[Federal Register Volume 82, Number 122 (Tuesday, June 27, 2017)]
[Notices]
[Pages 29132-29135]
[FR Doc No: 2017-13371]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80994; File No. SR-NASDAQ-2017-058]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt Initial and Continued Listing Standards for the Listing of Equity
Investment Tracking Stocks

June 21, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 8, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to adopt initial and continued listing
standards for the listing of Equity Investment Tracking Stocks.
    The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to adopt initial and continued listing standards
for the listing of Equity Investment Tracking Stocks. An Equity
Investment Tracking Stock is defined as a class of common equity
securities that tracks on an unleveraged basis the performance of an
investment by the issuer in the common equity securities of a single
other company listed on the Exchange.\3\ An Equity Investment Tracking
Stock may track multiple classes of common equity securities of a
single issuer, so long as all of those classes have identical economic
rights and at least one of those classes is listed on the Exchange.
---------------------------------------------------------------------------

    \3\ Nasdaq will determine whether a security tracks the
performance of a single other company based on the facts and
circumstances of the particular matter, including whether the
security tracks substantial assets in addition to the other listed
company. Nasdaq encourages any company considering listing a
security that tracks the performance of another listed company, in
whole or in part, to contact Nasdaq staff as early as possible to
discuss.
---------------------------------------------------------------------------

    An Equity Investment Tracking Stock may be listed on the Nasdaq
Global

Select, Global, or Capital Markets under the Rule 5300, 5400 or 5500
Series, as applicable, provided it also meets the additional
requirements set forth in the proposed Rule 5222. An Equity Investment
Tracking Stock is only eligible to be listed on the same tier of Nasdaq
(Global Select, Global or Capital) as the equity security it tracks.
    Proposed Rule 5222(a) provides that, prior to the commencement of
trading of any Equity Investment Tracking Stock, Nasdaq will distribute
an information circular to its members that describes any special
characteristics and risks of trading the Equity Investment Tracking
Stock, and lists Exchange Rules that will apply to the Equity
Investment Tracking Stock including rules that require members: (A) To
use reasonable diligence in regard to the opening and maintenance of
every account, to know (and retain) the essential facts concerning
every customer and concerning the authority of each person acting on
behalf of such customer; and (B) in recommending transactions in the
Equity Investment Tracking Stock to have a reasonable basis to believe
that (i) the recommendation is suitable for a customer given reasonable
inquiry concerning the customer's investment objectives, financial
situation, needs, and any other information known by such members, and
(ii) the customer can evaluate the special characteristics, and is able
to bear the financial risks, of an investment in the Equity Investment
Tracking Stock.
    Proposed Rule 5222(b) provides that in addition to the initial
listing requirements of the Rule 5300 Series,\4\ the Rule 5400
Series,\5\ or the Rule 5500 Series \6\ applicable to all securities,\7\
the issuer of the Equity Investment Tracking Stock must own (directly
or indirectly) \8\ at least 50% of both the economic interest and the
voting power of all of the outstanding classes of common equity of the
issuer whose equity is tracked by the Equity Investment Tracking Stock.
Further, Nasdaq will not list an Equity Investment Tracking Stock if,
at the time of the proposed listing, the issuer of the equity tracked
by the Equity Investment Tracking Stock has received a Staff Delisting
Determination or been notified about a deficiency, except for a
corporate governance deficiency with a grace period provided under Rule
5810(c)(3)(E),\9\ with respect to such security.
---------------------------------------------------------------------------

    \4\ The Rule 5300 Series generally requires that for initial
listing on the Nasdaq Global Select Market a security must satisfy a
price, publicly held shares, market maker, ownership, market value
and valuation requirement.
    \5\ The Rule 5400 Series generally requires that for initial
listing on the Nasdaq Global Market a security must satisfy a price,
publicly held shares, round lot holder, market maker, and either an
income, an equity, a market value of listed securities, or a total
assets and total revenue requirement.
    \6\ The Rule 5500 Series generally requires that for initial
listing on the Nasdaq Capital Market a security must satisfy a
price, publicly held shares, round lot holder, market maker, and
either an equity, a market value of listed securities, or a net
income requirement.
    \7\ In addition to meeting the quantitative requirements of the
Rule 5300 Series, the Rule 5400 Series, or the Rule 5500 Series, the
issuer of Equity Investment Tracking Stock must meet the
requirements of the Rule 5100 Series, the disclosure obligations set
forth in the Rule 5200 Series, the Corporate Governance requirements
set forth in the Rule 5600 Series, and pay any applicable fees in
the Rule 5900 Series.
    \8\ An example of an indirect ownership would be where the
listed company has a 100%-owned subsidiary and that subsidiary in
turn owns the stock of the company whose performance is being
tracked. Another example would be where the listed company owns 100%
of each of two subsidiaries, each of which owns stock in the company
whose performance is being tracked.
    \9\ Rule 5810(c)(3)(E) provides that if a company fails to meet
the majority board independence or the audit committee composition
requirements due to one vacancy, or fails to meet the audit
committee composition requirements because an audit committee member
ceases to be independent for reasons outside her control, Nasdaq
will provide the company with an automatic grace period for up to
one year to regain compliance with the rule.
---------------------------------------------------------------------------

    Proposed Rule 5222(c) provides that in addition to the continued
listing requirements of the Rule 5400 Series \10\ or the Rule 5500
Series,\11\ as applicable, Nasdaq will also apply additional continued
listing requirements. Specifically, if the listed equity security or
securities whose value is tracked by the Equity Investment Tracking
Stock is transferred to a different tier of Nasdaq (Global Select,
Global or Capital), the Equity Investment Tracking Stock that tracks
such security will be automatically transferred to the same tier of
Nasdaq, provided the Equity Investment Tracking Stock meets the
applicable listing standards for that tier. However, if the Equity
Investment Tracking Stock does not meet the applicable listing
standards for that tier, Nasdaq will determine whether the Equity
Investment Tracking Stock meets an applicable initial listing standard
in place at that time and will halt trading in the Equity Investment
Tracking Stock and issue a Staff Delisting Determination pursuant to
Rule 5810(c)(1) if it does not. Similarly, if the listed equity
security or securities whose value is tracked by the Equity Investment
Tracking Stock ceases to be listed on Nasdaq or is suspended pending
delisting, the issuer of the Equity Investment Tracking Stock owns less
than 50% of the issuer whose equity is tracked by the Equity Investment
Tracking Stock, or the Equity Investment Tracking Stock ceases to track
the performance of the listed equity security or securities that was
tracked at the time of initial listing, Nasdaq will determine whether
the Equity Investment Tracking Stock meets an applicable initial
listing standard in place at that time and will halt trading in the
Equity Investment Tracking Stock and issue a Staff Delisting
Determination pursuant to Rule 5810(c)(1) if it does not.
---------------------------------------------------------------------------

    \10\ The Rule 5400 Series generally requires that for continued
listing on the Nasdaq Global Market, including the Nasdaq Global
Select Market, a security must satisfy a price, publicly held
shares, total holders, market maker, and either an equity, a market
value of listed securities, or a total assets and total revenue
requirement.
    \11\ The Rule 5500 Series generally requires that for continued
listing on the Nasdaq Capital Market a security must satisfy a
price, publicly held shares, public holders, market maker, and
either an equity, a market value of listed securities, or a net
income requirement.
---------------------------------------------------------------------------

    Nasdaq also proposes to amend Rule 5810(c)(1) to provide that an
Equity Investment Tracking Stock's failure to comply with the
additional continued listing requirements in Rule 5222(c) or the
issuance of a Staff Delisting Determination with respect to the
security such Equity Investment Tracking Stock tracks will constitute a
deficiency that will immediately result in Nasdaq issuing a Delisting
Determination with regard to the Equity Investment Tracking Stock.
    Proposed Rule 5222(d) imposes additional disclosure and procedural
requirements on the Equity Investment Tracking Stock when a listed
equity security whose value is tracked by the Equity Investment
Tracking Stock is subject to deficiency procedures. These requirements
are designed to provide investors in the Equity Investment Tracking
Stock with notice about the potential delisting of the listed equity
security or securities whose value is tracked by the Equity Investment
Tracking Stock and to assure that the Equity Investment Tracking Stock
is treated in the same manner as the equity security whose value it
tracks during the deficiency administration process. Specifically, if
the issuer of the security that the Equity Investment Tracking Stock
tracks announces that it has received a deficiency notification then
the issuer of the Equity Investment Tracking Stock must promptly
publicly announce (either by filing a Form 8-K, where required by SEC
rules, or by issuing a press release) that fact.\12\
---------------------------------------------------------------------------

    \12\ In addition, the issuer of the Equity Investment Tracking
Stock that receives a notification of deficiency or Staff Delisting
Determination is required by Rule 5810(b) to make a public
announcement disclosing receipt of the notification.

