24 Ekim 2007 Çarşamba
PROPOSED RESOLUTION
PROPOSED RESOLUTION
PREAMBLE
This legislation would mandate a total reformation and restructuring of how tobacco products are manufactured, marketed and distributed in this country. The nation can thereby see real and swift progress in preventing underage use of tobacco, addressing the adverse health effects of tobacco use and changing the corporate culture of the tobacco industry.
The Food and Drug Administration ("FDA") and other public health authorities view the use of tobacco products by our nation's children as a "pediatric disease" of epic and worsening proportions that results in new generations of tobacco dependent children and adults. There is also a consensus within the scientific and medical communities that tobacco products are inherently dangerous and cause cancer, heart disease and other serious adverse health effects.
The FDA and other health authorities have concluded that virtually all new users of tobacco products are under legal age. President Clinton, the FDA, the Federal Trade Commission ("FTC"), state Attorneys General and public health authorities all believe that tobacco advertising and marketing contribute significantly to the use of nicotine-containing tobacco products by adolescents. These officials have concluded that because past efforts to restrict advertising and marketing have failed to curb adolescent tobacco use, sweeping new restrictions on the sale, promotion and distribution of such products are needed.
Until now, federal and state governments have lacked many of the legal means and resources they need to address the societal problems caused by the use of tobacco products. These officials have been armed only with crude regulatory tools which they view as inadequate to achieve the public health objectives with which they are charged.
This legislation greatly strengthens both the federal and state governments' regulatory arsenal and furnishes them with additional resources needed to address a public health problem that affects millions of Americans, including most importantly underage tobacco use. Further, it is contemplated that certain of the obligations of the tobacco companies will be implemented by a binding, enforceable contractual protocol.
The legislation reaffirms individuals' right of access to the courts, to civil trial by jury and to full compensatory damages. Resolution through the Act of potential punitive damages liability of the tobacco industry for past conduct is only made in the context of the comprehensive settlement proposed by the legislation. It is not intended to have precedential effect, nor does it express any position adverse to the imposition of punitive damages in general or as applied to any other specific industry, case, controversy or product and does not provide any authority whatsoever regarding the propriety of punitive damages.
Among other things, the new regime would:
-- Confirm FDA's authority to regulate tobacco products under the Food, Drug and Cosmetic Act, making FDA not only the preeminent regulatory agency with respect to the manufacture, marketing and distribution of tobacco products but also requiring the tobacco industry to fund FDA's oversight out of ongoing payments by the manufacturers pursuant to the new regime ("Industry Payments").
-- Go beyond FDA's current regulations to ban all outdoor tobacco advertising and to eliminate cartoon characters and human figures, such as Joe Camel and the Marlboro Man, two tobacco icons which the public health community has long assailed as advertising appealing to our nation's youth.
-- Impose and provide funding out of the Industry Payments for an aggressive federal enforcement program, including a State-administered retail licensing system, to stop minors from obtaining tobacco products, while in no way preventing the States from enacting additional measures.
-- Ensure that the FDA and the States have the regulatory flexibility to address issues of particular concern to public health officials, such as youth tobacco usage and tobacco dependence.
-- Subject the tobacco industry to severe financial surcharges in the event underage tobacco use does not decline radically over the next decade.
-- Empower the federal government to set national standards controlling the manufacturing of tobacco products and the ingredients used in such products.
-- Provide new and flexible regulatory enforcement powers to ensure that the tobacco industry works to develop and introduce less-hazardous tobacco products," including, among other things, vesting FDA with the power to regulate the levels of nicotine in tobacco products.
-- Require the manufacturers of tobacco products to disclose all previously non-public internal laboratory research and all new internal laboratory research generated in the future relating to the health effects or safety of their products.
-- Establish a minimum federal standard with tough restrictions on smoking in public places with enforcement funding from the Industry Payments, while preserving the authority of state and local governments to enact even more severe standards.
Authorize and fund from Industry Payments a $500 million annual, national education-oriented counter-advertising and tobacco control campaign seeking to discourage the initiation of tobacco use by children and adolescents and to encourage current tobacco product users to quit use of the products.
-- Authorize and fund from Industry Payments the annual payment to all States of significant, ongoing financial compensation to fund health benefits program expenditures and to establish and fund a tobacco products liability judgments and settlement fund.
-- Authorize and fund from Industry Payments a nationwide program, administered through State governments and the private sector, of smoking cessation.
The sale of tobacco products to adults would remain legal but subject to restrictive measures to ensure that they are not sold to underage purchasers. These measures respond directly to concerns voiced by federal and state public health officials, the public health community and the public at large that the tobacco industry should be subject to the strictest scrutiny and regulatory oversight. This statute imposes regulatory controls, including civil and criminal penalties, equal to, and in many respects exceeding, those imposed on other regulated industries. Further, it imposes on tobacco manufacturers the obligation to provide funding from Industry Payments for an array of public health initiatives.
The sale, distribution, marketing, advertising and use of tobacco products are activities substantially affecting interstate commerce. Such products are sold, marketed, advertised and distributed in interstate commerce on a nationwide basis, and have a substantial effect on the nation's economy. The sale, distribution, marketing, advertising and use of such products are also activities substantially affecting interstate commerce by virtue of the health care and other costs that federal and State governmental authorities have attributed to usage of tobacco products.
Various civil actions are pending in state and federal courts arising from the use, marketing or sale of tobacco products. Among these actions are cases brought by some 40 state Attorneys General, cases brought by certain cities and counties, the Commonwealth of Puerto Rico, and other third-party payor cases seeking to recover monies spent treating tobacco-related diseases and for the protection of minors and consumers. Also pending in courts throughout the United States are various private putative class action lawsuits brought on behalf of individuals claiming to be dependent upon and injured by tobacco products. Additionally, a multitude of individual suits have been filed against the tobacco products manufacturers and/or their distributors, trade associations, law firms and consultants.
All of these civil actions are complex, slow-moving, expensive and burdensome, not only for the litigants but also for the nation's state and federal judiciaries. Moreover, none of those litigation's has to date resulted in the collection of any monies to compensate smokers or third-party payors. Only national legislation offers the prospect of a swift, fair, equitable and consistent result that would serve the public interest by (1) ensuring that a portion of the costs of treatment for diseases and adverse health effects linked to the use of tobacco products is borne by the manufacturers of these products, and (2) restricting nationwide the sale, distribution, marketing and advertising of tobacco products to persons of legal age. The unique position occupied by tobacco in the nation's history and economy, the magnitude of actual and potential tobacco-related litigation, the need to avoid the cost, expense, uncertainty and inconsistency associated with such protracted litigation, the need to limit the sale, distribution, marketing and advertising of tobacco products to persons of legal age, and the need to educate the public, especially young people, of the health effects of using tobacco products all dictate that it would be in the public interest to enact this legislation to facilitate a resolution of the matters described.
Public health authorities believe that the societal benefits of this legislation, in human and economic terms, would be vast. In particular, FDA has found that reducing underage tobacco use by 50% "would prevent well over 60,000 early deaths." FDA has estimated that the monetary value of its present regulations will be worth up to $43 billion per year in reduced medical costs, improved productivity and the benefit of avoiding the premature death of loved ones. This statute, which extends far beyond anything FDA has previously proposed or attempted, can be expected to produce human and economic benefits many times greater than such existing regulations.
As part of this settlement, the tobacco companies recognize the historic changes that will be occurring to their business. They will fully comply with increased federal regulation, focus intense efforts on dramatic reductions in youth access and youth tobacco usage, recognize that the regulatory scheme encourages the development of products with reduced risk and acknowledge the predominant public health positions associated with the use of tobacco products.
[Source/precedent: FDA Rule]
Contents
Preamble
Title I: Reformation of the Tobacco Industry
A. Restrictions on Marketing and Advertising
B. Warnings, Labeling and Packaging
C. Restrictions on Access to Tobacco Products
D. Licensing of Retail Tobacco Product Sellers
E. Regulation of Tobacco Product Development and Manufacturing
F. Non-tobacco Ingredients
G. Compliance and Corporate Culture
H. Effective Dates
Title II: "Look Back" Provisions/State Enforcement Incentives
Title III: Penalties and Enforcement; Consent Decrees; Non-Participating Companies
A. Penalties and Enforcement
B. Consent Decrees
C. Non-participating Companies
Title IV: Nationwide Standards to Minimize Involuntary Exposure to Environmental Tobacco Smoke
Title V: Scope and Effect
A. Scope of FDA Authority B. State Authority
Title VI: Programs/Funding
A. Up Front Commitment
B. Base Annual Payments
C. Applicability
D. Tax Treatment
Title VII: Public Health Funds From Tobacco Settlement As Recommended by The Attorneys General For Consideration by the President and the Congress
Title VIII: Civil Liability
A. General
B. Provisions as to Civil Liability for Past Conduct
C. Provisions as to Civil Liability for Future Conduct
Title IX: Board Approval
Appendices:
Appendix I: Warnings in Advertisements
Appendix II: Retail Tobacco Product Seller Penalties
Appendix III: Application to Indian Tribes
Appendix IV: Industry Associations
Appendix V: "Look Back"
Appendix VI: State Enforcement Incentives
Appendix VII: Restrictions on Point of Sale Advertising
Appendix VIII: Public Disclosure of Past and Future Tobacco Industry Documents and Health Research
TITLE I: Reformation Of The Tobacco Industry
Title I of the legislation would incorporate and expand upon FDA's recent regulation of nicotine-containing tobacco products.
