2011-21612. Standards for Pipe Tobacco and Roll-Your-Own Tobacco; Request for Public Comment

AGENCY:

Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION:

Advance notice of proposed rulemaking; reopening of comment period.

SUMMARY:

The Alcohol and Tobacco Tax and Trade Bureau (TTB) is reopening the comment period for Notice No. 106, which requested public comments on standards to distinguish between pipe tobacco and roll-your-own tobacco for Federal excise tax purposes based on certain physical characteristics of the two products. This reopening of the comment period solicits comments from the public on certain issues that were raised in public comments received in response to Notice No. 106. This notice also sets forth for possible public comment the results of preliminary laboratory analyses conducted by TTB.

DATES:

We must receive written comments on or before October 24, 2011.

ADDRESSES:

You may send comments on this notice to one of the following addresses:

• http://www.regulations.gov: Use the comment form for Notice No. 106 as posted within Docket No. TTB-2010-0004 on “Regulations.gov,” the Federal e-rulemaking portal, to submit comments via the Internet;
• Mail: Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, P.O. Box 14412, Washington, DC 20044-4412.
• Hand Delivery/Courier in Lieu of Mail: Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street, NW., Suite 200-E, Washington, DC 20005.

See the Public Participation section of this notice for specific instructions and requirements for submitting comments, and for information on how to request a public hearing.

You may view copies of all published notices, selected supporting materials, and the comments received about this proposal within Docket No. TTB-2010-0004 at http://www.regulations.gov. A link to this Regulations.gov docket is posted on the TTB Web site at http://www.ttb.gov/​regulations_​laws/​all_​rulemaking.shtml under Notice No. 106. You also may view copies of all published notices, all supporting materials, and any comments we receive about this proposal by appointment at the TTB Information Resource Center, 1310 G Street, NW., Washington, DC 20220. Please call 202-453-2270 to make an appointment.

FOR FURTHER INFORMATION CONTACT:

Christopher M. Thiemann, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street, NW., Suite 200E, Washington, DC 20220; telephone [phone], Ext. 138.

SUPPLEMENTARY INFORMATION:

TTB Authority

Chapter 52 of the Internal Revenue Code of 1986 (IRC) sets forth the Federal excise tax and related provisions that apply to tobacco products and processed tobacco manufactured, or imported into, the United States. Section 5702(c) of the IRC (26 U.S.C. 5702(c)) defines the term “tobacco products” as “cigars, cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco.” Each of these terms is also separately defined in section 5702. Section 5702(p) states that a manufacturer of processed tobacco is “any person who processes any tobacco other than tobacco products” and that “the processing of tobacco shall not include the farming or growing of tobacco or the handling of tobacco solely for sale, shipment, or delivery to a manufacturer of tobacco products or processed tobacco.”

Regulations implementing the provisions of chapter 52 of the IRC are contained in 27 CFR parts 40 (Manufacture of tobacco products, cigarette papers and tubes, and processed tobacco), 41 (Importation of tobacco products, cigarette papers and tubes, and processed tobacco), 44 (Exportation of tobacco products and cigarette papers and tubes, without payment of tax, or with drawback of tax), 45 (Removal of tobacco products and cigarette papers and tubes, without payment of tax, for use of the United States), and 46 (Miscellaneous regulations relating to tobacco products and cigarette papers and tubes). These statutory and regulatory provisions are administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

Publication of Notice No. 106

On July 22, 2010, TTB published in the Federal Register (75 FR 42659) an advance notice of proposed rulemaking, Notice No. 106, in response to changes made to the IRC tobacco provisions by sections 701 and 702 of the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA). These changes to the IRC included an expansion of the definition of “roll-your-own tobacco” and an increase in the tax rate applicable to pipe tobacco and roll-your-own tobacco that resulted in a significant difference in the tax rates applicable to the two groups of products. In Notice No. 106, TTB described the heightened need for more regulatory detail to clarify the difference between pipe tobacco and roll-your-own tobacco as a result of the tax rate changes adopted by CHIPRA. In that notice, TTB also described and requested comments on six written submissions concerning the distinctions between pipe tobacco and roll-your-own tobacco that it had received in response to earlier rulemaking action regarding CHIPRA.

Comments Received

TTB received 24 comments from groups and individuals in response to Notice No. 106. Commenters provided input on the distinctions between pipe tobacco and roll-your-own tobacco based on physical characteristics as described by the original six submissions noted above. Commenters also provided suggestions on other characteristics which would be useful for distinguishing between pipe tobacco and roll-your-own tobacco, and made other substantive comments about the issues involved in the rulemaking. One of the 24 comments was withdrawn by the commenter after the close of the comment period, and two of the comments were not suitable for public posting because they did not address the issues presented for public comment. The remaining 21 comments may be viewed at the Regulations.gov Web site referred to in the ADDRESSES section of this document.

After the close of the Notice No. 106 comment period, TTB received a request to meet with attorneys from Patton Boggs LLP and their client, Liggett Vector Brands LLC. At this meeting, which took place on June 13, 2011, Liggett Vector's chief executive officer and other company representatives presented TTB with a proposal to use certain physical characteristics to distinguish between pipe tobacco and roll-your-own tobacco that differ from the standards proposed by other commenters, described in Notice No. 106. The new proposal, which was submitted as a slide presentation, is now posted with the comments on Notice No. 106 as Comment 23 and may be viewed at the Regulations.gov Web site referred to above.

