affected by this rule, while an unknown proportion of other tobacco product manufacturers would be affected. Importers are not identified in the Census, but instead may be designated as wholesalers or retailers. Most tobacco product-importing wholesalers would be classified as “tobacco and tobacco product merchant wholesalers.” Although many different categories of retailers (such as grocery and convenience stores) may sell tobacco products, those most likely to import them are specialty tobacco shops and non-store retailers operating electronically or through delivery services. Table 3 shows the Small Business Administration (SBA) size thresholds for small businesses in each of these categories, as well as the most comparable size categories available from the U.S. Census (Refs. 4, 5, and 6). (13)
For cigarette manufacturers and tobacco product retailers, the proportion found to be small will be underestimated because the Census size category is lower than the SBA threshold.
NAICSDescription of NAICS categorySBA Size Standard (employees or $million)Census size category (employees or $million)
Tobacco Product Manufacturers: 312221Cigarette Manufacturing1,000500
312229Other Tobacco Product Manufacturing500500
Potential Tobacco Product Importers: Wholesalers424940Tobacco and Tobacco Product Merchant Wholesalers100100
Retailers453991Tobacco Stores$7.0$5.00
454111Electronic Shopping$30.0$25.00
454113Mail-Order Houses$35.5$25.00
NAICSDescription of NAICS categoryNumber of firmsNumber of firms below census size standardPercentage of small firms (%)
312221Cigarette Manufacturing191579
312229Other Tobacco Product Manufacturing443989
424940Tobacco and Tobacco Product Merchant Wholesalers1,1181,01991
453991Tobacco Stores4,0253,79394
454111Electronic Shopping11,64611,37498
454113Mail-Order Houses5,6455,28194
2. Costs for Small EntitiesTable 5 shows the potential effect of this rule on small tobacco product manufacturers. Compliance costs are compared to average value of shipments, determined for establishments based on 2002 Census data (Ref. 7). We assume that most small manufacturers operate a single establishment. We use 2002 data rather than 2007 data because 2007 data suppress most information about value of shipments by tobacco product establishment size in order to safeguard confidentiality. The distribution of small tobacco product manufacturing establishments by employment size and the average value of shipments by employment size may have changed since 2002. Therefore, we are uncertain whether the effect of this proposed rule would be the same today as estimated in table 5. With that caveat in mind, we see that the annual compliance cost equals 0.71 percent of average value of shipments for other tobacco product manufacturing establishments with 1 to 4 employees, which could be a substantial portion of profits. There were 38 such other tobacco product manufacturing establishments in 2002, but we do not have enough information to determine how many manufactured cigarettes, snuff, chewing tobacco, or roll-your-own tobacco and would therefore be affected by the proposed rule. Therefore, we are unable to rule out the possibility that this proposed rule would have a significant economic impact on a substantial number of small entities.
Type of manufacturing establishmentAverage value of shipments (million $)Annual compliance cost as a percent of average value of shipmentsTransition cost as a percent of average value of shipments
Cigarette (All)2,3040.000.00
Other Tobacco Product (All)440.010.00
1 to 4 employees0.30.710.04
5 to 9 employees20.160.01
10 to 19 employees40.060.00
20 to 49 employees120.020.00
50 to 99 employees170.010.00
100 to 249 employees640.000.00
250 to 499 employees2730.000.00
3. Regulatory ReliefAn alternative that might reduce costs for small entities would be to exempt firms from reporting in a particular month if they did not introduce any units of any tobacco products for which user fees are assessed into domestic commerce. A drawback to this approach is that FDA would be unable to distinguish a firm that failed to report from a firm that introduced zero units into domestic commerce in a particular month.G. ConclusionCompared with the primary baseline, this proposed rule would impose private costs on industry to submit data to FDA on a monthly basis, with an approximately offsetting reduction in government information collection costs. The net effect of this may be a small social cost or benefit. This proposed rule would also allow FDA to be in control of the data needed for calculating and billing user fees and would resolve impediments that may otherwise exist to FDA's ability to use the data for its intended purpose. Compared with other possible baseline scenarios, this proposed rule can be expected to eliminate the potential need for additional legislation and allow the collection of user fees after 2014 to proceed more smoothly than it could without legislation.VII. Paperwork Reduction Act of 1995This proposed rule contains information collection provisions that are subject to review by OMB under the PRA (44 U.S.C. 3501-3520). A description of these provisions is given in the paragraphs that follow with an estimate of the annual reporting burden. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information. FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.
