In an email to subscribers, My Freedom Smokes (MFS) announced Monday that it would be closing its doors due to the current regulatory climate of the vaping industry. In business since 2008, MFS has been a longtime staple in the business of vaping.
Credit: MFS
“Due to ongoing compliance requirements and new regulations of the e-cig industry, it has become nearly impossible for a shop like MFS to function without turning into something completely different,” the email states. “This was never the goal for MFS as we always prided ourselves on being able to offer customized products and service at great prices. So unfortunately, we will be shutting our doors at the end of the month.”
The MFS website states that the company is run by vapers, for vapers and is a one-stop website for everything from e-cig starter kits and cheap e-liquids to the most advanced cloud competition ready box mods and RDAs available. Based out of Charlotte, North Carolina, MFS was founded by Chris Yelton.
An amendment to the PACT Act to include vapor products has caused major disruption throughout the vapor industry.
By Timothy S. Donahue
When a 5,000-plus page omnibus bill, the Consolidated Appropriations Act of 2021, was signed into law on Dec. 28, 2020, the vapor industry knew its impact would be bad. It was impossible to know at the time how crushing a blow it would be. Buried deep within the bill (page 5,136) was the Preventing Online Sales of E-cigarettes to Children Act. It was a provision that effectively bans the United States Postal Service (USPS) from shipping electronic nicotine-delivery systems (ENDS).
The updated provision redefines the word “cigarette” under the 2009 Prevent All Cigarette Trafficking (PACT) Act to include ENDS products. ENDS would now be subject to the same shipping laws as combustible tobacco. The ensuing shipping problems for vapor retailers forced many companies to end all U.S. online sales and many others have been forced out of business. Chris Innes, owner of Elevated Vaping in Houston, Texas, announced that he would be closing his shop due to the PACT Act and the U.S. Food and Drug Administration’s stringent premarket tobacco product application (PMTA) requirements.
The Vape Spot in Los Angeles also announced it would be closing its store due to the PACT Act after eight years of helping smokers make the switch. Securience, parent to DuraSmoke, announced a merger with VapinDirect to stay in business. Logic ended all online sales on March 16. White Cloud Electronic Cigarettes ended all online U.S. sales on March 26. Vapewild and Vistavape went out of business entirely. The list goes on.
“If the increase in shipping costs wasn’t enough, the bill also imposes huge paperwork burdens on small retailers and backs it up with threats of imprisonment for even innocent mistakes,” said Gregory Conley, president of the American Vaping Association. “This is not a law designed to regulate the mail-order sale of vaping products to adults; it’s an attempt to eliminate it.”
According to Karen Goss of Chemular, a business improvement solutions and compliance systems provider, the PACT Act affects the entire vaping industry from the manufacturers shipping to the distributor, the distributor shipping to the retailer, and businesses taking orders from consumers online regardless of whether the product is even mailed.
While the legislation was geared toward nicotine vaping products, the law is so broadly defined that cannabis businesses must also comply. This means marijuana and CBD companies selling, manufacturing or shipping vaporizers or associated parts across state lines are required to comply with the provisions of the PACT Act.
“It affects literally everyone in the distribution chain, regardless of whether you are actively shipping your product into a state. If you are advertising your product for sale in that state, you should be registered with that state for PACT Act purposes. This is for any electronic device that, through an aerosolized solution, delivers nicotine, flavor or any other substance to the user by inhaling from a device,” said Goss during a recent webinar. “This covers liquid and any component, part or accessory, whether sold with the device or separate. It coves liquids with 0 mg of nicotine. It covers synthetic nicotine. It essentially covers the gamut of vaping products.”
The PACT Act has turned out to be an even greater hurdle to the vaping business than the FDA’s onerous PMTA applications, which had to be submitted to the regulatory agency in September of last year, according to James Xu, chairman and CEO of Avail Vapor, a major chain of brick-and-mortar vape shops. He said FDA regulations took time; the PACT Act was implemented in less than four months.
“It was just like, wow, this is happening. The PACT Act can take away the majority of online vapor businesses. Smaller companies aren’t going to be able to comply, especially these companies that are selling e-liquids for $10 a bottle that are now going to have to go up to $50, $60 a bottle,” he said. “They’re not going to survive; there’s no way they can survive. They were already cutting their profit margins just to be able to push product out.”
Credit: Sam Larussa
Rules of the road
PACT Act regulations are so stringent for online merchants that leading private shipping companies will also stop delivering vapor products. “Effective April 5, 2021, UPS will not transport vaping products to, from or within the United States due to the increased complexity to ship those products,” said UPS spokesperson Matthew O’Connor in a statement. FedEx began no longer accepting vapor products for delivery on March 1, 2021. DHL had already previously banned all shipments of nicotine-containing products and has now also ended all cannabis vapor product shipments.
The only shipping option that remains is Austin, Texas-based X Delivery, a private B2C shipping company. “The shipping carrier X Delivery isn’t afraid of a little red tape,” the company’s website states. “X will verify the age of the purchaser and obtain the required signature of the adult, as outlined in the PACT Act, with every vape-related delivery.” Another company, Vapefreight, was preparing to ship B2B vapor products but was still conducting trial runs as of this writing.
