Proposed Rule: Alcohol, Tobacco and Other Excise Taxes: Cigars and Cigarettes Tax Classification

Wednesday,
October 25, 2006
Part II
Department of the
Treasury
Alcohol and Tobacco Tax and Trade
Bureau
27 CFR Parts 40, 41, 44, and 45

Tax Classification of Cigars and Cigarettes
(2006R–276P); Proposed Rule
Total Reducing Sugars Analytical Method;
Notice
mstockstill on PROD1PC61 with PROPOSALS2
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62506 Federal Register / Vol. 71, No. 206 / Wednesday, October 25, 2006 / Proposed Rules
DEPARTMENT OF THE TREASURY You may view copies of this notice, cents per thousand ($1.594 cents per
the related rulemaking petitions, and thousand on cigars removed during 2000 or
Alcohol and Tobacco Tax and Trade any comments we receive on this 2001);
Bureau proposed rule by appointment at the (2) Large cigars. On cigars weighing more
than 3 pounds per thousand, a tax equal to
TTB Information Resource Center, 1310 20.719 percent (18.063 percent on cigars
27 CFR Parts 40, 41, 44, and 45 G Street, NW., Washington, DC 20220. removed during 2000 or 2001) of the price for
To make an appointment, call 202–927– which sold but not more than $48.75 per
[Notice No. 65]
2400. You may also access copies of this thousand ($42.50 per thousand on cigars
RIN 1513–AB34 notice and any comments we receive on removed during 2000 or 2001).
this proposal online at http:// Cigars not exempt from tax under this
Tax Classification of Cigars and www.ttb.gov/tobacco/ chapter which are removed but not intended
Cigarettes (2006R–276P) tobacco_rulemaking.shtml. for sale shall be taxed at the same rate as
similar cigars removed for sale.
AGENCY: Alcohol and Tobacco Tax and FOR FURTHER INFORMATION CONTACT: (b) Cigarettes.
Trade Bureau, Treasury. Linda Wade Chapman, Regulations and On cigarettes, manufactured in or imported
Rulings Division, Alcohol and Tobacco into the United States, there shall be imposed
ACTION: Notice of proposed rulemaking. the following taxes:
Tax and Trade Bureau, 1310 G Street,
NW., Suite 200–E, Washington, DC (1) Small cigarettes. On cigarettes,
SUMMARY: The Department of the
20220; telephone 202–927–8210; or e- weighing not more than 3 pounds per
Treasury and the Alcohol and Tobacco thousand, $19.50 per thousand ($17 per
Tax and Trade Bureau are proposing mail Linda.Chapman@ttb.gov.
thousand on cigarettes removed during 2000
changes to the regulations that govern SUPPLEMENTARY INFORMATION: or 2001).
the classification and labeling of cigars Background (2) Large cigarettes. On cigarettes, weighing
and cigarettes for Federal excise tax more than 3 pounds per thousand, $40.95 per
purposes under the Internal Revenue Statutory Provisions thousand ($35.70 per thousand on cigarettes
Code of 1986. The proposed regulatory removed during 2000 or 2001); except that,
Chapter 52 of the Internal Revenue
changes contained in this document if more than 61/2 inches in length, they shall
Code of 1986 (IRC) sets forth the Federal be taxable at the rate prescribed for cigarettes
address concerns that TTB has regarding excise tax and related provisions that weighing not more than 3 pounds per
the adequacy of the current regulatory apply to tobacco products manufactured thousand, counting each 23/4 inches, or
standards for distinguishing between in, or imported into, the United States. fraction thereof, of the length of each as one
cigars and cigarettes. The document also Section 5702(c) of the IRC (26 U.S.C. cigarette.
summarizes and responds to three 5702(c)) defines the term ‘‘tobacco
petitions received by TTB requesting Section 7805 of the IRC (26 U.S.C.
products’’ as ‘‘cigars, cigarettes,
rulemaking action regarding the 7805) gives the Secretary of the Treasury
smokeless tobacco, pipe tobacco, and
classification of cigars and cigarettes, the general authority to issue
roll-your-own tobacco.’’ In addition,
with particular reference to the regulations to carry out the provisions of
sections 5702(a) and (b) of the IRC
distinction between little cigars and the IRC. In addition, section 5722 of the
define the terms ‘‘cigar’’ and ‘‘cigarette’’
cigarettes. The proposals contained in IRC (26 U.S.C. 5722) gives the Secretary
as set forth below:
this document clarify the application of authority to require from manufacturers
Sec. 5702. Definitions. or importers of tobacco products reports
existing statutory definitions and update When used in this chapter—
and codify administrative policy in containing such information, in such
(a) Cigar. form and at such times, as the Secretary
order to provide clearer and more ‘‘Cigar’’ means any roll of tobacco wrapped
objective product classification criteria. in leaf tobacco or in any substance containing may prescribe by regulations. Finally,
These clarifications are intended to tobacco (other than any roll of tobacco which section 5723(a) of the IRC (26 U.S.C.
reduce possible revenue losses through is a cigarette within the meaning of 5723(a)) gives the Secretary authority to
the misclassification of cigarettes as subsection (b)(2)). prescribe regulatory standards for the
little cigars. In addition, these (b) Cigarette. packaging of tobacco products. Further,
‘‘Cigarette’’ means— section 5723(b) of the IRC gives the
clarifications should facilitate the (1) any roll of tobacco wrapped in paper or
determination of payments under the Secretary the authority to prescribe
in any substance not containing tobacco, and regulations requiring marks, labels, and
Master Settlement Agreement. (2) any roll of tobacco wrapped in any
notices on every package of tobacco
DATES: We must receive your written substance containing tobacco which, because
of its appearance, the type of tobacco used in products.
comments on or before December 26,
2006. the filler, or its packaging and labeling, is Regulatory Provisions
likely to be offered to, or purchased by,
ADDRESSES: You may send comments to consumers as a cigarette described in Regulations implementing the tobacco
any of the following addresses: paragraph (1). product provisions of Chapter 52 of the
• Director, Regulations and Rulings The distinction between cigars and IRC are contained in 27 CFR parts 40
Division, Alcohol and Tobacco Tax and cigarettes is important for Federal tax (manufacture of tobacco products and
Trade Bureau, (Attn: Notice No. 65), purposes because the rate of tax varies cigarette papers and tubes), 41
P.O. Box 14412, Washington, DC 20044– from one product class to another. (importation of tobacco products and
4412. Section 5701 of the IRC (26 U.S.C. 5701) cigarette papers and tubes), 44
• 202–927–8525 (facsimile). prescribes the following rates of tax for (exportation of tobacco products and
• nprm@ttb.gov (e-mail). cigars and cigarettes: cigarette papers and tubes, without
• http://www.ttb.gov/tobacco/ payment of tax, or with drawback of

tobacco_rulemaking.shtml (An online Sec. 5701. Rate of tax. tax), and 45 (removal of tobacco
(a) Cigars.
comment form is posted with this notice On cigars, manufactured in or imported
products and cigarette papers and tubes,
on our Web site). into the United States, there shall be imposed without payment of tax, for use of the
• http://www.regulations.gov (Federal the following taxes: United States). These regulations are
e-rulemaking portal; follow instructions (1) Small cigars. On cigars, weighing not administered by the Alcohol and
for submitting comments). more than 3 pounds per thousand, $1.828 Tobacco Tax and Trade Bureau (TTB).
Federal Register / Vol. 71, No. 206 / Wednesday, October 25, 2006 / Proposed Rules 62507
Sections 40.11, 41.11, 44.11, and the regulation in question. The ruling Ruling 73–22 states the following
45.11 of the TTB regulations (27 CFR and two procedures in question, and with reference to the issue of whether
40.11, 41.11, 44.11, and 45.11) include TTB’s adherence to them, are discussed the product is likely to be offered to, or
definitions of cigars and cigarettes that below. purchased by, consumers as a cigarette:
follow the statutory definitions without Two other factors which are relevant under
ATF Ruling 73–22
further elaboration. The tax rates the Code in determining the tax category of
imposed on cigars under the IRC are ATF Ruling 73–22 was published in a product are whether the product is likely
reflected in §§ 40.21 and 41.31 of the 1973 to update the criteria for to be offered to, or purchased by, consumers
TTB regulations (27 CFR 40.21 and determining whether a tobacco product as a cigarette. It is, therefore, important that
41.31) and the IRC tax rates imposed on wrapped in a ‘‘substance containing the package for a product to be offered as a
cigarettes are reflected in §§ 40.23 and tobacco’’ is a cigar or cigarette for tax cigar conspicuously declare it to be a cigar
purposes. This ruling restated the basic and that all marketing materials and
41.32 of the TTB regulations (27 CFR advertising clearly present the product to the
40.23 and 41.32). provisions of, and superseded, Revenue consumer as a cigar and not as a cigarette.
The TTB regulations that set forth Ruling 69–198, C.B. 1969, pg. 1,359 There must be no representations or
notice requirements for packages of (Internal Revenue). Specifically, Ruling implications on the package or in other
cigars are found at 27 CFR 40.214, 73–22 amplified the three fundamental merchandising or advertising materials
41.73, 44.186, 44.253, and 45.44. These factors that govern the classification of which tend to negate the tax declaration that
regulations provide that before removal little cigars: the wrapper, the filler, and the product is a cigar. If the package for a
subject to tax (§§ 40.214 and 41.73) or the product packaging and labeling. cigar product is comparable to the traditional
With regard to the wrapper material 20-cigarette soft (cup) pack or the similar
before removal from a factory (§ 44.186)
hard pack, the declaration ‘‘cigars’’, ‘‘small
or before withdrawal from a customs used to manufacture cigars, Ruling 73– cigars’’, or ‘‘little cigars’’ must appear in
warehouse (§ 44.253) or before removal 22 states the following: direct conjunction with, parallel to, and in
(§ 45.44), every package of cigars must The legislative history concerning Public substantially the same conspicuousness of
have adequately imprinted on it, or on Law 89–44 indicates the terms ‘‘substance type and background as the brand name each
a label securely affixed to it, the containing tobacco’’ as used in 26 U.S.C. time the brand name appears. A conspicuous
designation ‘‘cigars’’, the quantity of 5702 and ‘‘reconstituted tobacco’’ were used ‘‘cigar’’ declaration must appear on the front,
cigars contained in the package, and for synonymously. In the trade and in general back, and bottom panels of such a typical
terminology, ‘‘reconstituted tobacco’’ is cigarette-type package even if the brand name
small cigars, the classification of the
ground or pulverized tobacco mixed with does not appear on any of these panels.
product for tax purposes (that is, either Cartons must similarly declare the product to
‘‘small’’ or ‘‘little’’). The TTB various adhesive agents and/or cellulose
fibers derived from tobacco or other sources be a cigar in conjunction with the brand
regulations that set forth cigarette notice and formed into sheets. name and a conspicuous cigar declaration
requirements are found at 27 CFR For a wrapper material to be considered a must appear on each panel of the carton
40.215, 41.74, and 45.45. These ‘‘substitute [sic] containing tobacco’’ as used which is likely to be visible in a retail sale
regulations provide that before removal in 26 U.S.C. 5702(a), the finished wrapper display.
subject to tax (§§ 40.215 and 41.74) or must (1) be approximately two-thirds or more TTB continues to apply the principles
before removal (§ 45.45), every package tobacco which did not in the reconstitution reflected in Ruling 73–22 in preparing
of cigarettes must have adequately process lose its tobacco character (e.g., taste, responses to requests from
imprinted on it, or on a label securely aroma, identifiable chemical components),
manufacturers, importers and other
and (2) be of a color consistent with that of
affixed to it, the designation parties for advance rulings or other
the natural leaf tobaccos traditionally used as
‘‘cigarettes,’’ the quantity of cigarettes in a wrapper for American cigars. advice on the tax classification of cigars
the package, and the classification for and cigarettes.
tax purposes (that is, for small Ruling 73–22 states that a Ruling 73–22 is available on the TTB
cigarettes, either ‘‘small’’ or ‘‘Class A’’, combination of other factors must be Web site at http://www.ttb.gov.
and for large cigarettes, either ‘‘large’’ or considered in determining whether a
‘‘Class B’’). product wrapped in a ‘‘substance ATF Procedure 73–5
containing tobacco’’ is a cigar or a In 1973, ATF published Procedure
Current Standards and Methods Used cigarette. With regard to the filler 73–5, the purpose of which was to set
To Differentiate Between Little Cigars tobacco, the ruling goes on to state: forth some basic analytical methods for
and Cigarettes for Excise Tax Purposes use by ATF in determining if specific
For a product to be a cigar the filler must
In connection with the administration be substantially of tobaccos unlike those in reconstituted tobacco material is
of Chapter 52 of the IRC, TTB’s ordinary cigarettes and must not have any acceptable as a cigar wrapper, and to
predecessor agency, the Bureau of added flavorings which would cause the determine if a product wrapped in such
Alcohol, Tobacco and Firearms (ATF), tobaccos to have the taste or aroma generally material is a cigar or cigarette for tax
published ATF Ruling 73–22 and attributed to cigarettes. The inclusion of flue- purposes. Specifically, Procedure 73–5
Procedures 73–5 and 76–2 to provide cured or aromatic (Oriental) tobaccos—which
established analytical examinations and
traditionally have been the primary
the tobacco industry and the public at constituents of cigarette filler—can tests to provide objective information
large with the Agency’s official contribute significantly to making a product for use with other relevant factors in: (1)
interpretation and guidance with regard cigarette-like, and if the product also is of the Distinguishing between those materials
to the classification of cigars and typical cigarette size and shape, has a typical that contained sufficient tobacco to be
cigarettes for excise tax purposes. A cigarette-type filter, and is in a cigarette-type classified as reconstituted tobacco and
ruling published by ATF or TTB package, the inclusion of these tobaccos those that did not, (2) differentiating
represents an Agency interpretation of could cause the product to be classified as a between the filler tobaccos typically
applicable statutes or regulations or cigarette rather than a cigar. Conversely, if a used in cigars and those generally used
other statement of Agency policy. A product is made predominantly of cigar-type
tobaccos with distinctive cigar taste and
in cigarettes, and (3) determining if a
published procedure provides technical aroma, if it does not resemble a cigarette smoking product wrapped in
guidance on how to fulfill a regulatory (such as most large cigars do not), and if it reconstituted tobacco is taxable as a
requirement, for example by providing is not to be marketed in a cigarette-type cigar or as a cigarette under the IRC.
detailed analytical criteria that the package, it would probably be classified as a The examinations and tests provided
Agency uses to assess compliance with cigar. in Procedure 73–5 are as follows:
WRAPPER EXAMINATIONS AND TESTS

