WASHINGTON (CN) – Cigarette manufacturers will have to make up the difference as tobacco growers are weaned off government subsidies lost a challenge to those payments, a federal judge ruled.
The dispute stems from the Fair and Equitable Tobacco Reform Act of 2004, which Congress enacted so that tobacco growers would not feel the full force of the the U.S. government’s decision to cut subsidies they were receiving,
The law requires manufacturers and importers of tobacco products to, for the next 10 years, assume the financial responsibility of making subsidy payments to tobacco growers.
Every quarter, an agency within the U.S. Department of Agriculture called the Commodity Credit Corporation determines how much each manufacturer or importer has to make.
The CCC arrives at that number by calculating the manufacturer or importer’s relative share of the overall domestic market for tobacco products.
R.J. Reynolds Tobacco Co. and Santa Fe Natural Tobacco Co. brought a lawsuit in Washington based on their contention that the CCC overcharges them.
They say that, by excluding illegal cigarette sales, CCC underestimates the size of the overall domestic market.
In 2012, a private investigation that the tobacco companies commissioned revealed two Native American tribes in upstate New York that were making and selling cigarettes illegally.
CCC refused to accept the companies’ findings, however, calling the study irrelevant to its calculations since the figures were imprecise and unsubstantiated by another federal agency.
U.S. District Judge Ketanji Jackson dismissed the complaint Thursday, however, finding “that the FETRA permits the agency to decide to credit only precise figures that other government agencies have already substantiated.”
“Therefore, the CCC’s refusal to accept Plaintiffs’ study was consistent with the law,” the 42-page opinion states.
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