Many businesses were unsure if B2B mailing would be allowed. According to Azim Chowdhury, a partner at Keller and Heckman, the PACT Act has historically exempted business-to-business deliveries from the USPS ban. Specifically, the USPS ban does not extend to tobacco products mailed only for business purposes between legally operating businesses that have all applicable state and federal government licenses or permits and are engaged in tobacco product manufacturing, distribution, wholesale, export, import, testing, investigation or research.
“Companies seeking to use USPS for business-to-business deliveries must first submit an application to the USPS Pricing and Classification Service Center and comply with several other shipping, labeling and delivery requirements,” said Chowdhury. Under the B2B exception for the USPS, all transactions must be done in-person, face-to-face, according to the USPS.
“This was not a requirement set by Congress, and it imposes time and money burdens on both businesses and the USPS infrastructure,” said Conley. “USPS should accept the approved business purposes exception documentation, verify that a recipient is a covered and approved authorized business recipient of ENDS products, and allow mailings through both the USPS pickup and drop-off system in place for other USPS-handled packages.”
The USPS mail ban on vaping products will go into effect on or before April 27, 2021. After this date, retail customers will no longer be able to receive vaping products by way of USPS delivery, according to the USPS. However, the USPS rule states that the agency will mail vapor products under narrowly defined circumstances:
Noncontiguous states: intrastate shipments within Alaska or Hawaii;
Business/regulatory purposes: shipments transmitted between verified and authorized tobacco industry businesses for business purposes, or between such businesses and federal or state agencies for regulatory purposes;
Certain individuals: lightweight shipments mailed between adult individuals, limited to 10 per 30-day period;
Consumer testing: limited shipments of cigarettes sent by verified and authorized manufacturers to adult smokers for consumer testing purposes; and
Public health: limited shipments by federal agencies for public health purposes under similar rules applied to manufacturers conducting consumer testing.
The USPS rules also state that the listed exceptions cannot feasibly be applied to inbound or outbound international mail, mail to or from the Freely Associated States, or mail presented at overseas Army Post Office, Fleet Post Office, or Diplomatic Post Office locations and destined to addresses in the United States. Because of this inability, all ENDS products “in such mail are nonmailable, without exception.”
One way USPS could simplify the exception process would be digitizing not only the specific business requirements but also the exception application itself, suggested Conley. He says that by uploading the necessary permits and business filing documents online, USPS would have access to verified businesses anywhere in the nation, ensuring that there are not unnecessary delays in the shipping process for ENDS businesses. “This online portal could also be used by applicant businesses to verify the status of an approval for utilizing USPS as a shipping provider of ENDS in a timely manner,” he said.
Excluded from the statutory definition are products approved by the FDA for sale as “tobacco cessation products or for other therapeutic purposes and marketed and sold solely for such purposes.” The USPS also proposes to treat ENDS as a standalone category, “albeit one generally subject to the same restrictions and exceptions as cigarettes, consistent with the statute.”
According to the PACT Act legislation, anyone selling vaping products must:
Register with the U.S. Attorney General;
Verify age of customers using a commercially available database;
Use private shipping services that collect an adult signature at the point of delivery;
Register with the federal government and with the tobacco tax administrators of the states if selling in states that tax vaping products;
Collect all applicable local and state taxes, and affix any required tax stamps to the products sold;
Send each taxing state’s tax administrator a list of all transactions with customers in their state, including the names and addresses of each customer sold to and the quantities and type of each product sold; and
Maintain records for five years of any “delivery interrupted because the carrier or service determines or has reason to believe that the person ordering the delivery is in violation of the [PACT Act].”
Retailers can be cited by states for not following their individual requirements for tax payments and filings, and they may have to purchase tobacco and other licenses or hire a registered agent in the state. The cost for being PACT Act compliant can range anywhere from $40 to $250 or more per year per state, according to Goss. “There are a variety of companies that perform PACT Act compliance,” she said. “I put those numbers out there so that you have some sort of ballpark figure and you know you’re not getting overcharged. At the same time, it gives you a view of what to expect for this process on an ongoing basis.”
Credit: Manuel Alvarez
Registered for mail
In addition to the nonmailing provisions, the PACT Act requires anyone who sells ENDS products to register with the Bureau of Alcohol, Tobacco and Firearms and Explosives (ATF) and the tobacco tax administrators of the states into which a shipment is made or into which an advertisement or offer is disseminated, according to Chowdhury. Retailers who ship ENDS, cigarettes or smokeless tobacco to consumers are further required to label packages as containing tobacco and maintain records of all delivery sales for a period of four years after the date of sale, among other things.
Registering with the ATF online requires visiting the agency’s website (www.atf.gov) and filling out a single-page form. Goss said that companies should notice that in the first section under “Person,” the company would enter its name; person is defined as the business. “Another item to note is that you should list all of your business locations that are receiving product,” she said. “For example, if you have multiple distribution hubs, list all of them on this form. Save yourself the trouble of filling out multiple forms and lump all your business locations into one form.”
Companies will also have to tell the ATF where to send service of process in each state the company operates in case of any potential lawsuits. This is another area where hiring an agency to serve as a registered agent can make things easier. “There are a number of registered agent organizations that have offices in every state across the U.S. When you find a company that you like, they can most likely be your agent in all states that you require their services in,” said Goss. “Basically, they’re your mailbox in that state.” There’s not any further interaction required with the ATF after filling out the form unless a company changes agents or any information such as addresses change.