Color ........................................................ Visual examination with general description and statement as to whether it is in the range of natural
leaf tobaccos traditionally used as a wrapper for American cigars.
Composition ............................................. Microscopic examination for tobacco particles, vegetable fibers, mineral particles, adhesives, other
substances.
Cellulose Fibers ....................................... Microscopic examination may be reported as none, few, numerous; or chemical tests may be used.
Texture ..................................................... Microscopic examination described as rough, smooth, etc.
Tensile Strength ...................................... Instrumentation can be used, but usually only a physical manipulation of stretching, tearing, etc. Gen-
erally reported as degree of dry and wet tensile strength.
Paper-like Qualities ................................. Subjective evaluation based on appearance, tensile strength, number of fibers, general visual char-
acter, and evaluation of chemical composition as shown later.
Taste ........................................................ Degree of tobacco-like character.
Burning .................................................... Described as more characteristic of tobacco or of paper.
Fragments of Tobacco ............................ Microscopic examination, described as large, small, pulverized, none, etc.
Percent moisture.
Percent total ash.
Percent acid insoluble ash.
Percent sodium.
Percent potassium.
Percent calcium.
Other elements may be determined.
pH of water extract.
Percent nicotine.
Sequential Differential Solvent Extractions as described in Section 7.08.
FILLER EXAMINATIONS AND TESTS

Composition ............................................. Microscopically observed character of filler, expressed as relative proportions of basic tobacco types.
Taste ........................................................ Tobacco character, described as heavily fermented type, fire-cured type, etc., and other descriptives
such as added menthol, etc.
Odor before smoking ............................... Expressed as to kind of tobacco product character, such as mild cigar-like, etc.
Odor when smoking ................................ Expressed as to kind of tobacco product character such as mentholated cigarette-like, etc.
Percent moisture.
Percent total ash.
Percent acid insoluble ash.
Percent sodium.
Percent potassium.
Percent calcium.
Other elements may be determined.
pH of water extract.
Percent nicotine.
Sequential Differential Solvent Extractions as described in Section 7.08.
PRODUCT EXAMINATIONS AND TESTS

Diameter .................................................. In millimeters to the nearest tenth.
Length (Including filter) ............................ In millimeters to the nearest tenth.
Weight of 1,000 (Including filters) ........... In pounds to nearest hundredth.
Added distinctive flavorings not otherwise reported, such as any included in the filter.
pH of smoke.
Opinions of cigarette smokers.
Procedure 73–5 is available in its were amplified and the standards were erroneous test results. The solvents used
entirety on the TTB Web site at http:// redetermined on a residue-free solvent in the sequential solvent extraction
www.ttb.gov. basis. The decision to update the method under Procedure 76–2 are as
ATF Procedure 76–2 method was based in part on follows:
information received from some • Petroleum Ether;
ATF Procedure 76–2 was published in industry members to the effect that the
1976 to supersede, in part, ATF method contained in Procedure 73–5 • Tetrahydrofuran;
Procedure 73–5. was not sufficiently specific for it to be • Acetonitrile;

Specifically, this procedure sets forth effectively employed in their • 95% Ethanol; and
an updated sequential solvent extraction laboratories. In addition, it was noted
• Dioxane—20% Water.
method to replace the one contained in that the extractive procedure used in the
Procedure 73–5. The updated method method did not account for the Procedure 76–2 is available in its
was essentially the same as the method possibility of varying residues from the entirety on the TTB Web site at http://
it replaced except that the instructions solvents themselves, thus leading to www.ttb.gov.
Current Analytical Procedures (pH 2.5), and 1% triethanol amine were material. Flue-cured tobaccos, which are
similar. Nicotine concentrations in 67 high in reducing sugars, are
TTB has in recent years supplemented samples of cigarettes, cigars, and bidis varied
most of the methodologies contained in predominant in cigarettes sold in the
between 0.37 and 2.96% (w/w). An
ATF Procedures 73–5 and 76–2 with U.S. market.3 Furthermore, sugar is
established gas chromatography/mass
other more efficient methodologies. In spectrometry method using toluene often added directly to cigarette filler
particular, TTB no longer uses the extraction consistently yielded lower tobaccos to ‘‘balance’’ smoke flavor.4 In
sequential solvent extraction method to nicotine values than the CE method. contrast, cigars are manufactured from
test tobacco products. With regard to Experimental evidence suggests that this is processed tobaccos that contain
due to insufficient extraction of nicotine by relatively low levels of sugars.
analyzing the filler tobaccos used in toluene.2
cigars and cigarettes, TTB has adopted Therefore, TTB surmised that
a less labor intensive analytical method comparing the sugar content in the filler
Total Reducing Sugars Study tobacco used in cigars to the sugar
that does not require use of the toxic
solvents used in the sequential solvent Over the last several years, TTB has content in the filler tobacco used in
extraction method. Although this seen an increase in the number of cigarettes might yield a clear and
tobacco products labeled ‘‘Little Cigars’’ objective line of distinction between
method, titled ‘‘Characterization of
submitted to the Agency by members of these two classes of tobacco products.
Tobacco Products by High-Performance
the U.S. tobacco industry, importers, In the study, TTB analyzed 93
Anion Exchange Chromatography- products labeled either as ‘‘cigars’’
Pulsed Amperometric Detection,’’ was and other Federal agencies requesting
letter rulings or other advice regarding (large cigars and little or small cigars) or
published in the Journal of Agricultural as ‘‘cigarettes.’’ The products were
and Food Chemistry in 1996, it has not the proper classification of the products
under the IRC. In light of this increased analyzed to determine the quantity of
been published as an Agency procedure. total reducing sugars in each product
The published abstract for this method interest in the tax classification of little
cigars, and because of a desire to using an Astoria 2 + 2 Flow Analyzer.
is as follows: In the study, sucrose was converted to
improve the efficacy of the analytical
A simple and reproducible method has standards discussed above, TTB decided a monosaccharide in order to result in
been developed for the classification of a total reducing sugars value for each
to explore other analytical avenues that
cigarette versus cigar tobacco. Although the product.
tobacco used for both cigars and cigarettes might provide a more reliable standard
for distinguishing between cigars and Products were chosen for the study
may be of the same natural origin, tobacco
types and processing parameters alter the cigarettes. based largely on recent sales history in
relative amounts of natural constituents (e.g., We found that U.S. manufacturers the domestic market. For cigarettes,
carbohydrates). In this method, conduct analyses of their tobacco products were obtained of the five
carbohydrates are obtained by water products with a flow analyzer, which largest manufacturers whose combined
extraction. The extracts are then analyzed has been specifically designed, market share totals approximately 90
using high-performance anion exchange percent of the domestic market.
developed, and validated for analysis of
chromatography followed by pulsed Approximately 140 cigarette products
amperometric detection. The relative target tobacco components, including
total reducing sugars and nicotine were collected for analysis, and to date,
amounts of glucose, fructose, and sucrose
between cigarette and cigar tobaccos are used (‘‘total reducing sugars’’ encompasses 47 have been analyzed for total reducing
for their characterization. Complete analysis all monosaccharides and disaccharides). sugars. For cigars, products were also
of a tobacco product is achieved in less than Since this instrument has become a obtained of the manufacturers with the
60 min.1 widely used and accepted analytical most significant domestic presence. In
In addition to the method mentioned tool within the tobacco industry, we all, 190 cigars and little cigar products
above, ATF developed a method to concluded that it would be appropriate were obtained, of which 46, to date,
determine the quantity of nicotine in for our inquiry. have been analyzed for total reducing
tobacco products, specifically in cigar Accordingly, in 2005, TTB obtained sugars.
an Astoria 2 + 2 Flow Analyzer from The 93 analyzed samples were
and cigarette wrapper materials. This
Astoria-Pacific International in order to selected to provide a robust
method was not published as an Agency
conduct a study of cigar and cigarette representative sample of the domestic
procedure, but was published in the marketplace for both cigars and
Journal of AOAC International under samples obtained for testing. Our study
was grounded on the fact that cigars and cigarettes. Specifically, samples of
the title ‘‘Quantitation of Nicotine in ‘‘cigarettes’’ were chosen to ensure that
Tobacco Products by Capillary cigarettes contain different blends of
tobacco’cigarettes are made primarily the most common brand descriptors
Electrophoresis,’’ in 2002. The were represented (full flavor, mild,
published abstract for this method is as from flue-cured or light air-cured
light, ultra light, menthol) as well as
follows: (burley) and oriental (Turkish) tobaccos,
some of the less common descriptors,
A simple and rapid capillary
whereas cigars are usually made from
such as natural cigarettes. The tested
electrophoresis (CE) method was developed air-cured and fermented tobaccos. Many
‘‘cigars’’ were chosen to reflect the
for the quantitation of nicotine in commercial of the significant chemical differences
diversity of the product lines (flavored,
tobacco products. The method involves a 6 between cigar and cigarette tobaccos are
machine rolled, premiums, and little
min run at 30 kV, using a 50mM phosphate related to the curing and/or
buffer (pH 2.5), paraquat as internal standard, cigars). In addition, the little cigars used
fermentation processes used to
and UV detection at 260 nm. Nicotine was in the study were those that closely
manufacture them.
extracted from tobacco products in <15 min. resembled cigarettes in length, diameter,
One of the most significant chemical
Recoveries from spiked extracts were >95%, and uniformity of the cylinder and in
differences between cigars and
and the extraction efficiencies of water, 1M having a filter. While it is anticipated

HCl, 1M acetic acid, 5mM phosphate buffer
cigarettes is the level of total reducing
sugars, which varies significantly 3 Abdallah, F. ‘‘Blending Concepts. ABC Blend
1 Zook, C., Patel, P., LaCourse, W., & Ralapati, S., depending on the processing of the filler Development and Maintenance’’, Tobacco Reporter,
J. Agric. Food Chem., Vol. 44, No. 7, 1996, April 2003, pp. 72–78.
Characterization of Tobacco Products by High- 2 Clarke, M., J.AOAC International, Vol. 85, No. 4 Leffingwell, J. ‘‘Chemical Constituents of
Performance Anion Exchange Chromatography- 1, 2002, Quantitation of Nicotine in Tobacco Tobacco Leaf and Differences among Tobacco
Pulsed Amperometric Detection. Products by Capillary Electrophoresis. Types’’, February 2001.
that future additions to the data set will agitation using a wrist action shaker for Because the values for reducing sugars
provide greater insight into the chemical ⁄ hour. The mixture was then filtered
12
found in cigars are below 2%, the TTB
differences among these products, it is (to remove the remaining solid material) laboratory could not report those values
not expected that more data will using Whatman 114V pleated filter with the exactitude reportable for values
significantly alter the overall results of paper and poured into sample vials. within the 2% to 40% range.
the study. Three sample vials were prepared for Consequently, any value below 2% for
Each tobacco product was prepared each tobacco sample. total reducing sugars will be reported as
for analysis by separating the wrapper The total reducing sugars results ‘‘<2%.’’ However, even though 2% is
material from the filler and drying the obtained for each tobacco sample were
the smallest percentage of total reducing
filler at 90° C for one hour in a the average of nine injections into the
sugars that can be quantitatively
convection oven. The filler was then flow analyzer (three injections for each
ground into a coarse powder using a of the three sample vials prepared for determined with suitable precision and
Wiley Mill equipped with a 20 mesh each tobacco sample). The results accuracy using this method, the values
screen and transferred to airtight obtained by using this method were obtained for cigars are still valid for the
containers. Approximately 100 mg of reported as percent by weight. Further, purpose of distinguishing cigars from
the ground fill material was accurately the method accurately reports the cigarettes using total reducing sugars.
weighed into a flask and mixed with percentage weight of reducing sugars in Statistical analyses of the results of the
100 milliliters of a 1% acetic acid each sample at levels from 2% to 40% study are summarized in the table
solution. Extraction of sugars from the by weight. As expected, the cigar below.
ground fill material was facilitated by samples showed levels below 2%.
Range (% by Mean (% by Interval

Sample weight) weight) @ 99%
Cigars ............................................................................................................................................... Below 2 ....... Below 2 ....... *n/a

