FSC Observations

1
FSC Observations

• May 15, 2008 Presentation to NFPA

2
Travel Through Time

• Journey
• Where we are today?
• The way forward

3
Consumer Testing

• Model Bill Section 4 (g) (2)
• the sale of cigarettes solely for the purpose of
  consumer testing.  For purposes of this
  subsection, the term "consumer testing" shall
  mean an assessment of cigarettes that is
  conducted by a manufacturer (or under the control
  and direction of a manufacturer), for the purpose
  of evaluating consumer acceptance of such
  cigarettes, utilizing only the quantity of
  cigarettes that is reasonably necessary for such
  assessment, and in a controlled setting where the
  cigarettes are either consumed on-site or
  returned to the testing administrators at the
  conclusion of the testing

4
Consumer Testing (contd)

• RJRT Recommendation
• the sale of cigarettes solely for the purpose of
  consumer testing.  For purposes of this
  subsection, the term "consumer testing" shall
  mean an assessment of cigarettes that is
  conducted by a manufacturer (or under the control
  and direction of a manufacturer), for the purpose
  of evaluating consumer acceptance of such
  cigarettes, utilizing only the quantity of
  cigarettes that is reasonably necessary for such
  assessment. and in a controlled setting where the
  cigarettes are either consumed on-site or
  returned to the testing administrators at the
  conclusion of the testing

5
Consumer Testing (contd)

• Going Forward
• Take the RJRT recommended language
• Make it an exemption or exception to Model Bill
  Section 5 as a new paragraph (h) it would read
  as follows
• No certification shall be filed for a cigarette
  that has been offered for sale solely for the
  purposes consumer testing.  For purposes of this
  subsection, the term "consumer testing" shall
  mean an assessment of cigarettes that is
  conducted by a manufacturer (or under the control
  and direction of a manufacturer), for the purpose
  of evaluating consumer acceptance of such
  cigarettes, utilizing only the quantity of
  cigarettes that is reasonably necessary for such
  assessment.

6
Local Preemption Provision

• Baltimore Experience

7
Local Preemption Provision

• Baltimore Experience
• Recommended Language
• Notwithstanding any other provision of law, the
  local governmental units of this state may
  neither enact nor enforce any ordinance or other
  local law or regulation conflicting with, or
  preempted by, any provision of this section or
  with any policy of this state expressed by this
  section, whether that policy be expressed by
  inclusion of a provision in the section or by
  exclusion of that subject from the section.
• Effective immediately upon passage

8
Sell-Through

• New York
• Tax stamped prior to effective date
• Bought in quantities similar to prior year
• No cut-off
• Recently, efforts made to close off the window
  for sale of properly stamped, non FSC products
• Issue impacts the trade
• Recommendation, if cut-off necessary 12-18 month
  timeline

9
Fees

• First 7 states to pass had no fee provision
• The model bill language
• For each cigarette listed in a certification, a
  manufacturer shall pay to the state entity
  responsible for administering the provisions of
  this Act a 250 fee.  The state entity
  responsible for administering the provisions of
  this Act is authorized to annually adjust this
  fee to ensure it defrays the actual costs of the
  processing, testing, enforcement and oversight
  activities required by this Act

10
Fees (contd)

• States have taken various approaches to both fee
  calculation
• Fee/brand style Mass., NJ
• Fee per brand family Ky., Conn.
• Fee per certification form NC, RI
• And whether the state has discretion to raise the
  fee
• No Discretion Ky. Mont., Tx.
• Discretion Utah, Ala. Del.

11
Fees (contd)

• RJRTs concerns
• Brand styles vs. brand families
• RJR has 200 brand styles among 28 brand families
• For industry, the numbers are 1275 styles v. 138
  families
• Why Brand Family?
• Style or Family, the information is all on one
  form and all styles are arranged under the family
• By setting the appropriate fee on a brand family
  basis, states could be able to accomplish their
  mission

12
RJRTs Concerns (contd)

• Discretion without limits
• Massachusetts Experience

13
RJRTs Concerns (contd)

• Discretion without limits
• Massachusetts Experience
• Administrative Headache
• Under a brand style fee, fees are paid every time
  a new brand style is launched
• Processing headache for manufacturer and state
  alike
• Brand family payment thats good for the entire 3
  year period relieves the burden

14
RJRT Proposed Fee Provision Language

• Recently passed Arizona legislation gives a good
  example
• The state fire marshal may adopt rules requiring
  each manufacturer to pay to the state fire
  marshal a fee of two hundred and fifty dollars
  per brand family of cigarettes certified in
  compliance with this section. The fee applies to
  all cigarettes within the brand family certified
  and includes any new cigarette brand style within
  the brand family during the three-year cycle.
• Kentucky and Bills in Ohio, Michigan and Colorado
  have 1000 per brand family while Florida and
  Conn. are at 250

15
RJRTs Proposed Fee Provision Language

• Were not opposed to limited discretion, Indiana
  offers some potential language on this front.
• For each brand family listed in a certification
  submitted under subsection (a) or (d), a
  manufacturer shall pay a fee to the state fire
  marshal of eight hundred dollars (800). The
  state fire marshal may adjust the fee every three
  (3) years to ensure that the fee defrays the
  actual costs of the processing, testing,
  enforcement, and oversight activities required by
  this chapter under rules adopted by the fire
  prevention and building safety commission.
  However, the fee for each brand family may not
  exceed one thousand dollars (1,000).

16
Enforcement

• Even-handed approach to the industry
• Intentional v. Aberration