The Preventing Online Sales of E-Cigarettes to Children Act substantially and materially alters how companies sell and ship e-cigarettes and tobacco and cannabis vaping products and components.  The act was signed into law on December 27, 2020 and is an amendment to the 2009 Prevent All Cigarette Trafficking (PACT) Act. 

Whereas the PACT Act created restrictions on the delivery of cigarettes to consumers, the 2020 amendment expands the definition of “cigarette” to include an “electronic nicotine delivery system” or ENDS.  The amendment defines ENDS as, “any electronic device that, through an aerosolized solution, delivers nicotine flavor, or any other substance to the user inhaling the device.”  It further lists examples of what ENDS include:  e-cigarettes, e-hookahs, e-cigars, vape pens, advanced refillable personal vaporizers, and electronic pipes.  Importantly, included in the examples are “any component, liquid, part, or accessory of [an ENDS] device . . . without regard to whether the component, liquid, part, or accessory is sold separately from the device.” 

Collectively, the scope of the amendment is incredibly broad, and it impacts businesses outside of the tobacco industry. Because the amendment defines ENDS to include an electronic device that delivers “nicotine flavor” or “any other substance,” the amendment applies to cannabis vaping products and any component, liquid, part, or accessory related to such products. 

The amendment has two narrow exceptions to exclude products that are approved by the Food and Drug Administration for, and marketed and sold solely for the purpose of, “sale as a tobacco cessation product” or “any other therapeutic purpose.”

Mailing Restrictions

The amendment applies restrictions on mailing cigarettes under the PACT Act to ENDS.  This means that any product that falls under the amendment’s broad definition of ENDS, including tobacco and cannabis vaping products and components, will no longer be able to be mailed directly to consumers through the United States Postal Service (USPS).  Under the amendment, the USPS has until April 26, 2021 to promulgate regulations to clarify the applicability of the prohibition on mailing ENDS, and the prohibition does not go into effect until after the regulations are promulgated.  Therefore, the earliest this restriction would take effect is April 26, 2021.

Under the PACT Act, there are a handful of exceptions to USPS’s mailing of cigarettes as codified in 18 U.S.C. § 1716E.  These exceptions include intrastate shipping within Alaska and Hawaii, shipment between businesses engaged in tobacco product manufacturing, distribution, wholesale, export, import, testing, investigation, or research, shipments by individuals for noncommercial purposes (including return of goods to manufacturer), limited shipments by manufacturers to adult smokers for consumer testing, and limited shipments by federal agencies for public health purposes.  On February 19, 2021, the USPS issued a proposed rule that would apply all of the above exceptions to ENDS except for the consumer testing exception.  In addition, the USPS determined that the exceptions are not feasible as applied to inbound or outbound international mail, and as such all cigarettes and smokeless tobacco in such mail are nonmailable, without exception.

Other shipping companies have announced their intent to stop or have already stopped shipping certain vaping products.  However, a close reading of each restriction, as posted on the carriers’ websites as of the date of this article, appears to limit this shipping restriction to tobacco products.  For example, FedEx and DHL prohibit the shipping of tobacco products, including vaporizers and e-cigarettes, but the restriction does not reference cannabis.  UPS is different in that it bans shipment of “Vaping Products,” defined to include “any and all noncombustible liquid or gel, regardless of the presence of nicotine, capable of being used with or for the consumption of nicotine.  All related vape devices, products, and accessories are included in this prohibition.”  Under this definition, the banned products are ones that are capable of delivering nicotine and thus could include cannabis vaping products. 

Beyond mailing restrictions, the amendment’s expanded definition of “cigarette” to include ENDS, and therefore cannabis vaping products and components, triggers the below PACT Act restrictions to now apply to sellers of ENDS, as described below.

Registration Requirement

Sellers of ENDS must register with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the U.S. Attorney General.  Specifically, the registration requirement applies to any person who sells, transfers, or ships cigarettes for profit in interstate commerce or who advertises or offers cigarettes for sale, transfer or shipment.  Because “cigarette” is now defined to potentially include cannabis vaping products and components, it appears that this requirement will also apply to these sellers.

Reporting Requirement

Sellers of ENDS must file a statement with the U.S. Attorney General and the tobacco tax administrators of the state into which the shipment is made or advertised.  This statement must set forth the seller’s name and trade name, address of the principal place of business and of any other place of business, telephone numbers for each place of business, a principal e-mail address, any website addresses, and the name, address, and telephone number of an agent in the state authorized to accept service of process on behalf of the person.

Furthermore, not later than the 10^th day of each calendar month, sellers of ENDS must file with the state’s tobacco tax administrator a memorandum or a copy of the invoice covering each shipment made during the previous month.  This must include the name and address of the recipient, the brand and quantity of the shipment, and the name, address, and phone number of the person delivering the shipment, organized by city/town and zip code.

Shipping and Packaging Requirements

Under the PACT Act, packages containing cigarettes or smokeless tobacco were also subject to certain shipping and packaging requirements.  These requirements include:

• A clear and conspicuous statement stating, “CIGARETTES/SMOKELESS TOBACCO: FEDERAL LAW REQUIRES THE PAYMENT OF ALL APPLICABLE EXCISE TAXES, AND COMPLIANCE WITH APPLICABLE LICENSING AND TAX-STAMPING OBLIGATIONS,” on the bill of lading and outside of the shipping package on the same surface as the delivery address.
• No selling or delivering in any single sale or delivery any cigarette package weighing more than 10 pounds.
• No selling or delivering to an underage person, as determined by the applicable law of the place of delivery.  This requires that delivery be signed and accepted by an adult who must provide identification verifying he or she is at least the minimum age required to purchase the product.  The seller also cannot accept an order from a person without obtaining the person’s name, birth date, and address, and verifying this information through the use of a commercially available database to ensure the purchaser is of age.
• Before the sale or delivery, pay any cigarette excise tax by the state or local government, and affix any required stamps or other indicia that the excise tax has been paid.  This requirement does not apply if the state or local government provides for the seller to collect the excise tax from the consumer and remit the excise tax, so long as the seller complies with the requirement.

Record Retention

Sellers of ENDS must keep for 4 years a record of any delivery sale that includes the information submitted to the tobacco tax administrators (name/address of recipient, brand/quantity of shipment, and name, address, and phone number of delivery person).  Records must be organized by state, and within the state by city/town and zip code.  These records must be made available to government officials in order to show compliance.

Consequences of Non-Compliance

Should a seller of ENDS not be in compliance with the requirements above, the seller will be placed on a list that is distributed to the attorney general and tax administrator of every state, as well as common carriers including the USPS, at least every 4 months.  After 60 days of the list being distributed, no person shall be allowed to deliver ENDS for any person on the list, with certain good faith exceptions.

There are also criminal and civil penalties associated with violating these requirements.  Criminal penalties include imprisonment of up to 3 years.  Civil penalties include $5,000 for the first violation and $10,000 for subsequent violations, or 2% of gross ENDS sales for the prior year.

Compliance with the amendment is complex and certain aspects are still evolving.  If you have questions, please contact Kelly Matayoshi or Cynthia Castillo.