California Code of Regulations › Title 11 - Law › Division 1 - Attorney General › Chapter 16 - Attorney General Regulations Under Master Settlement Agreement with Tobacco Product Manufacturers and Non-Participating Tobacco Product Manufacturer Law (Health and Safety Code Sections 104555-104557) › Section 999.10 - Compliance with Reserve Fund Requirements by Non-Participating Tobacco Product Manufacturers

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Scope and
				Purpose
The purpose of these regulations is to implement California's
				  Reserve Fund Statute (codified at Health and Safety Code sections
				  104555,
				  104556 and
				  104557) by providing Tobacco Product
				  Manufacturers clear definitions, instructions, guidance and forms to comply with the
				  requirement to establish a reserve fund for tobacco-related illness and other
				  potential liabilities. The Legislature imposed the reserve fund requirements to
				  ensure a source of compensation for the financial burdens imposed upon the State by
				  cigarette-smoking related illness and other health conditions. Health and Safety
				  Code sections 104555-104557 essentially require
				  Tobacco Product Manufacturers to provide a surety bond against future liability for
				  cigarette-smoking related healthcare costs. This surety bond is imposed upon
				  manufacturers that choose to avoid the conduct restrictions that apply if they sign
				  the Master Settlement Agreement ("MSA"). Government Code sections
				  11110-11113 require the Attorney
				  General to adopt regulations to provide forms for surety bonds which are approved by
				  the Attorney General as conforming with applicable law. Revenue and Taxation Code
				  section 30165.1(o) also
				  authorizes the Attorney General to adopt emergency rules and regulations regarding
				  the reserve fund requirements of Tobacco Product Manufacturers.
The Legislature also intended to prevent the unfair competition
				  that would occur if Tobacco Product Manufacturers who did not sign the MSA and did
				  not incur the financial obligation under the MSA were allowed to derive large
				  short-term profits to the disadvantage of those manufacturers participating in the
				  MSA. These regulations are also intended to protect tobacco Distributors and
				  Wholesalers from the financial risk of accepting orders for tobacco products or
				  purchasing tobacco products that may be banned from sale by a court or are not
				  listed on California's Directory of Tobacco Product Manufacturers and Brand Families
				  because the Tobacco Product Manufacturer failed to make the required deposits or
				  otherwise comply with the Reserve Fund Statute and Revenue and Taxation Code section
				  30165.1.
Through the definitions, instructions, guidance and forms
				  provided, these regulations also make available to the public and local and state
				  government officials the Attorney General's enforcement policy and interpretation of
				  how Tobacco Product Manufacturers should comply with the reserve fund requirements
				  to avoid unfair and unlawful business conduct and activity. Toward that end, these
				  regulations are intended to describe the meaning of compliance with the reserve fund
				  requirements, the proper interpretation of the statutory requirements and the
				  enforcement policy designed to protect those manufacturers which do comply from
				  unfair competition by those manufacturers which might otherwise fail to comply with
				  the reserve fund requirements without the definitions, instructions, guidance and
				  forms provided.
The purpose of regulations 999.16 through 999.29 is also to
				  implement Revenue and Taxation Code section
				  30165.1 by prescribing procedures to be
				  followed by all Tobacco Product Manufacturers who wish to sell Cigarettes in
				  California. Section
				  30165.1 requires the Attorney General
				  to develop, publish and maintain on its internet website a Directory of Tobacco
				  Product Manufacturers and Brand Families that are in compliance with the statute.
				  Any person who sells, distributes, acquires, holds, owns, possesses, transports,
				  imports, or causes to be imported Cigarettes, which includes Roll-Your-Own tobacco,
				  that the person knows or should know are not included on the Directory commits a
				  misdemeanor, as well as a violation of California's Unfair Competition Law, and is
				  subject to civil penalties, license suspension and revocation, and criminal
				  prosecution.
