We have been asked to clarify the TTB position with regard to the manufacture and importation of sheets of reconstituted tobacco in light of the amendments to the Internal Revenue Code of 1986 (IRC) by the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA). Specifically, we have been asked the following:
Under 26 U.S.C. 5702(o), as amended by CHIPRA, the term “roll-your-own tobacco“ means “any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars, or for use as wrappers thereof.” Specifically, CHIPRA added the words, “or cigars, or for use as wrappers thereof” to the end of the existing definition. In the trade and in general terminology, "reconstituted tobacco" is ground or pulverized tobacco mixed with various adhesive agents and/or cellulose fibers derived from tobacco or other sources and formed into sheets. The term “sheets” here refers to a form or size of product that cannot be used, without further manipulation, by the ultimate consumer as a wrapper for a cigar (also referred to at retail as a “wrap” or a “blunt”).
Sheets of reconstituted tobacco that are in sizes that cannot be readily used by the ultimate consumer as wrappers for cigars without further manipulation are not “roll-your-own” tobacco as contemplated by 26 U.S.C. 5702(o) as amended. Accordingly, persons who produce or import reconstituted tobacco solely in sheets, rather than in sizes that can be readily used by the ultimate consumer as wrappers for cigars, are not manufacturers or importers of roll-your-own tobacco and therefore are not required to have a TTB permit as such. A manufacturer that produces and removes reconstituted tobacco in a form or size that is ready for use by the ultimate consumer is a manufacturer of roll-your-own tobacco and must obtain a TTB permit as a tobacco product manufacturer to engage in such business on or after April 1, 2009. Similarly, a person who imports reconstituted tobacco in a form or size that is ready for use by the ultimate consumer is an importer of roll-your-own tobacco and must obtain a TTB permit as an importer of tobacco products in order to engage in such business on or after April 1, 2009.
Finally, whether a manufacturer or importer of sheets of reconstituted tobacco that are in sizes that cannot be readily used by the ultimate consumer as wrappers for cigars is required to qualify as a “manufacturer of processed tobacco” or an “importer of processed tobacco” will be addressed in detail in forthcoming TTB regulations. CHIPRA includes a transitional rule whereby any person engaged in the business as a manufacturer or importer of processed tobacco on April 1, 2009, who submits an application to TTB within 90 days after April 1, 2009 (that is, on or before June 30, 2009) may continue to engage in that business pending final action by TTB on the permit application.