Bill Could Burn Cigar Catalogers

Fifteen words tucked away on page 18 of a 46-page Senate bill jeopardize the future of mail order cigar firms. The phrase: “tobacco products are non-mailable and shall not be deposited in or carried through the mails.”

The nonmailability issue in bill S. 1177, which was introduced on June 3 and passed by the Senate on Dec. 8, “would put every mail order cigar company out of business,” says Lew Rothman, owner/founder of Burlington, NC-based JR Cigar.

Also known as the Prevent All Cigarette Trafficking, or PACT, Act, S. 1177 was written to better enforce the Jenkins Act of 1949, which prevents the interstate shipments or “trafficking” of cigarettes. The Senate bill expands the definition of tobacco to include loose tobacco, smokeless tobacco, and cigars.

Meanwhile, a competing bill from the House of Representatives, H.R. 2824, is working its way through Congress. Like its sister bill in the Senate, H.R. 2824 is designed to stop the interstate shipment of cigarettes, but the bill does not have a provision to halt the sale by mail of all tobacco products. Assuming the House passes H.R. 2824, the two bills are expected to go before a conference committee of House and Senate members to resolve the differences. “If the Senate conforms to the House bill, we don’t have a problem,” says Rothman.

TOBACCO MAILERS UNDER FIRE

According to the U.S. Department of Agriculture, consumers spent $83 billion on cigarettes in 2002, up from $77.8 billion in 2001 and $73 million in 2000. But to the dismay of the big cigarette companies, more people are buying their smokes online — particularly through Indian reservations. Indian nations are considered sovereign, says Norman Sharp, president of the Washington-based Cigar Association of America, so they don’t have to pay state sales and excise taxes and can therefore sell cigarettes cheaper.

This prompted major cigarette companies, such as Philip Morris, to send lobbyists to Capitol Hill to urge the restriction of the direct shipment of cigarettes to consumers. The cigarette firms “found their first line of defense, ironically enough, in enacting further legislation,” says Robert Franzblau, owner/president of Thompson Group in Tampa, FL, which owns Thompson Cigar as well as housewares title The Linen Source and apparel catalog Casual Living. Particularly galling to catalogers is that what began as anti-cigarette legislation grew to include roll-your-own and smokeless tobacco as well as the cigars they sell. Total cigar sales in 2002 were $2.25 billion, says Sharp. Premium cigars, the specialty of most cigar mailers, accounted for about $450 million in sales.

In response to the threat from Washington, 15 cigar catalogers gathered in Whippany, NJ, on Feb. 3 to discuss pooling resources for legal defense and lobbying efforts. Following the meeting, the catalogers established a retail/marketing division within the Cigar Association of America.

What’s more, the catalogers are rallying their customers to contact their elected representation. For example, Philadephia-based Holt’s Cigar has sent e-mails to customers urging them to voice their complaints to their congressmen and senators. Holt’s also dedicated space in its print catalog and Website to alert customers of the impending legislation, says president Robert Levin. Mail order accounts for 25%-30% of Holt’s total company sales; wholesale and retail sales make up the rest.

Rothman posted this missive on JR Cigar’s Website: “I think I speak for all of the mail-order dealers when I say we are committed to our customers and will do our utmost to protect your right to freely acquire a completely legal product that has been sold in this country since before it was a country. Our founding fathers established our system of government to protect our rights…NOT to dictate what our rights are.”

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