Authored By

Philip Snow

 

 

 

 

 

 

 

 

This article was written by Kight Law attorney Philip Snow.

Kight Law represents hemp and CBD businesses in the US and throughout the world. To schedule a consultation with Philip, please click here and mention this article.

 

INTRODUCTION

As a result of the most recent Congressional Appropriations Act, hemp vaping products, including hemp extracts, CBD, and delta-8 THC, are about to be subject to a comprehensive law and set of federal and state regulations. This article discusses the new law and associated regulations. It also provide a practical overview of the things that all sellers of vape products should know. Click here to read our other article on the new vape requirements.

 

OVERVIEW OF APPROPRIATIONS ACT AND JENKINS ACT

The Appropriations Act, signed into law on December 27, 2020 appropriated billions of dollars in federal funds to numerous agencies and programs. Most importantly, for purposes of this document, the Appropriations Act addresses vaping in two sections. The first section amends an existing law regarding online sales of e-cigarettes to children in several important ways. The second section places significant restrictions on mailing vaping products.

The Appropriations Act first addresses vaping by making amendments to the Jenkins Act, which was originally enacted in 1949. These amendments, collectively entitled, “Preventing Online Sales of E-Cigarettes to Children Act” become effective ninety (90) days after the Appropriations Act becomes law, namely March 27, 2021.

The Jenkins Act is a federal law requiring any person who sells and ships cigarettes across a state line to a buyer that is not a licensed distributor to report the sale to the buyer’s state tobacco tax administrator. The Appropriations Act amends the Jenkins Act to include “Electronic Nicotine Delivery Systems (ENDS)” among the tobacco products that are covered by its provisions. An ENDS 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.” It includes the following:

(i) an e-cigarette;

(ii) an e-hookah;

(iii) an e-cigar;

(iv) a vape pen;

(v) an advanced refillable personal vaporizer;

(vi) an electronic pipe; and

(vii) any component, liquid, part, or accessory of [an ENDS] without regard to whether the component, liquid, part, or accessory is sold separately from the device.

An ENDS does not include a product that is—

(i) approved by the Food and Drug Administration for—

(I) sale as a tobacco cessation product; or

(II) any other therapeutic purpose; and

(ii) marketed and sold solely for a purpose described in clause (i).

This comprehensive definition is not limited to products containing tobacco or nicotine. It specifically includes “any component, liquid, part, or accessory” of an ENDS. There are no exemptions for hemp and CBD vapes. The definition also includes a battery, whether sold with or without a vaping cartridge or e-liquid.

The Appropriations Act also requires the US Postal Service (USPS) to promulgate regulations within the next one hundred twenty (120) days: “to clarify the applicability of the prohibition on mailing of cigarettes… to [ENDS].” The effective date of the prohibition on mailing ENDS shall be the same date that the USPS issues its regulations.

 

IMPLICATIONS OF THE APPROPRIATIONS ACT, JENKINS ACT, AND PACT ACT ON HEMP AND CBD RETAILERS

The Appropriation Act applies to all companies that mail hemp vapes, CBD vapes, and all other vaping products to consumers. For reference, it also applies to all producers of marijuana vaping products, though it is illegal to mail them due to their federal illegal status. The practical effect of these provisions is to bring sellers of ENDS within the purview of the Jenkins Act and one of its subparts, the Prevent All Cigarette Trafficking (PACT) Act. PACT imposes stringent rules on online sellers of cigarettes, and now ENDS.

From a practical standpoint, this means that online retailers of ENDS, including hemp and CBD vapes, must adhere to a number of new requirements which are each briefly discussed below.

1.Registration with the United States Attorney General via the Bureau of Alcohol, Tobacco, and Firearms (ATF). You must use the ATF’s PACT Act Registration form and submit it via email to: PACTActregistrationinbox@atf.gov

You can also submit the form via US Mail to: Bureau of Alcohol, Tobacco, Firearms and Explosives, Alcohol and Tobacco Enforcement Branch, 99 New York Avenue, NE., Mailstop 6.N-509, Washington, D.C. 20226 USA.

2. Age verification of any party purchasing products using a commercially available database.

3. Use shipping services that collect an adult signature at the point of delivery:

a. USPS- As of the date of this writing, USPS has not drafted its rules regarding the shipment of vaping devices through the US Mail;

b. FedEx has stated it will no longer ship vaping products as of March 1, 2021;

c. UPS has stated it will no longer ship vaping products as of April 5, 2021; and

d. DHL previously banned the shipment of tobacco and tobacco products, as well as shipments containing nicotine, nicotine compounds, vapor, as well as shipments containing electronic cigarettes.

4. If selling in states that tax vaping products, sellers must register with the federal government and with the tobacco tax administrators of EACH state. State registrations must be done with the relevant “Tobacco Tax Administrator” in each state.

5. Collect all applicable local and state taxes (including tribal taxes where applicable) and affix any required tax stamps to the products sold.

6. Send each taxing state’s tobacco tax administrator a list of all transactions with customers in their state, including the names and addresses of each customer sold to, and the quantities and type of each product sold.

7. Maintain records for five (5) years of any “delivery interrupted because the carrier or service determines or has reason to believe that the person ordering the delivery is in violation of the PACT Act.

For more information on specific requirements under the PACT Act, continue reading below.