Regulations 999.16 through 999.29 set forth the certification
				  process for inclusion on California's Directory of Tobacco Product Manufacturers and
				  Brand Families, as well as the conditions under which a Tobacco Product Manufacturer
				  must provide supplemental certifications. The regulations state the requirements for
				  records retention and production of documents by Tobacco Product Manufacturers,
				  Distributors and Wholesalers. The regulations set forth additional requirements on
				  Non-Participating Manufacturers who are non-resident or foreign and who are not
				  registered to do business in California. The regulations clarify the requirements
				  and protections of California Distributors under Section
				  30165.1. Finally, the regulations
				  delineate the conditions a Tobacco Product Manufacturer, which has been removed from
				  the Directory, must satisfy if it seeks to be relisted with its Brand
				  Families.
(b) Definitions
All terms used in these regulations, which are defined in Revenue
				  and Taxation Code section
				  30165.1 and/or Health and Safety Code
				  sections 104555-104557, shall have the same
				  meaning in these regulations.
The definitions contained in this subdivision shall govern the
				  construction of this chapter.
(1) "Brand
				Family" shall have the same meaning as in Revenue and Taxation Code section
				30165.1(a)(2).
(2) "Brand Style" means the different Cigarettes
				within a Brand Family of Cigarettes, including but not limited to, menthol flavor or
				Cigarette length.
(3) "California
				Tobacco Directory," "Directory," and "Tobacco Directory" shall have the same meaning
				as Revenue and Taxation Code section
				30165.1(c).
(4) "CDTFA" means the California Department of Tax
				and Fee Administration.
(5)
				"Certification" means PM Certification and NPM Certification and includes a
				supplemental certification.
(6)
				"Cigarette" shall have the same meaning as in Health and Safety Code section
				104556(d), which
				section includes Roll-Your-Own tobacco ("RYO").
(7) "Deposit Date" means the date that Qualified
				Escrow Fund Principal was deposited into a Qualified Escrow Fund.
(8) "Distributor" shall have the same meaning as
				in Revenue and Taxation Code section
				30011.
(9) "Escrow Agent" shall mean the financial
				institution described in Health and Safety Code section
				104556(f) and holding
				a Qualified Escrow Fund Principal account for the benefit of the State.
(10) "Escrow Rate" shall have the same meaning as
				Health and Safety Code section
				104557(a)(2).
(11) "Fire Standard Compliant" and "FSC" means the
				requirements of the California Cigarette Fire Safety and Firefighter Protection Act
				at Health and Safety Code sections
				14950 through
				14960.
(12) "JUS-TOB1" means the Participating Tobacco
				Product Manufacturer ("PM") Certification Seeking Listing on the California
				Directory form (JUS-TOB1, Rev. 11/2021), which is hereby incorporated by
				reference.
(13) "JUS-TOB2" means the
				Notice of Appointment of Registered Agent and Registered Agent's Statement for
				Non-Participating Manufacturer form (JUS-TOB2, Rev. 02/2011), which is hereby
				incorporated by reference.
(14)
				"JUS-TOB3" means the Certification of Compliance and Affidavit by Non-Participating
				Tobacco Product Manufacturer form (JUS-TOB3, Rev. 11/2021), which is hereby
				incorporated by reference.
(15)
				"JUS-TOB4" means the CIG-Sales form (JUS-TOB4, Rev. 11/2021), which is hereby
				incorporated by reference.
(16)
				"JUS-TOB5" means the Non-Participating Manufacturer Certification ("NPM") Seeking
				Listing on the California Directory form (JUS-TOB5, Rev. 11/2021), which is hereby
				incorporated by reference.
(17)
				"JUS-TOB6" means the Approved Tobacco Escrow Agreement (JUS-TOB6, Rev. 02/2023),
				which is hereby incorporated by reference.
(18) "JUS-TOB7" means the CIG-Map form (JUS-TOB7,
				Rev. 09/2020), which is hereby incorporated by reference.
(19) "JUS-TOB8" means the Brand List form
				(JUS-TOB8, Rev. 02/2023), which is hereby incorporated by reference.