Completing the requirements to register with the states is more complicated. Each state has its own rules for companies doing business in the state. Retailers can be cited by states for not following their individual requirements for tax payments and filings. Some will have special forms while others will accept the same letter copy of the federal registration (addressed to the state). “Go to each state’s tobacco tax office website, if there is one,” said Goss. “Typically, that’s where the state will have information on how to register.”
The state and ATF registration requirements only apply when the destination state taxes ENDS products, according to JDSupra.com, a business news source. This is important for cannabis companies since some states, Oregon for example, have exemptions for ENDS shipments of cannabis (THC and CBD) devices.
The most arduous requirement of the PACT Act is monthly reporting. Similar to the ATF and state registration requirements, the state reporting requirements only apply when the destination state taxes ENDS, according to JDSupra. Just like with the registration process, states have different ways to submit information, and states also want varying amounts of information, according to Goss.
Some states want a form and hard copies sent in, while others have an online portal with templates. Typically, for each delivery sale and each person who has delivered product in connection with a delivery sale, it is required to file a delivery sales report with the comptroller’s office.
“The same product may get reported to the state multiple times. A bottle of e-liquid will get reported when it’s shipped from the manufacturer to the distributor, and then the distributor is going to report it when it ships it to the retailer,” says Goss. In most states, the reports must also include a memorandum or a copy of an invoice that provides:
the name, address and phone number of the person delivering the shipment to the recipient on behalf of the delivery seller;
the name, address, telephone number and email address of the individual to whom the delivery sale was made;
the brand or brands of the ENDS products sold; and
the quantity of ENDS products sold.
California, however, requires brand names and wants registrants to identify and distinguish between various types of ENDS products (a coil and an e-liquid, for example) with all invoice information relating to specific customers to be organized by city or town and by zip code. Texas wants only the brand name and the quantity sold. Every state requires the reports to be submitted on or before the 10th of the month for the previous month. For many states, the first reports were due April 10 for sales from March 27 to March 31.
Credit: John R Perry
Back to the basics
Many believe that including ENDS products in the PACT Act requirements is going to be a detriment to the overall public health of the country. If ENDS products cost more than combustible cigarettes and are harder to acquire, smokers who quit cigarettes with vaping will likely return to smoking combustibles. States are going to know where all the ENDS shipments are going now and how much was purchased. Alongside all the other requirements that vary by state, each state also has varying rules and regulations for when and who should apply and collect any excise taxes.
Xu says that many online companies do not charge either state or local sales tax or excise taxes. Now, the consumer will be responsible for all the taxes and the additional shipping costs. This could mean the end of online vapor sales entirely in some states. For example, numerous vapers from California order online due to their state’s complex tax regime, explains Xu.
According to the California Dept. of Tax and Fee Administration (CDTFA), the state’s statewide sales tax rate is 7.25 percent. The excise tax rate on vapor products is 59.27 percent of wholesale value. In most areas of California, local jurisdictions have added district taxes that increase the tax owed by a seller. Those district tax rates range from 0.10 percent to 1 percent. Some areas may also have more than one district tax in effect.
“That will be a huge cost increase to the consumer when they add up the sales tax, local tax and the vaping excise tax. People order online, one for convenience, but mostly it’s for the cost. That cost advantage is going to go away,” said Xu. “Add an adult signature fee with the shipping-related cost and suddenly the online purchase is just as costly as from the brick-and-mortar stores … possibly even more. [In some states], it’s immediately become a level play[ing] field with brick-and-mortar stores.”
There is no arguing that the PACT Act will change the vapor market. There are going to be supply chain issues, and companies may receive warning letters, felony charges and fines as they navigate the new process. As numerous online retailers close or move to a distributor, those customers will most likely move to brick-and-mortar vape shops.
There are some positives, according to Xu. “The online market is going to suffer, and sadly, it’s going to push some back to traditional cigarettes. However, the local brick-and-mortar vape shop can do a better job at educating consumers about vapor products and helping people transition away from deadly combustibles,” he says. “Most shop owners and employees take pride in their customer service and their knowledge of the product. It’s too early to tell what type of impact the PACT Act will have on our retail stores or the industry as a whole. Right now, it’s still wait and see.”
X Delivery wants to be the logistics answer to the challenges of mailing PACT Act-compliant vaping products in the U.S.
By Timothy S. Donahue
When the options seemed bleak, X Delivery took on the challenge. Buried within the omnibus spending bill passed at the end of last year was the Preventing Online Sales of E-Cigarettes to Children Act that prohibits the U.S. Postal Service (USPS) from delivering nicotine or cannabis vaping products directly to consumers by bringing electronic nicotine-delivery systems (ENDS) and cannabis products under the 2009 Preventing All Cigarette Trafficking Act (PACT Act).
All the major shipping carriers (UPS, FedEx, DHL) stopped shipping vaping products too. It seemed the online market for vaping products had ended abruptly (see “Attack of the PACT Act,” page?). Then came X Delivery. The shipping carrier with the simple name offered a solution. While there is still room for growth and bringing on more drivers to deliver vaping products to more zip codes, X Delivery has given many online retailers hope.
