Sana Ventures LLC d/b/a Space City Food Mart / A and K Food Store, DAB TB8467

INITIAL DECISION

On November 24, 2023, the Center for Tobacco Products (CTP) served a Complaint on Sana Ventures LLC d/b/a Space City Food Mart / A and K Food Store (Respondent), at 7004 Bellfort Street, Houston, Texas 77087, and filed a copy of the Complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management. CTP seeks to impose a $19,192 civil money penalty against Respondent for impermissibly receiving in interstate commerce an electronic nicotine delivery system (ENDS) product lacking the required premarketing authorization and offering such product for sale, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq. 
Respondent denies the allegations in the Complaint and argues that the CMP is too high. For the reasons discussed below, I find Respondent violated the provisions of 21 U.S.C. § 331(c) and conclude that a CMP in the amount of $17,272 is appropriate.

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I. Background and Procedural History

Respondent does business under the name of Space City Food Mart / A and K Food Store located at 7004 Bellfort Street, Houston, Texas 77087. Complaint at 3, ¶13; CTP Exhibit 3 at 1, ¶¶3-4.

On June 8, 2023, CTP issued a Warning Letter to Respondent notifying Respondent that on May 17, 2023, an FDA inspector witnessed electronic nicotine delivery system (ENDS) products offered for sale at Respondent’s establishment that lacked the required marketing authorization. CTP Ex. 7 at 1.

On August 15, 2023, at approximately 11:42 AM, FDA-Commissioned Officer Robert Becker inspected Respondent’s business. CTP Ex. 2 at 2, ¶5. During the inspection, Inspector Becker observed, “that the establishment sold FDA-regulated tobacco products and had a sales display containing tobacco products, including an Elfbar Sour Apple [ENDS] product, available for sale.” Id., ¶7.

Inspector Becker took photographs at the establishment, including the store and its external signage, and also photographed the tobacco products, including the Elfbar Sour Apple ENDS product, and its placement within the establishment. Id.; CTP Ex 4 at 2-3; CTP Ex. 5.

On November 24, 2023, CTP served an Administrative Complaint on Respondent by United Parcel Service at 7004 Bellfort Street, Houston, Texas 77087, as provided in 21 C.F.R. §§ 17.5 and 17.7. See Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 1b.

On December 22, 2023, Karim Muhammad electronically filed three documents that are collectively Respondent’s Answer. CRD Dkt. Entry Nos. 3, 3a, 3b (Answer). In its Answer, Respondent denied the allegations and argues the civil money penalty is too high. Answer at 1-2.

On March 15, 2024, CTP filed a pre-hearing exchange consisting of an Informal Brief of Complainant (CTP PH Brief), Complainant’s List of Proposed Witnesses and Exhibits, and exhibits 1 through 7 (CTP Exs. 1-7, respectively). CTP’s exhibits included the declaration of two witnesses: (1) James Bowling, Deputy Division Director in the Office of Compliance and Enforcement, CTP, FDA (CTP Ex. 1), and (2) Robert Becker, FDA-Commissioned officer with the State of Texas (CTP Ex. 2).

On April 8, 2024, Respondent submitted their pre-hearing exchange consisting of a one-page Microsoft Word document (Resp. PH Brief). Respondent’s exchange did not include any witness declarations or proposed exhibits.

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I held a pre-hearing conference (PHC) via Microsoft Teams on April 24, 2024. At the PHC, Mr. Muhammad indicated Respondent did not intend to cross-examine either of CTP’s witnesses, Respondent also waived the right to a hearing for the purpose of cross-examination and agreed to a decision based on the written record. CTP did not object. On April 25, 2024, I issued an order summarizing the PHC, which set a due date of June 26, 2024, for the parties to file their Final Briefs. CRD Dkt. No. 14.

On June 26, 2024, both parties submitted final briefs (CTP Final Br. and Resp. Final Br.).

The administrative record is now complete, and this matter is ready for a decision. 21 C.F.R. § 17.41; 21 C.F.R. § 17.45(c). I will now decide this case based on the evidence in the administrative record. 21 C.F.R. § 17.19(b)(11), (17).