---------------------------------------------------------------------------

    In addition, proposed Rule 5222(d) provides that notwithstanding
any provisions to the contrary, if the Staff Delisting Determination
issued to the security such Equity Investment Tracking Stock tracks is
stayed pursuant to the Rule 5800 Series, the suspension of the Equity
Investment Tracking Stock also will be stayed and will remain stayed on
the same terms that apply to the security such Equity Investment
Tracking Stock tracks.
    Nasdaq proposes to amend Rule 4120(a) governing Nasdaq's authority
to initiate trading halts or pauses and Rule IM-5250-1 providing
interpretive material regarding trading halts to provide that, in the
event that the issuer of the common equity security tracked by an
Equity Investment Tracking Stock intends to issue a material news
release during the trading day and Nasdaq determines that a regulatory
trading halt should be implemented, including a trading halt pending
dissemination of the news, Nasdaq will also halt trading in the Equity
Investment Tracking Stock simultaneously with the halt in the security
it tracks and will also recommence trading at the same time. In
addition, Nasdaq will halt trading in the Equity Investment Tracking
Stock if the security it tracks is suspended from trading, such as
while the security is pending delisting.\13\
---------------------------------------------------------------------------

    \13\ If the security that an Equity Investment Tracking Stock
tracks is suspended pending delisting Nasdaq would also follow the
procedures in Rule 5222(c) and initiate delisting proceedings for
the Equity Investment Tracking Stock unless it meets another
applicable listing standard. The trading halt in the Equity
Investment Tracking Stock would remain in place until the Equity
Investment Tracking Stock is requalified or is suspended pending its
delisting pursuant to the procedural requirements of the Rule 5800
Series.
---------------------------------------------------------------------------

    Nasdaq proposes to amend Rules 5401 and 5501 to update the preamble
to these rules and Rule 5305 to provide that an Equity Investment
Tracking Stock may be listed as a primary equity security or as a
secondary class of common stock, as applicable, provided it must also
meet the requirements set forth in Rule 5222.
    Nasdaq represents that it will monitor activity in Equity
Investment Tracking Stocks to identify and deter any potential improper
trading activity in such securities. The Exchange will adopt
surveillance procedures, and make any enhancements necessary,
sufficient to enable it to monitor Equity Investment Tracking Stocks
alongside the securities whose value they track. Additionally, the
Exchange will rely on its existing trading surveillances, administered
by the Exchange, or the Financial Industry Regulatory Authority
(``FINRA'') on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\14\
---------------------------------------------------------------------------

    \14\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
    Given the novel investment characteristics of Equity Investment
Tracking Stocks, the Exchange will conduct a review of the trading and
compliance with continued listing standards of Equity Investment
Tracking Stocks and their issuers over the initial two year period for
which the proposed listing standard is in operation.
    The Exchange will furnish two reports to the SEC based on this
review, one to be provided no later than sixty days after the first
anniversary of the adoption of the proposed rule, which will cover the
first year, and the second to be provided one year later, which will
cover the second year. At a minimum, the reports will address the
relationship between the trading prices of listed Equity Investment
Tracking Stocks and those of the securities whose values they track,
the liquidity of the market for the two securities, and any
manipulation concerns arising in connection with the trading of
securities listed under the standard and the securities whose values
are being tracked. The reports will also discuss any recommendations
the Exchange may have for enhancements to the listing standard based on
its review.
    Nasdaq proposes to make a conforming change to Rule 5950(e)(3) to
allow for the renumbering of the defined terms in Rule 5005(a).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\15\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\16\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the proposed listing standards are designed to
protect investors and the public interest by ensuring that Equity
Investment Tracking Stocks listed on the Exchange meet stringent
quantitative and qualitative listing standards to qualify for initial
and continued listing. The Exchange notes that trading in an Equity
Investment Tracking Stock will be halted and subject to delisting if it
does not meet another applicable initial listing standard and (i) the
equity security or securities whose value is tracked by the Equity
Investment Tracking Stock ceases to be listed on the Exchange or is
suspended pending delisting; (ii) the issuer of the Equity Investment
Tracking Stock owns (directly or indirectly) less than 50% of either
the economic interest or the voting power of all of the outstanding
classes of common equity of the issuer whose equity is tracked by the
Equity Investment Tracking Stock; or (iii) the Equity Investment
Tracking Stock ceases to track the performance of the listed equity
security that was tracked at the time of initial listing. If the
security whose value is tracked by an Equity Investment Tracking Stock
changes tiers (e.g., from Capital Market to Global Market), Nasdaq will
halt trading and initiate delisting of the Equity Investment Tracking
Stock unless the Equity Investment Tracking Stock meets the applicable
listing requirements for the new tier or qualifies for listing under
another applicable initial listing standard.
    The Equity Investment Tracking Stocks will have to meet the
requirements of the proposed Listing Rule 5222 in addition to the other
listing requirement applicable to equity securities. The issuer of an
Equity Investment Tracking Stock must fully comply with the
requirements of the Rule 5100 Series, the disclosure obligations set
forth in the Rule 5200 Series, the quantitative requirements set forth
in the Rule 5300 Series, the Rule 5400 Series or the Rule 5500 Series,
and the Corporate Governance requirements set forth in the Rule 5600
Series, subject to applicable exemptions such as those for controlled
companies.
    The proposed rule change is designed to provide equivalent
treatment to an Equity Investment Tracking Stock as is provided to the
security or securities it tracks, and therefore it will not permit
unfair discrimination between customers, issuers, brokers, or dealers.

    The Exchange notes that it is proposing to amend Rule 4120(a)
governing Nasdaq's authority to initiate trading halts or pauses and
Rule IM-5250-1 providing interpretive material regarding trading halts
to provide that, in the event that the issuer of the common equity
security tracked by an Equity Investment Tracking Stock intends to
issue a material news release during the trading day and Nasdaq
determines that a regulatory trading halt should be implemented pending
dissemination of the news or if Nasdaq determines that any other
required regulatory trading halt should be implemented, the Exchange
will also halt trading in the Equity Investment Tracking Stock
simultaneously with the halt in the security whose values is being
tracked and will also recommence trading at the same time. The Exchange
believes that this proposed amendment will protect investors and the
public interest by preventing market participants from gaining an
advantage in trading in an Equity Investment Tracking Stock based on
their possession of material nonpublic information with respect to the
company whose value is being tracked by the Equity Investment Tracking
Stock. In addition, Nasdaq will halt trading in the Equity Investment
Tracking Stock if the security whose value is being tracked is
suspended from trading, such as while the security is pending
delisting.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is
designed to provide listing standards for Equity Investment Tracking
Stocks that are appropriately protective of investors and is not
designed to limit the ability of the issuers of those securities to
list them on any other national securities exchange. The market for
listing services is extremely competitive.\17\ Because issuers have a
choice to list their securities on a different national securities
exchange, the Exchange does not believe that the proposed listing
standards impose a burden on competition.
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 78153 (June 24,
2016), 81 FR 42762 (June 30, 2016) (SR-NYSE-2016-22) (adopting
listing standards for Equity Investment Tracking Stocks).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act\18\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\19\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2017-058 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2017-058. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2017-058, and should
be submitted on or before July 18, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Eduardo A. Aleman,
Assistant Secretary.
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2017-13371 Filed 6-26-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 90 (Tuesday, May 10, 2016)]
[Rules and Regulations]
[Pages 28707-28716]
[FR Doc No: 2016-10688]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 1150

[Docket No. FDA-2012-N-0920]
RIN 0910-AG81

Requirements for the Submission of Data Needed To Calculate User
Fees for Domestic Manufacturers and Importers of Cigars and Pipe
Tobacco

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA or we) is issuing a
final rule that requires domestic manufacturers and importers of cigars
and pipe tobacco to submit information needed to calculate the amount
of user fees assessed under the Federal Food, Drug, and Cosmetic Act
(the FD&C Act). FDA recently expanded its authority by issuing a final
rule, ``Deeming Tobacco Products To Be Subject to the Federal Food,
Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and
Tobacco Control Act; Restrictions on the Sale and Distribution of
Tobacco Products and Required Warning Statements for Tobacco Products''
(Deeming rule), deeming all products that meet the statutory definition
of ``tobacco product,'' except accessories of the newly deemed tobacco
products, to be subject to the FD&C Act. The Deeming rule, among other
things, subjected domestic manufacturers and importers of cigars and
pipe tobacco to the FD&C Act's user fee requirements. Consistent with
the Deeming rule and the requirements of the FD&C Act, this final rule
requires the submission of the information needed to calculate user fee
assessments for each manufacturer and importer of cigars and pipe
tobacco to FDA.

DATES: This rule is effective August 8, 2016. Domestic manufacturers
and importers of cigars and pipe tobacco must begin submitting data
required by Sec.  1150.5 (21 CFR 1150.5) to FDA no later than the 20th
day of August, 2016.
    Because FDA can perform class allocations only on a full fiscal
year basis, domestic manufacturers and importers of cigars and pipe
tobacco will become subject to user fee assessments on October 1 of the
first full fiscal year following the effective date of this rule.