(20) "JUS-TOB9" means the Waiver of Tribal
				Sovereign Immunity by Native American Tribe form (JUS-TOB9, Rev. 10/2011), which is
				hereby incorporated by reference.
(21)
				"JUS-TOB10" means the Waiver of Sovereign Immunity by Government-Owned Tobacco
				Company form (JUS-TOB10, Rev. 10/2011), which is hereby incorporated by
				reference.
(22) "JUS-TOB11" means the
				Standard Waiver of Sovereign Immunity by Tobacco Manufacturer or Importer form
				(JUS-TOB11, Rev. 08/2011), which is hereby incorporated by reference.
(23) "JUS-TOB12" means United States Importer
				Declaration Accepting Joint and Several Liability (JUS-TOB12, Rev. 02/2011), which
				is hereby incorporated by reference.
(24) "JUS-TOB13" means the Notice of Appointment
				of Registered Agent and Registered Agent's Statement Form for Importer (JUS-TOB13,
				Rev. 02/2011), which is hereby incorporated by reference.
(25) "JUS-TOB14" means the California Tobacco
				Manufacturer and Importer Surety Bond form (JUS-TOB14, Rev. 10/2011), which is
				hereby incorporated by reference.
(26)
				"Ledger" has the same meaning as in section
				2.I of JUS-TOB6.
(27) "MSA" means the Master Settlement Agreement
				and has the same meaning as in Health and Safety Code section
				104556(e).
(28) "Non-Participating Tobacco Product
				Manufacturer" or "NPM" means any Tobacco Product Manufacturer selling Cigarettes to
				consumers within the state, whether directly or through a Distributor, retailer or
				similar intermediary or intermediaries, which has not become a Participating
				Manufacturer as that term is defined in section II(jj) of the Master Settlement
				Agreement (MSA) or has become a Participating Manufacturer but does not generally
				perform its financial obligations under the MSA.
(29) "NPM Certification" means a California
				Tobacco Directory certification submitted by an NPM using a JUS-TOB5.
(30) "PACT Act" means the Prevent All Cigarette
				Trafficking Act at 15 U.S.C. §§
										375-378.
(31) "Participating Manufacturer" or "PM" has the
				same meaning as in Revenue and Taxation Code section
				30165.1(a)(7) and
				section II(ii) of the MSA.
(32) "PM
				Certification" means a California Tobacco Directory certification submitted by a PM
				using a JUS-TOB1.
(33) "Qualified Escrow
				Fund" shall have the same meaning as in Health and Safety Code section
				104556(f)
(34) "Qualified Escrow Fund Principal" and
				"Qualified Escrow Principal" has the same meaning as in section
				2.R of JUS-TOB6.
(35) "Quarter(s)" and "Quarterly" means the
				following periods of the year: January 1 through March 31 (first quarter); April 1
				through June 30 (second quarter); July 1 through September 30 (third quarter); and
				October 1 through December 31 (fourth quarter).
(36) "Reserve Fund Statute" means Chapter 1 of
				Part 3 of Division 103 of the Health and Safety Code (sections
				104555-104557).
(37) "Roll-Your-Own" or "RYO" tobacco means any
				tobacco which, because of its appearance, type, packaging, or labeling is suitable
				for use and likely to be offered to, or purchased by, consumers as tobacco for
				making Cigarettes. Each 0.09 ounces of RYO equals one Cigarette.
(38) "Tobacco Product Manufacturer" shall have the
				same meaning as in Health & Safety Code section
				104556(i).
(39) "Sales Year" means the calendar year during
				which the Tobacco Product Manufacturer sold Cigarettes in California requiring a
				deposit of Qualified Escrow Fund Principal or an MSA payment.
(40) "Units Sold" shall have the same meaning as
				in Health and Safety Code section
				104556(j).
(41) "Wholesaler" shall have the same meaning as
				in Revenue and Taxation Code section
				30016.