II. Issues

1. Whether Respondent received in interstate commerce an ENDS product that lacked the required FDA marketing authorization order, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. §§ 301 et seq.; and
2. If so, whether the CMP amount of $19,192 sought by CTP is an appropriate amount, pursuant to the provisions of 21 C.F.R. § 17.2 and 21 U.S.C. § 333(f)(9)(A).

III. Applicable Law and Industry Guidance

In 2009, Congress enacted the Family Smoking Prevention and Tobacco Control Act (TCA) to regulate tobacco products. 21 U.S.C. §§ 387 et seq. The TCA prohibits selling any “new tobacco product” without authorization from the FDA. 21 U.S.C. § 387j(a); 21 U.S.C. § 387a(b) (delegating the FDA the authority to determine what constitutes new tobacco products). A new tobacco product is any tobacco product that was not commercially marketed in the United States as of February 15, 2007. 21 U.S.C. § 387j(a)(1).

The TCA requires new tobacco products to have a premarket authorization in effect. 21 U.S.C. § 387j(a)(2). To obtain premarket authorization, manufacturers of new tobacco products are required to submit a premarket tobacco application (PMTA) to the FDA for approval to sell their products. 21 U.S.C. § 387j(b)(1). Alternatively, the product manufacturer may submit a substantial equivalence report, in response to which the FDA may issue an order finding the product is substantially equivalent to a predicate tobacco product. 21 U.S.C. § 387e(j). Or, the product manufacturer may submit a report, in response to which the Secretary may issue an exemption order. 21 U.S.C. § 387e(j)(3).

The TCA directs FDA to review PMTAs to determine whether “permitting such tobacco product to be marketed would be appropriate for the protection of the public health.” 21 

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U.S.C. § 387j(c)(2)(A). Absent an approval from the FDA, the new tobacco products are considered adulterated and misbranded if they lack the required FDA marketing authorization order, substantial equivalence order, or an exemption order. 21 U.S.C. §§ 387b(6) and 387c(6).

Under the Act, “[a] tobacco product shall be deemed to be misbranded if, in the case of any tobacco product sold or offered for sale in any State, it is sold or distributed in violation of regulations prescribed under section 387f(d).” Under 21 U.S.C. § 387c(a)(6), a new tobacco product is misbranded if a “notice or other information respecting it was not provided as required” under the substantial equivalence or substantial equivalence exemption pathway, including a substantial equivalence report or an abbreviated report. 21 U.S.C. § 387c(a)(6).

Under the Act, a tobacco product is adulterated if it has not obtained the required premarket authorization. 21 U.S.C. § 387b(6)(A). Thus, when a manufacturer does not submit a PMTA for its ENDS products, or when a manufacturer submits a PMTA for its ENDS products and receives a denial order, the products are being adulterated. 21 U.S.C. § 387b(6)(A). The adulterated and misbranded ENDS products in turn violate the Act.

The Act prohibits the receipt in interstate commerce of any tobacco product that is adulterated or misbranded and the delivery or proffered delivery thereof for pay or otherwise. 21 U.S.C. § 331(c). The FDA may seek a civil money penalty from “any person who violates a requirement of this chapter which relates to tobacco products.” 21 U.S.C. § 333(f)(9)(A) (2012). Penalties are set by 21 U.S.C. § 333 note and 21 C.F.R. § 17.2.

IV. Analysis

CTP alleges that Respondent received in interstate commerce and offered for sale ENDS products that required FDA premarket authorization in violation of 21 U.S.C. § 331(c) on August 15, 2023. CTP PHB at 2; Complaint at 4, ¶¶15, 19.

In its Answer, Respondent denies the allegations in the Complaint. However, in its pre-hearing brief, Respondent appears to admit that Respondent was in possession of the unauthorized ENDS product on August 15, 2023. Resp. PHB at 1. Specifically, Respondent states that it did not “know that the product is banned,” and that it “would have happily taken it off the shelves and thrown it away.” Id.