Little cigars ....................................................................................................................................... Below 2 ....... Below 2 ....... *n/a
Cigarettes ......................................................................................................................................... 7.47 to 17.94 11.85 ........... ±0.85
*n/a = not applicable.
The results obtained for total reducing TOTAL REDUCING SUGARS (TRS) TRS Uncertainty
sugars for the cigars tested differed STUDY RESULTS—Continued Sample number (percent by (+/¥)
greatly from the results obtained for weight)
cigarettes tested. The data obtained from TRS 62 ...................... 10.64 0.23
the study is listed in the chart below Sample number (percent by 63 ...................... 10.89 0.45
according to tax class and sample weight) 64 ...................... 10.90 0.15
number. 65 ...................... 10.31 0.16
29 .............................................. 0.5 66 ...................... 9.43 0.14
67 ...................... 11.38 0.12
TOTAL REDUCING SUGARS (TRS) Little Cigars 68 ...................... 11.93 0.18
STUDY RESULTS 31 .............................................. 1.2 69 ...................... 11.28 0.18
32 .............................................. 1.3 70 ...................... 11.14 0.17
TRS 33 .............................................. 1.1 71 ...................... 13.51 0.26
Sample number (percent by 34 .............................................. 0.8 72 ...................... 13.75 0.16
weight) 35 .............................................. 1.0 73 ...................... 12.63 0.22
36 .............................................. 1.0 74 ...................... 13.74 0.19
Large Cigars 37 .............................................. 1.2 75 ...................... 13.41 0.21
38 .............................................. 0.5 76 ...................... 12.43 0.17
1 ................................................ 0.4 39 .............................................. 0.7 77 ...................... 12.06 0.09
2 ................................................ 0.5 40 .............................................. 1.4 78 ...................... 11.49 0.21
3 ................................................ 0.6 41 .............................................. 0.6 79 ...................... 11.28 0.07
4 ................................................ 0.8 42 .............................................. 0.8 80 ...................... 11.57 0.16
5 ................................................ 0.8 43 .............................................. 0.8 81 ...................... 11.50 0.16
6 ................................................ 0.6 44 .............................................. 1.5 82 ...................... 11.40 0.22
7 ................................................ 0.7 45 .............................................. 0.5 83 ...................... 13.52 0.12
8 ................................................ 0.6 46 .............................................. 1.6 84 ...................... 11.21 0.28
9 ................................................ 0.6 47 .............................................. 1.0 85 ...................... 12.73 0.10
10 .............................................. 0.3 86 ...................... 11.86 0.21
11 .............................................. 0.5 87 ...................... 13.57 0.15
12 .............................................. 0.7 TRS Uncertainty 88 ...................... 12.27 0.22
13 .............................................. 0.9 Sample number (percent by (+/¥) 89 ...................... 13.74 0.25
14 .............................................. 0.7 weight)
90 ...................... 13.76 0.10
15 .............................................. 0.5 91 ...................... 12.61 0.23
16 .............................................. 0.7 Cigarettes
92 ...................... 16.44 0.24
17 .............................................. 0.6 93 ...................... 11.74 0.30
18 .............................................. 0.5 51 ...................... 7.47 0.12
19 .............................................. 0.6 52 ...................... 8.38 0.41 94 ...................... 14.46 0.73
20 .............................................. 0.5 53 ...................... 7.61 0.15 95 ...................... 14.44 0.32
21 .............................................. 0.4 54 ...................... 7.71 0.14 96 ...................... 17.21 0.26
22 .............................................. 0.4 55 ...................... 9.19 0.15 97 ...................... 17.94 0.36

23 .............................................. 0.8 56 ...................... 9.82 0.09
24 .............................................. 0.7 57 ...................... 9.80 0.15 The following is a graphical
25 .............................................. 0.6 58 ...................... 10.06 0.09
26 .............................................. 0.3 59 ...................... 11.09 0.08 representation of the study results listed
27 .............................................. 0.3 60 ...................... 11.31 0.41 above.
28 .............................................. 0.5 61 ...................... 10.42 0.16 BILLING CODE 4810–31–P
BILLING CODE 4810–31–C