The following rules would apply to all tobacco products sold in the U.S. (including all its territories and possessions, as well as duty-free shops within U.S. borders). The new regime would be allowed to operate as described below for five years. FDA would have authority to make revisions even within this period under extraordinary circumstances. Thereafter, the FDA would be authorized to review and revise the rules under applicable Agency procedures.
A. Restrictions on Marketing and Advertising
The advertising and marketing of tobacco products would be drastically curtailed, including in ways that exceed the FDA rule as originally promulgated and in ways that have previously been challenged on First Amendment grounds. As in the FDA rule the new regime would:
-- Prohibit the use of non-tobacco brand names as brand names of tobacco products except for tobacco products in existence as of January 1,1995 (897.16(a)) (The citations in this and in the next section are to Part 897 of the FDA's tobacco regulations, 61 Fed. Reg. 44396 (August 28, 1996).
-- Restrict tobacco product advertising to FDA specified media (897.30(a)(1 )-(2))
-- Restrict permissible tobacco product advertising to black text on a white background except for advertising in adult-only facilities and in adult publications (897.32(a)-(b))
-- Require cigarette and smokeless tobacco product advertisements to carry the FDA-mandated statement of intended use ("Nicotine Delivery Device") (897.32(c))
-- Ban all non-tobacco merchandise, including caps, jackets or bags bearing the name, logo or selling message of a tobacco brand (897.34(a)).
-- Ban offers of non-tobacco items or gifts based on proof of purchase of tobacco products (897.34(b))
-- Ban sponsorships, including concerts and sporting events, in the name, logo or selling message of a tobacco brand (897.34(c))
Further, building on and going beyond the FDA rule, the new regime would:
-- Ban the use of human images and cartoon characters - thereby eliminating Joe Camel and the Marlboro Man - in all tobacco advertising and on tobacco product packages
-- Ban all outdoor tobacco product advertising, including in enclosed stadia as well as brand advertising directed outside from a retail establishment (modifies 897.30(a)(1) and extends 897.30(b))
-- Prohibit tobacco product advertising on the Internet unless designed to be inaccessible in or from the United States
-- Establish nationwide restrictions in non adult-only facilities on point of sale advertising with a view toward minimizing the impact of such advertising on minors. These provisions, which are detailed in Appendix VII, restrict point of sale advertising that was otherwise permitted in retail establishments by the FDA rule.
-- Ban direct and indirect payments for tobacco product placement in movies, television programs and video games
-- Prohibit direct and indirect payments to "glamorize" tobacco use in media appealing to minors, including recorded and live performances of music -- Without limiting the FDA's normal rulemaking authority in this area, require that the use, in both existing and future brand styles, of words currently employed as product descriptors (e.g., "light" or "low tar") be accompanied by a mandatory disclaimer in advertisements (e.g., "Brand X not shown to be less hazardous than other cigarettes"); exemplars of all new advertising and tobacco products labeling shall be submitted to FDA concurrently with their introduction into the marketplace for FDA's ongoing review.
[Source/precedent: FDA Rule; 21 C.F.R. 101.70]
B. Warnings, Labeling and Packaging
The federally-mandated warning labels on cigarettes were last changed in 1984. Since then a number of countries, including Canada and members of the European Union, have imposed new warning labels. Further, the Federal Trade Commission's methodology to measure the "tar" and nicotine yields of cigarettes has been criticized as producing misleading information.
1. The legislation, through amendments to the Federal Cigarette Labeling and Advertising Act and the Comprehensive Smokeless Tobacco Health Education Act, would mandate new rotating warnings, to be introduced concurrently into the distribution chain on all tobacco product packages and cartons, and to be rotated quarterly in all advertisements. For cigarettes, the warnings would be:
-- "WARNING: Cigarettes are addictive"
-- "WARNING: Tobacco smoke can harm your children"
-- "WARNING: Cigarettes cause fatal lung disease"
-- "WARNING: Cigarettes cause cancer"
-- "WARNING: Cigarettes cause strokes and heart disease"
-- "WARNING: Smoking during pregnancy can harm your baby"
-- "WARNING: Smoking can kill you"
-- "WARNING: Tobacco smoke causes fatal lung disease in non-smokers"
-- "WARNING: Quitting smoking now greatly reduces serious risks to your health"
For smokeless tobacco products, the warnings would be:
-- "WARNING: This product can cause mouth cancer"
-- "WARNING: This product can cause gum disease and tooth loss"
-- "WARNING: This product is not a safe alternative to cigarettes"
--"WARNING: Smokeless tobacco is addictive"
For cigarettes, the warnings would occupy 25% of the front panel of the package (including packs and cartons) and would appear on the upper portion thereof. The legislation would contain a grandfather provision for existing brands with flip-top boxes comprising less than 25% of the front panel. For smokeless tobacco products, the warnings would appear on the principal display panel (e.g., a band around the can for moist smokeless tobacco products) and would occupy 25% of the display panel. The warnings would be printed in line with current Canadian standards (e.g., 17 point type with appropriate adjustments depending on length of required text) and in an alternating black on white and white on black format. The size and placement of warnings in advertisements would follow the requirements set forth in the existing United Kingdom standards. As described in Appendix I, the warning text and, where relevant, "tar" and nicotine (or other constituent) yield information would occupy 20% of press advertisements.
Cigarette and smokeless tobacco product packages would also carry the FDA mandated statement of intended use ("Nicotine Delivery Device") on the side of pack.
2. The FDA would be required to promulgate a rule governing the testing, reporting and disclosure of tobacco smoke constituents that the Agency determines the public should be informed of to protect public health, including, but not limited to "tar," nicotine and carbon monoxide. This authority would be transferred from the FTC and would include the authority to require label and advertising disclosures relating to "tar" and nicotine, as well as disclosures by other means relating to other constituents.
[Source/precedent: Canadian warning regulations; FDA Rule; FDCA, 21 U.S.C. Sec. 360h, with conforming amendment in light of FCLAA]
C. Restrictions on Access to Tobacco Products
Preventing youth access to tobacco products is a major objective of this legislation and the FDA Rule. Without preventing state and local governments from imposing stricter measures, the legislation would incorporate every access restriction of the FDA Rule, and more. As in the FDA Rule, the legislation would:
-- Set a minimum age of 18 to purchase tobacco products (897.14(a))
-- Require retailers to check photo identification of anyone under 27 (897.1 4(b)( 1 )-(2))
-- Establish the basic requirement of face-to-face transactions for all sales of tobacco products (897.14(c))
-- Ban the sale of tobacco products from opened packages (897.14(d))
-- Establish a minimum package size of 20 cigarettes (897.16(b))
-- Impose retailer compliance obligations to ensure that all self-service displays, advertising, labeling and other items conform with all applicable requirements (897.14(e))
-- Ban the sampling of tobacco products (897.16(d))
-- Ban the distribution of tobacco products through the mail, including redemption of coupons, except for sales subject to proof of age, with a review after 2 years by FDA to determine if minors are obtaining tobacco products through the mail (goes beyond 897.16(c)(2)(i))
Building on and going beyond the FDA Rule, the legislation would:
-- Ban all sales of tobacco products through vending machines (goes beyond 897.16(c)(2)(ii))
-- Ban self-service displays of tobacco products except in adult-only facilities. In all other retail outlets, tobacco products must be placed out of reach of consumers (i.e., behind the counter or under lock-and-key) or, if on the counter, not visible or accessible to consumers (goes beyond (897.1 6(c)(2)(ii))
[Source/precedent: FDA Rule]
D. Licensing of Retail Tobacco Product Sellers
The legislation would mandate minimum federal standards for a retail licensing program that the federal government and state and local authorities would enforce through funding provided by the Industry Payments. Any entity that sells directly to consumers - whether a manufacturer, wholesaler, importer, distributor or retailer -would require a license.
Elements of the licensing program would include:
-- Mandating compliance with the Act as a condition to obtain and hold a license
-- Penalties for violations (See Appendix II)
-- Suspension or revocation of licenses (on a site-by-site basis) for certain violations (see Appendix II)
-- A requirement that distribution of tobacco products for resale to consumers be made only to licensed entities
-- Licensing fees to cover the administrative costs of issuing state licenses (all other costs covered as noted above)
-- Comparable federal licensing programs (with federal enforcement) for military facilities, U.S. government installations abroad, and other U.S. territories and possessions not otherwise under the jurisdiction of the States (including duty-free shops within U.S. borders)
-- Comparable licensing programs to govern tobacco product sales on Indian lands (see Appendix III)
(Source/precedent: Various state laws governing sales of tobacco products and alcoholic beverages)
E. Regulation of Tobacco Product Development and Manufacturing
This legislation, for the first time, would impose a regulatory regime to govern the development and manufacturing of cigarettes and smokeless tobacco products, including FDA approval of the ingredients used in such products and imposition of standards for reducing the level of certain constituents, including nicotine.
Elements of the regulatory regime would include:
1. Tobacco products shall have the same definition as contained in the FDA Rule. Jurisdiction shall also cover Roll Your Own, Little Cigars, Fine Cut, etc.
2. Tobacco will continue to be categorized as a "drug" and a "device" under the Food, Drug and Cosmetic Act ("FDCA"). The Agency's authority to regulate the products as restricted medical devices" will be explicitly recognized and tobacco products will be classified as a new subcategory of a Class II device pursuant to 21 U.S.C. section 360c. FDCA shall apply to these products as provided by the Act and the amendments to FDCA contained herein.
