Vape Shipping Ban - What it Means for Hemp ProducersVape producers are feeling the squeeze.
In 2020, Americans spent $44 million on CBD vape cartridges, all ordered online. But, as of April 27, 2021, new federal legislation has made these sales effectively illegal. The hemp sector may not have been the original target of the vape shipping ban, but the industry is now reeling from the ramifications.
The Congressional Appropriations Act contained only a few pages dedicated to vape products, but the implications are shattering for online retailers. These few terms updated the language around "Electronic Nicotine Delivery Systems" with broad new definitions. Unfortunately, hemp-derived products now fall under this mandate, with no exemptions.
As online retailers selling CBD, Delta 8 THC, and other cannabinoids have discovered, these legislative amendments have effectively stopped all online sales and shipments of vapes. With the USPS and other companies now prohibiting the shipment of any vape products (and the components), what does this mean for retailers and producers?
The Appropriations Act in Two Parts
On December 27, 2020, congress signed the Appropriations Act into law. The full scope of this act covers billions of dollars, but two small portions specifically target the online sales of electronic vape products. It's these amendments that have the CBD and hemp industries panicking.
Part I: Amendments to the Jenkins Act
The first part of the Appropriations Act, which applies to the hemp industry, is an amendment to a 1949 piece of legislation called the Jenkins Act. The amendment, known as the "Preventing Online Sales of E-Cigarettes to Children Act," came into effect on March 27, 2021.
The Jenkins Act requires anyone selling (and shipping) tobacco products between states to non-licensed distributors to report these sales to the state's tobacco tax administrator. This has effectively curbed the online sale of hemp-based vape products direct to consumers.
Hemp producers and retailers have found themselves wrapped up in this legislation because this amendment defines an e-cigarette as "any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device."
In short, because of this broad language, CBD vapes, Delta 8 THC vapes, and any other hemp-derived extraction destined for a vape product have been classified as "Electronic Nicotine Delivery Systems," or ENDS.
Under this new definition of e-cigarette, everything from e-hookahs to refillable personal vaporizers to disposable vape pens are now essentially illegal to sell to the everyday consumer via e-commerce. Even the components of these products, like an empty cartridge or battery, are prohibited.
Part 2: Updates to the Prevent All Cigarette Trafficking (PACT) Act
The Appropriations Act has also made adjustments to the PACT Act, which was initially designed to prevent the trafficking of tobacco products and prevent sales to minors. The same broad definition of e-cigarettes in the Jenkins Act has once again been adopted here.
With CBD vape retailers now classified as ENDS under the PACT Act, they must adhere to the layers of new legal requirements. For all but the largest online retailers, these changes make shipping vape products all but impossible. Some of the requirements include:
- Registration with the US Attorney General
- Age verification of buyers from a specific database
- Adult signature collection at the point of delivery
- Registration with federal and state tobacco tax administrators
- Ongoing submission of customer details (names, addresses, purchase details, etc.) to the taxing state's tax administrator
Failure to comply with these regulations comes with stiff penalties, including steep fines and prison time. While it has already been illegal to ship THC products, including THC vape pens, through the mail, this new legislation now expands that to all electronic tobacco, CBD, and other hemp-derived vape products.
The Implications for the Cannabinoid Vape Sector
Following the rollout of these amendments, all major shipping services have announced they will no longer service the hemp and cannabinoid vape retailers. This includes USPS, FedEx, DHL, and UPS.
What's more, the strict taxation, registration, and reporting obligations now required for all vape sales will make it effectively impossible for all but the most prominent retailers to continue online sales.
With the amendments to the PACT Act in place on April 27, 2021, the industry is gearing up to lose access to most shipping services. The vast majority of business-to-consumer online vape sales will now have to pivot.
There will remain few (if any) private shipping services open to shipping CBD vape products across state lines. Online retailers may cut vape products from their inventory entirely.
Even if retailers can find a shipper, there will likely be substantial increases in shipping costs. It remains to be seen if consumers will want to eat this additional cost or if it's feasible for the shipper to cover.
Thus far, there have been few viable solutions proposed. However, one solution put forth by Joseph Sheppard, III and Kirk Kaczmarek of Carnahan, Evans, Cantwell & Brown, P.C. seems plausible.
Borrowing from other federally restricted online sales, they suggest producers pivot toward a model that allows consumers to pick up online purchases at retail locations. Customers order products online but pick them up from a licensed business.
The Vape Industry Has to Roll with the Punches
Beyond a few tentative suggestions, online retailers have no immediate solutions unless they plan to jump through extensive registration, taxation, and reporting requirements. Even then, their ability to ship is drastically impaired.
But, as this new legislation comes online, many analysts expect the CBD sector to come out on top once again. As Sheppard and Kaczmarek suggest, "The PACT Act is an unexpected left hook; but with the right plan, the vape industry can roll with this punch and counter with the judo needed to keep the supply and sales of safe vapes coming."
It is true. Hemp is an evolving regulatory space that has always adjusted to a complicated reality. It is possible that expanding pro-hemp federal legislation would pivot and clean up these recent adjustments to the Jenkins and PACT Acts to exempt hemp from these regulations. However, if that does roll out, it is still many years away.