Vape Mail Ban
The “Preventing Online Sales of E-Cigarettes to Children Act” or as many are calling it, the “vape mail ban” is mainly targeted to forbid sales of vaping products to underage customers. Not only that, but the compliance of this act to the PACT Act (Prevent All Cigarette Trafficking Act) is extended to regulate mailing of all Electronic Nicotine Delivery System (ENDS) including products that do not contain nicotine.
With the Vaping Industry booming at a CAGR of 9.2% and a market size of 15.7 billion in 2019, the PACT Act has hit online Vape Shops with a huge impact on sales which will lower the numbers in the upcoming years. Sellers are imposed with restrictions, forcing them to find a manageable solution before 90 days from the date of enactment.
Originally, the PACT Act passed in 2009 included the regulation of mailing cigarettes and smokeless tobacco products through the U.S. Postal Service. The amendment of this act in December 2020 imposed a strict law over e-cigarettes and vaping products, affecting vaping businesses online. As stated in the amended PACT Act, the mailing of ‘ENDS’ by the U.S. Postal Service directly to consumers has been outlawed, but other third-party carriers can ship directly to consumers with certain restrictions put forth. These include age verification, adult signature at the point of delivery, collecting all applicable taxes, maintaining a list of all transactions and any interrupted transactions for five years. Due to the increased complexity, FedEx, UPS, and DHL have prohibited shipping of all vaping products. Vaping businesses will have to resort to an alternative by approaching private logistics and transportation companies.
Given the shipping and reporting rules of the PACT Act, businesses who figure out a viable solution will also face challenges.
- Age Verification: This rule requires verification of the customers’ age at the time of delivery. But, almost all online sellers already require their customers to present an ID for age and identity verification during purchase.
- Adult signature at the point of delivery: This PACT law requires an adult signature at delivery. Depending on the courier service, packages will be delivered somewhere between 9 am to 7 pm of business hours. This will be a challenge to adults working at the time.
- Collecting all applicable taxes: Sellers should be aware of the state and local taxes applicable to the states they are selling in. Online retailers will have to register with the respective states and pay additional taxes to continue selling these vape products.
- Maintaining a list of all transactions: The online retailers must send a list of all the transactions and the respective customer details to the taxing state’s tax administrator every month. This requires companies to share their customer information and handle heavy paperwork every month.
- Maintaining records of failed transactions: Online retailers must keep a record of all failed/interrupted transactions of the last five years due to any violation of the PACT Act by the delivery service or the customer. It is cumbersome to manage such data.
- Shipping Obligations: Private carriers and online retailers will have to abide by a couple of rules while delivering vaping products. The package must weigh no more than 10 pounds, and the packages should have a statement highlighting the customer’s obligation.
- Additional Shipping Cost: Sellers are obligated to utilize private delivery services after USPS, FedEx and UPS have banned the mailing of vaping products. Since it is necessary to acquire an adult signature at the time of delivery, companies will have to pay extra shipping charges if they want to ensure the shipping of vaping products.
The passing of the PACT Act increases shipping costs, imposes cumbersome paperwork, and 3 years of prison or other legal consequences for violating any shipping or reporting rule of the amended PACT Act.
While the main goal of the PACT Act was to decrease the usage of vaping products by the youth, it has its fair share of limitations and challenges on the vaping industry. Online retailers will have to make sure they are in compliance with the PACT Act before it comes into effect in March or April 2021. They will have to work with their attorneys to understand the severity of this Act and learn to manage their business under these difficult circumstances.