3. The Class II classification shall permit FDA to require product modification of tobacco products, including the regulation of nicotine content, and shall provide that the sale of tobacco products to adults in the form that conforms to Performance Standards established for tobacco products pursuant to Section 514 ("Section 514") of the FDCA (21 U.S.C. Section 360d) shall be permitted notwithstanding 21 U.S.C. Sections 360f, 352(j) and 360h(e)
4. Reduced Risks Products
Products sold that an objective, reasonable consumer would believe pose less of a health risk:
-- Tobacco product manufacturers will be barred from making claims that could reasonably be interpreted to state or imply a reduced health risk unless the manufacturer demonstrates to FDA that the product scientifically does in fact "significantly reduce the risk to health" from ordinary tobacco products. Currently employed product descriptors such as "light" and "low tar" will be regulated as described in 1(A) above.
-- FDA would have to approve all health claims (direct or implied), as well as the content and placement of any such claims in advertisements, to prevent the public from being misled and to prevent the advertisement from being used to expand, or prevent the contraction of, the marketplace.
-- For "less hazardous tobacco products," FDA will be authorized to permit scientifically-based specific health claims and to permit exceptions to the advertising restrictions that apply to other products if FDA determines that such advertising would reduce harm and promote the public health. The FDA will promulgate a rule to govern how these determinations will be made.
-- The manufacturers will be required to notify FDA of any technology that they develop or acquire and that reduces the risk from tobacco products and, for a commercially reasonable fee, to cross license all such technology, but only to those companies also covered by the same obligations. Procedural protections will be built in to resolve license fee disputes, if the private parties cannot agree among themselves first. If the technology reported to the FDA is in the early development stages, the manufacturer will be provided confidentiality protection during the development process.
-- The Agency shall also have the authority to mandate the introduction of "less hazardous tobacco products" that are technologically feasible, after a formal rule making subject to the Administrative Procedures Act ("APA"), with the right of judicial review. In doing so, the Agency shall have the authority to mandate that a manufacturer subject to this Act who owns such technology (at such manufacturer's election) either introduce such products, or, at a commercially reasonable market rate, license such technology to a manufacturer who agrees to bring the technology to market in a reasonable time frame. In the event that no manufacturer or licensee introduces such "less hazardous tobacco products," within a reasonable time frame set by FDA, then the U.S. Public Health Service may produce either itself, or through a licensing arrangement, any such product.
-- The goal of any rule mandating the introduction into the marketplace of "less hazardous tobacco products" for which the technology exists is to guarantee that a mechanism exists to ensure that products which appear to hold out the hope of reducing risk are actually tested and made available in the marketplace and not held back.
5. Performance Standards
To further the public health, to promote the production of "reduced risk" tobacco products, and to minimize the harm to consumers of tobacco products by insuring that the best available, feasible safety technology becomes the industry standard, FDA will have the authority to promulgate Performance Standards pursuant to Section 514 that require the modification of tobacco products to reduce the harm caused by those products (including the components that produce drug dependence), provided that the standard shall not require the prohibition on the sale to adults of traditional tobacco products in the basic form as described in the August 28, 1996 FDA Rule at 61 Fed. Reg. at 44616 (to be codified at 21 C.F.R. Section 897.3).
Specifically:
A. For a period of no fewer than twelve years following the effective date of the Act, the product Performance Standards will be governed by the following: The Agency shall be permitted to adopt performance standards that require the modification of existing tobacco products, including the gradual reduction, but not the elimination, of nicotine yields, and the possible elimination of other constituents or other harmful components of the tobacco product, based upon a finding that the modification: (a) will result in a significant reduction of the health risks associated with such products to consumers thereof, (b) is technologically feasible, and (c) will not result in the creation of a significant demand for contraband or other tobacco products that do not meet the product safety standard. In determining the risk of the demand for a market in contraband products, the FDA shall take into account the number of dependent tobacco product users and the availability, or lack thereof, of alternative products then on the market and such other factors as the Agency may deem relevant.
The authority to require such product modification can be exercised upon a showing of "substantial evidence," based upon an administrative record developed through a formal rule making subject to the Administrative Procedures Act, with the right of judicial review, and any such modification shall be subject to the current procedures of the Regulatory Reform Act of 1996 to provide time and a process for Congress to intervene should it so choose. In the event a party subsequently files a petition seeking an administrative review of whether a modification has, in fact, resulted in the creation of a significant demand for contraband or other tobacco products that do not meet the safety standard and FDA denies the petition, the petitioner shall have the right to seek judicial review of the denial of the petition.
Additionally:
-- Within one year of the effective date of this Act, the FDA shall establish a Scientific Advisory Committee to examine and determine the effects of the alteration of nicotine yield levels and to examine and determine whether there is a threshold level below which nicotine yields do not produce drug dependence and, if so, to determine that level, and also review any other safety, dependence or health issue so designated by FDA.
-- Separate from and without detracting from the Agency's authority under the requirements of the Section 514 Performance Standard noted above, effective three years from the date of enactment of this Act, no cigarette shall be sold in the United States which exceeds a 12 mg "tar" yield, using the testing methodology now being used by the Federal Trade Commission.
B. After the initial twelve year period, the Agency will be permitted to set product safety standards that go beyond the standards it is authorized to set pursuant to the above noted provisions and, if it does so, any such product Performance Standards shall be governed by the following: The Agency will be permitted to require the alteration of tobacco products then being marketed, including the elimination of nicotine and the elimination of other constituents or other demonstrated harmful components of the tobacco product, (the elimination of nicotine or other harmful constituent shall not be deemed to violate the prohibition on the sale of traditional tobacco products to adults, even if it results in a reduction of the number of the consumers who use the tobacco products then remaining on the market), based upon a finding that: (a) the safety standard will result in a significant overall reduction of the health risks to tobacco consumers as a group, (this includes the reduction in harm which will result from decreased drug dependence from the reduction and/or elimination of nicotine from (a) those who continue to use tobacco products, but less often, and (b) those who stop using tobacco products), (b) the modification is technologically feasible, and (c) the modification will not result in the creation of a significant demand for contraband or other tobacco products that do not meet the safety standard. In determining the overall health benefit of a change, the Agency shall consider the number of dependent tobacco users then in existence, the availability and demonstrated market acceptance of alternate products then on the market, and the effectiveness of smoking cessation techniques and devices then on the market and such other factors as the Agency may deem relevant.
Given the significance of such an action, the Agency will be permitted to require the elimination of nicotine or take such other action that would have an effect comparable to the elimination of nicotine based upon a "preponderance of the evidence" pursuant to, at a manufacturer's election, a Part 12 hearing, or notice and comment rule making, with a right of judicial review. Any such action shall be phased in, and no such phase-in shall begin in less than two years, to permit time for a meaningful Congressional review pursuant to the current procedures of the Regulatory Reform Act of 1996. In the event a party subsequently files a petition seeking an administrative review of whether a modification has, in fact, resulted in the creation of a significant demand for contraband or other tobacco products that do not meet the safety standard and the FDA denies the petition, the petitioner shall have the right to seek judicial review of the denial of the petition. In any judicial review, the deference accorded to the Agency's findings shall depend upon the extent to which the matter at issue is then within the Agency's field of expertise.
6. Manufacturing Oversight
The legislation would subject tobacco product manufacturers to good manufacturing practice standards ("GMPs") comparable to those applicable to medical device manufacturers, food companies and other FDA regulated industries, but tailored specifically to tobacco products. In this regard there would be:
-- Implementation of a quality control system (e.g., to prevent contamination) -- Inspection of tobacco product materials (e.g., to ensure compliance with quality standards) -- Requirements for proper handling of finished product -- Tolerances for pesticide chemical residues in or on commodities in the possession of the manufacturer; existing EPA authority and oversight is retained -- Inspection authority comparable to FDA's authority over other FDA regulated products, including the ability to enter manufacturing plants and demand certain records -- Record keeping and reporting requirements
Tobacco farmers will face no greater regulatory burden than the producers of other raw products regulated by the federal government.
[Source/precedent: FDA Rule; FDCA, 21 U.S.C. Sections 346a; 360]
7. Access to Company Information
-- The Act would ensure that previously non-public or confidential the files of the tobacco industry - including internal documents - are disclosed to FDA, private litigants The details of the arrangement are set forth in documents from health research and the public. Appendix VI II.
-- Any subpoena authority FDA has with respect to manufacturers of medical devices generally would also apply to tobacco product manufacturers.
F. Non-tobacco Ingredients
Currently, at the federal level, tobacco manufacturers are required only to submit aggregated ingredient information (not by brand or company) to HHS for monitoring and review. Nor do tobacco products manufacturers currently disclose to consumers ingredients information for each of the tobacco products they sell.
The legislation would supersede the current often-criticized federal ingredient law and confirm FDA's authority to evaluate all additives in tobacco products. No non-tobacco ingredient could be used in manufacturing tobacco products unless the manufacturer can demonstrate that such ingredient is not harmful under the intended conditions of use. Further, the legislation would require the manufacturers to disclose to FDA the ingredients and the amounts thereof in each brand. In addition, it would require manufacturers to disclose ingredient information to the public under regulations comparable to what current federal law requires for food products, reflecting the intended conditions of use.
Under this proposed legislation:
-- Manufacturers would be required to provide FDA on a confidential basis a list of all ingredients, substances and compounds (other than tobacco, water or reconstituted tobacco sheet made wholly from tobacco) which are added by the manufacturer to the tobacco, paper or filter of the tobacco product by brand and by quantity in each brand. For each such item, the manufacturer would identify whether or not it believes that the item would be exempt from public disclosure under the legislation.
-- Manufacturers would be required to submit, within 5 years of the enactment of the Act, for each ingredient currently added to the tobacco product, a safety assessment, based on the best available evidence, that there is a reasonable certainty in the minds of competent scientists that the ingredient (up to a specified amount) is not harmful under the intended conditions of use. FDA shall promulgate applicable regulations within 12 months.