EP25OC06.000</GPH>
Petitions for Rulemaking categories with respect to taxes, fees and request that TTB initiate a number of
assessments paid. The relative burden faced specific actions.
After TTB began developing a plan to by cigarettes has increased by a far greater The first action requested is that TTB
clarify and amplify its regulations amount than cigars in recent years, creating publish a notice of proposed rulemaking
pertaining to the classification of cigars an economic advantage for the little cigar
classification. In addition, companies to update the existing regulations that
and cigarettes, the Agency received
participating in the ‘‘Master Settlement pertain to the classification of little
three petitions for rulemaking
Agreement’’ (‘‘MSA’’) must make payments cigars and cigarettes. The petitioners
concerning this issue. One petition,
to the States based on sales of cigarettes, not request several specific regulatory
including a later follow-up to that cigars. As a result of these and other factors, changes described in more detail below.
petition, was submitted by the Cigar since the signing of the MSA a number of The petitioners urged TTB to take
Association of America, Inc. (CAA). tobacco products have been introduced into steps beyond ATF Ruling 73–22 to
Another petition came from the the domestic market and are being strengthen the reporting requirements
Lorillard Tobacco Company (Lorillard) improperly packaged, labeled, and classified
placed on manufacturers and importers
and the R.J. Reynolds Tobacco Company as little cigars in order to bypass federal and
state tax burdens, reporting requirements, of little cigars. The petitioners stated:
(RJR). The third petition, which
included a later amendment to that and MSA payments. ATF Ruling 73–22 specifically allows the
In a few short years, the tobacco market has TTB to ‘‘reappraise and update the criteria’’
petition, was submitted by 39 States and changed substantially. A large number of for defining cigars or cigarettes due to
one U.S. territory. products have been introduced and marketed ‘‘[c]hanging technology and merchandising
CAA Petition as ‘‘little cigars,’’ yet they are packaged like methods.’’ Therefore, the ruling provides the
cigarettes, and in many cases have the look, TTB with the explicit authority to amend the
On December 19, 2005, the CAA taste, flavorings, and characteristics of regulations governing cigars in light of
submitted a petition to TTB specifically cigarettes. Yet they are much less expensive, changes in the marketplace. While we believe
requesting rulemaking on little cigars in avoiding the taxes and MSA burdens that the factors in ATF Ruling 73–22
order to ‘‘maintain the integrity of the imposed upon cigarettes. continue to provide a logical basis for the
little cigar class.’’ In this petition, the The petitioners highlighted several classification of little cigars and cigarettes,
CAA urged TTB to expedite its we also believe that the non-binding and
reasons why they believe that it is voluntary nature of the reporting
proposed rule to distinguish between important for TTB to update its requirements under this Ruling are no longer
cigars and cigarettes due to what the regulations governing the classification effective in the current marketplace.
CAA believes is widespread confusion of little cigars and cigarettes. They noted We think a more targeted approach by TTB
within the tobacco industry concerning the following regarding the changes in will better serve to promote effective
how to classify little cigars and domestic invoice volume for little cigars enforcement and reduce current market
cigarettes for Federal regulatory and tax and cigarettes: confusion of little cigars. This approach,
purposes. outlined below, should include an additional
In 1998, the domestic invoice volume for disclosure requirement for new brands that
In their petition, the CAA stated that little cigars was 1,638,000,000 units. By 2004, may be contributing to potential consumer
since the signing of the Master this volume had risen to 2,702,000,000 units, confusion.
Settlement Agreement (MSA) by the an increase of 64.96%. By contrast, domestic
several States and the cigarette cigarette volume was 22,755,000,000 packs in In addition, the petitioners requested
companies in 1998, it has witnessed a 1998. By 2004, domestic volume had fallen that TTB distinguish between little cigar
proliferation of new brands of domestic to 18,922,000,000 packs, a decrease of brands marketed prior to the signing of
and imported little cigars entering the 16.84%. the MSA and those that appeared on the
U.S. market. Further, the CAA stated The petitioners further stated: market only after the MSA, by creating
that there is confusion in many of the In recent years, lines have been blurred in
a presumption ‘‘in favor of those little
States, whose attorneys general believe the marketing of cigarettes and little cigars. cigar brands marketed prior to the
that little cigars are cigarettes in For example, little cigars are increasingly existence of the financial disincentives
disguise, specifically designed to sold in packs of 20, much like cigarettes, created by the MSA.’’ While those
circumvent the provisions of the MSA. with packs that are similar in size to a pack brands would still be subject to
Hence, the CAA stated that the of cigarettes. monitoring and challenge as under
distinction between little cigars and In addition to the decrease in existing regulations, there would be a
cigarettes is an issue requiring Federal domestic sales of cigarettes, the rebuttable presumption that such brands
action and that TTB should assume the petitioners stated that the monetary continue to comply with all TTB
leadership role in this area. obligations provided in the MSA have requirements, and are likely to be
increased the financial burden on offered to, and purchased by, consumers
Lorillard-RJR Petition as little cigars.
cigarette makers whereas little cigar
The Lorillard-RJR petition, dated makers are unaffected since cigars, little Further, the petitioners urged TTB to
January 9, 2006, requested that TTB and large, are not covered under the establish a certification procedure for
amend its regulations regarding the MSA. The petitioners noted in this post-MSA little cigar brands. The
classification of little (small) cigars. The regard that the financial impact of petitioners proposed the following in
petitioners stated that they propose compliance with the MSA has been this regard:
these changes because current estimated to be 50 cents per pack. For those little cigar brands initially
regulatory and interpretive ruling Further, the petitioners state that State marketed after the signing of the MSA
standards ‘‘do not adequately focus the excise taxes on cigarettes have increased (November 23, 1998), a certification
resources of TTB on the many new significantly over the last several years. requirement should be created. Such
products that have entered the These tax increases, when combined certification would require each
marketplace.’’ The petitioners went on with MSA payments, have driven up the manufacturer (under 27 CFR Part 40) or
importer (under 27 CFR Part 41) to certify to
to state: cost of cigarettes, thus further widening the TTB that each of the factors set forth in
Lorillard and R.J. Reynolds believe that the cost differential between little cigars ATF Ruling 73–22 have been satisfied with
changes in the regulations governing little and cigarettes. To rectify the problems respect to such brand. For enforcement
cigars are necessitated by the increased identified in the petition and purposes, each of the seven conditions
differential between tobacco product highlighted above, the petitioners currently required for an advanced ruling
should be included in the certification when, in fact, it is over 200 times the little cigar brands, arguing that it is
submission to TTB. size. premature to discuss ‘‘certification’’ of a
We recommend that this certification be The CAA goes on to state: product as a little cigar without
made a one time requirement for post-MSA knowing what test is to be used. Under
brands. In addition, any material change in The cigarette company proposal also
the appearance, type of tobacco used in the fundamentally mischaracterizes the little the Lorillard-RJR proposal, all of the
filler, and packaging and labeling of the cigar industry by suggesting incorrectly that seven conditions specified in ATF
product would trigger a recertification little cigars are a recent phenomenon. Little Ruling 73–22 for an advance ruling
process. New brands marketed after the cigars have been on the market for almost 40 would have to be included in the
completion of the rulemaking would also be years and, because they were first made on certification, which would also apply to
required to comply with the certification old cigarette machines, have always had a pre-MSA brands if there is any material
process. superficial resemblance to cigarettes. Little change in the product or packaging. The
However, we do not recommend that the cigars, however, have always differed from
cigarettes, in both composition and
CAA asserts that such an approach is
certification process include any affirmative tantamount to a pre-approval scheme, as
action by the TTB in order for the brand to marketing. They are made of cigar—not
cigarette—tobacco, they are wrapped in leaf it would result in immediate review and
be eligible for entering into commerce. In
other words, there would not be a pre- tobacco or in reconstituted tobacco (the inspection of a product coming to
approval process prior to the marketing of a material approved by BATF/TTB for use on market, without any basis for such
post-MSA brand. Rather, the certification cigar making equipment), and they are action.
submissions would form the basis for an clearly labeled and promoted as little cigars. Finally, the CAA takes issue with the
initial level of TTB analysis and review, While it is true that there are new entrants Lorillard-RJR proposal for a ‘‘third party
focusing on those products in the in the little cigar market since the finalization challenge procedure,’’ arguing that such
marketplace where the most significant of the MSA, it is unreasonable to suggest that a procedure would be an invitation to
classification issues are likely to exist. all little cigars, or even all those introduced those with a variety of interests to force
since 1998, are suspect.
The petitioners also requested that little cigar manufacturers to continually
TTB amend the regulations to provide For two reasons, the CAA opposes the defend their products from unwarranted
for a third party challenge procedure. Lorillard-RJR proposal for a compliance and unjustified attack. In addition, the
This procedure would be open to any and enforcement approach. First, the CAA noted that because under Federal
party to demonstrate that tobacco proposal does not provide any new statute the tax status of any particular
products introduced into commerce as guidance on how to distinguish between product must be held in confidence by
‘‘small’’ or ‘‘little’’ cigars do not meet little cigars and cigarettes but rather TTB, Federal legislation would be
the regulatory criteria established by suggests that the factors in ATF Ruling required for TTB to create and
TTB. 73–22 continue to provide a logical implement such a third party challenge
Finally, the petitioners requested that basis for the classification of these procedure.
any efforts to modernize the TTB products. The CAA argues that Ruling
73–22 needs to be supplemented and The 23 States Joint Petition and
regulations be done in conjunction with Amendment
the U.S. Customs and Border Protection that, until this is done, it is premature
to consider compliance and On April 24, 2006, the States of
as they relate to tobacco product Montana, Wisconsin, Oklahoma, Utah,
imports. In addition, the petitioners enforcement procedures.
The CAA then states: Oregon, South Dakota, Vermont,
recommended the inclusion of post- California, Louisiana, Delaware, New
MSA presumption and certification Second, even with new guidance in place,
the cigarette company proposal for York, Arizona, Arkansas, Nebraska,
requirements in 27 CFR part 41. West Virginia, New Mexico, Rhode
compliance and enforcement is unacceptable.
CAA Petition Follow-Up It would create a ‘‘presumption’’ in favor of Island, Wyoming, Nevada, Kentucky,
little cigars marketed prior to the Master Idaho, Hawaii, and Pennsylvania (the
On February 21, 2006, the CAA Settlement Agreement of November 23, 1998. petitioner States) submitted a petition to
submitted a letter with reference to its This ‘‘presumption,’’ however, is TTB requesting the repeal of the
December 19, 2005, petition. This letter meaningless, since pre-MSA brands would definitions of ‘‘cigar’’ and ‘‘cigarette’’ as
is directed to certain issues raised in the ‘‘still be subject to monitoring and challenge provided in 27 CFR 40.11, 41.11, 44.11,
Lorillard-RJR petition. as under existing regulations.’’ More
and 45.11. The petitioner States also
importantly, the unstated corollary to the
The CAA states in this letter that the propose new rules defining ‘‘cigar’’ and
favorable presumption for pre-MSA little
Lorillard-RJR proposal does not offer cigars is that there will be a presumption ‘‘cigarette’’ as used in 26 U.S.C. 5702
much in the way of establishing against little cigars first marketed after the and new procedural rules for cigar and
standards for distinguishing between MSA. The implication is that any such cigarette rulings. The petitioner States
little cigars and cigarettes, but instead product will be presumed to be a cigarette say that they take an active role in
focuses on compliance and enforcement unless the manufacturer can demonstrate protecting the health and safety of their
issues pertaining to these two products. otherwise. The tax, customs, MSA and other citizens. They also state that they find
The CAA further states that the implications of this presumption are unstated that the tax classification of cigars and
Lorillard-RJR proposal would impose but the results would certainly include chaos
cigarettes allows products that are
and confusion, as products move between
regulatory requirements on one small actually cigarettes to be taxed and sold
categories. This negative presumption would
segment of the tobacco industry that apparently apply to pre-MSA brands as to as cigars. Further, the petitioner States
would exceed those imposed on the rest which there is any material change in maintain that this is a growing trend
of the industry. The CAA notes in this appearance, type of tobacco used in the filler, and that it endangers the integrity of the
regard that the domestic sales volume or packaging and labeling of the product. A Federal and State tax systems in
figures for little cigars and cigarettes change in any one of these characteristics addition to the MSA. They also state
provided in the Lorillard-RJR petition would reverse the favorable presumption, that the trend places the health and
are misleading because the petition uses temporarily re-classifying a little cigar as a safety of U.S. citizens, especially
‘‘units,’’ or individual sticks, for little cigarette.
youths, at risk. Specifically, the
cigars and ‘‘packs’’ for cigarettes, which The CAA also opposes the Lorillard- petitioner States address the following
suggests that the cigarette industry is ten RJR proposal that TTB create a topics in their petition:
times the size of the little cigar industry certification procedure for post-MSA • Public Health;
• Federal Definition of Cigar and that is intended to keep stray pieces of cigarettes will not be if they are labeled as
Cigarette; tobacco out of the mouth. In the United cigars. This has led to rolls of tobacco that
• Lost Tax Revenues; States, cigars come in many styles and sizes. are filtered, appear to be cigarettes in brown
Small cigars generally have straight bodies wrapper and packaged in a traditional
• Evasion of MSA Payments;
and weigh between 1.3 and 2.5 grams each. cigarette pack, are being taxed and sold to
• Evasion of State Escrow and Large cigars vary greatly in size and shape. consumers as cigars because they are labeled
Cigarette Directory Laws; They can contain from 5 to 17 grams of as little cigars. But recent surveys on youth
• Health Warnings and Ingredient tobacco. use of little cigars and the manufacturers’
Reporting; Traditionally cigarettes have been wrapped own statements show that ‘‘Little Cigars’’ are
• Confusion in the Marketplace; and in paper. Cigarettes are made of flue-cured being purchased in lieu of cigarettes. ‘‘Little
• Proposed New Rules. tobaccos, not fermented tobaccos. Cigarette Cigars’’ are advertised to consumers as
smoke is intended to be inhaled into the cigarette alternatives and consumers are self-
Public Health lungs, consequently some cigarettes have identifying ‘‘Little Cigars’’ as cigarettes.
The petitioner States address several cellulose acetate filters or other integrated Consumers recognize that a product that
filters that are intended to filter some of the looks like a cigarette, is filtered to be inhaled
concerns regarding the effect that little like a cigarette, and is packaged like a
tar out of the smoke. Cigarette manufacturers
cigars have on public health. They state cigarette is, in fact, a cigarette. Unscrupulous
often add sugar to enhance the flavor of the
that young people are beginning to cigarette smoke. They generally range from manufacturers have exploited the loopholes
smoke little cigars at a higher rate than 68–121 mm. in length and are generally of in Ruling 73–22 by self-classifying cigarettes
they smoke cigarettes. Thus, the less than 28 ring gauge. as cigars. This intentional, unscrupulous
petitioner States are afraid that this Prior to 1965, ‘‘Cigar’’ as used in 26 U.S.C. misclassification of cigarettes as cigars has
increase will reverse the gains they have 5702 was defined as ‘‘any roll of tobacco resulted not only in damage to the public
made in lowering the rate of cigarette wrapped in tobacco’’ and ‘‘Cigarette’’ was health but also in significant lost revenues
defined as ‘‘any roll of tobacco, wrapped in and confusion in the marketplace.
smoking in this segment of the
population. They also allege that young paper or any substance other than tobacco.’’ Lost Tax Revenues
26 U.S.C.S. 5702.
people have greater access to little cigars The petitioner States allege in their
With the advent of reconstituted tobacco,
than cigarettes, because in many states it became possible to machine wrap cigars in petition that the Federal government
cigarettes are required to be sold in a mixture of paper and tobacco. and the States are losing significant tax
packages of 20 sticks or more, whereas Reconstituted tobacco is ground tobacco revenues because cigarettes are
there is no such requirement for little mixed with various adhesives and cellulose improperly taxed as cigars. On the
cigars. The petitioner States assert that fibers. This blurred the line between a cigar Federal front, with the excise tax rate for
little cigars that are sold in packages of and a cigarette. In 1965, Congress enacted
Public Law 89–44 which amended the
small cigars at 4 cents per pack or 40
less than 20 sticks, such as packages of cents per carton and that the rate for
eight sticks, five sticks, or one stick, definitions of cigar and cigarette to those we
have today. The legislative history of Public cigarettes at 39 cents per pack or $ 3.90
would be less expensive and thus more per carton, there is tax difference of
Law 89–44 describes how technology created
accessible for younger buyers than a the problem of distinguishing between cigars $3.50 per carton. Further, the petitioner
package of 20 sticks. They also note that and cigarettes. States suggest the following with regard
the flavors such as strawberry, cherry, to lost Federal tax revenue:
and vanilla used in some little cigars The petitioner States also included
make these products attractive to the the following statement from the From 1999 to 2005, the total little cigars
young. legislative history of Public Law 89–44 sales (domestic, PR & imported) increased by
to describe the nature of the problem of over 1.7 billion sticks, or 79%. During this
The petitioner States also address the same time period cigarette sales decreased by
general health effects of cigars. distinguishing between cigars and
cigarettes that led to the legislation: over 20%. The States believe that consumers
Specifically, they state that ‘‘[C]igar are buying the cigarettes that are
smokers face a risk of death from The introduction of reconstituted intentionally misclassified as much cheaper
laryngeal, oral or esophageal cancer that (homogenized) tobacco for use as a wrapper ‘‘Little Cigars’’ in order to avoid the high
is 4 to 10 times greater than the risk for rolls of tobacco had created problems cigarette prices. If we assume that this
faced by nonsmokers.’’ regarding the existing distinction between a increase is all due to the improperly labeled
cigar and a cigarette. Reconstituted tobacco products, the federal excise taxes lost total
The petitioner States argue that sales can be used to wrap rolls of tobacco that $34 million, based upon the applicable tax
of little cigars are on the increase and closely resemble cigarettes. Moreover, it rate of $3.90 per carton.
that in some instances the marketing of possesses many of the properties of paper, Almost as much federal excise taxes are
these products can be misleading. including suitability for use in high-speed lost even if the shorter time period, from
Specifically, they state that ‘‘[L]ittle cigarette manufacturing machinery. 2002 to 2005, is selected. From 2002 to 2005,
Cigar makers have encouraged smokers ‘‘Little Cigar’’ sales increased over 1.6 billion
The petitioner States further argued as sticks, or 69%. The federal excise taxes lost
to identify Little Cigars as cigarettes follows based on the legislative history
through their marketing practices.’’ on this increase, at $3.90 per carton, total $32
and the wording of the amended million.
Federal Definition of Cigar and Cigarette definitions: ‘‘Clearly Congress intended
that ‘‘cigarette’’ would include a Evasion of MSA Payments
The petitioner States included the
product wrapped in something that The petitioner States point out that
following points concerning the
contains tobacco if it was likely to be the MSA payments to the States are
evolution of the Federal definitions of
sold as or purchased as a cigarette.’’ based on the sales of cigarettes and not
cigar and cigarette: The petition noted the issuance of cigars. Further, they state that because
Traditionally cigars have been wrapped in Revenue Ruling 69–198, which was MSA payments are calculated based on
a leaf of tobacco. Cigars are made of air-cured subsequently superseded by ATF Ruling the Federal excise taxes paid for
tobacco that is aged and subjected to a multi- 73–22. The petition then stated the cigarettes, little cigars are not included
step fermentation process that reduces sugar following regarding the difficulties with
content. Traditionally, cigars are also
in the calculation of MSA payments.
unflavored. Cigar smoke is not intended to be
Ruling 73–22: The petitioner States argue that this
inhaled, so traditionally cigars do not have There are several difficulties with Rev. Rul. creates a financial incentive to shift a
integrated filters. Sometimes, however, cigars 73–22. The Ruling assumes that products that product classification from a cigarette to
have a mouthpiece made of plastic or wood are likely to be sold as or purchased as a cigar to avoid making MSA payments.
They note that the MSA payment for under both State law and Federal law. g. It contains any other indicia that the
2005 was $4.25 per carton. Further, they suggest that TTB ‘‘take the product fits within the definition of cigarette
lead to establish clear, objective, non-lab in 26 U.S.C. 5702(b).
Evasion of State Escrow and Cigarette Proposed New Rule III—Procedure.
dependent standards that create a clear
Directory Laws 1. A manufacturer shall request an advance
federal regulatory framework into which ruling from the bureau as to any product a
The petitioner States point out that the states may integrate their laws.’’ manufacturer or importer wishes to market as
the tobacco product manufacturers that a cigar.
did not join the MSA (referred to as The States’ Proposed New Rules
2. The bureau shall make an advance
non-participating manufacturers) still ruling as to whether a product is a cigar
The petitioner States included three
must make annual payments into within the meaning of 26 U.S.C. 5702(a),
proposed new rules designed to: (1)
escrow accounts held by the MSA using the criteria above and the
Preserve the integrity of the cigar characteristics of the tobacco product, its
signatory States; in 2005 the escrow
classification, (2) fairly define cigarettes packaging and labeling, and the totality of the
amount per carton was $4.16. The
based upon their design characteristics, circumstances.
payments are based on the
and (3) set forth a procedure for 3. Along with a request for determination,
manufacturer’s sales of products
determining if a product is a cigar or a the manufacturer shall submit the following:
stamped as cigarettes in each State, and a. The package and any larger consumer
the State Directory laws list the names cigarette under Federal law. The States’
proposed new rules were outlined in the container such as the carton, or the detailed
of the manufacturers who make escrow graphics for these if they have not been
payments and thus are allowed to sell petition as follows:
printed;
their products in the State. However, Proposed New Rule I—Cigar. b. A statement of the merchandising theme
cigars are not subject to the escrow A cigar is a roll of tobacco that: and copies of all advertising that mentions or
requirements. Therefore, the petitioner 1. Is wrapped in 100% natural leaf tobacco; depicts the product and point of sale
States allege that when a cigarette or merchandising material for the product;
manufacturer is sanctioned for failing to 2. (a) Is wrapped in any substance that c. A statement under penalty of perjury
contains 75 percent or more tobacco which that the merchandising and advertising
make escrow payments, the materials submitted are of the exact, actual
did not in the reconstitution process lose its
manufacturer simply repackages its tobacco character (taste, aroma, identifiable advertising that will be used in the United
cigarettes as ‘‘Little Cigars’’ and chemical components) and is of a color States;
continues to sell them in the State. consistent with that of the natural leaf d. A statement under penalty of perjury
tobaccos traditionally used as a wrapper for that the manufacturer will obtain a new
Health Warnings and Ingredient ruling from the Bureau if any material
Reporting American cigars; and
(b) Is not a cigarette within the meaning of modifications are made to the marketing or
The petitioner States state that the [New Rule II]. advertising of the product prior to any
Federal Cigarette Labeling and Proposed New Rule II—Cigarette. change in the existing marketing or
Advertising Act (FCLAA) administered A cigarette is a roll of tobacco that: advertising;
by the Federal Trade Commission (FTC) 1. Is wrapped in paper or any substance e. A statement of composition of the
not containing tobacco; or wrapper including the type, geographic
requires health warning labels and origin, treatment, age, and percentage of each
ingredient reporting for cigarettes but 2. Is wrapped in a substance containing
tobacco, and is likely to be offered to, or tobacco used;
that no such requirement exists for f. 2,500 square inches (17 square feet) of
purchased by, consumers as a cigarette. A
cigars. The petitioner States further note the wrapper material;
roll of tobacco wrapped in a substance
that in 2000 the FTC and the seven containing tobacco (other than 100 percent g. A statement of all the materials,
largest cigar manufacturers entered into chemicals, and additives and proportion of
natural tobacco leaf) shall be considered to be
an agreement to place warning labels on each used in the binder, and the production
likely to be offered to, or purchased by,
their cigars. They argue that one of the process;
consumers as a cigarette if any of the
warning labels included in the 2000 h. 400 sticks of the finished product (if
following are true:
weighing not more than 10 pounds a
settlement, ‘‘Cigar smoking can cause a. It has a cellulose acetate or other
thousand), or 200 sticks of the finished
cancers of the mouth and throat, even if integrated filter; product (if weighing more than 10 pounds a
you do not inhale’’, would be highly b. The tobacco used in the filler contains thousand);
misleading if the product in question flue-cured or unfermented tobaccos or has i. A statement under penalty of perjury of
were actually a cigarette and not a cigar flavor additives; all the materials, chemicals, and additives
because the warning in question c. The tobacco in the filler, binder, or and proportion of each used in the filler and
wrapper contains any sucrose; the production process, including, but not
assumes that the consumer will not d. The packaging does not clearly and
inhale when smoking the product. limited to, the proportion of fermented air-
conspicuously declare that the product is a cured tobacco, flue-cured tobacco and
Confusion in the Marketplace cigar; unfermented tobacco;
e. The appearance, packaging and/or j. A statement under penalty of perjury that
The petitioner States point out that labeling of the product meets three or more the samples submitted are of the exact, actual
several States have looked at ‘‘Little of the following criteria: product that will be sold in the United States;
Cigars’’ and have determined that they i. The product is sold in packs containing and
are cigarettes as defined by the State for twenty or twenty-five sticks; k. A statement under penalty of perjury
state tax purposes. The petitioner States ii. The product is available for sale in that the manufacturer will obtain a new
further contend that ‘‘[i]f the States cartons of 10 packs; ruling from the Bureau if any modifications
change their tax definitions without a iii. The product is sold in soft packs, hard are made to the composition or ingredients
corresponding change in the TTB packs, flip-top boxes, clam shells, or other of the product prior to sales of any modified
regulations, the inconsistencies between cigarette-type boxes; product.

