How will the new law banning vaporizer shipments impact cannabis companies?
(This story appears in the March issue of Business magazine about marijuana.)
The U.S. Postal Service will be banned from shipping vaping products starting this summer due to a new law that worries cannabis companies.
In late December, when Congress approved an appropriation bill to keep government running, lawmakers included text for a separate measure.
The “Preventing Online Sales of Electronic Cigarettes to Children Act” prohibits the USPS from shipping vaping products.
There is no mention of hemp or marijuana in the new law, but companies in both industries should be prepared to comply, said Rod Kight, a cannabis lawyer in Asheville, Carolina. North.
“To the extent that these are industry participants selling vaping products, it absolutely affects them,” Kight said of the companies that make or sell cannabis vaping supplies.
The legislation comes into effect at the end of March, after which the USPS has 120 days to create rules to implement the law.
FedEx and UPS have previously said they will follow the U.S. Postal Service’s directive and will not ship vaping products.
“As of April 5, 2021, UPS will not be shipping vaping products to, from or within the United States due to the increased complexity of shipping these products,” said Matthew O ‘ Connor, a spokesperson for UPS, in a statement.
At this time, there is no publicly available information on how often vaping products are mailed. However, U.S. consumers ordered $ 44 million worth of CBD vaping cartridges online in 2020, giving some measure of how often factors could be used to fulfill orders, according to Rick Maturo, associate customer director of the. Nielsen Cannabis Insights Practice.
Under the new regulations, sellers of vaping products must do the following:
- Ship through private companies, such as DHL, which require a signature upon delivery.
- Register with the United States Attorney General.
- Set up an age verification system.
“A lot of them are already doing the age check,” Kight said. “For some, it will be a larger project to undertake.”
Business-to-business sales – whether for wholesale distribution or manufacturing – are exempt from the USPS shipping ban, Kight said, as long as they have the necessary licenses to operate.
Arnaud Dumas de Rauly, CEO and co-founder of The Blinc Group, a New York-based company that develops and supplies cannabis vaping equipment, called the new restrictions “a new attempt by the government to ‘demonize’ vaping in the world. nicotine.” However, he said he is convinced that lawmakers are not targeting cannabis.
“The most important concept in this part of the bill is its intent, and that is to curb the vaping of nicotine, not cannabis,” said Dumas de Rauly.
It’s time to prepare
Since the USPS has yet to release new rules in the following months, Dumas de Rauly said the government agency has enough time to explain how the product shipping ban will be enforced. This window, he added, “also leaves the door open for our industry to put pressure on USPS.”
Kight agreed that businesses should use the time before the law goes into effect to prepare for the impending changes.
“The first thing (for cannabis business owners) is to learn about the law and whether it will affect them or not. And if they are a company (of vaporizer manufacturing) or a retailer of vaping products, it will affect them, ”he said.
The new regulations update an existing law governing the taxation of cigarettes and smokeless tobacco, known as the Jenkins Act, which has been in effect since 1949.
While the law targets nicotine products, the way the new legislation is worded casts a wide net. The term “electronic nicotine delivery system”, for example, includes any product which “delivers nicotine, flavor or any other substance to the user upon inhalation from the device”. It is the “any other substance” part of this sentence that makes cannabis companies anxious.
The updates to the law include “CBD liquids as well as vaping products that contain no nicotine,” said Gregory Conley, president of the Connecticut-based American Vaping Association. Determining what local and state taxes apply in all the places where a business sells products is going to be difficult, he said, and might require lawyers and consultants.
“It should be possible to modernize the tax infrastructure so that small businesses do not suddenly have to obtain licenses and deal with 20 to 50 different national tax authorities, let alone indigenous tribes and local governments,” he maintained.
Conley said his organization lobbied Congress for an alternative to the ban on shipments of vaping products through the USPS, but that it had “encountered complete resistance to the idea.” His group also argued that the law’s definitions were too broad.
“The best we can hope for is that there will be an opportunity to comment with the USPS – as well as engage with the various state tax authorities – to determine what compliance will be required,” he said. -he declares. “You have to be prepared to dramatically increase your shipping prices.”
Conley said the impact of the new rules will depend on how rigorously they are applied. The punishment for breaking the law can include three years in prison, but Conley said a more likely scenario is that a business faces heavy fines and goes out of business.
“For nicotine vaping products, which will benefit the majority of the application,” he said, “that’s very bad.”