By Timothy S. Donahue

Top Takeaways:

• A provision in the Senate’s “Big Beautiful Bill” seeks to remove tobacco products from the federal drawback program, potentially imposing significant financial burdens on U.S. tobacco exporters.
• Former White House agricultural advisor Ray Starling warns that eliminating this tax credit could cost the American tobacco industry up to $100 million annually, affecting approximately a quarter of the crop’s value.
• Industry advocates are urging lawmakers to reconsider the measure, emphasizing its potential to undermine the competitiveness of U.S. tobacco products in global markets.

As the Senate deliberates the comprehensive “Big Beautiful Bill,” a specific provision targeting the tobacco industry could have serious financial implications for tobacco product exporters. The bill proposes removing tobacco products from the federal drawback program.

The drawback program currently allows manufacturers to receive refunds on tariffs paid for imported materials that are subsequently exported as part of finished products. The system is particularly relevant for the tobacco industry, where domestic tobacco is often blended with imported leaf before being exported as a finished product.

Ray Starling, former agricultural advisor during the Trump administration and current General Counsel of the North Carolina Chamber, highlighted the potential impact of the proposed change.

“You’re using import, blending that, in many cases, with domestic or American leaf, and then you’re putting that product back out on the international market,” Starling explained. “That’s why you’re paying a tax when that original product comes in here, but that’s why you get the credit when you push that product back out into the global market.”

Starling estimates that eliminating the drawback for tobacco could result in an annual recurring loss of up to $100 million for the industry, equating to approximately 25% of the crop’s value. He expressed concern that the measure singles out tobacco for a tax increase, despite the broader bill’s emphasis on supporting American exports and manufacturing.

The National Black Farmers Association (NBFA) and its 130,000-plus members are calling on the Senate to protect American farmers, especially those who grow tobacco. John Boyd, Jr., founder and president of the NBFA and a fourth-generation black farmer, said he would like to see the provision to repeal the duty drawback incentive removed.

“Logic suggests that ‘making America great again’ is achieved on the backs of American farmers,” said Boyd. “Growers in North Carolina, Tennessee, South Carolina, and across our nation will be jeopardized if the duty drawback incentive does not remain in place.

“To some, the incentive may seem minor. However, to my members and growers across America, protecting the duty drawback is of great significance. On behalf of the National Black Farmers Association, I humbly plead that legislators do not jeopardize the current American agricultural economy nor the future generations of American farmers.”

Industry representatives are actively engaging with lawmakers to address the concern about eliminating the drawback for tobacco products. Starling noted that discussions have commenced to potentially remove or amend the provision in the Senate version of the bill. “We hope that although it remained in the House version of the Big Beautiful Bill, we can conceivably get it removed in the Senate version,” he stated.