 Plus: the long arm of the U.S. Government snares Cuban cigar buyers
Los Angeles, August 22 – As Congress readies to return and begin work on hammering out the differences between the two bills passed to re-authorize the State Children’s Health Insurance Program (SCHIP), the Bush Administration has been quoted once again in opposition to the proposed increased in the scope of the program:
“As states have expanded into higher income levels, we actually are seeing SCHIP become a substitute for private insurance,” White House spokesman Tony Fratto told reporters yesterday. “States are looking to vastly expand eligibility for SCHIP at a time when no states are making adequate progress in enrolling the target populations, which are families with children at, or below, 200 percent of the poverty line.”
One example, cited by the New York Times is legislation passed by the State of New York which would extend SCHIP coverage eligibility to children in families which earn 400 percent of the poverty level, or $82,600 per year. That may sound reasonable for Manhattan, but for Buffalo?
According to the Wall Street Journal, “The State Children's Health Insurance Program was created in 1997 to help children whose families couldn't afford insurance but didn't qualify for Medicaid, and administration officials tell the New York Times that the changes are aimed at returning the program to its low-income focus and assuring it didn't become a replacement for private insurance.”
Pete Stark (D-California) told the Wall Street Journal that he doubted that a two-thirds majority could be raised in the House of Representatives to override a Presidential veto. If the SCHIP bill – and the heavy cigar taxes contained within it – is vetoed, 291 votes (out of 435) in the House would be needed. The House’s own bill on the SCHIP matter passed fairly narrowly, 225-204, with almost all Republicans voting against it.
The clock is ticking on the program as it will expire on September 30 and a House-Senate conference committee must be appointed, come up with a joint bill that both houses can pass and only then will it be sent to the President for signature (or veto). Heavy lobbying by the cigar industry is continuing to (a) minimize any raise in the tax rate or cap for cigars and (b) eliminate any floor stock tax. At present, the House version has no floor tax and a cap of $1 per cigar and the Senate bill has a $3 cap and a floor tax.
“Our industry would be put out of business with a $3 cap,” said David Berkebile, the outgoing president of the Retail Tobacco Dealers of America, in an interview with Forbes. Noting the impact of the floor tax proposed in the Senate bill, he told the magazine, “I’d have to take my cigars out of the store and literally give them away.” And then he would have to close his doors for good.
Even the Congressional Research Service has noted the disproportionate impact on cigars compared to cigarettes in the Senate bill: Assuming that retail prices are twice the manufacturer’s price, the price of large cigars under the cap would rise by 20.8% and the price of large cigars over the cap, while varying considerably, would average 33%. Prices would rise more if there is also a retailers markup on the tax. The cigarette tax increase is about 14%.”
The RTDA – now called the International Premium Cigar and Pipe Retailers Association – is hiring a lobbyist to work on this issue, in concert with representatives from the affected countries, including the Dominican Republic, Honduras and Nicaragua. According to the Forbes story, the three countries export about $600 million in cigars annually to the U.S. and some industry executives have estimated that the job status of up to 250,000 people in the three countries combined could be impacted.
Alejandro Martinez Cuenca, head of the Nicaraguan cigarmakers association and the producer of the Joya de Nicaragua brand, says that “If the tax passes we definitely have a case for arbitration and we will not hesitate to introduce that litigation. What is at stake is so socially and politically devastating for the whole [Central American Free Trade Agreement] region, that we cannot leave this issue without action.”
OFAC collecting bigger Cuban penalties:
The Office of Foreign Assets Control, a small department of the U.S. Treasury which is tasked with enforcement of the U.S. Trade Embargo with Cuba, has been busy.
On August 10, OFAC announced a major penalty against Travelocity.com, the well-known, Ft. Worth, Texas-based travel services Web site. The company paid a penalty of $182,750 “to settle allegations of violations of the Cuban Assets Control regulations by Travelocity occurring on 1,458 occasions between January 1998 and April 2004" according to an OFAC statement. The penalty stemmed from booking airfare and hotels in Cuba without an OFAC license. According to the agency, Travelocity has stopped this activity and implemented a program of “corrective measures.”
In addition, OFAC collected another $16,625 from the Mexican branch of American Express Travel Related Services Co. for the same type of activity, this time related to group travel to Cuba in December 2002 and October 2003.
During July and August, OFAC also fined four individuals for purchasing Cuban cigars on the Internet. The fines ranged from $200.00 for four apparently small purchases in 2003, to $510.00 for a two-purchase violation in 2003, to $999.45 for four purchases in 200 and 2005 and $2,892.75 for six purchases over a period from December 2004 to September 2006.
The legend of Pepin Garcia:
Heard among the din of the RTDA trade show held in Houston earlier this month, this stunner about celebrated cigar maker Jose “Pepin” Garcia:
He was not only a top-grade (level 8) cigar roller in his native Cuba, but reportedly once won a contest for rolling skill and speed, producing 320 Churchill-sized (7 inches by 47 ring) cigars in four hours. Impossible? Not if you have seen Pepin in action; he is a marvel.
~ Rich Perelman
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