HEARD IN THE HUMIDOR

Highlights of the week in cigars and smoking from

For December 13 - 17, 2010

Los Angeles - "Our officers stationed at mail facilities routinely discover and seize a variety of contraband arriving from all over the world, but this is the first time in Chicago we have seen this level of activity involving illegal cigars." That's David Murphy, director of field operations for the Chicago office of the U.S. Customs and Border Protection Service, in comments to reporters, noting the seizure of 30,000 Cuban cigars sent to the U.S. via O'Hare International Airport in Chicago. The Customs folks aren't through, however. About 700 shipments that have arrived over the past two weeks have been processed, but another 2,000 shipments involving another 70,000 cigars are being checked for the country of origin. Because of the U.S. trade embargo with Cuba, Cuban cigars are not allowed to be imported into the country. Customs officials said that normally only 10-12 boxes of cigars a week are caught by Customs, but spokesman Brian Bell noted that changes to freight regulations after last month's attempt to ship explosives to synagogues in Chicago led to a change in plan for European shippers of Cuban cigars to the U.S. According to the Chicago Tribune story:

"On Nov. 8, the Department of Homeland Security banned shipment of parcels over 16 ounces on passenger flights, Bell said. Officials believe that because European shippers could no longer send packages to the United States via these flights, they had to stockpile mail until it could be put on cargo freighters, which fly less frequently. "Bell said customs officers found full cargo pallets loaded with boxes of suspected Cuban cigars. "'We Googled 'buy Cuban cigars' and found several (European) sites, the majority of which say they don't have any trouble sending them to the U.S.,' said Bell. Some had a disclaimer saying vendors couldn't guarantee the product wouldn't get seized by customs officials, he said." Bell confirmed that the contraband cigars were discovered in a routine search of cargo coming from Switzerland. "The Swiss post had no way to move their mail," he said. "They had to contract on cargo planes, so they stockpiled until they could get flights into the United States. All the sudden there are all these yellow and brown boxes and they are all cigars." The cigars, according to Federal law, will be destroyed in a blast furnace.

The Office of Foreign Assets Control, a unit of the U.S. Treasury, is the enforcement agency for Cuban trade embargo regulations and has been noticeably silent on penalties for Cuban cigar importations under the Obama Administration. After more than two dozen penalties were imposed in 2008, a total of one penalty was levied in 2009 and only one so far this year. It will be interesting to see if any enforcement actions are taken by OFAC as a follow-up to the Chicago seizures. According to a report from WLS TV, "The buyers of these items will soon receive notices that their packages were seized by Customs officials in the U.S. Authorities say they will not be charged." Those buyers certainly hope so. But Bell also noted that "If we have a company purchasing the cigars, we will investigate them. We are definitely putting a hurt on a couple companies."

>> Even with the difficult economy and continuing expansions of smoking bans, the number of premium cigars imported into the U.S. in September showed surprising strength. In fact, September 2010 imports were essentially even with the total from that month in 2009 and 2008, at just more than 26 million cigars: => September 2010 imports of premium cigars totaled 26.17 million, down 0.3% from the 2009 figure of 26.25 million and 1.0% from the 2008 (non-SCHIP-impacted) total of 26.43 million. For the year, the January-September 2010 totals showed 184.69 million premium cigars were imported into the U.S., 14.4% behind the 2009 SCHIP-impacted total of 215.82 million, but pretty close to the 2008 figure of 195.67 million. If the import figures for the last three months of 2010 hold steady with fourth-quarter imports for the last two years, the 2010 total will be from 256-260 million, the worst figures since 2000, but down only 4% from the average import total of 271 million from 2006-08, which were considered to be reasonably good years for many U.S. cigar retailers.

=> As usual, the Dominican Republic led the way with 12.5 million cigars sent to the U.S. in September, which was down 12.5% from the 2009 figure of 14.3 million, but ahead of 2008's 11.5 million. For the first nine months of 2010, Dominican premium cigar exports to the U.S. were 80.5 million, way off 2009's SCHIP-impacted total of 107.7 million, but close to the 2008 figure of 80.8 million. => Nicaragua continued its record-setting march in September, sending 7.6 million premium cigars to the U.S., up 3.6% from the September 2009 total and 33.2% ahead of the 5.7 million it sent in September 2008. Nicaraguan production is set for a seventh straight increase, with 61.6 million premium exports to the U.S. in the first nine months of 2010, way ahead of both 2009 (55.7 million) and 2008 (50.6 million) at the same point.

=> Even Honduran production was up for a change, after many down months, to 5.8 million premium cigars exported to the U.S., compared to 4.4 million in September 2009 but way down from the 9.1 million sent in September 2008. For the nine months ended September, year-to-date Honduran imports totaled 41.1 million vs. 50.3 million at the same point in 2009 and 62.2 million in 2008.  Small amounts of premium cigar imports were logged from Costa Rica, Mexico and the Phillippines in September, but these accounted for only one percent of imports. While premium imports are steady, machine-made cigar imports continue to go crazy, up 51.7 million or 27.1% in September, compared to 2009. For the first nine months of the year, imports of machine-made cigars of all types - large and little - are now at 1.78 billion units, a 25.3% rise over the 2009 nine-month total of 1.42 billion. Wow! Moreover, it's worth noting that the machine-made import total does not include domestic production from market leaders Swisher International in Jacksonville, Florida; John Middleton in King of Prussia and Limerick, Pennsylvania and Altadis U.S.A. in Cayey, Puerto Rico. There are a lot of machine-made cigars being smoked out there. The steady premium reports and rising machine-made totals show that cigars are hardly dead, even if only a tiny fraction of the number of cigarettes consumed annually. But with retailers maintaining extraordinarily tight controls on in-store inventories, these figures also show that premium smokers are continuing to enjoy their passion.

>> It's no secret that tobacconists in the State of New York are hurting after the state's tax on cigars was raised to 75% of the wholesale price earlier this year. So now Miami Cigar & Co., in conjunction with the La Aurora factory in the Dominican Republic, are trying to help out. Their response is the debut of a new cigar line - the La Aurora Broadway Series - which will be sold only at shops located in New York state. La Aurora chief Guillermo Leon said in the brand announcement that "New York has always been special to me and my family. What has happened with the cigar taxes in New York is tragic. Since we cannot lower the taxes, we worked hard to lower the cost of this cigar without compromising quality." Nestor Miranda, owner of Miami Cigar, added that ""we are beginning to try to help tobacconists with the Broadway series by La Aurora just in time for Christmas." The line will be introduced with a single size called Sumo Toro, a fat robusto of 5 3/4 inches by 54 ring gauge. It features a double wrapper of Ecuadorian-grown, Sumatra-seed and Nicaraguan leaves, a Dominican Corojo binder and filler tobaccos grown in the Dominican Republic, Nicaragua and Peru. It will be introduced in December 20 at a private dinner hosted by Cigar Inn on Second Avenue in New York, with the cigar available thereafter at a reasonable - for New York - retail price of $12.75 each, which includes the 75% tax. This is the second recent introduction of a cigar specially made to assist New York tobacconists due to the onerous tax burden placed on them by the state. The Alec Bradley New York line debuted on Friday, December 10 and will only be sold by New York state tobacconists. This new brand, which features the Empire State Building in its brand artwork and was also introduced at a Cigar Inn dinner last September, is being offered in five sizes at an average, tax-included price of $12.75 per cigar.

>> Short fillers: Find our latest tasting reviews, of the newest blends from La Gloria Cubana in our News & Views archives for December 10.

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