Letter to The Honorable Shalanda Young and The Honorable Richard Revesz (November 16, 2023)

Summary

A letter dated November 16, 2023, from the House Committee on Small Business to Director Shalanda Young of the Office of Management and Budget and Administrator Richard Revesz of the Office of Information and Regulatory Affairs, expressing concern about the Food and Drug Administration's proposed rule on menthol flavored cigarettes. The letter says the rule would have significant economic impacts on small entities and would fuel illicit markets, citing figures from the National Association of Convenience Stores. It requests information no later than November 30, 2023, on small business closures, alternatives considered and consultation with other agencies. The signature block names Roger Williams and Dan Meuser.

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Issuer: Congressional materials
Document type: 2023 11 16 Housesbc Majority To Omb Letter To Omb Re Rfa Fda Menthol Rule
Date: 2023-11-16
Case: 2023 11 16 Housesbc Majority To Omb Letter To Omb Re Rfa Fda Menthol Rule

Cite this document

“Letter to The Honorable Shalanda Young and The Honorable Richard Revesz (November 16, 2023).” Original at smallbusiness.house.gov, dated 2023-11-16. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2023-11-16-2023-11-16-housesbc-majority-to-omb-letter-to-omb-re-rfa-fda-menthol-rule/, SHA-256 92c0f1df3af131642ca76dcc7785ef0a01012d90f66977ea45c18b2459fdffd6.

Full text

November 16, 2023

The Honorable Shalanda Young The Honorable Richard Revesz
Director Administrator
Office of Management & Budget Office of Information & Regulatory Affairs
Executive Office of the President Office of Management & Budget
725 17th Street, NW 725 17th Street, NW
Washington, DC 20503 Washington, DC 20503

Dear Director Young and Administrator Revesz,

The House Committee on Small Business (Committee) writes to express its concern
about the Food and Drug Administration’s (FDA) proposed rule that would implement product
standard regulations to prohibit the manufacture and sale of menthol flavored cigarettes (Rule),
which is currently under review by the Office of Management and Budget’s (OMB) Office of
Information and Regulatory Affairs (OIRA).1 The Committee has followed the FDA’s process as
it relates to this rulemaking and seeks to ensure OMB/OIRA is considering both the significant
economic impacts on small entities and the fueling of illicit markets that would result from
implementation of this Rule.

The Regulatory Flexibility Act (RFA) requires agencies to analyze proposed rules to
determine if they will have a significant economic impact on a substantial number of small
businesses.2 The FDA found that this Rule would have such an impact on small manufacturers,
wholesale, and retail firms—triggering compliance costs dwarfed by losses in revenue.3 The
National Association of Convenience Stores (NACS), which represents more than 150,000
convenience stores in the U.S., reports that tobacco products are a vital source of revenue for the
convenience store industry, 60 percent of which are single-store operators.4 If implemented, this
Rule would cause a single convenience store to lose $72,285 a year in non-tobacco sundry sales
(nearly 4 percent of inside sales) on top of the $160,107 lost due to the reduction in sales of
tobacco products.5 Small operators in the convenience industry would collectively lose $2.16

1
87 Fed. Reg. 26454 (May. 4, 2022); DEPT. OF HEALTH & HUMAN SERVICES, FOOD & DRUG ADMIN, DOCKET NO.
FDA-2021-N-1349, TOBACCO PRODUCT STANDARD FOR MENTHOL IN CIGARETTES (Spring 2023).
2
Regulatory Flexibility Act, 5 U.S.C. 601-612.
3
DEPT. OF HEALTH & HUMAN SERVICES, FOOD & DRUG ADMIN., TOBACCO PRODUCT STANDARD FOR MENTHOL IN
CIGARETTES, DOCKET NO. FDA 2021-N-1349, PRELIMINARY REGULATORY IMPACT ANALYSIS, INITIAL
REGULATORY FLEXIBILITY ANALYSIS, UNFUNDED MANDATES REFORM ACT ANALYSIS (2022).
4
Letter from the National Association of Convenience Stores to Joseph R. Biden, United States, President (Nov. 8,
2022).
5
Id.
The Honorable Shalanda Young
The Honorable Richard Revesz
November 16, 2023
Page 2 of 4

billion in sales, representing $232,392 in lost sales per store.6 This is just the convenience stores
that would be impacted. While the FDA anticipates that consumers of menthol cigarettes would
simply pivot to regular cigarettes and retailers would retain revenue, this unsubstantiated claim
does not rectify the impact on small manufacturers who would have their revenue stream from
menthol cigarettes completely wiped out. While well intentioned, the FDA’s ban of menthol
cigarettes will deliver a significant blow to the small businesses in this country and will not be
successful in eradicating menthol cigarettes from the United States.

