The PACT Act & The Death of Small Business

The recently amended PACT Act threatens the vaping industry as a whole and ushers in a new wave of deaths of small businesses.

 

As you may or may not know, SkyBlue Vapor is a very small business.  Although we have shipped products worldwide now since we opened in 2017, we still have less than 10 employees making us a true definition of “small business”.  We are not alone either.  There are many vaporizer manufacturers who will be affected by this and hundreds if not thousands of other online websites that resell products like ours.

Let’s briefly dive into the information compiled by The National Law Review as found in their article https://www.natlawreview.com/article/congress-amends-pact-act-to-apply-to-all-vaping-products-placing-huge-burden-small :

Background on the PACT Act (skip to next section to see how recent changes are affecting us)

As part of the “Consolidated Appropriations Act, 2021,” in the most recent COVID-19 relief bill signed into law on December 27, 2020, Congress amended the Prevent All Cigarette Trafficking (“PACT”) Act to apply to e-cigarettes and all vaping products. Originally passed in 2009, the PACT Act amended the existing Jenkins Act of 1949, which required interstate shippers to report cigarette sales to state tobacco tax administrators in order to combat illicit sales and tax avoidance. When it became law 60 years later – the same year the Tobacco Control Act gave FDA authority over tobacco products – the PACT Act, among other things, prohibited the use of the U.S. Postal Service (“USPS”) to deliver cigarettes and smokeless tobacco products directly to consumers.

  • In addition to the non-mailing provisions, the PACT Act requires anyone who sells cigarettes or smokeless tobacco to register with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the tobacco tax administrators of the states into which a shipment is made or in which an advertisement or offer is disseminated. Delivery sellers who ship cigarettes or smokeless tobacco to consumers are further required to label packages as containing tobacco, verify the age and identity of the customer at purchase, use a delivery method (other than USPS) that checks ID and obtains adult customer signature at delivery, and maintain records of delivery sales for a period of four years after the date of sale, among other things.
  • The PACT Act also requires sellers to file a monthly report with the state tobacco tax administrator and any other local or tribal entity that taxes the sale of cigarettes. Such reports must include the name and address of the persons delivering and receiving the shipment and the brand and quantity of the “cigarettes” that were shipped. These requirements apply to all sales of cigarettes and smokeless tobacco, including sales to consumers and sales between businesses.
  • The PACT Act mandates that the ATF maintain a non-compliant list of 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. ATF distributes the list to common carriers, USPS, credit card companies, and others to help enforce the list.

PACT Act Amendment: Preventing Online Sales of E-Cigarettes to Children Act (skip to next section to see the changes taking place at SkyBlue)

  • The 2020 PACT Act amendment, the “Preventing Online Sales of E-Cigarettes to Children Act,” modifies the original definition of “cigarette” in the PACT Act to include Electronic Nicotine Delivery Systems (ENDS). The term “ENDS” is defined very broadly to essentially include all vaping products, liquids, components, and accessories, whether they contain nicotine or not. Specifically, 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,” including “an e-cigarette; an e-hookah; an e-cigar; a vape pen; an advanced refillable personal vaporizer; an electronic pipe; and any component, liquid, part, or accessory of a device described [above], without regard to whether the component, liquid, part, or accessory is sold separately from the device.” (Emphasis added.) Based on this definition of ENDS, zero-nicotine e-liquids, synthetic “tobacco-free” nicotine e-cigarettes, and CBD/THC/hemp vape pens, among other things, would all appear to be captured.
  • The PACT Act requirements summarized above apply to ENDS effective 90 days from the date of enactment, or on or about March 28, 2021. Certain requirements (e.g., labeling, weight restrictions, and 21+ age verification on delivery) only apply to direct-to-consumer sales (made through common carriers or private delivery services). The registration and reporting requirements apply to all sales, including business-to-business sales. Companies should plan well in advance of the effective date to ensure they are fully compliant with existing state sales and excise taxes, licenses, and registrations. Currently, 28 states plus various localities impose a tax on vapor products, so sellers should plan accordingly. Sellers should also review their system capabilities to ensure excise taxes are being collected from consumers where required and data is properly being captured for required reporting.