iv. The product weighs less than three 4. If the manufacturer requests a ruling, the
the two definitions cause tremendous
pounds per thousand sticks; or manufacturer shall submit all other relevant
confusion in the marketplace.’’ To clear v. The product is the diameter and length evidence required to enable the bureau to
up this confusion, the petitioner States of a commercially-manufactured cigarette; make a ruling. Pending a ruling by the
propose that TTB revise its definitions f. The product is marketed or advertised to Bureau, the manufacturer may only sell its
of cigar and cigarette so that the consumers as a cigarette or cigarette product as a cigarette and comply with all
products can be treated consistently substitute; or laws applicable to cigarettes; such sales may
occur only after the manufacturer notifies the The petition amendment concludes with regulations to clarify the distinction
revenue departments of the states where the the following statement: between cigars and cigarettes for tax
product will be sold that a ruling by the We believe it is obvious that the majority purposes. This being said, TTB has
Bureau is still pending. of this astonishing growth is due to the fact authority to interpret those definitions
5. Not later than January 1, 2007, the that cigarettes are being passed off as ‘‘little
Bureau shall develop and publish on its cigars’’ and that, absent effective action by
and determine how they are applied to
Internet Web site a directory listing of all this agency, this dangerous and illegal specific products. Several basic
rulings by the Bureau regarding the activity will only intensify * * * The States interpretations of those definitions
classification of a tobacco product as a cigar urge the TTB to act now to adopt new rules underlie the regulatory changes
or as a cigarette, including the name and and regulations that clearly classify as a proposed in this document.
address of the manufacturer requesting the cigarette through specific, objective criteria, One interpretation concerns the effect
product classification, the product brand products that are properly a cigarette— of the usage of the terms ‘‘leaf tobacco’’
family and if the trademark for the brand namely ‘‘any roll of tobacco wrapped in any and ‘‘substance containing tobacco’’ in
family is not owned by the manufacturer, the substance containing tobacco which, because
name and address of the owner of the
these definitions. It is the position of
of its appearance, the type of tobacco used in TTB that a ‘‘roll of tobacco’’ that is
trademark. the filler, or its packaging and labeling, is wrapped in ‘‘leaf tobacco’’ must be
On May 18, 2006, the Assistant likely to be offered to, or purchased by,
consumers as a cigarette.’’ The States also
classified as a cigar and never as a
Attorney General for the State of cigarette. This position is based on the
Montana, Kelly M. O’Sullivan, request that TTB adopt policies and
procedures for classification which prevent fact that whereas both definitions
submitted an amendment to the petition include a reference to a ‘‘substance
manufacturers from self-classifying their
submitted by the 23 States on April 24, cigarettes as cigars in order to avoid the containing tobacco’’ when referring to
2006. The amendment was submitted to attendant federal and state regulations, laws, the wrapper material, the term ‘‘leaf
add an additional 16 States and one taxes and payments. tobacco’’ appears as a wrapper reference
territory to the original petition, only in the ‘‘cigar’’ definition. The terms
bringing the supporters of this petition The Need for Regulatory Changes
‘‘leaf tobacco’’ and ‘‘substance
to 39 States and one territory, as Based on the considerations that led containing tobacco’’ were introduced
follows: Alaska, Arizona, Arkansas, to the total reducing sugars study when the definitions were amended in
California, Connecticut, Delaware, discussed above, and in light of the 1965 (prior to that amendment, the cigar
Georgia, Hawaii, Idaho, Illinois, Iowa, uncertainties and other problems definition referred to a roll of tobacco
Kansas, Kentucky, Louisiana, Maine, outlined in the three petitions wrapped in ‘‘tobacco’’ and the cigarette
Maryland, Massachusetts, Michigan, summarized above, TTB believes that a definition referred to a roll of tobacco
Minnesota, Montana, Nebraska, Nevada, pressing need for regulatory wrapped in ‘‘paper or any substance
New Mexico, New Jersey, New York, improvements exists. TTB notes in this other than tobacco’’). The fact that
North Carolina, Oklahoma, Oregon, regard that the only extant regulatory Congress chose not to use the new
Pennsylvania, Rhode Island, South standard for distinguishing between wrapper term ‘‘leaf tobacco’’ in the
Carolina, South Dakota, Tennessee, cigars and cigarettes consists of the cigarette definition is evidence of an
Utah, Vermont, Washington, West definitions of these terms, which merely intent to restrict it to a cigar wrapper
Virginia, Wisconsin, Wyoming, and repeat the statutory definitions. The context.
Guam. only other published source for As a corollary to the rule stated above,
In addition, the petition amendment guidance in this area is ATF Ruling 73– a distinction must be made between
included more recent information 22, which does not have the same force ‘‘leaf tobacco’’ and a ‘‘substance
pertaining to the consumption of little and effect as a regulation. containing tobacco.’’ This is necessary
cigars and cigarettes. Specifically, the We also must emphasize that tax both because the statutory definition of
petition amendment states: administration under the IRC is the only ‘‘cigar’’ uses both terms in the
Since the States filed our petition with the appropriate basis for the regulatory disjunctive (thus making an implicit
TTB, the following official information from changes proposed in this document. distinction between them) and because
the United States government, U.S. Although the CAA, Lorillard-RJR, and including leaf tobacco within the
Department of Agriculture, Tobacco Outlook the petitioner States petitions stress the meaning of ‘‘substance containing
has come to our attention. While cigarette significance of the signing of the Master tobacco’’ would allow a ‘‘cigarette’’ to
consumption has continued to decline, small Settlement Agreement (MSA), in have a wrapper consisting of leaf
cigar consumption increased significantly in
2005 over 2004. ‘‘Consumption of little cigars particular regarding the alleged effect of tobacco, contrary to the rule stated
reached 4,037 million cigars, compared with the MSA on the marketing of little above.
2,917 million in 2004. Popularity of little cigars, we note that TTB has no Similarly, it is the position of TTB
cigars increased in part due to lower tax rates jurisdiction to act under the MSA. that a ‘‘roll of tobacco’’ that is wrapped
than cigarettes and because Master Similarly, although the petitioner States in a ‘‘substance not containing tobacco’’
Settlement Agreement payments are not cited a number of public health issues must be classified as a cigarette and
assessed on small cigars as they are with in their petition, such issues are clearly never as a cigar. This position is based
cigarettes.’’ [U.S. Dep’t of Agriculture, on two factors: (1) The presence of
Tobacco Outlook. Wash., DC: U.S. Dep’t of
outside the scope of Chapter 52 of the
Agric., Econ. Res. Serv., 2005, p. 2. The IRC. Accordingly, the proposed tobacco in the wrapper (either as ‘‘leaf
Tobacco Outlook and accompanying tables regulatory amendments contained in the tobacco’’ or in a ‘‘substance containing
are available at: usda.mannlib.cornell.edu/ document are directed only to enforcing tobacco’’) is a prerequisite to
reports/erssor/specialty/tbs-bb/2006/ the provisions of Chapter 52 of the IRC. classification as a cigar under the cigar
tbs260.pdf.] Data compiled from reports of definition; and (2) only the first of the
the Bureau of Alcohol, Tobacco and Basic Interpretative Principles two cigarette definitions refers to a
Firearms, and the Bureau of the Census TTB recognizes that the statutory ‘‘substance not containing tobacco.’’
indicate that per capita consumption of small definitions of ‘‘cigar’’ and ‘‘cigarette’’ Finally, and most important, it is the
cigars increased from 10.4 small cigars per
person in 2003 to 12.1 small cigars in 2004 are controlling and are not susceptible position of TTB that, in the case of a
and 17.2 small cigars in 2005, an increase of to modification by regulation. ‘‘roll of tobacco’’ that is wrapped in a
65% since 2003 and an increase of 42% in Accordingly, we must operate within ‘‘substance containing tobacco,’’ the
the most recent year. those definitions in amending the statutory definition of ‘‘cigar’’ requires a
threshold determination of whether the objective regulatory standards for compliance from the taxpayer to the
product in question is a cigarette; if it distinguishing between cigars and Government. We believe that the
is, it must be treated as a cigarette for cigarettes, a properly designed following statement from ATF Ruling
tax purposes. We note in this regard that certification procedure could provide a 73–22 continues to reflect the proper
a ‘‘roll of tobacco’’ wrapped in a workable solution for manufacturers, agency position on this issue:
‘‘substance containing tobacco’’ is importers, and TTB. Manufacturers and importers have the
potentially classifiable either as a cigar initial responsibility for (1) determining
Third Party Challenge Procedure
or as a cigarette, because those words whether material intended for use as a
are used both in the ‘‘cigar’’ definition TTB agrees with the CAA that the wrapper for rolls of tobacco is a ‘‘substance
and in the second ‘‘cigarette’’ definition. third party product classification containing tobacco,’’ (2) determining whether
However, the words ‘‘other than any roll challenge procedure suggested in the a roll of tobacco wrapped in such material
of tobacco which is a cigarette within Lorillard-RJR petition would be has the characteristics of a cigar or a
unworkable. Such a challenge cigarette, (3) knowing whether the product is
the meaning of subsection (b)(2)’’ in the
likely to be offered to or purchased by
statutory definition of ‘‘cigar’’ require procedure would put TTB in the
consumers as a cigar or a cigarette, and (4)
the reader first to determine whether it position of having to mediate a dispute paying the tax at the proper rate.
is described by the second definition of involving private parties, a position that
‘‘cigarette.’’ If it is so described, it must TTB should not occupy. Moreover, any However, we no longer believe that the
be classified as a cigarette role that TTB might perform in such a advance ruling procedure referred to in
notwithstanding the fact that it also dispute would inevitably involve the ATF Ruling 73–22 is the best way to
meets the description of a ‘‘roll of issue of disclosure of tax return ensure compliance. Rather, we believe
tobacco * * * wrapped in any information, which in most cases is that a procedure involving the advance
substance containing tobacco’’ prohibited under 26 U.S.C. 6103. We submission of a written tax
contained in the definition of ‘‘cigar.’’ should point out, however, that any classification certification to TTB is the
person, including a competitor, may best approach because it places the
Issues Raised in the Petitions initial responsibility where it lies under
refer information to us about a
TTB has carefully reviewed the manufacturer’s or importer’s improperly the IRC, that is, with the manufacturer
comments and recommendations made classified tobacco product. or importer. The certification procedure
in the three submitted petitions. In that TTB proposes is discussed in more
addition to our general agreement with Coordination With Customs and Border detail later in this document.
all of the petitioners regarding the need Protection
Status of ATF Ruling 73–22 and ATF
for regulatory action to clarify the TTB agrees with the suggestion in the Procedures 73–5 and 76–2
distinction between cigars and Lorillard-RJR petition regarding
cigarettes, we note the following with coordination with Customs and Border With the exception of the reference to
regard to the tax-related points made in Protection (CBP) on regulatory changes the advance ruling procedure, TTB is in
the petitions. as they affect imported products. We substantial agreement with the
consulted with CBP in connection with standards and statements contained in
Creation of an MSA-Based Presumption ATF Ruling 73–22. However, as noted
the drafting of this document, and we
TTB does not concur with the will continue to closely coordinate with above, it is preferable to have tax
Lorillard-RJR petition suggestion to CBP on our regulatory and related classification standards reflected in the
create a (rebuttable) presumption in actions as they relate to import text of a regulation rather than in a
favor of those little cigar brands transactions falling under the guidance document that was not the
marketed prior to the MSA, for two jurisdiction of CBP. subject of public notice and comment
reasons. First, the adoption of such a procedures. Accordingly, we propose to
presumption would give the MSA an Proposed New Rules To Define Cigars incorporate the substance of ATF Ruling
inappropriate role in tax classification. and Cigarettes 73–22 in the regulations, with the result
As indicated above, TTB’s regulatory While TTB agrees with the suggestion that ATF Ruling 73–22 will be
authority proceeds from the IRC, not the of the petitioner States that specific new superseded in its entirety upon
MSA. TTB also agrees with the rules are necessary to clarify the adoption of the proposed regulatory
observation made by the CAA in its distinction between cigars and changes as a final rule.
response to the Lorillard-RJR petition cigarettes, we do not agree with their With regard to ATF Procedures 73–5
that such a presumption could lead to proposed new definitions approach, and 76–2, TTB notes that the tobacco
confusion, particularly as products because, as noted above, the IRC industries in the United States and
move from one category to another or definitions control and cannot be abroad have changed the way they
are subjected to a material change in changed by regulatory action. Rather, manufacture and market their products,
composition or presentation. we believe that the proper approach is and this may be especially true for little
to set forth specific rules that interpret cigars. As a result of these changes and
Certification for Post-MSA Brands in view of the technological advances
and apply the IRC definitions for tax
TTB does not agree with the Lorillard- classification purposes. The made with regard to the analytical
RJR suggestion to require a one-time acceptability of the specific rules instrumentation used to examine
certification for post-MSA brands, for suggested by the petitioner States is tobacco products, TTB believes it will
the same reason that an MSA-based addressed below in the discussion of the be necessary to update the analytical
presumption would not be appropriate. proposed regulatory texts set forth in standards it uses to evaluate these
However, TTB does not agree with the this document. products. Moreover, the new standards
CAA assertion that it would be proposed in this document rely in part
premature to consider the certification Proposed Advance Ruling Procedure on the results of the total reducing
concept because it is not known what TTB is opposed to the new advance sugars study discussed above, which
‘‘test’’ is to be used. For reasons set forth ruling procedure proposed by the requires an analytical approach not
in more detail below, we believe that, petitioner States, because this would covered by the existing Procedures. We
with the adoption of improved, improperly shift the burden of tax are publishing elsewhere in this issue of
the Federal Register a notice describing The proposed definitions do not taxpayer to initially determine the tax
the analytical methodology that TTB include the additional two criteria in status of a tobacco product. TTB
uses to determine the total reducing ATF Ruling 73–22 requiring that the believes that, with the adoption of the