-- Within a statutory time assessment(s) in accordance within 90 days, FDA shall period FDA must review with the applicable standard; approve or disapprove an ingredient's safety, and if FDA takes no action, the ingredient is deemed approved. FDA may also challenge any manufacturer's assertion that an ingredient would be exempt from disclosure to consumers under applicable regulations comparable to what current federal law requires for food products.
-- New ingredients or use of current ingredients beyond the specified maximum amount are subject to a comparable process prior to use.
-- FDA would be required to protect as strictly confidential ingredient information not otherwise subject to public disclosure. If not subject to such disclosure, this information will be treated as trade secrets under federal law, exempt from FOIA requests and protected by procedures which shall include the designation of an agent who will store it in a locked cabinet, maintain a record of any person who has access to the information and require a written confidentiality commitment from any such person.
-- Manufacturers would be required to disclose to the public ingredients information pursuant to regulations comparable to what current federal law requires for food products. During an initial 5 year period, each ingredient that would be exempt from disclosure under the food regime would be presumed not to be subject to disclosure unless FDA disproves its safety. However, manufacturers would be required to disclose all ingredients which they have been compelled to publicly disclose with respect to a particular brand in order to comply with a statute or regulation (e.g., MA Ch 94 §307B).
-- Manufacturers would be required to have procedures for the selection, testing, purchase, storage and use of ingredients.
The Act would:
-Provide for record keeping regarding ingredients
-Allow FDA access to such records, with protection of proprietary information
[Source/precedent: MA Chapter 94, §307B; 21 C.F.R. §§101.4, 101.105, and 101.170; 18 U.S.C. §1905; 5 U.S.C. §552(b)(4); MA proposed reg. 105 C.M.R. §660.200(G)]
G. Compliance and Corporate Culture.
A key element in achieving the Act's goals will be forcing a fundamental change in the way the tobacco industry does business. Accordingly, the Act will provide for means to ensure that the industry will not only comply with the letter of the law but will also have powerful incentives to prevent underage usage of tobacco products and to strive to develop and market less hazardous tobacco products.
First manufacturers would be required to create plans, with an annual review and update, to:
-- Ensure compliance with all applicable laws and regulations
-- Identify ways to achieve the goals of reduced youth access to and incidence of underage consumption of tobacco products and provide internal incentives for doing so
-- Provide internal incentives to develop products with reduced risk
Second, with a special emphasis on laws and regulations that make it unlawful to sell tobacco products to underage persons and other laws directed at the issue of underage tobacco use, the manufacturers must implement compliance programs that include, at a minimum, the following elements:
-- Compliance standards and procedures to be followed by employees and agents that are reasonably capable of reducing the prospect of violations
-- Assignment to specific individual(s) within high-level personnel of the organization of overall responsibility to oversee compliance with the relevant standards and procedures, especially in regard to preventing underage tobacco use
-- Use of due care not to delegate substantial discretionary authority to individuals who the organization knows, or should have known through the exercise of due diligence, had a propensity to disregard corporate policy
-- Steps to communicate relevant standards and procedures to all employees and other agents (including lobbyists), e.g., by requiring participation in training programs or by disseminating publications that explain in a practical manner what is required
-- Internal audits, hotlines and other measures to promote compliance
-- Appropriate disciplinary mechanisms and measures (e.g., discipline of employees who violate marketing restrictions)
-- Reasonable steps to respond appropriately to a violation and to prevent further similar violations
Furthermore, the Act would provide "whistleblowers" in the tobacco industry with the maximum protection available under current federal statutes.
Beyond compliance with the letter of the law, manufacturers would be required to take affirmative steps in furtherance of the spirit of the new regime, including:
-- Promulgating corporate principles that express and explain the company's commitment to compliance, reductions of underage tobacco use, and development of reduced risk tobacco products
-- Designating a specific individual within high-level personnel of the organization with appropriate responsibility and authority to promote efforts to attain these new standards
-- Providing reports to shareholders on compliance as well as progress toward meeting these new standards
Manufacturers would also be required to work with retail organizations on compliance, including retailer compliance checks and financial incentives for compliance.
Third, each tobacco manufacturer would require all contract lobbyists (and any other third-parties who may engage in lobbying activities on behalf of a manufacturer) to agree that they will not support or oppose any state or federal legislation, or seek or oppose any governmental action on any matter, without the manufacturer's express authorization. Manufacturers would also require anyone lobbying on their behalf to agree in writing that a) they are aware of and will fully comply with all applicable laws and regulations; b) they have reviewed and will fully comply with the Act as it applies to them; c) they have reviewed and will fully comply with the Consent Decree as it applies to them; and d) they have reviewed and will fully abide by the manufacturer's business conduct policies and any other policies and commitments as they apply, especially those related to prevention of youth tobacco usage.
Fourth, within ninety days after the Act's effective date, the Tobacco Institute and the Council for Tobacco Research, U.S.A. would be dissolved and disbanded. Tobacco product manufacturers would be permitted to form new trade associations only in accordance with strict procedures and federal oversight designed to ensure compliance with antitrust and other applicable laws. (See Appendix IV)
Finally, companies would be subject to fines and penalties (including "Scarlet Letter" advertising) for breaching their obligations vis-a'-vis the development, implementation and enforcement of compliance plans and corporate principles. These penalties shall follow the scheme set forth in the Clean Air Act, up to $25,000 per day per violation with a total not to exceed $200,000. In addition, each manufacturer's employees shall be directed to report to that manufacturer's compliance officer any known or alleged violations of this Act by retailers or distributors. In accordance with procedures established by FDA, the compliance officer shall be required to furnish all such reports to FDA for reference to appropriate federal or state enforcement authorities. The manufacturer shall be subject to fines or penalties in the event its compliance officer fails to furnish any such reports to FDA.
[Source/precedent: Federal Organizational Sentencing Guidelines; various federal consent decrees; various corporate environmental programs]
H. Effective Dates
Many of the foregoing requirements relating to the reformation of the tobacco industry will become effective shortly after the Act is signed by the President; including the following categories of new rules, which will be implemented on the dates indicated:
Category / Effective Dates on Final Passage
Retail Product Displays / 9 months
Retail signage / 5 months
Advertising / 9 months
Package Labeling / 1/3 in 90 days
1/3 in 120 days
1/3 in 180 days
Sponsorships / 12/31/98
Vending machines / 12 months
Sampling / 3 months
GMPs / 24 months in accordance with rulemaking, whichever is later
Corporate compliance / 12 month
Face-to-face transactions / 3 months
Ban on sales of open packs / 3 months
20 cigarettes per pack minimum / 3 months
Puerto Rico pack size / 12 months
TITLE II: "Look Back" Provisions/State Enforcement incentives
A central aim of this legislation is to achieve dramatic and immediate reductions in the number of underage consumers of tobacco products. The legislation accordingly contains a "look-back" provision giving tobacco product manufacturers significant economic incentives to take every possible step to ensure that the advertising, marketing and distribution requirements of this Act are met, and imposing substantial surcharges on the manufacturers in the event that underage tobacco-use reduction targets are not achieved.
The "look-back" provision sets targets for the dramatic reduction of current levels of underage tobacco use (as measured by the University of Michigan's National High School Drug Use Survey "Monitoring the Future"). Underage use of cigarette products must decline by at least 30% from estimated levels over the last decade by the fifth year after the legislation takes effect, by at least 50% from estimated levels over the last decade by the seventh year after the legislation takes effect, by at least 60% from estimated levels over the last decade by the tenth year after the legislation takes effect, and remain at such reduced levels or below thereafter. (These required reductions amount to even steeper declines from current levels of underage smoking.) Underage use of smokeless tobacco products must decline by at least 25% from current levels by the fifth year after the legislation takes effect, by at least 35% from current levels by the seventh year after the legislation takes effect, by at least 45% from current levels by the tenth year after the legislation takes effect, and remain at such reduced levels or below thereafter. FDA will annually assess the prevalence of underage tobacco use (based on the methodology employed by the University of Michigan survey) to determine whether these targets have been met.
If a target has not been met, FDA will impose a mandatory surcharge on the relevant industry (cigarette or smokeless tobacco) based upon an approximation of the present value of the profit the industry would earn over the lives of all underage users in excess of the target (subject to an annual cap of $2 billion for the cigarette industry (adjusted each year for inflation) and a comparably derived cap for the smokeless tobacco industry). Tobacco product manufacturers could receive a partial abatement of this surcharge (up to 75%) only if they could thereafter prove to FDA that they had fully complied with the Act, had taken all reasonably available measures to reduce youth tobacco use and had not taken any action to undermine the achievement of the required reductions.
A fuller description is provided in Appendix V.
In addition, the proposed Act goes well beyond the provisions of the Synar Amendment's "no tobacco sales to minors" law and related regulations, 42 U.S.C. § 300X-26, and the Final Rule promulgated thereunder, which became effective February 20,1996 (61 Fed. Reg., June 19,1996). The proposed Act requires the several States to undertake significant enforcement steps designed to dramatically reduce the incidence of youth smoking, and youth access to tobacco products. These enforcement obligations are funded by Industry Payments. Each state must maintain specific levels of enforcement effort, or the state risks the loss of a significant portion of the health care program funds otherwise payable to the state under the Act. Amounts withheld from states not doing an adequate enforcement job will be reallocated to states with a superior "no sales to minors" enforcement record. No state will be held responsible for sales to underage consumers outside that state's jurisdiction.
The details of these state enforcement incentives are set forth in Appendix VI.
