Both the U.S. Senate and House of Representatives agreed on identical versions of legislation which expands the State Children's Health Insurance Program (SCHIP). It has been signed into law by President Obama. The legislation is funded primarily by an increase in tobacco taxes paid by manufacturers at the federal level. This legislation has been discussed for the last 2 years, and was twice vetoed by former President Bush. House of Oxford, along with many other manufacturers and distributors in the industry - have been at the forefront of fighting this legislation, or at least making its outcome as reasonable as possible.

The new rates in the legislation will become effective on April 1, 2009. At that time their will be a floor stocks tax assessed by the federal government on all tobacco products EXCEPT large cigars - with payment due on August 1, 2009. The new rates are as follows:

	Current	New
Cigarettes	$.39/pack	$1.01/pack
Large Cigars	20.719% with a cap of 4.875 cents	52.75% with a cap of 40.26 cents
Snuff	$.585 cents/lb	$1.51 / lb
Chew	$.195 cents /lb	$.5033 cents / lb
Pipe Tobacco	$1.0969 / lb	$2.8311 / lb
RYO/Wraps	$1.0969 / lb	$24.78 / lb
Little Cigars	$1.828 / 1000 ($.04 cents per pack)	$50.33 / 1000 ($1.01 per pack)

What all of this means is that we are going to be seeing substantial increases on all tobacco products over the next few months. Since there is no floor tax on large cigars - and the price is guaranteed to increase by April 1, many people are trying to buy extra inventory at this time. Unfortunately, the manufacturers are not able to keep up with this extra demand due to capacity and production constraints. We are doing whatever we can to obtain as much product as possible for you during these difficult times, but we may be forced to limit or allocate certain products, as the manufacturers are not allowing us to buy what we need.

Additionally, many manufacturers including Altadis USA, John Middleton (an Altria company), Swedish Match, and General Cigar have already taken some price increases - but you can be guaranteed that they, along with all others, will take much larger increases by the time this is done. In simplest terms, a premium cigar that sells for over $.75 cents will have a $.35 cent increase at the federal level - that is an increase of $10.50 per box of 25. The manufacturers then may take additional increases to maintain margin - we hope they are not greedy enough to take advantage of this situation and just pass on the tax - but it does not look like this will be the case.

House of Oxford is constantly striving to buy the best product at the best prices - and we will continue to do so. As prices go up on items you normally carry - it may be in your best interest, and that of your consumers, to look for more value priced brands, such as many of the private labels that we carry.

If you have any questions about the SCHIP tax, or the availability of alternative products, please call Mark or Alex at 732 568 0300, and we will be happy to help you as best as we can.

At this time we must also announce a change to our shipping policies. Even as the cost of fuel has returned to reasonable levels recently, we are incurring substantial increases in many aspects of our business - insurance, shipping, packaging, etc. Therefore, effective Jan. 2nd, 2009 the following will be in effect:

• Minimum order for shipment will be $300
• Orders between $300 and $1000 will have a $5 handling fee added to each invoice.
• Orders over $1000 will have a $1 handling fee added to each invoice.
• Next Day Air Orders will be charged shipping of $4 per item ($20 minimum shipping charge on all air shipments)
• 2nd Day Air Orders will be charged shipping of $3 per item ($20 minimum shipping charge on all air shipments)
• 3rd Day Select Orders will be charged shipping of $2 per item ($20 minimum shipping charge on all air shipments)

In closing let me wish you a joyful holiday season and a prosperous 2009. If there is anything we can do to help please feel free to contact us.