FOR FURTHER INFORMATION CONTACT: Paul Hart, Food and Drug
Administration, Center for Tobacco Products, Document Control Center,
Bldg. 71, Rm. G335, 10903 New Hampshire Ave., Silver Spring, MD 20993-
0002; 1-877-287-1373<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Overview of the Final Rule
III. Comments on the Proposed Rule
IV. Legal Authority
V. Environmental Impact
VI. Economic Analysis of Impacts
VII. Paperwork Reduction Act of 1995
VIII. Federalism
IX. References

I. Background

    The Family Smoking Prevention and Tobacco Control Act (Tobacco
Control Act) was enacted on June 22, 2009 (Pub. L. 111-31), amending
the FD&C Act and providing FDA with the authority to regulate tobacco
products. Section 101(b) of the Tobacco Control Act amends the FD&C Act
by adding chapter IX (sections 900 through 920 (21 U.S.C. 387 through
387u)). Chapter IX provides FDA with tools and funds to regulate
tobacco products and imposes certain obligations on domestic tobacco
product manufacturers and importers. Included among FDA's authorities
are the authorities to assess and collect user fees.
    In enacting the Tobacco Control Act, Congress found that tobacco
use is the single most preventable cause of disease, disability, and
death in the United States. Each year, over 400,000 people die
prematurely from smoking or exposure to secondhand smoke. Approximately
8.6 million people in the United States live with a serious illness
caused by smoking. A consensus exists within the scientific and medical
communities that tobacco products are inherently dangerous and cause
cancer, heart disease, and other serious adverse health effects
(sections 2(2), (3), and (13) of the Tobacco Control Act).
    The Tobacco Control Act grants FDA the authority to regulate
tobacco products and to protect the public from the harmful effects of
tobacco use. Section 901(b) of the FD&C Act automatically provides that
chapter IX applies to cigarettes, cigarette tobacco, roll-your-own
tobacco, and smokeless tobacco. It also permits FDA to issue a
regulation to deem other tobacco products subject to the FD&C Act,
which FDA has done, by publishing elsewhere in this issue of the
Federal Register, the Deeming rule to bring all products meeting the
definition of tobacco product under its FD&C Act authority. More
specifically, the Tobacco Control Act gives FDA the authority to, among
other things:
     Restrict tobacco product retail sales to youth;
     require owners and operators of tobacco companies to
register annually and be subject to biennial inspection by FDA (section
905 of the FD&C Act);
     require manufacturers and importers who wish to market a
new tobacco product to obtain a marketing order from FDA prior to
marketing that product (section 910 of the FD&C Act);
     require each manufacturer or importer to report all
constituents, including smoke constituents as applicable, identified by
FDA as harmful or potentially harmful to health in each tobacco
product, and as applicable in the smoke of each tobacco product, by
brand and by quantity in each brand and subbrand (section 904(a)(3) of
the FD&C Act);
     establish tobacco product standards if FDA finds that it
is appropriate for the protection of the public health (section
907(a)(3) of the FD&C Act);
     conduct compliance-check inspections of tobacco product
retailers to determine a retailer's compliance with Federal laws and
regulations;
     establish science and research programs to inform the
development of tobacco product regulations and better understand the
risks associated with tobacco use;
     educate the public about the harmful effects of tobacco
use; and
     assess and collect user fees from each domestic
manufacturer and importer of tobacco products subject to section 919 of
the FD&C Act.
    Section 919(c)(2) of the FD&C Act provides that tobacco product
user fees are the sole source of funding for FDA's regulation of
tobacco products. Therefore, FDA considers these fees to be critical to
the Agency's ability to achieve its mission to protect and promote the
public health. User fees provide FDA with a source of stable,
consistent funding that has made possible our implementation of the
Tobacco Control Act. The revenues from these fees fund the Agency's
regulation of tobacco products and the tobacco industry, as described
previously.
    In the Federal Register of May 31, 2013 (78 FR 32581), FDA issued a
notice of proposed rulemaking (User Fee proposed rule) to add 21 CFR
part 1150 to require domestic tobacco product manufacturers and
importers to submit information needed to calculate the amount of user
fees assessed under the FD&C Act. FDA finalized portions of the User
Fee proposed rule relating to tobacco products under FDA's jurisdiction
at that time in the final rule

``Requirements for the Submission of Data Needed to Calculate User Fees
for Domestic Manufacturers and Importers of Tobacco Products,'' which
was published in the Federal Register of July 10, 2014 (79 FR 39302)
(User Fee final rule). Elsewhere in this issue of the Federal Register,
FDA is publishing the Deeming rule to deem all products meeting the
statutory definition of ``tobacco product,'' except accessories of the
newly deemed tobacco products, to be subject to the FD&C Act. This rule
is being issued in response to FDA's user fee authority over cigars and
pipe tobacco, and finalizes portions of the User Fee proposed rule that
relate to domestic manufacturers and importers of cigars and pipe
tobacco, requiring them to submit information needed to calculate user
fee assessments to FDA.
    The final rule, issued under section 919(a) of the FD&C Act,
requires FDA to assess user fees on, and collect such fees from, each
manufacturer and importer of tobacco products subject to chapter IX of
the FD&C Act. The total amount of user fees for each fiscal year is
specified in section 919(b)(1) of the FD&C Act, and under section
919(a) we are to assess and collect a proportionate amount each quarter
of the fiscal year. The FD&C Act provides for the total assessment to
be allocated among the classes of tobacco products identified in the
statute: Cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and
roll-your-own tobacco. The class allocation is based on each tobacco
product class' volume of tobacco products removed \1\ into commerce
that is not exempt from certain taxes. Within each class of tobacco
products, an individual domestic manufacturer or importer is assessed a
user fee based on its statutorily defined ``percentage share'' for that
tobacco product class.
---------------------------------------------------------------------------

    \1\ Removal is defined at 26 U.S.C. 5702 as the removal of
tobacco products or cigarette papers or tubes, or any processed
tobacco, from the factory or from internal revenue bond under
section 5704, as the Secretary of Treasury shall by regulation
prescribe, or release from customs custody, and shall also include
the smuggling or other unlawful importation of such articles into
the United States.
---------------------------------------------------------------------------

    In specifying how to determine each of these two allocations--to a
class of tobacco products and then to a domestic manufacturer or
importer within a particular class of tobacco products--section 919 of
the FD&C Act references the Fair and Equitable Tobacco Reform Act of
2004 (FETRA, Pub. L. 108-357 (7 U.S.C. 518 et seq.)). In determining
the user fees to be allocated to each class of tobacco products,
section 919(b)(2)(B)(ii) of the FD&C Act provides that the applicable
percentage for each tobacco product class shall be the percentage
determined under section 625(c) of FETRA for each such class of product
for such fiscal year. The classes of tobacco products identified in
section 919 of the FD&C Act are the same classes subject to assessments
under FETRA. In determining the user fee to be paid by each company
within a given class, except the cigar class, section 919(b)(4) of the
FD&C Act directs that we use percentage share information determined
for purposes of allocations under paragraphs (e) through (h) of section
625 of FETRA. With regards to cigars, section 919(b)(5) of the FD&C Act
directs that the percentage share for each domestic manufacturer and
importer be based on the excise taxes paid during the prior fiscal
year, rather than the prior quarter.
    FETRA provided for a Tobacco Transition Payment Program (TTPP)
through which eligible former tobacco quota holders and tobacco
producers received payments in 10 equal installments in each fiscal
year 2005 through 2014. FETRA provided for the establishment of
quarterly assessments on each domestic manufacturer and importer of
tobacco products to fund the 10-year TTPP. The last assessment under
FETRA was in September 2014, which encompassed the 39th and 40th
quarterly TTPP assessments. The issuance of the 40th, or last,
quarterly assessment, was on September 1, 2014, rather than on December
1, 2014, in accordance with statutory requirements specified in section
625(d)(3)(A) of FETRA. We are issuing this final rule consistent with
section 919(b)(7) of the FD&C Act, which requires we ensure that we are
able to make the determinations necessary for assessing tobacco product
user fees.