TITLE III: Penalties and Enforcement; Consent Decrees; Non-Participating Companies
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PREAMBLE
This legislation would mandate a total reformation and restructuring of how tobacco products are manufactured, marketed and distributed in this country. The nation can thereby see real and swift progress in preventing underage use of tobacco, addressing the adverse health effects of tobacco use and changing the corporate culture of the tobacco industry.
The Food and Drug Administration ("FDA") and other public health authorities view the use of tobacco products by our nation's children as a "pediatric disease" of epic and worsening proportions that results in new generations of tobacco dependent children and adults. There is also a consensus within the scientific and medical communities that tobacco products are inherently dangerous and cause cancer, heart disease and other serious adverse health effects.
The FDA and other health authorities have concluded that virtually all new users of tobacco products are under legal age. President Clinton, the FDA, the Federal Trade Commission ("FTC"), state Attorneys General and public health authorities all believe that tobacco advertising and marketing contribute significantly to the use of nicotine-containing tobacco products by adolescents. These officials have concluded that because past efforts to restrict advertising and marketing have failed to curb adolescent tobacco use, sweeping new restrictions on the sale, promotion and distribution of such products are needed.
Until now, federal and state governments have lacked many of the legal means and resources they need to address the societal problems caused by the use of tobacco products. These officials have been armed only with crude regulatory tools which they view as inadequate to achieve the public health objectives with which they are charged.
This legislation greatly strengthens both the federal and state governments' regulatory arsenal and furnishes them with additional resources needed to address a public health problem that affects millions of Americans, including most importantly underage tobacco use. Further, it is contemplated that certain of the obligations of the tobacco companies will be implemented by a binding, enforceable contractual protocol.
The legislation reaffirms individuals' right of access to the courts, to civil trial by jury and to full compensatory damages. Resolution through the Act of potential punitive damages liability of the tobacco industry for past conduct is only made in the context of the comprehensive settlement proposed by the legislation. It is not intended to have precedential effect, nor does it express any position adverse to the imposition of punitive damages in general or as applied to any other specific industry, case, controversy or product and does not provide any authority whatsoever regarding the propriety of punitive damages.
Among other things, the new regime would:
-- Confirm FDA's authority to regulate tobacco products under the Food, Drug and Cosmetic Act, making FDA not only the preeminent regulatory agency with respect to the manufacture, marketing and distribution of tobacco products but also requiring the tobacco industry to fund FDA's oversight out of ongoing payments by the manufacturers pursuant to the new regime ("Industry Payments").
-- Go beyond FDA's current regulations to ban all outdoor tobacco advertising and to eliminate cartoon characters and human figures, such as Joe Camel and the Marlboro Man, two tobacco icons which the public health community has long assailed as advertising appealing to our nation's youth.
-- Impose and provide funding out of the Industry Payments for an aggressive federal enforcement program, including a State-administered retail licensing system, to stop minors from obtaining tobacco products, while in no way preventing the States from enacting additional measures.
-- Ensure that the FDA and the States have the regulatory flexibility to address issues of particular concern to public health officials, such as youth tobacco usage and tobacco dependence.
-- Subject the tobacco industry to severe financial surcharges in the event underage tobacco use does not decline radically over the next decade.
-- Empower the federal government to set national standards controlling the manufacturing of tobacco products and the ingredients used in such products.
-- Provide new and flexible regulatory enforcement powers to ensure that the tobacco industry works to develop and introduce less-hazardous tobacco products," including, among other things, vesting FDA with the power to regulate the levels of nicotine in tobacco products.
-- Require the manufacturers of tobacco products to disclose all previously non-public internal laboratory research and all new internal laboratory research generated in the future relating to the health effects or safety of their products.
-- Establish a minimum federal standard with tough restrictions on smoking in public places with enforcement funding from the Industry Payments, while preserving the authority of state and local governments to enact even more severe standards.
Authorize and fund from Industry Payments a $500 million annual, national education-oriented counter-advertising and tobacco control campaign seeking to discourage the initiation of tobacco use by children and adolescents and to encourage current tobacco product users to quit use of the products.
-- Authorize and fund from Industry Payments the annual payment to all States of significant, ongoing financial compensation to fund health benefits program expenditures and to establish and fund a tobacco products liability judgments and settlement fund.
-- Authorize and fund from Industry Payments a nationwide program, administered through State governments and the private sector, of smoking cessation.
The sale of tobacco products to adults would remain legal but subject to restrictive measures to ensure that they are not sold to underage purchasers. These measures respond directly to concerns voiced by federal and state public health officials, the public health community and the public at large that the tobacco industry should be subject to the strictest scrutiny and regulatory oversight. This statute imposes regulatory controls, including civil and criminal penalties, equal to, and in many respects exceeding, those imposed on other regulated industries. Further, it imposes on tobacco manufacturers the obligation to provide funding from Industry Payments for an array of public health initiatives.
The sale, distribution, marketing, advertising and use of tobacco products are activities substantially affecting interstate commerce. Such products are sold, marketed, advertised and distributed in interstate commerce on a nationwide basis, and have a substantial effect on the nation's economy. The sale, distribution, marketing, advertising and use of such products are also activities substantially affecting interstate commerce by virtue of the health care and other costs that federal and State governmental authorities have attributed to usage of tobacco products.
Various civil actions are pending in state and federal courts arising from the use, marketing or sale of tobacco products. Among these actions are cases brought by some 40 state Attorneys General, cases brought by certain cities and counties, the Commonwealth of Puerto Rico, and other third-party payor cases seeking to recover monies spent treating tobacco-related diseases and for the protection of minors and consumers. Also pending in courts throughout the United States are various private putative class action lawsuits brought on behalf of individuals claiming to be dependent upon and injured by tobacco products. Additionally, a multitude of individual suits have been filed against the tobacco products manufacturers and/or their distributors, trade associations, law firms and consultants.
All of these civil actions are complex, slow-moving, expensive and burdensome, not only for the litigants but also for the nation's state and federal judiciaries. Moreover, none of those litigation's has to date resulted in the collection of any monies to compensate smokers or third-party payors. Only national legislation offers the prospect of a swift, fair, equitable and consistent result that would serve the public interest by (1) ensuring that a portion of the costs of treatment for diseases and adverse health effects linked to the use of tobacco products is borne by the manufacturers of these products, and (2) restricting nationwide the sale, distribution, marketing and advertising of tobacco products to persons of legal age. The unique position occupied by tobacco in the nation's history and economy, the magnitude of actual and potential tobacco-related litigation, the need to avoid the cost, expense, uncertainty and inconsistency associated with such protracted litigation, the need to limit the sale, distribution, marketing and advertising of tobacco products to persons of legal age, and the need to educate the public, especially young people, of the health effects of using tobacco products all dictate that it would be in the public interest to enact this legislation to facilitate a resolution of the matters described.
Public health authorities believe that the societal benefits of this legislation, in human and economic terms, would be vast. In particular, FDA has found that reducing underage tobacco use by 50% "would prevent well over 60,000 early deaths." FDA has estimated that the monetary value of its present regulations will be worth up to $43 billion per year in reduced medical costs, improved productivity and the benefit of avoiding the premature death of loved ones. This statute, which extends far beyond anything FDA has previously proposed or attempted, can be expected to produce human and economic benefits many times greater than such existing regulations.
As part of this settlement, the tobacco companies recognize the historic changes that will be occurring to their business. They will fully comply with increased federal regulation, focus intense efforts on dramatic reductions in youth access and youth tobacco usage, recognize that the regulatory scheme encourages the development of products with reduced risk and acknowledge the predominant public health positions associated with the use of tobacco products.
[Source/precedent: FDA Rule]
Contents
Preamble
Title I: Reformation of the Tobacco Industry
A. Restrictions on Marketing and Advertising
B. Warnings, Labeling and Packaging
C. Restrictions on Access to Tobacco Products
D. Licensing of Retail Tobacco Product Sellers
E. Regulation of Tobacco Product Development and Manufacturing
F. Non-tobacco Ingredients
G. Compliance and Corporate Culture
H. Effective Dates
Title II: "Look Back" Provisions/State Enforcement Incentives
Title III: Penalties and Enforcement; Consent Decrees; Non-Participating Companies
A. Penalties and Enforcement
B. Consent Decrees
C. Non-participating Companies
Title IV: Nationwide Standards to Minimize Involuntary Exposure to Environmental Tobacco Smoke
Title V: Scope and Effect
A. Scope of FDA Authority B. State Authority
Title VI: Programs/Funding
A. Up Front Commitment
B. Base Annual Payments
C. Applicability
D. Tax Treatment
Title VII: Public Health Funds From Tobacco Settlement As Recommended by The Attorneys General For Consideration by the President and the Congress
Title VIII: Civil Liability
A. General
B. Provisions as to Civil Liability for Past Conduct
C. Provisions as to Civil Liability for Future Conduct
Title IX: Board Approval
Appendices:
Appendix I: Warnings in Advertisements
Appendix II: Retail Tobacco Product Seller Penalties
Appendix III: Application to Indian Tribes
Appendix IV: Industry Associations
Appendix V: "Look Back"
Appendix VI: State Enforcement Incentives
Appendix VII: Restrictions on Point of Sale Advertising
Appendix VIII: Public Disclosure of Past and Future Tobacco Industry Documents and Health Research
TITLE I: Reformation Of The Tobacco Industry
Title I of the legislation would incorporate and expand upon FDA's recent regulation of nicotine-containing tobacco products.
The following rules would apply to all tobacco products sold in the U.S. (including all its territories and possessions, as well as duty-free shops within U.S. borders). The new regime would be allowed to operate as described below for five years. FDA would have authority to make revisions even within this period under extraordinary circumstances. Thereafter, the FDA would be authorized to review and revise the rules under applicable Agency procedures.
