In December, President Trump signed a 5000+ omnibus bill into law titled the Consolidated Appropriations Act of 2021 (CAA). The bill was highly publicized for extending certain COVID-relief measures to small businesses, such as revitalizing the Paycheck Protection Program. Another facet of the CAA was a provision which bans the United States Postal Service (USPS) from shipping Electronic Nicotine Delivery Systems (ENDS).
Cannabis vaporizers are captured in the CAA’s broad and vague definition of ENDS, which are defined as “any electronic device that through an aerosolized solution, delivers nicotine, flavor, or any other substance to users inhaling from the device.” The definition includes a component, liquid, part or accessory of the vaporizer device, without regard to whether the component, liquid, part or accessory is sold separately.
The CAA provided that the USPS must develop regulations within 120 days on how it will implement its ban on shipping and handling ENDS.
The USPS released its proposed rule on February 19, 2021 titled “Treatment of E-Cigarettes in the Mail.”
Currently, shipping cigarettes and smokeless tobacco through the USPS is prohibited unless, as set forth in the exceptions, they are mailed between authorized tobacco businesses or are small shipments between individuals – like gifts. If the USPS believes, or has reason to believe, a package contains cigarettes or smokeless tobacco, it cannot be accepted or shipped, and any cigarettes or smokeless tobacco dropped in a USPS box may be subject to forfeiture. Furthermore, the sender of these products risks criminal or civil penalties at the federal and state levels.
The newly proposed rule essentially adds vaporizers and all related components to the current rule, making B2C (business-to-consumer) shipments essentially non-existent and providing a number of hurdles for B2B (business-to-business) transactions, as well.
The comment period for the USPS’s proposed rule ends March 22, 2021. This allows the public to provide feedback to the USPS and it will be extremely important for manufacturers, vendors, retailers, and vapers themselves to create as much noise as possible to convey how much this will affect the vaping industry. Whether there will be a response to such attempts remains to be seen.
The CAA revised the Preventing Online Sales of E-Cigarettes to Children Act, or “PACT Act,” to include ENDS. The PACT Act imposed certain restrictions and compliance measures on the sale of tobacco to prevent its unregulated sale and the avoidance of taxes. However, with the expanded definition of ENDS, this includes vaporizers and components, whether or not they contain tobacco.
Online retailers will be required to comply with burdensome regulations if they choose to ship vape products, including:
- Registering with the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Attorney General.
- Verifying the age of consumers using a commercial database.
- Labeling requirements.
- Record-keeping requirements.
- Requirements for signature at the point of delivery.
- Reporting requirements to a state agency.
- Payment of applicable state and local taxes.
Simply put, smaller businesses will struggle as implementing these changes will be expensive, and the amount of time, labor and money required to comply with the PACT Act will put many businesses to the test.
However, another result of these impending changes is the emergence of business models to help navigate new regulations and enforcement. Two examples include shipping company “X” and “IGEN”, which brands itself as the country’s first end-to-end vape compliance software.
“X” markets its vaporizer shipping business as PACT Act-compliant. In February, MarketWatch commented that “X” was currently the only shipper of ENDS.
IGEN markets a tax and compliance software that will assist vape and e-cigarette businesses with jurisdictional and other regulations.
These two companies, X and IGEN, demonstrate there is a large amount of additional legwork required to stay compliant with shipping in an ever-changing business landscape.
There’s no room for error and the stakes are high, as these changes will weed out competition, leaving a few goliaths to profit from a massive potential market. Nicotine and vaping are certainly not disappearing overnight, but many of the auxiliary businesses may.
If you own a vaping business or plan to ship vape products, we encourage you to reach out to a trusted attorney or any member of the Burns & Levinson CannaBusiness Advisory team.
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