Menthols make up 37 percent of all retail cigarette sales in this country.7 Disallowing the
legal sale of menthol cigarettes will only incentivize the illicit tobacco market. A coalition of
approximately 700,000 law enforcement officers commented on the proposed Rule saying that
the ban “will increase multiple categories of crimes in our communities. The data is clear that
illicit tobacco attracts gangs and organized crime.”8 Rather than continuing to have oversight of
the production and sale of menthol cigarettes while generating tax revenue, the government will
instead leave the production and sale to unregulated criminal enterprises and foreign producers.

This is not an unsubstantiated fear; after California implemented a state-wide ban on
menthol cigarettes in 2022, a study found that roughly one in five cigarettes smoked were
menthols even six months later, of which 27.6 percent were imported.9 The conclusion of that
report is clear: the tax losses from these policies are substantial, and illicit smuggling operators
appear capable of filling the demand prohibited by legal market transactions.10 Similar results
were found in Massachusetts after it passed a state-wide ban in 2019.11 As we saw with the
FDA’s attempt at tackling e-vapor products, foreign and illegal products replaced the regulated
market; FDA Commissioner Califf acknowledged this failure before the House Appropriations
Subcommittee on Agriculture, Rural Development, and Food and Drug Administration on March
29, 2023.12

Given the enormous impact this Rule will have on small entities, please provide the
following documents and information as soon as possible but no later than November 30, 2023:

1. How many small businesses do you estimate will be forced to close because of the
proposed Rule?

6
Id.
7
FED. TRADE COMMISSION, CIGARETTE REPORT FOR 2020, 10 (2021).
8
National Organization of Black Law Enforcement Executives, Comment Letter to Food & Drug Administration on
Proposed Rule on Tobacco Product Standard for Menthol in Cigarettes (Aug. 3, 2022)
https://www.regulations.gov/comment/FDA-2021-N-1349-175322.
9
Adam Hoffer, Californians Still Smoking Menthol after Ban: Evidence from a Discarded Pack Audit, TAX FOUND.
(Oct. 26, 2023).
10
Id.
11
Ulrik Boesen, Massachusetts Flavored Tobacco Ban Has Severe Impact on Tax Revenue, TAX FOUND. (Jan. 19,
2021).
12
Letter from Rep. John H. Rutherford, et. al., to Robert M. Califf, M.D., U.S. Food & Drug Admin., Commissioner
(Jun. 13, 2023).
The Honorable Shalanda Young
The Honorable Richard Revesz
November 16, 2023
Page 3 of 4

a. What is your estimate on reduced employment figures associated with these small
business closures?
b. What is your estimate on reduced employment figures for businesses that remain
open but with reduced revenues?

2. Given that many of the small businesses projected to be impacted by the proposed Rule
are sources of food and pharmaceuticals in local communities, what data can you share
about the effect that the proposed Rule will have on “food deserts” and “pharmacy
deserts”?

3. The FDA’s Initial Regulatory Flexibility Analysis briefly details only three alternatives
— a delayed effective date, prohibiting menthol as an intentional additive, and
exemptions — to minimize the proposed Rule’s burden on small businesses. What other
alternatives has the FDA, OMB, and OIRA considered or analyzed?13

4. Given the FDA’s expressed interest in the proposed Rule’s impact on minority
communities, what data did the FDA share with OMB/OIRA regarding the effect on
minority-owned small businesses? Please include data related to the impact on revenue,
employment, and viability for these businesses.

5. Has OMB or OIRA consulted with other agencies who oversee criminal activity in the
United States over the repeatedly expressed concerns of Congress that this proposed Rule
will grow the illicit tobacco market?

6. Evidence sufficient to show OMB and OIRA are taking the concerns of small businesses
seriously, including but not limited to meetings that the Offices took with small
businesses, and responses to their letters.

7. A nationwide ban of menthol cigarettes is estimated to result in $1.9 billion in lost tax
revenue within the first year alone.14 How does OMB plan to make up for this loss when
the government is trillions of dollars in debt?

To schedule the delivery of your response or ask any related follow-up questions, please
contact Committee on Small Business Majority Staff at (202) 225-5821. The Committee on
Small Business has broad authority to investigate “problems of all types of small business” under
House Rule X. Thank you in advance for your cooperation with this inquiry.”

13
DEPT. OF HEALTH & HUMAN SERVICES, FOOD & DRUG ADMIN., TOBACCO PRODUCT STANDARD FOR MENTHOL IN
CIGARETTES, DOCKET NO. FDA 2021-N-1349, PRELIMINARY REGULATORY IMPACT ANALYSIS, INITIAL
REGULATORY FLEXIBILITY ANALYSIS, UNFUNDED MANDATES REFORM ACT ANALYSIS, 214-220 (2022).
14
Ulrik Boesen, Federal Menthol Cigarette Ban May Cost Governments $6.6 Billion, TAX FOUND. (Mar. 2, 2022).
The Honorable Shalanda Young
The Honorable Richard Revesz
November 16, 2023
Page 4 of 4

In God We Trust,

_________________________ _________________________
Roger Williams Dan Meuser
Chairman Member
Committee on Small Business Committee on Small Business

cc: The Honorable Nydia M. Velasquez, Ranking Member
Committee on Small Business

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