Amended PACT Act Could Disrupt Vape Industry

WASHINGTON, D.C. – In December, the 2021 Consolidated Appropriations Act passed by Congress and signed into law by former President Donald Trump expanded the reach of the Prevent All Cigarette Trafficking (PACT) Act through legislation known as the ‘‘Preventing Online Sales of E-Cigarettes to Children Act.” The amendment could have serious ramifications for CBD and THC Vape sales and is set to take effect on or about March 28, 2021.

Background on the PACT Act

An amendment to the existing Jenkins Act of 1949 that required interstate cigarette sales be reported to state tobacco tax administrators, the PACT Act went into effect on June 29, 2010. The amended legislation prohibited shipping of cigarettes and smokeless tobacco products directly to consumers via the United States Postal Service (USPS). Additional provisions required entities selling cigarettes and smokeless tobacco products to:

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  • Verify the age and identity of purchasers through a commercially available database.
  • Use a non-USPS delivery service that checks ID and obtains an adult signature at time of delivery.
  • Collect applicable local and state taxes.
  • Affix any required tax stamps to products sold.
  • Send each taxing state’s tax administrator a monthly list of all transactions in their state, including customer names, addresses, and the quantities and type of each product sold.
  • Maintain records of delivery sales for a period of four years after the date of sale.
  • Maintain records of failed deliveries for a period of five years.
  • Register with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and the U.S. Attorney General.

The PACT Act grants the ATF inspection authority to examine registrants’ business records and commercial goods and mandates the bureau maintain and distribute a list of unregistered or non-compliant entities. Delivery carriers are barred from working with companies appearing on the list.

The PACT Act amendment

Introduced by Senator Dianne Feinstein (D–Calif.) in 2019, the Preventing Online Sales of E-Cigarettes to Children Act modifies the PACT Act’s original definition of “cigarette” to include electronic nicotine delivery systems (ENDS).

The new legislation defined ENDS as “any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device, including 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…without regard to whether the component, liquid, part, or accessory is sold separately from the device.”

The Act specifically excludes any products approved by the Food and Drug Administration for tobacco cessation or any other therapeutic purposes.

What does it all mean?

Under the amendment, vape companies appear to be prohibited from shipping vaping products to consumers via USPS. As previously stated, the ban applies to “any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device.” Any other substance. Those three words are crucial.

“Every product related to vaping, whether of nicotine, THC, CBD, lavender, or anything else, will now be subject to the Jenkins Act’s burdensome requirements,” wrote Jacob Sullum, senior editor at Reason.com. “According to Feinstein, a bottle of e-liquid is a cigarette; so is a bottle of herbal essential oil if you plan to vape it. A coil or pod cartridge for a nicotine vaporizer is now also a cigarette; so is a vaporizer designed for THC or CBD oil.”

Attorney Rod Kight agrees. “The act applies to all companies that mail hemp vapes, CBD vapes, and all other vaping products to consumers,” he said. “Retailers who do not register and/or who do not comply with the shipping and reporting rules of PACT are subject to severe penalties, including up to three years in prison. Additionally, retailers must comply with applicable state laws regarding vapes and ENDS.”

While it is unclear whether the true intention of the amended PACT Act was to disrupt the THC and CBD industries, the news is discouraging to many.

Baker Law P.A., a firm that offers Hemp and CBD licensing consultation, believes many smaller producers could be negatively impacted. “Regrettably, the financial burdens imposed by the new legislation will likely mean many small businesses will simply be unable to participate in delivery sales of such products,” said Baker Law President Jonathon W. Baker, Esq.

American Vaping Association President Gregory Conley also is worried about the impact on small businesses. “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,” he said. “This is not a law designed to regulate the mail-order sale of vaping products to adults. It’s an attempt to eliminate it.

“The sponsors of this legislation repeatedly refused to consider commonsense amendments that would have protected youth, while also not needlessly shutting down small businesses,” Conley continued. “Thanks to their intransigence, the language included in the omnibus is so sloppily drafted that it will also ban the USPS from shipping CBD liquids intended to be vaporized, as well as devices intended for use with THC or other non-nicotine substances.”

JDSupra.com offered the following advice from Husch Blackwell partner attorney Seth A. Mailhot:

“Any business involved in any aspect of the vaporizer industry, whether business-to-business, cannabis-based liquid products, vaporizer accessories, or nicotine e-liquids, should review their business operations and develop a strategy to address the PACT Act requirements.”

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