The PACT Act requirements make shipping vapor products complicated. Paul Vinuelas, chief logistics officer for X Delivery, said that the company can fulfill all the PACT Act requirements, including verifying the age of the purchaser and obtaining the required signature of the adult with every vape-related delivery. All packages containing vaping products cannot weigh more than 10 pounds (4.5 kg) and all shipping packages must also carry a sticker stating the contents contain a “tobacco” product, along with a statement reminding the recipient that taxes are owed on the purchase, according to Vinuelas.
“All shipping has unique challenges. The fact that the national carriers have opted out of vape shipping shows us that they are only interested in the drop-and-run delivery model. They are not confident in their ability to deliver to a person 21 years or older,” explains Vinuelas. “That’s where X Delivery comes in; we have a network of dedicated individuals who take the PACT Act seriously. We are dedicated to ensuring compliance and protecting youth from obtaining these products. It takes a bit more effort to perform our deliveries and audit them for PACT Act compliance, but we think it’s worth it.”
X Delivery has the capability to ship products to consumers nationwide and can currently deliver to about 90 percent of the U.S. population for vaping products. Vinuelas told Vapor Voice that the company is working to increase its coverage to 100 percent of the country as soon as possible.
“Our final-mile delivery partners are required to check IDs and obtain adult signatures. From an end-customer’s perspective, ordering from an online merchant that ships via X Delivery is just like getting an order from an online merchant that ships with a household-name shipping carrier: You get tracking updates from the moment your order is placed all the way through to your delivery,” says Vinuelas. “We take it a step further and work to notify customers when their package is arriving soon to make sure they are home to receive their package.”
X Delivery was started by CEO Chris Guggenheim, who has a storied career in the entertainment and ecommerce technology industries. These experiences led Guggenheim to invest in technology that drives commerce and opened “X.” The technology company X powers X Delivery, and there are more offerings that will come to market over time under the X umbrella. In 2019, his highest-volume clients asked for help solving challenges they were facing regarding delivery. The technology company soon began supporting the high-tech nationwide shipping carrier X Delivery, which Guggenheim started in early 2020. In just six months after beginning operations, X Delivery delivered more than 10 million packages within a two-day average delivery time nationwide. The company began shipping vape products in late 2020.
“Over the last 6 months, we have partnered with vape companies to build a fully compliant shipping carrier service leveraging our existing technology and logistics capabilities,” explained Vinuelas. “We appreciate the seriousness of these residential deliveries and our local, state and federal regulation compliance efforts have been exhaustive yet successful.”
The knowledge gained running X helped Guggenheim solve a variety of retail issues for merchants, according to Vinuelas. “When we began to pilot our service in 2019, we realized that building technology from the ground up was the only way to support high-growth D2C [direct-to-consumer] e-commerce businesses long term,” he said. “When we talk about the value of X Delivery, it is to improve customer experience, sales conversion and to enable merchants to experience peak performance from one warehouse.”
X Delivery’s official slogan is “Reimagine Delivery.” X Delivery has an unofficial slogan too: Fix logistics. The purpose of X Delivery is to “simplify package delivery through technology, reliability, speed and price,” according to the company’s website, xdelivery.ai. Vinuelas says the company has developed a new approach to logistics by leveraging in-motion supply chain assets, from empty warehouses to local delivery services, and connecting them to new technology.
“Most e-commerce merchants will not be able to accurately answer how much it costs them to ship a package. Many e-commerce merchants incorrectly believe that running an operation out of multiple warehouses will help them take advantage of faster shipping and lower costs. This is not true, and this is what is broken,” explains Vinuelas. “Shipping carriers need to understand that all customers should get the same service no matter where they are shipping from or where they are shipping to in the U.S. This is our purpose in the market today. I’m also going to add that it shouldn’t take a Ph.D. to figure out what it will cost a merchant to ship in the U.S. Shipping carriers need to stop with the extra fees, fuel surcharges, Covid-19 fees, etc. We have done that.”
Paul Vinuelas
X Delivery uses an application programming interface (API) to help streamline its shipping process. An API is a set of protocols that sync up data in real-time across various platforms by allowing the backends of software and applications to communicate with each other over the internet.
According to the X Delivery website, with the help of an API, one program (application A) can “call” another program (application B) to access its data or functionalities. For example, users can see data from application A via application B’s interface without manually transferring the data from one program to another. API integrations allow users to automate processes across various digital applications to make the flow of information seamless and instantaneous.
“APIs allow companies to integrate shipping functionality directly into their system or other platforms so they can customize the interfaces to improve productivity and expand fulfillment capabilities while minimizing errors and delays associated with manually transferring data,” the website states. “Our API drives the future of logistics management. We help you simplify package delivery through technology, reliability, speed and price by leveraging in-motion supply chain assets to give you the best shipping options available in real-time.”
Currently, X Delivery is only shipping for customers with a minimum of 500 packages a day, shipping out of one warehouse with a weight limit of 10 pounds; however, Vinuelas says that the company is working on lowering the minimum package threshold. “We are working hard to eventually offer our service to smaller companies,” he said. “For now, we have partnered with several carefully selected fulfillment companies to help those (smaller) companies tap into the X Delivery network.”
