What it is:
On December 27, 2020, the President approved an emergency Covid-19 economic relief and government spending package called the Consolidated Appropriations Act, 2021. In addition to numerous provisions designed to support other industries, the bill includes legislation that could have major impacts on the e-cigarette industry.
This legislation, the Preventing Online Sales of E-Cigarettes to Children Act, extends the Jenkins Act and Prevent All Cigarette Trafficking (PACT) Act to cover all electronic nicotine delivery system (ENDS) products, including related accessories that do not contain nicotine.
What It Does:
Under the Preventing Online Sales of E-Cigarettes to Children Act, commonly referred to as the “vape mail ban”, the United States Postal Service (USPS) is required to impose new restrictions that prohibit the shipping of ENDS products through USPS no later than April 2021. It also imposes a number of stringent requirements for online sales. By March 27, 2021, online vape retailers will be required to:
1. Engage in third party identity verification for all sales.
2. Use a shipping service that verifies age at delivery.
3. Follow all PACT Act shipping requirements.
4. Register with the US Attorney General.
5. Register with the tobacco tax administrator of any state products are sold.
6. Collect all applicable local taxes.
7. Share all transactions for a state with that state’s tax administrator, following that state’s reporting rules.
8. Maintain records of any delivery interruptions or incomplete deliveries due to failure to confirm identity for five years.
What it Means:
Over the past year we have seen a drastic shift away from traditional brick and mortar retailers toward online sales channels, with many consumers turning to online retailers as a safer option for their shopping needs through the Covid-19 pandemic. This is equally true in the ENDS industry, where many local vape shops and ENDS brands have quickly spun up online shopping options to support customers who feel safer shopping from home, allowing them to bring in much needed revenue in a time where brick and mortar stores are failing at alarming rates.
While many ENDS retailers already use third party age verification and verified shipping methods, the remaining regulations listed in the PACT Act could be difficult hurdles to overcome. Without a unified process, many online retailers may struggle to keep track of state-by-state guidelines and requirements. Further, shipping options will soon narrow as USPS is required to stop shipping vape products by April of this year and FedEx has already announced that it will no longer serve vape retailers starting in March 2021. In addition, even minor mistakes in compliance can lead to severe penalties, including heavy fines, criminal charges, and up to three years in prison in some cases.
Time to Prepare:
The new PACT Act regulations take effect 90 days from when it was signed on December 27, 2020. Vape retailers who aim to continue selling their products online can use this time to start preparing for compliant sales. Critical steps include setting up third party age verification, contracting with a suitable shipper, preparing tax collection, and registering with the relevant federal and local administrative offices. While the new regulations will require extra effort, retailers will be able to maintain online sales by setting up their systems ahead of time.
Article written by MARA UNKEFER – Director of Consumer Research at Blackbriar Regulatory Services
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