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Old 11-10-2018, 09:06 AM   #1
jefslat
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STUDY SHOWS FDA REGULATIONS COULD COST U.S. 25,000 JOBS

BY ANDREW NAGY (Cigar Insider Newsletter)

More than 25,000 U.S. jobs could be lost, according
to a new study, should the brunt of the regulations
outlined in the FDA’s Final Rule take effect. Additionally,
the report found that FDA cigar regulations could force
nearly 500 handmade cigar retailers to close their doors.
The report, called “The Public Health, Financial and
Employment Impacts of Excluding Handmade Cigars
from Coverage by FDA’s Final Rule,” was conducted by
Mangum Economics, a Virginia-based firm that specializes
in producing objective economic analysis of government
policies. The author of the report is Dr. David Zorn. Before
working with Mangum Economics, Zorn was an economist
with the U.S. Food & Drug Administration. For the report,
Zorn used data from the FDA’s own Final Regulatory
Impact Analysis released in May 2016 as well as more
up-to-date government data.

“Using FDA’s own cost estimates, the regulations will
likely cause 85 to 90 percent of domestic cigar manufacturers
and importers to go out of business, leading to the
loss of over 3,500 U.S. manufacturing jobs and almost
1,800 jobs at U.S. importers,” said Zorn, who estimates
that between 320 to 338 manufacturers and importers
could be forced to close.

Zorn cites the FDA’s own estimates that manufacturers
and importers will have to pay more than $225,000 a
year to comply with the Final Rule as the major reason
these businesses will close. “Because handmade cigars
have the highest cost of compliance per cigar, almost all
of the cigar manufacturers and importers that go out of
business because of this rule will be manufacturers and
importers of premium, handmade cigars,” he said.
The study also examined how FDA cigar regulations
may affect retail tobacco stores, and the outlook is grim.
According to the FDA’s own estimates, 5 to 50 percent
of all SKUs (stock keeping units) would no longer be
offered for sale because the costs of the Final Rule would
make producing them unprofitable. (For cigars, SKUs
refer to individual sizes in a brand.) Since handmade
cigar retailers are “highly dependent on a wide offering
of products,” the study says, the market won’t be able
to support as many retail stores. In other words, fewer
cigars equals fewer stores.

“The expected reduction in the number of handmade
cigars on the market due to the [Final Rule] is also
likely to cause the closure of approximately 500 tobacco
retailers and the loss of as many as 19,800 U.S. retail jobs,”
Zorn said.

Zorn’s study concludes that if the FDA were to exempt
handmade cigars from the Final Rule, then the government
agency in charge of overseeing all tobacco products could
apply roughly $197.8 million “towards other rulemakings
that could promote and protect public health.” Additionally,
Zorn believes that regulating handmade cigars would have
“no public health benefit” because consumers will not
smoke significantly fewer cigars.

“This study brings to life the cost-benefit analysis that
should have been done before the previous administration
adopted cigar regulations. This tells us the specific number
of jobs and small businesses, manufacturers, distributors
and retail businesses that are directly threatened by these
regulations,” said Rocky Patel, founder of Rocky Patel
Premium Cigars. “We hope that the Trump administration
will take this study to heart and recognize that these are
real jobs, supporting real families and local entrepreneurs,
in a supply chain that spans this nation.”

“This report is the first of its kind to quantify the
domestic economic consequences of premium cigar
regulation,” said J. Glynn Loope, executive director
of Cigar Rights of America. “From the manufacturers,
headquarters operations and the supply chain based in
Florida, to family farms of Pennsylvania and Connecticut,
to community tobacconists from Seattle to Boston, these
regulations threaten jobs, families and small businesses
that dot Main Street America.”
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