With regard to the unauthorized product, CTP submitted a signed declaration from James Bowling, Deputy Division Director for the Division of Enforcement and Manufacturing in the Office of Compliance and Enforcement. CTP Ex. 1 at 1. Mr. Bowling has personal knowledge of CTP’s tobacco record keeping, registration process, and new tobacco product premarket authorization requirements. Id. at 1-2, ¶3. Mr. Bowling confirmed that a search of the Tobacco Registration and Product Listing Module Next Generation did 

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not reveal any registered establishments containing the name “Elfbar” or any listed product named “Elfbar Sour Apple” in Texas or elsewhere in the United States. Id. at 2, ¶6. Additionally, Mr. Bowling confirms that the Elfbar Sour Apple ENDS product purchased during the August 15, 2023 inspection, is manufactured in China by Guangdong Qisitech Co., Ltd. Id. at 3, ¶7. Mr. Bowling confirmed that Guangdong Qisitech Co., Ltd. does not have any registered tobacco production facilities in the state of Texas. Id., ¶10. Further, Mr. Bowling confirms that Elfbar Sour Apple ENDS products were not commercially marketed in the United States as of February 15, 2007. Id. at 4, ¶12. FDA did not have any record of a Substantial Equivalence Order or an abbreviated report requesting a Found-Exempt Order. Id. ¶¶13-14. Respondent did not object to Mr. Bowling’s declaration or wish to cross-examine him; therefore, I find Mr. Bowling’s statements about the Elfbar Sour Apple ENDS products and its manufacturer Guangdong Qisitech Co., Ltd. credible with respect to the question of whether the products had marketing authorization or if the manufacturer was registered for business in the United States for its new tobacco products. I also find that the Elfbar Sour Apple ENDS products are adulterated and misbranded as its manufacturer Guangdong Qisitech Co., Ltd. did not obtain FDA’s required premarket authorization.

Mr. Bowling’s declaration also supports a finding that the unauthorized product was received via interstate commerce, as the product manufacturer, Guangdong Qisitech Co. Ltd is based in China, a foreign country. Id. at 3, ¶7.

With regard to Respondent’s possession of the unauthorized product, CTP submits the signed declaration of inspector Robert Becker. CTP Ex. 2. Mr. Becker is an FDA-commissioned officer with the state of Texas who performs tobacco compliance inspections required under FDA’s Tobacco Retail Inspection Contract. Id., ¶3. Mr. Becker’s declaration states that on August 15, 2023, at approximately 11:42 AM, Mr. Becker visited Respondent’s business establishment to conduct a compliance check. Id. at 2, ¶5. During the inspection, Mr. Becker observed a sales display containing an Elfbar Sour Apple ENDS product available for sale. Id., ¶7. Photographs were taken by Mr. Becker of the business establishment and the unauthorized product. Id.; CTP Exs. 4 and 5. The inspection was recorded in the FDA’s record system and a Narrative Report was created. Id., ¶8; CTP Exs. 3 and 4. Respondent did not object to Mr. Becker’s declaration or wish to cross-examine him; therefore, I find Mr. Becker’s statements about what he observed during an inspection of Respondent’s business establishment credible.

Taking the above alleged facts as true, I conclude that Respondent possessed the Elfbar Sour Apple ENDS product observed by FDA-commissioned Inspector Becker on August 15, 2023. Respondent violated the prohibition against receiving and offering for sale a new tobacco product that was adulterated and misbranded because the Elfbar Sour Apple ENDS product lacked the required FDA marketing authorization order, substantially 

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equivalent order, or a found exempt order. 21 U.S.C. § 331(c); see also 21 U.S.C. § 387b(6)(A), 21 U.S.C. §§ 387j(a)(2)(A), 387e(j)(3)(A).