A. Restrictions on Marketing and Advertising
The advertising and marketing of tobacco products would be drastically curtailed, including in ways that exceed the FDA rule as originally promulgated and in ways that have previously been challenged on First Amendment grounds. As in the FDA rule the new regime would:
-- Prohibit the use of non-tobacco brand names as brand names of tobacco products except for tobacco products in existence as of January 1,1995 (897.16(a)) (The citations in this and in the next section are to Part 897 of the FDA's tobacco regulations, 61 Fed. Reg. 44396 (August 28, 1996).
-- Restrict tobacco product advertising to FDA specified media (897.30(a)(1 )-(2))
-- Restrict permissible tobacco product advertising to black text on a white background except for advertising in adult-only facilities and in adult publications (897.32(a)-(b))
-- Require cigarette and smokeless tobacco product advertisements to carry the FDA-mandated statement of intended use ("Nicotine Delivery Device") (897.32(c))
-- Ban all non-tobacco merchandise, including caps, jackets or bags bearing the name, logo or selling message of a tobacco brand (897.34(a)).
-- Ban offers of non-tobacco items or gifts based on proof of purchase of tobacco products (897.34(b))
-- Ban sponsorships, including concerts and sporting events, in the name, logo or selling message of a tobacco brand (897.34(c))
Further, building on and going beyond the FDA rule, the new regime would:
-- Ban the use of human images and cartoon characters - thereby eliminating Joe Camel and the Marlboro Man - in all tobacco advertising and on tobacco product packages
-- Ban all outdoor tobacco product advertising, including in enclosed stadia as well as brand advertising directed outside from a retail establishment (modifies 897.30(a)(1) and extends 897.30(b))
-- Prohibit tobacco product advertising on the Internet unless designed to be inaccessible in or from the United States
-- Establish nationwide restrictions in non adult-only facilities on point of sale advertising with a view toward minimizing the impact of such advertising on minors. These provisions, which are detailed in Appendix VII, restrict point of sale advertising that was otherwise permitted in retail establishments by the FDA rule.
-- Ban direct and indirect payments for tobacco product placement in movies, television programs and video games
-- Prohibit direct and indirect payments to "glamorize" tobacco use in media appealing to minors, including recorded and live performances of music -- Without limiting the FDA's normal rulemaking authority in this area, require that the use, in both existing and future brand styles, of words currently employed as product descriptors (e.g., "light" or "low tar") be accompanied by a mandatory disclaimer in advertisements (e.g., "Brand X not shown to be less hazardous than other cigarettes"); exemplars of all new advertising and tobacco products labeling shall be submitted to FDA concurrently with their introduction into the marketplace for FDA's ongoing review.
[Source/precedent: FDA Rule; 21 C.F.R. 101.70]
B. Warnings, Labeling and Packaging
The federally-mandated warning labels on cigarettes were last changed in 1984. Since then a number of countries, including Canada and members of the European Union, have imposed new warning labels. Further, the Federal Trade Commission's methodology to measure the "tar" and nicotine yields of cigarettes has been criticized as producing misleading information.
1. The legislation, through amendments to the Federal Cigarette Labeling and Advertising Act and the Comprehensive Smokeless Tobacco Health Education Act, would mandate new rotating warnings, to be introduced concurrently into the distribution chain on all tobacco product packages and cartons, and to be rotated quarterly in all advertisements. For cigarettes, the warnings would be:
-- "WARNING: Cigarettes are addictive"
-- "WARNING: Tobacco smoke can harm your children"
-- "WARNING: Cigarettes cause fatal lung disease"
-- "WARNING: Cigarettes cause cancer"
-- "WARNING: Cigarettes cause strokes and heart disease"
-- "WARNING: Smoking during pregnancy can harm your baby"
-- "WARNING: Smoking can kill you"
-- "WARNING: Tobacco smoke causes fatal lung disease in non-smokers"
-- "WARNING: Quitting smoking now greatly reduces serious risks to your health"
For smokeless tobacco products, the warnings would be:
-- "WARNING: This product can cause mouth cancer"
-- "WARNING: This product can cause gum disease and tooth loss"
-- "WARNING: This product is not a safe alternative to cigarettes"
--"WARNING: Smokeless tobacco is addictive"
For cigarettes, the warnings would occupy 25% of the front panel of the package (including packs and cartons) and would appear on the upper portion thereof. The legislation would contain a grandfather provision for existing brands with flip-top boxes comprising less than 25% of the front panel. For smokeless tobacco products, the warnings would appear on the principal display panel (e.g., a band around the can for moist smokeless tobacco products) and would occupy 25% of the display panel. The warnings would be printed in line with current Canadian standards (e.g., 17 point type with appropriate adjustments depending on length of required text) and in an alternating black on white and white on black format. The size and placement of warnings in advertisements would follow the requirements set forth in the existing United Kingdom standards. As described in Appendix I, the warning text and, where relevant, "tar" and nicotine (or other constituent) yield information would occupy 20% of press advertisements.
Cigarette and smokeless tobacco product packages would also carry the FDA mandated statement of intended use ("Nicotine Delivery Device") on the side of pack.
2. The FDA would be required to promulgate a rule governing the testing, reporting and disclosure of tobacco smoke constituents that the Agency determines the public should be informed of to protect public health, including, but not limited to "tar," nicotine and carbon monoxide. This authority would be transferred from the FTC and would include the authority to require label and advertising disclosures relating to "tar" and nicotine, as well as disclosures by other means relating to other constituents.
[Source/precedent: Canadian warning regulations; FDA Rule; FDCA, 21 U.S.C. Sec. 360h, with conforming amendment in light of FCLAA]
C. Restrictions on Access to Tobacco Products
Preventing youth access to tobacco products is a major objective of this legislation and the FDA Rule. Without preventing state and local governments from imposing stricter measures, the legislation would incorporate every access restriction of the FDA Rule, and more. As in the FDA Rule, the legislation would:
-- Set a minimum age of 18 to purchase tobacco products (897.14(a))
-- Require retailers to check photo identification of anyone under 27 (897.1 4(b)( 1 )-(2))
-- Establish the basic requirement of face-to-face transactions for all sales of tobacco products (897.14(c))
-- Ban the sale of tobacco products from opened packages (897.14(d))
-- Establish a minimum package size of 20 cigarettes (897.16(b))
-- Impose retailer compliance obligations to ensure that all self-service displays, advertising, labeling and other items conform with all applicable requirements (897.14(e))
-- Ban the sampling of tobacco products (897.16(d))
-- Ban the distribution of tobacco products through the mail, including redemption of coupons, except for sales subject to proof of age, with a review after 2 years by FDA to determine if minors are obtaining tobacco products through the mail (goes beyond 897.16(c)(2)(i))
Building on and going beyond the FDA Rule, the legislation would:
-- Ban all sales of tobacco products through vending machines (goes beyond 897.16(c)(2)(ii))
-- Ban self-service displays of tobacco products except in adult-only facilities. In all other retail outlets, tobacco products must be placed out of reach of consumers (i.e., behind the counter or under lock-and-key) or, if on the counter, not visible or accessible to consumers (goes beyond (897.1 6(c)(2)(ii))
[Source/precedent: FDA Rule]
D. Licensing of Retail Tobacco Product Sellers
The legislation would mandate minimum federal standards for a retail licensing program that the federal government and state and local authorities would enforce through funding provided by the Industry Payments. Any entity that sells directly to consumers - whether a manufacturer, wholesaler, importer, distributor or retailer -would require a license.
Elements of the licensing program would include:
-- Mandating compliance with the Act as a condition to obtain and hold a license
-- Penalties for violations (See Appendix II)
-- Suspension or revocation of licenses (on a site-by-site basis) for certain violations (see Appendix II)
-- A requirement that distribution of tobacco products for resale to consumers be made only to licensed entities
-- Licensing fees to cover the administrative costs of issuing state licenses (all other costs covered as noted above)
-- Comparable federal licensing programs (with federal enforcement) for military facilities, U.S. government installations abroad, and other U.S. territories and possessions not otherwise under the jurisdiction of the States (including duty-free shops within U.S. borders)
-- Comparable licensing programs to govern tobacco product sales on Indian lands (see Appendix III)
(Source/precedent: Various state laws governing sales of tobacco products and alcoholic beverages)
E. Regulation of Tobacco Product Development and Manufacturing
This legislation, for the first time, would impose a regulatory regime to govern the development and manufacturing of cigarettes and smokeless tobacco products, including FDA approval of the ingredients used in such products and imposition of standards for reducing the level of certain constituents, including nicotine.
Elements of the regulatory regime would include:
1. Tobacco products shall have the same definition as contained in the FDA Rule. Jurisdiction shall also cover Roll Your Own, Little Cigars, Fine Cut, etc.
2. Tobacco will continue to be categorized as a "drug" and a "device" under the Food, Drug and Cosmetic Act ("FDCA"). The Agency's authority to regulate the products as restricted medical devices" will be explicitly recognized and tobacco products will be classified as a new subcategory of a Class II device pursuant to 21 U.S.C. section 360c. FDCA shall apply to these products as provided by the Act and the amendments to FDCA contained herein.