Additionally, TTB believes it would be appropriate to bring to the attention of the public the results of preliminary laboratory tests that TTB conducted on a number of products labeled as pipe tobacco and as roll-your-own tobacco purchased by TTB from stores in the Beltsville, Maryland, area on February 13, 2009. TTB subjected the samples to a series of experiments to determine whether there were analytical markers that might be appropriate for further evaluation as a means of distinguishing between pipe tobacco and roll-your-own tobacco, and to evaluate standards submitted by industry members in response to the CHIPRA rulemaking actions in order to identify any methodological issues with those standards. A posting summarizing the results of these laboratory tests may be viewed at the Regulations.gov Web site referred to under the ADDRESSES section of this document. These posted results do not constitute a TTB conclusion regarding the distinction between pipe tobacco and roll-your-own tobacco but rather are merely intended as an additional point of reference for comments that the public may wish to make regarding the basic issue raised in Notice No. 106.

Determination To Re-Open Public Comment Period

Because some of the comments received in response to Notice No. 106 raise points that were not specifically addressed in that notice, and in view of the subsequent proposal from Liggett Vector Brands LLC, TTB has determined that it would be appropriate to reopen the comment period for Notice No. 106 in order to afford industry members and other interested parties an opportunity to submit comments on those additional points and proposals. In addition, the Bureau believes that it would be appropriate to make available for comment preliminary results of the laboratory procedures referred to above.

Accordingly, TTB is reopening the comment period for Notice No. 106 for an additional 60 days from the date of publication of this document. After the close of that 60-day comment period, TTB will carefully review the comments previously submitted in response to Notice No. 106, the Liggett Vector Brands LLC proposal, and any additional comments submitted in response to this document, in order to determine whether there is a sufficient basis for the publication of a notice of proposed rulemaking regarding specific regulatory changes to clarify the distinction between pipe tobacco and roll-your-own tobacco.

Public Participation

Comments Invited

As discussed above, in addition to the questions originally presented in Notice No. 106, TTB invites interested members of the public to comment on the proposals made by various commenters and on whether the proposed standards are appropriate and sufficient for distinguishing between pipe tobacco and roll-your-own tobacco. Further, we continue to invite commenters to opine on how many of the physical characteristics in a given proposal should be present in order for the product to be classified as “pipe tobacco” (e.g., 2 of 5, 3 of 6). Finally, because we recognize that roll-your-own tobacco and pipe tobacco must be classified relative to processed tobacco, which is not taxed, we also invite comments on how processed tobacco may differ from the other two named commodities.

If any comments include the results of any analytical procedures by or on behalf of the commenter, please provide the specific analytical data on which the comment is based. All comments previously submitted to TTB regarding Notice No. 106 will be given full consideration, so there is no need to resubmit such comments.

Submitting Comments

You may submit comments on this notice by using one of the following three methods:

• Federal e-Rulemaking Portal: You may send comments via the online comment form linked to Notice No. 106 as posting in Docket No. TTB-2010-0004 on “Regulations.gov,” the Federal e-rulemaking portal, at http://www.regulations.gov. A link to the docket is posted on the TTB Web site at http://www.ttb.gov/​regulations_​laws/​all_​rulemaking.shtml under Notice No. 106. Supplemental files may be attached to comments submitted via Regulations.gov. For information on how to use Regulations.gov, click on the site's Help or FAQ tabs.
• U.S. Mail: You may send comments via postal mail to the Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, P.O. Box 14412, Washington, DC 20044-4412.
• Hand Delivery/Courier: You may hand-carry your comments or have them hand-carried to the Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street, NW., Suite 200-E, Washington, DC 20005.

Please submit your comments by the closing date shown above in this notice. Your comments must reference Notice No. 106 and include your name and mailing address. Your comments also must be made in English, be legible, and be written in language acceptable for public disclosure. TTB does not acknowledge receipt of comments, and the Bureau considers all comments as originals.

If you are commenting on behalf of an association, business, or other entity, your comment must include the entity's name as well as your name and position title. If you comment via Regulations.gov, please include the entity's name in the “Organization” blank of the comment form. If you comment via postal mail, please submit your entity's comment on letterhead.

You may also write to the Administrator before the comment closing date to ask for a public hearing. The Administrator reserves the right to determine whether to hold a public hearing.

Confidentiality

All submitted comments and attachments are part of the public record and subject to disclosure. Do not enclose any material in your comments that you consider to be confidential or that is inappropriate for public disclosure.

Public Disclosure

On the Federal e-rulemaking portal, Regulations.gov, TTB will post, and the public may view, copies of all published notices, selected supporting materials, and all comments received in response to this proposal within Docket No. TTB-2010-0004. A link to this docket is posted on the TTB Web site at http://www.ttb.gov/​regulations_​laws/​all_​rulemaking.shtml under Notice No. 106. You may also reach Docket No. TTB-2010-0004 through the Regulations.gov search page at http://www.regulations.gov.

All posted comments will display the commenter's name, organization (if any), city, and State, and, in the case of mailed comments, all address information, including e-mail addresses. TTB may omit voluminous attachments or material that the Bureau considers unsuitable for posting.

You and other members of the public may view copies of all published notices, all supporting materials, and all electronic or mailed comments TTB has received or will receive in response to this proposal by appointment at the TTB Information Resource Center, 1310 G Street, NW., Washington, DC 20220. You may also obtain copies at 20 cents per 8.5- x 11-inch page. Contact the TTB information specialist at the above address or by telephone at 202-453-2270 to schedule an appointment or to request copies of comments or other materials.

Drafting Information

Christopher M. Thiemann of the Regulations and Rulings Division drafted this notice.

Signed: August 10, 2011.

Mary G. Ryan,

Acting Administrator.