By David Haber
Global Legal Law Firm
The Prevent All Cigarette Trafficking (PACT) Act was recently amended to apply to e-cigarettes and all vaping products. Among other things, the PACT Act prohibits the U.S. Postal Service from delivering cigarettes and smokeless tobacco products directly to consumers.
Although PACT appears to target tobacco products, the targets are much broader. The 2020 amendment modifies the original definition of "cigarette" to include Electronic Nicotine Delivery Systems (ENDS). ENDS is defined very broadly to include all vaping products, liquids, components and accessories, whether they contain nicotine or not.
An ENDS product is defined as "any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device." This includes any component, liquid, part or accessory of a device, not just nicotine-related products.
This broad definition of ENDS appears to include CBD, THC, and hemp vape pens. It also appears to include anything that can be used to vape any liquid or oil-based substance, and the substances themselves.
In addition to the USPS ban on smokeless products, FedEx and UPS recently announced that they would also stop deliveries of vapor products. As the president of American Vaping Association noted, the bill imposes increased shipping costs and huge paperwork burdens on small retailers and backs it up with threats of imprisonment for even innocent mistakes.
In addition to the non-mailing provisions, the PACT Act requires anyone who sells these products to register with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Unlike the relatively relaxed enforcement by the FDA, the ATF is an actual police agency that takes its enforcement mandate seriously.
The PACT Act also requires sellers to file a monthly report with the state tobacco tax administrator and other local entities that tax cigarette sales. The Act also mandates that the ATF maintain a list of non-compliant persons who fail to comply with the Act. Placement on the list bars common carriers and other persons from delivering products sold by the listed company. The ATF distributes the list to common carriers, USPS, credit card companies and others to help enforce the list.
While the law's goal was originally to police tax compliance, the inclusion of vaping products is supposedly intended primarily to prevent online sales to minors. Online retailers will be required to:
The PACT Act also imposes additional labeling, delivery and record-keeping rules. The federal law backs up its stringent standards with severe criminal penalties that can include huge fines and even federal prison sentences. The vaping industry expects that the ATF will likely make examples of some non-compliant retailers.
In addition to the ATF, each state has its own set of rules for companies doing business in the state. Retailers can be cited by states for not following their individual requirements for tax payments and filing, and they may have to purchase tobacco and other licenses or hire a registered agent in the state. The PACT Act reporting requirements are expected to squeeze money from out-of-state vendors that mandate sales tax collection.
Evidently a partnership between a private company and a national residential shipping carrier known as X has begun building a vaping product delivery network that will serve residential customers in some areas. Shipping costs are expected to be slightly higher, but not that far from the cost of USPS delivery with adult signature collection. The delivery coverage area is expected to include sections of Florida, Texas, California, Nevada and Arizona.
In summary, sellers of ENDS need to be aware of three main parts of the PACT Act: registration requirements, reporting requirements and shipping restrictions.
The new legal changes make it very important that cannabis, hemp and CBD companies carefully review whether the PACT Act amendments apply to their business and then determine their level of compliance, so they are not targeted by the ATF or local tax authorities.
As an associate attorney at Global Legal Law Firm, David Haber provides legal and practical solutions for small to midsize businesses. He is an experienced litigator who has represented clients in all phases of litigation. Practice areas include electronic payments litigation, contract disputes, business disputes and franchise law. He also advises companies on how to increase revenues and minimize risk. To reach him, please email firstname.lastname@example.org or call 888-846-8901.
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