3. The Class II classification shall permit FDA to require product modification of tobacco products, including the regulation of nicotine content, and shall provide that the sale of tobacco products to adults in the form that conforms to Performance Standards established for tobacco products pursuant to Section 514 ("Section 514") of the FDCA (21 U.S.C. Section 360d) shall be permitted notwithstanding 21 U.S.C. Sections 360f, 352(j) and 360h(e)
4. Reduced Risks Products
Products sold that an objective, reasonable consumer would believe pose less of a health risk:
-- Tobacco product manufacturers will be barred from making claims that could reasonably be interpreted to state or imply a reduced health risk unless the manufacturer demonstrates to FDA that the product scientifically does in fact "significantly reduce the risk to health" from ordinary tobacco products. Currently employed product descriptors such as "light" and "low tar" will be regulated as described in 1(A) above.
-- FDA would have to approve all health claims (direct or implied), as well as the content and placement of any such claims in advertisements, to prevent the public from being misled and to prevent the advertisement from being used to expand, or prevent the contraction of, the marketplace.
-- For "less hazardous tobacco products," FDA will be authorized to permit scientifically-based specific health claims and to permit exceptions to the advertising restrictions that apply to other products if FDA determines that such advertising would reduce harm and promote the public health. The FDA will promulgate a rule to govern how these determinations will be made.
-- The manufacturers will be required to notify FDA of any technology that they develop or acquire and that reduces the risk from tobacco products and, for a commercially reasonable fee, to cross license all such technology, but only to those companies also covered by the same obligations. Procedural protections will be built in to resolve license fee disputes, if the private parties cannot agree among themselves first. If the technology reported to the FDA is in the early development stages, the manufacturer will be provided confidentiality protection during the development process.
-- The Agency shall also have the authority to mandate the introduction of "less hazardous tobacco products" that are technologically feasible, after a formal rule making subject to the Administrative Procedures Act ("APA"), with the right of judicial review. In doing so, the Agency shall have the authority to mandate that a manufacturer subject to this Act who owns such technology (at such manufacturer's election) either introduce such products, or, at a commercially reasonable market rate, license such technology to a manufacturer who agrees to bring the technology to market in a reasonable time frame. In the event that no manufacturer or licensee introduces such "less hazardous tobacco products," within a reasonable time frame set by FDA, then the U.S. Public Health Service may produce either itself, or through a licensing arrangement, any such product.
-- The goal of any rule mandating the introduction into the marketplace of "less hazardous tobacco products" for which the technology exists is to guarantee that a mechanism exists to ensure that products which appear to hold out the hope of reducing risk are actually tested and made available in the marketplace and not held back.
5. Performance Standards
To further the public health, to promote the production of "reduced risk" tobacco products, and to minimize the harm to consumers of tobacco products by insuring that the best available, feasible safety technology becomes the industry standard, FDA will have the authority to promulgate Performance Standards pursuant to Section 514 that require the modification of tobacco products to reduce the harm caused by those products (including the components that produce drug dependence), provided that the standard shall not require the prohibition on the sale to adults of traditional tobacco products in the basic form as described in the August 28, 1996 FDA Rule at 61 Fed. Reg. at 44616 (to be codified at 21 C.F.R. Section 897.3).
Specifically:
A. For a period of no fewer than twelve years following the effective date of the Act, the product Performance Standards will be governed by the following: The Agency shall be permitted to adopt performance standards that require the modification of existing tobacco products, including the gradual reduction, but not the elimination, of nicotine yields, and the possible elimination of other constituents or other harmful components of the tobacco product, based upon a finding that the modification: (a) will result in a significant reduction of the health risks associated with such products to consumers thereof, (b) is technologically feasible, and (c) will not result in the creation of a significant demand for contraband or other tobacco products that do not meet the product safety standard. In determining the risk of the demand for a market in contraband products, the FDA shall take into account the number of dependent tobacco product users and the availability, or lack thereof, of alternative products then on the market and such other factors as the Agency may deem relevant.
The authority to require such product modification can be exercised upon a showing of "substantial evidence," based upon an administrative record developed through a formal rule making subject to the Administrative Procedures Act, with the right of judicial review, and any such modification shall be subject to the current procedures of the Regulatory Reform Act of 1996 to provide time and a process for Congress to intervene should it so choose. In the event a party subsequently files a petition seeking an administrative review of whether a modification has, in fact, resulted in the creation of a significant demand for contraband or other tobacco products that do not meet the safety standard and FDA denies the petition, the petitioner shall have the right to seek judicial review of the denial of the petition.
Additionally:
-- Within one year of the effective date of this Act, the FDA shall establish a Scientific Advisory Committee to examine and determine the effects of the alteration of nicotine yield levels and to examine and determine whether there is a threshold level below which nicotine yields do not produce drug dependence and, if so, to determine that level, and also review any other safety, dependence or health issue so designated by FDA.
-- Separate from and without detracting from the Agency's authority under the requirements of the Section 514 Performance Standard noted above, effective three years from the date of enactment of this Act, no cigarette shall be sold in the United States which exceeds a 12 mg "tar" yield, using the testing methodology now being used by the Federal Trade Commission.
B. After the initial twelve year period, the Agency will be permitted to set product safety standards that go beyond the standards it is authorized to set pursuant to the above noted provisions and, if it does so, any such product Performance Standards shall be governed by the following: The Agency will be permitted to require the alteration of tobacco products then being marketed, including the elimination of nicotine and the elimination of other constituents or other demonstrated harmful components of the tobacco product, (the elimination of nicotine or other harmful constituent shall not be deemed to violate the prohibition on the sale of traditional tobacco products to adults, even if it results in a reduction of the number of the consumers who use the tobacco products then remaining on the market), based upon a finding that: (a) the safety standard will result in a significant overall reduction of the health risks to tobacco consumers as a group, (this includes the reduction in harm which will result from decreased drug dependence from the reduction and/or elimination of nicotine from (a) those who continue to use tobacco products, but less often, and (b) those who stop using tobacco products), (b) the modification is technologically feasible, and (c) the modification will not result in the creation of a significant demand for contraband or other tobacco products that do not meet the safety standard. In determining the overall health benefit of a change, the Agency shall consider the number of dependent tobacco users then in existence, the availability and demonstrated market acceptance of alternate products then on the market, and the effectiveness of smoking cessation techniques and devices then on the market and such other factors as the Agency may deem relevant.
Given the significance of such an action, the Agency will be permitted to require the elimination of nicotine or take such other action that would have an effect comparable to the elimination of nicotine based upon a "preponderance of the evidence" pursuant to, at a manufacturer's election, a Part 12 hearing, or notice and comment rule making, with a right of judicial review. Any such action shall be phased in, and no such phase-in shall begin in less than two years, to permit time for a meaningful Congressional review pursuant to the current procedures of the Regulatory Reform Act of 1996. In the event a party subsequently files a petition seeking an administrative review of whether a modification has, in fact, resulted in the creation of a significant demand for contraband or other tobacco products that do not meet the safety standard and the FDA denies the petition, the petitioner shall have the right to seek judicial review of the denial of the petition. In any judicial review, the deference accorded to the Agency's findings shall depend upon the extent to which the matter at issue is then within the Agency's field of expertise.
6. Manufacturing Oversight
The legislation would subject tobacco product manufacturers to good manufacturing practice standards ("GMPs") comparable to those applicable to medical device manufacturers, food companies and other FDA regulated industries, but tailored specifically to tobacco products. In this regard there would be:
-- Implementation of a quality control system (e.g., to prevent contamination) -- Inspection of tobacco product materials (e.g., to ensure compliance with quality standards) -- Requirements for proper handling of finished product -- Tolerances for pesticide chemical residues in or on commodities in the possession of the manufacturer; existing EPA authority and oversight is retained -- Inspection authority comparable to FDA's authority over other FDA regulated products, including the ability to enter manufacturing plants and demand certain records -- Record keeping and reporting requirements
Tobacco farmers will face no greater regulatory burden than the producers of other raw products regulated by the federal government.
[Source/precedent: FDA Rule; FDCA, 21 U.S.C. Sections 346a; 360]
7. Access to Company Information
-- The Act would ensure that previously non-public or confidential the files of the tobacco industry - including internal documents - are disclosed to FDA, private litigants The details of the arrangement are set forth in documents from health research and the public. Appendix VI II.
-- Any subpoena authority FDA has with respect to manufacturers of medical devices generally would also apply to tobacco product manufacturers.
F. Non-tobacco Ingredients
Currently, at the federal level, tobacco manufacturers are required only to submit aggregated ingredient information (not by brand or company) to HHS for monitoring and review. Nor do tobacco products manufacturers currently disclose to consumers ingredients information for each of the tobacco products they sell.
The legislation would supersede the current often-criticized federal ingredient law and confirm FDA's authority to evaluate all additives in tobacco products. No non-tobacco ingredient could be used in manufacturing tobacco products unless the manufacturer can demonstrate that such ingredient is not harmful under the intended conditions of use. Further, the legislation would require the manufacturers to disclose to FDA the ingredients and the amounts thereof in each brand. In addition, it would require manufacturers to disclose ingredient information to the public under regulations comparable to what current federal law requires for food products, reflecting the intended conditions of use.
Under this proposed legislation:
-- Manufacturers would be required to provide FDA on a confidential basis a list of all ingredients, substances and compounds (other than tobacco, water or reconstituted tobacco sheet made wholly from tobacco) which are added by the manufacturer to the tobacco, paper or filter of the tobacco product by brand and by quantity in each brand. For each such item, the manufacturer would identify whether or not it believes that the item would be exempt from public disclosure under the legislation.
-- Manufacturers would be required to submit, within 5 years of the enactment of the Act, for each ingredient currently added to the tobacco product, a safety assessment, based on the best available evidence, that there is a reasonable certainty in the minds of competent scientists that the ingredient (up to a specified amount) is not harmful under the intended conditions of use. FDA shall promulgate applicable regulations within 12 months.
