What You Need to Know about the PACT Act | DMLift Inc.
What You Need to Know about the PACT Act

What You Need to Know about the PACT Act

April 28, 2021

The Prevent All Cigarette Trafficking (PACT) Act now applies to all Electronic Nicotine Delivery Systems, or “ENDS." These types of products include electronic devices that deliver a consumable aerosol, such as nicotine or otherwise. ENDS product vendors confront a new legal landscape after Congress expanded the PACT Act to cover vaping devices. ENDS products will no longer be sent through logistic services such as the U.S. Postal Service, FedEx, or UPS.

This law affects the transportation and sale of ENDS products. The term of "ENDS products", however, includes “any component, part, or accessory of a device.” This means companies selling, manufacturing, or shipping ENDS products across state lines should be closely monitoring the outcome of this legislation.

Additionally, they must also carefully consider whether it leads to new legal responsibilities. This includes batteries and packaging, even though they are not ENDS products in themselves. 

Sellers of ENDS products should focus on three main parts of the Act which include registration, reporting. and shipping.

Registration Requirements

Many people are referring to the PACT Act as a cartridge ban. This act is not considered to be a cartridge ban because there is no ban on any particular company or individual. It is not designed to legally stop people from using ENDS products or companies from making them. However, the PACT Act does seem to determine how the public can get products and what products are available.

The PACT Act, aside from prohibiting mail deliveries, also mandates sellers of cigarettes or smokeless tobacco to register with the ATF. State tobacco tax administrators must also be notified. This requirement applies to companies selling ENDS directly to consumer. Companies will need greater awareness regarding state enforcement of excise tax on ENDS products and any tax exemptions available. 

Reporting Requirements

Companies that offer ENDS (Electronic Nicotine Delivery Systems) products will be required to adopt a different shipping method for their products. This change is necessary to ensure that the products are shipped in a manner that is compliant with regulations and standards. The companies will also be required to report every shipment they make each month to the appropriate state tax administrator. Ensuring authorities keep track of the sales of ENDS products and that the correct taxes are being collected.

The report must be sent along with the invoice copies of the previous month's sales. As well as a memorandum containing the necessary information. The information required for the report will include details about the shipment such as: type of products shipped, quantity, and destination.

Companies must also collect and retain the city/town and zip code of their customers for a period of four years. This information will help the authorities to keep track of the location of ENDS product users. These policies will also be useful in the event of any investigations or audits.

It is important to note that these reporting requirements only apply if the destination state taxes ENDS products. In states where ENDS products are not taxed, these reporting requirements will not apply. Companies will therefore not be required to send the monthly reports or retain customer information. However, companies must still adhere to all other relevant regulations and standards when shipping their products.

Shipping Restrictions

It is important to understand that the amendments only apply to B2C sales. Wholesale distributors or manufacturers are exempt from the USPS shipping ban, as long as they have the necessary licenses to operate. Yet, with no major carriers willing to ship ENDS products, businesses are now forced to find new ways to supply products.

For example, many private shipping companies plan to install policies prohibiting the shipment of ENDS products. In some cases, these private restrictions may go further than the USPS ban by prohibiting all shipments of ENDS products. This would not include a B2B exception.

With that said, ENDS manufacturers, distributors, and shops may face many of the same shipping challenges as online retailers. Private carriers will no longer ship their packages, and the Postal Service exemption is not likely. The USPS is currently refusing applications for B2B ENDS accounts. Even if it allows manufacturers and wholesalers to ship, the process would be acutely more expensive.

This puts manufacturers and wholesalers in the same position as online retailers. Meaning they will have to create a new shipping ecosystem by forming private networks.

PACT Act requirements may be less stringent for B2B businesses. However, shippers are still responsible for compliance and reporting of sales tax. Freight shipment usage may also a viable option for circumventing this policy.

The wholesale sector is fairly accustomed to shipping by freight. However, without the big carriers, they’ll have to go through the same process as B2C shippers. The freight industry refers to transportation companies that operate at various scales to move goods from one place to another. This includes a range of carriers that specialize in different types and sizes of shipments.

The freight industry is made up of a complex network of carriers, brokers, shippers, and receivers. All of which work cohesively to transport goods efficiently and effectively. The industry is constantly evolving, as new technologies and innovations are introduced, and as market demand changes. Despite these challenges, the freight industry remains a crucial component of the global economy, connecting businesses and consumers across the world.

The requirement for ENDS product companies set by the PACT Act may result in dispensaries establishing new partnerships and networks. This may involve negotiating and contracting with companies that have the necessary logistics infrastructure to handle shipments in a compliant manner. The restructuring process could be a time consuming and complex one. Albeit, a necessary procedure to avoid any legal or financial consequences of non compliance.

What Now?

Violations of the PACT Act, codified as 15 U.S.C. § 375-378, have civil as well as criminal consequences. The PACT Act will make it necessary for all ENDS product companies to carefully review how operations will be affected. If there is a lack of adherence to regulation, compliance methods will have to be augmented.

Yet, without effective delivery options, PACT Act compliance is debatable. In light of this, many vapor businesses are seeking alternative solutions to meet the requirements of the act. Some businesses are partnering with private logistics and transportation companies to ensure safe and compliant delivery of their products. Others are investing in expensive software solutions to manage their sales and deliveries in accordance with the PACT Act amendments.

Are you interested in learning more about the PACT Act and how it affects the ENDS product industry? Feel free to contact us!

Our team of experts are here to help answer any questions you might have. Including guidance on how to ensure compliance with the new regulations. Don't wait - get in touch with us today to learn more! 

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