Vape Shipping Ban of 2021
In late 2020, Congress passed the Appropriations Act, which is now impacting how hemp producers and online retailers do business. The changes have put some companies into crisis mode.
Although the main design for the vape shipping ban was to protect children from accessing nicotine vaporizers, the broad language contained within the amendments has unfortunately effectively also included CBD, delta-8 THC, and other cannabinoid-based vape products.
What Does The Vape Shipping Ban Mean?
On December 27, 2020, Congress signed the Appropriations Act into law. This Act contained two specific amendments, which are now having devastating impacts on the hemp-derived vape industry.
The first amendment, called the "Preventing Online Sales of E-Cigarettes to Children Act," was to the Jenkins Act, a piece of legislation created in 1949. Now all producers, retailers, and shippers moving "Electronic Nicotine Delivery Systems," or "ENDS," between states and non-licensed parties must report sales to the relevant state's tobacco tax administrator.
On the surface, this seems like only an issue for nicotine devices. However, the broad definition of ENDS includes "any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance." This means, if your company produces any vape products, including CBD or delta-8 from hemp, these would be included under the new regulations.
The second amendment pertains to the Prevent All Cigarette Trafficking (PACT) Act. There are new strict rules for any retailer selling e-cigarettes and ENDS. Again, the broad language means hemp-based vape products get rolled into these new requirements.
What do vape producers need to do? A few highlights:
- Register with the US Attorney General
- Perform age verification of receiver within a commercially available database
- Collect and audit an adult signature with every delivery
- Collect and submit extensive transaction details (name, address, items, quantity, etc.) to the state's tax administer.
Following these legislative changes, many private shipping companies (UPS, FedEx, and DHL) have indicated they will cease shipping vape products. The USPS has also banned the shipment of vape products through its services, although this seems to be postponed for the moment.
What are the Implications for Hemp Producers?
What does this mean for hemp producers who either produce or supply extracts for CBD vape products?
Although it has always been illegal to ship THC-containing products between states because of strict federal regulations, now even non-intoxicating and legally produced substances like CBD will be banned as well.
Online CBD vape sales in 2020 totaled more than $44 million. Presumably, these sales were all shipped through the usual channels, like FedEx or USPS. The new regulations make it all but impossible for most suppliers to get their products to customers legally. Online sales of these products will likely experience a precipitous drop-off.
With no options for interstate shipping (at least direct to consumers), hemp producers will likely have to pivot to working with a business-to-business model. As it stands, it is still legal to ship hemp-derived vape products and hemp extracts from one business to another, provided registrations and paperwork is completed. This would mean direct sales to brick and mortar retailers and local state distribution networks instead of directly to consumers.
Another shift? For hemp producers heavily invested in a digital marketing strategy, this may need a big pivot in approach. Suddenly your cannabis SEO or CBD SEO targeting online sales will be a wasted effort. It is critical that once your brand has determined how to handle the vape shipping band, your digital marketing strategy follows suit.
Vape Shipping Ban for the Hemp Industry: Many Unknowns
This could be a devastating blow for small to medium-sized businesses whose model is wholly direct-to-consumer via online sales. There are few, if any, real solutions or legal loopholes being offered up at the moment.
By the end of 2021, many smaller companies that cannot afford the additional record keeping and registration will likely go out of business. Larger, more established hemp companies that have the capacity to pivot sales will eat up more of the market share.
But, these are only tentative predictions. As the many components of the ban have only been in place for a few weeks (and at the moment, USPS hasn't ceased shipping), the full ramifications are still unknown.
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