II. Overview of the Final Rule

    We are finalizing portions of the proposed rule with only minor
changes. We amended Sec.  1150.7(a)(1) and (2) to include language from
the proposed rule specifying the calculations that FDA will perform to
determine the yearly class allocation for cigars. Moreover, we added
Sec.  1150.9(a)(2) to codify the method by which FDA will calculate the
percentage share for each domestic manufacturer and importer of cigars.
In the proposed rule, we specifically discussed this proposed
methodology, requested comment, and reserved Sec.  1150.9(a)(2) for the
purpose of including the calculations for manufacturers and importers
in the cigar class if they became subject to chapter IX of the FD&C
Act. After reviewing comments on the proposed rule, FDA is adding this
methodology for cigars to Sec.  1150.9(a)(2) without changes.
    We added paragraph (c) to Sec.  1150.5 to require that domestic
manufacturers and importers of cigars report data for each prior month
in the fiscal year in their first submission under this rule. Once
deemed, cigars and pipe tobacco will be subject to user fees under
section 919 of the FD&C Act. However, domestic manufacturers and
importers of cigars and pipe tobacco will start being assessed fees
only at the start of the fiscal year following the effective date of
this rule because we can only perform class allocations on a full
fiscal year basis. As we discussed in section I.B. of the User Fee
proposed rule (78 FR 32583), section 919(b)(5) of the FD&C Act requires
FDA to allocate user fees within the cigar class to cigar firms based
on the amount of excise taxes those firms paid in the prior fiscal
year. This addition to Sec.  1150.5 will ensure that FDA has data for
the prior fiscal year necessary to calculate, assess, and collect user
fees for domestic manufacturers and importers of cigars in the first
fiscal year in which they are assessed fees. We do not need data for
the full prior fiscal year from domestic manufacturers and importers of
other tobacco products subject to user fees, including pipe tobacco,
because percentage share calculations for those classes only requires
prior fiscal quarter data.
    We added paragraph (d) to Sec.  1150.5 to require that domestic
manufacturers and importers of pipe tobacco begin their monthly
reporting of data in August 2016. As noted previously, FDA makes
percentage share calculations for tobacco products other than cigars
using prior fiscal quarter data. Because FDA will begin making
percentage share calculations for domestic manufacturers and importers
of pipe tobacco beginning in the first fiscal quarter of 2017, FDA does
not need pipe tobacco firms to submit data for months prior to the
fourth fiscal quarter of 2016. Requiring domestic manufacturers and
importers of pipe tobacco to make their first submission of prior month
data by August 20, 2016, ensures FDA will have data for each month of
the fourth fiscal quarter in 2016 and will be able to complete
percentage share calculations for pipe tobacco firms for the first
fiscal quarter of 2017.
    Further, in light of the Deeming rule subjecting cigars and pipe
tobacco to user fee requirements, we added 21 U.S.C. 387a and 21 CFR
1100.1 to the authority section. Finally, we amended Sec.  1150.5(a) by
removing the phrases ``that are part of a class of tobacco products
that is subject to regulation

under chapter IX of the Federal Food, Drug, and Cosmetic Act'' and
``beginning October 2014.'' We made these changes because all classes
of tobacco products that are included in the definition of ``class of
tobacco products'' are subject to chapter IX of the FD&C Act and it is
no longer necessary to make such a distinction, and because the October
2014 compliance date has passed.

III. Comments on the Proposed Rule

    We received 12 comments on the proposed rule. We addressed a
majority of the comments in the User Fee final rule. We declined to
address comments relating to cigars, pipe tobacco, and other deemed
products in that document because they were outside of FDA's
jurisdiction at the time. Now that the Deeming rule has expanded FDA's
authority to cover those products, we address the comments on assessing
user fees on tobacco products that FDA deemed subject to chapter IX of
the FD&C Act in this section.
    Comments were received from tobacco product manufacturers, trade
associations, and individuals. To make it easier to identify comments
and our responses, the word ``Comment,'' in parentheses, will appear
before each comment, and the word ``Response,'' in parentheses, will
appear before each response. We have numbered the comments to make it
easier to distinguish between comments; the numbers are for
organizational purposes only and do not reflect the order in which we
received the comments or any value associated with the comment. We have
combined similar comments under one numbered comment.
    (Comment 1) Multiple comments addressed FDA's authority to assess
and collect user fees from domestic manufacturers and importers of
products that have been deemed subject to FDA's jurisdiction,
particularly e-cigarettes. Some comments stated that FDA must assess
and collect fees because no ``free riders'' are allowed under section
919(a) of the FD&C Act. These comments relied on the language in
section 919(a) of the FD&C Act that FDA shall assess user fees on, and
collect such from, each manufacturer and importer of tobacco products
subject to chapter IX. The comments asserted that, unless deemed
products are subject to user fees, ``some regulated manufacturers and
importers would have to pay the cost of their regulation plus the cost
of regulating the non-paying manufacturers and importers,'' which would
provide the non-paying manufacturers and importers a significant
competitive advantage in terms of reduced costs and prices for their
products. Several of the comments claimed that failure to assess user
fees on deemed products would violate the Fifth Amendment. Some
comments also contend that exempting some products from user fees is
unfair to existing classes, arbitrary and capricious, and would violate
the Administrative Procedure Act.
    In contrast, other comments stated that FDA does not have the
authority to assess user fees for any class other than the six classes
named in section 919(b)(2)(B) of the FD&C Act and in FETRA. These
comments noted that section 919(a) provides that fees must be assessed
and collected ``in accordance with this section'' and, therefore, FDA
can assess fees only on those classes identified in section 919 and
FETRA. One of these comments also noted that the reallocation provision
in section 919(b)(2)(B)(iv) permits reallocation only to regulated
classes of the six FETRA classes. Similarly, another comment stated
that FDA cannot deem electronic cigarette manufacturers to meet the
definition of domestic manufacturer because FDA ``is bound under the
FD&C Act to follow the allocation procedures established under FETRA.''
    (Response) Section 919(b)(2) of the FD&C Act lists six classes of
tobacco products for the purpose of allocating among the classes--
cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-
your-own tobacco. The comments raise the question of whether Congress
intended FDA to assess fees for manufacturers and importers of tobacco
products of only these six classes or intended that FDA create
additional classes for other tobacco products and assess fees for them
as well. In construing section 919 of the FD&C Act, FDA is confronted
with two questions. First, has Congress directly spoken to the precise
question presented? (``Chevron step one''); Chevron, U.S.A., Inc. v.
NRDC, Inc., 467 U.S. 837, 842 (1984). To find no ambiguity, Congress
must have clearly manifested its intention with respect to the
particular issue (Young v. Community Nutrition Institute, 476 U.S. 974,
980 (1986)). If Congress has spoken directly and plainly, the Agency
must implement Congress' unambiguously expressed intent (Chevron, 467
U.S. at 842 to 843). If, however, section 919 is silent or ambiguous as
to whether FDA must impose assessments on manufacturers and importers
of only those classes of tobacco products listed in section 919(b)(2),
FDA may determine whether section 919 should be interpreted to contain
such a limitation, and FDA's interpretation must be upheld if it is
reasonable (``Chevron step two''); Chevron, 467 U.S. at 842 to 843; FDA
v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000).
    We have determined that, in enacting section 919 of the FD&C Act,
Congress clearly manifested its intention that FDA only assess fees for
manufacturers and importers of tobacco products in the six enumerated
classes.
    Section 919(a) of the FD&C Act states that FDA must assess fees
``in accordance with this section,'' and section 919 provides a clear
two-step process for assessing fees. The first step requires FDA to
allocate fees to each class of tobacco products, which it does by
multiplying the total amount of fees per year by the ``applicable
percentage'' for each class. Section 919(b)(2)(A) of the FD&C Act.
Section 919(b)(2)(B) of the FD&C Act sets forth how to calculate these
applicable percentages, but only for the six classes enumerated in
section 919(b)(2). The applicable percentage is the percentage
determined under section 625(c) of Pub. L. 108-357, which is FETRA.
Section 919(b)(2)(B)(ii) of the FD&C Act. Section 625(c) of FETRA
provides initial percentages for each of the six classes, totaling 100
percent, and mandates that subsequent allocations be made only among
these same classes. See sections 625(c)(1) and (2) of FETRA. Because
the percentage of the total user fee assessment for each class under
section 919 of the FD&C Act is the FETRA percentage, the sum of the
percentages for all six classes will always total 100 percent. Since
the six classes must comprise 100 percent of the allocation of the
total user fee assessment under section 919(b)(2) of the FD&C Act,
adding a class of tobacco product beyond the six would increase the
total to over 100 percent. This is a result that Congress could not
have intended, because it would require FDA to assess and collect user
fees beyond the total amount permitted by section 919(b)(1) of the FD&C
Act. Moreover, even assuming that under section 919 of the FD&C Act the
applicable percentage for a class could be something other than the
FETRA percentage, nothing in section 919 sets forth how FDA must, or
even could, determine that percentage. Thus, this first step shows that
section 919 is limited to the six classes enumerated in section
919(b)(2) of the FD&C Act.
    The second step in the process for assessing fees is to determine
the share of fees for each manufacturer and importer within each class
of tobacco products. Except for the cigar class, this percentage shall
be the percentage

