WASHINGTON (CN) - While Congress phases out a program to aid domestic tobacco farmers, a maker of little cigars must still pay an $11 million assessment, a federal judge ruled.
Congress decided in 2004 to disband a longstanding program that aids domestic tobacco farmers with tobacco price-support programs and marketing quotas for tobacco growers.
To do so gradually, however, lawmakers created the 10-year Tobacco Transition Payment Program.
The U.S. Department of Agriculture administers the program by issuing quarterly tobacco transition assessments on tobacco manufacturers and importers. Those proceeds then go to eligible growers.
Six classes of tobacco products are subject to the assessment. They are cigarettes, cigars, snuff, roll-your-own tobacco, chewing tobacco and pipe tobacco.
When Congress apportioned the assessment for each class in 2004, it made the cigarette class responsible for 96.331 percent of the total assessment and the cigar class responsible for 2.783 percent.
The USDA now adjusts those percentages periodically and then divides the amount among manufacturers and importers within the category.
For the cigar class, the USDA determines an individual manufacturer or importer's pro rata share by dividing the number of cigars from a particular manufacturer or importer by the total number of cigars placed in the domestic market. This is known as the "per-stick" or "stick count" method.
In 2005, a manufacturer of "small" cigars complained that USDA's per-stick fails to distinguish between differently sized cigars.
Cigars made by Single Stick, as it was then known, weigh less than 3 pounds per thousand cigars.
Though the department secretary agreed that it was necessary to adjust the assessment facing the manufacturer, then called Single Stick, he refused to let the company examine how the USDA calculates assessments.
Single Stick filed suit in 2006, and the case was still ongoing when the United States initiated an enforcement action against it in 2012.
By this time Single Stick had also changed its name to Prime Time International.
The court in Washington, D.C, consolidated the two cases and then administratively closed the later filed case.
Chief U.S. District Judge Royce Lamberth granted the USDA summary judgment Monday after concluding that its per-stick rule is a reasonable interpretation of ambiguous statutory language.
Lamnberth then administratively closed the 2006 action, reopened the 2012 federal enforcement action and entered judgment for the government in that case.
"The fact that FETRA [the Fair and Equitable Tobacco Reform Act of 2004] plainly lists six - not seven - tobacco product classes strongly supports USDA's decision to assess all cigars using a uniform methodology," Lamberth wrote. "Prime Time's proffered interpretation would require USDA to treat small and large cigars differently for the purposes of assigning assessments. Prime Time argues that this is clearly mandated by the pro-rata-basis limitation of FETRA, but this court thinks that such differential treatment is not required by the statute. USDA offers compelling arguments that dividing the cigar class into small and large cigar subclasses (or doing the functional equivalent thereof) may undercut a carefully constructed statutory scheme that intentionally created only one cigar class." (Parentheses in original; bracketed text added.)
Noting that the past-due assessment amounts are otherwise uncontested, Lamberth ordered Prime Time to pay the United States $11.6 million, plus any additional unpaid assessments and interest accrued since Sept. 14, 2012.
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