KKB Kleinfeld Kaplan & Becker LLP 1 Stacy Ehrlich, Esq. Partner Kleinfeld Kaplan & Becker LLP Washington, DC November 19, 2009

KKB Kleinfeld Kaplan & Becker LLP  Cigarettes and products meeting the definition of cigarette  Roll-your-own (RYO) cigarette tobacco  Smokeless tobacco  Cigarette papers/filters in certain contexts  Any other tobacco product only by regulation – excludes cigars and pipe tobacco 2

KKB Kleinfeld Kaplan & Becker LLP  Tobacco product = any product made or derived from tobacco that is intended for human consumption.  Includes any component, part, or accessory of a tobacco product  Cigarette includes tobacco in any form which is likely to be offered to, or purchased by, consumers as a cigarette or as RYO tobacco.  any roll of tobacco wrapped in paper or in any substance not containing tobacco  any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco use in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette  Unless otherwise stated, the requirements applicable to cigarettes also apply to RYO tobacco 3

KKB Kleinfeld Kaplan & Becker LLP  Cigarette tobacco = loose tobacco intended for use in a cigarette.  RYO tobacco = tobacco product which is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes.  Smokeless tobacco = cut, ground, powdered or leaf tobacco intended to be placed in the oral or nasal cavity.  Little cigar = any roll of tobacco wrapped in leaf tobacco or any substance containing tobacco (other than any roll of tobacco which is a cigarette within the statutory definition) and as to which one thousand units weigh not more than three pounds. 4

KKB Kleinfeld Kaplan & Becker LLP  Tobacco product manufacturer = entity that (1) manufactures, fabricates, assembles, processes, or labels a tobacco product or (2) imports a finished tobacco product for sale or distribution in the US.  Small tobacco manufacturer = fewer than 350 employees.  Package = container of any kind in which a tobacco product is offered for sale, sold or otherwise distributed to consumers (includes cartons if sold to consumers) 5

KKB Kleinfeld Kaplan & Becker LLP  Tobacco Warehouse = an entity that (1) removes foreign material from tobacco leaf through nothing other than a mechanical process; (2) humidifies tobacco leaf with nothing other than potable water in the form of steam or mist; or (3) de-stems, dries, and packs tobacco leaf for storage and shipment.  Legislation does not apply to (1) tobacco leaf that is not in the possession of a manufacturer of tobacco products, or (2) the producers of tobacco leaf, including tobacco growers, tobacco warehouses, and tobacco grower cooperatives; or (3) producers of tobacco leaf who grow tobacco under a contract with a tobacco product manufacturer but do not otherwise engage in the manufacturing process. 6

KKB Kleinfeld Kaplan & Becker LLP  Required under the Act  FDA beginning to establish this office  ResourcesforYou/ForIndustry/ucm htm ResourcesforYou/ForIndustry/ucm htm  For small business assistance, contact 7

KKB Kleinfeld Kaplan & Becker LLP  Required to be established by 10/1/10  9 voting members and 3 non-voting members representing (1) the tobacco manufacturing industry; (2) tobacco growers; and (3) the small business tobacco manufacturing industry  FDA will send to each organization that has expressed an interest a list of all nominees for nonvoting members  Interested organizations must confer to select a candidate within 60 days; if no individual is selected within 60 days, FDA will select the nonvoting member to represent industry interests 8

KKB Kleinfeld Kaplan & Becker LLP  Assessed and collected quarterly.  Currently applicable to cigarettes, cigarette tobacco, RYO tobacco, and smokeless tobacco.  Total amount of fees authorized to be assessed is based on the FY, e.g., 2009 is $85,000,000 and 2010 is $235,000,000, and is allocated for each class of product.  Fee paid by each manufacturer/importer determined based on its percentage share.  User fee for pro-rata share of 3 rd quarter + 4 th quarter was due 9/30/09. 9

KKB Kleinfeld Kaplan & Becker LLP  Went into effect 9/22/09  FDA has stated: “This standard applies to all tobacco products that meet the definition of a ‘cigarette’ in section 900(3) of the Act even if they are not labeled as ‘cigarettes’ or are labeled as cigars or as some other product.”  Interpreted by FDA to include loose RYO tobacco and rolling paper or filters intended for use in RYO cigarettes  Warning letters issued November 2 and 3. 10