determined for the purposes of allocations under subsections (e)
through (h) of section 625 of FETRA. Section 919(b)(4) and (5) of the
FD&C Act. This directive makes clear Congress' intent that all classes
except cigars (as discussed in the next paragraph) look to FETRA when
calculating the percentage share of manufacturers and importers within
a class. However, FETRA only yields, and by its text and structure can
only yield, percentages for firms within the six listed classes. First,
sections 625(e)(1) and (f) of FETRA provide allocations for each
manufacturer and importer of tobacco products in each class ``specified
in subsection (c)(1),'' which are the same six classes from section
919(b)(2) of the FD&C Act. Second, the FETRA allocations are based on
each firm's share of the gross domestic volume for the class. Gross
domestic volume is the volume of tobacco products ``removed'' and not
exempt for Federal excise tax purposes. Section 625(a)(2) of FETRA.
Thus, section 625(h) of FETRA sets forth the information required to be
submitted to calculate the domestic volume of each manufacturer and
importer, which relates to the removal of tobacco products for Federal
excise tax purposes and the payment of such taxes. However, tobacco
products outside the six classes listed in section 919 are not subject
to Federal excise taxes, nor can such products be ``removed'' for
Federal excise tax purposes. See 26 U.S.C. 52 and 26 U.S.C. 5702.
Third, section 625(g) of FETRA provides measurement parameters to
determine the volume of products removed, but they are explicitly
limited to the six listed classes. The volume of domestic sales within
a class are measured for the cigarette and cigar classes based on the
number of cigarettes or cigars; for the remaining four classes
specified in section 625(c)(1) of FETRA, they are measured based on the
number of pounds. Because FETRA does not, and cannot, have allocations
in the second step for products outside the six enumerated classes, it
is clear that Congress intended only manufacturers and importers of
tobacco products within those classes to be subject to user fees under
section 919 of the FD&C Act.
    This is reinforced by section 919(b)(5) of the FD&C Act, which sets
forth a somewhat different process for calculating allocations among
firms in the cigar class that is based on excise taxes paid during the
prior fiscal year rather than the prior quarter. That provision says
that the allocation among firms in the cigar class is
``notwithstanding'' section 919(b)(4) of the FD&C Act, showing that
Congress intended the modified process for cigars to be an exception to
the rule of using the FETRA framework to determine each firm's share of
the class assessment. Because section 919 of the FD&C Act does not
provide any other exceptions, the FETRA percentages must be used for
the allocations within all other classes.
    Section 919(b)(7)(A) of the FD&C Act likewise limits the assessment
of fees under section 919 to the six listed classes. This provision
requires FDA to obtain, from the appropriate Federal Agency, all
necessary information regarding all tobacco product manufacturers and
importers required to pay user fees in order to make percentage
calculations for each class (i.e., ``applicable percentages of each
class'' under the statute, Section 919(b)(2)) and percentage share
calculations within each class. As directed, FDA entered into a
Memorandum of Understanding with the U.S. Department of Agriculture
(USDA) to provide all the necessary information to FDA, and did so only
for firms manufacturing or importing products in the six classes listed
in section 919.\2\ USDA could not provide ``all necessary information''
to FDA to make percentage share calculations for tobacco products in
any other classes, nor could any other Federal Agency.
---------------------------------------------------------------------------

    \2\ USDA's authority to collect assessments under FETRA has
sunset. Section 919(b)(7)(B) of the FD&C Act requires FDA to ensure
that it is able to determine the applicable percentages described in
section 919(b)(2) and the percentage shares described in section
919(b)(4). Thus, FDA issued a rule in July 2014, as well as this
rule to require the submission of the necessary information to
determine these percentages, which enables FDA to assess and collect
the tobacco product user fees.
---------------------------------------------------------------------------

    The reallocation provision in section 919 of the FD&C Act also
shows that user fees cannot be imposed on products outside the six
listed classes. This provision requires that the amount of user fees
that would be otherwise be assessed to classes of tobacco products that
are not subject to chapter IX of the FD&C Act must be reallocated to
classes that are subject to chapter IX. Section 919(b)(2)(B)(iv) of the
FD&C Act. This reallocation must be done in the same manner and based
on the same relative percentages otherwise determined under section
919(b)(2)(B)(ii). By its terms, section 919(b)(2)(B)(ii) of the FD&C
Act can provide the applicable percentages for only the six classes in
section 919(b)(2)(B)(i) because those percentages are determined under
section 625(c) of FETRA. Accordingly, FDA is unable to reallocate any
user fees to a class outside of the six. Thus, the only way that FDA
could reallocate fees to classes that are subject to chapter IX of the
FD&C Act is for the tobacco product classes to be limited to those
listed in section 919(b)(2)(B)(i) of the FD&C Act and in FETRA. Any
other interpretation would render the reallocation provision's express
linkage to FETRA superfluous and contravene the clear intent of
Congress.
    Generally, comments that asserted that FDA should assess fees on
all deemed tobacco products, including those outside the six classes,
point to section 919(a) of the FD&C Act, which says that FDA shall
assess user fees on, and collect such from, each manufacturer and
importer of tobacco products subject to chapter IX. They argue that if
electronic nicotine delivery systems (ENDS) and other tobacco products
are deemed to be subject to chapter IX, then each manufacturer and
importer of such products is subject to these fees. These comments,
however, fail to take into account section 919(a)'s mandate that the
assessment shall be done ``in accordance with this section.'' As
described previously, when the assessments are made in accordance with
section 919's two-step process, they yield assessments only for tobacco
products in the six classes.
    Moreover, it is clear that, for the purposes of section 919 of the
FD&C Act, including 919(a), the term ``each manufacturer and importer
of tobacco products'' is limited to the tobacco products in the six
classes. By its terms, Congress intended section 919 to work in
accordance with the FETRA framework. Section 625 of FETRA, like section
919 of the FD&C Act, applies to each ``tobacco product manufacturer''
and ``tobacco product importer'' and to each class of tobacco products.
The terms manufacturer, importer, and tobacco product in section 919 of
the FD&C Act and FETRA flow from the Internal Revenue Code (IRC). 26
U.S.C. 5702. Just as section 919 requires FDA to make the allocations--
both for each class and within each class--based on FETRA, the FETRA
allocations are based on removals for the purposes of Federal excise
taxes. Thus, section 919 of the FD&C Act and FETRA, and their
respective implementing regulations, use the same terms used in the IRC
relating to Federal excise taxes. The classes of tobacco products are
likewise consistent among the IRC, FETRA, and section 919 of the FD&C
Act. The IRC defines six classes of tobacco products for Federal excise
tax purposes.\3\ The

same six classes are enumerated in FETRA and section 919 of the FD&C
Act for use in assessing the TTPP and tobacco user fees, respectively.
Accordingly, in the IRC, FETRA, and section 919 of the FD&C Act,
tobacco manufacturers are those who manufacture tobacco products in
those six classes subject to Federal excise taxes. Any other approach
to the term ``each manufacturer and importer of tobacco products'' in
section 919 of the FD&C Act would lead to absurd results that Congress
could not have intended. For example, section 900(20) of the FD&C Act
defines ``tobacco product manufacturer'' as any person, including any
repacker or relabeler, who manufactures, fabricates, assembles,
processes, or labels a tobacco product. Relying on the section 900(20)
definition would require FDA to assess user fees on each firm in the
supply chain that, among other things, repacks, relabels, or
distributes tobacco. However, doing so is impossible under the FETRA
calculus mandated for the six classes under section 919 of the FD&C Act
because FETRA calculates the relevant percentages based on the volume
of product removed into domestic commerce (as defined by section 5702
of the IRC), and not tax exempt. Section 625(a)(2) and (3), (c)(2), (e)
and (g) of FETRA. Some firms included in the section 900(20) of the
FD&C Act definition of manufacturer, such as repackers and relabelers,
do not ``remove'' products into domestic commerce as defined by the IRC
because they are not removing products from a factory or bonded
warehouse. Accordingly, these firms would not have a calculable volume
of product removed into domestic commerce; as such, FDA could not
calculate the user fees those firms would be assessed under section
919(b)(4) of the FD&C Act, nor could it determine how those firms
affect class allocations under section 919(b)(2)(B) of the FD&C Act.
---------------------------------------------------------------------------

    \3\ The IRC definition of tobacco product includes five classes,
including `smokeless tobacco,' which is further defined to comprise
two classes of tobacco products: Chewing tobacco and snuff. 21
U.S.C. 5702(c), (m).
---------------------------------------------------------------------------