Table 6—Estimated Annual Reporting Burden 1 21 CFR SectionNumber ofrespondentsNumber ofresponses perrespondentTotal annual responsesHours perresponseTotal hours
1150.5(a), (b)(1), (b)(2), and FDA Form 3852 General identifying information provided by manufacturers and importers of FDA regulated tobacco products and Identification and removal information (monthly)200122,40037,200
1150.5(b)(3) Certified Copies (monthly)200122,40012,400
1150.13 Submission of user fee information (Identifying information, fee amount, etc. (quarterly)10044001400
1150.15(a) Submission of user fee dispute (annually)1111010
1150.15(d) Submission of request for further review of dispute of user fee (annually)1111010
Total10,020
The information collection provisions of this proposed rule have been submitted to OMB for review. Interested persons are requested to fax comments regarding the proposed information collection to the Office of Information and Regulatory Affairs, OMB. To ensure that comments on the information collection are received, OMB recommends that written comments be faxed to the Office of Information and Regulatory Affairs, OMB, Attn: FDA Desk Officer, FAX: 202-395-7285, or emailed to . VIII. FederalismFDA 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. CommentsInterested persons may submit either written comments regarding this document to the Division of Dockets Management (see ADDRESSES) or electronic comments to . It is only necessary to send one set of comments. Identify comments with the docket number found in brackets in the heading of this document. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday, and will be posted to the docket at . X. ReferencesThe following references have been placed on display in the Division of Dockets Management (see ADDRESSES) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday, and are available electronically at . (FDA has verified the Web site addresses, but FDA is not responsible for any subsequent changes to Web sites after this document publishes in the Federal Register.)
2. U.S. Department of Agriculture, “Determination of the Administrator of the Farm Service Agency and Executive Vice President of the Commodity Credit Corporation Regarding the Current `Step A' and `Step B' Assessment Methods in the Tobacco Transition Payment Program,” ]).
3. U.S. Department of Agriculture, Commodity Credit Corporation, Form CCC-974, “Report of Tobacco Product Removals Subject to Tax for the Tobacco Transition Assessment Program (TTAP).”
4. U.S. Small Business Administration, 2010, Table of Size Standards. , accessed July 2011.
5. U.S. Census Bureau, Statistics of U.S. Businesses (SUSB), Latest SUSB Annual Data, U.S., All Industries, 2008, July 2011.
6. U.S. Census Bureau, American FactFinder, Establishment and Firm Size: Summary Statistics by Sales Size of Firms for the United States: 2007, 2007 Economic Census, Retail Trade, Subject Series, . 7. U.S. Census Bureau, American FactFinder, “2002 Economic Census, Manufacturing: Industry Series: Industry Statistics by Employment Size: 2002,” . 8. Draft Form FDA 3852.
List of Subjects InTobacco products, User fees.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, it is proposed that chapter I of title 21 be amended by adding part 1150 to read as follows:Part 1150 User FeesSec.1150.1 Scope.
Authority21 U.S.C. 371, 387b, 387i, 387s.
§ 1150.1 Scope.
§ 1150.3 Definitions.
§ 1150.5 Required information.
§ 1150.7 Yearly class allocation.
(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 figure).
§ 1150.9 Domestic manufacturer or importer assessment.
§ 1150.11 Notification of assessments.
§ 1150.13 Payment of assessments.
§ 1150.15 Disputes.
§ 1150.17 Penalties.
[FR Doc. 2013-12927 Filed 5-30-13; 8:45 am]BILLING CODE 4160-01-PFootnotes
As discussed later in this section, two of these classes (cigars and pipe tobacco) are not currently subject to regulation under chapter IX of the FD&C Act. Domestic manufacturers and importers are not required to pay user fees for these classes of tobacco products unless, by regulation, FDA deems them subject to FDA's jurisdiction.
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.”
In this document, the number of “sticks” is used to refer to the number of individual cigarettes or cigars.
