New Law ENDS Online Sales of Vaping Products to Minors

S. 1253: "PREVENTING ONLINE SALES OF E-CIGARETTES TO CHILDREN ACT"

On March 27, 2021, the Preventing Online Sales of E-Cigarettes to Children Act (“The Act”) is set to take effect. The Act was passed with bipartisan support in an effort to curb the underage use of electronic nicotine delivery systems or “ENDS,” better known as Vape products. The Act amends the language of previously enacted shipping regulations on cigarettes and tobacco to now include Vape products such as e-cigarettes, e-hookahs, e-cigars, vape pens, advanced refillable personal vaporizers, electronic pipes, and any part, component, or accessory of such a device (even if sold separately).

Under the new law, the U.S. Postal Service cannot accept or transmit any package that it knows, or has reasonable cause to believe, contains vapor products or any of the other prohibited devices, accessories or component parts. The Postal Service also explained that all of these products will be subject to many new mailing restrictions provided under The Prevent All Cigarette Trafficking (“PACT”) Act which was previously limited to cigarette and tobacco products only. All of the changes will obviously have a significant impact on the vapor industry and its consumers.

There are limited exceptions to the new rule for noncontiguous states, business/regulatory purposes, consumer testing, public health purposes and limited individual shipments.  Otherwise, the Postal Service’s prohibition of mailing Vapor products will apply immediately, on and around the date of the final rule proposed, i.e., April 27, 2021.

COMPLIANCE

Once the new law takes effect, in order for online retailers of Vapor products to be in compliance of new shipping requirements, they will now be required to:

• Register with The U.S. Attorney General and Bureau of Alcohol, Tobacco, Firearms and Explosives
• Register with each state and local tax administrator where business takes place or advertisements and offers are disseminated
• Include proper labeling on the outside of shipping packages and bills of lading
• Obtain proof from persons who accept delivery of shipments that they are at least the minimum age required for legal sale
• Verify the age of consumers through commercially available databases or aggregate of databases regularly used by government and businesses for age and identify verification
• Adhere to all federal, state and local recordkeeping, reporting, filings and excise tax requirements
• Collect and pay all applicable state and local taxes

In addition to the requirements listed above, online retailers will also need to provide a monthly list of every transaction to each state’s tax administrator where it conducts business. Clearly, the net effect of the new compliance requirements will significantly limit the ability for online retailers to ship vapor products directly to consumers. Aside from the inability to ship through the Postal Service, other carriers such as DHL, FedEx and UPS will all have bans on shipping vaping and nicotine products as well.

• DHL previously implemented a shipping ban on vaping and nicotine products
• FedEx implemented a ban that took effect March 1st
• UPS will soon follow with its ban going into effect April 5th

It will be a tall order for many businesses to comply with the new shipping requirements. It is also likely that only the larger retailers will have the resources to comply with the new regulations, presuming they are inclined to ramp up already strict administration and diligence protocols.

CONSUMER SALES AFTER THE ACT

Since business-to-business shipments are still allowed under The Act, consumers interested in purchasing vapor products will likely have to visit brick and mortar locations to acquire their goods and, as is the intent of the Act, without an adult signature minors will be left out completely. To ensure customers are only purchasing legitimate products, online retailers whom shift to in-store sales should consider including a list of authorized retailers on their websites. Forming partnerships may also be an option for online sellers to build a suitable infrastructure for acquiring and transporting VAPE products under the Act.

As of today, it appears that at least one company based out of Wisconsin, IGEN, has created a software program to assist online retailers with adhering to reporting requirements. The IGEN software assists with state licensing registrations, calculating applicable taxes, retaining customers’ licensing information and maintaining a record of transactions for generating and filing monthly reports. Additionally, if shipments to customers is too costly, online retailers may want to strongly consider a shift to permissible business-to-business shipments, such as shipping directly to stores and gas stations which already have some compliance measures in place as a viable starting point.

Despite the intentional difficulties created for the industry by Congress, well-intentioned as it may be, through the passage of this Act, a new opportunity for the freight industry has emerged. At least two companies have already come onto the scene. VapeFreight and another company simply known as “X” have begun identifying ways to deliver a shipping solution for this billion dollar industry. VapeFreight strives to provide business-to-business shipments nationwide, and company “X” will provide shipping solutions, verify the age of the purchaser and even obtain the required adult signature upon delivery. In time, freight options are expected to increase, particularly to make sure that vaping companies can continue to reach consumers in rural areas.

For now, as stated above, larger retailers may be better equipped to ride-out the period of uncertainty. However, given the innovative nature of this market, and the continuing prospects for opportunities, it will likely only be a matter of time before more solutions begin to appear. If so, Congress may accomplish its underlying goal of preventing sales of e-cigarettes and vapor products to children without decimating the online vapor industry. It would be wise to pay rapt attention to the developing news in this arena, April 27, 2021, is just around the corner.