    In contrast, using the definitions for manufacturer and importer in
the IRC, and as adopted in USDA's and FDA's implementing regulations,
allows FDA to make the necessary user fee allocations. This approach
limits the entities to be assessed fees to those that must obtain a
permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB) because
they meet the definition of manufacturer of tobacco products or
importer under the IRC and its implementing regulations (27 CFR 40.11
and 41.11). Only these entities are subject to Federal excise taxes
under chapter 52 of the IRC and can ``remove'' tobacco products into
domestic commerce. Thus, only these entities have a volume of domestic
sales under FETRA and can be assessed user fees under section 919 of
the FD&C Act.
    Additionally, section 919 of the FD&C Act directly contradicts the
section 900(20) definition in the manner it treats manufacturers and
importers of tobacco products. Whereas the former treats manufacturers
and importers as distinct entities for the purpose of assessments and
collections, the section 900(20) definition includes importer as a
subset of manufacturer, since the latter includes any person who
imports a finished tobacco product for sale or distribution in the
United States. Thus, Congress did not intend FDA to use the section
900(20) definition for the purposes of section 919.
    Likewise, Congress could not have intended section 919 of the FD&C
Act to incorporate the definition of ``tobacco product'' in section
201(rr) (21 U.S.C. 321(rr)) or the tobacco product definitions from
section 900 of the FD&C Act. The former includes any ``component, part,
or accessory'' of a tobacco product, which is significantly broader
than the definitions for the different types of tobacco products in the
IRC and FETRA. Similarly, the definition of ``cigarette'' in section
900(3) of the FD&C Act includes roll-your-own tobacco for cigarettes.
If FDA calculated user fee assessments relying the definitions of
``cigarette'' and ``roll-your-own'' found in section 900(3) and 900(15)
of the FD&C Act, respectively, manufacturers and importers of roll-
your-own cigarettes would be required to pay fees both as part of the
cigarette class and as part of the roll-your-own class. Such
duplicative assessments would run contrary to section 919(b)(3)(B) of
the FD&C Act, which expressly precludes manufacturers and importers
from paying a user fee in excess of their percentage share. To prevent
this, tobacco product classes must be distinct, and cannot overlap.
Using the tobacco product definitions found in section 5702 of the IRC
avoids double-billing firms because the classes are structured such
that they are distinct and non-overlapping. Thus, for the term ``each
manufacturer and importer of tobacco products,'' Congress intended FDA
to use the term in the IRC and FETRA.
    While the definitions in sections 201(rr) and 900 of the FD&C Act
say they apply for the purposes of the FD&C Act and chapter IX of the
FD&C Act, respectively, this cannot be the case when doing so would run
counter to the statutory purpose of a particular provision. Although
there may be ``a natural presumption that identical words used in
different parts of the same act are intended to have the same meaning
[citation omitted] . . . the presumption is not rigid. . . .''
(Atlantic Cleaners & Dryers, Inc. v. U.S., 286 U.S. 427, 433 (1932);
(accord: Yates v. U.S., 135 S. Ct. 1074, 1082 (2015)). Thus, the same
words may be given different meanings, even in the same statute, if
Congress intended different interpretations (at Chevron step one) or if
such different interpretations are reasonable (at Chevron step two)
(Atlantic Cleaners & Dryers, Inc., supra). See also Lawson v. Suwannee
S.S. Co., 336 U.S. 198, 201 (1949); Nw. Austin Mun. Util. Dist. No. One
v. Holder, 557 U.S. 193, 205 to 206 (2009). For the reasons given, it
is clear that Congress intended the terms in section 919 to be
consistent with the counterpart terms in FETRA and the IRC.
    Nothing in the legislative history of section 919 of the FD&C Act
undermines this view that user fees are limited to the six enumerated
classes. To the contrary, this interpretation is reinforced by the
legislative history of the Tobacco Control Act, which states that the
method of assessing fees shall be the same as that currently used by
United States Department of Agriculture for all tobacco manufacturers
and importers to fund the 2004 legislation providing transitional
payments to tobacco grower quota holders. H. Rpt. 111-58, p. 47.
Because products other than those in the six listed classes are not
``removed'' and are not subject to a Federal excise tax, a user fee
methodology for them could not be the same as that used by USDA under
FETRA.
    Having concluded that the statutory scheme precludes FDA from
assessing user fees on classes of tobacco products beyond the six
listed in section 919 of the FD&C Act, the Chevron analysis need not
proceed further. However, in the alternative, even if section 919 of
the FD&C Act is ambiguous as to whether classes beyond the six may be
subject to user fee assessments, FDA would adopt the same
interpretation of the statute in an exercise of its discretion. In
conducting this Chevron step two analysis, the Agency has based its
conclusion on the same considerations discussed previously as well as
the considerations discussed later in this document (Bell Atlantic
Telephone Co. v. FCC, 131 F.3d 1044, 1049 (D.C. Cir. 1997); Chevron
U.S.A., Inc. v. FERC, 193 F. Supp. 2d 54, 68 (D.D.C. 2002)). FDA's
interpretation of section 919 of the FD&C Act as assessing user fees
only on the six classes of tobacco products listed

in section 919(b)(2)(B)(ii) of the FD&C Act is reasonable. (Chevron,
USA, Inc. v. NRDC, Inc., supra at 843).
    FDA's interpretation is consistent with the text and statutory
structure of section 919. The statute requires FDA to use the FETRA
percentages, and thus the FETRA formula, to determine the applicable
percentages of the six classes listed in section 919(b)(2)(B)(i) of the
FD&C Act, but it gives no indication of the manner under which FDA
could or should determine user fee allocations for any additional
classes. By using the FETRA framework, the applicable percentages for
the six classes listed in section 919(b)(2)(B)(ii) are determined by a
basic and predictable calculation. In addition, the user fee
calculation is based on the share of gross domestic volume, which is
inextricably linked to the volume of tobacco products removed that are
subject to Federal excise taxes--information that was readily available
to FDA at the time the Tobacco Control Act was enacted. For these six
classes, Congress thus provided an easy-to-implement system that gives
FDA relatively little discretion in determining the assessments.
    As discussed previously, the class percentage for classes beyond
the six cannot be determined pursuant to the FETRA framework since
those classes do not have volumes as defined in section 625(a) of
FETRA. Thus, in order to assess any user fees on any class of tobacco
products beyond the six listed in section 919 of the FD&C Act, FDA
would need to demarcate a new set of tobacco product classes among
newly deemed tobacco products, and fashion an entirely novel framework
for determining class percentage allocations and allocations within
each class of tobacco product. It would have to do this against the
backdrop of the range of tobacco products, including various types of
ENDS (such as e-cigarettes, e-cigars, e-hookah, vape pens, personal
vaporizers, and electronic pipes), as well as nicotine gels, nicotine
toothpicks, etc.
    Even if section 919 of the FD&C Act somehow allowed FDA to allocate
percentages to and among additional classes, nothing in section 919
sets forth the methodology FDA must, or even could, use to calculate
these percentages or how FDA would obtain the necessary information for
doing so. Since 100 percent of the total amount of user fees to be
assessed are allocated among the six classes listed in section
919(b)(2)(B)(ii) of the FD&C Act, FDA would need to devise a common
metric for comparing each of these novel tobacco product classes to
those six listed in order to adjust the relative class percentages (and
find authority under section 919 to make such adjustments). FDA could
not use the common metric adopted by USDA and, subsequently, by FDA in
its 2014 final rule. This is based on the 2003 maximum Federal excise
tax rates, which do not exist for tobacco products beyond the six
classes. Further, because section 919(b)(2)(B)(ii) of the FD&C Act
states that the applicable percentages for the six listed classes are
the percentages from FETRA, for FDA to adjust those percentages based
on a novel common metric external to FETRA would violate the statutory
terms of that section.
    Some commenters argued that FDA could and should abandon the tax-
based methodology from FETRA altogether and create an entirely novel
system unrelated to taxes or tax rates for determining the applicable
percentages for both new and existing tobacco product classes. However,
this suggestion also falters against the plain language of section
919(b)(2)(B)(ii) of the FD&C Act, which requires FDA to use the FETRA
percentages for the six listed classes; deviating from FETRA's
methodology for allocations would contradict the clear intent of
Congress. Moreover, it is reasonable to conclude that Congress did not
intend FDA to develop a new system that departs from the methodology
mandated by FETRA. Any such system would necessarily be subjective,
especially relative to the system Congress established for the
enumerated six classes. As such, FDA's interpretation is a reasonable
construction of the FD&C Act.
    We disagree with commenters that a failure to assess fees on all
deemed tobacco products is arbitrary and capricious. FDA is
implementing the system established by Congress, which does not allow
FDA to assess user fees for products outside the six classes. Even
assuming section 919 of the FD&C Act is ambiguous regarding this point,
for the reasons previously stated, FDA's interpretation here is
reasonable. We also disagree with comments that argued that FDA's
proposed scheme amounts to a tax because there is no tangible benefit
to manufacturers and importers required to make user fee payments vis-
[agrave]-vis those that are not, as required under the Independent
Offices Appropriations Act (IOAA). Because Congress granted FDA
independent statutory authority to assess user fees, the requirements
of the IOAA do not apply. See American Medical Ass'n v. Reno, 857 F.
Supp. 80, 84 (D.D.C. 1994); National Cable Television Ass'n, Inc. v.
United States, 415 U.S. 336 (1974). Finally, we do not need to address
commenters' Fifth Amendment arguments here because the FD&C Act itself
differentiates between the six classes listed in section
919(b)(2)(B)(ii) and other tobacco product classes. As explained, FDA
is merely following Congress' intent as expressed in section 919 of the
FD&C Act.
    (Comment 2) One comment stated that FDA should formulate a
reasonable common metric to assess user fees on all regulated tobacco
products, including those not subject to excise taxes. This comment
said that a common metric was needed to compare new classes of tobacco
products with existing classes and suggested that FDA ``could base its
calculations on total sales (in units) of each tobacco product, using
traditional selling-sizes or weights of packages (e.g., 20 cigarettes =
1 e-cigarette cartridge = 1 standard container of moist snuff = 4 large
cigars) to derive the conversion factor necessary for market share
calculations.'' Another comment stated that FDA should develop a method
for calculating user fees for deemed products, not within the six
classes, before any deeming regulation takes effect.
    (Response) FDA disagrees with these comments. As discussed in the
response to comment 1, section 919 of the FD&C Act prevents FDA from
assessing and collecting user fees from manufacturers and importers of
deemed products other than cigars and pipe tobacco. Creating a common
metric among all product classes subject to FDA regulation would not
change the requirements of section 919 of the FD&C Act that prevent FDA
from assessing user fees for deemed products other than cigars and pipe
tobacco.
    (Comment 3) One comment stated that FDA should not adopt the USDA's
retrospective calculation method for determining class percentage
allocations at Step A because of concerns that a regulation deeming
additional products subject to FDA regulation could dramatically alter
class allocations from year to year, and that class allocation
calculations using this method will not be an accurate reflection of
each class' current percentage allocation. This comment stated that
small businesses may no longer be able to sell deemed products
withdrawn from the market due to premarket authorization requirements,
but may still have to pay their share of their respective classes' user
fees. Other companies that market grandfathered deemed products, the
comment argued, would be forced to pay a disproportionate share based
upon a class determination that was calculated before the deeming
regulation. The comment requested that