USPS Ban on Consumer Sales; UPS & FEDEX Refusing to Deliver Vapor Products (skip to next section to see how recent changes are affecting us)

  • As noted, the amended PACT Act now prohibits the use of the USPS to deliver “ENDS” directly to consumers. In terms of the mail ban’s effective date, the Act states that the prohibition on the mailing of cigarettes shall apply to ENDS on and after the date on which the Postal Service promulgates regulations clarifying the applicability of the mail ban on ENDS, which it is required to do within 120 days of the enactment (i.e., by April 27, 2021). The Postal Service has not yet published any clarifying regulations in this regard, but companies should anticipate the mail ban going into effect on or about April 27, 2021.
  • The PACT Act has historically exempted businesses-to-business deliveries from the USPS ban. Specifically, the USPS ban does not extend to tobacco products “mailed only … for business purposes between legally operating businesses that have all applicable State and Federal Government licenses or permits and are engaged in tobacco product manufacturing, distribution, wholesale, export, import, testing, investigation, or research….” See 18 U.S.C. § 1716E(b)(3)(A). Companies seeking to use USPS for business-to-business deliveries must first submit an application to the USPS Pricing and Classification Service Center and comply with several other shipping, labeling, and delivery requirements. The Postal Service’s yet-to-be-published clarifying regulations could address whether business-to-business deliveries will remain permitted for ENDS.
  • Critically for the vapor industry, the most commonly used carriers, Federal Express and United Parcel Service (UPS), have recently announced that they would cease all deliveries of vapor products. According to Vaping360, as of March 1, 2021, FedEx will begin prohibiting “electronic cigarettes, vaping liquids, and other vaping products in the FedEx global network.” A UPS spokesperson also told Vaping360 that, effective April 5, 2021, “UPS will not transport vaping products to, from, or within the United States due to the increased complexity to ship those products.”
  • Without effective delivery options, PACT Act compliance becomes moot. Many vapor businesses are exploring arrangements with private logistics and transportation companies, as well as expensive software solutions to help comply with the PACT Act requirements, but the outlook for many small vapor companies and online retailers looks bleak.

Changes to expect with SkyBlue Vapor effective March 28th 2021 –

Orders & Shipping

We will cease taking orders from customers for any vaporizer products beginning March 27th 2021 at 11:59 PM PST.  Our final orders will ship out on March 28th as they are purchased prior to the date when the PACT act takes effect.  We will still be able to sell chargers, care packages, non stick products, magnetic rings for the EV, SkyBlue Merch, CBD and ship them no problem.  However, anything that can be vaped or used to vape such as batteries and atomizer we will not take orders for and cannot ship.

Lifetime Warranty

SkyBlue Vapor was founded with an idea that our vape pens will last you for life.  We regret to inform you that we will not be able to ship replacements effective March 28th 2021.  Until we receive further legal advice when it becomes available the only way to claim a lifetime warranty will be to stop at our physical headquarters in Stroudsburg, Pennsylvania, visit us at our nationwide events, or to visit an authorized retailer which currently are located in Pennsylvania only.  We hope to expand our wholesale operations sooner but do recommend you troubleshoot any warranty related issue with us prior to March 28th so we can get you set up with a replacement if needed.  We are very sorry that it’s happening like this but the government took away our option to do anything different.

What’s next for SkyBlue Vapor in 2021 –

Events

Our goal is to go to as many events as possible to sell our vaporizers nationwide.  The PACT Act only applies to online sales so our in person operations will remain the same.  Currently we are scheduled for events in Pennsylvania, New Jersey, and Florida.  Vermont, Massachusetts, Colorado, & Washington are on our list as well.  Although we can’t ship right to your door, we hope to be at an event near you!

A list of the events we are attending can be found at skybluecannabis.com/events.

Wholesale / Retail Locations

SkyBlue has stepped up wholesale operations to get on shelves in every state nationwide.  We are just about to rev up those efforts and really make a push!  Currently our authorized retailers are in Pennsylvania but we aim to branch out to bordering states and make the move from there.  Make sure you tell your local shops & dispensaries about us!

A list of our authorized retailers can be found at skybluecannabis.com/retail-locations.

 

SkyBlue Vapor is still dedicated to providing the best low temp vaporizers on the market for Medical Patients, Veterans, CBD, and all cannabis consumers alike!  We will do so until we can’t anymore.  Although our online store will be changing, we do have hope it will turn around soon!

In the meantime, stock up now!  Our entire shop will be discounted at 50% OFF plus buy 4 of any 1 product and get the 5th FREE.  The sale is happening exclusively here at skybluecannabis.com

 

Thank you all once again for all your support, love, and memories.  We hope to see you at an event or at our store in Stroudsburg, Pennsylvania!

– Nick & Cliff

CEOs of SkyBlue Vapor

 

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