Business

Shipping law creates headaches for vape biz

By Alex Halperin Feb 19, 2021
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Alex Halperin is the founder, editor and publisher of WeedWeek. Before he started covering marijuana legalization in 2014 he reported on topics such as fracking, health care, technology a...
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Alex Halperin is the founder, editor and publisher of WeedWeek. Before he started covering marijuana legalization in 2014 he reported on topics such as fracking, health care, technology and finance. His work has appeared in The Guardian, Slate, Fast Company, Quartz, the Washington Post, Mother Jones, The New Yorker and many other publications. His first book, The Cannabis Dictionary, was published in March. He lives in Los Angeles.
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A new law buried on page 5,136 of December’s federal stimulus bill appears likely to create significant burdens for vape hardware manufacturers and has the potential to disrupt the cannabis vape supply chain. 

The Preventing Online Sales of E-Cigarettes to Children Act, signed by former president Donald Trump (R), most directly affects consumer-facing manufacturers of products, including e-cigarettes and vape pens, that deliver an aerosolized solution of “nicotine, flavor, or any other substance.” It does so by expanding a cigarette related-law from 1949 to apply to these products and forbids the U.S. Postal Service from shipping them to consumers. 

Taking effect March 28, the law requires companies that ship vapes to businesses to register with the U.S. Attorney General and state tobacco tax administrators in every state where a company sells products, among other bureaucratic hurdles, according to an analysis from Pittsburgh law firm Tucker Arensberg shared with WeedWeek. Companies must then report their sales to state administrators monthly. The law “will certainly make business more difficult,” the document says. Read the analysis.

The law also applies to the component parts of the devices — except probably batteries, according to the analysis. It excludes FDA-approved products.   

Penalties for non-compliance potentially include prison time. Since the law passed, FedEx and UPS have said they will stop shipping these products on March 1 and April 5, respectively.

Vape pen sales faltered in late 2019 after an some users fell gravely ill, apparently due to an additive used largely by unlicensed producers. Subsequent perceptions that inhaled products increase the risk of severe Covid-related illness have weighed on the market, though there are signs of recovery

The vape industry is sounding the alarm that the law could force hundreds of manufacturers out of business or otherwise impede their ability to supply cannabis vape brands.

The most severe burden falls on direct to consumer sales. However, Dana E. Shoched, president and CEO of vape hardware manufacturer O2Vape, says it could affect its wholesale business as well, “due to all the new regulatory red tape and hesitancy by private shippers to support the unnecessary bureaucracy and reporting imposed.” 

The law, she says “misrepresents our vape customers as nicotine addicts and our technology as tobacco driven, it effectively destroys our ability to effectively serve them.” She anticipates it costing the company millions of dollars in costs and lost revenue. “It’s a jobs killer.”

O2Vape is working with other manufacturers and associations to “hopefully get implementation delayed and ultimately overturned.”

Observers provide conflicting analyses of the likely fallout. While some say the onus will likely fall primarily on overseas vape hardware manufacturers, the hardship could expand to domestic cannabis brands accustomed to receiving thousands of empty cartridges via FedEx, which will no longer ship them.

“We need some major clarity,” said Ryan Basore, CEO of Redemption, a Michigan-based cannabis brand.  “If we can’t get those carts, we’re in trouble.” The law could also make it harder for patients in the MED only states which allow vape pens but not flower to access their medicine.

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Alex Halperin
Editor/Publisher