Shipping with X Delivery will be slightly more expensive than shipping with the big-name delivery services but not much more than the cost of USPS delivery with adult signature collection. A 1-pound package costs approximately $6–$7, depending on the amount of packages shipped, and a 10-pound package costs approximately $10–$11 with X Delivery. Those costs are expected to decrease as the network broadens and more companies start shipping through X Delivery, according to Vinuelas.
Moving forward, X Delivery is dedicated to optimizing delivery routes. By joining the X Delivery team, businesses have access to multiple delivery options from anywhere in the country.
“We understand that nothing we say will earn trust better than showing results. We are 100 percent transparent with our clients and their end-customers. We also make it easy for anyone to try us out. Once you try us, you will understand how logistics should work, and you will never want to go back to the old way,” says Vinuelas. “Our long-term goal is to be the No. 1 shipping carrier for D2C ecommerce brands. Vape and e-cigarette merchants want to partner with people who understand the relevant laws in detail and will be a good partner to them. We are that partner.”
The industry is still in flux. Many businesses closed or found more expensive shipping options. Some companies stopped shipping and then started again knowing that it could all end at any minute. As of this writing, however, the United States Postal Service (USPS) has yet to publish its final rule for mailing vaping products.
Credit: Tomasz Zajda
On April 19, the USPS issued guidance for exemptions to the requirements for mailing all vapor products, including cannabis. This was in response to the U.S. Congress placing electronic nicotine-delivery systems (ENDS) under the stringent mailing requirements of the Prevent All Cigarette Trafficking (PACT) Act. That guidance only references that a rule could be published at any time and the ban on mailing vaping products to consumers would take effect immediately after the rule is published.
“A forthcoming final rule will determine whether electronic nicotine-delivery systems (ENDS) may continue to be mailed pursuant to certain statutory exceptions that are currently administered through an application process,” the guidance states. “Until the final rule is issued, ENDS are not subject to the PACT Act …”
Many businesses ended shipping to consumers on or before April 26, a day before the assumed effective date of the USPS rules. The comment period closed March 22 and the USPS stated that it had received “numerous comments” pertaining to its proposed ENDS mailing rules. An e-mail to USPS media relations did not receive a response by this writing.
The USPS is required to use a definition of ENDS so broadly that it can be interpreted to include and inhalable electronic delivery system for any product. These means restrictions also apply to ENDS products such as: “an e-cigarette; an e-hookah; an e-cigar; a vape pen; an advanced refillable personal vaporizer; an electronic pipe; and any component, liquid, part, or accessory of a device described [ENDS], without regard to whether the component, liquid, part, or accessory is sold separately from the device,” according to the law.
Many in the industry think Congress overreacted placing ENDS under the PACT Act requirements. The PACT Act was intended to stop manufacturers from avoiding taxes on combustible tobacco products, not keep them out of the hands of youth. Congress said it amended the PACT Act to protect kids from vaping. There has been no evidence that youth can easily purchase vaping products online.
This USPS says its just following the orders of Congress. It’s also turning out to be more complicated than just ending all vape mail. The USPS was inundated with exemption applications, none of which will be addressed until the final rule is published, according to the USPS.
“Despite our best efforts, in order to ensure thorough and thoughtful consideration of the complex issues and voluminous comments by industry, individual, and governmental stakeholders, the Postal Service is unable to publish a final rule by today’s target date,” said David P. Coleman, a USPS spokesperson, in an email toMarijuana Business Daily, adding that his agency would “finalize the rule as soon as possible” and “mailers should be prepared for implementation upon publication anytime.”
Today could be the last day businesses can mail vapor products to consumers through the United States Postal Service (USPS). However, nothing is official just yet. The mail ban was predicted by many in the industry to go into effect on April 27, 2021, but the final rule must still be published in the Federal Register. Currently, effective March 28th, 2021, recipients of all vaping product(s) purchased online are required, by law, to present ID and sign for their delivery.
Credit: Sam Larussa
On April 19, the USPS issued guidance for exemptions to the requirements for mailing all vapor products, including cannabis. This was in response to the U.S. Congress placing electronic nicotine-delivery systems (ENDS) under the stringent mailing requirements of the Prevent All Cigarette Trafficking (PACT) Act. That guidance only references that a rule could be published at any time and the ban on mailing vaping products to consumers would take effect immediately after the rule is published.
“A forthcoming final rule will determine whether electronic nicotine-delivery systems (ENDS) may continue to be mailed pursuant to certain statutory exceptions that are currently administered through an application process,” the guidance states. “Until the final rule is issued, ENDS are not subject to the PACT Act …”
Many businesses ended shipping to consumers on or before April 26, a day before the assumed effective date of the USPS rules. The comment period closed March 22 and the USPS stated that it had received “numerous comments” pertaining to its proposed ENDS mailing rules. An e-mail to USPS media relations did not receive a response by this writing.
The USPS is required to use a definition of ENDS so broadly that it can be interpreted to include and inhalable electronic delivery system for any product. These means restrictions also apply to ENDS products such as: “an e-cigarette; an e-hookah; an e-cigar; a vape pen; an advanced refillable personal vaporizer; an electronic pipe; and any component, liquid, part, or accessory of a device described [ENDS], without regard to whether the component, liquid, part, or accessory is sold separately from the device,” according to the law.