V. Civil Money Penalty

Having determined that Respondent is liable under the Act, I conclude that I have the authority to impose a CMP under 21 U.S.C. § 333(f)(9)(A). In its Complaint, CTP sought to impose the penalty amount of $19,192 against Respondent. Complaint at 1. In its pre-hearing brief, CTP continued to assert that a $19,192 CMP is appropriate. CTP PH Brief at 7-11. Respondent argues the CMP is too high and should be reduced because this is Respondent’s “first time [being] fined with anything in [its] line of business.” Answer at 2; Resp. PH Brief at 1; Resp. Final Br. at 1.

In determining whether a $19,192 CMP is appropriate, I must consider any aggravating or mitigating circumstances and the factors listed in the Act. 21 C.F.R. § 17.34(a)-(b). Specifically, I am required to take into account “the nature, circumstances, extent and gravity of the violation or violations and, with respect to the violator, ability to pay, effect on ability to continue to do business, any history of prior such violations, the degree of culpability, and such other matters as justice may require.” 21 U.S.C. § 333(f)(5)(B); 21 C.F.R. § 17.45(b)(1)-(3). Respondent must prove any mitigating factors by a preponderance of the evidence. 21 C.F.R. § 17.33(c). For the following reasons, I conclude that a $17,272 CMP is appropriate based upon the record evidence, applicable law, and aggravating and mitigating circumstances in this case.

1.      Nature, Circumstances, Extent and Gravity of the Violations

The TCA was enacted for the purpose of authorizing regulation of tobacco products for the “protection of the public health.” 21 U.S.C. § 387f(d). On June 8, 2023, a Warning Letter was issued informing Respondent its establishment was unlawfully marketing new tobacco products lacking the statutorily required premarket authorization, which are subject to enforcement action by the FDA. CTP Ex 7 at 3. The Warning Letter referenced a May 17, 2023 inspection, where the establishment offered for sale Elfbar Sour Apple and Esco Bars Grape Ice ENDS products. Id. at 1. Respondent argues the June 8, 2023 Warning Letter was “nowhere to be found,” and states it did not know the product was banned. Resp. PH Brief at 1; Resp. Final Br. at 1. Almost three-months after the May 17, 2023 inspection, Inspector Becker conducted a follow up inspection, on August 15, 2023, where an Elfbar Sour Apple ENDS product was again seen on display. Even though Respondent claims he did not have notice about the illegality of the product in question, the record supports that Respondent was warned about possible enforcement action for offering Elfbar Sour Apple ENDS products for sale in the June 8, 2023 Warning Letter. Respondent’s continued marketing and sale of this “new tobacco product” demonstrates Respondent did not comply with federal tobacco law, which is serious in nature and demands a proportional CMP amount.

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2.      Respondent’s Ability to Pay and Effect on Respondent’s Ability to Continue to Do Business

Respondent’s pre-hearing brief and Final Brief both raise that the “penalty is absurd” and that “business is not performing well.” Resp. PH Brief at 1; Resp. Final Br. at 2. am sympathetic to Respondent’s statements, but I am limited by the evidence documented in the record. Having no specifics of Respondent’s financial situation, I cannot find Respondent has established an inability to pay.

3.      History of Prior Violations

There is no indication in the record of any prior violations of Section 331(c) resulting in a CMP. Further, in its filings, Respondent argues that it makes efforts to ensure that it follows the proper regulations.

4.      Degree of Culpability

The June 8, 2023 Warning Letter provided Respondent with a written notice that it was in violation of federal law that could subject it to a fine. Several months after the May 17, 2023 inspection, Respondent continued to market and sell the same unauthorized products. Therefore, I find that Respondent actions warrant culpability in receiving the CMP. However, I do note that Respondent has participated in defending this action, has stated that this is his only violation since being in business, and is requesting consideration because the CMP requested is the maximum amount.

VI. Conclusion

For the reasons set forth above, I impose a reduced civil money penalty in the amount of $17,272 against Respondent, Sana Ventures LLC d/b/a Space City Food Mart / A and K Food Store, for its violation of the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 331(c), by receiving via interstate commerce adulterated and misbranded tobacco products and offering the products for sale in its establishment. Pursuant to 21 C.F.R. § 17.45(d), this order becomes final and binding upon both parties after 30 days of the date of its issuance.