Vape Industry Excluded from Tobacco User Fee Budget for Third Time in A Row

Tobacco User Fees and Vaping

For the third year in a row (under both the Trump and Biden Administrations) the House of Representatives will not approve the budget request from the White House and the FDA to collect tobacco company user fees from vape manufacturers.

All initiatives by the FDA Center for Tobacco Products (CTP) are 100% funded by user fees generated by tobacco companies with no contributions from any other outlet. In 2020 and 2021 the Trump administration requested $100 million in vape user fees, and the Biden administration submitted the exact same request for fiscal year 2022. Specifically, of the $780.8 million in user fees requested by the Biden Administration for 2022, $100 million would be from vape companies.

A tweet from Paul Bair from Turning Point Brands on June 24, 2021 specifies that the Democratic-led House spending bill draft released by the House Democrats does not include vape companies, which comes as something of a surprise considering the largely negative opinions voiced by the party about vaping, with the justification that the widespread availability and fun flavors could encourage children to try it out.

But what exactly are tobacco user fees and how are they calculated by the FDA?

How Are Tobacco User Fees Determined?

According to the May 2016 FDA Small Entity Compliance Guide Requirements for the Submission of Data Needed to Calculate User Fees for Domestic Manufacturers and Importers of Tobacco Products:

FDA will calculate the percentage shares for each class as follows:

- FDA will multiply the units of product removed and not tax exempt for the most recent full calendar year by the 2003 maximum Federal excise tax rate for that applicable class or subclass (class dollar figure). The cigar class percentage share will be the sum of this calculation for the small and large cigar subclasses.

- FDA will total the class dollar figures for all tobacco classes for the most recent full calendar year (total dollar figure).

- FDA will divide the class dollar figure by the total dollar figure to determine the percentage share for each class.

- FDA will calculate the allocation for each class of tobacco products by multiplying the percentage share for each class by the total assessment.

- FDA will reallocate the percentage share of any class of tobacco products that has not, by the beginning of the fiscal year, been deemed subject to chapter IX of the FD&C Act. (§ 1150.7(a))

The vast majority of tobacco user fees come from cigarette sales. Because there is no federal tax on vape devices or e-liquids, if the FDA were to begin collecting user fees from vape manufacturers, the entire fee-calculation system would have to be reworked. Should that happen, large manufacturers like Juul would be responsible for a huge percentage of the fees.

What This Means for the Vape Industry

While it seems that the vape industry (for the third time in a row) has escaped by the skin of their teeth, the reasoning behind this decision is unclear. A great deal of speculation has begun to circulate regarding why exactly the Democratic House majority would neglect to include vape companies in this draft. One theory presented by Jim McDonald of Vaping360.com suggests that “Congress thinks assessing fees could legitimize an industry they see as illegitimate.”

It’s a reasonable assumption - after declaring time and time again that vaping is a danger to American youth and not a valid outlet to safely consume nicotine, to suddenly drop vaping into the same category as products like cigarettes seems a lot like backpedaling. It’s entirely possible that at this point, punishing the vape industry with user fees would force the House to admit that vaping is in fact here to stay. And for the time being, it is.

Sources:

Blair, Paul [@gopaulblair]. "House Democrats have just released their draft FDA spending bill. The Center for Tobacco Products will receive $681 million, $99 million less than the amount sought by the Biden Administration/FDA in the form of new user fees on e-cigarette manufacturers."  Twitter, 42 June 2021, https://twitter.com/gopaulblair/status/14081000927...

McDonald, Jim. “House Dems Reject Proposed FDA User Fees for Vape Companies.” Vaping360, 24 June 2021, vaping360.com/vape-news/110027/house-dems-reject-proposed-fda-user-fees-for-vape-companies/. Accessed 13 July 2021.

Products, Center for Tobacco. “Requirements for the Submission of Data Needed to Calculate User Fees for Domestic Manufacturers and Importers of Tobacco Products.” U.S. Food and Drug Administration, 28 July 2020, www.fda.gov/regulatory-information/search-fda-gui... Accessed 13 July 2021.