sugar content of tobacco products. reconstituted tobacco not lose its classification standards proposed in this
tobacco character (e.g. taste, aroma, document, manufacturers will be in a
Discussion of the Proposed
identifiable chemical components) and much better position to do that.
Amendments
be of a color consistent with that of the Manufacturers will also be able to assess
We are proposing to amend parts 40, natural tobacco leaf tobaccos more readily whether a change in the
41, 44, and 45 to clarify the tax traditionally used as a wrapper for formulation or manufacturing process
classification of cigars and cigarettes, American cigars. This criterion was also for their products results in a change in
with particular emphasis on the reflected in the superseded Revenue their tax classification. The new section
adoption of standards in the regulations Ruling 69–198 that was issued after the in each case also requires the
to distinguish between these two classes 1965 statutory amendments to the submission of a new certification if
of products. The proposed amendments, definitions of cigars and cigarettes in there is a change to a previously
which are essentially the same for each order to help implement those changes certified product.
part, involve: to the law. TTB believes that these
(1) The addition of two new standards are too subjective and should Notice Requirements for Cigars
definitions in §§ 40.11, 41.11, 44.11, and not be included in the proposed Finally, the new paragraph (b) added
45.11 and, in each current definition of definitions, which aim to establish an to the cigar notice requirements in the
‘‘cigar’’ and ‘‘cigarette,’’ the inclusion of objective standard. four parts reflects primarily the terms of
a cross-reference to the new clarifying Finally, the two definitions refer to ATF Ruling 73–22. These additional
classification provisions. ‘‘leaf or other fibrous material from the
notice requirements are intended to
(2) The addition of two new sections plant Nicotiana tabacum or the plant
ensure that a cigar is fully and clearly
in each part (§§ 40.12 and 40.13, 41.12 Nicotiana rustica’’ because the former is
marked as such, so that it would not be
and 41.13, 44.12 and 44.13, and 45.12 the plant most commonly associated
‘‘likely to be offered to, or purchased by,
and 45.13), the first one of which in with ‘‘tobacco’’ (see, for example,
consumers as a cigarette’’ within the
each part sets forth the clarifying Webster’s Third New International
meaning of the second cigarette
classification rules and the second of Dictionary of the English Language,
definition.
which requires a cigar manufacturer or unabridged, 1993, Merriam Webster,
importer to submit a classification Inc. Springfield, MA) and because we Effective Date Considerations
certification to TTB; and understand that the latter is also used in
(3) The addition of a new paragraph tobacco products on a more limited In addition to soliciting comments on
(b) setting forth additional notice scale. the proposed regulatory text
requirements for cigars in §§ 40.214, amendments set forth below and on the
Classification of Cigars and Cigarettes position of TTB on the issues discussed
41.73, 44.186, 44.253, and 45.44.
The following specific points are The ‘‘classification of cigars and in the preamble of this document, we
noted regarding the proposed regulatory cigarettes’’ section added to each part invite comments on whether, and if so
amendments. reflects the classification principles that for what period, a delayed effective date
we outlined earlier in this document. In should apply to any final rule action on
New Definitions addition, it incorporates a ‘‘3.0 percent this matter. Noting in particular the
The two new definitions cover two by weight of total reducing sugars’’ proposed new pre-removal cigar
terms, ‘‘substance containing tobacco’’ standard as a dividing line between the certification procedure, we are
and ‘‘substance not containing tobacco,’’ two classes of products, with cigars at interested in knowing whether a
the first of which appears in the existing or below that level and cigarettes above delayed effective date would be needed
statutory and regulatory definitions of it. This reflects the results of our total to afford manufacturers and importers
‘‘cigar’’ and ‘‘cigarette’’ and the second reducing sugar study, which yielded a sufficient time to obtain all of the facts
of which is only in the ‘‘cigarette’’ clear, objective criterion to distinguish necessary to execute and file a proper
definition. We included both because between these products that we believe certification.
including only one of them would not is more complete than the ‘‘contains any
in all cases clarify the meaning (scope) sucrose’’ standard for a cigarette Public Participation
of the other defined term. The suggested by the petitioner States Comments Sought
‘‘substance containing tobacco’’ because, as explained earlier, sucrose is
definition refers specifically (but not captured in the total reducing sugar TTB requests comments on the
exclusively) to ‘‘reconstituted tobacco’’ values disclosed in the study. The proposed amendments to our
based on the significance of this proposed standards for classification as regulations discussed in this notice from
material in this context, as discussed a cigarette also incorporate some anyone interested. Please submit your
earlier in this document. specific criteria from both the petitioner comments by the closing date shown
The two definitions incorporate the States petition and ATF Ruling 73–22. above in this notice. Your comments
two-thirds rule, rather than the 75 The ‘‘cigar certification’’ section must include this notice number (Notice
percent standard proposed by the added to each part requires a No. 65) and your name and mailing
petitioner States (see the description of manufacturer or importer of cigars to address. Your comments must be legible
the two-thirds rule in the discussion of have filed with TTB’s National Revenue and written in language acceptable for
ATF Ruling 73–22 earlier in this Center a certification that the product in public disclosure. We do not
preamble). We note in this regard that question meets the rules for acknowledge receipt of comments, and
the two-thirds rule is familiar to the classification as a cigar prior to removal we consider all comments as originals.
trade and has been the standard since of the product. This certification reflects Submitting Comments
ATF Ruling 73–22 was issued, and our the principle stated in ATF Ruling 73–
experience since 1973 does not support 22, and reaffirmed in this document, You may submit comments in one of
any change in this standard. that it is the legal obligation of the five ways:
• Mail: You may send written all cases, the full comment will be Comments are invited on: (a) Whether
comments to TTB at the address listed available in the TTB Information the collections of information are
in the ADDRESSES section. Resource Center. To access the online necessary for the proper performance of
• Facsimile: You may submit copy of this notice and the submitted the functions of the agency, including
comments by facsimile transmission to comments, visit http://www.ttb.gov/ whether the information shall have
202–927–8525. Faxed comments must— tobacco/tobacco_rulemaking.shtml. practical utility; (b) the accuracy of the
(1) Be on 8.5- by 11-inch paper; Select the ‘‘View Comments’’ link under agency’s estimate of the information
(2) Contain a legible, written this notice number to view the posted collection burden; (c) ways to enhance
signature; and comments. the quality, utility, and clarity of the
(3) Be no more than five pages long. information to be collected; (d) ways to
This limitation assures electronic access Paperwork Reduction Act
minimize the information collection
to our equipment. We will not accept The collection of information burden on respondents, including
faxed comments that exceed five pages. contained in this notice of proposed through the use of automated collection
• E-mail: You may e-mail comments rulemaking has been submitted to the techniques or other forms of information
to nprm@ttb.gov. Comments transmitted Office of Management and Budget technology; and (e) estimate of capital or
by electronic mail must— (OMB) for review in accordance with start up costs and costs of operations,
(1) Contain your e-mail address; the Paperwork Reduction Act of 1995 maintenance, and purchase of services
(2) Reference this notice number on (44 U.S.C. 3507). An agency may not to provide information.
the subject line; and conduct or sponsor, and a person is not
(3) Be legible when printed on 8.5- by required to respond to, a collection of Regulatory Flexibility Act
11-inch paper. information unless the collection of Pursuant to the requirements of the
• Online form: We provide a information displays a valid control Regulatory Flexibility Act (5 U.S.C.
comment form with the online copy of number. chapter 6), we certify that this notice of
this notice on our Web site at http:// The current information collections proposed rulemaking will not have a
www.ttb.gov/tobacco/ are in §§ 40.214, 44.186, 44.253, and significant economic impact on a
tobacco_rulemaking.shtml. Select the 45.44, which was approved under OMB substantial number of small entities.
‘‘Send comments via e-mail’’ link under control number 1513–0101 and The proposed regulations primarily
this notice number. included notice requirements for all codify and clarify existing
• Federal e-rulemaking portal: To cigars. The estimated average burden for
administrative tax classification
submit comments to us via the Federal the current information collections is
principles and practices. Accordingly, a
e-rulemaking portal, visit http:// one hour. The new information
regulatory flexibility analysis is not
www.regulations.gov and follow the collection requirements are in new
required. Pursuant to section 7805(f) of
instructions for submitting comments. §§ 40.214(b), 41.73, 44.186(b), 44.253(b),
the Internal Revenue Code of 1986, we
You may also write to the and 45.44(b) and involves notice
will submit this notice of proposed
Administrator before the comment requirements for all exported cigars and
rulemaking to the Chief Counsel for
closing date to ask for a public hearing. additional notice requirements for all
Advocacy of the Small Business
The Administrator reserves the right to small cigars. This information is
Administration for comment on its
determine whether to hold a public required to ensure proper excise
impact on small businesses.
hearing. payment of taxes on tobacco products.
The likely respondents are businesses or Executive Order 12866
Confidentiality other for-profit institutions, including This proposed rule is not a significant
All submitted material is part of the partnerships, associations, and regulatory action as defined by
public record and subject to disclosure. corporations. Executive Order 12866. Therefore, it
Do not enclose any material in your The notice information currently
requires no regulatory analysis.
comments that you consider required to be displayed on cigar labels
confidential or inappropriate for public is minimal. It is information that is Drafting Information
disclosure. maintained by manufacturers as part of
The principle author of this document
cost and quality control measures. Cigar
Public Disclosure is Linda Wade Chapman, Regulations
manufacturers and importers do not
You may view copies of this notice, and Rulings Division, Alcohol and
expend significant time or expense
the related rulemaking petitions, and Tobacco Tax and Trade Bureau.
collecting or providing the notice
any comments we receive on this information. Accordingly, the new List of Subjects
proposal by appointment at the TTB collection of information will not result
Information Resource Center at 1310 G 27 CFR Part 40
in an increased burden on respondents.
Street, NW., Washington, DC 20220. Comments on the collection of Cigars and cigarettes, Claims,
You may also obtain copies at 20 cents information may be sent by e-mail to Electronic funds transfers, Excise taxes,
per 8.5- by 11-inch page. Contact the OMB at Imports, Labeling, Packaging and
TTB information specialist at the above Alexander_T._Hunt@omb.eop.gov, or by containers, Reporting and recordkeeping
address or by telephone at 202–927– paper mail to Office of Management and requirements, Surety bonds, Tobacco.
2400 to schedule an appointment or to Budget, Attention: Desk Officer for the
27 CFR Part 41
request copies of comments. Department of the Treasury, Office of
We will post this notice and any Information and Regulatory Affairs, Cigars and cigarettes, Claims, Customs
comments we receive on this proposal Washington, DC 20503. A copy should duties and inspection, Electronic funds
on the TTB Web site. All name and also be sent to TTB by any of the transfers, Excise taxes, Imports,
address information submitted with methods previously described. Labeling, Packaging and containers,
comments, including e-mail addresses, Comments should be submitted Puerto Rico, Reporting and
will be posted. We may omit within the time frame that comments recordkeeping requirements, Surety
voluminous attachments or material that are due regarding the substance of the bonds, Tobacco, Virgin Islands,
we consider unsuitable for posting. In regulation. Warehouses.
27 CFR Part 44 from the plant Nicotiana tabacum or the the certification with the National
plant Nicotiana rustica. Revenue Center, Alcohol and Tobacco
Aircraft, Armed forces, Cigars and Tax and Trade Bureau, 550 Main Street,
cigarettes, Claims, Customs duties and * * * * *
3. New §§ 40.12 and 40.13 are added Cincinnati, Ohio 45202. The
inspection, Excise taxes, Exports, certification must be in the following
Foreign trade zones, Labeling, Packaging to read as follows:
form:
and containers, Reporting and § 40.12 Classification of cigars and
recordkeeping requirements, Surety cigarettes. I, lll lll ll (name of person
bonds, Tobacco, Vessels, Warehouses. The rules set forth in this section executing certification) of
control in determining whether a llllllllll (name and
27 CFR Part 45 address of manufacturer) hereby certify
tobacco product is classified as a cigar
Administrative practice and or as a cigarette for purposes of this part. under penalty of perjury that the
procedure, Authority delegations (a) Classification of cigars. (1) product designated
(Government agencies), Cigars and General. A tobacco product is classified llllllllll (brand and style
cigarettes, Excise taxes, Labeling, as a cigar if: of product) ll complies with ll
Packaging and containers, Reporting (i) It consists of a roll of tobacco does not comply with (check one) the
and recordkeeping requirements, wrapped in leaf tobacco; or rules for classification as a cigar set
Tobacco. (ii) It consists of a roll of tobacco that forth in 27 CFR 40.12.
contains no more than 3.0 percent by llllllllll (Signature and
Proposed Amendments to the Date).
Regulations weight of total reducing sugars and that
is wrapped in a substance containing (b) Change in product. If, after the
For the reasons discussed in the tobacco, and it is not classifiable as a filing of a certification for a product
preamble, we propose to amend 27 CFR cigarette under paragraph (a)(2) of this under paragraph (a) of this section, there
parts 40, 41, 44, and 45 as set forth section. is any change in the composition or
below. (2) Cigarette classification presentation of that product, the
precedence. A tobacco product manufacturer must file a new
PART 40—MANUFACTURE OF consisting of a roll of tobacco wrapped certification that:
TOBACCO PRODUCTS AND in a substance containing tobacco is (1) The product complies with the
CIGARETTE PAPERS AND TUBES classified as a cigarette rather than as a rules for classification as a cigar; or
cigar if it is described in paragraph (2) The product does not comply with
1. The authority citation for part 40 the rules for classification as a cigar.
(b)(2) or (b)(3) of this section.
continues to read as follows: (b) Classification of cigarettes. A 4. Section 40.214 is revised to read as
Authority: 26 U.S.C. 5142, 5143, 5146, tobacco product is classified as a follows:
5701, 5703–5705, 5711–5713, 5721–5723, cigarette if:
5731, 5741, 5751, 5753, 5761–5763, 6061, § 40.214 Notice for cigars.