FDA include safeguards against inequitable retrospective user fee
requirements or allow for the continued marketing of deemed products
while their corresponding premarket applications are pending review.
    (Response) FDA disagrees with this comment. FDA is unable to alter
the user fee calculations required by section 919 of the FD&C Act. In
determining the user fees to be assessed on each class of tobacco
products, section 919(b)(2)(B)(ii) of the FD&C Act provides that the
applicable percentage for each tobacco product class shall be the
percentage determined under section 625(c) of FETRA for each such class
of product for such fiscal year. Relying on the initial allocation
percentages in section 625(c) of FETRA, USDA calculated the yearly
class allocations for each fiscal year based on data about removals
covering the most recent full calendar year (see 70 FR 7007). As such,
FDA's class allocations are calculated in the same manner. Section 919
also requires FDA to calculate assessments on each manufacturer and
importer within a class on a quarterly basis using the prior quarter's
tax removal data for products other than cigars and the prior fiscal
year's tax removal data for cigars. While it is true that class
allocations between product classes and percentage shares between
companies within product classes can fluctuate throughout the year, FDA
cannot alter the required method of user fee calculations.
    (Comment 4) One comment argued that premium cigars should be exempt
from FDA regulation generally and user fees specifically because FDA
regulation would be disproportionately burdensome for the product
segment, as exemplified by the new product (or premarket) requirements
that would be triggered by the often minor ingredient variations
intended to alter the taste and aroma of a premium cigar.
    (Response) FDA disagrees with this comment. In the Deeming rule,
FDA concluded that all cigars should be deemed subject to chapter IX of
the FD&C Act and, in doing so, took into account the concerns about
premarket authorization requirements raised in this comment. All cigars
have been deemed subject to FDA's regulation and, as such, are subject
to user fees under section 919 of the FD&C Act. Furthermore, FDA lacks
the authority to exempt any portion of a class that has been deemed
subject to chapter IX of the FD&C Act from user fee requirements.
    (Comment 5) FDA received comments addressing the calculation of
user fee assessments for domestic manufacturers and importers of
cigars. One commenter asserted that using the amount of excise tax paid
to determine percentage share within the cigar class would favor
importers over domestic manufacturers because importers ``can typically
sell cigars to distributors at a lower price'' because they benefit
from lower wages, taxes, and regulatory costs. The commenter stated
that actual units (sticks) would better reflect true market share and
using excise taxes paid to calculate percentage share would increase
incentives to move production and jobs off-shore.
    Another comment suggested that FDA consider the differences in
taxation of cigars compared with other taxable classes of tobacco
products and assess the rule's ``potentially inequitable impact on
cigar manufacturers and importers.'' The comment asserted that the
different excise tax rates applied within the cigar class would have
the ``unintended consequence'' of causing manufacturers and importers
of similar products to pay dramatically different amounts in user fees.
The commenter further stated that large cigars have different first
wholesale prices, and that some of these pricing differences are due to
economies of scale or other efficiency factors. Companies with
significant economies of scale would benefit by paying lower user fees
due to their products being produced at lower cost, while small
manufacturers and importers would be disadvantaged.
    (Response) FDA disagrees with the suggestion that it can use
something other than excise taxes to calculate the percentage share of
manufacturers and importers in the cigar class. Section 919(b)(5) of
the FD&C Act specifies that ``if a user fee assessment is imposed on
cigars, the percentage share of each manufacturer or importer of cigars
shall be based on the excise taxes paid by such manufacturer or
importer during the prior fiscal year.'' We acknowledge that this
method of calculating cigar manufacturers' and importers' percentage
share depends on the excise tax rate and would result in manufacturers
and importers of small cigars paying a lower dollar amount of user fees
per stick than manufacturers and importers of large cigars because
large cigars are taxed at a higher rate than small cigars. However, we
disagree that this would favor importers over domestic manufacturers
and that it would encourage manufacturers to move abroad. Low volume,
higher priced cigars are both more expensive and largely manufactured
abroad. Importers of the higher priced cigars would pay more in user
fees under the FD&C Act methodology than under a system in which volume
was determined based on sticks.
    In addition, we disagree that differences in user fee assessments
across cigar types would be an unintended consequence of the FD&C Act
methodology and that it would be inequitable. Cigars are a
heterogeneous group of products, differing in such attributes as size
and quality. The market for cigars is sufficiently competitive that
price differences primarily reflect these product differences. It is
not inequitable for products that differ greatly, as measured by market
price, to pay different amounts of user fees. Moreover, the statute
expressly states that each cigar manufacturer's or importer's
percentage share must be calculated based on excise taxes paid.
Congress thus clearly intended that user fees for cigars would vary
depending on the excise taxes imposed on cigars, which in turn vary
depending on the price and size of cigars.

IV. Legal Authority

    Section 901 of the FD&C Act provides that chapter IX of the FD&C
Act applies to all cigarettes, cigarette tobacco, roll-your-own
tobacco, and smokeless tobacco and to any other tobacco products that
the Secretary of Health and Human Services by regulation deems to be
subject to this chapter. In accordance with section 901, FDA is issuing
the Deeming rule (published elsewhere in this issue of the Federal
Register) to extend FDA's ``tobacco product'' authorities to products
that meet the statutory definition of ``tobacco product'' in section
201(rr) of the FD&C Act, except the accessories of these tobacco
products. Section 919(b)(7) of the FD&C Act requires that FDA ensure we
are able to determine the applicable percentages described in section
919(b)(2) and the percentage shares described in section 919(b)(4).
Section 909(a) of the FD&C Act authorizes FDA to issue regulations
requiring tobacco product manufacturers or importers to make such
reports and provide such information as may be reasonably required to
assure that their tobacco products are not adulterated or misbranded
and to otherwise protect public health. Under section 902(4), a tobacco
product is deemed to be adulterated if the manufacturer or importer of
the tobacco product fails to pay a user fee assessed to it under
section 919 of the FD&C Act. In addition, section 701(a) of the FD&C
Act (21 U.S.C. 371(a)) gives FDA general rulemaking authority to issue
regulations for the efficient enforcement of the FD&C Act. Consistent
with these

authorities, FDA is issuing this rule, which is intended to ensure that
we are able to make the determinations required by section 919 of the
FD&C Act and assess and collect tobacco product user fees.

V. Environmental Impact

    The Agency has determined under 21 CFR 25.30(h) that this action is
of a type that does not individually or cumulatively have a significant
effect on the human environment. Therefore, neither an environmental
assessment nor an environmental impact statement is required.

VI. Economic Analysis of Impacts

    FDA has examined the impacts of the final rule under Executive
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5
U.S.C. 601 to 612), and the Unfunded Mandates Reform Act of 1995 (Pub.
L. 104-4). Executive Orders 12866 and 13563 direct Agencies to assess
all costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety, and other advantages; distributive impacts; and
equity). FDA has determined that this final rule is a significant
regulatory action under Executive Order 12866.
    The Regulatory Flexibility Act requires Agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. The potential impact on small entities is uncertain,
and FDA is unable to rule out the possibility that this final rule may
have a significant economic impact on a substantial number of small
entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires
that Agencies prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing ``any rule that
includes any Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100,000,000 or more (adjusted annually for
inflation) in any one year.'' The current threshold after adjustment
for inflation is $144 million, using the most current (2014) Implicit
Price Deflator for the Gross Domestic Product. FDA does not expect this
final rule to result in any 1-year expenditure that would meet or
exceed this amount.
    Under our baseline, FDA would obtain the information necessary for
collecting cigar and pipe tobacco user fees directly from other Federal
Agencies that collect such information. Compared with this baseline,
this final rule would impose both initial transition costs and monthly
information submission costs on industry. There would also be an
approximately offsetting reduction in government information collection
costs. The net effect of this may be a small social cost or benefit.
This final rule would also allow FDA to have full access to the data
needed for calculating and billing user fees and would resolve
impediments that may otherwise exist concerning FDA's ability to use
the data for its intended purpose. This final rule can be expected to
eliminate the potential need for additional regulatory mechanisms to
collect information and allow user fee assessment to proceed more
smoothly than it could otherwise.
    Compared to the baseline, the estimated one-time private sector
transition cost is $159.36 per manufacturer or importer, including
small manufacturers and importers, and the annual compliance cost is
$2,549.76. One option for regulatory relief would be to exempt firms
from reporting in a particular month if they did not introduce any
units of any tobacco products for which user fees are assessed into
domestic commerce. Another option for regulatory relief would be to
require submission of either the FDA form or copies of forms submitted
to other Agencies. The full analysis of economic impacts is available
as Ref. 1 in Docket No. FDA-2012-N-0920 and at http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

