What Cannabis, Hemp, and CBD Companies Need to Know about the PACT Act
Vape product sellers face a new legal landscape after Congress recently expanded the Prevent All Cigarette Trafficking (“PACT”) Act to cover vaping devices. The amendments to the PACT Act came in the waning days of 2020 as a little noticed addition to a consolidated budget and Covid-19 relief bill.
The requirements of the PACT Act now apply to all Electronic Nicotine Delivery Systems, or “ENDS”, which are defined as: “any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device.”
Not only does the definition of ENDS cover all vaping products – whether or not the target substance for delivery is nicotine – it also includes “any component…part, or accessory of a device.” This means cannabis, hemp and CBD companies selling, manufacturing, or shipping vaporizers or vaporizer parts across state lines should carefully consider whether the amended PACT Act leads to new legal obligations for their business.
Sellers of ENDS should be aware of these three main parts of the Act: registration requirements, reporting requirements, and shipping restrictions.
Registration Requirements
First, any person that “sells, transfers, or ships for profit” in interstate commerce, must register with the Alcohol, Tobacco, and Firearms Bureau (“ATF”) and the tobacco tax administrator in the shipping state. This requirement applies to not only delivery sellers (ie: companies selling directly to consumers), but distributers and manufactures shipping in interstate commerce.
This registration requirement, however, only applies when the destination-state taxes ENDS, meaning cannabis companies will need to look closely at (1) whether the state they ship into taxes ENDS and (2) whether that ENDS-tax exempts THC, hemp or CBD devices.
Reporting Requirements
Second, any person who “sells, transfers, or ships for profit” ENDS in interstate commerce, must report every shipment made during the previous month to their respective state tobacco tax administrator.
Sellers must collect, and retain for four years, city/town and zipcode data of customers they ship to. Similar to the registration requirements above, the reporting requirements only apply when the destination-state taxes ENDS.
Shipping Restrictions
Finally, the amendments instruct the U.S. Postal Service (“USPS”) to issue regulations prohibiting the shipment of all vaping products through the mail to residential addresses. While the amended PACT Act will now prohibit USPS delivery of ENDS, the Act has always maintained a business-to-business exception for tobacco shipments transmitted between verified and authorized tobacco industry businesses. The USPS plans to extend this business-to-business exception for ENDS products, according to the proposed rule issued on February 19th. The USPS says it plans to implement this retail mail ban no later than April 26, 2021.
A number of private shipping companies – UPS, Fedex, and DHL – have also implemented or plan to implement company policies prohibiting the shipment of ENDS. In some cases, these private restrictions may go further than the USPS ban, by prohibiting all shipments of ENDS and not including a business-to-business exception.
Vape product sellers should be aware that violations of the PACT Act, codified at 15 U.S.C. § 375-378, carry civil as well as criminal penalties. The new legal changes outlined above make it imperative that cannabis, hemp and CBD companies carefully review whether the PACT Act amendments apply to their business, and then promptly determine their level of compliance.