KKB Kleinfeld Kaplan & Becker LLP  Final Guidance on Registration and Product Listing for Owners and Operators of Domestic Tobacco Product Establishments issued 11/12/09  Domestic tobacco establishments must register on or before December 31 of each year.  BUT “FDA does not intend to enforce the requirement to submit registration and product listing information under section 905 of the act by December 31, 2009, provided that the submission is received by FDA on or before February 28, 2010.”  Registration must include a product list, including labeling and advertisements; update 2x a year. 11

KKB Kleinfeld Kaplan & Becker LLP  Each domestic establishment is subject to inspection at least once every 2 years beginning with date of registration.  Foreign establishments must register with FDA pursuant to regulations that will be promulgated.  Tracking and tracing recordkeeping will be inspected (after effective date of regulations) 12

KKB Kleinfeld Kaplan & Becker LLP Submission of list of “ingredients” added to the tobacco, paper, filter, or other part of each tobacco product by brand and by quantity in each brand and subbrand (12/22/09) “Ingredients” broadly defined Draft Guidance on Listing of Ingredients in Tobacco Products issued 11/3/09 Delay of enforcement likely 13

KKB Kleinfeld Kaplan & Becker LLP  Regulations to require a description of the content, delivery, and form of nicotine in each tobacco product measured in milligrams of nicotine.  A listing of all constituents identified by FDA (through regs) as harmful or potentially harmful to health in each tobacco product by brand and by quantity in each brand and subbrand. 14

KKB Kleinfeld Kaplan & Becker LLP Must contain:  Name and place of business of manufacturer, packer or distributor  Quantity of contents in terms of weight, measure or numerical count  % of domestic versus foreign tobacco  The statement, “Sale only allowed in the United States”  If not in compliance with these requirements, deemed to be “misbranded” 15

KKB Kleinfeld Kaplan & Becker LLP  Cigarettes (includes RYO) must bear one of 9 specified warning statements.  Warning must comprise the top 50% of the front and rear panels in 17-point black type on a white background.  Warning statements must be randomly displayed in each 12 month period in accordance with a plan submitted to and approved by FDA.  FDA must issue regs by 6/22/2011 that require color graphics depicting the negative health consequences of smoking.  Non-graphic warning requirements take effect 15 months after issuance of graphic-depiction regs (by 9/22/2012). 16

KKB Kleinfeld Kaplan & Becker LLP  Must bear one of 4 specified warning statements.  Must comprise at least 30% of both principal display panels in 17-point black type on a white background.  Warning statements must be used in an alternating fashion consistent with plan submitted to and approved by FDA.  Takes effect 6/22/

KKB Kleinfeld Kaplan & Becker LLP  Ads permitted in newspapers, magazines, publications, billboards, posters, placards, direct mail, audio and video delivered at point- of-sale.  If not one of listed media, must notify FDA. What about Internet?  No outdoor ads for cigarettes or smokeless tobacco permitted within 1000 feet of the perimeter of any public playground, elementary school or secondary school. 18

KKB Kleinfeld Kaplan & Becker LLP  Can only be black text on a white background, except (1) where vending machines are permitted (adult only facilities) if affixed to a wall/fixture and not visible from outside the facility or (2) in adult publications (as defined in regs).  Audio must be limited to words only with no music or sound effects.  Video must be limited to static black text only on a white background and no music or sound effects. 19

KKB Kleinfeld Kaplan & Becker LLP  Adult-only facility = Where the retailer ensures that no person younger than 18 years of age is present or permitted to enter at any time.  Adult-only publication = newspaper, magazine, periodical or other publication (1) whose readers younger than 18 constitute 15% or less of total readership and (2) that is read by fewer than 2 million persons under age 18.  Website with age-verification? 20

KKB Kleinfeld Kaplan & Becker LLP  Must bear one of the warning statements set forth in the regs with the specified prominence in the appropriate language (as described in the regs).  Warning statements in ads must be rotated quarterly in alternating sequence in accordance with a plan submitted to and approved by FDA.  It is unlawful to advertise on radio or TV. 21

KKB Kleinfeld Kaplan & Becker LLP  FDA must promulgate regulations re: sale and distribution (by 10/1/11) and the promotion and marketing (4/1/12) of tobacco products that occur through means other than a direct face-to-face exchange between a retailer and consumer.  No use of “light,” “mild,” “low,” or similar without an order approving such modified risk products (as of 6/22/2010).  Mail order sales, excluding mail-order redemption of coupons and distribution of free samples through the mail, are permitted.  Vending machines and self-service displays are permitted solely in adult-only facilities. 22