VII. Paperwork Reduction Act of 1995

    This final rule contains information collection provisions that are
subject to review by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3501-3520).
The title, description, and respondent description of the information
collection provisions are shown in the following paragraphs with an
estimate of the annual reporting burden. Included in the estimate is
the time for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed, and completing and reviewing
each collection of information.
    Title: Tobacco Products, User Fees, Requirements for the Submission
of Data Needed to Calculate User Fees for Domestic Manufacturers and
Importers of Cigars and Pipe Tobacco.
    Description: This final rule requires each domestic manufacturer
and importer of cigars and pipe tobacco to submit to FDA information
needed to calculate and assess user fees under the FD&C Act.
    The USDA collected information to calculate percentage share for
its purposes and provided FDA with the data FDA needs to determine user
fee assessments under the FD&C Act. USDA ceased collecting this
information at the end of fiscal year 2014. Consistent with the
requirements of the FD&C Act, this rule continues the submission of
this information, but to FDA rather than USDA, and thus ensures that
FDA continues to have the information needed to calculate the amount of
user fees assessed to each entity and collect those fees. Section 919
of the FD&C Act establishes the user fee allocation and collection
process, which references the FETRA framework for determining tobacco
product class allocations and individual domestic manufacturer or
importer allocations. As was required by USDA under FETRA, the final
rule requires domestic manufacturers and importers of tobacco products
to submit to FDA each month a form with summary information and copies
of the reports or forms that relate to the tobacco products removed
into domestic commerce.
    Description of Respondents: Domestic manufacturers and importers of
newly deemed tobacco products.
    The information collection provisions in this final rule have been
submitted to OMB for review as required by section 3507(d) of the PRA.
The requirements were approved and assigned OMB control number 0910-
0749. This approval expires on July 31, 2017.
    An Agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number.

                                 Table 1--Estimated Annual Reporting Burden \1\
----------------------------------------------------------------------------------------------------------------
                                                      No. of
         21 CFR section               No. of       responses per   Total annual      Hours per      Total hours
                                    respondents     respondent       responses       response
----------------------------------------------------------------------------------------------------------------
1150.5(a), (b)(1), (b)(2), and               135              12           1,620               3           4,860
 FDA Form 3852 (Ref. 2) General
 identifying information
 provided by manufacturers and
 importers of FDA regulated
 tobacco products and
 Identification and removal
 information (monthly)..........
1150.5(b)(3) Certified Copies                135              12           1,620               1           1,620
 (monthly)......................
1150.13 Submission of user fee            \2\ 68               4             272               1             272
 information (Identifying
 information, fee amount, etc.
 (quarterly)....................
1150.15(a) Submission of user                  1               1               1              10              10
 fee dispute (annually).........
1150.15(d) Submission of request               1               1               1              10              10
 for further review of dispute
 of user fee (annually).........
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............  ..............  ..............           6,772
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of
  information.
\2\ This figure was rounded to the nearest tenth.

    Table 1 describes the annual reporting burden of 6,772 hours as a
result of the provisions set forth in this proposed rule. Our estimated
number of 135 newly deemed respondents (335 total tobacco entities) is
based on 2013 summary information obtained from the Alcohol and Tobacco
Tax and Trade Bureau (TTB) regarding the number of permitted
manufacturers and importers. As referenced previously, the PRA burden
for currently regulated products was previously approved by OMB. The
burden analysis for that collection assumed 200 respondents would
submit user fees. Therefore given our updated estimate of 335 entities,
the total number of new deemed tobacco entities is 135 (335 - 200 =
135). FDA estimates that there are 113 cigar manufacturers and 74 pipe
tobacco manufacturers, as well as 216 importers of cigars and 43
importers of pipe tobacco. However, these estimates from TTB reflect
that in 2013 there were 135 total permitted manufacturers and 200
permitted importers over all tobacco product types for which TTB
collects excise taxes (including cigarettes, cigars, snuff, chewing
tobacco, pipe tobacco, and roll-you-own tobacco, excluding electronic
nicotine delivery systems). This total is less than the sum across all
tobacco product types because some manufacturers and importers produce
or import more than one type of tobacco product (we subsequently refer
to these entities as polymanufacturers and polyimporters). As the
number of cigar and pipe tobacco manufacturers cannot exceed the number
of permitted entities, we use 335 as an upper bound estimate of the
number of affected entities. The estimate of 135 respondents reflects
both reports of no removal into domestic commerce and reports of
removal of tobacco product into domestic commerce. The estimate of 68
respondents reflects an average number of domestic manufacturers and
importers who may be subject to fees each fiscal quarter. FDA assumes
half the number of respondents will submit quarterly payments to the
Agency. Based on our experience with the assessment of user fees for
other FDA-regulated products, we estimate that approximately one
respondent might appeal an assessment, and one respondent will request
for further review of their dispute.

VIII. Federalism

    FDA has analyzed this final rule in accordance with the principles
set forth in Executive Order 13132. FDA has determined that the rule
does not contain policies that would have substantial direct effects on
the States, on the relationship between the National Government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Accordingly, the Agency has concluded
that the rule does not contain policies that have federalism
implications as defined in the Executive order and, consequently, a
federalism summary impact statement is not required.

IX. References

    The following references have been placed on display in the
Division of Dockets Management (HFA-305), Food and Drug Administration,
5630 Fishers Lane, rm. 1061, Rockville, MD 20852, and may be seen by
interested persons between 9 a.m. and 4 p.m., Monday through Friday,
and are available electronically at http://www.regulations.gov. FDA has
verified the Web site address, as of the date this document publishes
in the Federal Register, but Web sites are subject to change over time.

    1. Regulatory Impact Analysis. Available at: http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.
    2. Form FDA 3852.

List of Subjects in 21 CFR Part 1150

    Tobacco products, User fees.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, 21 CFR part
1150 is amended to read as follows:

PART 1150--USER FEES

0
1. The authority citation for part 1150 is revised to read as follows:

    Authority:  21 U.S.C. 371, 387a, 387b, 387i, 387s, 21 CFR
1100.1.

0
2. In Sec.  1150.3, revise the definition for ``Units of product'' to
read as follows:

Sec.  1150.3  Definitions.

* * * * *
    Units of product means:
    (1) The number of sticks for cigarettes and cigars, or
    (2) The weight (measured in pounds) for snuff, chewing tobacco,
pipe tobacco, and roll-your-own tobacco.
* * * * *

Sec.  1150.5  [Amended]

0
3. Amend Sec.  1150.5 by:
0
a. Removing from the first sentence of paragraph (a) the phrases ``that
is subject to regulation under chapter IX of the Federal Food, Drug,
and Cosmetic Act'' and ``beginning October 2014''.
0
b. Adding paragraphs (c) and (d) to read as follows:

Sec.  1150.5  Required Information.

* * * * *
    (c) First report for cigars. Domestic manufacturers and importers
of cigars must submit the information described in this section
beginning no later than

the 20th day of August, 2016. Domestic manufacturers and importers of
cigars must submit the information described in this section for each
of the prior months of fiscal year 2016 as their first monthly
submission. The previous sentence only applies for the first report in
fiscal year 2016.
    (d) First report for pipe tobacco. Domestic manufacturers and
importers of pipe tobacco must submit the information described in this
section beginning no later than the 20th day of August, 2016.
* * * * *

0
4. In Sec.  1150.7, revise paragraph (a)(1) and add paragraph (a)(2) to
read as follows:

Sec.  1150.7  Yearly class allocation.

* * * * *
    (a) * * *
    (1) Except for cigars, 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 class (class dollar
figure).
    (2) For cigars, FDA will:
    (i) Multiply the units of small cigars removed and not tax exempt
for the most recent full calendar year by the 2003 maximum Federal
excise tax rate for small cigars (small cigar subclass dollar figure).
    (ii) Multiply the units of large cigars removed and not tax exempt
for the most recent full calendar year by the 2003 maximum Federal
excise tax rate for large cigars (large cigar subclass dollar figure).
    (iii) Add the small cigar subclass dollar figure and the large
cigar subclass dollar figure (cigar class dollar figure).
* * * * *

0
5. In Sec.  1150.9, revise paragraph (a)(1) and add paragraph (a)(2) to
read as follows:

Sec.  1150.9  Domestic manufacturer or importer assessment.

* * * * *
    (a) * * *
    (1) For each class of tobacco products except cigars, FDA will
calculate the percentage share for each domestic manufacturer and
importer by dividing the Federal excise taxes that it paid for the
class for the prior quarter by the total excise taxes that all domestic
manufacturers and importers paid for the class for that same quarter.
    (2) For the cigar class, FDA will calculate the percentage share
for each domestic manufacturer and importer by dividing the Federal
excise taxes that it paid for the class for the prior fiscal year by
the total excise taxes that all domestic manufacturers and importers
paid for the class for the prior fiscal year.
* * * * *

    Dated: May 3, 2016.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2016-10688 Filed 5-5-16; 8:45 am]
 BILLING CODE 4164-01-P