Violators are no longer dealing only with the U.S. Food and Drug Administration (FDA). The PACT Act requires companies to now register with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) as the enforcement agency for violating PACT Act requirements. Companies shipping vapor products must also file monthly reports with state tobacco tax administrators and retain federal, state and local compliance records that should be available upon request.
Unless changes are made, an exemption must be made for companies mailing cannabis vape products, such as CBD vape pens, as well as other potentially exempt mailings such as business-to-business mailings or research. Companies must create a list of all businesses that would receive mail and a list of detailed information on the business and products being shipped. The USPS also says it is unsure if normal PACT Act exemptions will apply to ENDS product. It will also not process any exemption requests until after the final rule is published.
Credit: blr60
“If any of the relevant exceptions are ultimately made available for [electronic nicotine delivery systems (ENDS)], then, given the highly decentralized nature of the ENDS industry relative to the industries historically covered by the PACT Act, the Postal Service anticipates receiving ENDS-related exception applications at a rate several orders of magnitude above the historic norm,” the guidance reads. “The Postal Service has not yet determined whether and to what extent those exceptions will be extended to ENDS. Early acceptance of applications would pose significant administrative challenges for the very Postal Service personnel who are developing the final rule amid substantial public comment under a tight timeframe.”
For hemp and CBD products with a THC concentration not exceeding 0.3 percent, the USPS states that mailers must retain, and prepare to make available upon request, “records establishing compliance with all applicable federal, state, and local laws pertaining to hemp production, processing, distribution, and sales, including the Agricultural Act of 2014 and the Agricultural Improvement Act of 2018.” These records may include laboratory test results, licenses, and compliance reports.
The repercussions of the USPS vapor mail ban on the vaping industry will not be realized for some time. While the PACT Act requirements have forced many businesses to close, the vapor industry is used to dealing with a great amount of uncertainty. It does not seem like that is going to change any time soon.
The United States Postal Service (USPS) has published its guidance for mailing vaping products on the Federal Register. The notice provides some clarity on USPS policy and outlined potential exceptions, which could include legal hemp and its derivatives. Until the final rule is issued, ENDS are not subject to the Prevent All Cigarette Trafficking (PACT) Act. The USPS also says that it will not review any exemption applications before the rule is finalized. The agency did, however, state that it has attempted to streamline the application process.
The USPS makes reference to possibly exempting cannabis products. Other exceptions include intrastate shipping within Alaska and Hawaii, shipment between businesses engaged in tobacco product manufacturing, distribution, wholesale, export, import, testing, investigation, or research, shipments by individuals for noncommercial purposes (including return of goods to manufacturer), limited shipments by manufacturers to adult smokers for consumer testing, and limited shipments by federal agencies for public health purposes.
Credit: Bruce Emmerling
When filing for exemption status for mailings related to possibly exempt situations such as legal hemp and CBD products, business-to-business and research, the USPS guidance suggests that applicants create a spreadsheet that contains the following data elements with respect to each sender and recipient address that they intend to identify in their exemption application:
Business or governmental entity name.
Address.
The Postal Service retail or business mail acceptance office(s) where each intended sender would tender shipments.
The Postal Service retail office(s) where each intended recipient would retrieve shipments.
A description of the business or governmental entity (e.g., battery manufacturer, retail store, wholesale distributor, testing laboratory).
For each permit or license, the issuing jurisdiction; the permit or license number; the expiration date (if any); and the activity covered by each current permit or license (e.g., general business operations; sale or manufacture of tobacco products or ENDS).
For each sender or addressee engaged in testing, investigation, or research, the entities authorizing the conduct of such activities; the expiration date (if any) of such authorization; and a brief statement of the subject of each authorization (e.g., health effects of flavor substances, medical effects of cannabidiol (“CBD”), battery safety testing).
The brand name and a description of each product intended to be shipped by each sender or to each addressee.
Whether any identified products or other intended shipments from each sender or to each addressee contain lithium batteries, nicotine, CBD, or tetrahydrocannabinol (“THC”).
For products containing nicotine or THC, the intended quantity of the product per shipment and the concentration of nicotine or THC.
For products containing CBD with a THC concentration not exceeding 0.3 percent, whether the CBD derives from hemp.
“If any of the relevant exceptions are ultimately made available for [electronic nicotine delivery systems (ENDS)], then, given the highly decentralized nature of the ENDS industry relative to the industries historically covered by the PACT Act, the Postal Service anticipates receiving ENDS-related exception applications at a rate several orders of magnitude above the historic norm,” the guidance reads. “The Postal Service has not yet determined whether and to what extent those exceptions will be extended to ENDS. Early acceptance of applications would pose significant administrative challenges for the very Postal Service personnel who are developing the final rule amid substantial public comment under a tight timeframe.
Credit: blr60
“The Postal Service understands that those concerns are heightened by Congress’s decision to make ENDS nonmailable immediately upon publication of the final rule, rather than applying the 30-day notice period that typically follows a final rule under the Administrative Procedure Act. Therefore, this document is intended to clarify the state of the exception application process in advance of the final rule and to provide guidance to mailers interested in availing themselves of any exceptions that may ultimately be made available.”