-- Within a statutory time assessment(s) in accordance within 90 days, FDA shall period FDA must review with the applicable standard; approve or disapprove an ingredient's safety, and if FDA takes no action, the ingredient is deemed approved. FDA may also challenge any manufacturer's assertion that an ingredient would be exempt from disclosure to consumers under applicable regulations comparable to what current federal law requires for food products.
-- New ingredients or use of current ingredients beyond the specified maximum amount are subject to a comparable process prior to use.
-- FDA would be required to protect as strictly confidential ingredient information not otherwise subject to public disclosure. If not subject to such disclosure, this information will be treated as trade secrets under federal law, exempt from FOIA requests and protected by procedures which shall include the designation of an agent who will store it in a locked cabinet, maintain a record of any person who has access to the information and require a written confidentiality commitment from any such person.
-- Manufacturers would be required to disclose to the public ingredients information pursuant to regulations comparable to what current federal law requires for food products. During an initial 5 year period, each ingredient that would be exempt from disclosure under the food regime would be presumed not to be subject to disclosure unless FDA disproves its safety. However, manufacturers would be required to disclose all ingredients which they have been compelled to publicly disclose with respect to a particular brand in order to comply with a statute or regulation (e.g., MA Ch 94 §307B).
-- Manufacturers would be required to have procedures for the selection, testing, purchase, storage and use of ingredients.
The Act would:
-Provide for record keeping regarding ingredients
-Allow FDA access to such records, with protection of proprietary information
[Source/precedent: MA Chapter 94, §307B; 21 C.F.R. §§101.4, 101.105, and 101.170; 18 U.S.C. §1905; 5 U.S.C. §552(b)(4); MA proposed reg. 105 C.M.R. §660.200(G)]
G. Compliance and Corporate Culture.
A key element in achieving the Act's goals will be forcing a fundamental change in the way the tobacco industry does business. Accordingly, the Act will provide for means to ensure that the industry will not only comply with the letter of the law but will also have powerful incentives to prevent underage usage of tobacco products and to strive to develop and market less hazardous tobacco products.
First manufacturers would be required to create plans, with an annual review and update, to:
-- Ensure compliance with all applicable laws and regulations
-- Identify ways to achieve the goals of reduced youth access to and incidence of underage consumption of tobacco products and provide internal incentives for doing so
-- Provide internal incentives to develop products with reduced risk
Second, with a special emphasis on laws and regulations that make it unlawful to sell tobacco products to underage persons and other laws directed at the issue of underage tobacco use, the manufacturers must implement compliance programs that include, at a minimum, the following elements:
-- Compliance standards and procedures to be followed by employees and agents that are reasonably capable of reducing the prospect of violations
-- Assignment to specific individual(s) within high-level personnel of the organization of overall responsibility to oversee compliance with the relevant standards and procedures, especially in regard to preventing underage tobacco use
-- Use of due care not to delegate substantial discretionary authority to individuals who the organization knows, or should have known through the exercise of due diligence, had a propensity to disregard corporate policy
-- Steps to communicate relevant standards and procedures to all employees and other agents (including lobbyists), e.g., by requiring participation in training programs or by disseminating publications that explain in a practical manner what is required
-- Internal audits, hotlines and other measures to promote compliance
-- Appropriate disciplinary mechanisms and measures (e.g., discipline of employees who violate marketing restrictions)
-- Reasonable steps to respond appropriately to a violation and to prevent further similar violations
Furthermore, the Act would provide "whistleblowers" in the tobacco industry with the maximum protection available under current federal statutes.
Beyond compliance with the letter of the law, manufacturers would be required to take affirmative steps in furtherance of the spirit of the new regime, including:
-- Promulgating corporate principles that express and explain the company's commitment to compliance, reductions of underage tobacco use, and development of reduced risk tobacco products
-- Designating a specific individual within high-level personnel of the organization with appropriate responsibility and authority to promote efforts to attain these new standards
-- Providing reports to shareholders on compliance as well as progress toward meeting these new standards
Manufacturers would also be required to work with retail organizations on compliance, including retailer compliance checks and financial incentives for compliance.
Third, each tobacco manufacturer would require all contract lobbyists (and any other third-parties who may engage in lobbying activities on behalf of a manufacturer) to agree that they will not support or oppose any state or federal legislation, or seek or oppose any governmental action on any matter, without the manufacturer's express authorization. Manufacturers would also require anyone lobbying on their behalf to agree in writing that a) they are aware of and will fully comply with all applicable laws and regulations; b) they have reviewed and will fully comply with the Act as it applies to them; c) they have reviewed and will fully comply with the Consent Decree as it applies to them; and d) they have reviewed and will fully abide by the manufacturer's business conduct policies and any other policies and commitments as they apply, especially those related to prevention of youth tobacco usage.
Fourth, within ninety days after the Act's effective date, the Tobacco Institute and the Council for Tobacco Research, U.S.A. would be dissolved and disbanded. Tobacco product manufacturers would be permitted to form new trade associations only in accordance with strict procedures and federal oversight designed to ensure compliance with antitrust and other applicable laws. (See Appendix IV)
Finally, companies would be subject to fines and penalties (including "Scarlet Letter" advertising) for breaching their obligations vis-a'-vis the development, implementation and enforcement of compliance plans and corporate principles. These penalties shall follow the scheme set forth in the Clean Air Act, up to $25,000 per day per violation with a total not to exceed $200,000. In addition, each manufacturer's employees shall be directed to report to that manufacturer's compliance officer any known or alleged violations of this Act by retailers or distributors. In accordance with procedures established by FDA, the compliance officer shall be required to furnish all such reports to FDA for reference to appropriate federal or state enforcement authorities. The manufacturer shall be subject to fines or penalties in the event its compliance officer fails to furnish any such reports to FDA.
[Source/precedent: Federal Organizational Sentencing Guidelines; various federal consent decrees; various corporate environmental programs]
H. Effective Dates
Many of the foregoing requirements relating to the reformation of the tobacco industry will become effective shortly after the Act is signed by the President; including the following categories of new rules, which will be implemented on the dates indicated:
Category / Effective Dates on Final Passage
Retail Product Displays / 9 months
Retail signage / 5 months
Advertising / 9 months
Package Labeling / 1/3 in 90 days
1/3 in 120 days
1/3 in 180 days
Sponsorships / 12/31/98
Vending machines / 12 months
Sampling / 3 months
GMPs / 24 months in accordance with rulemaking, whichever is later
Corporate compliance / 12 month
Face-to-face transactions / 3 months
Ban on sales of open packs / 3 months
20 cigarettes per pack minimum / 3 months
Puerto Rico pack size / 12 months
TITLE II: "Look Back" Provisions/State Enforcement incentives
A central aim of this legislation is to achieve dramatic and immediate reductions in the number of underage consumers of tobacco products. The legislation accordingly contains a "look-back" provision giving tobacco product manufacturers significant economic incentives to take every possible step to ensure that the advertising, marketing and distribution requirements of this Act are met, and imposing substantial surcharges on the manufacturers in the event that underage tobacco-use reduction targets are not achieved.
The "look-back" provision sets targets for the dramatic reduction of current levels of underage tobacco use (as measured by the University of Michigan's National High School Drug Use Survey "Monitoring the Future"). Underage use of cigarette products must decline by at least 30% from estimated levels over the last decade by the fifth year after the legislation takes effect, by at least 50% from estimated levels over the last decade by the seventh year after the legislation takes effect, by at least 60% from estimated levels over the last decade by the tenth year after the legislation takes effect, and remain at such reduced levels or below thereafter. (These required reductions amount to even steeper declines from current levels of underage smoking.) Underage use of smokeless tobacco products must decline by at least 25% from current levels by the fifth year after the legislation takes effect, by at least 35% from current levels by the seventh year after the legislation takes effect, by at least 45% from current levels by the tenth year after the legislation takes effect, and remain at such reduced levels or below thereafter. FDA will annually assess the prevalence of underage tobacco use (based on the methodology employed by the University of Michigan survey) to determine whether these targets have been met.
If a target has not been met, FDA will impose a mandatory surcharge on the relevant industry (cigarette or smokeless tobacco) based upon an approximation of the present value of the profit the industry would earn over the lives of all underage users in excess of the target (subject to an annual cap of $2 billion for the cigarette industry (adjusted each year for inflation) and a comparably derived cap for the smokeless tobacco industry). Tobacco product manufacturers could receive a partial abatement of this surcharge (up to 75%) only if they could thereafter prove to FDA that they had fully complied with the Act, had taken all reasonably available measures to reduce youth tobacco use and had not taken any action to undermine the achievement of the required reductions.
A fuller description is provided in Appendix V.
In addition, the proposed Act goes well beyond the provisions of the Synar Amendment's "no tobacco sales to minors" law and related regulations, 42 U.S.C. § 300X-26, and the Final Rule promulgated thereunder, which became effective February 20,1996 (61 Fed. Reg., June 19,1996). The proposed Act requires the several States to undertake significant enforcement steps designed to dramatically reduce the incidence of youth smoking, and youth access to tobacco products. These enforcement obligations are funded by Industry Payments. Each state must maintain specific levels of enforcement effort, or the state risks the loss of a significant portion of the health care program funds otherwise payable to the state under the Act. Amounts withheld from states not doing an adequate enforcement job will be reallocated to states with a superior "no sales to minors" enforcement record. No state will be held responsible for sales to underage consumers outside that state's jurisdiction.
The details of these state enforcement incentives are set forth in Appendix VI.
TITLE III: Penalties and Enforcement; Consent Decrees; Non-Participating Companies
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