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FDA Fallout- Robert Holt of Southern Draw Cigars Speaks Out

FDA Fallout- Robert Holt of Southern Draw Cigars Speaks Out

By: Robert Holt

Initial comments regarding the U.S. Food & Drug Administration (FDA) plans to regulate deemed tobacco products.  These are my personal thoughts and not reflective of those of the Company or the industry as a whole.  

Southern Draw Cigars is a relative newcomer to the industry and only represents a small fraction of a percent of the estimated 300 million premium cigars imported to the US annually, the consequences of the FDA’s broad brush stroke could and likely would end in our dissolution.  Family, friends, partners (including media and lifestyle publications) and customers will all be adversely impacted where all we have invested in and worked toward may be gone in a relative blink of an eye.  The process for approval, the additional costs and administrative oversight while still unclear, are probably more than we or any moderately sized manufacturer could accommodate and the associated risks of compliance would logically deter future investments we would need to continue our growth.  

I feel as if the language included in Option 1 and the use of terms including this paragraph provided to us as a reference by HalfWheel “The agency did state that it will not consider blend changes “to address the natural variation of tobacco (e.g., tobacco blending changes due to variation in growing conditions) in order to maintain a consistent product” a new product. However, any changes that are designed specifically to change flavor or nicotine characteristics, “including those involved in seasonal and boutique blends” will be considered new products. It’s unclear how the agency plans on determining a manufacturer’s intent for a particular blend change”, is evidence of the blatant disregard for critical consideration and it further necessitates the immediate need for Congressional guidance as it applies to the true intention of the regulation of premium cigars and the budgets required to enact and monitor the perceived convoluted and costly process.

While we can all choose and I hereby urge person who reads this to be proactive by supporting our National, State and local level industry voices i.e. IPCPR, CRA, Texas Cigar Merchants Association (or your own state association) and to further support our rights via letters and phone calls to your Congressional representatives and even through peaceful protests, all of which we have been afforded the right to enjoy under our Constitution, my prayers and concerns are more for all of the hard working people employed by our industry trade partners throughout Latin America and the Caribbean Basin.

Given that so many industry representatives have covered the topic over the last week, I wish to move beyond the purported public health related concerns of premium cigars that have been referenced yet unsubstantiated by the FDA, making an effort to bring into light the nature of our trade policies.  The US has stated its intent to help economically struggling regions such as Latin America and the Caribbean Basin. These regions are undeniably of political importance to us and we should also factor that open trade on premium cigars will help keep prices down globally and reduce the pressure of inflation even if on a micro scale.  300 million cigars per year and a good majority of those subject to the new FDA regulation is a significant amount of export that cannot be dismissed as irrelevant. 

We must acknowledge that American cigar producers are not especially competitive based on the sheer volume of our consumption and the average consumer price, so maintaining open trade promotes economic growth, social stability and even democracy in the key regions.  Although the FDA through its action could effectively destroy many cigar manufacturers and retailers in the US and in friendly countries, the current administration has made significant efforts to relax or even remove related sanctions on Cuba and other countries where we have been restricting trade due to the violation of human rights, trafficking/toleration of narcotics or those that pose a threat to international peace, which to this layperson is a confusing change of policy at best.  Imagine buying LEGAL Cuban cigars in the US that were subject to a long term embargo and not being able to buy certain Padrón, AJ Fernandez, Espinosa or even our beloved Southern Draw Cigars…it could happen in the near future if no action is taken. 

A simple review of the economic data is best used to consider the adverse economic impact which may be caused by the regulation of tobacco products, most notably on the premium and machine made cigars which I believe should be reviewed by Congress on a per line basis.  What are the ramifications under the principle articles of our Latin America and Caribbean trade policies if we adversely impact their respective economies?  Does the US simply say I’m sorry or make a promise to replace the jobs and income lost through another import?  Even then, we loose a beautiful culture which cannot be replaced. We often hear a reference to each premium cigar resulting from over 300 pairs of hands cultivating, processing, rolling and packaging each product and what a shame it would be if “We the People” allow the regulation to take the honest, hard work, traditions, income and way of life away from so many even without serious consideration and action beyond that of the FDA. 

While I would need further research to provide the most recent information, at last check the three largest industry related trade partners are the Dominican Republic, Nicaragua and Honduras and clearly each country has pinned measurable economic hopes on their ability to produce and supply related products to the US economy.  The far reaching effects of the new FDA regulation will quite certainly serve as a catalyst for economic crisis, even if it is concentrated only in certain regions that are best known for tobacco and cigar production.  These are our friends, our family, our partners, many Americans live and work in the region and call it home and we owe it to them to fight for all that they have worked towards as well as our own domestic agendas. I am in no way discounting the investments and contributions of other regional investments including Mexico, Ecuador, Brazil, Costa Rica and even Jamaica but most of them have more diverse economies and could likely overcome short term losses of the related export products.  One doesn’t need to be a degreed economist to point out that we have a need for our trade partners to maintain stable or at least predictable growth or we can leave an economic void in the region in places like Esteli, Danli or Tamboril that could have far reaching implications, creating an opportunity for less friendly forms of commerce to replace it in a region that has finally turned to free markets.  

In closing, if you haven’t traveled to these regions, if you haven’t witnessed the lifestyle, the work ethic, the dedication, the collaboration of cultures and the vital importance of this industry on so many outside of the US, then you may not see my point.  There is nothing like driving the Pan American highway,  colorful old school buses filled with eager workers, walking on cobblestone roads, bright green seed beds, the smell of a tobacco drying barn or the joy of lighting up a fresh rolled cigar made by any number of rolling pairs in any factory in the region.  Let us not react in anger for together we can “Band Together” to use an IPCPR term, respond and fight for not only our rights here but for those that have nobody else fighting for them.  Be blessed. 

2016 : U.S. trade in goods with South and Central America 

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding.

Month

Exports

Imports

Balance

January 2016

10,596.8 

7,498.8

3,098.0

February 2016

10,301.6 

7,805.8

2,495.8

March 2016

11,910.8 

8,794.7

3,116.1

TOTAL 2016

32,809.3

24,099.3

8,710.0

2015 : U.S. trade in goods with South and Central America 

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding.

Month

Exports

Imports

Balance

January 2015

12,749.8 

10,663.4

2,086.4

February 2015

12,514.7 

9,069.1

3,445.6

March 2015

13,767.5 

10,758.7

3,008.8

April 2015

12,785.3 

10,165.5

2,619.8

May 2015

14,039.6 

9,457.3

4,582.3

June 2015

13,519.5 

10,281.5

3,238.1

July 2015

12,549.7 

10,539.5

2,010.3

August 2015

13,140.9 

9,567.2

3,573.8

September 2015

12,445.4 

9,199.7

3,245.7

October 2015

12,442.0 

8,859.0

3,582.9

November 2015

11,654.8 

8,423.1

3,231.6

December 2015

11,696.7 

8,888.2

2,808.6

TOTAL 2015

153,306.0

115,872.3

37,433.7

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