FETRA defines removal with reference to 26 U.S.C. 5702 (see 7 U.S.C. 518d(a)(2)).
Smokeless tobacco, as defined in section 900(18) of the FD&C Act, includes snuff and chewing tobacco as these classes are defined in 26 U.S.C. 5702; thus, the classes of snuff and chewing tobacco are currently subject to user fees.
With respect to the quarterly assessments issued by USDA on September 1, 2014, the user fee allocations will be based on percentage share during the April 1 to June 30, 2014, quarter (7 CFR 1463.6). The original 40th quarter's market share will be “trued-up” or revised after receipt of the July, August, and September 2014 monthly reports during the 2014 annual revision and this information will then be provided to FDA.
Section 201(rr)(1) of the FD&C Act states: “The term `tobacco product' means any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product (except for raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product).”
Although FDA has not deemed cigars to be subject to its jurisdiction, roll-your-own tobacco for cigars is part of the roll-your-own tobacco class, as defined in 26 U.S.C. 5702. Thus, we have considered roll-your-own tobacco for cigars to be subject to user fees under the roll-your-own tobacco class.
As previously noted, except for cigars, section 919(b)(4) of the FD&C Act requires FDA to determine percentage share for each entity in the same manner described in subsections (e) through (h) of section 625 of FETRA.
The current draft FDA form is very similar to the USDA form.
May 2011 National Industry-Specific Occupational Employment and Wage Estimates for NAICS 312200—Tobacco Manufacturing. (12)
The technical term for this is “removal,” which is defined in footnote 2.
Tobacco product manufacturers (and importers) are considered small under the FD&C Act if they employ fewer than 350 people. This definition is used in determining the deadline for compliance with certain requirements under the FD&C Act. However, the SBA's definition of small is applicable to the small entity analysis required under the Regulatory Flexibility Act.
Attachments View All (8) Return to top Ref 1 USDA MOU View Attachment: + View more information Ref 2 USDA Determination of the Administrator of FSA View Attachment: + View more information Ref 3 CCC974 View Attachment: + View more information Ref 4 SBA View Attachment: + View more information Ref 5 2008 Statistics of US Businesses View Attachment: + View more information Ref 6 2007 Economic Census Retail Trade Ind Stat by Emp Size View Attachment: + View more information Ref 7 2002 Econ Census Manuf View Attachment: + View more information Ref 8 Draft FDA 3852 View Attachment: + View more information View document: No documents available. Attachments View All (0) Comment Now! Comment Period Closed Aug 14 2013, at 11:59 PM ET ID: FDA-2012-N-0920-0001 Tracking Number: View original printed format: Document Information Date Posted: May 31, 2013RIN: 0910-AG81CFR: 21 CFR Part 1150Federal Register Number: 2013-12927 Show More Details Submitter Information Comments12 Comments Received* See attached file(s) View Comment See attached file(s) View Comment See attached file(s) View Comment Docket Information This document is contained in FDA-2012-N-0920 Related Dockets: FDA-2014-N-0189Related RINs: NoneRelated Documents: Requirements for the Submission of Data Needed To Calculate...Tobacco Products, User Fees, Requirements for the Submission...OMB Review, Executive Order 12866, Tobacco Products, User... Related Comments: View all * This count refers to the total comment/submissions received on this document, as of 11:59 PM yesterday. Note: Agencies review all submissions, however some agencies may choose to redact, or withhold, certain submissions (or portions thereof) such as those containing private or proprietary information, inappropriate language, or duplicate/near duplicate examples of a mass-mail campaign. This can result in discrepancies between this count and those displayed when conducting searches on the Public Submission document type. For specific information about an agency’s public submission policy, refer to its website or the Federal Register document. Document text and images courtesy of the Federal Register Home Search Advanced Search Browse By Category Learn About Us eRulemaking Program Media Toolkit Agencies Awards & Recognition Enhancements & Fixes Resources Site Data Regulatory Agenda Agency Reports Required by Statute API Overview Developers Help How to use Regulations.gov FAQs Glossary Connect With Contact Us Privacy and Security Notice User Notice Accessibility Statement Partner Sites We the People Federal Register Reginfo Congress.gov USA.gov E-Gov Opengov Participate Today!