(1) It consists of a roll of tobacco
6065, 6109, 6151, 6301, 6302, 6311, 6313, wrapped in paper or in any substance (a) General. Before removal subject to
6402, 6404, 6423, 6676, 6806, 7011, 7212, tax, every package of cigars shall have
7325, 7342, 7502, 7503, 7606, 7805; 31 U.S.C.
not containing tobacco;
(2) It consists of a roll of tobacco that adequately imprinted on it, or on a label
9301, 9303, 9304, 9306. securely affixed to it:
contains more than 3.0 percent by
2. In § 40.11, a new sentence is added weight of total reducing sugars and that (1) The designation ‘‘cigars’’;
at the end of the definition of ‘‘Cigar,’’ is wrapped in a substance containing (2) The quantity of cigars contained in
a new sentence is added at the end of tobacco; or the package; and
paragraph (2) in the definition of (3) It consists of a roll of tobacco (3) For small cigars, the classification
‘‘Cigarette,’’ and new definitions of wrapped in a substance containing of the product for tax purposes (i.e.,
‘‘Substance containing tobacco’’ and tobacco; and— either ‘‘small’’ or ‘‘little’’).
‘‘Substance not containing tobacco’’ are (i) It is put up in a package that bears (b) Additional notice for small cigars.
added in alphabetical order, to read as a product designation or tax In addition to the notice required under
follows: classification specified in § 40.215; paragraph (a) of this section, the
(ii) It has a typical cigarette size and following notice requirements apply to
§ 40.11 Meaning of terms. small cigars put up in a package that is
shape, has a cellulose acetate or other
* * * * * cigarette-type integrated filter, or is put comparable to a traditional cigarette-
Cigar. * * * For classification rules up in a traditional cigarette-type type package:
applicable to cigars, see § 40.12. package that does not bear all of the (1) The declaration ‘‘cigars’’, ‘‘small
Cigarette. * * * notice requirements for cigars specified cigars’’, or ‘‘little cigars’’ must appear in
in § 40.214; or direct conjunction with, parallel to, and
(2) * * * For classification rules
(iii) It has a filler primarily consisting in substantially the same
applicable to cigarettes, see § 40.12.
of flue-cured, burley, oriental, or conspicuousness of type and
* * * * * background as the brand name each
unfermented tobaccos or has a filler
Substance containing tobacco. material yielding the smoking time the brand name appears;
Reconstituted tobacco sheet or any other characteristics of any of those tobaccos. (2) A conspicuous ‘‘cigars’’, ‘‘small
material, other than leaf tobacco, at least cigars’’, or ‘‘little cigars’’ declaration
two-thirds by weight of which consists § 40.13 Cigar certification. must appear on the front, back, and
of tobacco leaf or other fibrous material (a) Submission. In the case of a bottom panels of the package even if the
from the plant Nicotiana tabacum or the tobacco product classified as a cigar brand name does not appear on one or
plant Nicotiana rustica. under § 40.12(a)(1)(ii), the manufacturer more of these panels; and
Substance not containing tobacco. must have filed a tax classification (3) A carton containing multiple
Paper or any other material of which certification with TTB before removal of packages must bear the declaration
less than two-thirds by weight consists the product subject to tax. The ‘‘cigars’’, ‘‘small cigars’’, or ‘‘little
of tobacco leaf or other fibrous material manufacturer must sign, date, and file cigars’’ in conjunction with the brand
name and on each panel of the carton consisting of a roll of tobacco wrapped (2) The product does not comply with
that is likely to be visible in a retail sale in a substance containing tobacco is the rules for classification as a cigar.
display. classified as a cigarette rather than as a 8. Section 41.73 is revised to read as
cigar if it is described in paragraph follows:
PART 41—IMPORTATION OF (b)(2) or (b)(3) of this section.
TOBACCO PRODUCTS AND § 41.73 Notice for cigars.
(b) Classification of cigarettes. A
CIGARETTE PAPERS AND TUBES tobacco product is classified as a (a) General. Before removal subject to
cigarette if: internal revenue tax, every package of
5. The authority citation for part 41 cigars, except as provided in § 41.75,
continues to read as follows: (1) It consists of a roll of tobacco
wrapped in paper or in a substance not shall have adequately imprinted on it,
Authority: 18 U.S.C. 2342; 26 U.S.C. 5701,
containing tobacco; or on a label securely affixed to it:
5703, 5704, 5705, 5708, 5712, 5713, 5721– (1) The designation ‘‘cigars’’;
5723, 5741, 5754, 5761–5763, 6301, 6302, (2) It consists of a roll of tobacco that
(2) The quantity of cigars contained in
6313, 6404, 7101, 7212, 7342, 7606, 7651, contains more than 3.0 percent by
the package; and
7652, 7805; 31 U.S.C. 9301, 9303, 9304, 9306. weight of total reducing sugars and that (3) For small cigars, the classification
6. In § 41.11, a new sentence is added is wrapped in a substance containing of the product for tax purposes (i.e.,
at the end of the definition of ‘‘Cigar,’’ tobacco; or either ‘‘small’’ or ‘‘little’’).
a new sentence is added at the end of (3) It consists of a roll of tobacco (b) Additional notice for small cigars.
paragraph (2) in the definition of wrapped in a substance containing In addition to the notice required under
‘‘Cigarette,’’ and new definitions of tobacco, and— paragraph (a) of this section, the
‘‘Substance containing tobacco’’ and (i) It is put up in a package that bears following notice requirements apply to
‘‘Substance not containing tobacco’’ are a product designation or tax small cigars put up in a package that is
added in alphabetical order, to read as classification specified in § 41.74; comparable to a traditional cigarette-
follows: (ii) It has a typical cigarette size and type package:
shape, has a cellulose acetate or other (1) The declaration ‘‘cigars’’ , ‘‘small
§ 41.11 Meaning of terms. cigarette-type integrated filter, or is put cigars’’, or ‘‘little cigars’’ must appear in
* * * * * up in a traditional cigarette-type direct conjunction with, parallel to, and
Cigar. * * * For classification rules package that does not bear all of the in substantially the same
applicable to cigars, see § 41.12. notice requirements for cigars specified conspicuousness of type and
Cigarette. * * * in § 41.73; or background as the brand name each
(2) * * * For classification rules (iii) It has a filler primarily consisting time the brand name appears;
applicable to cigarettes, see § 41.12. of flue-cured, burley, oriental, or (2) A conspicuous ‘‘cigars’’, ‘‘small
* * * * * unfermented tobaccos or has a filler cigars’’, or ‘‘little cigars’’ declaration
Substance containing tobacco. material yielding the smoking must appear on the front, back, and
Reconstituted tobacco sheet or any other characteristics of any of those tobaccos. bottom panels of the package even if the
material, other than leaf tobacco, at least brand name does not appear on one or
§ 41.13 Cigar certification.
two-thirds by weight of which consists more of these panels; and
of tobacco leaf or other fibrous material (a) Submission. In the case of a (3) A carton containing multiple
from the plant Nicotiana tabacum or the tobacco product classified as a cigar packages must bear the declaration
plant Nicotiana rustica. under § 41.12(a)(1)(ii), the importer ‘‘cigars’’, ‘‘small cigars’’, or ‘‘little
Substance not containing tobacco. must have filed a tax classification cigars’’ in conjunction with the brand
Paper or any other material of which certification with TTB before removal of name and on each panel of the carton
less than two-thirds by weight consists the product subject to internal revenue that is likely to be visible in a retail sale
of tobacco leaf or other fibrous material tax. The importer must sign, date, and display.
from the plant Nicotiana tabacum or the file the certification with the National
plant Nicotiana rustica. Revenue Center, Alcohol and Tobacco PART 44—EXPORTATION OF
* * * * * Tax and Trade Bureau, 550 Main Street, TOBACCO PRODUCTS AND
7. New §§ 41.12 and 41.13 are added Cincinnati, Ohio 45202. The CIGARETTE PAPERS AND TUBES,
to read as follows: certification must be in the following WITHOUT PAYMENT OF TAX, OR WITH
form: DRAWBACK OF TAX
§ 41.12 Classification of cigars and
cigarettes. I, ________ (name of person executing 9. The authority citation for part 44 is
certification) of __________ (name and revised to read as follows:
The rules set forth in this section
address of importer) hereby certify
control in determining whether a Authority: 26 U.S.C. 5142, 5143, 5146,
under penalty of perjury that the
tobacco product is classified as a cigar 5701, 5703–5706, 5711–5713, 5721–5723,
product designated ___________ (brand 5731, 5741, 5751, 5754, 6061, 6065, 6151,
or as a cigarette for purposes of this part.
(a) Classification of cigars. (1) and style of product) __ complies with 6402, 6404, 6806, 7011, 7212, 7342, 7606,
General. A tobacco product is classified __ does not comply with (check one) the 7805; 31 U.S.C. 9301, 9303, 9304, 9306.
as a cigar if: rules for classification as a cigar set 10. In § 44.11, a new sentence is
(i) It consists of a roll of tobacco forth in 27 CFR 41.12. __________ added at the end of the definition of
wrapped in leaf tobacco; or (Signature and Date). ‘‘Cigar,’’ a new sentence is added at the
(ii) It consists of a roll of tobacco that (b) Change in product. If, after the end of paragraph (b) in the definition of
contains no more than 3.0 percent by filing of a certification for a product ‘‘Cigarette,’’ and new definitions of
weight of total reducing sugars and that under paragraph (a) of this section, there ‘‘Substance containing tobacco’’ and
is wrapped in a substance containing is any change in the composition or ‘‘Substance not containing tobacco’’ are
tobacco, and it is not classifiable as a presentation of that product, the added in alphabetical order, to read as
cigarette under paragraph (a)(2) of this importer must file a new certification follows:
section. that:
(2) Cigarette classification (1) The product complies with the § 44.11 Meaning of terms.
precedence. A tobacco product rules for classification as a cigar; or * * * * *
Cigar. * * * For classification rules (ii) It has a filler primarily consisting (2) A conspicuous ‘‘cigars’’, ‘‘small
applicable to cigars, see § 44.12. of flue-cured, burley, oriental, or cigars’’, or ‘‘little cigars’’ declaration
Cigarette. * * * unfermented tobaccos or has a filler must appear on the front, back, and
(b) * * * For classification rules material yielding the smoking bottom panels of the package even if the
applicable to cigarettes, see § 44.12. characteristics of any of those tobaccos. brand name does not appear on one or
* * * * * more of these panels; and
§ 44.13 Cigar certification. (3) A carton containing multiple
Substance containing tobacco.
Reconstituted tobacco sheet or any other (a) Submission. In the case of a packages must bear the declaration
material, other than leaf tobacco, at least tobacco product classified as a cigar ‘‘cigars’’, ‘‘small cigars’’, or ‘‘little
two-thirds by weight of which consists under § 44.12(a)(1)(ii), the manufacturer cigars’’ in conjunction with the brand
of tobacco leaf or other fibrous material must have filed a tax classification name and on each panel of the carton
from the plant Nicotiana tabacum or the certification with TTB before removal. that is likely to be visible in a retail sale
plant Nicotiana rustica. The manufacturer must sign, date, and display.
Substance not containing tobacco. file the certification with the National 13. Section 44.253 is revised to read
Paper or any other material of which Revenue Center, Alcohol and Tobacco as follows:
less than two-thirds by weight consists Tax and Trade Bureau, 550 Main Street,
Cincinnati, Ohio 45202. The § 44.253 Tax classification for cigars.
of tobacco leaf or other fibrous material
from the plant Nicotiana tabacum or the certification must be in the following (a) General. Before withdrawal of
plant Nicotiana rustica. form: cigars from a customs warehouse under
I, ________ (name of person executing this subpart, every package of cigars
* * * * *
11. New §§ 44.12 and 44.13 are added certification) of __________ (name and shall have adequately imprinted on it,
to read as follows: address of manufacturer) hereby certify or on a label securely affixed to it:
under penalty of perjury that the (1) The designation ‘‘cigars’’;
§ 44.12 Classification of cigars and product designated __________(brand (2) The quantity of cigars contained in
cigarettes. and style of product) __complies with__ the package; and
The rules set forth in this section does not comply with (check one) the (3) For small cigars, the classification
control in determining whether a rules for classification as a cigar set of the product for tax purposes (i.e.,
tobacco product is classified as a cigar forth in 27 CFR 44.12. either ‘‘small’’ or ‘‘little’’).
or as a cigarette for purposes of this part. __________(Signature and Date). (b) Additional notice for small cigars.
(a) Classification of cigars. (1) In addition to the notice required under
(b) Change in product. If, after the
General. A tobacco product is classified paragraph (a) of this section, the
filing of a certification for a product
as a cigar if: following notice requirements apply to
under paragraph (a) of this section, there
(i) It consists of a roll of tobacco small cigars put up in a package that is
is any change in the composition or
wrapped in leaf tobacco; or comparable to a traditional cigarette-
presentation of that product, the
(ii) It consists of a roll of tobacco that type package:
manufacturer must file a new
contains no more than 3.0 percent by (1) The declaration ‘‘cigars’’, ‘‘small
certification that:
weight of total reducing sugars and that cigars’’, or ‘‘little cigars’’ must appear in
(1) The product complies with the
is wrapped in a substance containing direct conjunction with, parallel to, and
rules for classification as a cigar; or
tobacco, and it is not classifiable as a (2) The product does not comply with in substantially the same
cigarette under paragraph (a)(2) of this the rules for classification as a cigar. conspicuousness of type and
section. 12. Section 44.186 is revised to read background as the brand name each
(2) Cigarette classification as follows: time the brand name appears;
precedence. A tobacco product (2) A conspicuous ‘‘cigars’’, ‘‘small
consisting of a roll of tobacco wrapped § 44.186 Tax classification for cigars. cigars’’, or ‘‘little cigars’’ declaration
in a substance containing tobacco is (a) General. Before removal from a must appear on the front, back, and
classified as a cigarette rather than as a factory under this subpart, every bottom panels of the package even if the
cigar if it is described in paragraph package of cigars shall have adequately brand name does not appear on one or
(b)(2) or (b)(3) of this section. imprinted on it, or on a label securely more of these panels; and
(b) Classification of cigarettes. A affixed to it: (3) A carton containing multiple
tobacco product is classified as a (1) The designation ‘‘cigars’’; packages must bear the declaration
cigarette if: (2) The quantity of cigars contained in ‘‘cigars’’, ‘‘small cigars’’, or ‘‘little
(1) It consists of a roll of tobacco the package; and cigars’’ in conjunction with the brand
wrapped in paper or in any substance (3) For small cigars, the classification name and on each panel of the carton
not containing tobacco; of the product for tax purposes; (i.e., that is likely to be visible in a retail sale
(2) It consists of a roll of tobacco that either ‘‘small’’ or ‘‘little’’). display.
contains more than 3.0 percent by (b) Additional notice for small cigars.
weight of total reducing sugars and that In addition to the notice required under PART 45—REMOVAL OF TOBACCO
is wrapped in a substance containing paragraph (a) of this section, the PRODUCTS AND CIGARETTE PAPERS
tobacco; or following notice requirements apply to AND TUBES, WITHOUT PAYMENT OF
(3) It consists of a roll of tobacco small cigars put up in a package that is TAX, FOR USE OF THE UNITED
wrapped in a substance containing comparable to a traditional cigarette- STATES
tobacco, and— type package:
14. The authority citation for part 45