Creating spreadsheets listing every address is an arduous task, according to many vaping industry businesses, however it’s just one of the requirements placed on business owners when the federal government placed electronic nicotine-delivery system (ENDS) products under the PACT Act rules. Among other requirements, the PACT Act also stipulates that manufacturers register with the Bureau of Alcohol, Tobacco, Firearm and Explosives (ATF), as well as file monthly reports with state tobacco tax administrators.
Effective March 28th, 2021, recipients of all vaping product(s) purchased online are required, by law, to present ID and sign for their delivery. Many states are expecting businesses to start filing monthly reports on May 10 and the USPS is expecting to post the final rule and officially end the mailing of ENDS products to consumers on April 27. The rules are also having an impact internationally. The U.K. Vaping Industry Association (UKVIA), for example, has expressed “deep concern” about the measures, saying that U.K. business are affected.
Tennessee has announced the starting date for its PACT Act requirements. The state’s Department of Revenue states that beginning May 10, 2021, and the 10th of every month thereafter, any entity shipping electronic nicotine-delivery systems (ENDS) or related products into Tennessee from another state is required to report all such shipments to the department.
It is expected that all states will require PACT Act reporting to begin on May 10. Effective March 28th, 2021, recipients of all vaping products purchased online will be required to present ID and sign for their delivery. The United States Postal Service mail ban on vaping products will go into effect on April 27th, 2021. After this date, customers will no longer be able to receive vaping products by way of USPS delivery.
The amended PACT Act provides that any person who sells, transfers, or ships for profit ENDS in interstate commerce, or who advertises such products for sale, must register with the tobacco tax administrator of the state into which the shipment is made. The company must also file monthly reports with the tobacco tax administrator no later than the 10th day of each month.
Under the PACT Act, a delivery seller faces violations that may result in civil penalties of up to $5,000 for the first violation, $10,000 for the second violation, or 2percent of the gross sales during the prior 12 months. Additionally, there are penalties for common carriers or other persons providing delivery services of up to $2,500 for a first violation or $5,000 for any other violation within one year of a prior violation.
White Cloud Electronic Cigarettes, a stalwart in the vaping industry, will end all online sales for U.S. customers on March 26 at 4pm. In a post on its Facebook page, the vapor company stated that it will continue to fill international orders (the vape mail ban is for U.S. customers) and will post a list of retail stores that will still carry White Cloud products.
“This was not a decision we wanted to make, especially after putting so much effort into submitting our PMTAs to the FDA and ensuring our products never reached the hands of minors. But, after spending the last couple of months searching for a solution to the vape mail ban, we’ve reached the end of all possible options and there is simply nothing we can do to continue shipping domestically,” the post states. “We will be fulfilling all U.S. orders until March 26, and inventory is running out rather quickly, so we urge you to place an order as soon as possible to ensure you’ll have a chance to stock up on your favorite White Cloud products for the last time.”
The company asks that vapor industry advocates send a message to Congress, as well as support the Consumer Advocates for Smoke-free Alternatives Association (CASAA), an advocacy group to raise awareness and protect consumers right to access reduced harm alternatives. CASAA has organized a campaign to fight the U.S. mail ban.
“CASAA has been made aware that some lawmakers are refusing to acknowledge the validity of organized consumer campaigns, and are insisting their constituents contact them directly via their website,” a recent CASAA statement says. “Therefore, CASAA is recommending that you also copy and paste your comments from our form below to the contact form on your lawmaker’s website. You can find their website by using our Legislator Lookup tool.”
Amid the economic devastation caused by Covid-19, one industry has actually thrived: the cigarette business. Some people are smoking to relieve the emotional and economic stress of lockdowns. But many others returned to smoking when the lower-risk options they relied on, such as nicotine vapor products, became too expensive or hard to find when compared with the combustible tobacco available at every gas station and corner store.
Now, Congress wants to eliminate the ability for adults to receive e-cigarettes by mail, a measure that will reduce access to these life-saving options even after the lockdowns end, Minton writes in National Review.
Buried within the omnibus spending bill passed at the end of last year was the “Preventing Online Sales of E-Cigarettes to Children Act.” The Act, colloquially called the “vape mail ban,” prohibits the U.S. Postal Service (USPS) from delivering nicotine or cannabis vaping products.
One might think that e-cigarette makers could simply switch to private carriers, such as FedEx or UPS. But these private carriers don’t deliver to all addresses, particularly in rural areas. Private carriers actually rely on USPS to make “last mile” deliveries. Even if private carriers did deliver everywhere in the U.S., most — including FedEx, UPS, and DHL — have yielded to the anti-vaping mob, voluntarily ending e-cigarette deliveries.
For any carrier hoping to fill the gap, the new law also imposes strict requirements on records-keeping, tax collection, and reporting. These requirements will significantly raise the cost of e-cigarette deliveries, which will be passed on to consumers. And that added expense, even if relatively small, will be enough to discourage many adults — particularly those in lower-income brackets — from continuing to use e-cigarettes.
Supporters of the law seem to think that if they force adults to quit vaping, they will simply quit using nicotine altogether. They’re dead wrong.
Study after study has shown that policies that make e-cigarettes more expensive can reduce e-cigarette use. But they also increase smoking. The same is true for convenience: The harder it is for smokers to access e-cigarettes, the less willing and able they’ll be to choose e-cigarettes over combustible cigarettes, which are available almost everywhere.
