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U.S. postal rules make outlook bleak for small vape companies

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[UPDATE April 27, 2021: Implementation of these rules has been delayed]

Rules taking effect this week in the U.S. could cause serious headaches for companies making hemp-based vape products due to broad definitions in a law aimed at curbing vape sales to minors — perhaps putting a crushing burden on small producers.

The Preventing Online Sales of E-Cigarettes to Children Act (2020) comprises revisions to a previous law, the 2010 Prevent All Cigarette Trafficking (PACT Act) which bans direct sales of cigarettes to consumers through the mail.

Passed last December as part of a COVID-19 relief bill, the amendment adds all e-cigarettes and vaping products to the direct sales ban. The U.S. Postal Service (USPS) last week published guidance in the Federal Register and notified vape component makers that the new prohibitions on the mailing of their products is imminent.

Critical distribution channel

The USPS is a critical distribution channel for vape companies, as major private shippers United Parcel Service, FedEx and DHL already have restrictions on shipping vaping products.

While hemp and CBD stakeholders have said they don’t believe the law is targeted at them, language in the amendment could be interpreted to include legal hemp and CBD-derived vapes, they say.

Vape makers and sellers have suggested that the definition of “electronic nicotine delivery systems” (ENDS) in the law is so broad that it may be interpreted to include even batteries and empty cartridges, and say they are particularly concerned about language that refers to the banning of “any electronic device that, through an aerosolized solution, delivers nicotine, flavor or any other substance to the user inhaling from the device.”

Specified products restricted

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 [above], without regard to whether the component, liquid, part, or accessory is sold separately from the device,” according to the law.

Based on this definition of ENDS, zero-nicotine e-liquids, synthetic “tobacco-free” nicotine e-cigarettes, and CBD and THC hemp vape pens would all appear to be products that cannot be mailed through the USPS, observers have said.

The new law allows companies to apply for exemption of their products for USPS shipping. But companies worry that delays and bureaucracy caused by the application process could kill their businesses.

Crowded exemption process

Guidance issued by the government last week indicates the potential for a flood of applications to clear specific products for sales, suggesting a lengthy path to market. “the Postal Service anticipates receiving . . . applications at a rate several orders of magnitude above the historic norm,” according to the guidance issued last week.

Many vape businesses are exploring arrangements with private logistics and transportation companies, The National Law Review observed earlier this year, “But the outlook for many small vapor companies and online retailers looks bleak,” the Review said.

Rules under exemption allow business-to-business sales, but manufacturers must register with the Bureau of Alcohol, Tobacco, Firearm and Explosives (ATF), and file monthly reports with state tobacco tax administrators. Shippers must also retain federal, state and local compliance records that should be available upon request.

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