The December 2020 COVID relief bill, or Consolidated Appropriations Act, 2021, passed by Congress, contained roughly 5,500 pages of details and legislation. Among them was the Preventing Online Sales of E-Cigarettes to Children Act, or PACT Act. In short, the PACT Act bans the mailing of all vapes, e-cigarette products and their components to consumers. The ban extends to tobacco, and now, cannabis. The pain points are already showing on the industry. If implemented further, consumers will have little to no options to receive products through the mail–and brands will pay higher than ever before if they can stay open.
Many vape operators reading this article already know the immense toll the ban has had on their business and stress levels. To make matters worse, most were already attempting to recover from the 2020 downturn spurred by the EVALI lung crisis and the illicit market use of vitamin E acetate.
The downturn is evident. While the market grew at an average of 20% across California, Colorado, Nevada, Oregon and Washington in 2020, Marijuana Business Daily reports that the figure is nearly half of 2019’s 39% growth.
Uncertainty remains in the air for many vape operators in cannabis and beyond. As the supply chain awaits the following steps, here is what we know so far about the PACT Act and its impact on the cannabis supply chain.
What Is The PACT Act?
The PACT Act of 2020 expands 2010’s Preventing Online Sales of E-Cigarettes to Children Act, building off the 1949 Jenkins Act that applied to interstate tobacco sales. Under the 2020 expansion, the PACT Act expanded its definition of “cigarette” to essentially include all vaping products, including liquids, oil, machine components and accessories. The term used to cover the broad range of products is Electronic Nicotine Delivery Systems (ENDS).
The bill’s passage is intended to prohibit the U.S. Postal Service (USPS) from mailing any ENDS to consumers. The bill was slated to take effect within 120 days of its enactment. However, as of early fall, that hasn’t happened at the USPS. In April 2021, the USPS postponed its implementation of the law, stating that it needed more time to consider the matter. Postal service spokesperson David P. Coleman cited the complexity of the issue and the large outpouring of public response as reasons for the delay.
Still, the law is taking effect at some leading shipping providers, including FedEx and UPS, who joined the ban in early 2021.
The ban is just one component concerning vape operators. Additional parameters would see cannabis companies registering with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Operators would also be faced with other state taxes typically levied against nicotine brands. Failure to comply could cost between $5000 and $10000 each month, a staggering fee for many smaller cannabis companies barely or unable to break even as it is.
What’s The Latest News On The PACT Act?
Since the April news broke, vaping brands in cannabis and tobacco have remained in limbo. In April 2021, along with postponing its implementation, the USPS published guidelines to apply for a possible exemption. However, applications won’t be considered ahead of the final ruling.
While awaiting the final rules from the USPS, the industry and its consumers continue to plead with private common carriers to reverse their policies. The outpouring of public comments and pleas includes roughly 400 vape companies. In July 2021, the American Vaping Association sent a signed letter to Frederick W. Smith, chairman and CEO of FedEx. The crux of the letter focused on smoking cessation, noting that the ban adversely impacts individuals using vape products as a cessation device. FedEx has not revised its rules as of this article’s posting.
In August, U.S. Senator Rand Paul sent a letter to Postmaster General Louis DeJoy noting his vape ban concerns. The letter also included anxieties from more than 60 vaping leaders. The message focused on the ban’s scope, citing the potential impact on small businesses and consumers. The group and Sen. Paul highlighted the lack of an economic impact study as another standout concern.
How The Vape Ban Is And May Further Affect Cannabis
While the final decision on implementation awaits, vape companies, cannabis and beyond, are already feeling the effects. In cannabis, companies have considered numerous options, from pivoting to different consumption methods to, unfortunately, closing their doors.
The supply chain harbors numerous concerns regarding the bill and its further implementation. With carriers primarily out of the equation, companies need to work with alternative shipping options that often come with a much higher price, passing the rising costs onto the consumer in the end. High costs could steer legal consumers back to the illicit market and their zero tax, untested goods.
Rather than contend with the new rules, some companies have considered switching products. Rather than making vapes, a pivot to edibles, tinctures or other consumables could serve as a lifeline to some. However, not every company can afford to pivot or find higher-priced shipping alternatives. Many smaller operations, be it a Mom and Pop operation or a small-to-mid-size brand, can’t keep up with the cost of compliance, much less consider other business alternatives. With looming regulations and expenses brought on by federal and local agencies, operators must contend with many regulatory checkpoints that often come with a high cost associated. If they survive, then the consumer is likely going to face the brunt of the costs.
What’s Next For Vape Companies And Consumers?
The wait continues for everyone on the vaping supply chain.
While companies anticipate a ruling, the unaccounted-for stress and worry placed on operators and their employees are undoubtedly immense. Even if implementation never comes to fruition at the USPS, the hours and finances allocated to planning and preparing are already spent. More may be required if the rules take effect at the USPS.
These costs will continue to reach the consumer. That is if customers can even get the products. Vaping could, in theory, become a local market of sorts if the USPS implements its ban, leaving some markets potentially underserved. With hope, these concerns will lessen with an eventual favorable ruling from the Post Office, giving the cannabis industry one less trouble to fret over.
Still, with the law in effect, cannabis companies could continue to see pain points from other common carriers. As we’ve seen with banking and numerous other critical industry needs, major institutions tend to adhere to federal law or rather than risk getting burnt on their connections to the burgeoning industry.