KKB Kleinfeld Kaplan & Becker LLP  Cannot use a trade or brand name of a nontobacco product as a trade or brand name for a cigarette or smokeless tobacco product, except if used for both on or before January 1,  Cannot sell cigarette packages that contain less than 20 cigarettes.  No free samples of tobacco products except free samples of smokeless tobacco in a qualified adult- only facility (as very strictly defined in regs) and not to a sports team or entertainment group or at most sporting events. 23

KKB Kleinfeld Kaplan & Becker LLP  No non-tobacco items or services that bear the brand name, logo, symbol, motto, selling message, recognizable color or pattern of colors, or any other indicia of product identification identical or similar to those used for any brand of cigarettes or smokeless tobacco.  No free gifts (other than cigarettes or smokeless tobacco) may be offered for the purchase of cigarettes or smokeless tobacco.  No sponsorship of events using the brand name, logo, etc. of cigarettes or smokeless tobacco. 24

KKB Kleinfeld Kaplan & Becker LLP  FDA published 9/09 Draft Guidance on the Scope of the Prohibition Against Marketing a Tobacco Product in Combination with Another Article or Product Regulated by FDA  Prohibited:  A tobacco product and a non-tobacco product regulated under the FDCA that are physically, chemically, or otherwise combined or mixed to produce a single entity that is marketed as containing both products (e.g., nicotine water)  A tobacco product and a non-tobacco product regulated under the FDCA that are packaged together in a single package or as a unit (e.g., cigarettes and mouthwash in one box)  A coupon for a discount on a specifically identified non-tobacco product regulated under the FDCA offered contingent upon the purchase of a tobacco product 25

KKB Kleinfeld Kaplan & Becker LLP  FDA must promulgate regulations but no required date  FDA must consider the manner in which the different types of tobacco products have historically been produced, the financial resources of the manufacturers, and the state of existing facilities and provide a reasonable period for conformance.  Small manufacturers not required to comply for at least 4 years following the effective date (which will be not before 6/22/12).  May petition for temporary or permanent exemption or variance from a requirement. 26

KKB Kleinfeld Kaplan & Becker LLP  By 4/1/13, FDA is required to promulgate regulations requiring the testing and reporting of tobacco product constituents, ingredients, and additives, including smoke constituents, by brand and subbrand.  Small manufacturers will not be required to comply prior to 2 years after promulgation of the regulations and will be given a 4 year period (25% each year) in which to conduct testing and reporting for its products (with a case-by-case delay not to exceed 5 years after initial date of compliance and delays for limited laboratory capacity). 27

KKB Kleinfeld Kaplan & Becker LLP  New tobacco product = any tobacco product that was not commercially marketed in the US as of 2/15/07 or any modification (including a change in design, any component, any part, or any constituent, including a smoke constituent, or in the content, delivery or form of nicotine, or any other additive or ingredient) of a tobacco product where the modified product was commercially marketed in the US after 2/15/07  Must be substantially equivalent to legally marketed product  Reports for products introduced between 2/15/07 and 3/22/11 due no later than 3/22/11  Exemptions available for addition or deletion of a tobacco additive or increasing or decreasing the quantity of an existing tobacco additive (FDA to issues regs by 7/1/11) 28

KKB Kleinfeld Kaplan & Becker LLP  Products sold or distributed for use to reduce harm or the risk of tobacco-related disease associated with commercially marketed tobacco products.  Require advance approval  FDA must issue regulations and/or guidance on the scientific evidence required for assessment and review of modified risk tobacco products  References to “smokeless tobacco” or “smokefree” not considered claims of modified risk 29

KKB Kleinfeld Kaplan & Becker LLP  General penalties for adulteration and misbranding  Warning letter, publicity  Seizure, injunction  Criminal penalties  Statutory civil penalties  $15,000 for each violation; max $1,000,000 per adjudication.  Enhanced for certain violations: $250,000 per violation; max $1,000,000 per adjudication. 30

KKB Kleinfeld Kaplan & Becker LLP Stacy L. Ehrlich, Esq. Kleinfeld Kaplan and Becker LLP th St. NW Suite 900 Washington, DC (202)