(i) It has a typical cigarette size and (1) The declaration ‘‘cigars’’, ‘‘small
continues to read as follows:
shape, has a cellulose acetate or other cigars’’, or ‘‘little cigars’’ must appear in
cigarette-type integrated filter, or is put direct conjunction with, parallel to, and Authority: 26 U.S.C. 5703, 5704, 5705,
up in a traditional cigarette-type in substantially the same 5723, 5741, 5751, 5762, 5763, 6313, 7212,
package that does not bear all of the conspicuousness of type and 7342, 7606, 7805, 44 U.S.C. 3504(h).
notice requirements for cigars specified background as the brand name each 15. In § 45.11, a new sentence is
in § 44.186 or § 44.253; or time the brand name appears; added at the end of the definition of
‘‘Cigar,’’ a new sentence is added at the (b) Classification of cigarettes. A is any change in the composition or
end of paragraph (2) in the definition of tobacco product is classified as a presentation of that product, the
‘‘Cigarette,’’ and new definitions of cigarette if: manufacturer must file a new
‘‘Substance containing tobacco’’ and (1) It consists of a roll of tobacco certification that:
‘‘Substance not containing tobacco’’ are wrapped in paper or in any substance (1) The product complies with the
added in alphabetical order, to read as not containing tobacco; rules for classification as a cigar; or
follows: (2) It consists of a roll of tobacco that (2) The product does not comply with
contains more than 3.0 percent by the rules for classification as a cigar.
§ 45.11 Meaning of terms. weight of total reducing sugars and that 17. Section 45.44 is revised to read as
* * * * * is wrapped in a substance containing follows:
Cigar. * * * For classification rules tobacco; or
applicable to cigars, see § 45.12. (3) It consists of a roll of tobacco § 45.44 Notice for cigars.
Cigarette. * * * wrapped in a substance containing (a) General. Before removal under this
(2) * * * For classification rules tobacco, and— part, every package of cigars shall have
applicable to cigarettes, see § 45.12. (i) It is put up in a package that bears adequately imprinted on it, or on a label
* * * * * a product designation or tax securely affixed to it:
Substance containing tobacco. classification specified in § 45.45;
(ii) It has a typical cigarette size and (1) The designation ‘‘cigars’’;
Reconstituted tobacco sheet or any other (2) The quantity of cigars contained in
material, other than leaf tobacco, at least shape, has a cellulose acetate or other
cigarette-type integrated filter, or is put the package; and
two-thirds by weight of which consists (3) For small cigars, the classification
of tobacco leaf or other fibrous material up in a traditional cigarette-type
package that does not bear all of the of the product for tax purposes (i.e.,
from the plant Nicotiana tabacum or the either ‘‘small’’ or ‘‘little’’).
plant Nicotiana rustica. notice requirements for cigars specified
in § 45.44; or (b) Additional notice for small cigars.
Substance not containing tobacco.
(iii) It has a filler primarily consisting In addition to the notice required under
Paper or any other material of which
of flue-cured, burley, oriental or paragraph (a) of this section, the
less than two-thirds by weight consists
unfermented tobaccos or has a filler following notice requirements apply to
of tobacco leaf or other fibrous material
material yielding the smoking small cigars put up in a package that is
from the plant Nicotiana tabacum or the
characteristics of any of those tobaccos. comparable to a traditional cigarette-
plant Nicotiana rustica.
type package:
* * * * * § 45.13 Cigar certification. (1) The declaration ‘‘cigars’’, ‘‘small
16. New §§ 45.12 and 45.13 are added (a) Submission. In the case of a cigars’’, or ‘‘little cigars’’ must appear in
to read as follows: tobacco product classified as a cigar direct conjunction with, parallel to, and
§ 45.12 Classification of cigars and
under § 45.12(a)(1)(ii), the manufacturer in substantially the same
cigarettes. must have filed a tax classification conspicuousness of type and
certification with TTB before removal of background as the brand name each
The rules set forth in this section
the product. The manufacturer must time the brand name appears;
control in determining whether a
sign, date, and file the certification with (2) A conspicuous ‘‘cigars’’, ‘‘small
tobacco product is classified as a cigar
the National Revenue Center, Alcohol cigars’’, or ‘‘little cigars’’ declaration
or as a cigarette for purposes of this part.
and Tobacco Tax and Trade Bureau, 550 must appear on the front, back, and
(a) Classification of cigars. (1)
Main Street, Cincinnati, Ohio 45202. bottom panels of the package even if the
General. A tobacco product is classified
The certification must be in the brand name does not appear on one or
as a cigar if:
following form: more of these panels; and
(i) It consists of a roll of tobacco
wrapped in leaf tobacco; or I, llllllll (name of person (3) A carton containing multiple
(ii) It consists of a roll of tobacco that executing certification) of packages must bear the declaration
contains no more than 3.0 percent by llllllllll (name and ‘‘cigars’’, ‘‘small cigars’’, or ‘‘little
weight of total reducing sugars and that address of manufacturer) hereby certify cigars’’ in conjunction with the brand
is wrapped in a substance containing under penalty of perjury that the name.
tobacco, and it is not classifiable as a product designated llllllll Signed: August 3, 2006.
cigarette under paragraph (a)(2) of this (brand and style of product) ll John J. Manfreda,
section. complies with ll does not comply
Administrator.
(2) Cigarette classification with (check one) the rules for
precedence. A tobacco product classification as a cigar set forth in 27 Approved: September 28, 2006.
consisting of a roll of tobacco wrapped CFR 45.12. llllllllll Timothy E. Skud,
in a substance containing tobacco is (Signature and Date). Deputy Assistant Secretary (Tax, Trade, and
classified as a cigarette rather than as a (b) Change in product. If, after the Tariff Policy).
cigar if it is described in paragraph filing of a certification for a product [FR Doc. 06–8835 Filed 10–24–06; 8:45 am]
(b)(2) or (b)(3) of this section. under paragraph (a) of this section, there BILLING CODE 4810–31–P

Proposed Rule: Alcohol, Tobacco and Other Excise Taxes: Cigars and Cigarettes Tax Classification

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Proposed Rule: Alcohol, Tobacco and Other Excise Taxes: Cigars and Cigarettes Tax Classification

Enviado por

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Formatos disponíveis

Wednesday,

October 25, 2006

27 CFR Parts 40, 41, 44, and 45

• http://www.ttb.gov/tobacco/ payment of tax, or with drawback of

WRAPPER EXAMINATIONS AND TESTS

FILLER EXAMINATIONS AND TESTS

PRODUCT EXAMINATIONS AND TESTS

Procedure 73–5. was not sufficiently specific for it to be • Acetonitrile;

and the extraction efficiencies of water, 1M having a filter. While it is anticipated

Range (% by Mean (% by Interval

Cigars ............................................................................................................................................... Below 2 ....... Below 2 ....... *n/a

22 .............................................. 0.4 55 ...................... 9.19 0.15 97 ...................... 17.94 0.36

BILLING CODE 4810–31–C

regulations, the inconsistencies between cigarette-type boxes; product.

14. The authority citation for part 45

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