In late December 2020, President Trump signed a coronavirus relief act that included a variety of provisions. In that 5,000 page document was a new law entitled the Preventing Online Sales of E-Cigarettes to Children Act. This law is actually an amendment to previous shipping regulations on tobacco products called the PACT Act.
Although the bill is aimed at the services provided by United States Postal Service, it will have consequences that are much larger than that. When the bill was first signed and passed by Congress, the expectation was for the USPS to implement procedures to guard against the shipping of tobacco and vaping products. This is an extension of the procedures already followed by the USPS as part of the PACT (Prevent All Cigarette Trafficking) Act.
What is the impact of the PACT Act on merchants?
The USPS was expected to implement the new regulations on the shipping of vape products by April of 2021. However, they are delaying their rollout of these new rules based on the inability to effectively enforce them. Once they go into effect, many online merchants will experience some major impacts on their businesses.
Merchant compliance with PACT
In order to be in compliance with the new laws, online vape merchants will need to register their business with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), as well as the Attorney General. They also need to register with each state in which they plan to do business or disseminate advertisements for their products. For an online retailer, this could feasibly be every state in the country, due to the nature of online businesses.
Merchants will need to verify the age of consumers who are purchasing their products and obtain proof of their age upon delivery of the package. Verification of a buyer’s age can be done through a variety of state and federal databases and will require merchants to alter their online purchasing processes for consumers. Proof of age upon delivery is an even more difficult policy to implement and enforce.
Last but not least, merchants will need to keep detailed records of every transaction that occurs within their business. They will be expected to provide a monthly report to each state’s administrator regarding the transactions completed in that state. Online merchants will also be responsible for the collection and payment of applicable taxes in each state.
Shipping practices
Business-to-business sales and shipping are still allowed under the new regulations. This means that consumers who purchase vape products have to physically go to a brick and mortar store to present their ID as proof of their age in order to obtain their products. With this practice in place, minors won’t be able to make vape purchases, which is the whole purpose of the act from the beginning.
Larger online vape retailers will likely have the resources available to comply with the new shipping regulations. However, many smaller online retailers will struggle to do so. As a result, these merchants will be forced to build relationships with local retailers in various states to whom they can ship their products for consumers to pick up. If they choose not to do that, they may need to opt-out of the business altogether or conduct it in their own state in their own brick and mortar shop.
New opportunities for software and freight
Despite the fact that these regulations were put in place to make business more difficult for retailers in this industry, there is hope. The amendments to the original PACT Act were passed with good intention – to prevent minors from purchasing and using tobacco and vape products. However, they are also making it incredibly difficult for merchants to continue doing business with their adult customers.
All of this difficulty is creating some innovation in the marketplace. Companies that are passionate about the vape industry are finding ways to help small businesses stay afloat. These include companies from vape merchant account providers, to customer management software and freight services, among other things.
For example, IGEN, a Wisconsin-based software company is building solutions for retailers to remain compliant with all of the new laws. Their software includes solutions for registration, age verification, transaction tracking, and more. Small businesses who need help navigating through all of the red tape will find some reprieve in companies like this, who are designing solutions.
Likewise, some new freight companies are emerging to help with the shipping and delivery of vape products. Companies like VapeFreight and “X” are designed to help with the delivery of vape products directly to consumers. They offer merchants a shipping option that will verify the age of the consumer by accepting an adult signature upon delivery. Over time, it is expected that more companies like this will emerge to help keep the billion-dollar industry growing and thriving.
Final thoughts on PACT
The PACT Act is designed to protect public health, specifically for minors. Its purpose is to keep minors from purchasing vape products online and subsequently using them. While there is some debate about the health effects of vape products on minors, the bigger concern for merchants is the impact on their business.
If online retailers can find a way to protect the health of minors by complying with the laws, while still conducting business with their adult consumers, they will fare just fine through these changes. It will take some major shifts in daily operations but will be worth it in the end if they want to stay in business. Right now, forming partnerships with local businesses in the states where a merchant sells is one of the best things they can do!