 

REPORTING REQUIREMENTS

Briefly mentioned above are the reporting requirements under the PACT Act. Specifically, any person who sells, transfers, or ships ENDS in interstate commerce, whereby such ENDS are shipped into a State… taxing the sale or use of cigarettes or smokeless tobacco or who advertises or offers cigarettes or smokeless tobacco for such sale, transfer or shipment shall –

Not later than the 10th day of each calendar month file with the tobacco tax administrators of the state a memorandum or copy of the invoice covering every shipment made during the previous calendar month into such State to the tobacco tax administrators of the States, not with the ATF. Copies of the memorandum or invoice must also be field with the chief law enforcement officers of the local governments and Native American tribes operating within the borders of the State that apply their own local or tribal taxes on cigarettes or smokeless tobacco.

Each memorandum or invoice must identify the following information:

a. The name and address of the person to whom the shipment was made;

b. The brand and quantity delivered to the person in the specific shipment; and

c. The name, address, and phone number of the person delivering the shipment to the recipient on behalf of the delivery seller.

The seller must organize all information relating to specific customers by city/town and by ZIP Code. The tobacco tax administrator or chief law enforcement officer will only use this information for purposes of the enforcement of the Jenkins Act and collection of any tobacco taxes owed.

State, local, or tribal governments must report to ATF all common carriers and other persons who make deliveries of cigarettes or smokeless tobacco in or into the State, locality, or tribal land. States shall also provide updates and corrections every 4 months until such time as the government notifies the Attorney General of the United States in writing that the government no longer desires to submit information to supplement the list.

 

DELIVERY REQUIREMENTS

Common carriers or other delivery services must have the purchaser placing the delivery sale order or another adult sign to accept the delivery of the shipping container at the delivery address. They must also obtain proof from the person who accepts the delivery of the shipping container- in the form of a valid, government-issued identification bearing a photograph of the individual- that the person is at least the minimum age required for the legal sale or purchase of tobacco products, as determined by the applicable law at the place of delivery. Delivery sellers shall not accept a delivery sale order from a person without:

a. Obtaining the full name, birth date, and residential address of that person; and

b. Verifying that information using a commercially available database or aggregate of databases regularly used by the government and businesses for age and identity verification and authentication.

 

RECORDKEEPING REQUIREMENTS

The PACT Act requires that a common carrier or other delivery service:

a. Maintain for five (5) years any records kept in the ordinary course of business relating to any delivery interrupted because the carrier or service determines or has reason to believe that the person ordering the delivery is in violation of the Jenkins Act; and

b. Provide that information, upon request, to ATF or to the attorney general or chief law enforcement official or tax administrator of any State, local, or tribal government.

 

TAXATION REQUIREMENTS

The PACT Act provides that a delivery seller may not sell or delivery to any consumer, or tender to any common carrier or other delivery service, any cigarettes or smokeless tobacco pursuant to a delivery sale unless, in advance of the sale, delivery, or tender:

a. Any cigarette or smokeless tobacco excise tax that is imposed by the State in which the cigarettes or smokeless tobacco are to be delivered has been paid to the State;

b. Any cigarette or smokeless tobacco excise tax that is imposed by the local government of the place in which the cigarettes or smokeless tobacco are to be delivered has been paid to the local government; and

c. Any required stamps or other indicia indicating that the excise tax has been paid are properly affixed or applied to the cigarettes or smokeless tobacco.

The law provides an exception from these requirements specific to the delivery sale of smokeless tobacco if the law of the State or local government of the place where the smokeless tobacco is to be delivered requires or otherwise provides that delivery sellers collect the excise tax from the consumer and remit the excise tax to the State or local government, and the delivery seller complies with this requirement.

 

RECORDKEEPING REQUIREMENTS FOR UNREGISTERED OR NONCOMPLIANT DELIVERY SELLERS

The PACT Act, codified at 15 U.S.C. § 376a, directs ATF to compile and distribute a list of delivery sellers of cigarettes or smokeless tobacco who have not registered or are otherwise not in compliance with the Jenkins Act. State, local, or tribal governments shall report to ATF all known delivery sellers who have failed to register, failed to make reports as required by the Jenkins Act, or have been found in a legal proceeding to otherwise fail to comply with the Jenkins Act. This reporting by the State, local or tribal government must include supporting documentation. ATF will update and distribute the list at least once every 4 months to:

a. The attorney general and tax administrators of every State;

b. Common carriers and other persons that deliver small packages to consumers in interstate commerce, including the USPS; and

c. Any other person who can promote the effective enforcement of the Jenkins

To ensure that this list is accurate and complete, the ATF will attempt to send a notice to delivery sellers—no later than 14 days before including them on the list—stating that they have the opportunity to challenge their placement on the list. ATF will investigate such challenges and tender the results no later than 30 days after the date on which the challenge is made.

 

PROHIBITION ON DELIVERY

Commencing 60 days after the date of the initial distribution or availability of the list described above, no person who delivers cigarettes or smokeless tobacco to consumers shall knowingly complete, cause to be completed, or complete its portion of a delivery of any package for any person whose name and address are on the list, unless:

a. The person making the delivery knows or believes in good faith that the item does not include cigarettes or smokeless tobacco;

b. The delivery is made to a person lawfully engaged in the business of manufacturing, distributing, or selling cigarettes or smokeless tobacco; or

c. The package weighs more than 100 pounds, and the person making the delivery does not know or have reasonable cause to believe that the package contains cigarettes or smokeless tobacco. 15 U.S.C. 376(2)(A)(i-iii)

 

CONCLUSION

The lawyers at Kight Law can help your hemp and CBD business remain compliant with these and other rules and laws impacting the hemp and CBD industry. Click here to schedule a consultation.

KIGHT LAW ATTORNEY PHILIP SNOW IS WELL VERSED IN THE LEGAL ISSUES SURROUNDING HEMP VAPE PRODUCTS, INCLUDING HEMP EXTRACT, CBD, AND DELTA-8 THC.