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Attorneys General Petition to Stop Sales of "Little Cigars"

May 19, 2006

WASHINGTON, D.C. – Forty Attorneys General1 have filed a petition with the U.S. Department of Treasury’s Alcohol Tobacco Tax and Trade Bureau (TTB) asking the federal agency to close a loophole that allows tobacco manufacturers to pass off cigarettes wrapped in brown paper as “little cigars.”

The Attorneys General want the TTB to change the way its rules and regulations classify these so-called “little cigars,” and to change its policy of allowing tobacco companies to classify their own products in a way that avoids public health restrictions and taxes that are placed on cigarettes.

“While sales of these ‘little cigars’ are still small, this growing trend places at risk the health and safety of our citizens, especially our youth,” said Iowa Attorney General Tom Miller, co-chair of the National Association of Attorneys General Tobacco Committee. “Attorneys General and public health organizations have been successful in lowering cigarette smoking rates among teens, but the growing use of ‘little cigars’ threatens over time to reverse these gains.”

The current federal policy for classification of cigars and cigarettes allows products that are actually cigarettes to be marketed, taxed and sold as cigars. Tobacco companies use this self-classification loophole to evade state and federal laws aimed at protecting the public from the harms of cigarettes. It also allows manufacturers to circumvent the landmark 1998 tobacco Master Settlement Agreement (MSA), which imposes significant additional public health restrictions on the advertising, promotion and marketing of cigarettes by tobacco companies, particularly to youth.

Most of those public health restrictions—including the restrictions in the Master Settlement Agreement—apply to cigarettes and not to little cigars.

Many Attorneys General take the view that some manufacturers discovered that if they wrap their cigarettes in brown paper and call them little cigars, they can avoid the restrictions and also avoid the much higher taxes that apply to cigarettes. Once the products reach the market, however, they are promoted as if they are cigarettes, the Attorneys General believe.

Federal data shows that little cigar production, sales and consumption have increased dramatically in recent years, while cigarette production, sales and consumption have declined significantly. Earlier this year, Attorneys General announced that cigarette sales in the United States had reached a historic 55-year low and that fewer Americans were smoking since implementing public health restrictions under the landmark tobacco Master Settlement Agreement. The sharply divergent trends suggest that a good portion of the growth in the little cigar segment is attributable to brown cigarettes being passed off as “little cigars.”

The federal government currently defines a “cigar” as any roll of tobacco wrapped in leaf tobacco or any substance containing tobacco. Little cigars are those cigars that weigh less than 3 pounds per thousand – the same as cigarettes. A “cigarette” is defined as any roll of tobacco wrapped in paper or in any substance not containing tobacco and any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance (packaging and labeling) or filler content, is likely to be offered to or purchased by consumers as a cigarette.

Traditionally, cigars are unflavored, wrapped in leaf tobacco, and made of aged, fermented air-cured tobacco with little sugar content. The petition is not aimed at traditional large cigars, or their miniature counterparts. Rather, the Attorneys General are concerned with the many “little cigars” now appearing in the marketplace that are in virtually every respect indistinguishable from cigarettes. The Attorneys General assert that such “little cigars,” which are the same size and shape of cigarettes, have filter tips like cigarettes, and are packaged in traditional cigarette packaging, are actually cigarettes disguised in brown wrappers.

Current TTB rules allow tobacco manufacturers themselves to decide whether their product is a cigar or a cigarette and pay the corresponding tax rate. However, cigars are taxed at a significantly lower rate than cigarettes by federal and state governments. By self-classifying their cigarettes as cigars, the tax differential allows the tobacco companies to price cigars at half the price of cigarettes, or even less, making them more affordable for youth.

“The current ability of tobacco companies to self-police allows the manufacturers to evade the more restrictive public health protections that apply to cigarettes and not cigars,” said Idaho Attorney General Lawrence Wasden, co-chair of NAAG’s Tobacco Committee. “By disguising cigarettes as little cigars, the manufacturers endanger the public health, the gains achieved through the 1998 tobacco Master Settlement Agreement and the integrity of our federal and state tax systems.”

Cigarettes must carry health-warning labels, but only seven cigar manufacturers are required to place warnings on their packages. The ingredients of cigarettes, but not cigars, must be reported to the Centers for Disease Control.

Cigarettes disguised as “little cigars” appear in the same varieties as regular cigarettes, such as “light,” “menthol” and “full flavor,” and are often sweetened with flavors like chocolate, chocolate mint, raspberry, cherry, vanilla, strawberry, wild berry, peach, rum, cinnamon and spearmint. These appealing flavors, and their ready availability in packs of five, eight, or even single sticks, make the product more attractive and less costly for teens to buy.

Most states have laws that require cigarettes to be sold in packages of at least 20 --- to keep less expensive “kiddie packs” out of the hands of children. The tobacco companies are evading these laws designed to protect our kids from the cheaper, smaller packages by simply labeling some cigarettes as cigars. Numerous studies have shown that increasing cigarette prices reduces smoking among children, who are particularly price-sensitive.

"Youth are attracted both to candy-flavored cigarettes as well as tobacco that is inexpensive, so these "little cigars" appear tailor made just for them," said Cheryl G. Healton, President and CEO of the American Legacy Foundation. "We must be able to track their popularity to know if their sales are increasing while the sale of regular, more expensive cigarettes are on the decline. We applaud the Attorneys General for championing this effort and support strong changes in policy that would keep these products on the federal government's radar screen."

Tobacco is the number one cause of preventable death in the United States. Attorneys General across the country are actively and successfully working to enforce the provisions of the MSA to reduce tobacco use and protect consumers from tobacco’s deadly toll.

[1] Alaska, Arizona, Arkansas, California, Connecticut, Delaware, Georgia, Guam, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming

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