Perhaps some think that more adult smoking is a small price to pay to protect children. More adults smoking is, in their mind, a small price to pay to stop the small percentage of minors willing to break the law to get their hands on e-cigarettes.
MIchelle Minton / Credit: Competitive Enterprise Institute
As the name of the law implies, the purpose of the Preventing Online Sales of E-cigarettes to Children Act is to stop those under 21 years old from illegally purchasing nicotine products online. But if that were really the goal, there are less-extreme approaches, such as requiring an ID check on delivery, a service offered by all major delivery services (and USPS) and that has proved sufficient for alcohol deliveries.
But that’s not the purpose of the law. The real goal is to hurt the legal vaping industry, which the vape mail ban will almost certainly do. It will also be a boon to the illegal vaping market, as well as the traditional cigarette business. What it won’t do is stop youth from buying e-cigarettes. Ironically, it may only make it easier, as less respectable businesses step up to fill the gap in the market that the law is creating.
Most of us would prefer to buy the things we want from licensed, reputable businesses, especially given the dangers associated with illicit goods. But, if regulation prohibits those things or makes them too expensive, it rapidly opens the door for illegal markets. The more unmet demand there is, the larger the illegal market. For example, New York City’s high cigarette taxes led to a vibrant underground market for cheap cigarettes.
The bootleg cigarette business became so widespread, in fact, that by 2013 more than 60 percent of all cigarettes sold in the state were illegal. The continued prohibition on recreational cannabis in some states and high taxes in states where it is legal also explain the continued existence of an illicit THC market, which in 2019 caused thousands of people to be hospitalized and several deaths due to contaminated products.
The illegal market for nicotine vapor is small at the moment, because there remains a relatively vibrant, legal market for adults. But it will grow if lawmakers continue their irrational push to make e-cigarettes as expensive and hard-to-get as possible. And the larger it grows, the easier it will be for youth to buy these products online. That is because, in addition to ignoring shipping laws and skirting taxes, dealers on Snapchat and Facebook aren’t likely to verify the age of their customers.
So, by banning vape mail, Congress is not only kicking legal vapor businesses when they are down, forcing adults back to smoking tobacco, and forfeiting much-needed tax revenue; it is also making youth vaping more likely and more dangerous by encouraging an illicit vapor market and forcing consumers into it.
Michelle Minton is a senior fellow specializing in consumer policy for the Competitive Enterprise Institute, a free-market public policy organization based in Washington, D.C. The author’s opinion may not be the same as Vapor Voice staff.
The impact of the pending U.S. restrictions on shipping vapor products is being felt internationally. The U.K. Vaping Industry Association (UKVIA), for example, has expressed “deep concern” about the measures, saying that U.K. business are affected.
In late December, Congress voted into law a $2.3 trillion coronavirus relief and government funding bill that contains a provision banning the U.S. Postal Service (USPS) from delivering vapor products.
The USPS was already prohibited from delivering cigarettes and smokeless tobacco products to consumers under the PACT Act. The law passed in December extends the act’s original definition of “cigarette” to include electronic nicotine-delivery systems.
Tobacco and vapor companies may use private services to ship their products to consumers, but the PACT Act requires them to register with the Bureau of Alcohol, Tobacco, Firearms and Explosives and the tobacco tax administrators of the states into which a shipment is made. Delivery sellers are further required to verify the age and identity of the customer at purchase and maintain records of delivery sales for a period of four years after the date of sale, creating substantial administrative burdens.
Critically for the vapor industry, the most popular carriers, Federal Express and United Parcel Service, have recently announced that they would cease all deliveries of vapor products.
“We have had orders not being collected, and our own shops not receiving stock in a reliable manner, all of which impacts customers,” said Joe Bevan, director of UKVIA member Celtic Vapours. “As the majority of our business is currently online, we need efficient delivery of stock to provide the quickest service.”
“At a time when many vapers are unfortunately unable to visit their local vape store, this is making it even more difficult for them to receive the consumable products they rely upon,” said Richard Russell, operations manager Vape Distribution. “Certain carriers perhaps don’t realize that this action could lead vapers to revert back to smoking.”
“The vaping supply chain is a global one, bringing together resources and expertise from around the world,” said John Dunne, director general at UKVIA. “It is bitterly disappointing to see these American restrictions having a negative impact in the U.K., but the nature of the supply chain makes it inevitable. In the EU too we are hearing of vaping businesses being turned away from major carriers.
“The potential impact on public health is grave, as so many people are relying on shipped goods as a lifeline during the pandemic. Without proper access to harm-reduction products we know people can revert to smoking cigarettes, today in the U.S. but perhaps tomorrow in the U.K. With businesses already struggling through lockdown, and our health services under great strain, supply chain issues really are the last thing we need.
“I call on the distribution industry, many of whom have been partners of the vaping industry for many years, to do all they can to support their U.K. customers, and to avoid the blanket implementation of U.S. restrictions worldwide.
“Furthermore, I call on the U.K. government, to ensure that carriers in this country are free to continue to deliver vaping products to retailers and direct to consumers, and to resist any urge to follow the U.S. down this regressive route.”
